Clean Perspectives

The Burgeoning Massachusetts Biofuels Industry
Conference Insight Report January 23, 2008

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Clean PersPeCtives
About Clean Perspectives
Clean Perspectives is a series of fireside chats/networking events bringing together politicians, investors, entrepreneurs, and policy experts to discuss their visions for the future and answer questions from the community about Cleantech. Moving toward a Solar Economy in Massachusetts is Clean Perspectives’ debut event. Future events and their tentative dates are as follows:

• • • •

Biofuels revolution- January 2008 energy efficiency and smart metering - March 2008 reducing waste through better management and reuse - May 2008 additional events tBa in 2008

Clean Perspectives events are hosted by: Trent Yang, Globespan Capital Partners Trent is focused on game-changing investments in energy and consumer media & technology. He is passionate about the environment, fostering vibrant local communities and technologies that affect how we live and communicate. An active member of the venture community, Trent currently sits on the Steering Committee of the New England Venture Network and is an active participant in a number of energy, start-up, and MIT Alumni committees. Prior to Globespan, Trent advised a number of Fortune 1000 technology firms on strategy, growth, and R&D issues. Trent holds graduate degrees in engineering, policy, and management from MIT. He can be reached at trent@globespancapital.com. Leland Cheung, Masthead Venture Partners Leland is focused on early stage investments in digital media and cleantech. An active member of the venture community, Leland currently sits on the Steering Committee of the New England Venture Network. Prior to joining Masthead, he served as Chief Information Officer of Space Adventures, a startup made famous for successfully sending paying citizens to the International Space Station. Leland holds three degrees from Stanford University: an MS in Aeronautical and Astronautical Engineering, a BS in Physics, and a BA in Economics. To take personal responsibility for reducing carbon emissions in daily life, Leland has given up driving in favor of a hand-made electric scooter. He can be reached at Leland@mvpartners.com. Contact Information Please forward all feedback and comments. You can reach the hosts through their website, www.CleanPerspectives.com, by e-mailing cochairs@cleanperspectives.com or emailing them individually.

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Panel Speaker Bios
Senator Michael Morrissey, Massachuasetts State Senate Massachusetts State Senator Michael Morrissey has served as Massachusetts Congressman and Senator for the last 30 years. He is the Chair of Telecommunications, Utilities & Energy committee and a significant contributor on the recent MA energy bill. In addition, Senator Morrissey chairs the Consumer Protection & Professional Licensure committee and is a member of the Senate committee on Ways and Means, Election Laws and Tourism, Arts & Cultural Development. Senator Benjamin B. Downing, Massachuasetts State Senate Massachusetts State Senator Benjamin B. Downing is an active proponent of biofuels in the local economy. In addition, the Senator chairs the Senate Committee on Ethics and Rules, and is the Vice-chairman of the Joint Committee on Higher Education and Senate Committee on Bills in the Third Reading. mittee on Bills in the Third Reading. Jef Sharp, President and CEO, SunEthanol President and CEO Jef Sharp is a successful entrepreneur who has owned and operated many businesses including Gravity Graphics, Inc. of New York, which quickly became an Inc. 500 company, and several computer software and service businesses. Jef has received numerous awards for his entrepreneurship, including “Small Business Person of the Year” and “Environmental Achievement” awards from New York State. He currently serves as chair of the Clean Tech Council of the Regional Technology Corporation and as President of TechCavalry, Inc., both based in Western Massachusetts. Bruce Jamerson, CEO, Mascoma Corporation Mr. Jamerson has over 25 years of experience in renewable fuels, energy and finance. He previously was President of VeraSun Energy Corporation from 2003 to 2007 and served as a member of VeraSun’s Board of Directors from 2003 through August 2007. He also served as its Chief Financial Officer from 2003 until its initial public offering of stock in 2006. Prior to VeraSun, Mr. Jamerson was Founder and President of Conifer Investments, L.L.C., an investment banking firm and early stage venture investor. He previously served as Vice President of U.S. Natural Resources, Inc., an affiliate of Kohlberg, Kravis, Roberts & Company. He worked in the investment banking department of The First Boston Corporation (now Credit Suisse) in New York focusing on natural resources and in the ship financing department of Citibank in New York. Mr. Jamerson earned an M.S. from the Sloan School of Management at the Massachusetts Institute of Technology and a B.G.S. from the University of Michigan. Irwin Heller, CEO, Twin Rivers Technologies Irwin Heller is the CEO of Twin Rivers Technologies. Twin Rivers is a local biofuels company using vegetable oil as the primary ingredient. Jim Matheson, General Partner, Flagship Ventures Jim joined Flagship Ventures in 2000 and focuses on new ventures in the IT and special technology arenas. He brings to this task 20 years of technology and leadership experience across a variety of organizations and roles designing, engineering and deploying sophisticated technology platforms. He serves on the boards of Flagship portfolio companies Avidimer Therapeutics, eDialog, Genstruct, Mascoma Energy Corporation, Novomer, Tira Wireless and Trusted Network Technologies, and is Chairman of the Board of Ze-gen. He was previously a director of Yantra (acquired by Sterling Commerce / SBC) and Flamenco Networks (acquired by SOA Software). Jim is on the Board of New York-based hedge fund Black Horse Capital, Common Impact (a non-profit providing IT services to other non-profits), and the Center for Women & Enterprise, and is actively involved in numerous entrepreneurial and venture capital organizations including the New England Clean Energy Council, the MIT Enterprise Forum, The Deshpande Center, and The Service Academy Business Network.

