Handbook for Analyzing the Costs and Benefits of Alternative Aviation Turbine Engine Fuels at Airports (2011)

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27 The main goals of this project were the development of a computational tool and a handbook to analyze the costs and benefits of using alternative fuels at airports. The handbook is organized according to the structure of AFIT. It describes inputs, outputs, and use and interpretation of the results. The AFIT tool is available on the CD-ROM that accompa- nies this report. The handbook can be loaded onto the user’s computer by clicking the help button on any screen of AFIT. The handbook describes the intent, purpose, limits, and gen- eral use of AFIT and offers sources of information potentially useful to the user. The handbook is designed to help airports, fuel suppliers, and other interested parties evaluate the costs and benefits of using an alternative jet fuel at an airport. The alternative fuels addressed in the handbook and tool are ULSJ and SPK. SPK includes Fischer-Tropsch fuels and hydroprocessed renewable jet fuel created from feedstocks such as algae and palm oils. 5.1 AFIT Use AFIT has been developed to estimate costs associated with the introduction of an alternative fuel and associated emis- sions reductions. AFIT does not provide a cost–benefit metric. Deciding whether to introduce an alternative fuel to a specific airport is a complex decision and is beyond the scope of this research and the AFIT software tool. It must also be noted that AFIT, in its present configuration, is only for analyzing alter- native jet and ground support equipment fuels and not for analyzing all fuels in use at airports, which may include com- pressed natural gas, biodiesel, propane, or electric power. The primary costs related to introduction of an alternative fuel are transportation and delivery to the airport. Typically, costs are captured in two stages of delivery. Off airport, which are the costs associated with delivering the fuel to the airport perimeter, and on airport, which are the costs of delivery to the airport fueling facilities as well as the GSE and aircraft wing. Costs unrelated to delivery are decommissioning—diesel handling and distribution equipment that is taken out of serv- ice where alternatives are used with GSE—and the avoided costs associated with a single fuel source and unnecessary diesel equipment. These costs are included to capture any costs an airport is likely to incur. Chapter 1 of the handbook lays the foundation for under- standing the intended cost–benefit analysis. It describes the key functions and parameters to be investigated, the limita- tions in data availability, eventual barriers, sources, and chal- lenges of information gathering. The handbook also discusses interrelations between parameters: fuel, airport landscape, weather conditions, and so on. It also introduces concepts that are inherent to a cost–benefit analysis but may be unfamiliar in aviation settings. The more accurate the analyst can be with input values, the more useful the outcome will be. For the convenience of users, AFIT has typical cost numbers included in a range that can be selected by the user. These costs are based on research during development of the tool and are intended to capture the typi- cal costs and range of costs associated with transportation and storage of fuels. The AFIT user should, however, understand that commodity prices vary by time, region, supplier, volume, and other factors, and the ranges provided may not reflect an individual airport’s circumstances. AFIT uses relatively simple, readily available data to quantify alternative fuel transportation and equipment modification costs. AFIT is a stand-alone application that runs on computers using the Windows operating system. Total fuel costs are deter- mined using inputs related to fuel use quantity, transportation sequence, and handling requirements. To determine environ- mental benefits, AFIT requires a baseline emissions inventory for the subject airport, created by FAA’s EDMS, as an input. AFIT produces a report enumerating the costs and potential savings that can come from using alternative jet fuel and sum- marizes changes to an airport’s emissions inventory. Additional details on using AFIT are presented in the handbook. C H A P T E R 5 About the Handbook

