Clean

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

www.cleanperspectives.com

Conference Insight Report provided by:

CLEAN PERSPECTIVES:
THE BURGEONING MASSACHUSETTS
BIOFUELS INDUSTRY

Conference Insight Report

In affiliation with:
Clean Perspectives
About Clean Perspectives

Clean Perspectives is a series of fireside chats/networking events bringing together politi-

cians, 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. Fu-
ture 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 con-

sumer 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 Eng-
land 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 Interna-
tional 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 respon-
sibility 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 Morris-
sey 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 “Environ-
mental 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 invest-
ment 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 technol-
ogy arenas. He brings to this task 20 years of technology and leadership experience across a va-
riety of organizations and roles designing, engineering and deploying sophisticated technology
platforms. He serves on the boards of Flagship portfolio companies Avidimer Therapeutics, e-
Dialog, 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 port-
folio 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 busi-
ness 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 com-
panies, government agencies, not-for-profit organizations and leaders in primary indus-
tries 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 com-
bined 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 in-
novative 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 Bio-
Energy/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 http://www.civentures.com

Event Sponsored by

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 innova-

tion? How do we get great technology to be born here?
Session Quote
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 gas-
permitting? 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 feed-
pretty 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 distribu- Energy 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 legisla-
tors 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 repre-
sent 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,
and I think we did some good things that people cop- Until each and every one
ied. We focused on what they did not do in Washing- of us starts to think about
ton. We focused on renewables, such as solar, wind, how to consume energy,
and geothermal. We have a state administration that we could bring on all the
is pretty good at putting together an energy policy. renewable energy in the
We had one that did not have any for four years, until world and it is not going
Governor Patrick came in. His administration seems to change a thing.
to be very committed, particularly to developing some - Sen. Benjamin Downing
of the newer types of technology. The biofuels seg- of Senate Committee
ment of the industry will get a lot of attention from on Ethics and Rules

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 dol-
lar,” 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 dis-
tricts 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 Mas-
sachusetts 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
has been put to work. We have proposals for a biod- I would love to build a
iesel plant in Pittsfield and a biomass plant. I am try- plant in Massachusetts,
ing to find out how state government, working with a but if New York State
federal delegation, can come in to try and meet some offers to pay for half of a
of those needs of this emerging industry cluster in an plant up there, how can I
emerging market, because the private capital may not turn it down?
be there for all these deals right up front. - Bruce Jamerson
of Mascoma Corporation
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 sustain-
able 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

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 Mas-
sachusetts as a leader in capturing not only the environmental benefits but the eco-
nomic 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 mak-
ing 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 differ- Session Quote
ently so that we can spawn more innovation in the state?

A FUTURE GIANT
What are the priorities?
The priorities are really
Jef Sharp of SunEthanol: what you can put the
votes together for, at the
The opportunity for alternative fuels is absolutely tre- end of the day.
mendous and much larger than anyone is even consid-
ering. As John Doerr said over at Kleiner Perkins, “You - Sen. Michael Morrissey
of Telecom Utilities and
know, this could be bigger than the Internet and it could Energy Committee
be bigger than biotech combined.”

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 tech-
nology 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 pro-
grams 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 differ-
ent 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 in-
terested 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 at-
tract 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 Administra-
tion 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 It’s not just about provid-
support in the branch for energy versus life sciences or ing direct financing to
others and we express that. Sometimes we express it these projects. It’s help-
by voting for legislation that the Governor may not want ing to create a market
or that the House may not want. It comes to different by putting in mandates
ways to express your opinion, some of it behind closed when the technology is
doors and some openly by moving legislation. there to use.

We were co-opted early because we have some vested -Irwin Heller

interests in our own districts, so we have to build on of Twin Rivers Technologies
that. We think that our two districts have a pretty good-
sized 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 econo-
mies. 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 De-
velopment 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 sup-
ported 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 fi-
nancing 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 die-
sel, 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 go-
ing 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 differentia-
tion 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.
Put E85 stations along
Jef Sharp of SunEthanol:
the Mass Pike for a
The reason that Brazil is energy-independent today is starter; that single cor-
that 15 years ago or so, someone said, “You know, this ridor would make a huge
gasoline situation could be volatile.” It is not going to statement to the rest
get any easier, and the opportunity for Massachusetts of the country and the
to become energy-independent is not just a pipedream. rest of the world that it’s
It is a very real possibility and it needs to be started by happening here in Mas-
people who are here on the panel with me, and by all sachusetts.
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 sta-
tions along the Mass Pike for a starter; that single cor-
ridor 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 hap-
pening 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 con-
sume 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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Clean Perspectives

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 plug-
in 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 every-
body 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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Clean Perspectives

Jim Matheson of Flagship Ventures:

Good question, and what about GMOs as they relate to feed stock, the characteriza-
tion 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 low-
cost 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 low-
cost 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.

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