FN360 Q3 2014 by FUELSNews

M A R K E T

N E W S

I N F O R M A T I O N

JULY – SEPTEMBER Q1

3rd QUARTER Q4

2 0 1 4

Q3 2014 Executive Summary Similar to the first two quarters of this year, military conflicts filled the headlines over the last three months. Ukrainian separatists experienced a brief resurgence with help from Russia, Islamic militia seized Libya’s largest cities, and the Islamic State drew the ire of its Arab neighbors. But the market didn’t follow headlines this fall. Instead, strong fundamental indicators and weak demand from some of the world’s leading economic powers encouraged non-commercial traders to abandon record-high long positions for rising equities and promising foreign investments. Despite armed conflicts throughout much of the world, production levels remained constant during the third quarter. In fact, domestic crude oil production rose to their highest levels since the late ‘80s; reigniting the crude export ban debate. European leaders urged President Obama to reconsider the ban, suggesting America’s isolationism forces global partners to purchase pricey barrels from abroad while we sit atop our petroleum treasure trove wondering what to do with crude oil poorly suited for domestic refineries. Weak economic indicators from China and key European economies increased the value of the U.S. dollar against several foreign currencies— lowering crude oil prices. These same indicators suggest weaker demand for crude oil than initially forecast by several of the world’s leading energy agencies — also lowering crude oil prices. Finally, non-commercial traders saw the same writing on the wall and promptly reversed record long bullish bets — overwhelming any positive indicators and ensuring lower crude oil prices in the near term. Meanwhile, a distinct lack of storm activity amid favorable refining economics resulted in refinery operations well above three-year averages; though one refiner made headlines despite a strong season — Citgo. Wholly owned by Venezuela’s state-run oil company and one of America’s oldest and largest refining operations, Citgo assets went up for sale in the third quarter as Venezuelan officials scramble to replenish dangerously-low cash reserves and fight off economic collapse. Finally, consumers experienced a significant reduction in retail fuel prices during the third quarter following historically-high prices in June. Though retail gasoline prices fell roughly 10 percent and diesel came down almost 4 percent, consumers weren’t the only ones enjoying their fuel savings. Wholesale rack-to-retail spreads on diesel widened from nearly 16 cents a gallon in mid-February to just shy of 34 cents a gallon in late August.

Index FUELSNews 360° Quarterly Report Q3 2014 FUELSNews 360°, published four times annually by Mansfield Energy Corp., analyzes and summarizes the prior quarter’s activity in the oil, natural gas and refined products industries. The purpose of this report is to provide industry market data, trends and reporting both domestically and globally as well as provide insight into upcoming challenges facing the energy supply chain. 4

Overview

FUELSNews 360° Commentaries

July through September, 2014

Commentaries; Andy, Dan and Evan S.

Third Quarter Summary

Commentaries; Jessica, Chris and Evan P.

Economic Outlook

Regional View

Global Economic Outlook

PADD 1A, Northeast

U.S. Economic Outlook

PADD 1B & 1C, Central & Lower Atlantic

PADD 2, Midwest

PADD 3, Gulf Coast

PADD 4, Rocky Mountain

PADD 5, West Coast, AK and HI

Canada

Fundamentals 10

U.S. Export of Crude Oil

Venezuela

Distillate Inventories

Winter Weather Forecast

Alternative Fuels 41 44

Financials 18

Macroeconomic Influences

National Diesel

Renewables Natural Gas

Transportation & Logistics

Diesel Exhaust Fluid (DEF)

FUELSNews 360˚ Supply Team

Overview July 2014 through September 2014 Military conflicts showed little influence over the crude oil market this summer, producing only marginal price spikes. Instead, this was the quarter of the economist. Weakness in the global economy leading to doubts of future crude oil demand prompted noncommercial traders to sell out of record long positions, resulting in overwhelming downward momentum. WTI crude futures now appear range-bound between $85 and $95 a barrel while Brent bounces between $90 and $100 a barrel.

WTI Crude Futures

(Dollars per Barrel)

European Leaders Push for Ending the Crude Oil Ban CFTC Reports Non-Commercial Net Long Positions Down 22 Percent

Non-Commercial Rockets Fired from Positions Reach Eastern Ukraine Destroy Record Long Malaysian Air MH17

OPEC's Secretary General Suggests Rate Cut

Satellites Photograph Russian Military Deep in Ukrainian Territory

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Source: Oil Price Information Service (OPIS)

Pro-Russian rebels drive an armored truck in Donetsk, eastern Ukraine, Sept. 7, 2014 4

ÂŠ 2014 Mansfield Energy Corp.

Overview Third Quarter Summary Strong refinery outputs coupled with falling crude oil prices produced a third-quarter decline in RBOB (gasoline) futures, despite increased seasonal demand during the peak driving season. Prices fell as much as 51 cents a gallon before regaining 20 cents a gallon over the course of two weeks in the latter half of September. Heating oil (diesel) futures steadily declined throughout the quarter for a total loss of 31 cents a gallon.

Summary, Third Quarter 2014

2.7180 2.6958

92.53020

16945.80

FN360o Source: Bloomberg Finance L.P.

ÂŠ 2014 Mansfield Energy Corp.

IIIII II

Global Economic Outlook

IIII II I

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Economic headlines this quarter focused on China’s struggle to maintain long-term growth, Europe’s stagnating economic recovery, and Venezuela’s desperate need for economic reform. The world’s twelfth-largest crude oil producer and founding member of the Organization of the Petroleum Exporting Countries (OPEC) —Venezuela— captured headlines this summer as falling crude oil prices pushed an already desperate administration to slash imports of every-day necessities and replace several key executives within its energy sector. The nation’s central bank even stopped publishing monthly inﬂation updates after its May report underscored just how badly the Maduro administration is handling the country’s economic hardship.

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IIII II I IIII II I

China’s prime minister, Li Keqiang

Despite assertions by China’s prime minister, Li Keqiang, the nation’s industrial output —a chief indicator of China’s crude oil consumption and economic health —has fallen along with property sales, which constitute roughly 15 percent of China’s total GDP. Unsold homes accounted for two-thirds of all developer assets in September, representing an all-time high and signiﬁcant threat to the property sector. Crude oil producers and economists dread the prospect of a shrinking Chinese economy, but reduced consumption spells “cheaper fuel” for end users.

According to the International Monetary Fund (IMF), weak demand for goods out of leading economies such as these and ongoing military actions in Eastern Europe resulted in disappointing growth through the third quarter; casting doubt on the Fund’s 3.6-percent growth expectation quoted in April. Looking ahead, the Fund warns low inﬂation rates in several advanced economies and slow growth in the world’s emerging markets could hinder an already sluggish global recovery.

Similarly, key European economies struggle to stave off deflation in the midst of an already tenuous economic recovery. The European Central Bank (ECB) reduced benchmark interest rates yet again, continuing their less-than-zero rate for banks. By charging banks interest on deposits, the ECB hopes to stimulate more private lending and, consequently, greater consumer spending. However, measures may come “too little, too late” as early indications suggest Germany —the EU’s financial cornerstone —officially went into recession this quarter. So, what happens to the group’s economic recovery plan when the kingpin can’t build enough momentum to avoid a recession themselves?

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U.S. Economic Outlook

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Headline Producer Price Index (PPI) Month-to-Month Change

July

0.15%

August

-0.30%

September -0.40%

IIII II I

Headline Consumer Price Index (CPI) Month-to-Month Change While key foreign economies struggle, the U.S. steps conﬁdently July August September* Consumer Sentiment into the fourth quarter. rose into the mid-80s -0.04% -0.17% 0.48% during the third quarter, third quarter GDP is estimated to have grown at 3.2 percent ahead of forecasts, and unemployment ﬂirts with rates below 6 percent even as wages are expected to rise.

Consumer Sentiment Index July 81.8

August 82.5

September 84.6

Federal Reserve Chairwoman Janet Yellen

While a slowing global economy could threaten exports, the U.S. supplies a broad range of foreign nations, limiting risk exposure. Furthermore, exports account for only 13 percent of the nation’s GDP. Consequently, experts suggest a stronger U.S. economy should bolster global economic growth in the 3-percent range while foreign nations rehabilitate ailing economies, leading to 3.5-percent global growth in the coming year.

Consumer Sentiment Index

As the nation’s economy improves, Federal Reserve Chairwoman Janet Yellen foretells of rising interest rates. Already planning to end the Fed’s QE bond purchasing program this October, Yellen points to falling unemployment and a soaring stock market as reasons for the more than 5-year-old, zero-percent interest rate to increase. While bond market investors would suffer losses in the event of an even slight rate increase, most analysts agree the bond bubble cannot be sustained and should end sooner rather than later. To a lesser degree, commodity and equity markets should also prepare for losses as higher interest rates threaten rapid economic growth and demand for goods and services.

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Source: University of Michigan 8

U.S. Economic Outlook The Producer Price Index (PPI), a measure of change in producers’ selling prices, proved to be a mixed bag in the third quarter. Core prices remained ﬂat while the more volatile headline prices declined nearly a full percent. Prices for unprocessed good fell while prices for services advanced slightly. Core producer prices tend to follow behind the more volatile energy index, so the next quarter may show more evidence of falling fuel prices.

Headline Producer Price Index (PPI) Month-to-Month Change

July

August -0.30%

0.15%

September -0.40%

Headline vs. Core Producer Price Index (Year-over-year Percent Change, Seasonally Adjusted)

Headline Consumer Price Index (CPI) Month-to-Month Change

July

August

September*

July 0.15%

August -0.30%

September -0.40%

Headline Producer Price Index (PPI) Month-to-Month Change -0.04% -0.17% 0.48%

FN360 Consumer Sentiment Index o

July 81.8

Source: U.S. Bureau of Labor Statistics

The Consumer Price Index (CPI), a measure of change in prices paid by urban consumers, waned steadily in the third quarter partially due to declining gasoline prices. Prices for new vehicles and alcoholic beverages increased, but they couldn’t offset declines in airline fares, apparel, and recreation. With discussion on Capitol Hill pointing towards an end of the Fed’s near-zero interest rate policy, consumers can expect to see prices rise along with inﬂation.