The user needs to be familiar with the airport’s current fuel usage, either annual or monthly, for both diesel and Jet A. The user also needs to be familiar with the price per gallon paid for each fuel. AFIT has default fuel price settings based on typical prices paid throughout the Unites States and averaged. Appendix B in the handbook also lists several sources for fuel information, which are described below. The user also has to determine whether the study is for alternative fuels to be run through existing equipment or whether the alternative fuel use is associated with a significant expansion to the airport where new construction will be required. The user also must select the type of alternative fuel to be considered in the study and should be familiar with types of fuel available and cost at the production facility. Familiarity with the current costs of fuel delivery will also be helpful. Storage, flowage, throughput, and other fuel handling per-gallon costs of existing fuels and those expected for the alternative fuel are also helpful. AFIT sup- plies default costs, but they are averaged from airports across the United States. Knowledge of the current GSE fleet and suppliers of parts and service will be needed to estimate change-out costs in those cases where modifications are necessary. Access to past construction estimates and project documents or current contact with construction companies and fuel supply vendors will improve the accuracy of esti- mates. Where the alternative fuel replaces diesel fuel, removal and decommission costs of the diesel system also need to be estimated. The final chapter of the handbook shows the user how to interpret the results of the analysis and presents additional con- siderations for the airport prior to deciding whether to imple- ment the alternative. Whether an airport would choose to adopt an alternative fuel depends on a multitude of factors. Cost and emission reduction numbers, as computed by AFIT, can give a sense of expected change in only two aspects of fuel use at airports. Cost and emission reduction numbers can give a sense of expected change in only two aspects of fuel use at airports. Other factors, such as supply availability, regulations, long- term sustainability, and broader regional environmental con- siderations must be weighed accordingly. AFIT is not intended to provide the user with a clear result to use or not use an alternative fuel. However, it will give some valuable information to estimate costs of adopting alternative fuels, in total or in cents per gallon, and will also provide esti- mates of the potential reduction in emissions one can expect given the equipment at an airport. As with any investment decision, costs and benefits are crucial components, but they should be considered in light of airport traffic forecasts, eco- nomic outlook, local and regional considerations, and options concerning financing and raising capital to undertake such a significant change. 5.2 Data References Some data needed for the fuel comparisons can be easily sourced. Other information, such as transportation costs (e.g., pipeline, truck, barge, and rail, and storage and blend- ing fees) depends on the facility and businesses involved. References for fuel information are illustrated below. The AFIT tool provides the typical cost range for the various han- dling fees. 5.2.1 Fuel 5.2.1.1 Gasoline and Diesel EIA gasoline and diesel prices: http://tonto.eia.doe.gov/dnav/pet/pet_pri_gnd_dcus_nus_ w.htm U.S. Gulf Coast No. 2 Diesel Low Sulfur Spot Price FOB (cents per gallon): http://tonto.eia.doe.gov/dnav/pet/hist/LeafHandler.ashx?n= PET&s=rdlusg&f=d IATA Jet Fuel Price Monitor: http://www.iata.org/whatwedo/economics/fuel_monitor/ index.htm ATA jet fuel price statistics: http://www.airlines.org/Energy/FuelCost/Pages/MonthlyJet FuelCostandConsumptionReport.aspx 5.2.1.2 Alternative Fuel Price Estimates at the Producer Many reports (e.g., Hileman et al., 2009) provide esti- mates of the economic costs of producing fuel, but these val- ues are from the viewpoint of the fuel producer. This should not be confused with the price that would be paid by a fuel consumer. The price paid by a consumer will be set by the prevailing market price for conventional jet fuel. Assuming that the fuel producer can create its alternative jet fuel at a cost that is less than the prevailing price of conventional jet fuel, it will sell it at the market price of conventional jet fuel to maximize profits. However, if the fuel producer and fuel buyer go into a long-term contract, then the fuel producer may sell its product at a discount to conventional jet fuel. Because of these issues, AFIT has a default assumption that the price of the alternative fuel is assumed to be the same as conventional jet fuel. 5.2.1.3 Transportation and Storage Costs These costs are not collected and posted conveniently on any single website. The cost ranges provided in AFIT were collected by reviewing financial filings, regulatory requirements, and other legal and non-legal documents and sources. Pipeline, 28

barge, truck, and rail costs vary widely depending on a multi- tude of factors. The Energy Information Administration (EIA) is a large repository of useful information and can be found at http://www.eia.doe.gov/. 5.2.1.4 New Diesel Fueling Station Costs Construction costs vary depending on region, project type, preexisting arrangements, and so on, but the RSMeans Building Construction Cost Data manual is an excellent source for the latest industry standards. The 2008 edition was used for this handbook. A 2010 version of the manual is now available. 5.2.1.5 Equipment Costs GSE equipment replacement costs vary widely depending on the equipment on site, its age and condition, onsite inven- tory, mechanical skill level of employees, and other factors. Fleet and equipment managers currently maintaining the equipment are likely the best source for cost data with the air- port’s current suppliers. 29