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About Globespan Capital Partners, Mintz Levin and Flagship Ventures

Globespan Capital Partners Globespan Capital Partners is a leading global venture capital firm investing in information technology and clean tech companies. Our investment team has a proven track record based on partnering with management teams to build strong, successful companies. We have significant experience and relationships in Asia which allows us to provide our portfolio companies access to global markets. With offices in Boston, Palo Alto and Tokyo, we invest in companies all across the world on behalf of a global base of limited partners.

Mintz Levin Mintz Levin is an AmLaw 100 law firm with offices in the US and the UK. The firm has exceptional depth in a broad range of practice areas, but our clients recognize that what sets us apart from other law firms is our industry focus. By truly understanding business drivers and industry trends, we are able to provide our clients with more than just legal advice; we provide legal solutions to our clients’ business issues. Since 1933, our lawyers have represented entrepreneurs, emerging growth companies, Fortune 500 companies, government agencies, not-for-profit organizations and leaders in primary industries that include Life Sciences/Biotechnology; Technology & Communications; Energy & Clean Technology; Financial Services & Insurance; Healthcare; Real Estate, Hospitality & Construction; and Retail & Consumer Products. The Energy and Clean Tech Practice is comprised of a team of 30 professionals from all of our offices and legal disciplines with a focused knowledge of the energy and clean tech markets. Mintz Levin’s attorneys have demonstrated experience representing emerging and established energy companies in federal and state regulatory matters, project development, energy marketing and sales, corporate and finance work, facility siting, environmental matters, litigation, real estate, intellectual property, telecommunications and employment. Our practical knowledge combined with our industry expertise enables us to provide our clients with enterprise legal advice that gives their business a competitive advantage in the marketplace.

Flagship Ventures Flagship Ventures is a venture capital firm focused on creating, financing and building innovative companies. Founded in 1999, Flagship manages over $500 million in early-stage funds and operates from its offices at Kendall Square in Cambridge, MA. With an active portfolio of over 40 companies, the firm’s strategy is to balance its investments across three principal business sectors: Therapeutics, Life Science Tools & Diagnostics, and BioEnergy/Cleantech.

