PENNSYLVANIA ECONOMICS DEVELOPMENT ASSOCIATION 2010 FALL CONFERENCE Presented by:

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1 PENNSYLVANIA ECONOMICS DEVELOPMENT ASSOCIATION 2010 FALL CONFERENCE Presented by:

2 Located on 15 acres within a 108 acre industrial park Zoned Industrial Access to rail, road, water

3 Mike Noble President (814) or Chris Peterson Vice President-Finance & Commodity Risk (814) or Tim Keaveney Vice President-Sales (814) or Ryan Steuben Plant Manager (814) or

4 Privately financed Leading biodiesel producer in the Eastern US, producing more than 130,000 gallons per day Capacity is 45 million gallons per year of top quality, competitively-priced B100/B99.9 biodiesel Continuous flow multi-feedstock Desmet-Ballestra technology and design World-class, on-site testing laboratory guarantees quality, meeting / exceeding ASTM specifications BQ-9000 Accredited as Producer and Marketer

5 Biodiesel adds value to the US economy while reducing U.S. dependence on foreign fossil fuels; Biodiesel is a sustainable renewable fuel source that does not require significant modifications to engines/heating systems; Reduction and exploration of fossil fuels in conjunction with use of renewable energy will collectively help to solve our energy crisis; Biodiesel availability, quality and price will remain to be determining factors.

6 WHAT IS BIODIESEL? Alternative fuel produced through transesterification from renewable resources such as vegetable oils, animal fats and recycled grease; Biodiesel can be blended with petroleum diesel, home heating oil BIOHEAT ) and off-road diesel; Biodiesel blends enhance fuel lubricity and do not require diesel engine modifications; Environmental benefits: reduced emissions.

7 Transesterification Chemistry (1) oil + (3) methanol (3) biodiesel + (1) glycerol (1 x 855.8) + (3 x 32) (3 x 286.6) + 1 x 92) The reaction requires a catalyst (sodium methylate) Traces of residual FFA react with the catalyst to form soaps.

8 Costs of Feedstock Cost to Produce Sales Prices The Landscape

9 Fuel Properties of Feedstocks HERO BX Proprietary Blends HBX-1000 Cold Flow properties similar to SME Lower cost than SME HBX-2000 Much lower cost than SME Slightly higher cloud point than SME Much lower iodine than SME Much higher cetane than SME HBX-3000 Extremely lower cost than SME Higher cloud point than SME Extremely lower iodine than SME Very high cetane number

10 Fuel Properties of Feedstocks Soybean Methyl Ester Vs. Animal Fats/Used Oils Refining: osoy has high metals while animal fats have high FFA. Transesterification: osoy requires more catalyst to force the reaction to completion. Used oils have polymerized components reducing the end Ester concentration. Polish filtration: o Soy has sterols, tocopherols and other impurities while animal fats have high cloud point temp fatty acids which need to be filtered out. This is a crucial step for all biodiesel to ensure field operability of biodiesel and biodiesel blends. Finished Biodiesel: o Soy has a high distillation temperature, low cetane, low stability while animal fats have a lower distillation temp, high cetane, higher stability right off the process and reacts better with common additives. Animal Fats/Used oils Pro s High Cetane of >54 Low Iodine of <80 React readily with many Common Additives Easy to Transesterify to full Reaction Virtually no sterols, tocopherols and other natural impurities found in Soy Low in Metals Low Cost Lower NOx than Soy Higher BTU s than Soy High Stability Con s Dark in color Higher cloud points Soybean Methyl Ester Pro s Low Cold Flow Property Light color product Very large surplus of Oil in USA Con s Low Cetane of ~48 High Iodine of ~130 High in Metals Hard to additize Hard to Transesterify High in Steroglucosides High cost feedstock Food vs fuel debate Lower BTU s than animal fats High NOx Low Stability High Distillation Temperature

11 HBX Favorites Yellow Grease and Used Veg Oils Choice White Grease (Pork Fat) Poultry Grease Corn Oil (DDG) Soybean Oil Canola oil Other Biodiesel Feedstocks Used At HERO BX -Palm -Jatropha Oil -Algae Oil -Cod Oil -Beef Tallow -Camelina Oil -Corn Oil -Catfish Oil -Sardine Oil -Salmon Oil

