Biodiesel Industry Overview

& Technical Update

April 2014

1

Objective and Topics• Upon completion of this session, you will gain a better

understanding of: what biodiesel is, the latest biodiesel industry technical developments, which biodiesel blends the various OEMs support, and how biodiesel can be promoted and used successfully in the diesel vehicles you sell, operate, or service.

• Brief Introduction to Biodiesel• Top Five Reasons Smart Customers Are Using Biodiesel• ASTM Fuel Specifications and Fuel Quality• Legislative Updates Impacting Demand• OEM Acceptance and Positions of Support• Biodiesel Use and Handling Guidelines• Sales and Service Tips for Dealers• Information Resources / Q and A

2

What is Biodiesel?

A renewable Advanced Biofuel commercially derived from a diverse array of fats and oil by-products and used in normal diesel engines.3

Biodiesel Defined

• Biodiesel, n. -- a fuel comprised of mono-alkyl esters of long chain fatty acids derived from vegetable oils or animal fats, meeting ASTM D 6751, designated B100.

• Biodiesel Blend, n. -- a blend of biodiesel fuel with petroleum-based diesel fuel designated BXX, where XX is the volume percent of biodiesel.

• EPA Definition 40 CFR 80.1401 - Advanced Biofuel means renewable fuel, other than ethanol derived from cornstarch, that has lifecycle greenhouse gas emissions that are at least 50 percent less than baseline lifecycle greenhouse gas emissions (i.e., diesel fuel) 4

Feedstock OptionsCurrent EPA-approved pathways for Advanced Biofuel

Distillers Corn Oil Yellow Grease

Soybean Oil

Canola Oil

Camelina

Animal Fats

2013 Feedstock Use

Soybean Oil53%

Canola Oil7%

Distillers Corn Oil10%

Animal Fats11%

Recycled Oils13%

Palm Oil6%

2013 Feedstock Utilization (Jan to Dec)

Oils and fats for biodiesel production are minor by-products of producing food for human and animal consumption

Where do we expect additional gallons in the future?

• Non-traditional Agricultural Land

• Algae

Winter Annuals

Yield Growth

Algae

• Virtual Acres

Halophytes

Other Lipid Sources

• Yield Technology

• Increased Recovery of Yellow Grease

• Brown Grease

• Camelina

• Brassica Juncea

• JatrophaPhoto by: Joel Rose

Biodiesel Reaction

100 Lbs.Vegetable Oil

orAnimal Fat

+ 10 Lbs.Alcohol

Methanol or Ethanol

100 Lbs.

Biodiesel

+

10 Lbs.

Glycerine

In the Presence of a CatalystReacting: Yields:

Transesterification process produces mono-alkyl esters –chemically similar to diesel fuel 9

Sodium Hydroxide or Potassium Hydroxide

10

An Advanced BiofuelAvailable Now

115 EPA-Registered plants nationwide

with over 2.3 Billion GPY Capacity

11

Biodiesel Infrastructure

• Biodiesel and biodiesel blends are now available nationwide from more than:

630 Distributors

859 Retailers

506 Truck Stops

At least 1,995 Public Locations

• Visit the new NBB website at: www.biodiesel.org/using-biodiesel/finding-biodiesel/retail-locations to view biodiesel retailers near you, by state, or along a route

• NBB Mobile App “Biodiesel Now” identifies locations en-route

12

• B5 and lower blends are being transported on existing U.S. pipelines that do not carry jet fuel. Volume is relatively small, but current research is expected to allow more.

13

Pipelining Biodiesel

Top Five Reasons Why Smart Customers Are Using Biodiesel

14

#1 – It’s Here and Now

• Biodiesel is America’s first domestically produced, commercially available Advanced Biofuel and meets EPA requirements for inclusion and use under the new Renewable Fuels Standard (RFS-2).

