1. 07/21/2010 DRAFT – DO NOT CITE OR QUOTE For NPC Study Discussion Only 11 National Petroleum Council Future Transportation Fuels Study Demand Task Group Meeting - Houston July 28, 2010 Website: http://ftf.npc.org/ UserId: fuels10 Password: ftf Go to: Demand Task Group/Task Group File Sharing

2. 07/21/2010 DRAFT – DO NOT CITE OR QUOTE For NPC Study Discussion Only Antitrust Reminders – NPC Studies Remember the Antitrust Guidelines, and don’t –Coordinate your companies’ plans, prices, outputs –Disclose your company’s non-public information –Use the study process to create competitive harm Check with counsel before you –Collect or discuss non-public data –Evaluate public data about future prices and costs –Discuss topics about whose legality you’re unsure Antitrust resources include: your lawyer, and –Mike Young (Anadarko) 832-636-7555 –Doug Melin (Marathon) 419-421-3265 –Jim Haynes (Chevron) 925-842-1298 –Kenly Webster (NPC) 202-898-0780

3. 07/21/2010 DRAFT – DO NOT CITE OR QUOTE For NPC Study Discussion Only 3 Agenda July 21, 2010 8-8:30 Welcome / Introductions / Antitrust 8:30-10Base case and model 10-10:15Break 10:15-12Demand framing questions (non-LDV) 12-12:45Lunch 12:45-2Imagining report drafting 2-2:15Break 2:15-3Division of work & building out teams 3-3:30Schedule and deliverables 3:30-4Wrap-up / parking lot issues

4. 07/21/2010 DRAFT – DO NOT CITE OR QUOTE For NPC Study Discussion Only 4 Parking Lot Issues Will Vehicle team handle non-Light Duty Vehicles (LDVs)? CAFEs – Demand incorporates in mkt shares, but where do they come from after 2016? Technology Task Group? Rail & air legacy fuel availability – is issue in questions? Mode switching analytical framework – how do we handle it? Special group? Need to coordinate coal and bio-feedstock projections with rail How do we bring Dept of Defense into study? Need light rail/mass transit team?

5. 07/21/2010 DRAFT – DO NOT CITE OR QUOTE For NPC Study Discussion Only 5 Base Case Development Plan Review 2-3 key comprehensive studies Decide on assumptions to be used in FTF base case Insert assumptions in framework & evaluate results Fine tune assumptions for consistency between calculated results and results of key studies –Iterative process –Learning about tool Reflect sensitivity of results on a few select assumptions to generate a “cone” around the base case Note – Forces us to identify key elements of FTF study and where the analytical tool will need to be augmented

6. 07/21/2010 DRAFT – DO NOT CITE OR QUOTE For NPC Study Discussion Only 6 Types of Models Comprehensive energy system models (NEMS) –All energy types and energy consumers –Modular supply and demand subroutines Transportation Module contains nested subroutines to derive fuel demand by the different modes and vehicles –Iterates according to specified rules to solve for market clearing prices and consistent volumes

7. 07/21/2010 DRAFT – DO NOT CITE OR QUOTE For NPC Study Discussion Only 7 Types of Models (continued) Spreadsheet models –Partial energy market (i.e. transportation) –Useful for running scenarios Can calculate relative impact of various assumptions Provides consistent treatment of variables out of focus –Relatively transparent for user Can work from assumptions to results or results to assumptions –Sacrifice some second order or “rebound” effects Looking for how pathways compare, rather than scalar findings

8. 07/21/2010 DRAFT – DO NOT CITE OR QUOTE For NPC Study Discussion Only 8 Developed for DOE Office of Energy Efficiency and Renewable Energy and maintained by Argonne National Laboratory Calibrated to the latest AEO reference case Measures energy and GHG emissions impacts of scenarios relative to a base case projection GHG coefficients represent full fuel cycle emissions and were developed using the GREET model Designed to provide quick turn around analyses of assumptions regarding increased fuel economy, advanced technology penetration, travel demand, and alternative fuel use for highway vehicles Proposal to use VISION as integrating tool

9. 07/21/2010 DRAFT – DO NOT CITE OR QUOTE For NPC Study Discussion Only 9 Fundamental Integrating Issue Solving for consistent fuel offering mix and fuel demand mix Demand task group determines travel activity (VMT, tonmiles, seat miles, etc.) Supply task group determines fuel and vehicle offerings: timing, cost, availability, volumes Demand task group determines end user purchases of vehicles by fuel and technology type (market shares of new vehicle sales) Framework calculates fuel consumption by type Check for supply & demand volume consistency Re-iterate if necessary

10. 07/21/2010 DRAFT – DO NOT CITE OR QUOTE For NPC Study Discussion Only 10 Fundamental Integrating Issue (continued) If fuel consumption is not consistent with supply volumes, then –Change relative fuel & vehicle costs and –Re-iterate consumer decision model and –Recalculate fuel mix calculation For convergence, supply must increase with price and demand decrease with price Reasons to re-iterate –A fuel is constrained such that demanded volume exceeds supply –The volume demanded is below a minimum supply required for production –A fuel required of supply has zero demand

