1. Senate Transportation and Housing Committee Providing Fuels of the Future Catherine Reheis-Boyd President October 24, 2011 WESTERN STATES PETROLEUM ASSOCIATION

2. Low Carbon Fuel Standard  Adopted April 2009  Reduce full fuel cycle “carbon intensity” C.I.) of transportation fuel pool at least 10% by 2020; a reduction of 16MMT of GHG emissions; 10% of total GHG reductions to meet AB32 target  Intended to drive market toward innovative, low carbon fuels  Reduce California’s dependence on petroleum  Applies to all refiners, blenders, producers or importers  Considers direct and indirect land use changes  Includes periodic reviews – 2011, 2014  Board revisions to regulation in 2011 WESTERN STATES PETROLEUM ASSOCIATION 2

3. 3 Petroleum is a fuel of the future Source: U.S. Energy Information Administration

4. WESTERN STATES PETROLEUM ASSOCIATION Petroleum companies are investing in the fuels of the future 4

5. Low carbon options Source: California Air Resources Board, staff report on Low Carbon Fuel Standard fuel pathways, September 2010 5 WESTERN STATES PETROLEUM ASSOCIATION

6. Federal Biofuels Mandate (RFS2): Incentive To Develop Advanced Biofuels Source: US Energy Information Administration Advanced cellulosic; advanced non- cellulosic, (e.g., sugar ethanol); biomass- based diesel Conventional, corn ethanol 6

7. Low Carbon Fuel Standard compliance schedule Source: Proposed Regulation to Implement the Low Carbon Fuel Standard Volume I, Staff Report: Initial Statement of Reasons, March 5, 2009 7 WESTERN STATES PETROLEUM ASSOCIATION

8. Midwest Corn Ethanol CI Range 73.20 – 120.99 Cellulosic Ethanol From Trees CI 20.40 (not commercially available) Sources: CARB Tool for Calculation for Required Ethanol CI to Comply with Gasoline Standard, May 2011; Method 2A/2B Applications and Internal Priority Pathways (as of June 24, 2011); May 25, 2011Clean Final Regulation Order Part 1 and 2 Combined; Detailed California-Modified GREET Pathway for Cellulosic Ethanol from Farmed Trees by Fermentation, February 27, 2009 *Assumes no change to current 10% ethanol blend wall and no wide scale use of E85 Carbon intensity of ethanol blended into gasoline required to meet LCFS gasoline targets* Carbon Intensity (gCO2e/MJ) LFCS Compliance Scenario – Gasoline Only Brazil Sugar Cane Ethanol CI Range 58.40 – 83.96 Sorghum/Wheat/Corn Ethanol CI Range 56.56 – 99.89 California Ethanol CI Range 71.40 – 88.90 8

9. Examples of other LCFS compliance pathways Source: Proposed Regulation to Implement the Low Carbon Fuel Standard Volume I, Staff Report: Initial Statement of Reasons, March 5, 2009; California Energy Commission, 2009 Integrated Energy Policy Report All electric car Hydrogen fuel cell vehicle Flexible fuel vehicle (E85) Natural gas vehicle Electric & hydrogen560,000 – 2 million14,680 vehicles Flexible fuel vehicles1.8 – 3.4 million400,000 (43 E85 stations) Natural gas vehicles ?24,810 Vehicle pathwayCARB scenarioReality 1 1 Based on 2008 data 9 WESTERN STATES PETROLEUM ASSOCIATION

10. 10 Global oil reserves

11. WESTERN STATES PETROLEUM ASSOCIATION 11 HCICO could result in crude shuffling, higher GHG emissions

12. 12 WESTERN STATES PETROLEUM ASSOCIATION LCFS impacts to California refiners, consumers  Lower carbon intensity biofuels are expected to command a price premium  Over the long ‐ term, there will be pressure to pass costs increases along to consumers  The potential impact on E10 prices for blends using Brazilian ethanol could range between 10.4 cents per gallon and 17.5 cents per gallon  There are numerous challenges to developing adequate vehicle production and sales, refueling infrastructure, and technical standards Source:California Energy Commission, Draft Staff Report, Transportation Energy Forecasts and Analyses for the 2011 Integrated Energy Policy Report, August 2011