today’s agenda - aacog
TRANSCRIPT
Today’s Agenda
9:30 Pamela Burns Clean Cities
10:00 Chris Herbert Good Company
10:45 Break
11:00 Jon Scharingson Renewable Energy Group
12:00 Lunch
1:00 David Carey Bosselman Energy
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Copyright 2011. Renewable Energy Group®
Renewable Energy Group, Inc.
Texas Biodiesel Road ShowJanuary 16-19
Talking Points
• Global/Domestic demand continues to grow
• State incentives will continue to drive where biodiesel is consumed domestically
• RINS continue to be driving factor in biodiesel and advanced biofuels value proposition
• Advanced biofuels additional opportunity.
• REG corporate update
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Growing Domestic Market
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U.S. Biodiesel production in million gallonsGrowing domestic market through RFS2 starting in 2011
1 – Minimum biomass-based diesel obligations of RFS2
Sub-prime market crashes
EUTariffs
Blender’s Tax credit lapses
Blender’s Tax credit reinstated
RFS2 Effective
Source: EIA
14 28 91
250
490
678
506
309
800
1,000
1,280
2003 2004 2005 2006 2007 2008 2009 2010 2011E 2012E 2013E
2011 RFS 2 Balance Table(Biomass Based Diesel D4)
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Source: EPA/EMTS Data, USDA/FASNote: REG Estimate-Deficit, Carry forward and Fraudulent RINs
EMTS RIN DATAD-Code 4
Gallons RIN's
January 37,484,669 56,636,579
February 43,078,114 64,641,517
March 70,118,667 105,581,026
April 74,113,166 111,469,312
May 82,623,007 124,482,904
June 84,910,977 127,962,898
July 94,799,891 143,181,247
August 110,049,084 166,344,830
September 119,038,227 179,161,411
October 120,011,000 180,016,000
November 107,960,000 161,940,000
December
Less Retired RIN's 10,390,418
Total 944,186,000 1,411,027,000
Global Biodiesel Demand 2010-2020
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11+ billion gallon annual market by 2015
State Policy Programs Drive RFS2 Utilization
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Requirement
Incentive
Low Carb Fuels
California
Oregon
Washington
Montana
Idaho
Nevada
UtahColorado
ArizonaNew Mexico
Texas
Oklahoma
Wyoming
Hawaii
Kansas
Nebraska
South Dakota
North Dakota
Tennessee
Kentucky
Minnesota
Iowa
Missouri
Arkansas
IndianaIllinois
WisconsinMichigan
Ohio
Florida
Louisiana
Georgia
S. Carolina
N. Carolina
Mississippi
Alabama
Maine
Virginia
New York
Vermont
New Hampshire
Delaware
Maryland
W. Virginia
Massachusetts
Connecticut
Rhode Island
New Jersey
Source: REG
Legend
Pennsylvania
Biodiesel State Incentives 2011State Incentives – More than 40 states have incentives in place
– Minnesota B5 Mandate effective May 2009– Illinois Tax abatement on B11 biodiesel blends 6.25%– Iowa $0.03/gallon tax income tax credit on gallons including B2– Oregon B5 Mandate effective April 1st 2011– Washington B2 Mandate effective December 2008– Pennsylvania B2 mandate effective January 2010 for transportation fuel – South Carolina $0.25/gallon retailer incentive on B100– Texas $0.20/gallon tax abatement on B100– New Mexico B5 mandate for state fleets effective July 2010, all diesel July 2012– Hawaii Excise tax abatement of 25% on B100 gallons– Louisiana B2 Mandate once 15 mgy of production capacity– Connecticut B2 Heating Oil mandate– New York B2 Heating Oil mandate– Ohio Tax credit to retailers: $ 0.15 in year 1 and $ 0.13 in year 2– Rhode Island Biodiesel is exempt from excise taxes– South Dakota Reduced road tax rate for biodiesel blends– Kentucky Income tax credit of $ 1.00/gall of biodiesel blends– North Carolina Biodiesel is exempt form state sales and use tax– North Dakota Fuel suppliers entitled to a $0.05/gal credit for every gallon of B5 sold– Missouri $0.30/gallon production incentives for first 15m gallons, $0.10/gallon next
15m8
Source: REG analysis
TexasIncentives
• Grants for heavy-duty vehicle replacement, alternative fuel dispensing stations, electrification infrastructure and alternative fuel use
• Grants are available for alternative fuel and advanced technology demonstration and infrastructure projects
• $.20/gallon excise tax abatement per gallon of B100.
• The biodiesel or ethanol portion of blended fuel containing taxable diesel is exempt from the diesel fuel tax.
