1. EPA’S STARTUP, SHUTDOWN, AND MALFUNCTION PROPOSAL: IMPACTS AND IMPLICATIONS West Palm Beach, FL April 8, 2014 PRESENTED BY Randy E. Brogdon Troutman Sanders LLP 600 Peachtree Street, NE Suite 5200 Atlanta, GA 30308-2216 404.885.3147 randy.brogdon @troutmansanders.com

2. Background: SSM Provisions Allow emissions in excess of permit limits during, or resulting from, unit startup, shutdown and malfunctions under certain circumstances Most have been on the states’ books for decades and were approved by EPA as part of State Implementation Plan (SIP) submittals under the Clean Air Act Not specific to any particular industry/pollutant 2

3. Florida Example 62-210.700 Excess Emissions. (1)Excess emissions resulting from startup, shutdown or malfunction of any emissions unit shall be permitted providing (1) best operational practices to minimize emissions are adhered to and (2) the duration of excess emissions shall be minimized but in no case exceed two hours in any 24 hour period unless specifically authorized by the Department for longer duration. (2) Excess emissions from existing fossil fuel steam generators resulting from startup or shutdown shall be permitted provided that best operational practices to minimize emissions are adhered to and the duration of excess emissions shall be minimized. *** (4) Excess emissions which are caused entirely or in part by poor maintenance, poor operation, or any other equipment or process failure which may reasonably be prevented during startup, shutdown, or malfunction shall be prohibited. 3

4. Background: SSM Provisions Why SSM provisions are important: –Sources may not be able to meet applicable emission limits outside of normal operation –They clarify that excess emissions are not necessarily a “violation” of the Clean Air Act –They provide a defense to third party lawsuits for excess emissions during SSM conditions 4

5. Gas Turbine Startup Roll-off Ignition Synchronization Acceleration - Higher emissions; less efficient operation 5

6. SSM Cases Sierra Club v. Georgia Power, 365 F. Supp. 2d 1297 (N.D. Ga. 2004), reversed and remanded by 443 F.3d 1346 (11th Cir. 2006), summary judgment granted for Defendant in No. 02-00151, 2007 U.S. Dist. LEXIS 100219 (N.D. Ga. Jan. 11, 2007) Illinois v. S. Illinois Power Co., Illinois Pollution Control Board, PCB No. 04-201 (Feb. 16, 2006) National Parks Conservation Assoc. v. Tennessee Valley Authority, No. 00-00547 (E.D. Tenn. 2000) Biodiversity Conservation Alliance, et. al. v. Mountain Cement Co., No. 04-00361 (D. Wyo. Nov. 17, 2004) 6 Sierra Club v. PSC Colo., 894 F. Supp 1455 (D. Colo. 1996) Sierra Club v. Tri-State Generation and Transmission, PSC of Colo., Salt River Project Agricultural Improvement and Power District, Pacificorp, and Platte River Power Authority, No. 96-02368 (D. Colo. March 19, 2001) United States v. Exelon Mystic LLC, No. 04-10213 (D. Mass. Jan. 29, 2004) Grand Canyon Trust v. PSC New Mexico, No. 02-00552 (D.N.M. Mar. 10, 2005) Sierra Club v. TVA, No. 02-02279 (N.D. Ala. 2002) Citizens for Pennsylvania’s Future v. Allegheny Energy Supply Co., No. 05-00186 (W.D. Pa. July 13, 2006) PennFuture v. FirstEnergy Corp., No. 07-01412 (W.D. Penn. Oct. 15, 2007) Md. Dept. of Env’t v. Constellation Power Source Generation, Inc., No. 02-CV-07122918 (Md. Cir. Ct. Sept. 28, 2007) Sierra Club and Wyoming Outdoor Council v. PacifiCorp, No. 07-cv- 042-J (D. Wyo. Feb. 21, 2007) Conservation Law Foundation, Inc. and HealthLink, Inc. v. Dominion Energy New England, Inc., No 1:10- cv-11069 (D. Mass. Dec. 21, 2011) Sierra Club v. Ameren Corp., No. 1; CV-00408 (E.D. Missouri Mar. 3, 2014)

7. Civil Penalties for Noncompliance Federal Civil Penalties $37,500 per day, per violation Privileged and Confidential Attorney-Client Communication 7

8. Case Study: Georgia SSM In 2002 Sierra Club brought a citizen suit targeting a power plant - alleging thousands of violations of the Clean Air Act over a five year period (all resulted from SSM) Excess opacity – continuously monitored in 6-minute increments Court held that Georgia SSM Provision, once proven and not challenged by Plaintiffs, provided a complete defense 11 th Circuit Court of Appeals upheld validity of the Georgia SSM Rule

9. The Sierra Club Petition Filed Petition on June 30, 2011 Requested that EPA: –Revoke its prior approval of targeted state SSM rules; –Issue a “SIP Call” – requiring states to revise their rules and significantly limit the scope of the SSM provisions, and/or; –Issue a “FIP” – an EPA rule that would take the place of the current state SSM rules 9

10. EPA’s Proposed Rule Issued on February 22, 2013 Proposed to grant Sierra Club’s Petition for 36 states Provided only 30 days for public comment (agreed to extend another 30 days) Final Rule due initially September 26, 2013; extended until June 12, 2014 10

11. Impact of EPA’s Proposal All excess emissions would be “violations” of applicable emission limits Excess emissions during planned startup and shutdown would not be exempt No affirmative defense may be provided for startup/shutdown events, making them actionable for civil penalties and injunctive relief (i.e., an order preventing the emissions going forward) 11

12. Impact of EPA’s Proposal Excess emissions resulting from an unavoidable malfunction would be a violation but a state may provide a limited affirmative defense to civil penalties The defense would not apply to injunctive relief In short, the rule would effectively eliminate state- based SSM exemptions, particularly as applied to unit startup and shutdown 12

13. IMPORTANT NOTE The proposal does not directly impact SSM provisions in federal New Source Performance Standards or MACT programs. -but serious concerns about precedent 13

14. Objections To EPA’s Proposal EPA failed to review relevant data regarding improved air quality Many SSM events are unavoidable due to technical limitations of pollution control equipment Violates state/federal partnership under CAA –No consultation with states targeted by SIP Call CAA does not prohibit use of SSM exemptions –Change in EPA’s past position/approvals –EPA still uses SSM exemptions in Federal rulemakings 14

15. Recent EPA Actions Sept. 6, 2013 – Proposed disapproval of SSM provision in OK SIP submittal –“inconsistent with Clean Air Act” –“impermissible” Dec. 10, 2013 – Proposed disapproval of SSM provision in Clark County, NV –EPA has “reexamined” its previous policy on SSM Feb. 13, 2014 – Proposed disapproval of Alabama Visible Emission Rule –EPA will “assume that a SIP revision that relaxes an existing SIP requirement ‘would interfere’ with NAAQS attainment…” –“Any emissions limit must be met on a continuous basis…” 15

16. What’s Next? Final Rule now due on June 12, 2014 Proposed SIP Call rulemaking –Subject to public notice and comment –Deadline for state action of 12-24 months –Possible proposed FIP (for states that fail to act by the deadline) Appeals likely –Stay of the rule pending appeal less likely –States may have to move forward with rule changes 16

17. QUESTIONS Randy E. Brogdon Troutman Sanders randy.brogdon@troutmansanders.com 17 www.environmentallawandpolicy.com Visit our blog at: