James Frusti Manager, Fuels & Energy Affairs

1. Alternative Fuels (Ethanol, Biodiesel, et al) 8th Annual Iowa Renewable Fuels Summit Altoona, Iowa James Frusti Manager, Fuels & Energy Affairs January 28, 2014

2. Long Term Objectives & Alt. Fuels • The U.S. long-term goal of an 80% reduction in GHG by 2050 will require a comprehensive program consisting of vehicle efficiency improvements, fuel de-carbonization, customer acceptance, and government support. • Efficiency improvements will require higher quality fuels, especially octane. • Carbon content of “fuel”, including that used to generate electricity and produce hydrogen, must be correspondingly reduced. • Customers must embrace the new technologies and fuels. • Government policies targeted at fuels, infrastructure and customer acceptance must be coordinated.

3. Alternative Fuels Principles • Alternative Fuels andSustainability Objectives • Economic Sustainability • Cost-effective regulatory compliance – GHG/CAFE, ZEV Mandate and Tier 3/LEV III • Products that provide customer value: utility and cost of ownership • Social Responsibility • Protect the environment: less GHG emissions, improved air quality • Energy security: reduce petroleum use - increase the use of renewables • Jobs Across America: powered by an expanding alternative energy industry 3

4. Key Enablers • To Achieve Long Term Objectives • Emphasize a systems approach – vehicle and fuel • Concentrate on total life cycle effect • Increase attention paid to carbon in fuel, equal to that paid to vehicles • Alternative Fuel Drivers • Creation • Research to enable production of commercially viable alternatives • Distribution • Availability of adequate infrastructure • Use • Affordable (cheaper than gasoline/diesel) • Consumer education 4

5. Alternative Fuels – Major Obstacles • Big Rocks to overcome with any Alternative Fuel • Overcoming resistance of existing energy providers • Providing enough/strategic incentives to enable sustainability for the alternative • Government policy actions that are transparent, direct use of performance based standards and treat alternatives equally 5

6. Big Rocks for Renewables/Biofuels • Demise of Ethanol Incentives • Fuel Producers/Providers • RFS designed to drive higher ethanol volumes. However, EPA proposed significant reduction in 2014 RVOs. • Volumetric Ethanol Tax Credit (VEETC) – expired 12/31/11 • Small Ethanol Producer Credit – expired 12/31/11 • 2nd Generation (Cellulosic) Producer Tax Credit – expired 12/31/13 • Alternative Fuel Infrastructure Tax Credit – Expired 12/31/13 • Special Depreciation Allowance for Cellulosic Biofuel Plant Property – set to expire 12/31/14 • Vehicle Manufacturers • CAFE FFV credits are scheduled to phase out at the end of 2019 • CO2 FFV credits & related Usage Factor will reduce the incentive for auto manufacturers to continue the production of FFVs • Key Challenge - Maintaining the current renewable fuels momentum with rising political uncertainty & fading incentives 6

7. Renewable/Biofuels – Opportunities • Opportunities • NAS comments on vehicles with biofuels • Cellulosic biomass most promising • Drop-in Biofuels can be produced from cellulosic biomass w/o major change in delivery infrastructure and vehicles • Drop-in biofuels coupled with high efficiency ICEs/HEVs could be a major contributor to reducing petrol use and GHG emissions • DOE – is bullish on alternative fuels • Alternative fuels (H2 – Electric – CNG – alternative liquid fuels) • Biofuels emphasis – EERE reorganized to include emphasis on bioenergy • Opportune time to expand/focus on cooperative gov’t/industry research and funding for low carbon fuel research • Political support can be useful: • There has been 1½ years of negative policy on renewable fuels • There is a need to get the right story in front of Congress • Leverage NAS & DOE positive view/actions on biofuels and encourage the call for DOE to do research 7

8. Alternative Fuel Target for Autos • Lowest emissions and best performance in future engines – supported by a call for action on both product and fuels • Vehicle: • Elements of a well-designed fuel which enables improved efficiency through downsizing, boosting and higher compression ratio • Fuels: • High-octane, renewable and low carbon • Higher octane ratings by any possible new/alternative fuel To measure the alternative fuel impact for creation, distribution and use, we focus on full life cycle effects 8

9. Life Cycle Outline – Using GREET Well-to-Wheels Well-to-Tank + Creation & Distribution Tank-to-Wheels = Use – engine efficiency

10. Life Cycle for an Alternative Fuel • Our directional performance requires high octane/low carbon fuels. An example for achieving this goal for liquid transportation - ethanol • In examining the life cycle effects for creation and use, we find: • Refinery crude oil use and CO2 emissions • Decrease with higher ethanol content • Increase with higher Octane (but only by 1-2% for mid-level ethanol) • Engine effects • Fuel knock resistance and evaporative cooling improve with increasing ethanol and corresponding octane increase • Higher ethanol/octane: • Enables higher engine compressions • Increases engine efficiency • Decreases tailpipe CO2 emissions 10

11. Life Cycle Recap • A systems approach (vehicle + fuel) is needed to obtain “optimal” solutions for reducing CO2 emissions • The primary reduction in CO2 emissions and petroleum use comes from renewable, low-carbon fuel (ethanol) displacing fossil fuel (gasoline). This requires fuel capability in vehicles and infrastructure and a comprehensive implementation plan. • “Win-Win-Win” solutions (low cost, lower CO2 emissions, lower petroleum use) are possible for higher-octane fuel (from hydrocarbons, ethanol or their combination or other new fuels) in optimized engines 11

12. Summary Points for Policy Makers • Talking points to get alternative fuels back on track at the federal and state levels • Following what we’ve done to date, the science and research all point to the need for alternative fuels • We are pressing the energy carrier (the vehicle) to its physical limit – low carbon energy sources are now required • Key messages of alternative fuels • Decrease Carbon • Improve Fuel Quality • Those to engage or collaborate with include: • Alternative Fuel Industry people • OEMs • Energy providers 12