Fleet Mandate
• State fleets greater than 15 vehicles, excluding emergency and law enforcement vehicles, may not purchase or lease a motor vehicle unless the vehicle uses compressed natural gas, liquefied natural gas, propane, ethanol E85 or greater blends, biodiesel B20 or greater blends or electricity.
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Original RFS2 Volume Requirements
Year Biomass-Based Diesel Advanced Biofuel Cellulosic Total
2010 0.6500 0.600 .100 12.952011 0.800 0.950 .250 13.952012 1.000 1.330 .500 15.22013 1.000 1.830 1.000 16.552014 1.0+, TBD by EPA 2.500 1.750 18.152015 1.0+, TBD by EPA 3.670 3.000 20.502022 1.0+, TBD by EPA 14.000 16.00 36.00
Proposed Modified RFS2 Volume Requirements for Biodiesel
Year Biomass-Based Diesel Advanced Biofuel Cellulosic Total
2010 0.6500 0.600 .100 12.952011 0.800 0.950 .250 13.952012 1.000 1.330 .500 15.22013 1.280*** 1.830 1.000 16.552014 1.280+, TBD by EPA 2.500 1.750 18.152015 1.280+, TBD by EPA 3.670 3.000 20.502022 1.280+, TBD by EPA 14.000 16.000 36.000
***EPA proposed increasing biomass based diesel requirement to 1.28 bil gal in 2013
Why the proposed adjustment to biomass based diesel requirement?•Biodiesel industry demonstrated ability to produce > 1.0 billion gallons•EPA EMTS system reported 119 million gallons produced in September 2011
Other Reasons?•Concerns regarding advanced biofuel industry ability to meet 2012+ volumes
•Biodiesel, renewable diesel, sugar cane ETOH & cellulosic
0.0000
0.5000
1.0000
1.5000
2.0000
2.5000
$/R
IN
AVG Daily RINS Prices
Notes:
RINS are Key Economic Driver
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Why the dramatic volatility in RINS values?Supply and Demand• Obligated parties delayed implementation of blending infrastructure• Distressed biodiesel industry was slow to revive production• Brazilian sugar cane crop shorter than anticipated• Fraudulent RINS Activity
09/14/2011
12/17/2010
Fraudulent RINS ActivityCLEAN GREEN FUELOn November 7, 2011, the Office of Civil Enforcement (OCE) of the U.S. Environmental Protection Agency (EPA) issued Notices of
Violations (NOVs) to 24 companies alleging violations of the Clean Air Act?s Renewable Fuels Standard (RFS) program for using
invalid fuel credits known as Renewable Identification Numbers (RINs) for compliance
(http://www.epa.gov/compliance/civil/caa/fuel-novs.html). More than 32 million RINs are alleged to be invalid because the company,
Clean Green Fuel, LLC (Fuels Programs Company ID 3460 and Facility ID 84000), generated the RINs and neither
produced nor imported any renewable fuel whatsoever. Over 18 million of these RINs were used for compliance by the companies
that received the NOVs.
ABSOLUTE FUELSA Lubbock, Texas, man accused of producing fraudulent biodiesel blending credits sold more than 46 million Renewable Identification
Numbers (RINs) in just more than a year for more than $40 million, according to court documents.
An affidavit states that data from the EPA-Moderated Transaction System (EMTS), designed to serve as a central bank for RINs
transactions, shows that Jeffery Gunselman's company, Absolute Fuels, sold the RINs between Sept. 10, 2010, and Sept. 30, 2011.
The sales represent a purported output of more than 36 million gallons of biodiesel.
The problem, according to documents filed with the U.S. District Court for the Northern District of Texas, is that Absolute Fuels
"produced no bio-diesel after January 2010," yet became a business so lucrative that it led Verna Kell, the company's compliance
officer, to ask, "Where is all this money coming from?"
The Secret Service and the criminal division of the Dallas office of the U.S. EPA have been investigating Absolute Fuels since May
2011. In an affidavit filed in support of seizing assets, the Secret Service's lead agent outlined an alleged pattern of behavior that
indicated that Gunselman sold fraudulent RINs for ever-increasing amounts.
The feds claim that from 2009 through January 2010, Absolute Fuels produced biodiesel legitimately through Double Diamond
Biofuels, a Dimmit, Texas-based plant owned by Glenn Odum. Under the terms of their deal, Absolute Fuels would supply all raw
materials, pay wages for all employees and pay Odom 25cts/gal for biodiesel produced there. During that time, Gunselman's Double
Diamond biodiesel production showed a loss of about $500,000, the feds said, and after January 2010 no more biodiesel was
produced.
Obligated Parties Responsible for Their RINS
EPA Requires Corrected RFS Compliance Reports Within 14 DaysEPA has ordered companies that, unknowingly, used fake credits to meet their 2010 Renewable Volume Obligation (RVO) obligations to submit corrected compliance reports within 14 days or face penalties up to $37,000 per day. On November 7th, EPA issued notices to 24 companies that bought false renewable energy credits from Clean Green Fuels LLC.
