Mike Davis Associate Laboratory Director Energy Science & Technology

1. Converting Domestic Hydrocarbons into Transportation Fuels: Opportunities Abound Pasco-Kennewick Rotary Mike Davis Associate Laboratory Director Energy Science & Technology Pacific Northwest National Laboratory May 24, 2006

2. Our time together • A little bit about PNNL • The need to reduce the nation’s dependence on imported oil • Two opportunities: • Coal to liquid transportation fuels • Biobased products and fuels 2

3. DOE Multi-program National Laboratories Pacific Northwest Brookhaven Idaho Lawrence Berkeley Argonne Los Alamos Lawrence Livermore Oak Ridge Sandia Office of Science National Nuclear Security Administration Office of Nuclear Energy, Science & Technology 3

4. PNNL performs research for the Department for Energy, other agencies, and industry Business Volume ($M) FY05 FY06 Est. Dept. of Energy 423 488 DHS 133 113 Other Agencies 93 109 Battelle Private 7790 Total 726 800 Private 11% National Security Other Agencies 13% Homeland Security 18% Science Environ-ment Energy 4

5. Energy Sector Business$81 million in FY05 • Science-based solutions for: • Reducing dependence on foreign oil • Minimizing the energy system’s effect on the environment • Improving energy efficiency, security and reliability Pursuing conversion of coal/hydrocarbons to boost clean supply of electricity, gas and liquid fuels Ensuring the efficiency, reliability and security of the nation’s power grid Developing low-cost, high-efficiency solid oxide fuel cells Addressing hydrogen storage and hydrogen safety Increasing efficiency and reducing emissions in vehicles 5

6. Planning GuidanceFY07–FY11 Energy policy can be distilledinto four broad goals • Diversify our energy mix and reduce dependence on foreign petroleum, thereby reducing vulnerability to disruption and increasing the flexibility of the marketto meet U.S. needs • Reduce greenhouse gas emissionsand other environmental impacts(water use, land use, criteria pollutants) from our energy production and use • Create a more flexible, more reliableand higher capacity U.S. energy infrastructure, thereby improving energy services throughout the economy, enabling use of diverse sources, and improving robustness against disruption • Improve the energy productivity(or energy efficiency) of the U.S. economy 6

7. A snapshot of today’s reality If we do not aggressively pursue domestic solutions now for both expanded conversion capacity and carbon management, we risk substantial and increasing economic and environmental damage. • Oil production in the lower 48 states peaked ~ 1970 at 9.6 million barrels/day • Natural gas production in the lower 48 states may be peaking now • Global oil production is expected to peak early this century; predictions range from 2010 to 2025 • Hydrocarbons provide 85% of the world’s energy • Demand for hydrocarbons will continue to increase to support economic growth • Oil market economics are not driven by the strategic interests of our nation 7

8. U.S. consumes 20.5 million barrels of petroleum per day Resource End Use In 2003, total U.S. demand for petroleum was 20.044 million barrels per day, 56% of which was from net imports. By 2020, import reliance is expected to increase to 65% (source: EIA) 8

9. Enable domestic hydrocarbon resources to be used in an environmentally acceptable and economically competitive way within the existing energy infrastructure Address nation’s and world’s growing energy demand by utilizing a broad base of hydrocarbons Develop business case to support necessary privateinvestment in plant capacity Define value proposition for private financing Identify potential partners/collaborators/investors PNNL’s Energy Conversion InitiativeConvert domestic coal into liquid transportation fuels Goal: Develop energy conversion and carbon capture and sequestration process capabilities that can be deployed at plants with a production capacity of 100k barrels/day. 9

10. Near-term solution:Gasification and Carbon Capture • Conversion via gasification enables • Near-term solution, scalable and applicable for all hydrocarbons, to address economic and environmental needs • Expanded use of domestic hydrocarbons • Carbon capture sufficient to lower emissions output to that of natural gas and, over time, to zero (the goal of FutureGen) • Conversion via gasification produces economic efficiencies • Same “front end” approach for electricity generation and transportation fuels production • Transportation fuels could use existing infrastructure Globally, there’s no shortage of hydrocarbons, only a shortage of high-quality hydrocarbons 10

11. Biomass: Another opportunity DOE study identified 1.3 billion tons of dry biomass available in U.S. annually • Potentially could produce 130 billion gallons of liquid transportation fuels* • Significant new technology developments needed to maximize production • Same resource could supply virtually all raw materials for the chemical industry Oil-based crops could produce enough biodiesel to supply 2-5% of our current diesel consumption, but alternative crops and agricultural practices are required *U.S. consumes 150 billion gallons of gasoline annually, plus another ~55 billion gallons of diesel) 11

12. Economic drivers • Liquid transportation fuels derived from biomass must compete economically with petroleum to ensure a viable industry • Significant improvement in conversion technologies needed to reduce production costs of transportation fuels and chemicals from biomass • Current petroleum refinery produces about 90% fuel and 10% chemicals • To be economically competitive, biorefineries must consider converting biomass to liquid transportation fuels as well as chemicals and materials 12

13. Northwest has diverse biomass resource base Crops, crop residues, trees, and pulp and paper processing residues Mostly harder-to-process woody waste (lignocellulosic) vs. Midwest starches and oil. While harder to process, some are residues requiring collection and disposal Maximizing utilization requires understanding total resource base available and infrastructure Biomass—a state resource Washington state has 17 million tons of biomass residue, which potentially equates to 1.5 billion gallons of ethanol. The technology to make the conversion is there. The challenge is making it economically viable. 13

14. Bioproducts, Sciences, and Engineering LaboratoryJointly developing research agenda with WSU • Maximize use of Washington’s existing crops • Converting Washington’s diverse biomass residues to bioproducts and biofuels and determining how to maximize economic benefit • Optimize feedstocks • Bringing together WSU plant capabilities and PNNL bioproducts capabilities to create better crops specifically for bioproducts and biofuels feedstocks • Explore biobased engineered materials • Exploring value-added materials, not just chemicals, that can be made from biomass • Provide relevant analysis • Addressing technological and economical questions to enable the development of a strategic bioenergy roadmap for Washington 14

15. A “science to solutions” approach • PNNL performs research and development to address critical energy challenges for the nation and globally. In addition to what you heard today: • Fuel cells • Nuclear energy • Building technologies, including next-generation lighting • Lightweight materials and emissions reduction technologies for vehicles • Carbon sequestration • An honor to share our work with you 15