September 84.6

Headline Consumer Price Index (CPI) Month-to-Month Change

July -0.04%

August -0.17%

Consumer Sentiment Index

(Year-over-year Percent Change, Seasonally Adjusted) July 81.8

August 82.5

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September* 0.48%

*Projection

Headline vs. Core Consumer Price Index

August 82.5

September 84.6

Fundamentals Balancing Domestic Production with Consumption and Exports Debating the Fate of a Nearly 40-Year-Old Ban South Korea received the ﬁrst unrestricted barrel of U.S. crude oil in nearly forty years this quarter after the Obama administration granted two permits for the export of ultra-light crude stocks. Subsequently, crude oil exports increased by a staggering 231 percent, easily outpacing all crude oil exports reported since the implementation of the infamous crude oil ban in the mid-‘70s.

U.S. Exports of Crude Oil

(Thousand Barrels Per Day)

FN360o Source: Energy Information Administration (EIA)

Now, legislators are under pressure to repeal the legislation entirely, allowing cheaper crude oil to ﬂow freely throughout the international community. Foreign allies recently questioned the ban’s legality under international trade laws. More importantly, leaders suggested the nation’s soaring production no longer supports such an isolated approach to the global marketplace and requested the Obama administration’s aid in ending the nation’s antiquated policy. So, how would the domestic outlook change without the crude oil ban in place? While the cost per barrel of crude would not skyrocket 10

without the ban —after all, Brent crude currently trades at only a $5 premium to WTI futures—refiners believe it’s a question of competitive edge. Delta fuel executive Graeme Burnett spoke before a Senate Energy Committee in late September, suggesting to remove the 40-year-old ban without first addressing the 90-year-old Jones Act restrictions, which roughly triple waterborne transportation costs between U.S. markets and favor crude imports, would place Northeastern refineries at a severe disadvantage to European competition. Consequently, domestic refineries could shut their doors, endangering the nation’s pursuit of energy independence.

“ Subsequently, crude oil exports increased by a staggering 231 percent, easily outpacing all crude oil exports reported since the implementation of the infamous crude oil ban in the mid-‘70s.”

Fundamentals

Economic Troubles Threaten America’s Fourth-Largest Crude Oil Supplier and Eight-Largest Refiner

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As the world’s twelfth-largest crude oil producer and fifth-largest in the Western Hemisphere, Venezuela’s highly influential in the global crude oil market. Last year, Venezuela produced 2.2 million barrels of crude oil each day, exporting roughly one-third to U.S ports and making it our fourth-largest source of foreign oil behind Mexico, Canada, and Saudi Arabia. Now, the nation’s socialist government, dependent on crude oil exports for nearly half of budget revenues, struggles to provide basic necessities as international crude prices fall to their lowest in over a year. Despite Venezuela’s ranking as a top oil producer/exporter and extraordinary proven reserves, their economy strains under the weight of unsustainable export commitments —repaying debt with crude— and crippling government subsidies. The Venezuelan Central Bank’s last published report indicated the inflation rate topped 61 percent and, according to World Bank estimates, 12

Venezuela suffers the slowest economic growth among South American nations this year. Imports have been slashed due to dwindling cash reserves and recent policy reforms resulted in rationing of everyday goods such as milk, meat, corn, and toilet paper. In an effort to boost cash reserves and float their floundering , economy, Petroleos de Venezuela S.A. (PDVSA) announced in August it would consider offers for the purchase of its Houstonbased subsidiary, Citgo Petroleum Corp. —the eighth-largest refiner in the United States. The package includes three U.S. refineries with a combined capacity of 750,000 barrels a day, significant line space on the nation’s premier pipelines, and a healthy network of storage terminals. All this can be yours for a mere $10 billion.

Fundamentals Proven Oil Reserves by Selected Countries

Citgo is claim one of thethe largest refiners in the US, with tag plantsisin Texas, Illinois. a bitLouisiana high, and Critics $10-billion price citing Refining capacity in barrels per day: Marathon’s 2012 purchase of BP’s 475,000-bpd Texas City refinery, which sold for $2.4 billion. Conversely, supporters say its midstream storage terminals and docks —both eligible for tax advantages—justify the higher price. The company’s two Gulf Coast refineries Note: Data as of January 1; both run heavy crude oil from Venezuela whileranking its does not include PdVSA’s joint venture Chalmette, LA with Exxon. Lemont, IL refinery consumes cheaper Canadian refinery stocks. venture“gem of Royal Dutch Shell The Lemont facility has been referred to *Joint as the and Aramco. of the portfolio” while the other two —saddled with long-term purchase agreements for expensive Venezuelan crude— are viewed with less excitement.

(Billion Barrels)

350 300 250 200 150 100 50 0

Venezuela

Saudi Arabia

Canada

Iran

Iraq

Source: Energy Information Administration (EIA), Oil and Gas Journal

Analysts attribute the sale to Venezuela’s ﬂoundering economic position coupled with signiﬁcant debt to China. Burdened with ongoing civil unrest, international scrutiny, and widespread product shortages, the Venezuelan economy is failing. An extra $10 billion would help sustain the government while possibly freeing up barrels previously destined for the Gulf Coast, which could then be used to repay their debt to China. Former Minister of Energy Rafael Ramirez denied the claims, citing poor fuel economics, instead, and stressing shipments to the U.S. would remain steady.

Exxon Mobile Marathon Phillips 66 Chevron Tesoro Citgo Koch Industries BP

1,855,700 1,714,000 1,590,600 943,271 834,000 762,845 689,535 649,000

Citgo’s Lake Charles, LA Reﬁnery

For more than 20 years, Venezuela has imported refined products at an average rate of 500,000 bbl/d, largely supplied by Citgo. If PDVSA finds a buyer for their U.S. assets, it’s possible these Citgo products would instead find their way into domestic markets, improving fuel prices. At the very least, it could ensure all domestic refiners were operating with only the industry’s economics at heart rather than those of their parent country, as well. In a worst-case scenario, PDVSA is unable to find a single buyer for their network and we see the end of a more than 100-year legacy as it’s sold piecemeal and absorbed by the competition.

Citgo is oneCitgoofisthe largest refiners in the U.S., with plants in Texas, one of the largest refiners in the US, with plants in Texas, Louisiana and Illinois. capacity in Refining barrels per day: Louisiana,Refining and Illinois. capacity in barrels a day: 350 300 250 200 Note: Data as of January 1; ranking does not include PdVSA’s joint venture Chalmette, LA refinery with Exxon. *Joint venture of Royal Dutch Shell and Aramco.

Source: Wall Street Journal 13

150 100 50 0

Fundamentals

Distillate Inventories Remain Low for the Third Quarter of the Year Despite steady production and limited disruptions this season, distillate inventories remained significantly lower than those witnessed over the past five years. However, distillate imports fell to their lowest in nearly two years during July while exports of refined distillates increased by almost 250 percent since January of 2010. Distillate inventories remain comparable to historical norms, keeping in mind inventories were unusually high between 2009 and 2011.

Distillate Inventories

(Million Barrels)

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Source: Energy Information Administration (EIA)

Average days of distillate supply rose nicely late in the third quarter, adding 3.8 days of supply in just a few weeks’ time. However, supplies remain 3.4 days below the 3-year average as we prepare for colder temperatures and fall reﬁnery maintenance.

Distillate Days of Supply

(Million Barrels)

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Source: Energy Information Administration (EIA) 14

“ Despite steady production and limited disruptions this season, distillate inventories remained signiﬁcantly lower than those witnessed over the past ﬁve years.”

Fundamentals

Early Winter Weather Forecast Pro: Warmer than average Paciﬁc Ocean temperatures create shear eastern winds across the Gulf of Mexico which suppress the formation of hurricanes.

Con: The same warm water phenomena leads to colder, wetter winters for southern states and East Coast residents. El Niño’s Impact on Winter Jet Streams and Resulting Weather Patterns

Source: Accuweather.com

So, while the moderate El Niño pattern currently swirling in the Paciﬁc Ocean can be thanked for a slower-than-average start to the 2014 hurricane season, we may be cursing its name come January. The National Oceanic and Atmospheric Administration (NOAA) reports a strong El Niño pattern can disrupt average winter highs in the Southeast by as much as 25 degrees Fahrenheit and add several inches of precipitation. Northeast markets often receive the worst of it, however, as the two jet streams collide with arctic winds from Canada, producing slowmoving storms and heavy snows. In addition to the cold, wet weather East Coast markets generally experience during El Niño years, the NOAA expects cooler ocean temperatures northwest of Hawaii this winter. 16

Fundamentals According to meteorologist Matt Rogers, the low pressure created by these cooler waters intensify effects of El Niño patterns, leading to “Modoki” versions which generate colder temperatures and heavier snowfall than your average El Niño year. In 2002 and again in 2009, the same pattern appeared during a moderate El Niño event (map A) and the D.C. area received as much as 56 inches of snow. Compare this to similar El Niño events in 2004 and 2006 (map B) during which snowfall totaled less than 13 inches. While initial forecasts can vary widely, the NOAA predicts the Midwest, will likely experience a milder winter as the jetstream delivers warmer temperatures and drier air to the region. Consequently, Energy Information Administration (EIA) estimates suggest home owners will spend as much as $800 less to heat their homes this winter; particularly those using propane.