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tHe BUrGeOninG MassaCHUsetts BiOFUels inDUstrY
Executive Summary

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The Burgeoning Massachusetts Biofuels Industry
Overview Bringing together the perspectives of current energy legislation and the entrepreneurial/investment community, this panel explores the biofuels industry, especially as it relates to the interests of the state of Massachusetts. In the words of the discussion’s host, Trent Yang, “We are very passionate both about clean tech and environment, and we thought what was missing inside the Boston area was an opportunity to converse about the innovations and the policies that can help to drive this forward.” Among the major topics: • Information as a major key • The large scalability of the biofuels industry • Massachusetts’ fitness as a leader in biofuels • Priorities in environmental legislation, and actions that can be taken now • The relation of biofuels to GMOs Panel Michael Morrissey, Massachuasetts State Senate, Chair, Telecom Utilities and Energy Committee Benjamin B. Downing, Massachuasetts State Senate, Chair, Committee on Ethics and Rules Jef Sharp, President and CEO, SunEthanol Bruce Jamerson, CEO, Mascoma Corporation Irwin Heller, CEO, Twin Rivers Technologies Moderator: Jim Matheson, General Partner, Flagship Ventures Event Hosted by

http://www.globespancapital.com Event Sponsored by

http://www.civentures.com

http://www.flagshipventures.com

http://www.mintz.com

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Moderator: Last year, the venture community put out about $3 billion in the cleantech space, and the estimates are about $750 million of that went into alternative biofuels and a about a quarter to a third of that went to biofuels here in New England. The state of Massachusetts is the focus of our dialogue tonight. There are four interconnected topics we are going to try to work our way through as a panel: • Innovation: How do we actually spur greater innovasession Quote tion? How do we get great technology to be born here? How do we start companies? • Production: It is not enough to just start a company. A no matter where it is, lot of these biofuels companies have to build facilities, siting seems to be a which is a pretty interesting dimension from a venture problem, whether it is a capital standpoint. How do you actually get support in regular traditional gaspermitting? How do you get some funding support to fired plant or not. We are build what turns out to be very expensive facilities? Can trying to put a windmill we build demo plants here? Can we build large-scale up in Quincy. the issue is facilities and use both the work force and also the feedpretty simple: “not in my stock base here in Massachusetts? back yard.” • Distribution: Building facilities is not enough. It does not do any good to make ethanol if you cannot get it to - Sen. Michael Morrissey the pumps so people can pay $56—hopefully less in the of Telecom Utilities and future—to fill up their tank. We need to do get distribuEnergy Committee tion in place, E-85 pumps and other things, to get the ethanol where the folks can use it. • Adoption: How do we actually work with the supply chain? How do we work with the state budget legislators to make sure that folks are being motivated to adopt these alternative biofuels? Before we get into the questions, let’s hear from Evan Bienstock. He will talk a bit about the 2007 Energy Bill and what they are saying in DC, and will connect those thoughts to this panel. Evan Bienstock of Mintz Levin: Everybody is familiar with the Energy Independence and Security Act of 2007. It did great things for ethanol, not just corn-based ethanol but cellulosic ethanol as well. The question now is: Did it leave some stuff behind? Did it leave behind other renewables like wind, solar and geothermal? I think the answer is yes. Did it leave behind some renewable electricity proposals? Yes. Looking forward to 2008, I think the big question is tax. It left behind some tax measures and they continue to struggle. The Mintz Levin Strategies guys are telling us that production and investment tax credits will certainly be extended this year. That said, as the session reconvenes in DC, we do not expect to have any sort of sweeping new energy bills this year. We understand that the Senate hopes to bring the Lieberman-Warner Bill, an important climate and environmental bill, to the floor in the next six months.