• RFS-2 mandates 36 billion gallons of renewable fuel be used by obligated parties (i.e. refiners) by 2022

Biomass-Based Diesel Volume Requirement

2011 800 Million Gallons

2012 1 Billion Gallons

2013 1.28 Billion Gallons

2014 ??? (1.28 BG Proposed)

15

#2 – Biodiesel Is Cleaner

• U.S. biodiesel reduces lifecycle carbon emissions by over 50 percent compared to petro diesel

• Best carbon reduction tool of any liquid fuel commercially available

16

#2 – Biodiesel is Cleaner

• Other tailpipe emissions are also reduced by running on biodiesel, especially in pre-2010 diesel engines without aftertreatment systems

• NOx issue eliminated in today’s new technology diesel engines

Emission Type B20 B2

Total Unburned Hydrocarbons

-20% -2.2%

Carbon Monoxide -12% -1.3%

Particulate Matter -12% -1.3%

Oxides of Nitrogen (NOX) +/-2% +/-.2%

17

#3 – Sustainability

• Not sacrificing food for fuel

• Biodiesel is produced from a variety of renewable resources and by-products of producing food for humans and animals

• From the soybeans used to produce biodiesel, 81% of the soybean’s yield is protein that enters the market for either human consumption or animal feed.

18

#4 – Energy Security & Economy

• Reduces our dependence on foreign oil

• Expands and diversifies our domestic refinery capacity

• Most economical option for turning oils and fats into usable fuel diesel applications

• Creates added outlets for farm-based products

• Creates U.S. manufacturing jobs

19

#4 – Energy Security & Economy

• The nearly 1.8 billion gallons of biodiesel produced in 2013 supported more than 62,000 jobs across the U.S. and generated nearly $17 billion in economic activity.

• The 6.45 billion gallons of biodiesel produced in the U.S. since 2005 have:

– Displaced 6.45 billion gallons of diesel fuel

– Decreased lifecycle GHG emissions by 64 million tons

20

Myth: 5 Percent of the Diesel Market Is Not Significant

• REALITY – 5 percent displacement would have significant impacts.– 5 year average of on-highway diesel fuel demand in the

U.S. is 37.8 billion gallons– Replacing 5 percent with biodiesel = 1.88 billion gallons

of biodiesel

• The growth in domestic production has contributed to a significant decline in petroleum imports. The share of total U.S. liquid fuels consumption met by net imports peaked at more than 60% in 2005 and fell to an average of 33% in 2013. EIA expects the net import share for liquid fuels to decline to 25% in 2015, which would be the lowest level since 1971.

• Source: Energy Information Administration http://www.eia.gov/forecasts/steo/report/us_oil.cfm

U.S. BIODIESEL INDUSTRY VISION:

Replace 5 percent of petroleum

diesel use with Biodiesel by 2015

Replace 10 percent of petroleum

diesel use with Biodiesel by 2022

21

0

0.5

1

1.5

2

2.5

3

2012 2013 2014 2015 2016 2017

NBB Volume Recommendations to EPA, Gallons per Year

NBB members set a 10 year vision for volume levels of 4 billion gallons per year by 2022

Vision For Future Volumes

22

#5 – Ease of Use and Performance

Using Biodiesel Blends is Easy! Up to B20:• Biodiesel blends can be used in any diesel engine/vehicle per

manufacturer’s recommendations

• B5 – B20 use covered under OEM warranty

• Drop-in replacement for diesel fuel

• No vehicle modifications needed

• Similar, seamless performance compared to diesel

• Dispensed through existing fueling stations

• Comparable fuel prices to diesel

• Low overall cost of ownership

• High biodiesel energy balance – 5.54 : 1 (B100)

• 30-40 percent fuel efficiency gains with diesel engine

23

#5 – Ease of Use and Performance

Biodiesel Delivers Important Diesel Properties:

• Auto-ignition = Cetane Number over 50

• BTU Content = Similar to #1, less than #2

• Viscosity = Values in diesel fuel range (1.9 to 6.0)

• Cloud Point = Current biodiesel higher than #2

• Lubricity = Naturally high in lubricity

• Sulfur = Naturally less than 15 ppm

• Cleanliness = ASTM specs same as petrodiesel

• Stability = Spec currently set for six-month minimum shelf life; promising new research could increase time

• Emissions = Significantly less for PM, HC, CO

24

ASTM Specifications and Biodiesel Fuel Quality

25

Biodiesel Standards:

ASTM D6751 is the approved standard for B100 for blending up to B20, in effect since 2001

– Performance-based standard: feedstock and process neutral

D975 – Covers petrodiesel and blends up to five percent biodiesel maximum for on/off road engines; B5 is now fungible with diesel fuel

D396 – Covers heating oil and blends up to five percent biodiesel; B5 is now fungible with petro-based heating oil

D7467 – Covers blends containing six to twenty percent biodiesel (B6-B20) for on/off road engines

