The University of Georgia

Transcription

1 The University of Georgia Center for Agribusiness and Economic Development College of Agricultural and Environmental Sciences FEASIBILITY OF A FIVE MILLION GALLON PER YEAR BIODIESEL PLANT Prepared by: George A. Shumaker, Audrey Luke-Morgan and John C. McKissick December, 2006 Feasibility Report: FR-06-05

2 Introduction Mr. Mark Mauss and Dr. Travis Danner co-owners of SunsOil, LLC of Athens, TN contacted the Center for Agribusiness and Economic Development (CAED) at the University of Georgia requesting a feasibility study on plans for producing biodiesel in Georgia. They wanted an opinion as to the feasibility of acquiring an idle former chemical plant and converting it to biodiesel production. The business plan is to acquire by-product fats from the poultry slaughter industry to use as a primary feedstock, produce biodiesel at a projected nominal rate of 5 million gallons per year and market it to fuel wholesalers. Soybean oil may also be used as a feedstock. Future markets include fleet operators and other large scale fuels users. The contents of this report rely heavily upon information provided by SunsOil, LLC and thus the validity of the results reported are dependent upon the accuracy of that information. CAED provided analysis and some basic information concerning some of the production process, potential sources for feedstock and other related background materials. The Company and Management Team SunsOil, LLC is a new venture with the singular goal of producing and marketing biodiesel fuel. SunsOil, LLC was founded in late 2005 by Mr. Mark Mauss and Dr. Travis Danner. Their offices are in Athens, Tennessee. Mr. Mauss, President, has marketed and managed multi-million dollar fuel processing projects for Shell Oil and United Technologies. Those projects extended through the U.S. Europe and Asia. He earned Master s Degrees in Business Administration and Systems Engineering from the University of Virginia. Dr. Travis Danner, Vice President of Engineering and Operations, has worked with Computational Systems, Inc. developing process maintenance reduction systems and with NASA leading clean energy projects. He earned his PhD in Aerospace Engineering from Georgia Institute of Technology where he specialized in energy conversion systems. He grew up on a working farm in East Tennessee. The Concept SunsOil, LLC proposes to secure a suitable site in the North Georgia, North Alabama or Eastern Tennessee area. The ideal site would contain an existing manufacturing plant with equipment that can be adapted for use in biodiesel production. The ideal site would also have rail and truck access and storage suitable for feedstock, process chemicals, finished product and co-products. They intend to develop the site by augmenting it with all needed materials handling equipment, biodiesel processing and storage equipment and load out capabilities. The plan is to commence operations with a ramp up to full operations within 24 months from the date of securing title to the site. Ultimate capacity would be at about 5 million gallons of biodiesel per year at full operation

3 Initial feedstock for the process will be soybean oil which can be purchased from processors within a 150 miles radius of the site. Ideally, the soybean oil can be purchased in rail car quantities and delivered to the plant. After an initial production period for facility shake down, the plan is to switch feedstocks from soybean oil to poultry fat products. SunsOil, LLC believes that sufficient amount of the poultry fat is available and that it can be purchased at a lower price than soybean oil. SunsOil, LLC intends to market the biodiesel close to the manufacturing plant by selling to wholesalers and/or large fleet operators. Potential Feedstock Supplies SunsOil, LLC proposes to begin production by using soybean oil as the primary feedstock. After proving their ability to satisfactorily and profitably produce biodiesel from soybean oil to switch to less costly feedstocks such as fat by-products from the poultry slaughter industry. There are two large soybean processors operating in North Alabama and one in North Georgia. The estimated soybean oil capacity of these three firms is about 152 million gallons annually. These firms would have a more than adequate supply of refined soybean oil to meet the needs of SunsOil, LLC. There are several poultry slaughter and processing facilities in North Georgia and North Alabama. In 2005, Georgia had a poultry slaughter of 1.26 billion young chickens and Alabama a 1.09 billion young chicken slaughter. If each bird provides.5 pounds of fat, then total poultry fat produced in Georgia and Alabama would be million pounds (84.1 million gallons) and million pounds (72.3 million gallons) respectively. Approximately 75 percent of Georgia s and Alabama s broiler production occurs in the Northern half of each state. So the total broiler fat produced in and around the proposed plant is estimated to be million pounds (117.3 million gallons). Each of these sources is currently finding markets for the fats and oils they produce as Georgia does not have excess supplies of unused products. New users, such as biodiesel producers will need to bid those supplies away from the current use. This will surely place some upward pressure on available feedstock prices. SunsOil, LLC could compete for that by product with current users such as poultry feed manufacturers and other biodiesel producers that use that product. Feedstock Costs and Issues The following charts illustrate the price relationships between various potential primary feedstocks sources and some potential future secondary sources

4 Jan-01 Apr-01 Jul-01 Oct-01 Primary Production Feedstocks Jan-02 Apr-02 Jul-02 Oct-02 Jan-03 Apr-03 Jul-03 Oct-03 Jan-04 Apr-04 Jul-04 Oct-04 Jan-05 Apr-05 Jul-05 Oct-05 Jan-06 CD Soy Oil Poultry Fat Yellow Grease RBD Soy Oil Canola Oil Notes: CD Soy oil = Crude soybean oil; RBD Soy oil = Refined, bleached deodorized soybean oil. Source: The JACOBSEN Publishing Company The following chart lists the approximate current FOB prices for various feedstocks that may be used to produce biodiesel in Georgia. Relative Prices for Various Feedstocks October 18, 2006 Feedstock FOB Price Per pound Per Gallon Yellow Grease $ $1.12 Poultry Fat $ $0.97 Crude Soybean Oil $ $1.91 Cottonseed Oil $ $2.11 Refined Soybean Oil $ $2.20 Canola Oil $ $2.79 Source: The JACOBSEN Publishing Company Apr-06 Jul-06 The cost of the feedstock typically comprises 60 to 90 percent of the cost of production depending on the size of the plant, the value of the feedstock and the amount of pre-processing the feedstock needs prior to conversion. Generally, the feedstock percent of total cost will increase with higher priced feedstocks and as the capacity of the plant increases. Under current market conditions, feedstock costs would be higher for a plant using refined soybean oil than a similar plant using less expensive rendered yellow grease. However, often the lower priced feedstock requires extensive pre-processing that - 3 -