According to EPA, the Renewable Identification Numbers (RINs) were invalid “because they do not represent renewable fuel.” “The company that generated these RINs, Clean Green Fuels, neither produced nor imported any biodiesel as is necessary to legally generate those RINs,” EPA said. EPA contends that the use of invalid numbers for compliance was a violation of the Clean Air Act “regardless of that person’s good faith that the RINs were valid at the time they were acquired.” Clean Green Fuels allegedly sold 32 million RINs representing 22 million gallons of biodiesel fuel.
Blenders Tax Credit Current Status
• Federal blenders tax credit expired December 31, 2011.
• Continues to be bi-partisan support for biodiesel industry, and a recognition the industry is not as mature as ethanol industry.
• Biodiesel industry believes that RFS2, blenders tax credit and state incentive are all critical for sustained industry growth.
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Copyright 2011. Renewable Energy Group®
About Renewable Energy Group, Inc.
REG - Leading the Biodiesel Industry
• Largest biodiesel producer in U.S.
– ~ 22% market share in 20101
– Advanced biofuel producer, GHG reductions >70%
• Industry leadership since inception in 1996
• Actively consolidating the industry
– 6 acquisitions in 2010 and 2 in 2011
– Several more in pipeline
• Redefining quality with REG-9000
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REG Company History
Since 1996: First biodiesel plant built in Ralston , IA; SoyPOWER brand established
Ralston becomes United States’ largest
continuous flow plant
WCC launches REG (LLC)
with Todd & Sargent
RalstonBQ-9000
REG (Inc.) formed along with
~$100mm in capital
Acquisition ofUS Biodiesel
Group
$21.7mm investment
American BDF, LLC
REG Revenue in million $Source: REG Data
Clovis Biodiesel, LLC
REG 9000brand launch
Blender’s Tax credit lapses
Sub-prime market crashes
EU tariffs imposed
Blender’s Tax credit reinstated
RFS2 Effective
As of 6/30
1996 … 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011
Revenue
REG Danville (IL)45 MGY, Startup: 11/2008
Desmet Ballestra design and construction
REG upgraded and improved operations
REG Seneca (IL)60 MGY, Acquired: 04/2010Nova Biosource design and
constructionREG completed and improved
operations
REG Emporia (KS)60 MGY, Startup: TBD
REG/Crown Iron Works design and REG construction
REG Houston (TX)35 MGY, Startup: 08/2008
Lurgi design and constructionREG completed and improved
operations
Low free fatty acid feedstock conversion (soy, canola, refined fats)
Low
REG Network of Biodiesel Production
High High free fatty acid feedstock conversion (fats, corn, waste greases)
REG New Orleans (LA)
60 MGY, Startup: TBD
REG/Crown Iron Works design and REG construction
REG Newton (IA)30 MGY, Startup: 5/2007
REG/Crown Iron Works design and REG construction
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REG Ralston (IA)12 MGY, Startup: 3/2003
REG/Crown Iron Works design and REG construction
REG Clovis (NM) 15 MGY, Acquired: 09/2010
ARES design and construction
High
High
Low
Low
TBC To be completed
Low
Low
High
TBC
Low
High
High
Low
TBC
Low
Low
High
TBC
REG Albert Lea (MN)30 MGY, Startup: 8/2005
REG/Crown Iron Works design and REG construction
Low
REG Houston (35 MGY)
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11815 Port Road
Seabrook, TX 77586
BQ 9000 Certified Producer• To become a BQ 9000 certified producer, an internal quality
assurance program must be written and implemented.• This quality system and the plant is reviewed for compliance by an
external auditor.• Plants must also conduct internal audits and regular quality
management review meetings.• Plant must be in production for at least 6 months before the
external audit can be completed.• BQ 9000 status ensures that the producer or marketer is following
best practices.– Doesn’t guarantee that the product being marketed meets product
specifications because the entities may not be following BQ 9000 requirements all the time.
• www.bq-9000.org
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REG-9000® Branded Biodiesel
Note: REG-9000 is a trademark of REG
REG biodiesel is marketed based on fuel characteristics, not the type of feedstock
Purchasing Biodiesel From REG
• 4 Bosselman Energy Tank Locations
– Dallas, Austin, San Antonio & Houston
• REG Houston
• Transport Load Deliveries from REG Houston
• Railcar deliveries throughout the state
REG Contact Details
• Jon Scharingson
– Director of Sales & Marketing
– Office: 515-239-8042
– Email: [email protected]
• Barry Dickerson
– Biodiesel Sales Manager
– Office/Cell: 281-907-0510
– Email: [email protected]
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