-3

-2

-1

-0.5

-0.25 0.25

0.5

Source: National Oceanic and Atmospheric Administration (NOAA) -3

-2

-1

-0.5

-0.25 0.25

0.5

Cooler Temperatures in the Gulf of Alaska Historically Produce Colder, Snowier Winters

A Cold and Snowy

Meanwhile, homeowners along the East Coast and Northeast should prepare for colder temperatures and above average snowfall. No.1 diesel (kerosene) currently trades at a higher than normal premium to its more widely used No.2 counterpart and we’ve noticed these premiums growing in recent years. Couple this with stricter heating oil regulations in the region’s northernmost states and consumers can expect to pay significantly more for their home heat and cold weather diesel despite warmer forecasts. To reduce your fleet’s dependence on costly kerosene blends this winter, consider implementing a cold weather additive program to protect fuel from the harsh elements. Certain additives discourage paraffin wax in No.2 diesel from congealing under extreme temperatures, protecting your engine from clogged fuel filters and costly downtime. While additives do not eliminate the need for kerosene, they do make the kerosene you add more effective; allowing for lower blending ratios, fewer product related failures, and significant savings.

2002-2003 2009-2010

-5 -4.26

-3.5

-3 -2.25

-1.75

-1

-0.25 0.25

1.75 2.25

4.25

B Warmer and Drier

2004-2005 2006-2007

-5 -4.26

-3.5

-3 -2.25

-1.75

-1

-0.25 0.25

1.75 2.25

Source: Matt Rogers via Washington Post 17

3.5

4.25

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Financials

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Understanding Macroeconomic Influences and their Effects A Third of Non-Commercial Traders Lose Faith in the Value of Crude Traders and speculators began the third quarter by reduced bullish bets and didnâ&#x20AC;&#x2122;t slow until late September, according to the Commodity Futures Trading Commission (CFTC). Shedding more than a third of their record long positions set in late June, non-commercial traders contributed to a nearly 15-percent drop in WTI crude future values over the same timeframe.

CFTC Long Positions vs. WTI Crude

36%

FN360o Non-Commercial Net Long Posi ons Source: CFTC Commitment of Traders and Energy Information Administration

ÂŠ 2014 Mansfield Energy Corp.

As WTI crude futures sank lower, reﬁned product prices followed. However, the recent drop in crude oil prices pressured Heating Oil futures (diesel) below their historic lower range of $2.85 a gallon, creating conﬂicting upward pressure. As seen at right, heating oil futures rarely remain below their preferred range for very long, suggesting prices could rebound in the very near future.

Diesel Futures (Dollars per Gallon)

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Conversely, weak demand overseas, a strong U.S. dollar, booming North American crude production, and discord between OPEC nations all contribute to lower long-term crude oil prices. Until both China and Europe jumpstart their economies —resulting in increased demand— we can expect lower crude oil prices to pervade. Reﬁned product prices will likely follow. With technical traders and automated transactions triggering frequent downward movements, reﬁners could be the only means of support as 3:2:1 crack spreads continue to narrow. Regardless of whether we’ve seen the bottom of this market or not, this is a great time to hedge future fuel expenses.

Source: Oil Price Information Service (OPIS)

Falling Retail Prices Make Even Stronger Case for Bulk Tank Storage While falling product prices resulted in consumer savings of 16.5 cents a gallon at the pump this quarter, retailers enjoyed greater savings at the wholesale rack as the national average for wholesale diesel shed more than 23 cents a gallon. As seen below, rack-to-retail spreads demonstrate a widening trend since cold weather drove retail values to their peak in early February.

Notice the sharp decline in wholesale prices since February, yet a definitively gentler trajectory on the retail side. This has many companies evaluating the benefits of installing bulk tanks to replace retail fuel purchases. Since wider rack-to-retail spreads significantly shorten the time it takes to recoup initial investments (typically less than one year), businesses optimize the fuel spend between retail and bulk, generating immediate savings to the bottom line.

National Diesel – Wholesale vs. DOE Retail

FN360o Source: Energy Information Administration (EIA) 19

FUELSNews 360˚ Commentaries Andy’s Answer

BULL BEAR

Three months ago, my usual bullish sentiment turned bearish for the third quarter. It’s hard being right all the time! I guess the $4.99 Magic 8-Ball on my desk really does come in handy! (Literally you can see it my picture) Sorry Chris Carter, but the bear’s won last quarter. All this bearish sentiment comes on the heels of a stronger dollar, higher domestic production, and long-term limitations on exports. If any of those key items change, we’ll likely see upward movement. Additionally, the exodus of ﬁnancial traders affects market volatility. The average traded volume on WTI is already down considerably versus prior years. These factors represent major changes in the marketplace and the added volatility in the market has me peeling away from my typically bullish stance. Don’t get me wrong. The market’s already fallen considerably and futures could correct higher temporarily just to maintain the seasonal curve into next year. So, everyone’s dying to know my position on the market. Drum roll, please ... My call is for ULSD futures to bounce higher in the fourth quarter; mostly on winter fears, continued exports, and expectations for seasonal demand. Gasoline may continue to lag and I expect WTI crude to stay range bound between $85 a nd $95 a barrel. However, I’ll be watching the political debate on condensate and domestic crude. Nevertheless, I could be wrong. It wouldn’t be the ﬁrst or last time. Just look at my fantasy football team!

Dan’s Dissertation

BULL BEAR

Despite an already steep drop throughout the third quarter, crude oil will continue to fall through the end of the year due to ample supply; dragging reﬁned products with it. In the U.S., production averaged 8.6 million bpd in August, a level not achieved since July 1986. Globally, OPEC output increased last month, despite Saudi Arabia cutting production by 400,000 bpd. Looking forward, Libyan shipments are expected to increase by 240,000 bpd as the country works to restore production. Meanwhile, global demand remains tepid. China’s economy struggles with pronounced weakness in industrial production. Accordingly, the EIA pared its 2014 non-OECD crude demand forecast by 90,000 bpd with 70,000 bpd attributed speciﬁcally to China.

Evan’s Estimation

BULL BEAR

After accurately predicting a bearish third quarter, several key factors support my bullish prediction for Q4. I’m a firm believer in the Farmer’s Almanac, which predicts another brutally cold winter. This suggests higher product prices towards the end of the fourth quarter. Looking overseas, my focus turns to the ongoing Russia/Ukraine conflict. Russia remains unfazed by Western sanctions, which finally impacted the nation’s energy sector at the end of the third quarter. So, I’m not ruling out escalating violence, which could boost oil prices. Finally, RBOB, heating oil, and WTI prompt futures all tend to spike near the end of the year. So, I’m betting on cold weather, political tension, and product seasonality to lead this bull’s charge into the New Year.

FUELSNews 360˚ Commentaries Jessica’s Judgment

BULL BEAR

“Slow progress is better than no progress.” That’s the most optimistic position I can take when referring to government policy-making. By the looks of the RIN marketplace, along with multiple statements from EPA administrator Gina McCarthy, obligated parties are prepared for an increase in the 2014 Renewable Fuel Standard (RFS), due for publication sometime next quarter. However, if the signs are wrong, we could see a surge in demand as parties rush to fulﬁll obligations by the end of the year. Complicating matters, biodiesel plants nationwide are reportedly tight on product in Q4 – many of which are sold out for the quarter and one or two are already contracted up through the ﬁrst quarter of next year. Ethanol plants are holding strong with increased production rates only interrupted by maintenance-related downtime. Q4 quotes for both products are coming in cheaper than Q3 although, with the supply constraints, the numbers are not quite as cost effective as initially expected. Finally, winter weather is right around the corner, as many northern states already feel a brisk chill. The cool air is a reminder of last year’s harsh winter, rife with product quality concerns and transportation induced migraines. Between product constraints at biodiesel plants and potentially increasing demand following the EPA’s, we’re likely to see renewable product prices rally as we approach the end of the year. Producers, distributors, and consumers all remain cautious. I, however, can be found in Houston, where winter is the one time of year the temperature is favorable

Chris’s Concept

BULL BEAR

Last quarter, I was the only one betting on a bullish third quarter. Several subscribers have taken great pleasure in calling me out on this. I admit I missed the mark. As it turns out, we didn’t see the strong geopolitical influences I anticipated. The world’s conflict with Russia failed to impact prices, Libyan production rebounded nicely despite rapid militia advances, and Sunni insurgents made no attempt to disrupt outputs from Iraq’s southern producing region. The dollar steadily gained strength and lower demand in China and Europe pushed the market down. With production rates soaring and global demand down, expect OPEC leaders to adjust their output in an effort to boost prices, as we’ve already seen from Saudi Arabia. For the last quarter of 2014, I’m neutral to bearish. I’m not convinced we will see another large decrease in prices, as we’re already at bargain prices for traders, but product prices will have difficulty gaining upward momentum until the dollar weakens or traders decide to get back in the game.

Evan’s Expression

BULL BEAR

The third quarter’s downward momentum —rooted in steady production, weak international economies, and noncommercial traders abandoning bullish bets— will come to an end in the fourth quarter. In the last three months, crude oil production increased while demand in key markets declined. Rumors concerning China’s economic well-being have been swirling since the start of the year, but officials have been quietly providing stimulus and I don’t foresee the great recession some would suggest. Europe, on the other hand, remains a wild card. I’ll boldly predict the repeal of the Crude Oil ban following November elections, which could potentially breathe new life into European refineries, providing a much-needed spark to reignite industrial activity in the region. At home, cold weather and restrictive regulatory changes will drive distillate prices higher, unless we successfully avoid the disruptions experienced last winter. The return of the one-dollar blender’s credit on biodiesel (fingers crossed) should ease the price burden as well, particularly with the introduction of bioheat blending mandates in New England. While blend ratios remain low, every little bit helps! Finally, I can’t believe non-commercial traders will stay away for long. Sure, the dollar is strong against foreign currencies for the moment, encouraging greater investment in equities and foreign debt, but a small amount of renewed interest could go a very long way! Bull, bull, bull. 21

Regional View ? PADD 5: West Coast, AK, HI

PADD 4: Rocky Mountain

Did You Know? PADD 2: Midwest PADD 1: East Coast

PADD 3: Gulf Coast

PADD stands for Petroleum Administration for Defense Districts

During World War II, the United States was divided into five PADDs to organize the allocation of fuels derived from petroleum products, including gasoline and diesel. The purpose was to spread the nation’s oil supply among the regions, thereby eliminating the possibility of a single strike wiping out the country’s oil infrastructure and resources.

