1. Ag Lenders Conference Fall 2014 David Ripplinger
Biofuels Outlook
Ag Lenders Conference
Fall 2014
David Ripplinger

3. The Renewable Fuel Standard

4. RFS
The Renewable Fuel Standard mandates minimum use of biofuels by type and year. EPA can change the mandate for the next year in the case of - economic harm - inadequate supply Obligated parties (blenders and others) are required to blend or purchase RINs to show compliance with the law.

5. 2014 Proposed Rule (November 2013)
Original Mandate
2014 Proposed
Cellulosic
1.75
.017
Biomass-based diesel
1/1.28
1.28
Other advanced 1
.263
Total advanced
3.75
2.2
Corn-starch ethanol
14.4
13.01
Total renewable
18.15
15.21
Limited production
‘Blend wall’

6. Final Rule - Implications
For corn ethanol: ‘adjust the net’ For advanced biofuel and cellulosic: - slow or stop ethanol activity - support drop-in fuels activity It’s all about the reasoning. Is the ‘blend wall’ justification?

7. RFS Outlook
Mandate
Original Mandate
2014 Proposed
Outlook
Cellulosic
1.75
.017
Biomass-based diesel
1/1.28
1.28
Other Adv. 1
.263
Total
3.75
2.2
Corn-starch
14.4
13.01
13.8
Total renewable
18.15
15.21 16
Guarantee – The EPA will be sued by the biofuels industry, the oil and gas industry, or both
(billion gallons)

8. Corn Ethanol Outlook

9. Key Factors Large corn crop Higher than expected domestic use
Large crush margins
Exports

11. Domestic Use

12. Source: CME

13. Brazil may increase its gasoline blend from 25 to 27
Brazil may increase its gasoline blend from 25 to 27.5% Corn-ethanol is an extremely affordable source of octane

14. The New Normal?
Corn ethanol – unsubsidized, weakly supported by the RFS Economics driven by US corn prices, exports

15. Should we be building more corn ethanol plants?
2014 margins have been very attractive
Need to make 20% reduction in GHG
Risk management
Size
Site/Market

16. CAFE Standards
Corporate Average Fuel Economy (CAFE) - federal law intended to increase the fuel economy of cars and light trucks in the United States. Penalizes manufacturers whose fleets fall below the standard passenger vehicles need to achieve 54.5 mpg One way to achieve this is with higher octane gasoline, with the octane coming from ethanol (E20 or E30).

17. Corn Ethanol Outlook Production 14.25 billion gallons Capacity Use
95 %
Corn Use
5,100 billion bushels
DDGs
43.4 million tons
Consumption
billion gallons
Exports
1.125 billion gallons

18. Advanced Biofuels

19. Energy Beet-Ethanol
Langdon, Cando, Carrington, Jamestown, and Valley City under consideration for first 20 MMGPY biorefinery Require 750,000 tons of beets 30,000 dryland acres Most feedstock sourced within 20 miles of plant Grower meetings held last winter – chemical carryover

20. Biodiesel
Big soybean crop Production on track to exceed RFS, less than 2% of distillate fuel oil production Running at 2/3rds capacity; margins are tight Expecting biodiesel income tax credit ($1/gallon) which expired 12/31/13 to be renewed for a year and retroactive to Jan. 1

21. Cellulosic Biofuel
POET’s Project Liberty (Iowa) had its grand opening in September
Abengoa (Kansas) had its grand opening in October
Dupont’s refinery in Iowa is under commission

22. Summary
The justification for the 2014 final rule has HUGE implications for the renewable fuel sector Corn ethanol margins should remain positive for the 14/15 year. The industry should run near capacity, barring logistics issues. Cellulosic biofuel is here, kind of…