The Renewable Fuels Standard and Beyond

1. The Renewable Fuels Standard and Beyond Governors' Ethanol Coalition February 28, 2007 Sarah Dunham, Director Transportation and Climate Division EPA’s Office of Transportation and Air Quality

2. 18.0 16.0 14.0 12.0 Ethanol Use (Bgal) 10.0 8.0 6.0 4.0 2.0 0.0 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 Year Per AEO 2007 Per RFS Per AEO 2006 Assuming 100% E10 What a Difference a Year Makes:Increasing Ethanol Projections 76% of all Gasoline @E10

3. Its Been a Busy 18 MonthsRenewable Fuel Standard Rulemaking • Extensive stakeholder coordination • Proposed the rule in Sept 2006 • FRM expected within just a few weeks • An unprecedented schedule for a rule this significant 2006 2007 2005 J F M A M J J A S O N D J F M A M J J A S O N D J F M A M J J A S O N D RFS EPAct RFS 2006 Default Rule final rule proposal

4. The RFS – The Program Basics • The Energy Policy Act (EPAct) specified renewable fuel volumes • 2006: 4.0 billion gallons/yr • 2007: 4.7 • 2008: 5.4 • 2009: 6.1 • 2010: 6.8 • 2011: 7.4 • 2012: 7.5 • 2013+: Same percent of renewables for 2012 (0.25 billion gal of which must be cellulosic ethanol) • Each year EPA must convert RFS into percent of gasoline production standards that apply to refiners, importers, gasoline blenders.

5. Relative Value of Different Renewables • EPAct specifies that 1 gal of cellulosic ethanol counts as 2.5 gallons for compliance purposes. • We proposed to base the “Equivalence Value” or credit for other renewables on volumetric energy content in comparison to ethanol (adjusted for renewable content): • Corn-ethanol: 1.0 • Cellulosic biomass ethanol: 2.5 (mandate) • Biodiesel (alkyl esters): 1.5 • Renewable diesel: 1.7 • Biobutanol: 1.3 • Sought comment on life cycle energy, petroleum, or green house gas (GHG) emissions as the basis for these values.

6. Lifecycle GHG differs across renewable fuels • Compared to an energy equivalent amount of gasoline or diesel fuel replaced • Ethanol from corn kernels: 22 % lower GHG • Ethanol from cellulose: 91 % lower GHG • Ethanol from sugar cane: 56 % lower GHG • Biodiesel from soy: 60 % lower GHG • Biodiesel from waste grease: 76 % lower GHG

7. What The Country May Look Like in 2009 9.6 Bgal Ethanol 100% E10 50-100% E10 <10% E10 10-50% E10 Not Pictured AK: 0% ETOH HI: 100% ETOH DC: 100% ETOH

8. Emissions & Air Quality* • Impacts will vary by region, since renewable fuel use varies significantly • Incremental Impacts in 2012 compared to 2004 reference case (Results are from NPRM for RFS)

9. Costs of Renewable Fuels Production & Distribution Costs • Increases in the use of renewable fuels are expected to add 0.3 - 1 c/gal to the cost of gasoline for the nation as a whole at $47/bbl crude)* • For the Final Rulemaking we will assess impacts on market prices of corn and soybeans that might impact the Ag sector economy and the impacts on energy security from reduced imports * Incremental Impacts in 2012 compared to 2004 reference case (Results are from NPRM for RFS)

10. Energy and CO2* • Petroleum consumption in the transportation sector will be reduced 1.0 - 1.6 % • Equivalent to 2.3 - 3.9 billion gal petroleum in 2012 • ~95% of the reduction is estimated to be from imports • Transportation sector greenhouse gases (CO2 equivalent) will be reduced by 0.4 - 0.6 % • Equivalent to 9 - 14 million tons in 2012 • Incremental Impacts in 2012 compared to 2004 reference case (Results are from NPRM for RFS)

11. Next Steps • FRM expected out within a few weeks • Implementation workshop being arranged (NPRA has agreed to organize) • Implementation – the 3 Rs • Registration, Recordkeeping, Reporting • Significantly expanded Renewable and Alternative Fuel Volumes?

12. A Renewable and Alternative Fuel Standard? • The President called for a commitment to reduce petroleum-based gasoline consumption by 15% by 2017 through renewable plus alternative fuels • 15% reduction in 2017 translates into a target of 35B gallons of renewable plus alternative fuel use in transportation system • To reach goal, must consider several issues: • Available fuel feedstock sources • Fueling infrastructure • Appropriate fuelsand fuel blends

13. Available Fuel Sources • Already, ethanol production is expected to outpace the RFS requirements • EIA’s Annual Energy Outlook for 2007 projects 11.2 billion gallons ethanol by 2012 • Domestic corn ethanol will continue to be the most significant source of renewable fuel • Estimated to be 15B gallons maximum by National Corn Growers Association • Optimistic that cellulosic ethanol will begin to contribute to the market over the next decade • Biodiesel will also continue to grow • Other alternatives (e.g. CNG, LPG, CTL, etc.)

14. Fueling Infrastructure • Current ethanol fuels are blends of gasoline and ethanol - E10 and E85 • E10 nationwide would use about 15B gallons • E85 would have to expand significantly for ethanol volumes much higher than 15 billion gallons • Will need to significantly expand the number of pumps from today’s 1100 • Will need to increase number of flexfuel vehicles up from today’s 6M

15. Potential Fuel Blends • E85 may not be our only option • Blends above E10 other than E85 are being discussed for use • Minnesota passed law mandating E20, pending federal approval • Testing of blends by EPA required to ensure • Quality of fuel maintained • Emission standards are met • Use of other blend ratios in FFV’s are possible

16. Future Plans • Desire to design a system that accomplishes two goals: energy security and climate change • Renewable and Alternative Fuels are one part of the solution, but not the only solution • Role of EPA is to use our technical and regulatory expertise to help policy makers implement these goals

17. For Further Information… ww.epa.gov/otaq/renewablefuels/index.htm