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Moderator: Senator Morrissey and Senator Downing, when the Energy Bill gets passed in DC, what effect does that have on the legislative process here in Massachusetts? How do we think about that as entrepreneurs and CEOs of companies here, and what is going to happen next to make things happen in a good way? Senator Michael Morrissey of Telecom Utilities and Energy Committee: The reason that you have Ben and me here is that we have been co-opted: I represent Quincy, which is the site of Twin Rivers and soon to be H2 Diesel, and he has Berkshire Diesel. At the fed- session Quote eral level, we often look at where we are preempted. We started back in 1997 with the utility deregulation, Until each and every one and I think we did some good things that people copof us starts to think about ied. We focused on what they did not do in Washinghow to consume energy, ton. We focused on renewables, such as solar, wind, we could bring on all the and geothermal. We have a state administration that renewable energy in the is pretty good at putting together an energy policy. world and it is not going We had one that did not have any for four years, until to change a thing. Governor Patrick came in. His administration seems to be very committed, particularly to developing some - Sen. Benjamin Downing of the newer types of technology. The biofuels segof Senate Committee on Ethics and Rules ment of the industry will get a lot of attention from this administration. The energy bill we are working on now deals predominantly with wind and solar, some geothermal, not too much on siting yet. No matter where it is, siting seems to be a problem, whether it is a gas-fired plant or not. We are trying to put a windmill up in Quincy. The issue is pretty simple: “Not in my back yard.” Now, we will save about $750,000 a year in energy cost and recover the cost of the windmill in about seven years. We have a history of Hull being quite successful which is less than five miles away. So, one of the neighbors said, “How much will that save me on my MWRA bill?” The person at MWRA said, “About a dollar,” and the answer was, “Keep it.” Because Ben and I have some existing infrastructure—the old Procter & Gamble plant in Quincy has been quite successful as Twin Rivers—we think that with storage and transportation, train access and deep-water access, from a local point of view, this could be good for the district and good for jobs. Ben seems to see some of the same benefits that I see. So, we have a personal interest because we think our districts will be at the forefront. I escaped the Advanced Biofuels Task Force commission that Ben got on. Money is a little tight, as many of you are aware, and even in state government, revenues are not coming in as projected, and most of the good stuff that they want to do, green buildings and other initiatives, all cost money. The Senate took a harder line and we still have to reconcile with the House, so the only thing that we really did that was revenue neutral was cellulosic ethanol. Because it does not exist, we have not taxed it yet.

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On the federal level, we usually look at what we can do to support their initiatives. Ironically, the federal government is now going to be a bit of an anchor on biofuels initiatives: a report is coming out that may slow us down a little. Senator Benjamin Downing of Senate Committee on Ethics and Rules: The energy legislation coming out from Washington creates opportunities for Massachusetts to fill in some of those gaps that I have pointed out, and it provides all of you who are working session Quote on deals with a new set of tools for putting those deals together. I think that is where most of my experience i would love to build a has been put to work. We have proposals for a biodplant in Massachusetts, iesel plant in Pittsfield and a biomass plant. I am trybut if new York state ing to find out how state government, working with a offers to pay for half of a federal delegation, can come in to try and meet some plant up there, how can i of those needs of this emerging industry cluster in an turn it down? emerging market, because the private capital may not be there for all these deals right up front. - Bruce Jamerson For example, the biomass plant in Pittsfield has run into problems with traditional financing sources, going to the banks and saying that there will be a sustainable supply of the low-grade wood that they need at the right price. Being able to show that is something that we are working on: providing some certainty for the investors. We can fill in the gaps left by what we may see as some shortcomings of federal policy and then, hopefully, marry up with some things that they have done right to make Massachusetts more of a leader in the field. Moderator: Senator Downing, as you have been in DC for a number of years and are now here on Capitol Hill in Boston, what was your biggest surprise on learning about the disconnect or translation problem between what happens in DC and what happens here? What can business and entrepreneurs do to remedy that?
INFORMATION OUTREACH
of Mascoma Corporation

Senator Benjamin Downing of Senate Committee on Ethics and Rules: There seems to be much more energy and openness in the last 1-2 years around these issues. You have seen something similar with the new governor coming in. There is much more openness to looking at different ways to try and position Massachusetts as a leader in capturing not only the environmental benefits but the economic development benefits that we see. One thing that worked well in my district is that the projects that have come in have reached out to major employers in the area right away and said, “Listen, this is what we are bringing.” There is a lot of misinformation about alternative fuels at this point, but especially about biofuels and biomass plants. The more outreach, the more public education there is, the more engaging of either affected populations or people who can benefit, the more growth you’re going to see there. I have already talked to major energy users who said, “We think we might be able to set up co-gen
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sites on your sites to reduce some of the transmission cost” being in the western end of the state, we are the end of a pipeline and transmission costs kill us. We can reduce those, not only making the biodiesel and biomass projects more feasible, but also making current employers more competitive. The more outreach there is to strategic partners, in both the public and private sectors, the more likely you are to create markets for yourself, the more likely those projects are to be successful, both in the short term and in the long term. Moderator: Jef, you have been a serial entrepreneur, you came here from New York State to join a very early stage start-up at UMass Amherst. What advice you would have about making that transition from IT to the energy sector and the biofuels sector? What worked well in your experience of starting a biofuels company in Massachusetts? What would you have us work on differsession Quote ently so that we can spawn more innovation in the state?
A FUTURE GIANT

Jef Sharp of SunEthanol: The opportunity for alternative fuels is absolutely tremendous and much larger than anyone is even considering. As John Doerr said over at Kleiner Perkins, “You know, this could be bigger than the Internet and it could be bigger than biotech combined.”

What are the priorities? the priorities are really what you can put the votes together for, at the end of the day.
- Sen. Michael Morrissey of Telecom Utilities and Energy Committee

In terms of the transition from IT, it is easy. I am an entrepreneur; I love challenge, and I love doing things that make me excited and passionate, and that have huge upscale opportunity. Starting a company with technology that came out of the University of Massachusetts had its challenges, but also its rewards. We met with the scientist there, we looked at her technology and studied it carefully. In fact, we ran it by all kinds of different professionals, scientists and researchers, and saw how huge this opportunity was. Then, we went to the University of Massachusetts to license that technology from them, and that was challenging. As I had mentioned, testifying before the Advanced Biofuels Task Force is something that the state could improve upon, to motivate the faster movement of these technologies into the commercial world. The world of business moves very quickly and the opportunities are coming to us quickly in this space. Improvements would help Massachusetts get more lead in the biofuels expertise sector as we move forward. Jim Matheson (Moderator) of Flagship Ventures: I should note that the New England Clean Energy Council is doing a lot of good work here in helping start companies out of universities. We are working on some programs that help folks transition into the clean energy industry, because we can help to accelerate some things and wrap the community around new companies.

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Moderator: Let’s transition a bit. Take us through the thinking as a CEO. How do you think about those first facilities in terms of what the dialogue has been with Massachusetts and some of the choices you have made? What can make it easier to build facilities here in Massachusetts?
THE GENIUS OF MASSACHUSETTS

Bruce Jamerson of Mascoma Corporation: There has been a lot of interest in our technology all over the world and different regions are more aggressive in attracting business. For example, the State of Tennessee gave us a $40 million grant to build a project there. Half of our plant in upstate New York is being paid for by the state of New York’s clean energy funds. Other countries, for example, Canada, or some European countries, have a lot more incentives than America or individual states, because it is a higher-profile activity. What I found in Massachusetts is wonderful people. We have enjoyed working with them. But it is a different budgetary situation; Massachusetts has not had the financial incentives. I would love to build a plant in Massachusetts, but if New York State offers to pay for half of a plant up there, how can I turn it down? I would lose my job if I turned that down. Massachusetts has people who are very aware of greenhouse gases, for example. Our product has 5% of the greenhouse gases of gasoline. We have talked with the governor’s staff about E85, the 85% ethanol blend, and while he is not really interested in corn-based ethanol, he is very interested in cellulosic-based, and would encourage state vehicles and have pumps on the Mass Pike and the like. The idea of a rebate, or not charging sales tax on fuel that has cellulosic ethanol, is fantastic. That is 20 cents a gallon. Can you imagine saving 20 cents a gallon on your fuel? That makes up for the lower energy content that ethanol has compared with gasoline. As the car companies come out with technologies that have equal or better mileage, this is going to be a winner. In my last company, I drove a Saab 95 Euro version biopower and I got 24 1/2 miles a gallon on E85 corn ethanol and 24 1/2 miles a gallon on gasoline; same car, the only difference was that it had a $1,500 turbocharger on it. Car companies know how to do this and so you are going to have better mileage. We will have cellulosic fuels. I agree with Jef; it going to be huge. Massachusetts has great awareness, great political support, but I think the challenge right now is the budget. Moderator: Senator Morrissey, how does the state government weigh investments to keep and attract new energy technology? How does Massachusetts benchmark itself against other states like New York or Tennessee? How are those decisions made, especially in light of the amounts that the governor has put forward toward life science?
THE QUESTION OF PRIORITIES IN THE REAL WORLD / DOING WHAT CAN BE DONE

