The Potential Costs and Benefits of A Biomass-to-Ethanol Production Industry In California National Ethanol Conference National Ethanol Conference Las Vegas, Nevada - February 20, 2001 Pat Perez-Project Manager Biomass-Ethanol Project California Energy Commission

Purpose of Presentation 4Discuss Why California is Interested in Biomass-to-Ethanol Production 4Summarize Work Underway to Determine the economic costs and benefits of a biomass-to-ethanol industry 4Present Preliminary Findings From Study

State Budget Directive FY 2000/01 (Chapter 52) 4Determine the economic costs and benefits of a biomass-based ethanol production industry 4Assess the impact on consumer fuel costs from an in-state ethanol production industry and from imports 4Evaluate the impact on rice straw burning 4Provide recommendations on future steps

Why is California Looking at an In-state Ethanol Industry? 4 Phaseout of MTBE in Gasoline 4Capture economic and environmental benefits for California’s citizens 4Provide competition from imported ethanol and help mitigate the impact of supply shortages

Study Scenarios/California Ethanol Demand Oxygenate Requirement for California

* - Handling includes: harvesting, processing, storage and transportation ** - Co-products include biomass-power, lignin, extractives, etc. BIOMASSHANDLING* PRODUCTION OF ETHANOL & OTHER CO-PRODUCTS**TRANSPORTATION California Biomass-Ethanol Production Industry

Biomass-Ethanol Production Scenario (Low Production Case)

California Biomass (Bone Dry Tons) Used in 200 Million Gallon Production

16, , 19 Assumed Distribution of Biomass Feedstock Supply Regions Regions 1- 7, Forest Materials Regions 8-11, Agricultural Residues Regions 12-21, Urban Waste (to be updated)

What are the Economic Costs and Benefits to the State? 4$500 million cost to the State: l Costs include a $0.20 per gallon producer price payment l 10% capital cost support 4Over $800 million in benefits: (as expressed in personal income growth) l Activities related to plant construction and operation l Biomass collection

Economic Costs and Benefit Impacts Over 20 Year Plant Life (State Outlay: 10% Capital, $0.20 Per Gallon Producer Payment)

Additional Potential Environmental and Resource Benefits Include: 4Reduced wildfire risk 4Reduced air emissions from fires and agricultural burning 4Reduced landfilling of waste materials l Divert 400,000 tons of urban waste from landfills

Will the phase out of MTBE lead to ethanol supply and price problems? 4Phase out of MTBE will occur two years before first biomass-ethanol plant is operational l Ethanol price could potentially reach over $2.00 per gallon with U.S. Ban on MTBE l $1.00 increase in ethanol price equals at least $0.06 increase in cost of oxygenated gasoline l Reducing ethanol prices by $0.10 per gallon would lead to savings in excess of $50 million in consumer fuel prices

Ethanol Industry or Alternative Use of State Funds

Next Steps 4Seeking additional written comments through February 23, Develop report recommendations and next steps 4Release Revised Report in Early March Approve Final Report on March 21, Deliver Report to Legislature and Governor on March 30, 2001

For More Information about Biomass-to-Ethanol Activities... Call Pat Perez, Project Manager Biomass-Ethanol Project è (916) è (916) è or visit our web site at: