10/26/2010 DRAFT – DO NOT CITE OR QUOTE For NPC Fuels Study Discussion Only 1 National Petroleum Council Future Transportation Fuels Study Engine/Vehicles SubGroup Base Case Commentary November 10, 2010

10/26/2010 DRAFT – DO NOT CITE OR QUOTE For NPC Fuels Study Discussion Only Purpose of the Templates The following Guidelines and Template are a result of a request from several subgroups for more guidance and structure regarding base case commentary for the NPC Future Transportation Fuels Study –These templates will be used for the November 10 & 11 Supply & Infrastructure report-outs on the Base Case –The templates will be the basis for the narrative assessment of the Base Case in the study report These guidelines are a supplement to pages 10 and 11 of the “EIA AEO 2010 Reference Case Transportation Sector Overview” that was issued by the Supply & Infrastructure Task Group The “In Bounds for Comments on the Base Case” (p.11) section has been further grouped into the following categories : 1.Supply and Infrastructure 2.Technology 3.Demand 4.GHG 5.Legislation 6.Other materially significant areas not addressed. Upon completion, this document should be a top line overview, about 7-10 PowerPoint slides. 2

10/26/2010 DRAFT – DO NOT CITE OR QUOTE For NPC Fuels Study Discussion Only Future Transportation Fuels Study – Instructions Instructions: 1.Assess the Base Case (EIA AEO 2010 Reference Case Extrapolation GHG baseline) Assess EIA AEO 2010 Reference Case A.Consider the assumptions, data and conclusions for each category B.Subgroups should use the data supplied in the Base Case, Reference Case, even if assumptions are not clear 2.Explain the subgroup’s view as compared to the base caseReference Case 3.Provide references and sources for the subgroup’s view relative to the base case 4.Subgroups should comment on all six categories listed in the template 5.Summarize the subgroup’s top findings upon completing the exercise 3

10/26/2010 DRAFT – DO NOT CITE OR QUOTE For NPC Fuels Study Discussion Only 4 AEO Reference Case Assessment Highlights Subgroup’s comments: Comprehends current US fuel economy regulation/legislation for vehicles only Falls short of current regulation for biofuel volumes by 2022 Cost of vehicle fuel economy similar to June, 2010 NRC study, with the exception of under-predicting price of strong hybrids in large vehicles Ability of model to predict vehicle technology and segment shares is uncertain 1.7%/year growth in VMT through 2035 probably is too high Hybrid batteries unlikely to last the 1,500,000 mile life of heavy vehicles *National Energy Modeling System model used to create AEO

10/26/2010 DRAFT – DO NOT CITE OR QUOTE For NPC Fuels Study Discussion Only 5 Supply & Infrastructure Subgroup’s comments (example items for the Supply & Infrastructure category: Supply Chains, Infrastructure availability and development, Refining and manufacturing capacity and production costs, Supply and feedstock availability, volumes, and timing, Opportunities for fuel switching or substitution, State and regional observations) Costs, weight, horsepower, and fuel consumption for mini-compact and sub- compact cars higher than compact, probably because sports cars are falling in these categories. Classes don’t seem to match those of EPA or NHTSA E85 priced lower than gasoline on energy basis; this is consistent with E85 sales increase to meet RFS2; as with most items in the Reference case, there is uncertainty on what the actual future price of E85 will be

10/26/2010 DRAFT – DO NOT CITE OR QUOTE For NPC Fuels Study Discussion Only 6 Technology Subgroup’s comments (example items for the Technology category: Technology pathways and timing, Vehicle technology availability, Timelines): Vehicle technology costs are appropriately expressed as Retail Price Equivalent Assumption table don’t provide enough detail for comment on validity; slope of cost vs. fuel consumption of new vehicle fleet is close to that of June, 2010 NRC study (except for strong hybrids in large vehicles) Hybrid system costs (not including battery) for large vehicles assumed to be the same as those for compact vehicles; instead costs for larger motors and other systems will cause hybrid system costs will increase with size of vehicle Electric air conditioning cost not included by likely to be required for customer satisfaction with strong hybrids Batteries are priced only by kWh; no distinction is made between high power batteries and energy batteries The reference case assumes HEV batteries last the life of the vehicle; this is unlikely for heavy-duty vehicles with a mile life cycle FFVs should be an option on HEV, not just conventional gasoline Additional technologies should be considered when extrapolating to 2050