Senator Michael Morrissey of Telecom Utilities and Energy Committee: You look at a variety of factors. One is return on investment. What are we investing in? The movie tax credit is a good example. We have given all sorts of incentives to the movie industry. They tell me over the next six months that they are going to
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make five or six major motion pictures here in the Boston area, so we gave up the taxes on that, anticipating collection on ancillary revenues. For biofuels we can conduct a good analysis and put together a plan that shows that biofuels firms would build here, create jobs, and, in the long run, stimulate the marketplace. It is harder to grasp the concept and develop it because a lot of it is theoretical: how quickly the market will grow, what the up-front investment is, and what we are sacrificing. The Governor has a number of initiatives, all of which cost money, and life sciences are obviously very important to the Commonwealth. We start getting down to is it life sciences or is it the energy? He has made a major commitment, apparently more heavily into solar although very supportive of the biofuel industry, but at some point you’re going to have to put up to shut up. It is going to have to come to a consensus. A lot of that is decided at the Ways and Means Committees of the House and Senate; the Speaker, the Senate President, the Governor and the Secretary of Administration and Finance often get together and talk about the priorities, which direction they want to take, and that usually trickles down to the people like Ben and I. session Quote Sometimes, there are outright disputes between what the branches want to do. They may find there is more support in the branch for energy versus life sciences or others and we express that. Sometimes we express it by voting for legislation that the Governor may not want or that the House may not want. It comes to different ways to express your opinion, some of it behind closed doors and some openly by moving legislation. it’s not just about providing direct financing to these projects. it’s helping to create a market by putting in mandates when the technology is there to use.

We were co-opted early because we have some vested -Irwin Heller of Twin Rivers Technologies interests in our own districts, so we have to build on that. We think that our two districts have a pretty goodsized lead over the rest of the state in the development of biofuels and so we would have taken an early interest because of our own vested interest. Sometimes it comes down to that alone, so we are ready to support other initiatives, because we think it would be good for both the local and state economies. We often consider a lot of factors and some of it comes down to how it affects my own back yard. Senator Benjamin Downing of Senate Committee on Ethics and Rules: Even though we may not be making the investment that we want in Massachusetts today, there are things that we can do to support these projects, specifically for investments in biofuels. At the Berkshire biodiesel plant, one of the issues they had was getting an additional split-off rail line. Through a Public Works Economic Development grant, we were able to get them that rail line, about $3.2 million worth of rail that would not have been available otherwise. In addition, it would have cost them serious upfront capital, which would have been difficult to finance. We can use existing programs to target them for specific sectors that we want to grow. The projects in my district, from biofuels to several of the wind projects, have been heavily supported by the Massachusetts Technology Collaborative’s John Adams Innovation Institute.
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DISTRIBUTION—NOT A PROBLEM