– Designed so that if B100 meets D6751 and petro diesel meets D975, then B6 to B20 blends will meet their specifications

– Important quality control is at B100 level

26

Additional Fuel Quality Controls

• States that have adopted ASTM D6751

– 2007: 27

– 2013: 48 (AK and NJ remain)

• States with proactive enforcement

– 2007: 7

– 2013: 23

Fuel QualityProactive Testing

Proactive

Testing

No

Proactive

Testing

27

BQ-9000 and Fuel Quality

• The biodiesel industry has an excellent fuel quality program called BQ-9000 (www.bq-9000.org)

• Helps ensure that only the highest-quality biodiesel meeting ASTM specifications gets put into your fuel tanks

• ASTM Grade Fuel, BQ-9000 Companies

28

The latest numbers show that over 87% of biodiesel produced is by BQ-9000 accredited companies.

29

BQ-9000 Certified

47%

58%

66%65%

63%

79%81%

85%87%

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

FY05 FY06 FY07 FY08 FY09 FY10 FY11 FY12 FY13

% V

olum

e

Fiscal Year

Percentage of BQ9000 Producer Biodiesel

BQ-9000 Companies

• As of March 31, 2014, there are currently 51 accredited Producers approved within the program

• There are also 27 accredited Marketers / Blenders

• Additionally, we have 13 accredited Labs

The NBAC is currently working on a new Program for BQ-9000 Retailers. Additional information may be found at www.bq9000.org

30

2013 NREL Fuel Quality Survey• Over 87% of biodiesel in the market produced by

BQ-9000 approved companies

• Samples from 53 producers and 14 terminals were collected

• Critical properties were tested (free/total glycerin, metals, oxidation stability, acid value, etc.)

• More than 95% of all the samples collected met the specification limits

Legislative Updates Impacting Biodiesel Demand and OEM

Support

32

Renewable Fuels Standard (RFS-2)

33

Biodiesel qualifies for RFS-2 under 2 categories: Biomass-Based Diesel and Advanced Biofuel

Federal Legislation

Other federal legislative incentives that are important to OEMs and fleets:

• Biodiesel Tax Incentive– $1.00 per gallon blenders tax credit– Incentive expired as of 12/31/13; industry

seeking retroactive reinstatement

• EPACT Credits (Energy Policy Act)

– Incentive for fleets for B20+ use; most economical option for EPACT compliance

• CAFÉ Credits (Corporate Average Fuel Economy)

– Incentive for automakers for B20+ approval; set to expire after model year 2015

34

B2

B2

B10

B5

B2

B5

Statewide Mandates

Currently

Implemented

Implemented

in or after

2014

CT: 20MA: 5

RI: 5VT: 3

State Fleet Requirements

Mandatory

Mandatory

w/trigger

Encouraged

Consumption Incentives

1 to 3 cents

4 to 6 cents

> 7 cents

Low Carbon Fuel Standards

LCFS in Place

LCFS Potential

Volumes Driven by State Policy

0

0.5

1

1.5

2

2.5

3

2012 2015 2020

RFS-2

State Polices

39

Illinois Tax Incentive

• All U.S. fuels are taxed by the federal government

• Most states also have an additional state tax

– Both are flat taxes, cents per gallon

• Illinois also has a state sales tax on fuel

– 6.25 percent of sales price, not a flat tax

• Sales tax removed on entire gallon if at least 10 percent biodiesel is incorporated

• Incentive in place since 2003, extended until 2018

• With removal of sales tax, B11 is cheaper than diesel

• Illinois Department of Revenue projects half of diesel market is B11

40

Iowa Incentives

– Retailer Credit

• Increased to 4.5 cents for B5 blends

– Renewable Fuels Infrastructure

• $3 million per year

– Producer Credit

Established at:

• 2012 – 3 cents per gallon

• 2013 – 2.5 cents per gallon

• 2014 – 2 cents per gallon

41

California LCFS - Summary

• Low Carbon Fuel Standard signed into law in 2006 (AB 32)

• Implemented in 2010

• World’s first performance-based LCFS

• Requires 10% carbon intensity reduction by 2020

• Phases in over 10 years

• Includes broad “sustainability” requirements

• Being implemented, but litigation is pending & pressure is being applied to reduce targets

42

CARB Biodiesel Use Projections

Source: California Air Resources Board LCFS 2011 Program Review Report (pg. 179-181).43

