1. WESTERN STATES PETROLEUM ASSOCIATION California Climate Change Policies and the Fuels Industry WESTERN STATES PETROLEUM ASSOCIATION Tupper Hull Western States Petroleum Association April 1, 2014

2. WESTERN STATES PETROLEUM ASSOCIATIONWESTERN STATES PETROLEUM ASSOCIATION 96 percent of Californias transportation fuels are petroleum based We consume 43 million gallons of gasoline and 14 million gallons of diesel fuel every day More than 2 million gallons of gasoline and diesel fuel every hour, 365 days a year We are the third largest fuel consuming entity on earth, behind the US as a whole and all of China California Fuel Facts 2 Source: California Energy Commission 3. WESTERN STATES PETROLEUM ASSOCIATION 3 Climate Change Policy & Transportation Fuels: A Tough Nut to Crack California GHG emissions by sector Million Metric Tons CO2e Source: California Air Resources Board 4. WESTERN STATES PETROLEUM ASSOCIATIONWESTERN STATES PETROLEUM ASSOCIATION 4 5. WESTERN STATES PETROLEUM ASSOCIATIONWESTERN STATES PETROLEUM ASSOCIATION 5 6. WESTERN STATES PETROLEUM ASSOCIATIONWESTERN STATES PETROLEUM ASSOCIATION $4 billion additional cost, 24 cpg $3.3 billion additional cost, 20 cpg $2.6 billion additional cost, 16 cpg $2 billion additional cost, 12 cpg Source: California Climate Initiative from California Air Resources Board data Cost of Carbon is Variable and Volatile Fuels Under The Cap 6 7. WESTERN STATES PETROLEUM ASSOCIATIONWESTERN STATES PETROLEUM ASSOCIATION Cap & Trade for Fuels and Consumers Putting a price on carbon fuels is essential to salvaging our environment. For climate policy to work, it has to sting. Under Cap and Trade, no one can tell us whether fuels will trade at 10 cents or 40 cents a gallon in 2015, at any given time and without warning. There is a real risk of spikes and wild fluctuations in gas prices. Darrell Steinberg, President Pro Tem, California Senate Fuels Under The Cap 7 8. WESTERN STATES PETROLEUM ASSOCIATIONWESTERN STATES PETROLEUM ASSOCIATION 8 9. WESTERN STATES PETROLEUM ASSOCIATIONWESTERN STATES PETROLEUM ASSOCIATION 9 AB 32/LCFS Research Source: Boston Consulting Group, Understanding the Impacts of AB 32, June 19, 2012 LCFS is not a feasible regulation because the low carbon biofuels necessary for compliance are unlikely to be available in the timeframe covered by the regulation. Without adequate availability of LCFS credits and/or low carbon intensity (CI) bio-fuel blendstocks, refiners will have no choice but to export increasing quantities of gasoline and reduce supply to the local market, potentially creating fuels shortages in California with far reaching consequences. 10. WESTERN STATES PETROLEUM ASSOCIATION Low Carbon Fuel Standard compliance schedule 0.25% 0.5% 1% 1.5% 2.5% 3.5% 5% 6.5% 8% 10% 0.0% 2.0% 4.0% 6.0% 8.0% 10.0% 12.0% 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 Source: Proposed Regulation to Implement the Low Carbon Fuel Standard Volume I, Staff Report: Initial Statement of Reasons, March 5, 200910 WESTERN STATES PETROLEUM ASSOCIATION CARB has proposed freezing LCFS at 1% through 2015 11. WESTERN STATES PETROLEUM ASSOCIATION LCFS credit prices and volume have grown 11 Credit values rose from about $12 to $80/MT Source: Stillwater Associates LLC Graph Sources: 2013 LRT Quarterly Data Summary - Report No.1 and No 2 and OPIS $0 $5 $10 $15 $20 $25 $30 $35 $40 $45 $50 $55 $60 $65 $70 $75 $80 $85 $90 $95 $100 1/15/12 2/15/12 3/15/12 4/15/12 5/15/12 6/15/12 7/15/12 8/15/12 9/15/12 10/15/12 11/15/12 12/15/12 1/15/13 2/15/13 3/15/13 4/15/13 5/15/13 6/15/13 7/15/13 8/15/13 9/15/13 10/15/13 11/15/13 0 MT 50,000 MT 100,000 MT 150,000 MT 200,000 MT 250,000 MT LCFS Carbon Credit Price Trade Volume MT/mo 2012 ave MT QTR 1 ave MT Monthly MT OPIS Reported LCFS Carbon Credit $/MT CARB Reported Average $/MT for Period 12. WESTERN STATES PETROLEUM ASSOCIATION LCFS Decimates Refining Sector Demand reduction will likely result in closure of 4-6 refineries representing 20-30% of California's refining capacity Refinery closures California could lose 