PADD 1A Diesel Wholesale vs. DOE Retail

PADD 1 East Coast PADD 1A Northeast

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Source: Energy Information Administration (EIA)

Rhode Island Adopts Greener Heat According to the Biodiesel Heating Oil Act of 2013, all heating oil sold within the state of Rhode Island after July 1st, 2014 must contain at least a small amount of biodiesel; 2 percent currently, but increasing to 5 percent after July 1st, 2017. This piece of legislature is intended to lead the way for other states to convert to biodiesel blends. As residents of neighboring bio-mandated states can already attest, citizens of Rhode Island may face crippling logistical issues in exchange for their environmental conscientiousness. While 22

biodiesel blends produce cleaner emissions, their cold-weather properties leave something to be desired; raising both the product’s cloud point and cold filter plug point (CFPP). Additionally, the state’s capacity for biodiesel production (appx. 1.5 million gallons a year) falls short of the 2 percent mandate set out. If heating oil consumption remains constant, residents should burn a little more than 2 million gallons of biodiesel in the first year before increasing to over 5 million in 2017. With no pipelines or railcar terminals to offload additional supplies, consumers are vulnerable to price spikes.

When conditions are less favorable, consumers already ﬁnd themselves vulnerable to price spikes in heating oil, which often outstrips biodiesel; in which case, blending biodiesel with heating oil still offers consumers a reprieve from higher fuel costs while helping the state achieve its goals of signiﬁcantly lowering the region’s greenhouse gas emissions.

On the upside, the state of Rhode Island neither produces nor reﬁnes petroleum. Instead, products arrive through the state’s deepwater port in the capital city of Providence. So, even when supply conditions are favorable, heating oil prices easily exceed natural gas prices. Therefore, consumers enjoy a slight cost reduction when blending cheaper biodiesel in with heating oil.

Philadelphia’s City Council Fights for Cleaner Heating Oil

The Philadelphia Mayor signed an ordinance requiring all heating oil delivered within the city limits to contain no more than 15ppm sulfur starting July 1st, 2015. The city currently allows consumers up to 2,000ppm, but city council members hope to improve air quality and reduce related respiratory hospitalizations while advancing the Northeast’s shift towards a single, lower sulfur mandate. While city council members have taken an enormous step towards a greener and healthier city, suppliers warn of product shortages amid logistical pitfalls, limited line space on the Colonial pipeline, and a local reﬁnery network incapable of satisfying the increased demand. Additionally, consumers can expect to pay between 5 and 10 cents more for each gallon of heating oil due to diesel’s premium over high-sulfur products. Finally, heating oil containing only 15ppm sulfur runs a greater risk of gelling than high-sulfur blends because sulfur adds lubricity to heating oil. Without sulfur, producers must introduce parafﬁn wax to maintain lubricity 23

standards and paraffin wax congeals in cold weather situations, clogging fuel filters and leading to major headaches. While city leaders and state legislators should be commended for improving the quality of life for all residents, it’s difficult to take the plunge and risk the monetary discomfort. Suppliers may cringe when thinking of maintaining multiple tanks meeting various fuel standards and consumers may dislike the added cost, but this will likely be the direction more municipalities take in the future as growing populations raise more concerns for air quality.

PADD 1 East Coast

Refinery and Pipeline Issues Plague Northeast

PADD 1A Northeast

The third quarter proved troublesome for the Laurel pipeline. This being the first year without the Sunoco Logistics pipeline carrying refined products through Pennsylvania, the Laurel pipeline struggled with increased demand. Currently the sole refined products pipeline running from East Coast refineries west to Pittsburgh, the Laurel pipeline remained allocated for months and, at times, fell behind schedule; causing supply disruptions across central and western Pennsylvania. Demand will only increase as winter weather worsens. Consumers should be wary of pipeline disruptions along this route and brace for higher product prices.

“ Consumers should be wary

of pipeline disruptions along this route and brace for higher product prices.”

At the same time, Northeast refiners suffered several disruptions in the third quarter. Monroe Energy, owner of the 190,000-bpd Trainer, PA refinery, shut down its fluid catalytic cracker (FCC) for a week in early July, forcing the producer to make a rare purchase of RBOB to cover previous commitments. Shortly thereafter, the facility’s crude distillation unit (CDU) was also taken offline; extending the refinery’s shutdown further. Philadelphia Energy Solutions (PES) suffered their own battle with Murphy’s Law as three units —a reformer, naptha hydrotreater, and vacuum gasoil hydrotreater— were taken offline shortly into the quarter. A single ULSD hydrotreater continued operating during this time, but at reduced rates. Finally, Irving Oil’s 300,000-bpd facility in St. John, New Brunswick lost one crude distillation unit to extended maintenance while a catalytic cracker went offline unexpectedly in July just to be followed by a Residue Fluid Catalytic Cracking Unit (RFCCU) in September. The cascade of misfortune slowed Irving’s production to the lowest levels experienced in years. The Canadian refiner plays a significant role in the Northeast’s overall supply chain.

Irving Oil’s Reﬁnery in St. John, New Brunswick 24

PADD 1 East Coast

? Did You Know? There are approximately 20 different boutique gasoline products sold across the country during the Low RVP season. On the East Coast alone, there are four different variations of summer grade fuel sold between June 1st and September 15th. This often results in higher fuel costs and greater threat of supply disruption.

PADD 1B & 1C Central & Lower Atlantic

PADD 1B Diesel Wholesale vs. DOE Retail

FN360

Source: Energy Information Administration (EIA)

PADD 1C Diesel Wholesale vs. DOE Retail

FN360o Source: Energy Information Administration (EIA) 25

ÂŠ 2014 Mansfield Energy Corp.

PADD 1 East Coast PADD 1B & 1C Central & Lower Atlantic

Plantation Pipeline Leak Causes Product Shortages On August 21st Plantation Pipeline halted all product shipments after discovering a small leak in Helena, AL. The unscheduled repairs took just over three days to complete, resulting in product shortages throughout the Southeast. Markets supplied solely by the Planation Pipeline —Columbus, GA and Montgomery, AL, for instance— naturally proved most sensitive to the interruption.

“ If Kinder Morgan chooses

to pursue the pipeline project, it could fundamentally change the pricing and security of supply within the region.”

Supply in larger markets also proved difﬁcult, despite the availability of alternate sources. For example, Atlanta’s gasoline market suffered widespread allocations toward the end of August without Plantation’s additional throughput. Major suppliers, such as Marathon, Valero, and Motiva, shut down their unbranded gas racks for three days while Atlanta’s low-sulfur requirement prevented nearby markets from coming to the rescue. Frequent shortages of specialty or “boutique” fuels support opposition to city ordinances which ultimately threaten the market’s security of supply. Luckily, relief arrived a few days before the Labor Day weekend when the pipeline resumed deliveries.

Kinder Morgan Seeks Shippers for East Coast Palmetto Pipeline Kinder Morgan stocks earned a boost at the start of August following the launch of a binding open season soliciting commitments for their proposed refined product pipeline. Connecting several traditionally barge-fed markets in the Southeast to the Plantation Pipeline, the Palmetto Project would carry gasoline, diesel, and ethanol to markets throughout Georgia, Florida, and South Carolina. The proposal comes in response to a long-standing shortage of Jones Act vessels needed to transport refined product from Gulf Coast refineries to coastal cities in the Southeast. The shortage creates 26

demand for foreign imports despite a surplus of domestic reﬁned product and Kinder Morgan hopes to capitalize on the opportunity by July of 2017. The $1-billion project would carry 167,000 barrels a day via an expansion leased from Plantation Pipe Line Company between Baton Rouge, LA and Belton, SC. Additionally, a new 360-mile pipeline would connect Belton to Jacksonville, FL. If Kinder Morgan chooses to pursue the pipeline project, it could fundamentally change the pricing and security of supply within the region. The binding open season ended September 30th, but no developments had been made public at the time of writing.

HOVENSA to Sell St. Croix Refinery to Unnamed Buyer

St. Croix Reﬁnery U.S. Virgin Islands

Poor economics were blamed for the 2012 closure of HOVENSA’s 500,000-bpd reﬁnery located on St. Croix’s South Shore, but an unnamed startup hopes to revitalize the shuttered facility, according to the Governor John deJongh Jr. Government approval would be required before the sale is executed, but Gov. deJohgh told senators a proposal should be ready for vote by the end of the year. The facility’s Caribbean home offers considerable advantages given its proximity to Southeastern markets and exemption from Jones Act requirements. Since the plant closed in December of 2012, the need for Jones Act vessels sky rocketed, propelling transportation rates higher and increasing product prices throughout Florida and other markets along the Southeast Coast. 27

Markets such as Charleston and Jacksonville actually transitioned to New York Harbor product, fundamentally changing the way in which these markets are priced. If this mystery buyer succeeds, coastal markets throughout the Southeast could experience greater security of supply along with reduced transportation costs, regardless of whether barrels originated from the Caribbean plant. Barrels shipped by Northeast barges and Southeast pipelines, which have been stretched to cover the missing production from HOVENSA, will return to their normal markets, providing relief. Additionally, several Jones Act vessels should be freed up to carry other products, reducing transportation costs for all waterborne deliveries in the region.

“ Various reﬁnery hiccups and maintenance in the central swath of the country lead to elevated Midwest gasoline prices throughout the third quarter.”

