Ethanol Industry Update

Opportunities and RisksU.S. and SD

Legislative Briefing – Jan 11, 2007

Brian JenningsExecutive Vice President

American Coalition for Ethanol (ACE)www.ethanol.org

History of U.S. Ethanol ProductionU.S. Ethanol Production

0.175 0.215 0.35 0.375 0.430.61 0.71 0.83 0.845 0.87 0.9 0.95 1.1 1.2 1.35 1.4

1.11.3 1.4 1.47 1.63 1.77

2.12

2.81

3.4

4

5

0.1750.215 0.35 0.375 0.43 0.61 0.71 0.83 0.845 0.87 0.9 0.95 1.1 1.2 1.35 1.41.1

1.3 1.4 1.47 1.63 1.772.12

2.81

3.4

4

5

6.2

0

1

2

3

4

5

6

7

1980 1981 1982 1983 1984 1985 1986 1987 1988 1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007

Years

Billi

on G

allo

ns

Project 6 billion gallons + of actual production in 2007

Unprecedented Growth in U.S.

• 112 ethanol plants – 5+ billion gallon capacity. 72 ethanol biorefineries under construction.

• 2 billion bushels of corn & other grain for ethanol in 2006 – 20% of nation’s corn for ethanol.

• Ethanol blended with 46% of gasoline supply.

• E85 stations have doubled in last 24 mos.

• By end of 2006, 12 ethanol plants – nearly 600 million gallon capacity, #5 ethanol producer.

• Using about 50% of state’s corn crop for ethanol. 10,000 farm families invested.

• 50+ locations to fill up on E85.

• Ethanol (E10) blended w/ 70% of state’s gasoline.

South Dakota Stats

Plant Location Year CapacityHeartland Grain Fuels Aberdeen 1988 10 million gallons

Broin Enterprises Scotland 1989 9 million gallons

Heartland Grain Fuels Huron 2000 30 million gallons

Dakota Ethanol Wentworth 2001 48 million gallons

Glacial Lakes Energy Watertown 2002 48 million gallons

Northern Lights Big Stone City 2002 48 million gallons

VeraSun Energy Aurora 2003 120 million gallons

Great Plains Ethanol Chancellor 2003 48 million gallons

James Valley Ethanol Groton 2003 48 million gallons

Sioux River Ethanol Hudson 2004 48 million gallons

North Country Rosholt 2005 30 million gallons

Prairie Ethanol Loomis 2006 60 million gallons

12 plants in operation 550 million gallons capacity

South Dakota Ethanol Industry

Plant Location Year

Redfield Energy Redfield 2007

Millennium Ethanol Marion late 2007

Aberdeen Energy Mina 2008

Missouri Valley Renewable Energy Meckling 2008

Heartland Grain Fuels Aberdeen 2008/09

• Possible for 17 ethanol plants capable of making more than 1 billion gallons of ethanol in South Dakota in 2008-09.

Plants Under Construction

• More than $1 billion in economic activity from ethanol refineries in SD.

• $255 million in new wealth to state.

• 473 jobs at ethanol plants, and 3500 jobs total in state.

• Increased price of corn 10-30 cents in state, new revenue to corn farmers totaling $50 million to $100 million.

Economic Impact of Ethanol in SD

Source: Stuefen Research, based on 2004 data; 400 mg ethanol from 145 m/bu corn.

• Bipartisan support from legislature/Congress.

• SD Production Incentive: up to $10 million over 10 years.

• SD Pump Incentive: 2 cents/gallon on E10 and 12 cents/gallon on E85.

• Leadership from farmers & rural advocates; Corn price and availability, investment, andgrassroots momentum.

Secrets to SD’s Ethanol Success?

19 States offer production incentives – incl. SC and VA

14 states offer pump incentives – incl. Mich

7 states require ethanol use

Risks & Challenges

• No pricing correlation between ethanol, corn, and natural gas.

• Limits on how far we can go with corn.

• Public policies. Need certain and long-term commitment.

Opportunities

• Ethanol achieves multiple public policy goals: environment, economy & energy security.

• Oil problems: price, supply, geopolitics & climate change.

• Technology: Cellulose and biomass.

How far can we go on ethanol?

• No “silver bullet.” Need variety of alternatives to foreign oil.

• Corn & grain-based ethanol production forecast to satisfy the U.S. “blend market” with E10 nationwide (15 billion gallons).

• But there are limits….Beyond corn, DoE says cellulose and biomass can yield 60 billion gallons of ethanol in future.

• SD Biomass: corn stalks, wheat straw, native and warm season prairie grasses (Big Bluestem), wood waste.

• Ethanol from grain and cellulose likely to replace at least ½ of gasoline supply, 60 to 80 billion gallons.

www.ethanol.org

Thank you.