12 Soy Oil Poultry Fat Bleachable Fancy Tallow Choice White Grease Yellow Grease Source: The Jacobsen

13 Vegetable Oil or Animal Fats + Methanol + Catalyst = Biodiesel + Glycerin Calculating price (per gallon) Soyoil = $.40/lb. *7.4 = $3.33 YG = $.25/lb. *8.5 = $2.55 Methanol = $0.84/gal *12% = $0.12 Other chemicals and Catalyst = $0.15 Other variable costs = $0.06 Fixed costs and Depreciation = $0.22 $3.88 $3.10 ULSD US Avg at the rack $2.25

14 Lab Testing SME FAME-0 Middle Distillate

15 PA Sales End Use Residential Commercial Industrial Oil Companies Farm Electric Railroad Vessel Bunkering On Highway Military Off Road Other

16 Quality Never compromise and always eliminate places where experience has proven faults. BQ 9000 is more than a stamp. Creating Demand Product must be convenient for all who use it and must be educated why to use. Incentives Temporary safety nets that encourage Pennsylvania usage. Research and Development Funding for companies in PA that use PA Biodiesel for their R&D studies.

17 Pennsylvania 2% mandate for all on road diesel sold in PA should be about mil/gal of biodiesel. Lobbying for elimination of the $.75 credit and institute a $.20 $.30 buyers credit for buying from a PA producer. This is needed to offset similar credits from mid-western states. Federal $1 blenders credit expired 12/31/09 needs extended to 3-5 years. CCC Bioenergy Program in the Farm Bill needs funded. RFS-2 needs to be refined or a Federal Mandate needs implemented. Global $1.20-$1.46 tariff on all US produced biodiesel to European Union has been extended until Other States in our Region New York City, 2% BIOHEAT Mandate

18 Federal Blender s Credit Program Alternative Fuels Incentive Grant (AFIG) $625,000 (2008) PA Biomass Producer Credit ($0.75/gal) $1,900,000 (2008, 2009, 2010) PROGRAM EXPIRED Technology Council of NW PA $1,000 training reimbursement (2009) ebizitpa $12,288 displaced worker training (2008) ACE Grant (40% matching funds) $1,640,240 (we need to spend $2.5 million of our own $ to collect all we have collected about $170K so far)

19 Thank You and Q/A Michael Noble President Glenn Green Director of Technology

20 2010 PEDA Fall Conference October 27, 2010 Dan Arnett - Manager

21 Introduction ECS and EB Why Pennsylvania? Incentives summary and specifics Negatives Conclusion

22 Founded 1965 Meadville, PA Crawford County Native seed company 200+ species Applications include wetland mitigation, wildlife habitat, erosion control, land restoration, conservation 60+ full-time employees 8,000 acres Largest producer of switchgrass seed in the East

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24 Founded 2008 Dedicated to the production of solid fuel from native warm season grasses First of its kind Construction began September 2010 Due to begin production 1 st quarter ,000 tons/year Three markets: Residential, commercial, industrial

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26 Relationship to parent company Feedstock availability Marginal land available Access to markets

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28 Grant award - $896,400 Application process fairly easy

29 VERY easy to work with Application and reporting format slightly different than the norm Virtual Energy Incubator

30 Interns Grant Status Tax Incentives Micro-grant VERY supportive

31 Very flexible Easy to work with Fair terms

32 Loan Alternative and Clean Energy Program

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34 Communication a major issue Perfect storm for building permit Amount of oversight required is excessive Block foundation for sub-level

35 2 visits Follow-up was outstanding Project did not fit the mold Parameters are missing significant opportunity with biomass and thermal conversion

36 Low-interest loan Communication lacking Reporting Accountability Forms with suggestions more than instructions

37 PA is a GREAT place for a new venture with exceptions Work with groups that are interested and supportive from the beginning Do not overlook federal programs The time spent seeking assistance provides very good ROI

38 Daniel P. Arnett Manager Ernst Biomass, LLC 9006 Mercer Pike Meadville, PA (814)