The Regulatory Tsunami Rich Trzupek Trinity Consultants, Inc.

“In 2010, total U. S. greenhouse gas emissions were 6,865 “In 2010, total U.S. greenhouse gas emissions were 6,865.5 Tg or million metric tons CO2 Eq. Total U.S. emissions have increased by 11.0 percent from 1990 to 2010…” Source: USEPA DRAFT INVENTORY OF U.S. GREENHOUSE GAS EMISSIONS AND SINKS: 1990 – 2010 – Executive Summary

“In 2010, total U. S. greenhouse gas emissions were 6,865 “In 2010, total U.S. greenhouse gas emissions were 6,865.5 Tg or million metric tons CO2 Eq. Total U.S. emissions have increased by 11.0 percent from 1990 to 2010…” Source: USEPA DRAFT INVENTORY OF U.S. GREENHOUSE GAS EMISSIONS AND SINKS: 1990 – 2010 – Executive Summary

GHG Reductions Continue Directly Targeted Regulations & Programs GHG Permitting & Limits Regional Programs Renewable Portfolio Standards Renewable Subsidies/Grants/Other Wastes of Money Indirectly Targeted Regulations Ambient Air Standards Industrial and Utility Boiler Rules Aggressive Enforcement

Coal BAD! Gas Good

GHG Permitting COAL RIP 300,000,000 BC to 2012 AD Targets plants with 100,000 tpy CO2e emissions or more Roughly a 10 MW coal plant or larger VERY small in power generation world Plants must use “Best Available Control Technology” to reduce GHG emissions Detailed guidance to permit authorities RIP COAL 300,000,000 BC to 2012 AD

GHG Limits COAL RIP You Kept Us Warm 1,000 lbs CO2e/MW Generated Combined cycle gas can do Coal can not EPA dances around Clean Air Act 30 year averaging! Ignores financial reality RIP COAL You Kept Us Warm

Regional Programs COAL RIP We Dead Dinos Regional Greenhouse Gas Initiative (East Coast) Trading Program – active since 2009 Midwest Greenhouse Gas Reduction Accord (Midwest) Western Climate Initiative (West Coast) More regional trading on the way? RIP COAL We Dead Dinos

Renewable Portfolio Standards

RPS Examples State RPS Target Target Year GHG Reduced (tpy) California 33% 2025 50,500,000 Illinois 25% 2026 37,800,000 Michigan 10% 2015 8,400,000 Ohio 27,000,000 Texas 7% 21,700,000

Why Subsidies? Solar Wind Cost Gas Coal Nuclear Reliability

Obama’s Energy Policy I’m bound to find a parachute somewhere….

New Ambient Air Regs. National Ambient Air Quality Standards (NAAQS) define “clean air” A moving target Keeps EPA, enviros and consultants in business Big projects must model to show compliance New short term Nitrogen Oxides (NOx) NAAQS VERY stringent Coal plants can’t meet New short term Sulfur Dioxide (SO2) NAAQS Compliance by modeling, NOT monitoring! Coal plants, refineries are targets

New Boiler Rules Boiler MACT Utility MACT Targets industrial boilers Stated goal: reduce toxic emissions Real goal: stick it to coal Unrealistic emissions limits Energy efficiency requirements Will hurt manufacturing Utility MACT Targets utility boilers Real goal: (see Boiler MACT) Both rules put EPA in the control room for first time

Enforcement Small coal boilers targeted too Option 1: switch to biomass Option 2: shut down Option 3: enforcement As rules pile on, enforcement opportunities grow Less environmental return BUT – keeps $ flowing in to EPA

Result 50 – 80 GW of Coal Plant Retirements over next ~5 years Natural Gas fired turbines to fill most of gap Solar/Wind can’t be base-loaded Natural Gas meets GHG standards Natural Gas plants can be built quickly Much more GHG reductions – 500,000,000 tons + Natural Gas VERY cheap now, but: Prices historically not as stable as coal Current glut will create demand Increased shale gas regulation can affect price Grid stability issues? Unlikely – cost certainty the bigger issue

Thank you!