Solutions to the Issue: Real World ApplicationsSupply & Infrastructure

Steven J. LevySprague Energy

Hudson River Navigator

A Regional Conference to Address Air Quality:

Smart Fuels

& Technology03/29/ 2006

Sprague Energy Overview

• Sprague Energy has been servicing the Northeastern U.S. as the leading independent wholesale distributor of energy products for over 130 years

• Revenue in excess of $2 billion• Owns 20 terminals

– Over 7 million barrels of capacity

• Throughput, exchange and purchase product at 100 plus terminals

• 475 employees• Wholly owned subsidiary of Axel Johnson Inc., a

member of the Axel Johnson Group of Sweden– Energy– Environmental– Telecommunications

Sprague’s Core Businesses

Natural Gas

Materials Handling

Risk Management / Fuel Management

Coal

Fungible Petroleum Products

Clean FuelsULSD

BiofuelEthanol

What is driving fuel choice?

Emission reductions

Energy dependence

Who is driving fuel choice?

Environmentalists

Federal regulations

State legislation

Local legislation

Consent Decrees

Obstacles to Alternative Fuels

• Availability of supply• Lack of a fueling

infrastructure– Infrastructure cost

– Cost to supply fuel

– Lack of demand

• Equipment range limitations

• New equipment cost and availability

• Equipment cost of conversion

• Fuel Cost• Lack of experience,

education, training, etc.

Fuel Alternatives

Wind

Solar

NaturalGas

HydroelectricPower

Biomass

Liquid PetroleumGas

Coal

Uranium

Oil

ULSD

Hydrogen Propane

EmulsifiedFuel

Ethanol

FischerTropsch

Methanol

Electricity

Oxydiesel

Biofuel

Countries throughout the world are moving to lower

sulfur fuels to reduce worldwide emissions and

provide product consistency

What is Currently Happening?

Sulfur Level

50,000 ppm

5,000 ppm

2,000 ppm

500 ppm

15 ppm

Low Sulfur Diesel Regulations

500 ppm 80% 15 ppm, 20% 500 ppm 15 ppmOn-road

Diesel

Non-road

Diesel

Locomotive & Marine

Diesel

HomeHeating

Oil

5000 ppm 500 ppm 15 ppm

5000 ppm 500 ppm 15 ppm

5000 ppm 5000/500/15 ppm ? 500/15 ppm ?

2004

2006

2007

2010

2012

Why ULSD

• Environmental acceptance• Meets EPA regulations• Immediate emission reductions• Supply readily available• Unlike other alternative fuel options, ULSD has no

infrastructure or fleet changes/modifications• Least costly alternative fuel option• Meets/exceeds OEM fuel specifications• Most ULSD, we know Sprague’s does, exceeds ASTM

and engine manufacturers’ lubricity specifications

• Enabler to new emission reduction technology

KEY:PM = Particulate MatterCO = Carbon MonoxideTHC= Total Hydrocarbons

ULSD Base Fuel Only

ULSD with DPF Retrofit **

THC 76% 92%

CO 29% 94%

PM 23% 88%

*Society of Automotive Engineers, Inc. 2001-01-0511:“Performance and Durability Evaluation of Continuously Regenerating Particulate

Filters on Diesel Powered Urban Buses at New York City Transit” ** 99% reduction in PM particle counts across all size ranges, including the smallest particles.

ULSD Proven Emission Reductions*

ULSD vs Conventional Diesel

Big Dig Job Site

ULSD Applications

ULSD Typical

Applications

Local ULSD Users

• County of Westchester/Liberty Lines• City of New York

– Department of Sanitation– Department of Transportation– Department of Parks & Recreation– Police Department

• City of New York Department of Education• State of New York• MTA New York City Transit• Katonah-Lewisboro Schools• Wappingers School District• Keyspan• Silverstein Properties• Construction

Major Users of ULSD

What is Ethanol?

• Ethanol is grain alcohol, readily obtained from sugar or starch in crops such as corn

• Blended with gasoline for use as a fuel– Clean-burning– High-octane– Renewable resource

• E10 – 10% ethanol and 90% unleaded gasoline– Approved for use in any make or model vehicle sold in the U.S.

• E85 – 85% ethanol and 15% unleaded gasoline– An alternative fuel for use in Flexible Fuel Vehicles

• Increasingly used as an oxygenate for gasoline, replacing MTBE

What is Biodiesel?

• Biodiesel is the name of a clean burning alternative fuel, produced from domestic, renewable resources

• Soy– Most common in U.S.– Largest availability– Best cold temp ops 35

• Poultry / Tallow– Lower feedstock cost– Full tax benefit– Limited supply– Poorer cold temp ops 45 / 50

• Recycled oils / fats– Lower cost / ½ tax benefit– Limited supply– Mid cold temp ops 40 / 45

• Imports: Palm– Very large supply– Full tax benefit– Worst cold temp ops 60

Why Biofuel

• Energy Dependence• Emission benefit with higher sulfur fuels• Economical in conjunction with tax incentives and

high conventional fuel costs• Renewable• Stimulates economy

Why ULSD, Biodiesel, Bioheat, E85?

• Supply readily available

• Fueling infrastructure in place

• No equipment range limitations

• Additional fuel cost is minimal, if any

• Transparent to the user

• Most cost effective choices

Clean Fuels Supply

• Ultra Low Sulfur Diesel Fuel– Bulk deliveries– Mobile refueling– October 15, 2006 available at the retail service station as diesel is

today• Biodiesel/Bioheat

– Available today – Key is to make sure it meets industry quality standards– ASTM 6751 quality– Biodiesel realizes cold temperature operability issues faster than

most petroleum diesel• E85

– Available for bulk delivery– Local infrastructure will be based upon demand– Adverse reaction toward water as well as certain materials in the

infrastructure– Scouring effect of ethanol requires high-performance filtration of

contaminants

Contact Information

www.spragueenergy.com

Steven J. Levy

Sprague Energy4 New King StreetWhite Plains, NY 10604Phone: 914.328.6770Toll Free: 877.723.3425Fax: 914.328.6701

Email: slevy@spragueenergy.com