Biodiesel Use and OEM Acceptance

44

0

2

4

6

8

10

12

14

16

2010 2013 2016 2017 2018 2020 2025

Industry

LMC Auto

ALG

JD Powers

AVG

Diesel vehicle market share forecasts 10-15 percent by 2025

46

Diesel to be No. 1 transport fuel by 2020

• ExxonMobil: Diesel will surpass gasoline as the No. 1 global transportation fuel by 2020. Diesel demand will account for 70% of the growth in demand for all transportation fuels through the forecast period to 2040. Although natural gas will play a greater role as a transportation fuel by 2040, it will remain only a small share of the global transportation fuel mix, at 4% by 2040, up from today’s 1%, according to ExxonMobil’s forecast.

• The World Energy Outlook: Diesel fuel will remain the “dominant” growth fuel between now and 2035, according to the International Energy Agency. Globally, the report suggests the possibility of only a 2% share of natural gas in the heavy-duty transport market by 2035.

• The National Petroleum Council: 2012 report: “Advancing Technology for America’s Transportation Future,” for the U.S. DOE: “Diesel engines will remain the powertrain of choice for HD (heavy-duty) vehicles for decades to come because of their power and efficiency."

2014 Brings More Clean Diesels to U.S. Market

• 44 new clean diesel car, truck and SUV models available now or launching soon in MY 2014

• Auto industry experts predict more than 60 clean diesel models in North America by 2017

• Additionally, more than 27 other OEMs supplying over 150 different diesel models for Medium- and Heavy-Duty truck, bus and RV markets, as well as off-road equipment

OEM Warranty Statements

• All major OEMs selling diesel equipment in the U.S. support at least B5 and lower blends, provided they are made with biodiesel meeting ASTM D 6751 – Most OEMs are also recommending use of a BQ-9000 supplier

• 10 new OEM statements of B20 support in 2012, 7 in 2013; more in the works…

• Over 78 percent of U.S. manufacturers (39 brands) support B20 or higher blends in at least some of their equipment;

• Nearly 90 percent of the medium- and heavy-duty truck markets support B20

• For a complete listing of OEM position statements on biodiesel, as well as the current U.S. Diesel Vehicles List, visit: www.biodiesel.org/using-biodiesel/oem-information

48

• Vehicle performance and emissions benefits

• ASTM specifications

• BQ-9000 biodiesel quality

• Renewable Fuels Standard (RFS-2)

• State Mandates and Incentives

• EPACT Credits

• “Green” competitive advantage

• Consumers and fleets want the option

Why Are the Majority of OEMs Supporting B20?

49

OEMs Supporting B20+

50

OEMs Supporting B20+

New OEM B20 Support Statements in 2012

51

OEMs Supporting B20+

New OEM B20 Support Statements in 2013

52

* * *

* Currently allow up to B20 in Illinois only

Ford approves B20 in all its

2011 MY and beyond

Class 2 - 5 Super Duty &

Class 6,7 Medium Duty

Trucks

And in the 2014 Ford

Transit Van

B20 Approved – New Updates

53

B20 Approved – New Updates

• Chrysler supports the use of B20 in the 6.7L Ram 2500/3500 pickup and in its all new 2014 Ram 1500 light duty diesel pickup

• New 2014 diesel Jeep Grand Cherokee Approved for B20

54

All 2011 MY and beyond GM Heavy Duty Products continue to be approved for B20, and…

Chevrolet Silverado

GMC Sierra

Chevrolet Express

GMC Savana

55

New in 2013:

56

2014 Chevrolet Cruze

Approved for use with

B20

• First light-duty diesel passenger car approved for use with B20 nationwide in U.S.

New in 2013: VW & Audi

• Allowance for up to B20 in 2009-2013 MY Volkswagen and Audi TDI models registered in the state of Illinois; currently allow B5 in all other states

• “Your vehicle was originally designed to run on “ULSD” - Ultra Low Sulfur Diesel No. 2 –fuel that complies with ASTM D-975 specifications and permits up to a maximum blend of 5% biodiesel (B5).

• Due to Illinois state tax incentives for biofuels, biodiesel blends of B5 or less may not be available in Illinois. However, we want to assure you that Volkswagen and Audi will continue to honor the terms and conditions of the Volkswagen / Audi Limited Warranties that came with your vehicle.

