Wisconsin Legislative Council

1. Wisconsin Legislative Council September 16, 2008 Presented by Hoon Ge

2. Adequacy of Current Fuel Distribution System of Ethanol and Biodiesel Prospects for Biofuel Pipelines from Midwest to Population Centers Infrastructure Studies Concerns of Biodiesel Users Minnesota Ethanol and Biodiesel Mandate Experience Summary of Topics

3. Energy Independence & Security Act of 2007 • Biodiesel Requirement • 500 million gallons used by 2009 • 1 billion gallons used by 2012 • Ethanol Requirement (corn-based) • 15 billion gallons by 2015 • 36 billion gallons by 2022

4. Current U.S. Biofuel Production • Biodiesel is already meeting 2009 goal at 550 million gallons • Ethanol is estimated at 13.5 billion gallons

5. Midwest Biodiesel Production FacilitiesOver 40 throughout Midwest

6. Midwest Ethanol Production Facilities

7. Ethanol Pipeline Feasibility Study Sec. 243 in the 2007 Energy Act Studying the feasibility of the construction of an dedicated ethanol pipeline Study: Existing potential barriers to the construction of pipeline (technical, financing, regulatory) Market Risk Financial Incentives that may be necessary Technical factors that may compromise safe transportation of ethanol

8. Transportation of Renewable Fuels Sec. 245 in the 2007 Energy Act Studying the Adequacy of Transporting Bio-fuels Study Includes: Infrastructure/equipment Capabilities Cost of Transportation (and Fuel increases due to it) Distribution Issues Transportation Competition (and federal regulations) Addressing Transportation Service Problems Total Cost of all Programs to regulate transportation

9. Bio-fuels Infrastructure Study Sec. 9002 in the 2008 Farm Bill Federal Procurement of Bio-based Products Study: Into the use of bio-based products by Procuring Agencies Effects of bio-based products on functionality of Agencies Bottom Line: Preference for Contracts that implicate more Bio-based products (as long as products don’t affect Operability of the Agency)

10. Biodiesel Pipeline? • 75,000 barrels of B5 moved on the Colonial Pipeline from Houston to New Jersey • DOE supported the test • Test was completed and successful Only issue is trail-back of biodiesel into Jet-fuel… must be less than 10 ppm • Other test scheduled

11. Ethanol Pipeline? • Magellan Midstream Partners/Buckeye Partners - proposed pipeline would run 1,700 miles for a cost of $3 billion and take several years to build. The pipeline would have the capacity to take 10 million gallons of ethanol per day produced in IA, IL, MN and SD and deliver it to Pittsburgh, Philadelphia and New York. • Colonial Pipeline Company - using geographic information systems to build business models for ethanol pipelines. Using the business models, the company can compare production capacities of ethanol plants, proximity to existing pipelines, population centers for distribution, geographical concerns and other modes of transportation.

12. MN Ethanol Mandate • Phase Separation • Remedy was to remove all the free water from fuel tanks

13. MN Biodiesel Experience • Complaint filed by Flint Hills Pipeline of off quality product: Oct 27, 2005 • Dept of Commerce Wt/Measures finds biodiesel out of spec for flash point • Dept rules that blending out of spec biodiesel is illegal by statute • NBB is notified to determine the purpose of flashpoint testing and lab error analysis: flash point for diesel is 50 – 75 C, Biodiesel is 130 C.

14. MN Experience • Mandate suspended for 10 days • Out of spec flashpoint product found at 5 terminal locations in the state • Dept of Commerce began sampling at terminals and Mn producers • November 8, mandate reinstated • Cooperation of stakeholders allowed blending to begin

15. MN Experience • Root cause • Flash point test is variable • Some biodiesel from producers may have been below ASTM spec • Downstream tests of cross-contamination from ethanol or diesel was not conducted • Plants must meet 130C to ship, terminals 100C to blend • Some biodiesel was retrieved by producers and brought back to spec • Specification has since been changed in ASTM • 130 C flash or 100 C flash with GC proof of methanol content

16. MN Experience • Terminals began to institute procedures for approval of suppliers • Nov 2005, task force began to investigate cold weather plugging complaints, discussion of possible filter plugging from in-spec product • Feb 2006, filter plugging issues found out of spec biodiesel

17. MN Experience • Plants shipping out of spec product retrieved all product impacted • Dept of Commerce inspected all in-state producers for compliance • Suggestion of BQ-9000 and additional “Mn cold soak test” implemented to catch suspect product at terminals

18. What was happening? • Terminals were receiving product without proof of analysis, retains to determine offender not always present • Some production facilities were still filling tanks while trying to certify the product • Product tanks on average met standards, but individual loads were suspect • Sediment above cloud point was identified as potential issue • Either high mono-glycerides or sterols • ASTM std does not indicate mono-glyceride limit, only free and total limits

19. Concerns of Biodiesel Users • Microbial Growth – Exposure to air and water • Icing of Filter – Excess water in tank • Oxidation – Hot fuel return to fuel tank • Monoglyceride Build Up – Off specification of Total & Free Glycerin • Paraffin Wax – Temperature at or below cloud point

20. Breakdown of Filter Plugging Sources From April 2007 to March 2008 - Filter Plugging Problems Addressed by the National Biodiesel Hotline • Microbial Only 21% • High Water and Microbial 18% • High Water Only 15% • Biodiesel Contaminants 10% • No problem Found 10% • Improper blending 8% • Other 8% Oxidation, Oil Contaminants • Biodiesel Didn’t Meet Specification 5% • Outside Temperature Was Below Cloud Point 5% • ULSD Paraffin’s 3%