Moderator: Irwin, I’ll turn to you as the largest producer of biodiesel in the US. How do you think about distribution, distribution strategies, and the pieces that have to come together? Irwin Heller of Twin Rivers Technologies: We want to build a demonstration plant. We have two plants; we have a biodiesel facility outside of Cincinnati. Our plant in Quincy is in oleo chemicals, not really a biodiesel plant. It is a perfect location for a H2 Diesel plant that I think could grow into a nationwide company, but we need to do a demonstration plant. Ohio is very happy to welcome us and they do have economic incentives—the same reason that Bruce’s company built a plant in New York. Massachusetts has to wake up. I love biotech, but alternate energy is going to be as big. In the old days, Houston was the center of energy because of petroleum. Now, it is all about innovation, about capital, about coordination of this new approach to the energy future. Massachusetts is perfectly positioned. Those are the things we did well, that is how we have grown as a state. The legislature has to get behind this and make reasonable amounts of money available and not put it all behind biotech. That is my firm belief. Our H2 Diesel is perfect as a fuel for peaking stations—those power plants that only run when there is peak demand. It is also perfect for waste water treatment plants, it is perfect at state office buildings. How about a mandate? That will not cost you very much. Let us have a mandate that if the fuel is available, you need to use it, especially if it is made in Massachusetts. So, it’s not just about providing direct financing to these projects. It’s helping to create a market by putting in mandates when the technology is there to use. In terms of our distribution, our distribution is simple. It is blended into regular diesel, so we just put it into the same tanks with the same distributors that distribute it normally. We do not have any problem. We do not have a distribution system of our own and we do not have to worry about getting it to the ultimate consumer. The Spragues and other companies that are located here do that for us. Cellulosic is a great idea. These companies are forward-thinking and they are going to be successful. We have a technology that takes waste water that goes into a waste water treatment plant and before it is processed, we pull out the cellulosic material. A lot of toilet paper is in that waste. We can then recycle it and turn it into cellulosic fuel. In fact, we are doing a joint venture with Sun to accomplish that, so there is a lot of innovation in this industry. It is not just about Google or the Internet. Massachusetts is perfectly situated for it. We just need more support. Moderator: Bruce or Jef, do you have anything different to add on ethanol distribution? Bruce Jamerson of Mascoma Corporation: I moved here from South Dakota last year. Out there, 10% ethanol was about a nickel cheaper because corn ethanol gasoline companies get 50 cents of credit per
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gallon for using it. They do not do that in Massachusetts. But it will be pretty easy to take cellulosic ethanol into the gasoline supply. It is flash-blended in the trucks and the terminal locations, and the only question is whether there is a differentiation or branding or two-tier pricing. It is not really an issue to distribute it. It is that there are not enough E-85 stations. Of 150,000 gas stations, only about 1% carry ethanol, 85% blend. That needs to change. Also, the car companies are working on getting better mileage because of the low energy content from the ethanol. So, we can do it, the industry can do it. We would like to build a plant here and have a chain of gas stations, and would love some session Quote support for that. Jef Sharp of SunEthanol: Put e85 stations along the Mass Pike for a starter; that single corridor would make a huge statement to the rest of the country and the rest of the world that it’s happening here in Massachusetts.

The reason that Brazil is energy-independent today is that 15 years ago or so, someone said, “You know, this gasoline situation could be volatile.” It is not going to get any easier, and the opportunity for Massachusetts to become energy-independent is not just a pipedream. It is a very real possibility and it needs to be started by people who are here on the panel with me, and by all the people in this room getting out there and starting - Jef Sharp businesses, supporting businesses or creating policies of SunEthanol to make Massachusetts a real visionary. Put E85 stations along the Mass Pike for a starter; that single corridor would make a huge statement to the rest of the country and the rest of the world that it’s happening here in Massachusetts. This is just one of many alternative energy technologies that will make this a place where people are going to come visit to check out what is happening and all of the benefits that it is bringing to the economy because of the jobs and the money that are coming into the state. Right now, Massachusetts imports $5 billion worth of energy every year. The country pays $140 billion every year for gasoline from other countries. There is no reason why this could not happen here with the farmers in Massachusetts and across our country. I cannot stress enough how important I think it is for us to seize this moment. Audience Q&A Q1: Are biofuels the answer to energy crisis? And are you in the biofuels now because that is the long-term answer? Senator Benjamin Downing of Senate Committee on Ethics and Rules: Biofuels are part of the answer. The real absolute answer is, we all need to question how we consume energy. You need to look around, you need to look at everything that is plugged in. Until each and every one of us starts to think about how to consume energy, we could bring on all the renewable energy in the world and it is not going to change a thing. That being said, I look forward to the day when the Pike is filled with E-85 pumps so that when I make my trip from Pittsfield to Boston and I stop in my Prius and fill it up.