PADD 2 Diesel Wholesale vs. DOE Retail

PADD 2 Midwest

FN360

“ Traders left short by the lost

Source: Energy Information Administration (EIA)

Midwest Gasoline Basis (Dollars per Gallon)

production bid up Group 3 gasoline basis by 3 cents per gallon on the day. Over the next eight trading days, basis for the sub-octane fuel increased more than 20 cents per gallon.”

FN360o Source: Oil Price Information Service (OPIS)

Unplanned Midwest Refinery Maintenance Results in Tight Gasoline Supplies Various refinery hiccups and maintenance in the central swath of the country lead to elevated Midwest gasoline prices throughout the third quarter. In July, CVR Energy’s 125,000-bpd Coffeyville, KS refinery suffered a fire in their isomerization unit. Traders left short by the lost production bid up Group 3 gasoline basis by 3 cents per gallon on the day. Over the next eight trading days, basis for the sub-octane fuel increased more than 20 cents per gallon. With the refinery down for over a month, Gulf Coast gasoline eventually found its way into the area and eased the short supply. Unfortunately for Chicago area gas buyers, the region suffered its own refinery troubles. On August 27th, BP halted operations at their 410,000-bpd Whiting, IN refinery when a compressor exploded during the night, resulting in a small fire. A spokesman for the company said production was minimally affected, but Chicago RBOB jumped 12.5 cents a gallon on the day and CBOB increased roughly 4.5 cents a gallon, much higher than an otherwise flat futures market. Not to be left out, both P66’s 365,000-bpd Wood River refinery and ExxonMobil’s 248,000-bpd Joliet refinery faced small hiccups throughout August and September, exacerbating Midwest gasoline premiums. 29

PADD 2 Midwest

Ohio River Oil Spill Hampers River Traffic Ahead of Regional Refinery Maintenance A fuel oil spill in late August closed 15 miles of the Ohio River just north of Cincinnati, slowing barge traffic and driving fuel prices higher in river-supplied markets. The Coast Guard estimates about 5,000 gallons of fuel were released from Duke Energy’s W.C. Beckjord power station, leaving a sheen and requiring traffic in the area to receive Coast Guard clearance and maintain reduced speeds. The price disruption caused by the spill came ahead of Marathon taking 83,000 bpd offline at their 261,000-bpd Catlettsburg, KY refinery for maintenance of the crude unit, which is expected to last from early September to mid-October.

Ohio River Markets Less Chicago Wholesale

“ Rack prices continue to reﬂect

a higher premium to the Chicago wholesale cash market and fuel buyers may see premiums through the end of the reﬁnery maintenance in October.”

FN360

Source: Energy Information Administration (EIA)

As illustrated above, fuel prices in petroleum markets fed by Ohio River barges increased in relation to the Chicago Platts cash market, suggesting slower river traffic hindered distribution to terminals prior to the refinery maintenance. Catlettsburg supplies many terminals along the Ohio River via barge and several Cincinnati terminals rely solely on supply via water. While Louisville also receives product via pipeline, waterborne supply remains an integral source. Rack prices continue to reflect a higher premium to the Chicago wholesale cash market and fuel buyers may see premiums through the end of the refinery maintenance in October. 30

PADD 3 Gulf Coast

PADD 3 Diesel Wholesale vs. DOE Retail

FN360o Source: Energy Information Administration (EIA)

Refinery Maintenance Propels Gulf Coast Gasoline Basis Higher Several key Gulf Coast refineries began maintenance in September, causing regional gasoline prices to jump in the last few weeks of the quarter. Shell’s 340,000-bpd Deer Park refinery (6th largest in the nation), Delek’s 60,000-bpd Tyler refinery (regionally significant), and Exxon’s 573,000-bpd Baytown facility (largest in the nation) as well as its 365,000-bpd Beaumont refinery (5th largest in the nation) all initiated turnaround work on their fluid Gulf Coast premium to NYMEX (Dollars per Gallon) catalytic crackers (FCCs), diminishing gasoline supply in the area. An FCC unit converts heavier petroleum molecules into more valuable products, such as gasoline. As a result, Colonial Pipeline’s scheduling deadline for cycle 53 prompted the biggest oneday jump in Gulf Coast cash gasoline prices throughout the quarter. On September 17th, Gulf Coast 11.5-lb CBOB increased nearly 10 cents per gallon as traders looked for gallons to meet commitments prior to Colonial Pipeline ceasing acceptance of nominations. Meanwhile, RBOB contracts on the NYMEX fell 4.5 cents a gallon in the most active month. Adding to negative news on the day were rumors of an FCC failure at Pasadena Refining’s 100,000-bpd facility on the Houston Shipping Channel and flooding in Texas City, a home to many important refineries.

FN360

Source: Oil Price Information Service (OPIS)

Delek’s Tyler reﬁnery 29 31

ÂŠ 2014 Mansfield Energy Corp.

PADD 3 Gulf Coast

“ The rumored expansion

illustrates the refining community’s eagerness to leverage cost-advantaged crude from the nation’s booming oil fields against favorable refined product prices abroad. ”

ExxonMobil Rumored to Expand Beaumont Facility, Seizing Title of Top U.S. Refinery Processing more than 600,000 barrels a day, Motiva’s Port Arthur refinery holds the title of largest refinery in the nation; though it wasn’t until Motiva Enterprises LLC, a Royal Dutch Shell and Saudi Aramco joint venture, more than doubled the facility’s 285,000-bpd capacity through a $10 billion expansion in 2012. Now, Port Arthur faces a contender for the top spot. At the end of July, ExxonMobil announced plans to add a third crude distillation unit (CDU) at its 365,000-bpd Beaumont, TX refinery, which would roughly double its daily capacity and seize the No.1 spot from Motiva’s Port Arthur refinery by 2020. As part of the facility’s expansion, four coking unit drums would be replaced next year followed with two new drums in 2017. So, why is Exxon pumping billions into refinery expansions with domestic diesel demand flat and gasoline consumption on the decline? The rumored expansion illustrates the refining community’s eagerness to leverage cost-advantaged crude from the nation’s booming oil fields against favorable refined product prices abroad. In the last five years alone, refined product exports nearly doubled and, so long as federal legislation prevents the export of crude oil, refiners along the coast will continue increasing production capacity in the pursuit of substantial profits.

U.S. Finished Petroleum Product Exports

(Million Barrels a Day)

FN360

Source: Energy Information Administration (EIA)

31 33

PADD 4 Rocky Mountain

PADD 4 Diesel Wholesale vs. DOE Retail

FN360o Source: Energy Information Administration (EIA)

Long Lines in Denver “ Carriers reported lines

with wait times ranging from 2 to 6 hour long for several weeks until pipeline operations were fully restored.”

July and August proved challenging for consumers in the Rockies. First, operational disruptions suffered by Sinclair, Holly, and Suncor limited gasoline supplies. Then, the Magellan pipeline leading south from Denver into the Fountain/Colorado Springs area shut down; causing intermittent local supply issues and abnormally long lines at the terminals in Denver as a secondary supply source. Carriers reported lines with wait times ranging from 2 to 6 hour long for several weeks until pipeline operations were fully restored.

PADD 4 Refinery Yields Changing? Refiners often tweak units and crude slates to produce greater volumes of more profitable products. For instance, the Department of Energy reports a 4.5-percent increase in refiners’ distillate yields over the last 8 years while sacrificing small percentages of gasoline (1.2%), jet fuel (0.3%), and other petroleum products (2.6%). So, it’s interesting to note refiners in Padd 4 produced a higher yield of distillates in the third quarter —up as much as 5 percent on a 12-month rolling average since 2007— . yet, the price for retail distillate products in Padd 4 increased more than 43 percent in the last seven years while the national average increased by only 36 percent. 34

“ Reﬁners often tweak units and crude slates to produce greater volumes of more proﬁtable products.”

PADD 5 West Coast, AK, HI

PADD 5 Diesel Wholesale vs. DOE Retail

FN360o Source: Energy Information Administration (EIA)

California Cap-and-Trade Update “ Ultimately, the state’s regulatory changes could impact index spreads, government contracts, and the balance of supply all the way down to the end user.”

Not often do you witness the implementation of a tax-like regulation capable of dramatically affecting both the short and long-term supply balance within a region, but California is about to do just that with the upcoming changes to their highly-debated Cap-and-Trade program. In short, regulatory changes will require the redemption of carbon allowances to offset onroad consumption of gas and diesel products. Based on regulatory guidance provided by the California Air Resources Board (CARB), state-run auctions for carbon allowances promise to add between 10 and 40 cents to each gallon of reﬁned product sold across the state’s wholesale racks. The addition will either be hidden in the cost per gallon or appear as a separate line item on customer invoices. Wholesalers in California could potentially remain divided on the issue; adding confusion to index pricing. Ultimately, the state’s regulatory changes could impact index spreads, government contracts, and the balance of supply all the way down to the end user. 36

Since both imported and domestically-produced products sold across California racks will be on the Cap-and-Trade hook, lawmakers have actually incentivized California refiners to produce EPA-spec products for sale outside of the state. How is this? Since the obligation applies to transactions at the wholesale rack and not the refinery gate, producers may circumvent the fee by exporting refined products to lessdisadvantaged markets. So, the question becomes “how much regulation will refiners suffer before the California market is considered too high maintenance for their margins?” This question could lead to a dramatic 2015 for consumers in the state. Visit fuelsnews.com for updates as we will continue to monitor and update our readers throughout the implementation process.

PADD 5 West Coast, Diesel Prices Spike throughout the Pacific Northwest AK, HI Pacific Northwest Diesel Basis (Dollars per Gallon)

Consumers in the Pacific Northwest witnessed dramatic price spikes in late August due to product shortages and refinery issues. While a diesel price increase at this time of year is not unheard of, prices seen in the latter half of the quarter far exceeded any seasonal shift as basis peaked above 40 cents a gallon in the first week of September.