5 may off set the lower purchase price. Additionally, lower valued feedstocks may have lower biodiesel yields if they contain higher free fatty acid content and/or other impurities. There are technologies that can convert the free fatty acids into biodiesel but they have somewhat higher capital costs. Another concern when selecting feedstock is the quality of the biodiesel subsequently produced. Some of the lower valued feedstocks tend to produce a biodiesel product with a higher pour point. A layman s definition of pour point would be the temperature at which the biodiesel will not flow. The lower the pour point the better the fuel will flow in cold weather. The implication is that during colder temperatures the biodiesel will not flow and will create problems for users. Minnesota had some problems with the fuel gelling during cold weather in The marketability of the product is thus jeopardized during the colder months. Neither pre-processing nor the biodiesel production process can change the pour point characteristic of the feedstock. There are some issues concerning the future price of yellow grease and poultry fat. Given the current low price of these two products relative to other feedstocks and the rapid growth in biodiesel production, it is expected that their prices will rise relative to other feedstocks as demand strengthens. A second issue revolves around future potential prohibitions on the use of animal fats as feed ingredients. If there is a ban on their use, then demand may weaken and prices could indeed fall. A third issue involves the entire price level for energy in general and natural gas in particular. If energy (natural gas) prices return to the peaks seen during early 2006 or even go higher, then there may be a move to burn the fats and spent oils for fuel as a substitute. This would be an increase in demand and would likely pressure prices higher. These issues highlight the importance of the selection of feedstocks and the resulting decision consequences for plant design and construction. Feedstock Price Risk Management As discussed above, feedstock costs are a major part of the cost of producing biodiesel. Managing the risk of price change will be a priority for the long term success of the business. The major vegetable oils such as soybean oil and canola oil are traded on the major futures market and thus provide the biodiesel producer the opportunity to directly hedge future price risks. The remaining feedstocks currently do not have futures contracts and thus the risk management tools are limited. There may be some ability to cross hedge some of the feedstocks with either soybean oil or canola oil since many of the oil markets seem to move in the same general direction. Further research on this issue is warranted, especially in the case of poultry fats. The general rule for determining whether or not it is possible to cross hedge one commodity with another commodity is that the variance in the basis must be less than the variance in the price of the commodity to be hedged. The basis is defined as the difference in the prices of the two commodities. A smaller variance in the basis than the commodity means that there is a good direct relationship between the prices of the two commodities and less total price risk from a hedge position than in an un-hedged - 4 -

6 position. The following chart illustrates the price relationship between soybean oil and poultry fat over calendar 2006 to date. Given this weekly price data and the brief period, it appears poultry fat can be hedged successfully by using soybean oil. In fact the variance of the basis ($0.0006) is slightly less than the variance in poultry fat ($0.0008). This relationship should be further studied over time. $0.35 Price Relationship - Soybean Oil & Poultry Fat SoyOilFutures Poultry Fat Soy-PFBasis Cents per Pound $0.30 $0.25 $0.20 $0.15 $0.10 $0.05 $- 1/4/06 1/18/06 2/1/06 2/15/06 3/1/06 3/15/06 3/29/06 4/12/06 4/26/06 5/10/06 5/24/06 6/7/06 6/21/06 7/5/06 7/19/06 8/2/06 8/16/06 8/30/06 9/13/06 9/27/06 10/11/06 10/25/06 11/8/06 11/22/06 12/6/06 Another viable price risk management tool would be to secure long term contracts for feedstock with the price tied to one of the major oil futures contracts. That would be a type of cross hedging although forward contacting is not widespread at this time. Innovative thinking is needed to discover ways to manage the risk of changing feedstock prices. The possibility of joint ownership or a joint venture of some form with a feedstock provider would provide assurance of supply and open avenues for price management as well. The Product Biodiesel is a fuel product produced from various vegetable oils and animal fats by the trans-esterification and/or esterification processes. It is commonly blended with petroleum diesel and used in all forms of diesel engines. Biodiesel has many advantages as a fuel supplement including increased lubricity especially with low sulfur diesel fuels, is a clean burning fuel that is also non-toxic and biodegradable and its use improves air quality

7 Exhaust emission of many of the most harmful materials are reduced by the use of biodiesel. A 2002 Test Report from the EPA illustrates the reduction in the following chart. The highest reductions in harmful emission occurred at the highest rates of biodiesel in the fuel blend. However, in common practice, biodiesel is typically blended at the lower end of the scale with good benefits obtained at even a 2 percent blend. Most new model diesel engines and many late model engines can run on biodiesel blends with no modification needed. Some older model engines may suffer from seal and other rubber part deterioration. Biodiesel manufactured for sale must meet ASTM 6751 standards (American Society for Testing and Materials). It is easily and readily blended with petro-diesel at any step along the marketing channel for fuel. EMISSIONS BENEFITS OF BIODIESEL 20 Percent Change Nitrus Oxide Particulate Matter Hydrocarbons Carbon Monoxide Volatile Organic Compounds Sulphur Oxide % 20% 100% Percent Biodiesel Source: EPA, 2002 Biodiesel Emissions Test Report The Market and Competition According to the Department of Energy, the combined use of fuel oil for transportation purposes in the states of Georgia, Alabama and Tennessee for 2004 totaled about 3.79 billion gallons with 1.578, and billion gallons for each of the states, respectively. There is an estimated additional non-highway use of about 2.26 billion gallons for a total market of just over 6 billion gallons. Biodiesel can be said to be a direct competitor to diesel in the market place and thus the potential market could be that same amount. In more practical terms however, biodiesel is most likely to be a complementary product to diesel fuel and thus its potential market is some percentage of that total market. A practical estimate of the market might be when biodiesel is used at a - 6 -

8 2 percent blend or B2. Using B2 as the use level, then the total estimated market for the states of Georgia, Alabama and Tennessee would be about 120 million gallons. The proposed plant of SunsOil, LLC would produce about 4 percent of the total available market for the three state area. The market for biodiesel is open and rapidly finding acceptance by consumers. Current concerns over high fuel prices and both Federal and State efforts to improve air quality by reducing exhaust pipe emissions have created a market for the product. Concerns of international fuel supplies have also encourage buyers to seek out domestically produced fuels and the renewability factor of biodiesel is also a plus for marketing efforts. The biodiesel production industry is in the early stages of development here in the U.S. although biodiesel is widely used in Europe. The National Biodiesel Board estimates that production and sales of biodiesel are growing very rapidly as illustrated in the chart below. The above concerns on the part of consumers along with subsidies from the Federal and in some cases the States fuel the growth in biodiesel production. Under current Federal legislation, blenders of biodiesel into the fuel supply receive a tax credit of $1.00 per gallon of neat (pure) biodiesel made from virgin oils and a 50 cent per gallon credit on neat biodiesel made from reused oils such as yellow grease. This subsidy is passed along back to the producer through the pricing process. The Renewable Fuels Standards require the use of biofuels in increasing percentages in certain areas of the country, especially those with air pollution problems. This provision creates a market for biodiesel by Federal mandate. Million Gallons Estimated & Projected US Biodiesel Sales Source: Frazier Barnes and Associates Competing Biodiesel Production According to the National Biodiesel Board there are two producers of biodiesel in Rome, Georgia; Peach State Labs and U.S. Biofuels, Inc with an estimated capacity of about 14 million gallons per year. The NBB also indicates there is a producer located in - 7 -

