BRINGING BIODIESEL TO TEXAS

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Austin Perkins
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1 BRINGING BIODIESEL TO TEXAS

2 Biodiesel 2

3 Bosselman BioFuels Solutions Bosselman BioFuels Solutions, a division of Bosselman Energy, Inc., is focused on developing downstream marketing, infrastructure and supply for higher blending levels of biofuels including biodiesel and ethanol blends Biofuels Solutions works with retailers, truck stops, private and governmental fleets, and government agencies across the U.S. This encompasses logistics, infrastructure, price risk management, and supply. Leasing throughput capacity at terminals and private storage facilities throughout the Midwest, Southwest, and Southeast Bosselman BioFuels provides educational, promotional, and marketing support 3

Solutions works with retailers, truck stops, private and governmental fleets, and government agencies across the U.S. This encompasses logistics, infrastructure, price risk management, and supply.

4 Biodiesel Hurdles Uncertainty of Federal fuel tax credit Verification of good RINS and trading value Consumer Education - advantages to the environment, American jobs, and American security Product specifications - focus on product quality not on type of feedstock Quality control importance of dealing with creditable and reliable producers 4

and American security Product specifications - focus on product quality not on type

5 Biodiesel Hurdles Customer Acceptance dispelling myths National energy policy to support investments in new biodiesel production plant Logistics and infrastructure to support higher biodiesel blending levels > 5% Regional production facilities 5

biodiesel production plant Logistics and infrastructure to

6 Blending Generally 3 primary ways to achieve higher levels of blended biodiesel Splash blend diesel fuel with biodiesel by end user in a storage tank or into a transport truck Biodiesel pre-blended by a jobber or distribution company, and offering a finish blended product In-line blending of diesel and biodiesel at a terminal receiving a finished blended product 6

Biodiesel pre-blended by a jobber or distribution company, and offering a finish blended

7 Biodiesel Infrastructure Most existing commercial and retail fueling sites can handle up to B20 with no or limited modifications to the fueling facilities. Existing tanks and systems need to be thoroughly examined to make sure water, microbial contaminates, and heavy sediments are not present in the system. If so, these tanks and systems need to be cleaned New tanks are generally not required unless the site wants to continue offering straight diesel. Tank cleaning is still recommended before switching from diesel to any blend greater than B10 Blending above 5% generally requires splash blending at a private bulk storage facilities or installing B99/B100 on site tanks and doing your own blending at the fueling site with blenders 7

If so, these tanks and systems need to be cleaned New tanks are generally not required unless the site wants to continue offering straight diesel.

8 Product Quality Control Industry has developed voluntary program called BQ-9000 The producer receives the accreditation, not the fuel Quality control programs monitor production with proper sampling, testing, storage, sample retention, and shipping protocols COA provided for each production lot includes 9 parameters visual, free & total glycerin, flash point, acid #, water and sediment, oxidative stability, sulfur, cloud point 8

storage, sample retention, and shipping protocols COA provided for each production lot includes 9

9 Cleaning Effect Blends of B20 or lower minimizes any cleaning or solvent effect issues Minor filter plugging may occur during first few weeks of biodiesel use; should keep some extra filters on hand Sediments in the vehicle system may plug the filters during the first few weeks; but generally if it does occur, typically it will go away after the first few fill-ups Sediments in commercial fueling tanks may also cause plugging, and tanks may need to be cleaned For higher blends, i.e. B99/B100, tanks need to be cleaned out 9

first few weeks; but generally if it does occur, typically it will go away after the first few fill-ups Sediments in commercial

10 Setup Process Determine blending percentage desired - 5%, 10%, 15% or 20%; and take in to consideration time of year and season Determine whether you want to buy b100 or b99.9 Determine monthly volume required and for what term; determine turn over rate, i.e. daily or weekly. B100/b99.9 want higher turn over rate Determine what type of pricing you desire, what index to use, average or daily 10

