U.S. Coal Deposits ABUNDANT 800-year supply of coal – 25 billion tons of economically recoverable reserves Nationally, more than 200 years of economically recoverable coal reserves Lignite Subbituminous Bituminous Anthracite

Low-Cost Electricity 7-10 cents here versus 13-18 cents per kilowatt-hour in west / east coast. 25 cents in Hawaii.

Average Electricity Costs Price/Megawatt-Hour $25.30 LOW COST: Lignite-based plants are generally mine-mouth plants which eliminates transportation costs – we ship our “coal by wire”. Also the mines and plants have signed long-term agreements so aren’t subject to “spot pricing.” Source: Ventyx

Economic Impacts Economy and Employment: Over 15,000 jobs. 4,000 Direct Jobs at Mines and Plants 11,500 Indirect Jobs Average wages in Coal Country range from $51,119 to $76, 712.   $3.3 billion total business activity. Tax Revenues: Approximately $35 million in coal severance and conversion tax. $97.9 million in total tax revenues from lignite-related business.

Research and Development Over $1 billion invested over last decade to reduce emissions and improve efficiency. Lignite Research Fund

Industry Challenges Federal Regulation Clean Power Plan Stream Protection Rule Federal Production Tax Credit for Wind Historically-low Natural Gas Prices

Clean Power Plan Requires 45 percent reduction in carbon dioxide emissions from North Dakota’s existing fleet by 2030. Essentially requires 45 percent reduction in coal generation.

What’s Happening “Push back on misinformation. Speak up for the facts.” CPP Draft Rule EPA’s proposed CO2 regulation for existing power plants Estimated projected annual cost calculated by EPA and private analysts Projected temperature reduction by 2100 if EPA regulation is enacted - 0.032°F Projected maximum annual costs to consumers (billions) Average annual temperature (°F) NO GAIN ALL PAIN Source: NOAA National Climatic Data Center. Climate at A Glance. http://www.ncdc.noaa.gov/cag/ Baseline temperature is average 1995-2013 contiguous US annual average 53.24°F EPA Clean Power Plan Proposed Rule – Regulatory Impact Analysis. http://www2.epa.gov/carbon-pollution-standards/clean-power-plan-proposed-rule-regulatory-impact-analysis EPA Clean Power Plan: Costs and Impacts on U.S. Energy Markets. Energy Ventures Analysis, Inc. http://www.countoncoal.org/assets/Executive-Summary-EPA-Clean-Power-Plan-Costs-Impacts.pdf NERA Economic Consulting. Potential Energy Impacts of the EPA Proposed Clean Power Plan. NERA Economic Consulting. October 2014. http://www.nera.com/content/dam/nera/publications/2014/NERA_ACCCE_CPP_Final_10.17.2014.pdf (projected annual cost = 10-year EVA & NERA projected 202-2030l costs divided by 10) EPA leaves out the most vital number in their fact sheet. Paul Knappenberger & Patrick Michaels. Watts Up With That?. June 12, 2014. http://wattsupwiththat.com/2014/06/12/epa-leaves-out-the-most-vital-number-in-their-fact-sheet/

Stream Protection Rule Pending regulation from Office of Surface Mining (OSM) Industry estimates could strand approximately half of coal reserves at existing mines (600 million tons) $50 million annually in compliance No improvement in reclamation

Renewable Generation Over 2,100 megawatts (MW) of wind capacity already installed 400 additional MW approved by the PSC this year

What’s at Stake for North Dakota? Besides some of the lowest-cost electricity in the country, North Dakota’s coal-fired power plants provide 15,000 jobs, $3 billion in annual economic activity, and $100 million in tax revenues each year. Severance and Conversion tax revenue sharing is a significant source of revenue for counties in coal country. 70% of severance tax is returned to the counties in which the coal was produced. 15% of conversion tax is returned to the counties in which the coal was converted. Total Severance Tax Paid to Counties in 2014 $7,465,438 Counties General Fund $2,986,175 Schools $2,239,631 Cities Total Conversion Tax Paid to Counties in 2014 $5,715,346 $2,286,138 $1,714,604

Path Forward: Innovation To assure US grid reliability, affordability and environmental sustainability, we believe carbon solutions must include three things: Next generation solutions - Commercializing transformational technologies that enable the construction of new coal facilities Retrofit solutions – leveraging select existing coal facilities for CO2 capture retrofits CO2 sequestration solutions – EOR and geologic storage LEC member companies are working on all three: Next generation solutions - Most promising technology to-date for new plant construction with near zero emissions (full carbon capture) is the Allam Cycle. ALLETE subsidiaries BNI Energy and Minnesota Power are partnering with Basin Electric Cooperative to develop and demonstrate the Allam Cycle on ND lignite. Retrofit solutions – ALLETE subsidiary, ALLETE Clean Energy, and Minnkota Power Cooperative are spearheading project Tundra a project to capture carbon dioxide emissions from the Young Station. The project builds upon a project underway in Texas. Sequestration solutions – Dakota Gasification Company near Beulah has a long history of EOR sequestration dating back to the 19990’s. EERC has been leading PCOR partnership for CO2 storage solutions for the last decade and recently formed and is leading the Bakken EOR workgroup researching Bakken EOR solutions.

ND is Uniquely Positioned North Dakota is uniquely positioned to lead the R&D solutions that provide sustainable solid fuel options that are critical to our national security and global carbon reduction Research Capabilities - World class research capabilities at the EERC Geology – One of the world’s largest lignite coal resources adjacent to one of the world’s largest oil resources in the Williston Basin and huge saline aquifer geologic storage sinks CO2 Liability - Only state to have solved the legal aspects of CO2 liability Collaborative Partners - Collaborative industry partners with state of the art facilities and operating expertise Supportive State Policies - North Dakota is fully committed to environmentally sustainable carbon management solutions Growing electric loads in the state and region Bottom-line – Securing our Lignite Industry and preserving CO2 for enhanced oil recovery and sequestration is strategic to North Dakota. Continued public-private partnership will be needed.

Typical Technology Development Pathway & Funding Current Funding None Research Councils Incentives & Loan Guarantees Technology Research Technology Development Pilot Demonstration Commercial Demonstration Commercial Deployment Proposed Funding Basic Research Research Councils Advanced Technology Tax Incentives & Loan Guarantees Fundamental Research (1) Continue existing incentives and add anthropogenic CO2 incentive