9 Moundsville, AL but does not estimate their production level and list two producers in Tennessee, Agri-Energy, Inc in Louisburg and NuOil in Counce with a combined capacity of 6.5 million gallons per year. The author also located a small producer in the Atlanta area named VegEnergy Biofuels with an estimated annual production of less than 100,000 gallons. The current total estimated production capacity of the competition in the three state area is about 16.5 million gallons, but that could more than double in one year s time. Their combined current production would satisfy about 14 percent of the potential market demand using the B2 standard discussed above. The Southeast Farm Press reported that a group plans to construct a 60 million gallon per year plant near Columbus, GA with a scheduled ground breaking in late A cotton seed crusher in the Tifton area is exploring construction of a biodiesel production facility, presumably to use cotton seed oil as the feedstock. The capacity of this proposed plant in unknown. Another proposed operation named BullDog BioDiesel in Ellenwood, GA, near the Atlanta metro area, plans to use yellow grease and other oils for feedstock. Its proposed capacity is 15 million gallons per year. If these plants were to come on line within the next year, the combined supply to the B2 market would be about 90 percent filled, but that does not imply there would not be a viable market for additional biodiesel. It does imply that there could be some price pressure from the increased production capacity. Governmental Support for Biodiesel Production The 2005 Energy Act provides a significant incentive to produce and distribute biodiesel in the United States. The biodiesel tax credit provides diesel fuel distributors 1 cent for each percent of biodiesel blended with petroleum diesel fuel up to $1.00 per gallon for biodiesel produced from virgin feedstocks such as vegetable oil and animal fat. The incentive for non-virgin based biodiesel is 50% of the virgin rate. Non-virgin feedstock would include yellow grease or recycled vegetable oil from restaurants. A major portion of this incentive is typically reimbursed to the biodiesel producer from the blender in the form of higher payments for the biodiesel (effectively paying market prices). This study assumes that 95 percent of the incentive is returned to the producer and is in tune with current industry practices and is included in the B100 Sales Price line item in the biodiesel pro formas below. In Georgia, state agencies and departments are required to prioritize the procurement of high fuel efficiency and flexible fuel vehicles when such technologies are commercially available and economically practical. Additionally, all state-owned refueling facilities are required to maximize the purchase of gasoline blended with ethanol and diesel fuel blended with biodiesel for use in state vehicles, when available and economically practical. Furthermore, the Georgia Environmental Facilities Authority, Division of Energy Resources is required to lead a statewide stakeholder process to develop a Comprehensive State Energy Strategy to be completed by December 15, (Reference Executive Order , 2006) - 8 -

10 Marketing Strategy The proposed marketing strategy is to market the neat biodiesel of B100 through regional petroleum fuel distributors. SunsOil, LLC will also seek out large fleet operators and attempt to market direct to them. Any biodiesel produced in excess of what can be sold through the above outlets will be sold through fuel brokers. Pricing Strategies SunsOil, LLC recognizes that biodiesel is a commodity product that will compete for market access with biodiesel produced by regional competitors and with petroleum diesel fuel. Biodiesel produced by SunsOil, LLC is not a product that can be effectively differentiated from that produced by competitors and thus provided no pricing leverage unique to SunsOil, LLC. Price levels are determined by supply and demand for diesel fuel in general as well and supply and demand for biodiesel in particular. Prices can also be impacted by Government policy at both the state and federal levels and these policies are considered to be beyond influence by SunsOil, LLC. International events can and will also impact prices. For all practical purposes, SunsOil, LLC is considered a price taker of a commodity product. Price levels within the industry are typically based upon prices collected and reported by both public and private industry analysts. Sales prices are typically based upon these reported price levels. Market Channels for Biodiesel The market for biodiesel can be broken down into segments such as wholesale, retail and the government/public sectors. Producers can sell to each or all of these segments but should strive to maximize the retail and government sectors due to higher margins and the potential for long term commitments. Wholesale Marketers: The wholesale market is dominated by a few large firms, for example World Energy and West central. There may be smaller wholesale outlets available with small market potentials. World Energy specializes in biodiesel marketing and distribution. The advantages of wholesale sales include wider market penetration potential and a reduced need for a sales staff. The primary disadvantage to wholesale selling is that per unit margins will be less than other alternatives. Retail Distributors: Rather than retailing the biodiesel direct to the fuel tank, retail sales concentrates on selling direct to business that put the fuel into the consumer s tanks. Examples would be fueling stations, oil companies, independent gas station owners, marinas and fleet operators. The producer will need a sales staff to develop and service the market and this requires extensive effort and experienced personnel. Retail sales may offer a higher per unit margin but sales costs will be higher as well

11 Government/Public Sector: Local, state and national governments all use plenty of fuel. Many military and other federal agencies are directed to purchase renewable fuels when available at competitive prices. Local school districts are large diesel users. The advantages of selling to these outlets are the possibility of long term contracts and retail-like margins. Quality of the product and assurance of supply are integral to repeat sales. Biodiesel produced in Georgia can reach a wide and diverse market. A firm that has the ability to supply the market via both truck and rail will be positioned to take advantage of all the potential market outlets. Any plant should have rail access to be competitive over the long term. Export Potential There is a potential for biodiesel export sales from Georgia. Georgia s east coast position with major port facilities in both Savannah and Brunswick create an opportunity to sell biodiesel abroad. The European Union is projected to use about 1.8 billion gallons of biodiesel during 2006 and expectations that consumption will increase in the future. Further research on export market access is warranted. There is an unknown quantity of Georgia produced biodiesel that has been (and is being) sold into the European market but the details of the transactions are closely held by the producer. Biodiesel Prices The following chart illustrates the FOB producer price of biodiesel quoted for the Southeast U.S. for calendar year 2006 to date. As can be seen, FOB producer biodiesel prices have risen over that period from about $2.50 per gallon to around $3.00 per gallon. There also appears to be a strong direct relationship between biodiesel prices in the Southeast and crude oil prices. During the period shown on the chart crude oil prices were at about $48 per barrel in February 2005 and rose to a peak of about $74 in July Biodiesel prices tracked that rise although not in the same percentage terms. Crude oil rose about 54 percent while biodiesel rose only about 20 percent. This relationship may provide insight into the general direction of biodiesel prices as crude oil prices change. Biodiesel would seem to rise in price with crude oil but will likely decline as well if crude oil prices fall. Some market observers have indicated that biodiesel price risk could be managed by hedging against crude oil futures. The basis is plotted on the following chart indicating a good relationship between the two markets. The variance in the basis ($0.0129) is less than the variance for SE biodiesel prices ($0.0162) indicating that at least over this time period, hedging would not reduced total price risk

12 Price Relationship - Biodiesel vs Light Crude Oil Biodiesel Light Crude Oil Basis $3.500 $3.000 $2.500 $ per Gallon $2.000 $1.500 $1.000 $0.500 $- 1/4/06 1/18/06 2/1/06 2/15/06 3/1/06 3/15/06 3/29/06 4/12/06 4/26/06 5/10/06 5/24/06 6/7/06 6/21/06 7/5/06 7/19/06 8/2/06 8/16/06 8/30/06 9/13/06 9/27/06 10/11/06 10/25/06 11/8/06 11/22/06 12/6/06 It has been reported by The Jacobson Company that some Midwestern biodiesel producers have negotiated basis contacts with buyers using the heating oil futures contract on the NYMEX with a basis of $1.00 per gallon. The following chart demonstrates that price relationship over calendar year 2006 to date. The relationship appears to be a good fit over this time period the variance of the basis ($0.0123) was less than the variation in SE biodiesel prices ($0.0162) meaning that price risk could be reduced for SE biodiesel producers