Prices in the region had been elevated since FN360 mid-August after Shell’s 100,000-bpd refinery Source: Oil Price Information Services (OPIS) in Scotford, Alberta suffered an operational disruption and Northwest product was redirected to alleviate product outages. Less than a month later, Shell’s 149,000-bpd Puget Sound refinery in Anacortes, WA experienced issues of its own, halting operations, tightening supply further, and resulting in the highest product prices in the nation for nearly three weeks. By mid-September, Shell had restarted the Washington refinery and prices returned to their regularly scheduled basis. o

Shell’s Puget Sound reﬁnery in Anacortes, WA

Canada

Canadian Airlines Gear up to Combat Higher Taxes Airline operators in Ontario spoke out this quarter against a proposed tax rate hike which, when fully implemented in 2017, will cost consumers millions of dollars each year and arguably divert business away from the region’s growing airports. Ben Smith of Air Canada calls the increase “punitive” in nature, claiming his company would pay more than C$50 million each year at the tax’s 6.7-cent per liter height. Until now, the 2.7-cent per liter tax was endured while other provinces, such as British Columbia, New Brunswick, Alberta, Quebec, and Saskatchewan, eliminated their fuel taxes entirely. Other airlines have already announced their decision to operate flights out of cheaper American terminals. Sunwing, for instance, claims at least two of its flights will shift from Ontario airports to Buffalo, NY if the budget goes through. Legislators can’t blame them, however, since they’d be following their clients rather than leading them. According to the National Airlines Council of Canada, between 292,700 and 407,800 travelers will choose airports across the border in an effort to control costs; taking with them nearly 3,000 full-time jobs. Sousie Heath, a spokesman for Finance Minister Charles Sousa, suggests the 148-percent rate increase is modest, costing consumers as little as a few dollars, while generating significant revenues towards improving infrastructure. Sousa’s office also points out the current 2.7cent rate has remained unchanged for 22 years, implying the rate is out of touch with today’s economy. Voters will ultimately cast their ballots on the matter as they reach for their wallets and decide how far they’ll go to save a buck. 38

Canada Enbridge Skirts Administrative Review While Increasing Deliveries to Midwest Refiners More crude from Alberta’s oil sands region is expected to move into the Midwest before the end of September. Enbridge Inc., Canada’s largest pipeline company, will increase its shipments into the region while avoiding an administrative review —similar to those surrounding the Keystone XL— by switching pipelines before deliveries cross the U.S. border. The State Department conﬁrmed Enbridge could construct a link between the Alberta Clipper line and the adjacent Line 3 under existing permits.

The company hopes to boost production from its existing 450,000-bpd Alberta Clipper line to more than 570,000 bpd with the temporary Line 3 solution. The plan proposes crude be transitioned into the Line 3 pipeline in Gretna, Manitoba —1.5 miles north of the U.S. border— before returning to the Alberta Clipper line 16 miles south of the border. A U.S. presidential permit would not be required since the combined volume of the two lines remain within limits set by currently existing permits. An additional expansion project, which is still under review by the State Department, would subsequently increase the ﬂow of crude via the Alberta Clipper pipeline to more 800,000 bpd.

“ With several projects under construction and two more slated to begin operations in the fourth quarter of this year, supporters of the cellulosic biofuel industry still hope to meet the EPA’s goal of generating 17 million gallons of cellulosic fuel before the end of 2014.”

Alternative Fuels Renewables

Ears of Energy Plant-based fuels have been at the center of a food-versus-fuel debate since Time Magazine reported in 2007 approximately a quarter of all corn harvested wound up in fuel tanks as ethanol. Technological breakthroughs, however, now pave the way to processing unwanted corn waste into transportation fuel, sparing the delicious parts for you and your family.

Quad County Corn Processors also held an official grand opening for its cellulosic ethanol plant in Galva, Iowa this quarter after operations at the two-million-gallon-a-year facility began in July. With several projects under construction and two more slated to begin operations in the fourth quarter of this year, supporters of the cellulosic biofuel industry still hope to meet the EPA’s goal of generating 17 million gallons of cellulosic fuel before the end of 2014. While the industry currently sports several financial flops, those plants often rely on woody biomass and struggle to compete with food-based biofuels. Examples include KiOR’s failing Columbus, MS plant which, despite significant financial backing, halted operations at the start of the year. Other plants processing agricultural waste may have proven successful, but high transportation costs of feedstocks and challenges with storage often eat into profitability.

Courtesy of POET-DSM, Project Liberty

Early this September, POET-DSM hosted the grand opening of “Project LIBERTY,” the ﬁrst commercial cellulosic ethanol plant in the state of Iowa, which will produce 20 million gallons of cellulosic ethanol annually while consuming an estimated 770 tons of corn cobs, leaves, husks, and stalks each day. Strategically located in the heart of the Corn Belt, Project LIBERTY receives its feed stocks from local farmers at an average price of $70 per dry ton.

So, it’s no surprise cellulosic plants are cropping up in the Corn Belt as agricultural waste in the region can be found in abundance and at signiﬁcant discounts. Crop prices have also fallen to fouryear lows as the industry prepares for record-high yields this year and farmers are eager to supplement their income.

Renewables Update: Renewable Fuel Standard (RFS) Toward the end of last year, the Environmental Protection Agency (EPA) released a proposed amendment to the 2014 Renewable Fuel Standard (RFS), reducing Renewable Volume Obligations (RVOs) and sending renewable fuels advocates into a frenzy. The ensuing public outcry along with endless responses, letters to President Obama, and marketing campaigns showed overwhelming support for the industry. In the end, EPA Administrator Gina McCarthy announced the ﬁnal 2014 targets will differ from the initial proposal, but left industry participants and supporters with no clear guidance.

“ In the end, EPA EPA’s Gina McCarthy

Administrator Gina McCarthy announced the ﬁnal 2014 targets will differ from the initial proposal, but left industry participants and supporters with no clear guidance.”

The Office of Management and Budget (OMB) received the EPA’s final targets in late August and meetings between the OMB, EPA, DOE, and USDA have since begun. The OMB also held discussions with renewable fuels stakeholders and petroleum interests. While the wheels are in motion, many suggest the final rule will be held until after the November elections. Based on the EPA’s initial proposal and current production rates, there will be an excess of 2014 RINs in the marketplace at the end of this year. Analysts suggest obligated parties are encouraging RIN generation beyond the EPA’s proposal in anticipation of an increase in the ruling. The severe delay in the 2014 RFS will likely postpone the release of the 2015 proposal. Legislation dictates that the EPA produce the following year’s final RFS targets by November 30th of the previous year, but 2014 clearly missed the mark. Considering the EPA expects to publish the 2015 RFS proposal in February 2015, next year’s final rule will likely prove equally overdue. As a result, consumers should expect a sharp rise in biodiesel prices following the EPA’s final ruling in the fourth quarter; particularly if the $1 blenders’ credit returns. The chart below illustrates a similar effect as the 2013 RFS and blenders’ credit expired with the start of 2014. On January 1st, the market should return to what we’d consider “normal” pricing by this year’s standard as the RFS expires and we start the waiting game all over again.

Wholesale BioDiesel Values

(Dollars per Gallon)

FN360

Source: Oil Price Information Services (OPIS) 42

Renewables RINformation Earlier this year, the Environmental Protection Agency (EPA) released the final rule for a Quality Assurance Program (QAP), ensuring the validity of Renewable Identification Numbers (RINs) under the Renewable Fuel Standard (RFS). Although voluntary, the rigorous auditing process and resulting designation as a QAP-certified RIN should encourage all legitimate suppliers to participate; providing buyers a yet-unseen level of security amidst a string of fraud allegations. Initially, the program named two tiers of QAP RINs: QAP-A and QAP-B, with B acting as a less controlled RIN. However, starting January 1st, 2015, there will be only one QAP option: Q-RINs. With the adoption of the quality program, the EPA recently announced an updated version of the EPA Moderated Transaction System, known as EMTS version 3.2, will be released at the start of the fourth quarter for the generation of Q-RINs. Version 3.2 permits QAP auditors to label and identify Q-RINs; yet another method for RIN buyers to authenticate a producer’s RINs. Experts expect Q-RINs to trade at a premium to “unverified RINs,” but consumers should expect added volatility during the launch. In July and August, RIN values ranged between 50 and 60 cents per RIN, with prices tapering at the start of September. Despite the weaker RIN market, biodiesel RINs retained a 3 to 4-cent premium over ethanol RINs in the third quarter. 2015 biodiesel RINs experienced light trading as well, holding close to 2014 values.

2014 RIN Values

(Dollars in RIN Gallon)

FN360o Source: Oil Price Information Services (OPIS) 43

? What is a RIN? A Renewable Identification Number (or RIN) is a serial number assigned to a batch of biofuel for the purpose of tracking its production, use, and trading as required by the United States Environmental Protection Agency's Renewable Fuel Standard (RFS) implemented according to the Energy Policy Act of 2005.

Natural Gas Domestic Natural Gas Supply The Energy Information Administration (EIA) expects natural gas production to grow at an annual rate of 5.3 percent in 2014 and 2.1 percent in 2015. The Marcellus shale contributes a heavily to current growth and resulting net ﬂow of gas out of the Northeast. Unfortunately, the increasing volume of natural gas far surpasses current infrastructure in many of the nation’s most populated regions. However, several pipeline operators expressed interest to expand or improve these networks in the third quarter. Eventual expansions should result in the “debottlenecking” of valuable natural resources and alleviate some of the price discrepancies we currently see across regional markets. Imports are expected to decline as domestic production supplants more expensive products from Canada. Further, LNG imports proved negligible in recent years as only New England’s most extreme winter pricing could compete with Europe and Asia for such molecules. Conversely, the ﬁrst of several planned U.S. LNG export terminals, Sabine Pass, is expected to come online in late 2015 or early 2016. Cheniere’s Sabine Pass, located in Louisiana, was originally completed in 2008 as an LNG import terminal, but construction is currently underway to enable it to export up to 2.76 billion cubic feet per day (bcf/d) once fully operational.

increasing volume of natural gas far surpasses current infrastructure in many of the nation’s most populated regions.”

