Building the Biofuel InfrastructureBuilding the Biofuel InfrastructureJess Hewitt Jess Hewitt

President, Gulf HydrocarbonPresident, Gulf Hydrocarbonjess.hewitt@gulfhydrocarbon.comjess.hewitt@gulfhydrocarbon.com

Phone: +1 713-523-7755Phone: +1 713-523-7755www.gulfhydrocarbon.comwww.gulfhydrocarbon.com

"The U.S. Biodiesel Market, Trends, Drivers, & Threats"

December 4-5, 2007

Hyatt Summerfield Suites

Gulf Hydrocarbon:Gulf Hydrocarbon:• Biodiesel Marketing CompanyBiodiesel Marketing Company• Private Company Started 1997Private Company Started 1997• 4 Biodiesel Terminals:4 Biodiesel Terminals:

Houston, TexasHouston, Texas Amarillo, TexasAmarillo, Texas Dallas, TexasDallas, Texas Hammond, Indiana (Chicago)Hammond, Indiana (Chicago)

Production Locations January 2007

BQ-9000 Accredited Producers

0

50,000,000

100,000,000

150,000,000

200,000,000

250,000,000

Gallons

1999 2000 2001 2002 2003 2004 2005 2006 est.

500,000 2 Million

US Biodiesel US Biodiesel DemandDemand

Biodiesel TaxIncentive

Biodiesel Production Will IncreaseBiodiesel Production Will Increase

65 additional biodiesel production 65 additional biodiesel production facilities,facilities,

Adding 1.46 billion gallons/year of Adding 1.46 billion gallons/year of biodiesel productionbiodiesel production

Almost 600% increase in ProductionAlmost 600% increase in Production Possible Reinstatement of Bioenergy Possible Reinstatement of Bioenergy

Program for subsidies for feedstock.Program for subsidies for feedstock.

Biodiesel Demand DriversBiodiesel Demand Drivers

Tax Credit $1/gallon Renewed?Tax Credit $1/gallon Renewed? Export of Tax Credit Denied?Export of Tax Credit Denied? Imports of Biodiesel Continue to Imports of Biodiesel Continue to

Qualify for $1/gallon Blender’s CreditQualify for $1/gallon Blender’s Credit RINS: Biased to Biodiesel?RINS: Biased to Biodiesel?

• 2.5 credits for every gallons Biodiesel2.5 credits for every gallons Biodiesel

Biodiesel Demand DriversBiodiesel Demand Drivers

Tax Credit $1/gallon Renewed?Tax Credit $1/gallon Renewed?

Blenders tax credit expires December 2008. The Energy Title of the Farm Bill may contain an extension of the tax credit until 2010 (two year extension).

Biodiesel Demand DriversBiodiesel Demand Drivers Export of Tax Credit Denied?Export of Tax Credit Denied?

Major issue. The Energy Advancement and Investment Act passed by the US Senate contained a denial of the tax credit for biodiesel removed from the USA. Biodiesel and Soybean industry groups are petitioning to keep the credit for exports of “domestic biodiesel.” Export of tax credit is difficult to justify to public and Congress.

Biodiesel Demand DriversBiodiesel Demand Drivers Imports of Biodiesel Continue to Qualify for $1/gallon Blender’s CreditImports of Biodiesel Continue to Qualify for $1/gallon Blender’s Credit

Domestic Producers are asking for removal of the $1 credit for foreign made biodiesel but odds are that Congress will not address any exclusions for biodiesel imported into the USA. Look for this credit to keep being applied to foreign made biodiesel.

Biodiesel Demand DriversBiodiesel Demand Drivers RINS: Biased to Biodiesel?RINS: Biased to Biodiesel?

• 1.5 credits for every gallons Biodiesel1.5 credits for every gallons Biodiesel

Biodiesel producers are asking for a specific set aside in the Renewable Fuel Standard (RFS) of the Energy Bill, called the Alternative Diesel Standard. Look for NO CHANGE on the RFS for biodiesel as it already receives an advantage on RINS of 1.5 for biodiesel versus 1.0 for ethanol.

Current InfrastructureCurrent Infrastructure

About 1,800 petroleum distributors now About 1,800 petroleum distributors now

offer biodieseloffer biodiesel More than 1,000 retail locationsMore than 1,000 retail locations Half are truck stops or truck accessible Half are truck stops or truck accessible

locations (biotrucker.com) locations (biotrucker.com) 37 terminals 37 terminals

Infrastructure Must ExpandInfrastructure Must Expand

Must add more than 150 biodiesel Must add more than 150 biodiesel terminals:terminals:• 8.0 Million Gallons/Yr per Terminal8.0 Million Gallons/Yr per Terminal• Investment $350,000+ per TerminalInvestment $350,000+ per Terminal

Minimum Investment is $50 MillionMinimum Investment is $50 Million

Gulf Hydrocarbon FocusGulf Hydrocarbon Focus

Petroleum Terminals: Petroleum Terminals: • Add Biodiesel and Ethanol to boost Add Biodiesel and Ethanol to boost

utilization and encourage more demand utilization and encourage more demand of petroleum products.of petroleum products.

