1 Elements of a Settlement

2 Typically, cases are resolved with: Typically, cases are resolved with: Injunctive relief Injunctive relief Civil penalties (and sometimes SEPs) Civil penalties (and sometimes SEPs) We are more regularly considering mitigation. We are more regularly considering mitigation.

3 Injunctive Relief Relief necessary to return the company to compliance. Relief necessary to return the company to compliance. Very case specific: Very case specific: Control technologies Control technologies Operational standards Operational standards Work practice standards Work practice standards Training Training Can sometimes be “enhanced” requirements. Can sometimes be “enhanced” requirements. E.g., for a leak detection and repair program violation, we require monitoring more often and require relief for lower leak rates. E.g., for a leak detection and repair program violation, we require monitoring more often and require relief for lower leak rates. Justification is that you were unable to comply with the existing work practice standard. Justification is that you were unable to comply with the existing work practice standard.

4 Penalties Discussed separately. Discussed separately. One way to offset penalty amount is to do a Supplemental Environmental Project (SEP). One way to offset penalty amount is to do a Supplemental Environmental Project (SEP).

5 Mitigation Although we ask for injunctive relief (e.g., pollution controls or other steps to return to compliance) on a “going forward” basis, we historically have not consistently asked for relief to remedy the past harm caused by the violations. Although we ask for injunctive relief (e.g., pollution controls or other steps to return to compliance) on a “going forward” basis, we historically have not consistently asked for relief to remedy the past harm caused by the violations.

6 Mitigation What is our authority to get mitigation? What is our authority to get mitigation? Clean Air Act Section 113(b): “such court shall have jurisdiction to restrain such violations, to require compliance, to assess such civil penalty…and to award any other appropriate relief.” Clean Air Act Section 113(b): “such court shall have jurisdiction to restrain such violations, to require compliance, to assess such civil penalty…and to award any other appropriate relief.” Caselaw: Cinergy Court held that “it has authority to take appropriate actions that remedy, mitigate and offset harms to the public and the environment caused by the Defendants’ proven violations of the CAA.” Caselaw: Cinergy Court held that “it has authority to take appropriate actions that remedy, mitigate and offset harms to the public and the environment caused by the Defendants’ proven violations of the CAA.”

7 Mitigation Examples of mitigation obtained in EPA settlements: Examples of mitigation obtained in EPA settlements: American Electric Power (2007): Required to spend $60 million in projects to mitigate the adverse effects of its past excess emissions. American Electric Power (2007): Required to spend $60 million in projects to mitigate the adverse effects of its past excess emissions. MTD (2008): Required additional controls, emission allowance retirements. MTD (2008): Required additional controls, emission allowance retirements. CD Violations/Extensions: CD Violations/Extensions: Delayed compliance (“benefit of the bargain”): United States, et al. v. Motiva Enterprises LLC, No. H (S.D. Tex.) (shortfall of 7 tons NOx by original deadline; 3 month extension allowed, plus 62 tons in additional NOx reductions required). Delayed compliance (“benefit of the bargain”): United States, et al. v. Motiva Enterprises LLC, No. H (S.D. Tex.) (shortfall of 7 tons NOx by original deadline; 3 month extension allowed, plus 62 tons in additional NOx reductions required).

8 Mitigation What criteria should apply to mitigation projects? (1) Actual, permanent reductions; (2) Amount equal to or greater than the total aggregate excess emissions; (3) Same pollutant or pollutant(s) with the same health or environmental impact; (4) At the facility or in areas affected by the facility’s pollution; (5) Implemented in (3? 5?) years from the effective date of the settlement.

9 Mitigation What other considerations? The source must not: The source must not: Have a legal obligation; Have a legal obligation; Donate money to a third-party to perform the project but it can contract with a third-party to implement the project. Donate money to a third-party to perform the project but it can contract with a third-party to implement the project. Negotiate the projects prior to finalizing the settlement. Negotiate the projects prior to finalizing the settlement. Consent Decree must require the source to report the total tons reduced. Consent Decree must require the source to report the total tons reduced.

10 Mitigation What information do we need to include mitigation? What information do we need to include mitigation? How is mitigation different from SEPs? How is mitigation different from SEPs? What basic modeling tools are available to identify areas affected? What basic modeling tools are available to identify areas affected? Do we need to offset 100% of the calculated excess emissions? Do we need to offset 100% of the calculated excess emissions? What if it costs too much? What if it costs too much?

11 Discussion