America’s 21st Century Transportation Fuel

1. America’s 21st Century Transportation Fuel Ethanol From Biomass

2. Ethanol From Biomass: America’s 21st Century Transportation Fuel • The purpose of the initiative is to significantly expand the production and use of ethanol in all regions of the nation. • Current ethanol production is about 4 billion gallons a year – 2 percent of U.S. transportation fuel supplies • The Renewable Fuel Standard essentially doubles production to 7.5 billion gallons a year by 2012 – about 4 percent of U.S. transportation fuel supplies • Traditional feedstocks are available to increase production, 8-10 percent, but beyond this corn prices and availability could be impacted

3. Ethanol From Biomass: America’s 21st Century Transportation Fuel • A need for continued production efficiency improvements and utilization of new feedstocks: • corn kernel fiber, stover, and cobs • wheat straw, agricultural residues • switchgrass and other native dedicated energy crops • Supply and demand measures are needed to significantly expand production and use of ethanol – including dramatically greater resources for RD&D, incentives, and infrastructure The Impact of Expansion

4. Ethanol From Biomass: America’s 21st Century Transportation Fuel • Identified the need for policy initiatives to expand the production and use of cellulosic-derived ethanol in order to deliver the benefits of ethanol to all regions of the nation • Obtained financial support from the Hewlett Foundation for the Ethanol From Biomass project (September 2004) • Developed and issued the Governors’ Ethanol Coalition recommendations (April 2005) • Collaborated with a range of industry, agricultural, environmental and other organizations to ensure the Energy Policy Act of 2005 included the Coalition’s recommended actions (August 2005) Ethanol From Biomass Progress: 2004 - 2005

5. Ethanol From Biomass: America’s 21st Century Transportation Fuel Summary of the Coalition’s Three Recommendations and Corresponding Sections of the Energy Policy Act of 2005 • National Renewable Fuels Security Standard and Incentives (Energy Policy Act, Section 1501: Renewable Fuel Standard) • Research and Development (Energy Policy Act, Section 932 - Bioenergy program enhancements; Section 941 - Biomass R&D amendments) • Commercialization and Production Incentives (Energy Policy Act, Section 942: Production incentives for cellulosic biofuels)

6. Ethanol From Biomass: America’s 21st Century Transportation Fuel Section 1501– Renewable Fuel Standard • Requires 4 billion gallons of ethanol use a year in 2006 increasing to at least 7.5 billion gallons in 2012 • Directs EPA to implement the RFS • Includes trading credits for refiners • Allows States to seek an RFS waiver under strict test • Provides cellulosic ethanol and related ethanol to count as 2.5 gallons until 2013 • Directs EPA to establish a “new” RFS each year after 2012 • Requires at least 250 million gallons of cellulosic ethanol beginning in 2013

7. Ethanol From Biomass: America’s 21st Century Transportation Fuel Section 932: Bioenergy Program • Enhances existing DOE R&D program • Includes RDD&D on biofuels, bioproducts, thermo-chemical conversion,enzyme-based processing • Emphasizes cellulosic biofuels and co-products including demonstration of integrated biorefinery • Encourages variety of products (e.g., biobased chemicals, fuel) and demonstration applications (e.g., feedstock collection and treatment) • DOE has NOPI out to solicit interest, results pending • Maximum of $100 million for any one biorefinery demonstration

8. Ethanol From Biomass: America’s 21st Century Transportation Fuel Section 941: Amendments to Biomass R&D Act • Enhances existing USDA R&DD program conducted with DOE • Indicates R&D solicitation technical areas: • advanced feedstock production and harvesting • overcoming recalcitrance of biomass • diversification of biobased products from biorefineries • Includes guidance on distribution of projects funded: • 20% applied fundamentals • 45% recalcitrance of biomass • 30% product diversification • 5% strategic guidance • Increases authorization from $54 million to $200 million a year, from 2006 - 2015 (Note appropriation in FY’05 was $14M, FY’06 $12M)

9. Ethanol From Biomass: America’s 21st Century Transportation Fuel Section 942: Production Incentives for Cellulosic Biofuels • Authorizes production incentive for the first billion gallons of cellulosic biofuels by 2015 • Implementation by DOE in consultation with USDA, DoD, and EPA • Directs uses of a reverse auction approach for provision of the incentives • not more than 25% of the incentive for any one auction and any one project • not more than $100 million a year, not more than $1 billion total • ensure small producers and businesses are full participants in biofuels industry • Provides Authorization of $250 million for 10 years • First auction, if funded, one year after production of 1 million gallons or 2008

10. Ethanol From Biomass: America’s 21st Century Transportation Fuel • Identified implementation approach for the Coalition’s recommendations as embodied in the Energy Policy Act of 2005 (August 2005) • Obtained support from the Hewlett, Energy, and McKnight Foundations (September 2005) • Formed the Governors’ Renewable Fuels Security Roundtable to gain input (November 2005) • Set priorities for implementation (December 2005) Implementation of the Provisions:

11. Ethanol From Biomass: America’s 21st Century Transportation Fuel Priorities: • Ensure adequate federal funding: • $200 million annually for DOE’s Biomass Program • $100 million annually for USDA’s Biomass Program • Reduce the proportion of “earmarked” biofuels funding • Explore the creation of a Biofuels Trust Fund • Educate and inform the policy making process (e.g., further enhancements to the RFS, coordinated research, refined commercialization) • Support state, federal, and private-sector education efforts to dispel ethanol myths and raise visibility of the strategic, economic, and environmental benefits of biofuels

12. Ethanol From Biomass: America’s 21st Century Transportation Fuel Status and Challenges: Renewable Fuel Standard – EPA implementation is underway President’s FY’07 Budget Request –DOE Biomass Program $150 million, and USDA Biomass Program $12 million Challenges: • Building support to obtain appropriations for priority programs authorized by the Energy Policy Act of 2005 • Reducing the proportion of “earmarks” to aid in effective management of federal programs • Improving coordination of state, federal, local and industry activities to leverage resources and expedite delivery of biofuels

13. Ethanol From Biomass: America’s 21st Century Transportation Fuel Next Steps • Develop outreach and advocacy strategy in coordination with Senators Daschle and Dole for the Coalition and others to implement • Support Coalition members advocacy efforts with policy and appropriations information • Coordinate with partners in Washington, DC as they conduct advocacy and develop policy (e.g., appropriations, biofuels trust fund) • Provide educational materials to demonstrate the value of ethanol and need for RD&D efforts (e.g,. state case studies, respond to federal requests for state information, presentations) • Conduct research for the Coalition as it implements provisions and considers new positions • Engage Roundtable members to build support and gain input