State of the States NATIONAL BIODIESEL BOARD. Jacobsen Conference. Shelby Neal. May 24, 2018 Chicago, IL

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1 NATIONAL BIODIESEL BOARD State of the States Jacobsen Conference May 24, 2018 Chicago, IL Shelby Neal Director of State Governmental Affairs National Biodiesel Board 1

2 NATIONAL BIODIESEL BOARD Represent more than 90% of US biodiesel & renewable hydrocarbon diesel (RHD) production. Lead industry efforts on government affairs, education, & research. 2

3 MINIMUM STATE VOLUMES 1.1 Billion Gallons Illinois Texas 412 MG California 1.2 Billion Gallons Illinois Texas 507 MG California Illinois Texas California CA TX IL MN OR NY IA PA RI 1.4 Billion Gallons Minnesota Illinois Texas 650 MG California Iowa New York Oregon 3

4 STATE VOLUME DRIVERS Requirements Financial Incentives Carbon Reduction Policies 4

5 STATE REQUIREMENTS B2 B5 B20 B5 B2 CT: B20 MA: B5 RI: B5 VT: B3 B5 B2 Currently Implemented Implemented after 2018 Note: Downstate New York has a B5 Bioheat requirement.

6 STATE ECONOMIC INCENTIVES $.20-$.50 $.50-$1.00 $1.00 or > Note: Incentives are valued on a B100 basis.

7 LOW CARBON POLICIES 5 billion total gallons of diesel demand Implemented Potential

8 MAJOR STATE POLICIES

9 MAJOR STATE POLICIES Half of all biodiesel sold in these states.

10 10 CALIFORNIA!

11 BMBD GROWTH IN CALIFORNIA MG of BMBD..003% of market 507 million gallons of BMBD. >13% of diesel market BMBD Volume Source: CARB quarterly reports. 11

12 2017 LCFS CREDIT GENERATION Fossil NG 1% RNG 7% Electric 12% Renewable Diesel 30% Other 1% Ethanol 35% Biodiesel 14% Ethanol Biodiesel RD CNG Electric RNG Other Source: CARB quarterly reports. Other category includes Fossil LNG, Hydrogen, CARBOB, Diesel, Innovative Crude. 12

13 LCFS Carbon Intensity Values Biodiesel CI Values Other Values UCO Corn Oil Tallow Canola Soy Cane Ethanol CNG Corn Ethanol ULSD Carbon Intensity (g/mj) 13

14 LCFS Carbon Intensity Values in $/gallon $1.49 $1.32 $1.24 Biodiesel CI Values Other Values $.91 $.88 $ $.40 $.35 0 UCO Corn Oil Tallow Canola Soy Cane Ethanol CNG Corn Ethanol $0.0 ULSD Carbon Intensity (g/mj) Example values calculated for $150/MT. 14

15 CARB RULEMAKING TIMELINE Updated regulatory package published in June. 15-day public comment period. Potential approval at September 28 board meeting. Implementation January 1,

16 CARB RULEMAKING ISSUES 2018 rulemaking to determine: Carbon intensity reduction schedule for Verification process (similar to EPA s QAP program). Opt-Ins (renewable jet, military). Change EV credit methodology (more credits when renewable electricity is high). Litigation: CARB complying with Poet I case via 2018 regulatory package. Poet II case dismissed on January 5 th by Fresno County District Court. B6-B20 NOx additive approved: 21% PM decrease w/b20; 1.7% NOx decrease w/b20. 16

17 LCFS IMPLEMENTATION SCHEDULE Year Implementation Schedule Year Implementation Schedule Year Implementation Schedule % % % 2018 *5.0% % 6.25% % 7.5% % 8.75% % % 11.25% % 12.5% % 13.75% % 15% % 16.25% % 17.5% % 18.75% % 20% Note: Diesel reduction remains at 3.5% until CARB complies with Poet I court case. Source: Slide courtesy of Joe Gershen, Encore BioRenewables, LLC.

18 PROJECTED BMBD VOLUMES UNDER LCFS Billion Gallons 2.15 Billion Gallons Billion Gallons 1.8 Billion Gallons Low BMBD High BMBD Source: CARB Illustrative Supply Scenario Calculator ( 18

19 LCFS CREDIT PRICES In Dollars per Metric Ton (MT). May, May, $77.50/MT $180 $160 $140 $120 $100 $80 $60 $40 $20 $0 May June July Aug Sept Oct Nov Dec Jan, 2018 Feb March April May $153/MT Source: Progressive Fuels Ltd.

20 LONG-TERM LCFS COMPLIANCE Compliance may be easier than it seems due to: E15 Co-Processed Renewable Diesel ZEV rules Indirect Land Use Change (iluc) 20

21 ILUC OVER TIME 70 Soy Carbon Score US EPA, 2008 CARB, 2009 US EPA, 2010 CARB, 2015 Argonne, 2017 Carbon Score Note: Values in g/mj of CO2. 21

22 OREGON CLEAN FUELS PROGRAM Year % % Implementation Schedule Implementation Schedule % % % % % % % %

23 OREGON CLEAN FUELS PROGRAM Biodiesel Renewable Diesel 23

24 OREGON CLEAN FUELS PROGRAM Electric 5% Biodiesel 35% Ethanol 58% Ethanol Biodiesel Electric RNG Other Other: Diesel, gasoline, LPG, fossil CNG. 24

25 WASHINGTON STATE Composition of Legislature: Senate: 26 Democrats; 23 Republicans. House: 50 Democrats; 48 Republicans. Governor: Democrat Legislative Session: SB6203, Carbon Tax bill sponsored by Sen. Carlyle. Imposes tax of $12-$30/MT. Passed Environment, Ways & Means, & Rules Committees. HB 2338, LCFS bill sponsored by Rep. Fitzgibbon. Patterned after California & Oregon. Passed Environment & Transportation Committees. $15/MT Carbon Tax Likely on November Ballot: Protect Washington Act Filed March 2 nd by Alliance for Clean Jobs & Energy. 25

26 QUESTIONS? Thanks! Shelby Neal Director of State Gov. 26

27 TEXAS (BD&RD) The portion of the biodiesel blend is exempt from the state s $.20 per gallon excise tax. For example, B20 would receive an exemption worth 4 cents. Q: Is the exemption limited to B20? No. 27

28 KENTUCKY (BD&RD) $1 per gallon tax credit for producer or blender. Capped at $10 million. Pro-rated. 28

29 ILLINOIS (BOTH BD& RD) Blends above B10 receive a full exemption of the state s 6.25% sales tax on fuel. 29

30 IOWA (BD ONLY) 3 cpg road tax differential (29.5 vs cents) Production incentive extended to January 1, 2025 (2 cpg). Consumption incentive extended to January 1, Reformulated to 3.5 cpg on B5 and 5.5 cpg on B11. 30

31 INCENTIVES (OTHER) Maryland (BD only) 3 cpg state income tax credit for all gallons of B5 or higher Bioheat blends purchased. Rhode Island (BD only) Biodiesel portion of blend is exempt from road tax. 31

32 NEW YORK STATE New York State: (BD only) Bioheat consumer tax credit of 1 cent per percent of biodiesel in finished blend of heating oil. Expires December 31,

33 NORTHEAST CARBON POLICIES 400 MGPY potential RGGI & RPS States

34 2016 LCFS CREDIT GENERATION RNG 8% Electric 5% Fossil NG 2% Renewable Diesel 25% Biodiesel 20% Ethanol 40% Ethanol Biodiesel RD CNG Electric RNG Source: CARB quarterly reports. CARBOB, Diesel, & Hydrogen results not included due to de minimis quantities reported. 34