13 Price Relationship - SE Biodiesel vs Heating Oil SEB100 NYMEXHeatingOil Basis $3.500 $ per Gallon $3.000 $2.500 $2.000 $1.500 $1.000 $0.500 $- 1/4/06 1/18/06 2/1/06 2/15/06 3/1/06 3/15/06 3/29/06 4/12/06 4/26/06 5/10/06 5/24/06 6/7/06 6/21/06 7/5/06 7/19/06 8/2/06 8/16/06 8/30/06 9/13/06 9/27/06 10/11/06 10/25/06 11/8/06 11/22/06 12/6/06 FOB producer prices for biodiesel in the Southeast are not greatly different from other parts of the country according to the following chart and they track the trends seen in other parts of the U.S. The case of the FOB price decline for the upper Midwest during the late fall of 2005 and into early 2006 was the result of the gelling problem observed. Prices sagged as demand dried up until the problem was addressed and solved

14 Dollars Per Gallon Historical B100 Producer FOB Prices By Region Nov-06 Oct-06 Sep-06 Aug-06 Jul-06 Jun-06 May-06 Apr-06 Mar-06 Feb-06 Jan-06 Dec-05 Nov-05 Oct-05 Sep-05 Aug-05 Jul-05 Jun-05 May-05 Apr-05 Mar-05 Feb-05 Northeast Southeast Upper Midwest Lower Midwest West Coast Source: The JACOBSEN Publishing Company Currently biodiesel prices can be found both above and below petro-diesel prices as the market looks for a firm price relationship. As production and thus supply of biodiesel increases and its notion as a boutique fuel declines, it is likely there will be some price pressure. Industry observers feel that biodiesel must ultimately be priced competitively with petro-diesel in order to assimilated large volumes of biodiesel into the on-road market. Biodiesel price risk cannot be hedged directly at present as there is no futures market contract for biodiesel. There is the possibility of cross hedging using the heating fuel futures contract to manage price risk. Another alternative is to secure long term contracts although there is little evidence this method is widely used in the industry. Prices and Markets for the Co-Product Glycerin The primary co-product from biodiesel production is glycerin. The amount produced will be about 10 percent of the volume of biodiesel produced. The crude glycerin produced must be cleaned and concentrated in order to command good market prices. Glycerin is a very versatile product that has many uses as an ingredient in many products including cosmetics, toiletries, drugs and food products. It has many valuable properties including being a good moisturizer, plasticizer, emollient, thickener, solvent, dispersing medium, lubricant, sweetener and an anti-freeze agent. It has over 1,500 known uses. The glycerin suitable for the above uses must be stringent requirements of the U.S. Pharmacopeia (USP) and the Food Chemicals Codex (FCC). There is also a market for lower grade glycerin but at a substantially discounted price. A good working number

15 for the value of USP & FCC grade glycerin is around $0.20 per pound. Crude, nonrefined glycerin has a working price of around 2 to 3 cents per pound. At these price levels, the refining of glycerin is not economically feasible for plants less the 20 million gallons of biodiesel production. Financial Analysis The pro forma financial statements were prepared based upon the following assumptions: 1. The majority of the information for the analysis was provided by SunsOil, LLC and thus the accuracy of the analysis is predicted upon the accuracy of the information provided. 2. The base model assumes the plant operates at stated capacity of 5 million gallons of production for one year. The entire production is of market quality and can be sold at the assumed market price. 3. Prices for biodiesel, feedstocks and other inputs are assumed to be at or very near the levels readily attainable. 4. Capital cost expenditures are an estimated total value and are not based on a firm commitment for any given biodiesel equipment supplier. 5. Depreciation is based on 15 year, straight line basis of the estimated capital cost. Capital Expenditures SunsOil, LLC estimates that a total of $5.2 million will be expended to purchase land, buildings, storage tanks, process equipment and start-up capital for their biodiesel facility. It should be noted that this is just a preliminary estimate subject to change depending upon the actual site selected. The authors believe this estimate is on the low side based on what has been shown as the average estimated capital costs in many recent feasibility studies. An average multiple of 1.35 times the projected capacity was observed from thirteen studies. That multiple would imply a total capital requirement of about $6.75 million for the proposed 5 million gallon per year plant. It is possible to construct an efficient plant lower than the estimates cited above given an ideal site with considerable second hand equipment in good working condition. Many of the facilities in the studies used were turn key facilities from biodiesel facility supply firms, some of which contain capacity and quality guarantees. It is possible to construct a very satisfactory and successful operation using second hand and refitted equipment. SunsOil, LLC may well possess the ability to accomplish that. Economic Feasibility The first test of a proposed venture is whether or not it can return a fair market value return to the resources used to create a product. The resources used are essentially land, labor, capital and management. Each of these resources should be paid a fair market value. Land is included in the capital resource and is paid a 7 percent return

16 Labor is included in the production cost at the assumed wage rate and management receives a return equal to 5 percent of the total capital expenditure. The remaining returns, if positive indicate that the venture has a true economic feasibility of success. The following tables illustrate the Economic Feasibility of the proposed SunsOil, LLC venture when using Soybean Oil and Stabilized Poultry Fat as feedstocks. FEASIBILITY OF A 5 mmgal PER YEAR BIODIESEL PLANT ECONOMIC COSTS AND RETURNS SunsOil, LLC Soybean Oil Revenue Year 1 Year 2 Year 3 $2.75 per gallon $2,508,000 $10,341,225 $15,809,805 $0.02 per pound $18,392 $75,836 $115,939 Total $2,526,392 $10,417,061 $15,925,744 Production Costs Feedstock Costs $1,716,000 $7,075,575 $10,810,800 Processing Costs $303,996 $1,253,465 $1,915,175 Labor $618,000 $781,614 $820,695 Repairs and Maintenance $37,347 $153,992 $235,285 Insurance $13,200 $54,428 $83,160 Marketing and Freight $26,400 $108,855 $166,320 Other, G&A $28,160 $108,877 $163,368 Total Production Cost $2,743,103 $9,536,806 $14,194,803 Fixed Costs Depreciation 214,264 $279,431 $279,431 Return to all 7% $148,539 $182,751 $182,751 Return to 5% $212, ,073 $261,073 Total Fixed Costs $575,001 $723,255 $723,255 Total Economic Cost of Operation $3,318,104 $10,260,062 $14,918,058 Economic Return Before Income Taxes -$791,712 $156,999 $1,007,685 Return on Investment Before Income Taxes -18.2% 2.9% 18.8%