11. 07/21/2010 DRAFT – DO NOT CITE OR QUOTE For NPC Study Discussion Only 11 VISION’s handling of non-light duty Truck –Key inputs to VISION are market shares of new vehicle sales, fuel efficiencies, fuel prices –Fuel=VMTperVehByAge*TrkFltByAge / efficiency –Only 2 class size groups: 3-6 and 7&8 (SU & Comb) –Does not have natural gas fuel option (dsl, gasoline, dsl HEV) Rail, Marine, Air not in VISION, but can probably create additional sheets from NEMS calculations Rail & Marine in NEMS –Estimates tonmile from IP projections by major industries –Estimates fuel efficiency on technology and fuel costs Air in NEMS –Estimates passenger and freight demand from GDP, disposable income, merchandise exports and air travel & fuel costs –Fuel efficiency is based on share of fleet that is narrow body, wide body and regional jets

12. 07/21/2010 DRAFT – DO NOT CITE OR QUOTE For NPC Study Discussion Only 12 Framing Questions Objective is to group questions and focus scope Which questions would be addressed in base case discussion? Which questions are open issues affecting sector? (Pretty certain estimates exist) Which are proposed/future looking? Estimates will be based on expert opinion or policy driven Which are fuels and efficiency related, activity related, infrastructure related or operations related? Which are tied to another mode? Economics Environment Security

13. 07/21/2010 DRAFT – DO NOT CITE OR QUOTE For NPC Study Discussion Only 13 Report structure straw man Travel demand – VMT, tonmiles, revenue seats… –Discussion of drivers – such as population, income, IP, freight –Historical growth rates –Discuss any events or trends that have had a marked impact on growth rate of demand Infrastructure – (have to include if mode switching is scenario) –Discuss historical level of investment –Investment needs – framed against current state, expected growth, etc. –Need to choose some measure that relates activity to investment –Discuss operational or system efficiencies Vehicle and fuel efficiency –Functional characteristics and timing of options to come from supply –Discuss key aspects of purchase decision –Discuss operational and system efficiencies – APUs, operator training,… For discussion purposes only

14. 07/21/2010 DRAFT – DO NOT CITE OR QUOTE For NPC Study Discussion Only 14 Consider the following for next week’s meeting Do framing questions fit into these categories? Will this help standardize discussion across modes? Will this lead us to right information to discuss –Mode switching –Scenarios Will it lead to the right information for model inputs?

15. 07/21/2010 DRAFT – DO NOT CITE OR QUOTE For NPC Study Discussion Only 15 Division of work & Building out teams Who do we need to tap to answer these questions? Consider industry partners, NGOs, Labs, Universities? Truck: Rail: Air:

16. 07/21/2010 DRAFT – DO NOT CITE OR QUOTE For NPC Study Discussion Only 16 Schedule for Non-LDV Activities Build teams 9/1/10 Base case analysis of assumptions 9/1/10 Base case empirical preliminary estimates (need to augment VISION) 9/15/10 Research 11/1/10 First draft of base case and qualitative discussion of issues 12/1/10 Scenarios definition and discussion of results Jan-Mar 2011 (Will need fuel costs from supply teams) Proposed

17. 07/21/2010 DRAFT – DO NOT CITE OR QUOTE For NPC Study Discussion Only 17

18. 07/21/2010 DRAFT – DO NOT CITE OR QUOTE For NPC Study Discussion Only 18 Summary of August 28 th Houston Meeting Demand Task Group held meeting with non-passenger representatives –Reviewed how VISION handles non-light duty vehicles –Reviewed framing questions of Truck, Rail & Air Identified issues as basecase, likely to happen, scenario long term Proposed leadership for three subgroups Proposed Rail, Air & Marine subgroups in DTG would have vehicle responsibility Truck vehicle responsibility would reside with S&ITG –Mode switching issues will affect VMT of each subgroup and will be addressed by representatives of subgroups working together –Set time line for deliverables Passenger team –Customer choice critical to determining alternative fuel effectiveness –Mode switching requires Mass Transit team –Passenger VMT will be swing actor in scenarios with fixed outcome

19. 07/21/2010 DRAFT – DO NOT CITE OR QUOTE For NPC Study Discussion Only 19 Need to work with experts and vehicle team to determine which characteristics we will build model on Need to understand investment required to provide passengers choices Need to understand investment or business decisions to provide shippers choices Spreadsheet model will work, but need to be clear that we are holding non-transportation fuel demand exogenous

20. 07/21/2010 DRAFT – DO NOT CITE OR QUOTE For NPC Study Discussion Only 20 Who owns Engine/Vehicles? FEEDSTOCK / RAW MATERIALS FEEDSTOCK DISTRIBUTION CONVERSION / MANUFACTURING PRODUCT DISTRIBUTION Engine/Vehicle Subgroup Auto Truck Rail Water Air MOBILITY NEEDS INFRA- STRUCTURE OPERATIONS VMT SUPPLY DEMAND