10/26/2010 DRAFT – DO NOT CITE OR QUOTE For NPC Fuels Study Discussion Only 7 Demand Subgroup’s comments (example items for the Demand category: Fleet turnover, demand volumes and timing): The reference case projects a 1.7% year increase in light duty VMT. Although consistent with historical trends, future growth may be slower due to changing demographics and impacts of technology on the workplace The growth in demand for petroleum products in transportation is greater than that of the International Energy Agency Consumer vehicle choice module not well understood by us; high uncertainty in its ability to predict long-term vehicle technology shares Fleet turnover, based on a table of vehicle survival versus age, seems to be based on the best statistics available The 3 year/15% discount payback on fuel economy technology seems appropriate given customer behavior The model may not include appropriate maintenance costs beyond the warranty period in some technologies, such as HEVs Decreasing truck shares beyond 2010 are driven by CAFE requirements and changing consumer choices due to increased gasoline prices; however, it is not clear whether consumers react to the absolute gasoline price or the rate of change of gasoline price Higher penetration of FFVs than provided in Reference Case would provide flexibility in fuel choice when its price and availability are favorable

10/26/2010 DRAFT – DO NOT CITE OR QUOTE For NPC Fuels Study Discussion Only 8 GHG Subgroup’s comments (example items for the GHG category: Carbon/GHG, Other tail-pipe criteria pollutants): EIA bases transportation GHG on tailpipe emissions only; well to wheels GHG would better reflect emissions of the fuels+vehicles transportation system

10/26/2010 DRAFT – DO NOT CITE OR QUOTE For NPC Fuels Study Discussion Only 9 Legislation Subgroup’s comments (example item for the Legislation category: Existing legislation and regulation): Reference case matches current new light vehicle fuel economy regulation and law; new regulation is planned to cover but won’t be finalized during this study; in addition heavy duty fuel economy regulation is expected, but not covered in the reference case Reference case shows biofuels falling short of 36 billion gallons by 2022 regulation, but reaching 36 billion gallons by 2030; in part this is due to insufficient numbers of FFVs in the reference case, but also results from FFV owners not choosing E85 because of its lower driving range; There are likely to be tighter tailpipe HC, NOx, particulates, and evap emissions in the future, that will increase the cost of all vehicles; New safety regulations are likely to add cost, mass, and complexity to vehicles Tightened onboard diagnostics (OBD) regulations for heavy duty vehicles will increase cost

10/26/2010 DRAFT – DO NOT CITE OR QUOTE For NPC Fuels Study Discussion Only 10 Other materially significant areas not addressed Subgroup’s comments (example item for the Other category: Significant gaps (define significance), Other issues of material impact) Assumptions/results not fully transparent: fuel economy individual technology shares, weight, technology use available for conventional vehicles only; kWh of battery used not known Assumption Tables 7.1 and 7.2 do not give enough detail to assess their validity; not clear which require other technology, replace other technology, etc. There is considerable uncertainty in base projection due to: fuel costs, vehicle attributes, CAFE, VMT and technology development The reference case doesn’t track truck freight ton-miles or characterize fuel consumption per ton-mile.

10/26/2010 DRAFT – DO NOT CITE OR QUOTE For NPC Fuels Study Discussion Only 11 AEO Reference Case Assessment Top Findings Subgroup’s comments: Matches current light vehicle fuel economy regulation and law (35 mpg by 2020); additional regulation for both light and heavy duty, planned by NHTSA/EPA, is not in Reference Case Biofuel consumption reaches 36 billion gallons by 2030, rather than by 2022 (per Energy Independence and Security Act). In part, this results from insufficient numbers of FFVs and insufficient shares of E85 purchases by FFV owners. Heavy truck fuel efficiency is based on miles per gallon, rather than fuel consumption per ton-mile, the preferred consumption measure used by industry and that proposed for future NHTSA/EPA regulation Light vehicle technology assumption tables don’t provide enough detail to allow comment; NEMS* output indicates assumption are similar to those of June, 2010 NRC study (except for strong hybrids in large vehicles) Hybrid system costs (not including battery) for large light duty vehicles assumed to be the same as those for compact vehicles; instead costs for hybrid systems are expected to increase with size of vehicle NEMS predicts shares of advanced vehicle technologies using a consumer vehicle choice module, which is not well documented; its ability to predict long-term vehicle technology shares is uncertain The reference case projects a 1.7%/year increase in light duty VMT. Although consistent with historical trends, future growth may be slower due to changing demographics and impacts of technology on the workplace NEMS predicts decreasing truck shares (to 35% by 2035), based on CAFE requirements and changes in consumer choices due to increased gasoline prices ($3.90 in 2035); its not clear such a gradual increase in gasoline price would have such a large impact The reference case assumes HEV batteries last the life of the vehicle; this is unlikely for heavy-duty vehicles with a 1,500,000 mile life cycle The 3 year/15% discount payback on LD fuel economy technology seems appropriate given customer behavior *National Energy Modeling System model used to create AEO