9 Determine monthly volume required and for what term; determine turn over rate, i.e. daily or weekly.

11 Setup Process Arrange transport logistics to blend biodiesel with diesel; b99.9 should be bottom loaded first then diesel Inspect and clean your tanks and fueling systems; secure a supply of fuel filters; make sure operators do not remove fueling filters if dispensing is slow Label dispensers and tanks; and provide educational material to users Establish a protocol for customer complaints, i.e. what type of information to collect, samples to collect, and follow-up 11

filters; make sure operators do not remove fueling filters if dispensing is slow Label dispensers and tanks; and

12 Blending Logistics Considerations If splash blending into your transports, biodiesel storage should be within 3 miles of major terminals Blending should be available 24 x 7; carriers need to receive orientation and comply with loading protocol BOL s printed and provided to drivers showing volume b99.9 added for billing and tax purpose In cold weather months, tanks and piping should be heated and arrange for cold weather additives to be added to biodiesel prior to blending. Also if adding your own cold weather additives, so make sure there is no negative reaction between additives 12

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14 Example RINS Economics Example: Let s assume 2012 Vintage RINS are selling at $1.60 There are 1.5 RINS attached to every physical gallon of b99.9; therefore the RINS value associated with a physical gallon is 1.5 times $1.60 which = $2.40 Let assume b99.9 with RINS cost is NYMEX HO + $1.90; yesterday s NYMEX HO settled at $3.05; therefore b99.9 = $4.95 Net cost b99.9: $ $2.40 = $2.55 Local rack USLD price about 7 cents higher than NYMEX HO, so price of B99.9 to rack USLD = $ = $

60 which = $2.40 Let assume b99.9 with RINS cost is NYMEX HO + $1.90; yesterday s NYMEX HO settled at $3.05; therefore b99.

15 Current Blending Economics For a 10% blend, potential savings are 5.7 cents/gal plus 2 cent state tax savings For a 15% blend, potential savings are 8.55 cents/gal plus 3 cent state tax savings For a 20% blend, potential savings are 11.4 cents/gal plus 4 cents state tax savings Actual savings reduced by any incremental transport and delivery cost 15

55 cents/gal plus 3 cent state tax savings For a 20% blend, potential savings are 11.

16 Pricing and Terms Price of b100 is influenced by 8 different variables Animal fat, Soy, Corn, RFS requirements, RINS, Diesel, logistics, tax credit. No other fuel product has so many different moving parts that comprise or effect the pricing Typical pricing structures tied to NYMEX HO Index; previous day settlement; same day settlement; previous weekly average; With RINS or w/o RINS Term from 1 12 months 16

No other fuel product has so many different moving parts that comprise or effect the pricing Typical

17 Pricing Considerations Spot vs. term pricing Fixed pricing or index pricing Quality of product vs. time of year Take ownership of RINS or buy without RINS Sharing of Federal Blenders Credit if reinstated Ratably of pulling product Blending logistics Blend ratio, b5; b10; b20 Price differential between local ULSD and NYMEX HO 17

time of year Take ownership of RINS or buy without RINS Sharing of Federal

18 Summary 1. Blending infrastructure to provide higher level biodiesel blending are and can provide economic and operational benefits to users; 2. Blends at 5% and up cost less than ULSD, saves the consumer money, displaces foreign oil, improves the America economy, and improves the environment 2. Biodiesel is eco friendly, American made, and creates American jobs 3. For more information on biodiesel blending opportunity and setup in Dallas, Austin, San Antonio, and Houston contact David Carey 18

19 Presented by: David W Carey Vice President & Managing Director Operations Bosselman BioFuels Solutions david.carey@bosselmanenergy.com

BQ-9000 Quality Management System. Marketer Requirements

BQ-9000 Quality Management System Marketer Requirements Revision 5 Effective Date: February 1, 2009 2009 National Biodiesel Board This requirements document has been prepared by the National Biodiesel