17 FEASIBILITY OF A 5 mmgal PER YEAR BIODIESEL PLANT ECONOMIC COSTS AND RETURNS SunsOil, LLC Stabilized Poultry Fat Revenue Year 1 Year 2 Year 3 per gallon $2,508,000 $10,341,225 $15,809,805 per pound $18,392 $75,836 $115,939 Total $2,526,392 $10,417,061 $15,925,744 Production Costs Feedstock Costs $1,223,200 $5,043,615 $7,706,160 Processing Costs $303,996 $1,253,465 $1,915,175 Labor $618,000 $781,614 $820,695 Repairs and Maintenance $37,347 $153,992 $235,285 Insurance $13,200 $54,428 $83,160 Marketing and Freight $26,400 $108,855 $166,320 Other, G&A $28,160 $108,877 $163,368 Total Production Cost $2,250,303 $7,504,846 $11,090,163 Fixed Costs Depreciation $214,264 $279,431 $279,431 Return to all 7% $148,539 $182,751 $182,751 Return to 5% $212,198 $261,073 $261,073 Total Fixed Costs $575,001 $723,255 $723,255 Total Economic Cost of Operation $2,825,304 $8,228,102 $11,813,418 Economic Return Before Income Taxes -$298,912 $2,188,959 $4,112,325 Return on Investment Before Income Taxes -6.9% 40.9% 76.8% The venture appears to be economically feasible after the first year of operation when production ramps up to about 3.5 million gallons per year when using soybean oil and poultry fat as feedstocks. The operation covers all economic costs of operation and generates a positive return. Pro Forma Income Statements A pro forma income statement shows the financial feasibility of a venture by estimating the actual costs of production and revenue flows. The following pro forma is based on the first three years of operation at capacities and assumes all production is acceptable and sold into the market

18 PRO FORMA INCOME STATEMENT SunsOil, LLC Soybean Oil Revenue Year 1 Year 2 Year 3 $2.75 $2,508,000 $10,341,225 $15,809,805 $0.02 $18,392 $75,836 $115,939 Total $2,526,392 $10,417,061 $15,925,744 Production Costs Feedstock Costs $1,716,000 $7,075,575 $10,810,800 Process Costs Methanol $198,000 $816,413 $1,247,400 Catalyst $54,120 $223,153 $340,956 Natural Gas $20,196 $83,274 $127,235 Electricity $3,630 $14,968 $22,869 Water/Sewer $1,650 $6,803 $10,395 Labor $618,000 $781,614 $820,695 Repairs and Maintenance $37,347 $153,992 $235,285 Insurance $13,200 $54,428 $83,160 Marketing and Freight $26,400 $108,855 $166,320 Other, G&A $28,160 $108,877 $163,368 Total Production Cost $2,716,703 $9,427,951 $14,028,483 Fixed Costs Depreciation $214,264 $279,431 $279,431 Interest on Long Term Debt $282,931 $348,098 $348,098 Total Fixed Costs $497,195 $627,528 $627,528 Total Cost of Operation $3,213,898 $10,055,480 $14,656,012 Return Before Income Taxes -$687,506 $361,581 $1,269,732 Return on Equity Before Income Taxes -48.6% 20.8% 73.0%

19 PRO FORMA INCOME STATEMENT SunsOil, LLC Stabilized Poultry Fat Revenue Year 1 Year 2 Year 3 $2.75 per gallon $2,508,000 $10,341,225 $15,809,805 $0.02 per pound $18,392 $75,836 $115,939 Total $2,526,392 $10,417,061 $15,925,744 Production Costs Feedstock Costs $1,223,200 $5,043,615 $7,706,160 Process Costs Methanol $198,000 $816,413 $1,247,400 Catalyst $54,120 $223,153 $340,956 Natural Gas $20,196 $83,274 $127,235 Electricity $3,630 $14,968 $22,869 Water/Sewer $1,650 $6,803 $10,395 Labor $618,000 $781,614 $820,695 Repairs and Maintenance $37,347 $153,992 $235,285 Insurance $13,200 $54,428 $83,160 Marketing and Freight $26,400 $108,855 $166,320 Other, G&A $28,160 $108,877 $163,368 Total Production Cost $2,223,903 $7,395,991 $10,923,843 Fixed Costs Depreciation $214,264 $279,431 $279,431 Interest on Long Term 10% $282,931 $348,098 $348,098 Total Fixed Costs $497,195 $627,528 $627,528 Total Cost of Operation $2,721,098 $8,023,520 $11,551,372 Return Before Income Taxes - $194,706 $2,393,541 $4,374,372 Return on Equity Before Income Taxes -13.8% 137.5% 251.3% Note: Interest is based on the amortization of two-third of the estimated capital cost at 10 percent interest for 5 years. Based on the data provided along with some minor supplementary additions and adjustments by the authors, it appears that the venture is financially feasible when production ramps up to about 3.5 million gallons per year. The first year for the venture is not financially feasible due to the low production level

20 Cash Flows Requirements When poultry fat is used as the feedstock, the venture will not have any problems cash flowing. However, when high priced soybean oil is used as the feedstock the business will not cash flow given the negative financial returns. Added capital or further borrowing will be required to cover cash flows until production ramps up in the third year of operation to profitable levels. See the following five year annual cash flow summaries

21 Pro Forma Statement of Cash Flows for 5 MMGPY using Soybean Oil Operations: Begin Year 1 Year End 1 Year 2 Year 3 Year 4 Year 5 Net Income $ (702,042) $ 241,864 $ 1,197,884 $ 1,360,221 $ 1,258,899 Depreciation $ 214,264 $ 279,431 $ 279,431 $ 279,431 $ 279,431 (Increase) Decrease in Accounts Receivable (Increase) Decrease in Inventories (Increase) Decrease in Other Current Assets Increase (Decrease) in Accounts Payable Increase (Decrease) in Other Current Liabilities Increase (Decrease) in Other Non Current Liabilities Cash Flow from Operations $ - $ (487,778) $ 521,295 $ 1,477,315 $ 1,639,652 $ 1,538,330 Investing: (Acquisition) of Property, Plant & Equipment $ (3,343,963) $ (977,500) Other Assets Cash Flow from Investing $ - $ (3,343,963) $ (977,500) $ - $ - $ - Financing: Increase (Decrease) in Short-term Borrowing Increase (Decrease) in Long-term Debt $ 2,829,308 $ (459,107) $ (507,181) $ (560,289) $ (618,959) $ (683,772) Increase (Decrease) in Contributed Capital $ 1,414,654 $ 325,833 Dividends Cash Flow from Financing $ 4,243,963 $ (459,107) $ (181,348) $ (560,289) $ (618,959) $ (683,772) Net Change in Cash $ (4,290,847) $ (637,552) $ 917,025 $ 1,020,693 $ 854,557 Cash--Beginning of Year $ 4,243,963 $ (46,884) $ (684,437) $ 232,589 $ 1,253,282 Cash--End of Year $ (46,884) $ (684,437) $ 232,589 $ 1,253,282 $ 2,107,839