U.S. Natural Gas Production and Imports

U.S. Natural Gas Production and Imports (Billion cubic feet per day)

(Bcf/d)

annual change (Bcf/d) 7 6 5 4 3 2 1 0 -1 -2

78 76 74 72 70 68 66 64 62 60

2012

2013

2014

2015

Federal Gulf of Mexico production (right axis)

U.S. non-Gulf of Mexico production (right axis)

U.S. net imports (right axis)

Total marketed production (left axis)

Marketed production forecast (left axis)

FN360

Source: Energy Information Administration (EIA) Short-Term Energy Outlook, Sept. 2014 Source: Short-Term Energy Outlook, September 2014.

“ Unfortunately, the

Natural Gas Domestic Natural Gas Demand The EIA expects U.S. natural gas consumption to average 72.6 bcf/d in 2014, a 1.8-percent increase over 2013 figures, while 2015 presents a modest 0.2-percent growth rate as lower residential and commercial demand offset increases in industrial and electric demand, as shown below. Most significantly, power sector demand should increase to an average of 22.8 bcf/d in 2015 as gas-fired generation replaces aging coal and nuclear plants.

Consumers in the Northeast should be particularly wary of this shift as many of the retiring facilities contribute heavily to the Northeastern power grid. Making matters worse, the existing distribution network failed to adequately support the region’s demand this past winter and pipeline operators are having a difﬁcult time gaining approval for new construction or expansion of existing pipeline projects. Without the necessary improvements, how can the industry hope to support the increased demand of new power plants without leading to pricing spikes, as they did in February?

U.S. Natural Gas Consumption (Billion cubic feet per day) (Bcf/d)

annual change (Bcf/d) 8 7 6 5 4 3 2 1 0 -1 -2 -3

110 100 90 80 70 60 50 40 30 20 10 0 2012

2013

Electric power (right axis) Industrial (right axis) Total consumption (left axis)

2014

2015

Residential and comm. (right axis) Other (right axis) Consumption forecast (left axis)

FN360o

Source: Energy Information Administration (EIA) Short-Term Energy Outlook, Sept. 2014

Source: Short-Term Energy Outlook, September 2014.

Natural Gas

“ Luckily, a mild summer translated to

greater-than-normal inventory builds, since more than a quarter of the nation’s electricity starts as natural gas and consumption for electric power generation fell nearly 8 percent since the third quarter of last year.”

Domestic Natural Gas Inventories The EIA estimates working gas in storage at 2,801 bcf, as of September 5, 2014, which is 463 bcf below the 5-year average for this time of year. While seemingly signiﬁcant, the shortfall is less than half the storage deﬁcit experienced in March of this year, illustrated below. Luckily, a mild summer translated to greater-than-normal inventory builds, since more than a quarter of the nation’s electricity starts as natural gas and consumption for electric power generation fell nearly 8 percent since the third quarter of last year. As a result, the EIA reported a record nine weeks of 100+ bcf builds this injection season.

Working Gas in Underground Storage Compared with the 5-Year Maximum and Minimum (Billion cubic feet) (Bcf/d)

5-year average

Lower 48

5-year maximum - minimum range

FN360

Source: Energy Information Administration (EIA)

Natural Gas Domestic Natural Gas Prices As shown below, natural gas prices fell precipitously in the third quarter. The NYMEX prompt contract found support around $3.80 per million British thermal units (mmBtu) toward the end of July and has since remained range-bound. The October 2014 NYMEX contract currently trades at $3.96/mmBtu after bouncing off support and meeting resistance just above $4.00/mmBtu. Henry Hub Natural Gas Price

Henry Hub Natural Gas Price

dollars per million Btu

“ Although no one wants to

12 10

boldly predict anything close to last winter’s polar vortex, the majority of prognosticators anticipate another year of belownormal temperatures this winter relative to the 10-year and 30-year averages.”

8 6 4 2 0 Jan 2013

Jul 2013

Jan 2014

Jul 2014

Historical spot price STEO forecast price NYMEX futures price 95% NYMEX futures upper confidence interval 95% NYMEX futures lower confidence interval

Jan 2015

Jul 2015

Note: Confidence interval derived from options market information for the 5 trading days ending Sept. 4, 2014. Intervals not calculated for months with sparse trading in near-the-money options contracts.

FN360

Source: Energy Information Administration (EIA) Short-Term Energy Outlook, Sept. 2014

Meteorologists are beginning to share their winter 2014/15 forecasts and the “trend is your friend” mentality has been the rule, not the exception. Although no one wants to boldly predict anything close to last winter’s polar vortex, the majority of prognosticators anticipate another year of below-normal temperatures this winter relative to the 10-year and 30-year averages. Sufﬁce to say, cash price volatility should accompany any weather extremes.

Natural Gas Joint Venture Promises Marcellus/Utica Shale Gas to Southeast Markets Dubbed Atlantic Coast Pipeline LLC, Dominion Resources revealed plans in the ﬁrst week of September for a four-way joint venture between several of the Southeast’s largest natural gas companies. Why? To construct and operate a 550-mile pipeline capable of transporting 1.5 billion cubic feet of natural gas each day from within West Virginia shale formations to energy starved markets in Virginia and North Carolina.

Atlantic Coast Pipeline Clarksburg Harrison Co.

West Virginia

Upshur Co.

Washington R

Randolph Co.

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190

Buckingham Co. Cumberland Co. er 200 A

210 Prince Edward Co.

Roanoke

Richmond

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220230 240

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Dinwiddie Co.

R oanok

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260

X Y Z

Virginia

270

R iv

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290

Greensville Co.

North Carolina

Halifax Co.

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280

Brunswick Co.

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330

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340

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350 Raleigh

Deep

360

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Wilson Co.

370

Johnston Co.

380

390 400

420 430 440

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460

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Dominion and North Carolina-based Duke Energy Corp. retain the lion’s share of the partnership —controlling 85 percent between the two— while Charlotte-based Piedmont Natural Gas and Atlanta’s AGL Resources control 10 and 5 percent, respectively. Expected to cost $4.5 to $5 billion, Dominion will construct and operate the pipeline while the other partners consume or resell natural gas supplies.

Sou

Nelson Co.

iver es R am

Touting some of the nation’s highest natural gas prices, residents in North Carolina and Virginia pay roughly 20 percent more for their natural gas supplies than the average American. Unlike the Colonial and Plantation pipelines, which transport reﬁned petroleum products in relatively close proximity to coast markets, the East’s predominant source of natural gas originates in Texas and bisects the region; leaving coastal markets several hundred miles from the main trunk line traveling through western Tennessee and Kentucky. By increasing access to cost-advantaged resources trapped in the Marcellus and Utica shale formations, residents could experience some amount of relief after the pipeline’s completion in 2018.

iv e r Matt a

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Study Corridor Lateral Dominion Existing Pipelines

Atlantic Coast Pipeline General Location Map

FILE: M:\Clients\D-F\DOM\SRPP\_ArcGIS\Unpathed\Gas_Marketing_Brochure\20140722\_DOM_SEP_Genloc_GMB_Legal_Title_Block.mxd, REVISED: 08/29/2014, SCALE: 1:2,200,587 when printed at 11x17

Miles

ÂŠ 2014 Mansfield Energy Corp.

Transportation & Logistics The American Trucking Association (ATA) reported near-record demand for truck tonnage in the third quarter as the favorable economic environment resulted in tighter capacity and greater demand for trucking assets. July produced a 3.6-percent increase over June’s report of 2.3 percent, which was a 0.8-percent decline from the previous month. Growth is expected to continue through the end of the year; though modestly compared to last year’s advance, which was the strongest growth the industry had seen in 15 years. Class 8 truck retail sales continued their torrid pace, jumping 22.5 percent in July to nearly surpass June as the annual high. Recent months produced some of the highest sales increases since the buying boom of 2006. Industry analysts expect the market to stay strong into next year, driven by replacement demand for more efﬁcient and fuel-friendly trucks. Hours of service issues remained in the forefront this quarter as the 34-hour restart provision took center stage during July’s Senate Safety hearing on truck safety. According to Anne Ferro, chief of the Federal Motor Carrier Safety Administration (FMCSA), 400 lives will be saved each year so long as legislation requires drivers to rest for two periods between 1 a.m. and 5 a.m. during their 34-hour restart and limit restarts to once a week. Numerous senators requested the rule be suspended while the FMCSA studies its impact on safety due to the high number of trucks taken off the road during early morning hours for compliance sake. Ferro believes the additional trucks on the road during these early hours would prove insigniﬁcant and, since the provision has been in effect for only a year, rolling it back temporarily would have a detrimental effect on safety. The Senate approved (81-13) to keep the Highway Trust Fund solvent through next May; ensuring states receive necessary funds for highway projects over the next 10 months. Many states 50

feared cutbacks and their impact on reimbursement for projects already completed. The Department of Transportation was preparing to implement a cash management program before legislators reached a decision. Several voted “no,” viewing the provision as a short-term fix and a legislative failure to address the nation’s long-term highway needs. The FMSCA announced planned studies measuring the relationship between safety and driver pay. The studies address concerns for drivers forced into unsafe situations because they are not compensated while waiting to load or unload. The FMCSA argues safety would be significantly increased if drivers were compensated for all time on the clock. Drivers currently paid by the mile are particularly susceptible to these circumstances. Pending legislation, championed by the Obama administration, would require carriers to pay drivers the federal minimum wage while they wait to be loaded or unloaded. The agency also intends to “analyze the possible unintended consequences of the various methods by which commercial drivers are compensated. “ The agency will obtain data by randomly selecting carriers to participate in an online questionnaire. Numerous trucking trade associations petitioned Transportation Secretary Anthony Foxx to stop the FMCSA from publishing the individual safety scores of motor carriers online. As a part of CSA, the Compliance, Safety, Accountability program managed by FMCSA, the Safety Measurement System has been the subject of significant controversy; particularly since the U.S. Government Accountability Office (GAO) reported significant statistical issues with the data behind the scoring. While Secretary Foxx’s office has yet to respond, the FMCSA stands behind their program, stating that by providing the data to the public, the SMS program improved overall safety. The trucking associations ask that the scores be removed while the FMCSA works to resolve the issues identified by the GAO.

