Ethanol Industry Update Opportunities and Risks U.S. and SD Legislative Briefing – Jan 11, 2007

1. Ethanol Industry UpdateOpportunities and RisksU.S. and SDLegislative Briefing – Jan 11, 2007 Brian Jennings Executive Vice President American Coalition for Ethanol (ACE) www.ethanol.org

2. History of U.S. Ethanol Production Project 6 billion gallons + of actual production in 2007

3. 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.

4. South Dakota Stats • 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.

5. South Dakota Ethanol Industry PlantLocationYearCapacity Heartland Grain Fuels Aberdeen 198810 million gallons Broin EnterprisesScotland19899 million gallons Heartland Grain Fuels Huron200030 million gallons Dakota EthanolWentworth 200148 million gallons Glacial Lakes EnergyWatertown200248 million gallons Northern Lights Big Stone City200248 million gallons VeraSun EnergyAurora2003120 million gallons Great Plains EthanolChancellor200348 million gallons James Valley EthanolGroton200348 million gallons Sioux River EthanolHudson200448 million gallons North CountryRosholt200530 million gallons Prairie EthanolLoomis200660 million gallons 12 plants in operation550 million gallons capacity

6. Plants Under Construction • PlantLocationYear • 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.

7. Economic Impact of Ethanol in SD • 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. Source: Stuefen Research, based on 2004 data; 400 mg ethanol from 145 m/bu corn.

8. Secrets to SD’s Ethanol Success? • 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, and • grassroots momentum.

9. 19 States offer production incentives – incl. SC and VA

10. 14 states offer pump incentives – incl. Mich

11. 7 states require ethanol use

12. 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.

13. Opportunities • Ethanol achieves multiple public policy goals: environment, economy & energy security. • Oil problems: price, supply, geopolitics & climate change. • Technology: Cellulose and biomass.

14. 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.

15. www.ethanol.org Thank you.