22 Pro Forma Statement of Cash Flows for 5 MMGPY using Stabilized Poultry Fat Operations: Begin Year 1 Year End 1 Year 2 Year 3 Year 4 Year 5 Net Income $ (209,242) $ 2,273,824 $ 4,302,524 $ 4,602,353 $ 4,642,779 Depreciation $ 214,264 $ 279,431 $ 279,431 $ 279,431 $ 279,431 (Increase) Decrease in Accounts Receivable (Increase) Decrease in Inventories (Increase) Decrease in Other Current Assets Increase (Decrease) in Accounts Payable Increase (Decrease) in Other Current Liabilities Increase (Decrease) in Other Non Current Liabilities Cash Flow from Operations $ - $ 5,022 $ 2,553,255 $ 4,581,955 $ 4,881,783 $ 4,922,210 Investing: (Acquisition) of Property, Plant & Equipment $(3,343,963) $ (977,500) Other Assets Cash Flow from Investing $ - $(3,343,963) $ (977,500) $ - $ - $ - Financing: Increase (Decrease) in Short-term Borrowing Increase (Decrease) in Long-term Debt $ 2,829,308 $ (459,107) $ (507,181) $ (560,289) $ (618,959) $ (683,772) Increase (Decrease) in Contributed Capital $ 1,414,654 $ 325,833 Dividends Cash Flow from Financing $ 4,243,963 $ (459,107) $ (181,348) $ (560,289) $ (618,959) $ (683,772) Net Change in Cash $(3,798,047) $ 1,394,408 $ 4,021,665 $ 4,262,824 $ 4,238,438 Cash--Beginning of Year $ 4,243,963 $ 445,916 $ 1,840,323 $ 5,861,989 $10,124,813 Cash--End of Year $ 445,916 $ 1,840,323 $ 5,861,989 $10,124,813 $14,363,250

23 Sensitivity Analysis The previous sections provided an analysis of the proposed venture in static form and with strict assumptions of unchanged parameters. This section explores the impact upon net income when a single parameter is allowed to vary while all others are held constant. Plant production is assumed to be at 5 million gallons per year. One of the most significant factors impacting net income is the price paid for the feedstock used to produce biodiesel. When soybean oil is used as the feedstock, it represents nearly 69 percent of total production costs. So, even small changes in feedstock costs can have a large impact upon profitability. The following two figures, one for soybean oil and one for poultry fat feedstock prices demonstrate how changes in price change projected net income. Net Income vs Feedstock Price Soybean Oil Net Income $4,000,000 $2,000,000 $- $(2,000,000) $1.46 $1.56 $1.76 $1.85 $1.95 $2.05 $2.15 Feedstock Price $2.34 $2.44 One can see that if soybean oil could be secured at a price below $2.15 per gallon (about 29 cents per pound), all else held constant, then the venture would generate a positive net income. At soybean oil prices above $2.15 per gallon, the venture is not likely to be profitable as envisioned. The case where poultry fat is used as the feedstock is quite different. Positive net incomes are likely to be generated over a wide range of prices. The following chart illustrates net income with both a 25 percent increase and decrease in price from the assumed $1.15 per gallon cost

24 Net Income Net Income vs Feedstock Price Poultry Fat $6,000,000 $4,000,000 $2,000,000 $- $1.04 $1.11 $1.25 $1.32 $1.39 $1.46 Feedstock Price $1.53 $1.67 $1.74 The second major variable impacting biodiesel profitability is the sales price received. The two following charts illustrate the impact on net incomes of changes in the sales price, one each for soybean oil and one for poultry fat feedstocks. Net Income vs Biodiesel Price - Soybean Oil $5,000,000 $4,000,000 Net Income $3,000,000 $2,000,000 $1,000,000 $- $(1,000,000) $(2,000,000) $(3,000,000) $2.14 $2.28 $2.57 $2.71 $2.85 $2.99 $3.14 $3.42 $3.56 Biodiesel Price If the venture could secure a selling price of $2.66 per gallon or better when using soybean oil as a feedstock, it could generate positive net income. Negative net income would result for a sales price lower than $2.66 per gallon

25 Net Income vs Biodiesel Price Poultry Fat Net Income $8,000,000 $6,000,000 $4,000,000 $2,000,000 $- $2.14 $2.28 $2.57 $2.71 $2.85 $2.99 $3.14 $3.42 $3.56 Biodiesel Price The breakeven sales price of biodiesel when produced from poultry fat would be about $2.10 per gallon. Any price above $2.10 would result in positive net incomes. Summary and Conclusions SunsOil, LLC seeks to enter into the biodiesel production business with a small scale, primarily self built 5 million gallon per year plant. There is a good market potential in the three state areas of Eastern Tennessee, North Georgia and Northern Alabama. Currently there are strong biodiesel prices buoyed by the over all strong prices for petroleum fuel products. It appears there will be some major larger scale competitors entering the market in the near future. These new entrants with large scale plants may well have a competitive advantage of the SunsOil, LLC proposal. The business plan appears solid when poultry fat is used as the feedstock for the plant. Feedstock cost would represent only about 67 percent of total production costs which is near the industry average for all feedstocks. Processing costs of about $0.70 per gallon are well below what might be expected of similar sized operations ($1.02 per gallon). The venture as presented is both economically and financially feasible when poultry fat or soybean oil are used as a feedstock when production is above 3.5 million gallons per year. If SunsOil, LLC decides to pursue this or a similar venture it should strive to secure a confirmed source of feedstock. As the industry matures, many of the newer entrants will be of much larger size and will have a purchasing advantage over smaller operations such as the SunsOil, LLC proposal. Securing a source of feedstock will be critical. SunsOil, LLC should also consider the size of the operation. Industry analysts have indicated the size of proposed entrants has increased rapidly over the last two years

26 According to the National Biodiesel Board, the industry trade association, the average proposed plant size has increased from about 14 million gallons capacity in 2005 to about 22 million gallons in the fall of Clearly the trend is to bigger plants. SunsOil, LLC should carefully weight the advantages and disadvantages of building their own plant versus purchased turn key modular ready to run plants. The former model may be constructed with lower capital costs but will take longer to get on line and may have a considerable debugging period. The latter model may cost a little more but can be brought on line quickly with a guaranteed process and quality product ability. Once the plant is operating, the capital cost service is a relatively small portion of total production costs. Any anticipated savings on capital outlays can be quickly lost due to production lags or if the quality of product suffers from design flaws

27 Keys to Success The keys to success in the biodiesel business are: 1. Securing an assured source of feedstock at competitive prices. 2. Using good price risk management tools to reduce price risk exposure on both the buying and selling side. 3. Producing a quality product that meets ASTM standards all the time. 4. Hiring and retaining a quality labor force dedicated to producing and selling a quality product at minimum cost. 5. Operating the plant at near maximum safe operating capacity. 6. Maintaining good business relationships with all suppliers and associated businesses as well as all purchasers of the product. 7. Continuation of the Federal $1.00 per gallon subsidy on biodiesel production. 8. Getting up and running in as short of a time frame as possible

