Liquid Fuels Market Model of the National Energy Modeling System: Model Documentation 2013 December 2013 Independent Statistics & Analysis U.S. Department of Energy www.eia.gov Washington, DC 20585 This report was prepared by the U.S. Energy Information Administration (EIA), the statistical and analytical agency within the U.S. Department of Energy. By law, EIA’s data, analyses, and forecasts are independent of approval by any other officer or employee of the United States Government. The views in this report therefore should not be construed as representing those of the Department of Energy or other Federal agencies. U.S. Energy Information Administration | Liquid Fuel Market Model of the National Energy Modeling System i December 2013 Update Information This edition of the Liquid Fuels Market Model (LFMM) of the National Energy Modeling System—Model Documentation 2013 reflects changes made to the model over the past year for the Annual Energy Outlook 2013. These changes include: • Replaced Petroleum Market Model (PMM) • Updated most associated data files U.S. Energy Information Administration | Liquid Fuel Market Model of the National Energy Modeling System ii December 2013 Contents Update Information ...................................................................................................................................... ii Acronyms and Abbreviations ....................................................................................................................... vi Introduction .................................................................................................................................................. 1 Purpose of this report .............................................................................................................................. 1 Model summary ....................................................................................................................................... 1 Model archival citation ............................................................................................................................ 1 Organization of this report ...................................................................................................................... 1 Model Purpose .............................................................................................................................................. 2 Model objectives ..................................................................................................................................... 2 Relationship to other models .................................................................................................................. 3 Model Rationale ............................................................................................................................................ 5 Theoretical approach ............................................................................................................................... 5 Fundamental assumptions ...................................................................................................................... 5 Model Structure ............................................................................................................................................ 6 Main subroutines (refine.f, lfshell.gms)................................................................................................... 6 LP Preprocessing (lf_nem.gms, lfprep.gms) ............................................................................................ 7 Appendix A. Data and Outputs ..................................................................................................................... 9 Appendix B. Mathematical Description of Model....................................................................................... 15 Appendix C. Bibliography ............................................................................................................................ 20 Appendix D. Model Abstract ....................................................................................................................... 27 Appendix E. Data Quality ............................................................................................................................ 32 Appendix F. Estimation Methodologies ...................................................................................................... 35 Appendix G. Historical Data Processing ...................................................................................................... 70 Appendix H – Changing Structure of the Refining Industry ........................................................................ 80 U.S. Energy Information Administration | Liquid Fuel Market Model of the National Energy Modeling System iii December 2013 Tables Table A-1. Btu/bbl for gases lighter than propane ..................................................................................... 12 Table A-2. Btu/bbl for other streams .......................................................................................................... 12 Table A- 3. Excel files used to make LFMINPUT.GDX .................................................................................. 14 Table B-1. LP decision variables .................................................................................................................. 16 Table B-2. LP constraints ............................................................................................................................. 17 Table E-1. Sources of markup inputs .......................................................................................................... 33 Table F-1. Location multipliers for refinery construction ........................................................................... 37 Table F-2. State and Federal corporate income tax rates ........................................................................... 41 Table F-3. Location multipliers for refinery operating labor ...................................................................... 47 Table F-4. Capital-related fixed operating cost multipliers ........................................................................ 48 Table F-5. NGPL fractionation fractions ...................................................................................................... 49 Table F-6. Data series from federal tax table (CSeds_Fedtax) .................................................................... 52 Table F-7. Data identification codes ........................................................................................................... 52 Table F-8. Gasoline specification ................................................................................................................ 55 Table F-9. EPA diesel fuel sulfur Limits ....................................................................................................... 56 Table F-10. Screenshot of spreadsheet for estimation of diesel market shares ........................................ 57 Table F-11. Distillate consumption distribution .......................................................................................... 58 Table F-12. North American Crude Oil Distribution (NACOD) regions and NEMS Census Divisions .......... 59 Table F-13. Petroleum product pipeline capacities and tariffs ................................................................... 60 Table F-14. LPG/NGL pipeline capacities and tariffs ................................................................................... 60 Table F-15. Available virgin feedstock (soybean oil, cotton seed oil, sunflower oil, canola oil) ................. 63 Table F-16. Lag year factors for relating soyoil price to corn price ............................................................ 63 Table F-17. EISA2007 RFS schedule ............................................................................................................ 65 Table F-18. California LCFS carbon intensity targets .................................................................................. 67 Table F-19. Sample carbon intensities ........................................................................................................ 67 U.S. Energy Information Administration | Liquid Fuel Market Model of the National Energy Modeling System iv December 2013 Figures Figure 1. Liquid fuels production industry, with LFMM highlighted in red .................................................. 2 Figure G-1. Database linkages for historical data processing .................................................................... 70 Figure H-1. Liquid fuels production industry .............................................................................................. 81 Figure H-2. Mass-based overview of the U.S. liquids fuels production industry, AEO2012 LFMM case .... 82 Figure H-3. LFMM regions (PADDs and sub-PADDs) ................................................................................... 84 Figure H-4. RFS-mandated consumption of renewable fuels, 2009-2022 ................................................. 86 U.S. Energy Information Administration | Liquid Fuel Market Model of the National Energy Modeling System v December 2013 Acronyms and Abbreviations AEO EIA Annual Energy Outlook API American Petroleum Institute ASTM American Society of Testing Materials bbl Barrel bbl/cd Barrels Per Calendar Day Btu British thermal unit CARB