Clean Air Act Section 111(d) Indiana Energy Association September 11, 2014 Thomas W. Easterly, P.E., BCEE Commissioner IN Department of Environmental Management 1

President’s Climate Directives U.S. EPA directed to issue proposed carbon pollution restrictions for: –New power plants by September 20, 2013, 111(b). –Existing power plants by June 1, 2014, and finalize those restrictions by June 1, 2015, 111(d). States will be required to submit state plans under Section 111(d) of the Clean Air Act by June 30,

3 New Source Proposal—111(b) In September, 2013, U.S. EPA proposed New Source Performance Standards (NSPS) for Greenhouse Gas (GHG) Emissions for certain Electric Utility Generating Units (EGUs)—111(b). - Combined cycle gas turbines will meet the rule. -Coal fired units will not meet the rule without using carbon capture and storage.

4 New Source Proposal—111(b) Carbon Capture and Storage (CCS): −is not yet commercially available, −has not yet been demonstrated at commercial scale, and −is likely to be prohibitively expensive. Due to the increased energy used for CCS, the net greenhouse gas emissions per unit of useful energy produced from a coal fired plant using this technology and meeting the lower emission limits will likely be no lower than emissions from a modern plant without CCS.

5 Existing Source Proposal—111(d) In accordance with the President’s Climate Directive, on June 2, 2014, (June 1 was a Sunday) U.S. EPA Administrator McCarthy signed a proposed rule to reduce emissions from existing fossil fueled Electrical Generating Units (EGUs) starting in The proposed rule was actually published on June 18, 2014, at 79 FR Comments are due by October 16, 2014.

6 Existing Source Proposal—111(d) Each State has an individual carbon intensity goal developed from four “Building Blocks”: 1.Increase the thermal efficiency at coal fueled EGUs by 6%. 2.Increase utilization of natural gas combined cycle plants to 70%. 3.Increase zero carbon renewable generation. 4.Increase energy efficiency (load reduction). Choice of rate based or mass based regulations.

7 Existing Source Proposal—111(d) The proposed goal for Indiana is to reduce our net emissions from the 2012 level of 1,924 lb CO 2 /MWh to 1,607 lb CO 2 /MWh for the period 2020 to 2029 and 1,531 lb CO 2 /MWh after Goal is based upon: 1.Increase coal EGU efficiency by 6%. 2.Increase NGCC utilization from 53% to 70%. 3.Increase renewable energy generation to 7%. 4.Reduce energy demand by 3.2% by 2020 and 11.11% by 2030 through energy efficiency.

8 Existing Source Proposal—111(d) U.S. EPA estimates on a national level that: Coal production will decrease 25 to 27%, and the price of coal will decrease by 16 to 18% by Natural gas production will increase by 12 to 14% with a price increase of 9 to 12% by Renewable generation capacity will increase by 12 GW, NGCC capacity will increase by 20 to 22 GW. Coal generation capacity will decrease by GW, and oil generation capacity by 16 GW.

9 Existing Source Proposal—111(d) Annual incremental compliance costs of $5.5 to $7.5 billion in 2020 and $7.3 to $8.8 billion in Job increases of 25,900 to 28,000 in the electricity, coal and natural gas sectors by Job increases of 78,000 for demand-side energy efficiency by IDEM is currently evaluating both the feasibility and estimated cost of meeting U.S. EPA’s goals.

Indiana Carbon Dioxide Emission Rates (pounds of CO 2 per Megawatt Hour) 2012 BaselineU.S. EPA 2030 Goal Indiana 2030 Estimate 1,9241,5311,615 to 1,683 10

Impacts on Indiana This regulation will increase the costs of energy in the United States—both natural gas and electricity prices expected to rise by 10%--the impact on Hoosiers may be greater due to our current reliance on coal. The number of Hoosiers who lose utility services for non-payment is likely to increase. 11

Impacts on Indiana This increased cost of energy will likely reduce the international competitiveness of Hoosier businesses resulting in a shift of emissions from Indiana to other countries. The worldwide greenhouse gas emissions may actually increase when manufacturing moves from Indiana (and the rest of the United States) to other countries. 12

Climate Impacts—111(d) Proposal This rule will have virtually no impact on modeled global climate change. It is projected to reduce: Global CO 2 concentrations by 1.5 ppm by This represents 0.3% of the expected projected global average CO 2 concentrations in Sea level increases by 0.01 inch. 13

Climate Impacts—111(d) Proposal The proposed rule is also projected to reduce: Global average temperatures by o F (0.009 o C) based upon U.S. EPA’s climate models. –This projected temperature reduction is based upon the projected 1.5 ppm reduction in global CO 2 concentrations. –Since 1998, global average CO 2 concentrations have increased by 33 ppm or 9%, but global average temperatures have not increased. 14

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State Goals as % Reduction from Source: Bloomberg New Energy Finance

Percentage Change in CO 2 Emissions from Utilities (2005 – 2012) Decreasing >15% Decreasing 0 – 15% Increasing No Data Location of the State Capitals State Boundaries 17

Indiana’s Response to the 111(d) Proposal The proposed regulation is not consistent with our goal of affordable reliable energy. Governor Pence has issued numerous statements opposing U.S. EPA’s proposal. –June 2, 2014 –July 3, 2014 –July 10,

Indiana’s Response to the 111(d) Proposal Governor Pence has joined with Governor’s from other States in submitting written comments to the President opposing U.S. EPA’s proposal: –June 16, 2014 –September 9,

Indiana’s Response to the 111(d) Proposal IDEM Commissioner Easterly has testified asking that U.S. EPA’s proposal be withdrawn: –July 30, 2014—U.S. EPA Public Hearing –September 9, 2014—House Committee on Energy and Commerce, Subcommittee on Energy and Power hearing. 20

Indiana’s Response to the 111(d) Proposal Indiana joined with 11 other States on August 1, 2014 to petition the D.C. Circuit concerning U.S. EPA’s inability to regulate a source under 111(d) of the Clean Air Act when that source is already regulated under

Indiana’s Response to the 111(d) Proposal On August 25, Indiana joined other States in a request that U.S. EPA withdraw the proposed regulations under 111(d) and 111(b) because the U.S. EPA’s failure to include in the dockets key materials that the agency relied upon as support is a violation of Section 307(d) of the Clean Air Act. 22

Indiana’s Response to the 111(d) Proposal Indiana is pursuing other options in case the legal and policy challenges do not succeed. –IDEM is preparing possible options for a State plan to meet the proposed regulations. –IDEM and the IURC are working with other MISO states as the Midcontinent States Energy and Environmental Regulators (MSEER) to evaluate possible regional plans. 23

2 Midcontinent States Environmental and Energy Regulators 24

Indiana’s Response to the 111(d) Proposal Indiana will submit written comments on all aspects of the proposed rulemaking. These comments will represent all agencies including: IDEM, IURC, OUCC, IDNR as well as input received from stakeholders. 25

Questions? Tom Easterly Commissioner Indiana Department of Environmental Management (317)