28 Economic Impact of Biodiesel Production in Gwinnett County A proposed plant for biodiesel production in Gwinnett County would lead to economic activity throughout Georgia. Construction activity leads to one-time impacts during the period of building the plant. Production generates annual impacts due to purchasing of inputs for manufacturing biodiesel. Construction costs for the plant total $2.795 million dollars, not including land and other capital contingency funds. Plant officials expect revenues of $14.25 million from 5 million gallons of biodiesel and $104,500 in sales of crude glycerin as a by-product for total annual revenues of $ million. Officials of the proposed plant state that feedstock will be poultry fat from Georgia and Alabama. Principles of Economic Impact Analysis Economic impacts can be estimated with input-output models (IMPLAN) that separate the economy into various industrial sectors such as agriculture, construction, manufacturing, trade, and services. The input-output model then calculates how a change in one industry changes output, income, and employment in other industries. These changes, or impacts, are expressed in terms of direct and indirect effects. Impacts are interpreted as the contribution of the enterprise to the total economy. Direct effects represent the initial impact on the economy of either construction or operations of an enterprise. Indirect effects are changes in other industries caused by direct effects of an enterprise and include changes in household spending due to changes in economic activity generated by direct effects. Thus, the total economic impact is the sum of direct and indirect effects. Input-output analysis can interpret the effects of an enterprise in a number of ways including output (sales), labor income (employee compensation and proprietary income), employment (jobs), and tax revenue. Economic impacts result from a multiplier effect that begins with expenditures of an enterprise stimulating business to business spending, personal income, employment, and tax revenue. IMPLAN models include a regional purchase coefficient (RPC) for each impact variable that represents percentage of demand that is satisfied by production within an impact area. Enterprises vary in their multiplier effects due to differing expenditure levels, RPC s, and sectors in which their expenditures are directed. Impact analysis involves quantification of spending levels and proper allocation to impacted sectors. Output impacts are a measure of economic activity that results from enterprise expenditures in a specific industrial sector. Output is equivalent to sales, and this multiplier offers insights into how initial economic activity in one sector leads to sales in other sectors. Personal income impacts measure purchasing power that is created due to the output impacts. This impact provides the best measure of how standards of living are affected for residents in the impact area. An enterprise involves a specified number of employees that is determined by the technology of the enterprise. Employment multipliers indicate the effect on employment resulting from the enterprise initiating economic activity. IMPLAN indirect employment

29 includes both full-time and part-time jobs without any distinction. Jobs calculated within an IMPLAN industrial sector are not limited to whole numbers and fractional amounts represent additional hours worked without an additional employee. With no measure of hours involved in employment impacts, IMPLAN summations for industrial sectors which include fractional employment represent both jobs and job equivalents. Since employment may result from some employees working additional hours in existing jobs, instead of terming indirect employment impacts as creating jobs, a more accurate term is involving jobs or job equivalents. Economic Impacts of Biodiesel Plant Construction One-time economic impacts of plant construction are presented in Table 1. Direct impact of $1.629 million is less than construction costs of $2.795 million due to leakages outside of the Georgia economy caused by purchases of some construction items in other states. Construction of the plant involves 13 jobs with wages and benefits of $616,386. Direct jobs are equivalents based on the structure of the Georgia economy, and the actual number of individuals involved in construction may be greater than the 13 indicated by the direct employment impact. Indirect output is $1.284 million for a total output impact of $2.913 million. Indirect employment and labor income impacts lead to total labor income of $1.038 million for 24 jobs, or $43,230 per job in wages and benefits. Taxes generated total $110,319 of which $68,080 goes to the state government, and $42,238 goes to local governments throughout Georgia. Appendix 1 shows the allocation of economic impacts among major industrial sectors of the Georgia economy. Table 1. Plant Construction: One-Time Economic Impacts to Georgia Direct Indirect Total Impact Impact Impact Output ($) 1,628,591 1,284,227 2,912,818 Labor Income ($) 610, ,137 1,037,522 Employment State Taxes ($) 68,080 Local Taxes ($) 42,238 Sum of Taxes ($) 110,319 Economic Impacts of Biodiesel Production Operation of a biodiesel plant in Gwinnett County creates annual economic impacts within the local economy. Direct output impact of $ million in Table 2 is equal to the value of annual revenues. Direct labor income of $618,000 for 14 employees is plant expense for wages and benefits. Indirect economic activity in Gwinnett County of $1.590 million leads to a total output impact of $ million. Indirect output leads to indirect labor income of 506,515 for 13 jobs. Total labor income in Gwinnett County is $1.125 million for 27 jobs which averages $41,649 per job. State taxes of $49,168 in Table 2 are

30 for economic activity occurring in Gwinnett County. Local taxes of $36,678 in the county result in total tax revenue of $85,846. Appendix 2 shows economic impacts among major industrial sectors of the Gwinnett County economy. Table 2. Biodiesel Production Impacts to Gwinnett County Direct Indirect Total Impact Impact Impact Output ($) 14,354,500 1,589,697 15,944,197 Labor Income ($) 618, ,515 1,124,515 Employment State Taxes ($) 49,168 Local Taxes ($) 36,678 Sum of Taxes ($) 85,846 Production in Gwinnett County creates economic impacts in surrounding counties. One county has limited capacity to provide inputs for an enterprise, and this leads to indirect impacts in other local economies as inputs are purchased in other counties. The state of Georgia has designated 12 state service delivery regions (SDR) in order to foster regional collaboration in economic development. Gwinnett County is in SDR 3 which also includes the counties: Cherokee, Clayton, Cobb, Dekalb, Douglas, Fayette, Fulton, Henry, and Rockdale. Table 3 shows the regional economic impact for SDR 3. Direct impacts are identical to Table 2. Indirect impacts increase as the larger regional economy has greater supporting capacity for production inputs than a single county. The total output impact to the region is $ million. Total labor income of $1.442 million is created for 30 jobs which is a $48,081 average in wages and benefits. State and local taxes generated due to impacts in the region are $124,577. Appendix 3 shows economic impacts among major industrial sectors in SDR 3. Table 3. Biodiesel Production Impacts to Region Direct Indirect Total Impact Impact Impact Output ($) 14,354,500 2,675,490 17,029,990 Labor Income ($) 618, ,415 1,442,415 Employment State Taxes ($) 71,476 Local Taxes ($) 53,101 Sum of Taxes ($) 124,