28,000-51,000 jobs Loss of up to $ 4.4 Billion of tax revenue per year by 2020 12 13. WESTERN STATES PETROLEUM ASSOCIATION 13 Source: U.S. Energy Information Administration, Annual Energy Outlook 2014 WESTERN STATES PETROLEUM ASSOCIATION 80% of US Energy Supplied by Fossil Fuels in 2040 14. WESTERN STATES PETROLEUM ASSOCIATION 14 WESTERN STATES PETROLEUM ASSOCIATION Other Issues 15. WESTERN STATES PETROLEUM ASSOCIATIONWESTERN STATES PETROLEUM ASSOCIATION 15 Crude Oil Shipments by Rail 16. WESTERN STATES PETROLEUM ASSOCIATIONWESTERN STATES PETROLEUM ASSOCIATION 16 Sacramento officials kept in dark about crude oil transfers at rail facility Mar. 28, 2014 SACRAMENTO, Calif. -- Since at least last September, trains carrying tank cars filled with crude oil have rolled into the the former McClellan Air Force base. Workers have transferred the oil, including some volatile Bakken crude, from trains to tanker trucks, which take it to Bay Area refineries. Until this week, Sacramentos InterState Oil ran the crude operation without a required permit. Local fire and emergency officials who would be called upon to respond in case of a spill or fire werent informed it was happening. Crude Oil Shipments by Rail Richmond and Berkeley Oppose Fracked Oil and Tar Sands Rail Shipments Wed, Mar 26 The city councils of both Berkeley and Richmond unanimously passed resolutions last night calling for tighter regulation of the shipping of crude oil by rail through the East Bay. The Berkeley resolution went further, committing Berkeley to oppose all shipment of crude oil by rail through the city until tighter regulations are in place. Information has recently come to light about crude-by- rail activity in both cities. In September, with no public announcement, the Kinder Morgan rail yard in Richmond quietly switched from handling ethanol to crude oil. And a new proposal calls for shipping crude oil to the Phillips 66 refinery in Santa Maria on train tracks that run through the East Bay. 17. WESTERN STATES PETROLEUM ASSOCIATIONWESTERN STATES PETROLEUM ASSOCIATION 17 Crude Oil Shipments by Rail Rail transport of crude oil from North America ensures reliable supply of energy and jobs for California workers Crude from North Dakota and Canada provide a more secure source of vital energy supply than from the traditional sources of crude oil imported into the West Coast much of it from the Middle East and South America Because it is in abundant supply, North American crude is an affordable source of energy North Americas energy renaissance is dramatically improving the energy security of our nation and our states 18. WESTERN STATES PETROLEUM ASSOCIATIONWESTERN STATES PETROLEUM ASSOCIATION 18 Gasoline Markets: Supply & Demand Gasoline prices are a function of supply and demand Retail gasoline prices typically follow changes in crude oil prices Crude costs are typically two-thirds to three-fourths of gas costs Regional or local imbalances in the supply and demand for gasoline can also impact retail prices Source: U.S. Energy Information Administration, Gasoline and Diesel Fuel Update, September, 2013 19. WESTERN STATES PETROLEUM ASSOCIATIONWESTERN STATES PETROLEUM ASSOCIATION 19 Markets: Crude Oil, Gasoline Prices Source: Energy Information Administration 2007 to 2013 $0.00 $0.50 $1.00 $1.50 $2.00 $2.50 $3.00 $3.50 $4.00 $4.50 $5.00 Jan01,2007 Apr01,2007 Jul01,2007 Oct01,2007 Jan01,2008 Apr01,2008 Jul01,2008 Oct01,2008 Jan01,2009 Apr01,2009 Jul01,2009 Oct01,2009 Jan01,2010 Apr01,2010 Jul01,2010 Oct01,2010 Jan01,2011 Apr01,2011 Jul01,2011 Oct01,2011 Jan01,2012 Apr01,2012 Jul01,2012 Oct01,2012 Jan01,2013 Apr01,2013 Jul01,2013 Oct01,2013 CA Gas Prices US Gas Prices Crude 20. WESTERN STATES PETROLEUM ASSOCIATIONWESTERN STATES PETROLEUM ASSOCIATION 20 Gasoline Taxes 21. WESTERN STATES PETROLEUM ASSOCIATIONWESTERN STATES PETROLEUM ASSOCIATION 21 Diesel Taxes 22. WESTERN STATES PETROLEUM ASSOCIATIONWESTERN STATES PETROLEUM ASSOCIATION 22 Petroleum Industry Profits 23. 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