• Biodiesel blends (up to B20) may be used in your Illinois-registered TDI® Clean Diesel vehicle… “

» Letter from VW / Audi to all TDI customers in IL, Feb. 201357

New in 2013: Mercedes

• Resuming sales of Mercedes diesel vehicles in the state of Illinois where B11 blends are common; currently allow B5 in all other states

• Both customers and dealers alike in Illinois have expressed growing demand for Mercedes’ diesel products and now MBUSA feels confident that it can again offer the BlueTec diesel technology in Illinois.

• The fuel quality and customer experiences will be tracked quite closely to ensure customer satisfaction and maintain the trend of increased diesel acceptance.

• Mercedes recently delivered a brochure to Mercedes dealers and diesel customers in Illinois, educating them on fueling and service considerations associated with blends of biodiesel higher than B5.

58

Current B5 Positions

Approve B5:– Audi** (Allow B20 in IL)– BMW– Hustler Turf Equipment– Mercedes ** (Allow B20 in IL)– Mitsubishi Fuso – PACCAR:

– Peterbilt / Kenworth **– Volkswagen ** (Allow B20 in IL)

** Actively researching B20

59

Biodiesel Position TBA:

• JCB

• Mahindra

• Mazda

• Porsche

• Nissan

• NBB is working with these OEMs to clarify their biodiesel position

60

Biodiesel Performance, Use, and Maintenance

61

Biodiesel Use and Handling Guidelines

• Perform regularly scheduled maintenance per OEM

• Use only fuel that meets ASTM D6751 / D7467 specifications

• Purchase from BQ-9000-certified suppliers when possible

• Ensure fuel supplier conducts proper fuel blending

• Current recommendation is that biodiesel blends should be usedwithin six months; promising research could increase shelf life

• Storage tanks should be free from sediment and water, and cleaning is advisable

• Cleaning properties of biodiesel may call for fuel filter change upon first switching to biodiesel

• Be aware of cold weather properties and take appropriate precautions

62

Cold weather can cloud and even gel any diesel fuel, including biodiesel.

Users of a B20 with #2 diesel will usually experience an increase of the cold-flow properties (cold filter plugging point, cloud point, pour point) at approximately 2 to 10°Fahrenheit.

Similar precautions employed for petroleum diesel are needed for fueling with 20 percent blends.

• Blending with #1 diesel / #1 biodiesel• Using fuel heaters and parking indoors• Using a cold-flow improvement

additive

Cold-Weather Performance

B20 has been used successfully in climates below -20ºF

63

B20 Versus Diesel: In the Shop

• With in-spec B20 and lower, the issues you can expect to see in your shop are the same as you will see with petro diesel

• Except:– Expect to see fewer lubricity-related issues– Filter-related issues may be related to cleaning effect

upon first use, or are likely normal diesel issues, imposter biodiesel or raw vegetable oil

– Less black smoke from exhaust!

• NBB offers ASE-Certified Diesel Technician training to help distinguish and diagnose fuel issues

64

ASE Certified Training

• To see our curriculum of ASE-Certified continuing education courses on Biodiesel for Diesel Service Technicians, visit www.BiodieselAutomotive.org

65

Sell Green To Make Green – Tips:

1. Know your OEM’s warranty position on biodiesel and be honest in sharing it with your customers

2. Promote the increased cetane, lubricity and environmental benefits of using biodiesel blends in diesel vehicles

3. Advise your customers to use ASTM spec fuel, sourced from BQ-9000 suppliers

4. Be proactive with fuel filter checks as part of your regular service checklist

5. Continue your education with our ASE certified courses on Biodiesel for Diesel Service Technicians and other online biodiesel resources

66

Biodiesel Resources

www.biodiesel.org•Biodiesel Training Toolkit •News Releases & Information Resources•Technical Library, Spec Sheets & Videos•OEM Warranty Positions on Biodiesel• U.S. Diesel Vehicle List

www.nbb.org•Official site of National Biodiesel Board

www.BQ-9000.org•Listing of BQ-9000 Certified Companies

www.allthingsbiodiesel.com•Biodiesel merchandise, literature, pump labels and more!

67

Thank You!Questions…?

Jennifer WeaverOEM Outreach and Education Program SpecialistFor the National Biodiesel BoardAnn Arbor, MI734-904-3822Jennifer_Weaver@me.com

68

Steve HowellSenior Technical Advisor For the National Biodiesel BoardKearney, MO816-903-6272showell@marciv.com