31 Expanding the local impact area to Georgia indicates the economic impacts from biodiesel production to the state economy. Indirect impacts are greater in Table 4 than impacts for county and regional economies. Total output is $ million for the state economy. A total of $1.541 million in labor income is created for 34 jobs. Indirect wages and benefits average $46,145 per job, and the average for all jobs is $45,320. The state treasury realizes a total of $85,987 from biodiesel production, while local governments receive $64,003. Appendix 4 shows economic impacts among major industrial sectors in the Georgia economy. Table 4. Biodiesel Production Impacts to Georgia Direct Indirect Total Impact Impact Impact Output ($) 14,354,500 3,120,943 17,475,443 Labor Income ($) 618, ,896 1,540,896 Employment State Taxes ($) 85,987 Local Taxes ($) 64,003 Sum of Taxes ($) 149,990 Summary Construction of a 5 million gallon biodiesel plant in Gwinnett County would create a onetime economic impact leading to $1.038 million in labor income for Georgia workers. Operation of the plant would create an annual $ million output impact in Gwinnett County. Total labor income of $1.125 million would be created annually for 27 jobs in the county. Local governments in the county would receive $36,678 annually in tax revenues. Regional impacts for an area of 10 counties including Gwinnett County lead to a labor income impact of $1.442 million for 30 jobs in the region. Biodiesel production would generate a total output impact of $ million for the state economy. Employees in Georgia would earn $1.541 million in wages and benefits for 34 jobs. The state treasury would receive $85,987 annually, and local treasuries throughout the state would receive $64,

32 Appendix 1. Plant Construction: One-Time Economic Impacts to Major Sectors, Georgia Labor Sector Output ($) Income ($) Employment Agriculture 9,442 2,702 0 Construction & Mining 825, , Utilities 30,875 6,226 0 Manufacturing 927, ,740 4 Transportation, Warehousing 54,625 23,448 1 Trade 255,820 98,056 3 Finance, Insurance, & Real Estate 177,203 46,131 1 Services 532, ,042 6 Government & Non NAIC's 99,650 4,461 0 Total 2,912,818 1,037, Appendix 2. Biodiesel Production Impacts to Major Sectors, Gwinnett County Labor Sector Output ($) Income ($) Employment Agriculture 30,685 13,064 1 Construction & Mining 7,175 3,175 0 Utilities 47,008 7,176 0 Manufacturing 14,575, , Transportation, Warehousing 201,911 77,287 2 Trade 176,361 68,934 2 Finance, Insurance, & Real Estate 214,860 59,897 1 Services 568, ,191 6 Government and non-naics 122,505 2,874 0 Total 15,944,197 1,124,

33 Appendix 3. Biodiesel Production Impacts to Major Sectors, Region Labor Sector Output ($) Income ($) Employment Agriculture Construction & Mining 12,548 5,451 0 Utilities 205,508 40,827 0 Manufacturing 15,211, , Transportation, Warehousing 242,175 92,811 2 Trade 226,719 88,347 2 Finance, Insurance, & Real Estate 268,673 76,499 1 Services 724, ,836 8 Government and non-naics 137,731 4,954 0 Total 17,029,990 1,442, Appendix 4. Biodiesel Production Impacts to Major Sectors, Georgia Labor Sector Output ($) Income ($) Employment Agriculture 12,331 3,710 0 Construction & Mining 16,817 6,646 0 Utilities 207,637 40,696 0 Manufacturing 15,383, , Transportation, Warehousing 257,710 96,810 2 Trade 280, ,644 3 Finance, Insurance, & Real Estate 310,460 85,028 2 Services 834, , Government and non-naics 171,362 7,086 0 Total 17,475,443 1,540,

34 ATTACHMENTS 1. ASTM standards for biodiesel

35 Austria Czech Republic France Germany Italy Sweden United States United States Standard/ Specification ON C1191 CSN Journal Officiel DIN E UNI SS ASTM D S15 ASTM D-975 Date 7/1/1997 9/1/1998 9/14/1997 9/1/1997 4/21/ /27/1996 5/10/2002 Diesel Application Units FAME* RME* VOME* FAME* VOME* VOME* FAME* Fuel Density 15 C g/cm Viscosity 40 C mm2/s Distillation 95% C - - <360 - < max Flashpoint C >100 >110 >100 >110 >100 > min CFPP C 0/ /-10/ Pourpoint C - - <-10 - <0/< Sulfur %Mass <0.02 < <0.01 <0.01 < max 0.50 max CCR 100% %Mass <0.05 < < max 10% Dist. Resid. %Mass - - <0.3 - < Sulfated Ash %Mass <0.02 < < max 0.01 max (Oxid) Ash %Mass <0.01 < Water mg/kg - <500 <200 <300 <700 < % max.05 % max Total Contam. mg/kg - <24 - <20 - <20 - Copper Corrosion 3h/50 C No. 3 max No. 3 max Cetane No. >49 >48 >49 >49 - >48 47 min 40 min Neutral No. mgkoh/g <0.8 <0.5 <0.5 <0.5 <0.5 < max Methanol %Mass < <0.1 <0.3 <0.2 <0.2 - Ester Content %Mass - - > >98 >98 - Monoglycerides %Mass - - <0.8 <0.8 <0.8 <0.8 - Diglyceride %Mass - - <0.2 <0.4 <0.2 <0.1 - Triglyceride %Mass - - <0.2 <0.4 <0.1 <0.1 - Free Glycerol %Mass <0.02 <0.02 <0.02 <0.02 <0.05 < max Total Glycerol %Mass <0.24 <0.24 <0.25 < max Iodine No. <120 - <115 <115 - <125 - C18:3 and High. Unsat. Acids %Mass < Phosphorus mg/kg <20 <20 <10 <10 < ** <10 Alkaline Metals (Na,K) mg/kg - <10 <5 <5 - <10 - Cloud Point C - <10 <5 <5 - <10 - *FAME - Fatty Acid Methyl Esters; RME - Rapeseed Methyl Esters; VOME - Vegetable Oil Methyl Esters **% Mass ***Note that detailed ASTM Specification requirements must be obtained directly from ASTM. The ASTM Specification is expected to become more stringent and more competitive with European specifications. 34

36 The Center for Agribusiness & Economic Development The Center for Agribusiness and Economic Development is a unit of the College of Agricultural and Environmental Sciences of the University of Georgia, combining the missions of research and extension. The Center has among its objectives: To provide feasibility and other short term studies for current or potential Georgia agribusiness firms and/or emerging food and fiber industries. To provide agricultural, natural resource, and demographic data for private and public decision makers. To find out more, visit our Web site at: Or contact: John McKissick, Director Center for Agribusiness and Economic Development Lumpkin House The University of Georgia Athens, Georgia Phone (706) caed@agecon.uga.edu The University of Georgia and Fort Valley State University, and the U.S. Department of Agriculture and counties of the state cooperating. The Cooperative Extension Service offers educational programs, assistance and materials to all people without regard to race, color, national origin, age, sex or disability. An equal opportunity/affirmative action organization committed to a diverse work force. Report Number FR06-5 Date/Year December, 2006 Issued in furtherance of Cooperation Extension Acts of May 8 and June 30, 1914, the University of Georgia College of Agricultural and Environmental Sciences, and the U.S. Department of Agriculture cooperating. J. Scott Angle, Dean and Director 35