Transportation & Logistics Railways Increase Shipment of Crude Oil despite Regulatory Changes Despite the safe delivery of more than 2.47 million carloads of hazardous materials in 2012 and a 91-percent decline in hazmat related accidents along the railroad since 1980, several high-profile accidents drove North American lawmakers to adopt stricter policies in the handling of volatile cargo, such as crude oil and ethanol. In late July, U.S. Transportation Secretary Anthony Foxx proposed regulations requiring roughly one-third of the nation’s railcar fleet be phased out over the next two years. According to the Association of American Railroads (AAR), the affected DOT-111 model represents more than two-thirds of the industry’s 335,000-car active fleet, but only 92,000 of those cars are currently hauling flammable liquids. Of those 92,000, approximately 14,000 meet the industry’s latest safety standards. By August, the U.S. Department of Transportation published their proposal for long-term changes to the way in which railways handle crude oil shipments. Studies found crude oil extracted from tight shale formations in the Bakken region exhibited greater volatility than traditional crude stocks, increasing the likelihood of

“ Reﬁners along the East Coast

catastrophic failure in older railcar models. Consequently, railroads voluntarily reduced their speeds and improved equipment inspections ahead of federal regulations requiring upgrades to existing models. As the industry phases out older cars to comply with stricter equipment standards, trains hauling non-compliant cars filled with crude or ethanol will reduce their speed to less than 40 miles an hour — a 20-percent reduction from the national standard. This is expected to extend lead times, decreasing railcar availability, increasing delivery costs, and reducing cost advantages for refiners. Refiners along the East Coast will likely feel the greatest impact in the form of crude shipment delays and rate hikes, as cost-advantaged crude from the Western United States and Canada must travel by rail before reaching their facilities. Consumers may actually feel the pinch twice as ethanol shipments for E10 gasoline are impacted, as well. Earlier this year, we witnessed historically high ethanol prices thanks to slower railcar turns. While those issues eventually resolved themselves, this may prove slightly more permanent.

Average weekly U.S. rail carloads of crude oil and petroleum products Number of rail carloads per week

will likely feel the greatest impact in the form of crude shipment delays and rate hikes, as cost-advantaged crude from the Western United States and Canada must travel by rail before reaching their facilities.”

Million barrels per day

FN360

Source: Energy Information Administration (EIA) 51

Diesel Exhaust Fluid (DEF) U.S. Gulf Coast NOLA Barge Urea

(Dollars per Short Ton)

FN360

Source: GreenMarkets

DEF Near-term Outlook Prices for North American urea, the key component in the manufacture of Diesel Exhaust Fluid (DEF), stabilized during August and September. Prices remained in a weekly range of $340 to $365 per short ton (st) since early August and during recent weeks the pricing range narrowed to between $345 and $355/st. Expect prices to settle in the $330 to $340/st range as we head into the fourth quarter of 2014. The NOLA urea forward curve shows trading in a tight range of $330 to $335/st for November and December contracts. The Chinese export window for prilled urea closes on November 1st, at which time additional export duties are reapplied to prilled urea exported from China. We expect this to lend additional support to the North American urea pricing. At the same time, Pakistan and India will likely be signiďŹ cant buyers from the Chinese. As such, it is likely that $330 to $340/st will be a bottom for the NOLA index, which is based on the price per short ton of prilled urea delivered into New Orleans.

DEF Longer-term Outlook (2015+) The North American DEF urea market remains short of supply capacity with domestic producers supplying roughly half of the existing DEF urea demand. At the same time, DEF demand is forecasted to grow 30 percent annually through 2020 as additional on and off-road SCR-equipped vehicles enter the market. While domestic producers will continue to expand plant capacity and new North American plant constructions are planned (e.g., CHS and Yara/BASF), we believe the North American market will remain short supply for the next 3 to 5 years. Consequently, we expect the annual cyclical cost curve to gradually increase in year-over-year urea and DEF supply cost, barring any major disruptions or anomalies in the global ammonia and urea markets, which could drive North American DEF supply costs higher. 52

ÂŠ 2014 Mansfield Energy Corp.

Mansﬁeld’s National Supply Team Mansfield’s supply team brings unique experience and industry expertise to the table. From contract pricing and hedging to trading of fuel, renewables and alternatives such as CNG and LNG, the Mansfield supply team covers the gamut of knowledge that is required to manage today’s complex national fuel supply chain. Although they work as a national team, each member’s regional focus enables Mansfield to deliver geographic based supply solutions by more efficiently managing market specific refining, shipping and terminal/assets.

Andy Milton VP of Supply & Distribution Andy heads the supply group for Mansfield and during his tenure the company has grown from 1.3 billion gallons to over 2.5 billion gallons per year. Andy’s industry experience spans all aspects of the fuel supply business from truck dispatch, analytics, and index pricing to hedging and bulk purchasing. Prior to Mansfield, Andy worked at RaceTrac Petroleum. Andy’s expertise in purchasing via pipeline, vessel, and the coordination via futures and options for hedging purchases enables him to successfully lead a team of experienced and motivated supply personnel at Mansfield. Andy’s team handles a wide geographic area of all 50 states and Canada, including all gasoline products, ULSD, kerosene, Heating Oil, biodiesel, Ethanol, and Natural Gas. Andy’s education began at Young Harris College and later at Georgia Southern University where he received a BS in Sports Management.

Dan Luther Manager of Supply & Distribution Dan is responsible for purchasing, hedging, and the distribution of natural gas and renewable fuels. Before joining Mansﬁeld, Dan was Director of Operations at Aska Energy and also worked at RaceTrac Petroleum, where he helped manage all barge, rail, and truck fuel deliveries before assuming ethanol trading responsibilities, including purchasing product to fulﬁll RaceTrac’s demand while trading product across other U.S. markets. Dan holds a BSBA in Supply Chain Management and Marketing from Ohio State University and is currently working towards his MBA at Georgia Tech.

Evan Smiles Northeast Supply Supervisor Evan began his career with Mansﬁeld as an intern in the supply department back in the winter of 2011, assisting in the Southeast region. Evan quickly advanced into the role of Northeast Supply Optimization Analyst and currently holds the position of Northeast Supply Supervisor, handling various tasks including supply bids, day deal purchasing, long haul analysis, contract negotiations/fulﬁllment and supply optimization. Evan earned a BS in Sports Management and BBA in Finance from the University of Georgia.

Mansfield’s National Supply Team Jessica Phillips Renewable Supply & Distribution Supervisor Jessica is based out of Houston, TX and is responsible for nationwide purchasing, hedging, and the distribution of renewable fuels. Joining the Mansfield team in 2009, she has held multiple titles over the years: Contracts Coordinator, Regional Supply Analyst, Senior Strategic Supply Analyst, and as of late, Renewables Supply Supervisor. Jessica has a strong background in refined products scheduling, contracts, optimization and market analysis and is driven to continue to expand her knowledge in renewable and alternative fuels.

Chris Carter Southeast Supply Manager Chris serves as the Southeast Supply Manager responsible for reﬁned product purchases including contracts, day deals and rack purchases. The Southeast region covers Florida, Georgia, Mississippi, Alabama, Tennessee, South Carolina, North Carolina, Virginia and Maryland. His responsibilities also include supply contracts and current bids. Chris manages pipeline shipments of gas and diesel on the Colonial, Plantation and Central Florida Pipelines. Chris joined Mansﬁeld in 2009 as a Supply Optimization Analyst and earned his BA in Business Management from North Georgia College and State University.

Nate Kovacevich Senior Supply Manager Before joining the company, Nate worked for Yocum Oil Company as a Senior Trader where his responsibilities included managing the company's reﬁned product and renewable fuels procurement, handling all hedging related activities, and providing risk management tools and strategies to help customers mitigate volatility and price risk. Nate previously worked for FCStone, where he performed commodity research and analysis for customers with agricultural and petroleum related risk, devised and implemented risk management programs and strategies, and executed futures and option orders on all the major exchanges as well as any OTC related transactions. Nate earned his BA in Entrepreneurship and Economics from the University of St. Thomas

Evan Poole Supply Support Manager Evan started his career with Mansﬁeld analyzing purchasing strategies and index behavior throughout the US and Canada. He’s the resident expert in Canadian reﬁned products and serves in an advisory capacity to the Canadian Supply team. Evan holds an MBA concentrated in Managerial Leadership from Piedmont College.

FUELSNews 360° M A RK ET N E WS & INFOR MATIO N

Mansfield Energy Corp. www.mansfieldoil.com www.fuelsnews.com 678.450.2000 1025 Airport Pkwy SW Gainesville, GA 30501 United States of America

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* Some of the information provided is owned and licensed by OPIS. In no event shall any user copy, modify, publish, retransmit or otherwise reproduce information from OPIS. Copyright 2014. All rights reserved. Disclaimer: The information contained herein is derived from sources believed to be reliable; however, this information is not guaranteed as to its accuracy or completeness. Furthermore, no responsibility is assumed for use of this material and no express or implied warranties or guarantees are made. This material and any view or comment expressed herein are provided for informational purposes only and should not be construed in any way as an inducement or recommendation to buy or sell products, commodity futures or options contract.

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