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Bruce Jamerson of Mascoma Corporation: Yes, I would agree. The thing about biofuels is, you have an infrastructure today, so today about 8 billion gallons out of a 140 billion-gallon gasoline market are ethanol. To put in hydrogen stations would take years and billions of dollars. Today, I saw an article that if you converted some significant percentage of San Francisco to plugin hybrids, there would not be enough electricity in the grid to power them. It is a great solution, but probably within 25 years or less, we need to have no internal combustion engines anymore; our climate cannot take it. We need hydrogen or fuel cells, but biofuels can be there right now. You can use existing gasoline distribution systems, the infrastructure is there, and you do not need to invest a lot of money in infrastructure to convert everybody to plug-ins. Irwin Heller of Twin Rivers Technologies: One of the reasons you’re paying so much for gasoline is that there is a shortage of refineries, so if you change just 5% of your usage to biodiesel, if you can just get rid of 5% of the demand on those refineries, you are going to see prices drop a lot. It has a huge impact at a small marginal area. Q2: In the utility sector, we have the “system benefit charge,” which charges everybody a small fee whose proceeds are used to invest in renewable energy. It is a fee and a rebate. Why not do the same thing in transportation, tax or charge a fee on gasoline and diesel and put those proceeds into incentives for renewable fuels? Senator Benjamin Downing of Senate Committee on Ethics and Rules: I drove 40,000 miles last year, I would have no problem paying an additional bump in the gas tax for something like that. We are going to have to do it at some point but, again, it gets to the bigger budget picture. The state has $20 billion in deferred maintenance in our infrastructure. It comes down to priorities and trying to make sure that we get some of that money toward those projects. Senator Michael Morrissey of Telecom Utilities and Energy Committee: I agree with Ben. Right now, they are trying to evaluate how bad the roads and bridges are. Most of what we need to fix in roads and bridges is oil-based: the asphalt and the price of steel have gone through the roof. The gas tax is one of those oddball stories: the less fuel you use, the less tax we collect from you. So, it is kind of perverse: the more energy efficient we become, the less we are taking from you and, much as that is what we are trying to get you to do, if you are buying less, there will also be less to fix the infrastructure. As a practical matter, the day of reckoning is coming. Ironically, when you sell the idea of gas tax, people at least understand that we are not stealing their money. It goes to roads and bridges. Once you start trying to do something different, it gets harder to explain the long-term benefits. But they do understand it. There will be a push, probably within the year, but we need to start to do the analysis and get it to the administration because you are going to need them with you.
GMOS AND BIOFUELS

Q3: Are there restrictions on genetically modifying crops for biofuels similar to those for foods?

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Conference Insight Report

Clean PersPeCtives
Jim Matheson of Flagship Ventures: Good question, and what about GMOs as they relate to feed stock, the characterization of ethanol production, cellulosic? Jef Sharp of SunEthanol: About two thirds or a higher percentage of all the corn grown is GMO corn; so is a high portion of soybeans. These are drought-tolerant strains, and if we did not have them today, their prices would be even higher. Our plant in New York will run on wood chips. We are looking at witch grass, which is not really a GMO, but you will see GMO fuels. Now, these are going to be burned in a vehicle, not consumed by a human, so I do not know if you are going to have any issues with that. Europe does not like to see GMO-modified materials used as feed for animals. America does not have that restriction. GMOs do not live in nature. Essentially, we make cellulosic ethanol the same way Mother Nature makes energy in ruminant animals, by using the enzymes in their bellies to break grass down and turn it into energy. We are a lot more efficient than that, our enzymes have been modified to get higher yields, but they will not live outside of the tank. We talked to the EPA about it, showed them what we are doing: it dies when it gets out and even if it gets out, it is not going to do anything. So the EPA is pretty dormant because we use organisms that are found in nature. Q4: What is your vision for the biofuel industry? Where do you think it is headed? Bruce Jamerson of Mascoma Corporation: We are working on a couple of projects today for making biodiesel from grasses. We are also working on a project with a chemical company on bioplastics from our lowcost sugar feedstock. The way I see it is that we are breaking cellulose down into sugars and then we can take sugars into alcohol. We can take the same sugars into diesel, gasoline, bioplastics. So my vision for our business is for us to take our lowcost cellulosic-based fuels and make a gallon of ethanol, gasoline, diesel, or plastics, in the same way that an oil refinery runs on crude and produces gasoline, diesel and the like. That is where it is going to go. Ethanol has the infrastructure today. There are government incentives to do it, but clearly, there will be non-ethanol biofuels, no question, that we are looking at already.

Neuron Global Inc

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Conference Insight Report

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