• Terminal value increases dramaticallyTerminal value increases dramatically

Boost Diesel Demand with Boost Diesel Demand with Biodiesel?Biodiesel?

Biodiesel is only 5-20% of total diesel fuel Biodiesel is only 5-20% of total diesel fuel salessales

Diesel Demand increases as terminal is Diesel Demand increases as terminal is local source of Biodiesel Blendslocal source of Biodiesel Blends

Diesel fuel sales increase with every Diesel fuel sales increase with every Biodiesel BlendBiodiesel Blend

Therefore Biodiesel Creates Diesel Therefore Biodiesel Creates Diesel DemandDemand

Case Study: Shut Down TerminalCase Study: Shut Down Terminal

Petroleum TerminalPetroleum Terminal Houston, TexasHouston, Texas 160,000 Barrels Jet/Diesel Storage160,000 Barrels Jet/Diesel Storage Teppco and Magellan PipelinesTeppco and Magellan Pipelines 3 Bay Truck Rack 3 Bay Truck Rack

Petroleum TerminalPetroleum Terminal

Gulf Hydrocarbon SolutionGulf Hydrocarbon Solution

Add Biodiesel to Terminal Add Biodiesel to Terminal • 10 MB Tank, Dispense at the Rack10 MB Tank, Dispense at the Rack• Add Biodiesel Blend CustomersAdd Biodiesel Blend Customers• Add Municipal Customer (B10)Add Municipal Customer (B10)• Add Petroleum Distributor (LSD)Add Petroleum Distributor (LSD)

Total Cost: Greater than $300,000Total Cost: Greater than $300,000

ResultsResults

Terminal Sales Increase:Terminal Sales Increase:• Biodiesel Deliveries: 4-8 MGYBiodiesel Deliveries: 4-8 MGY• Diesel Fuel Deliveries: 20-25 MGYDiesel Fuel Deliveries: 20-25 MGY

Case Study: Underutilized TerminalCase Study: Underutilized Terminal

Vegetable/Chemical TerminalVegetable/Chemical Terminal Hammond, IndianaHammond, Indiana Excess Capacity AvailableExcess Capacity Available No truck rackNo truck rack No Petroleum on SiteNo Petroleum on Site

Vegetable Oil TerminalVegetable Oil Terminal

Gulf Hydrocarbon SolutionGulf Hydrocarbon Solution

Add Metered Loading System Add Metered Loading System • Petroleum Style Loading SystemPetroleum Style Loading System

Add 24/7 PersonnelAdd 24/7 Personnel Total Cost Less Than $100,000Total Cost Less Than $100,000

Tank 126,000 GallonsTank 126,000 Gallons

Petroleum-Style Loading SystemPetroleum-Style Loading System

ResultsResults

Terminal Sales Increase:Terminal Sales Increase:• Biodiesel Deliveries: 8 MGYBiodiesel Deliveries: 8 MGY

Gulf Hydrocarbon Gulf Hydrocarbon

Locate Petroleum and other Locate Petroleum and other Terminals for Biodiesel ExpansionTerminals for Biodiesel Expansion• Locations in Major Metropolitan AreasLocations in Major Metropolitan Areas• Proximity to Pipelines/BargeProximity to Pipelines/Barge• In need of Sales BoostIn need of Sales Boost

Building the Biodiesel InfrastructureBuilding the Biodiesel Infrastructure

Direct the nearly 2 billion gallons per Direct the nearly 2 billion gallons per year into terminals for distributionyear into terminals for distribution

Utilize governmental assistance for Utilize governmental assistance for adding biofuel infrastructureadding biofuel infrastructure

Creates a new Creates a new “green”“green” distribution distribution system that can accommodate future system that can accommodate future growth of renewable fuelsgrowth of renewable fuels

For More InformationFor More Information

Jess HewittJess Hewitt

Gulf HydrocarbonGulf Hydrocarbon

www.gulfhydrocarbon.comwww.gulfhydrocarbon.com

jess.hewitt@gulfhydrocarbon.comjess.hewitt@gulfhydrocarbon.com

Phone: +1 713 523-7755Phone: +1 713 523-7755