1. Change picture on Slide Master New EPA Challenges for Coal-Fired Plants SNL Energy June 10, 2010 PRESENTED BY Peter Glaser Troutman Sanders LLP 401 9 th Street, NW Suite 1000 Washington, DC 20004 202.274.2950 www.troutmansanders.com

2. What’s Coming Hazardous Air Pollutants NAAQS: NO 2, SO 2, PM-2.5, Ozone CAIR Replacement Rule Coal Ash Carbon

3. Hazardous Air Pollutants EPA to issue proposed MACT for utility HAP emissions by 3/11, finalize by 11/11. Highly aggressive schedule. Not just for mercury! Other air toxics, including acid gases, trace metals, organics, likely more important. Ongoing multi-hundred million dollar information collection effort…but will there be time for EPA to analyze the data? Very stringent standards and only 3 years for existing units to comply. Could have major impacts on existing fleet.

4. NO 2 Feb. 9, 2010 Revision Adds new 1-hour standard of 100 ppb, at upper end of range of 80-100 ppb in proposed rule Supplements existing annual standard of 53 ppb Additional monitoring both around sources and to measure area-wide concentrations Mostly a highway issue but could affect utility diesel generators

5. SO 2 NAAQS Replaces daily and annual standard with hourly standard. Proposed at 50-100 ppb, with comment taken on 150 ppb. Final at 75 ppb. Increased monitoring and modeling around emitting sources, meaning coal-fired EGUs. Concern that even some scrubbed plants could cause exceedance.

6. Ozone NAAQS 2008 standard: 0.075 ppm based on 8- hour average, reduced from prior standard of 0.084 ppm While standard on appeal, new administration pulls it back for reconsideration based on existing record New proposal 1/19/2010: 0.060-0.070 ppm Comments 3/10/10 Concern across many industries at large numbers of new nonattainment areas For coal EGUs, concern is NO X

7. PM-2.5 NAAQS 2006 standards: - 24-hour - 35 µg/m 3, reduced from previous standard of 65 µg/m 3. - Annual: 15 µg/m 3. Overturned in court. EPA considering on remand. Proposal expected this year. Affects coal EGU NO X and SO 2 emissions.

8. CAIR Replacement Rule CAIR covered NO x and SO 2 transport in East. Overturned in court. New proposal expected any day. Will not have same interstate trading as previous rule; likely intrastate trading and perhaps some sub- regional trading. Stricter caps and timetables.

9. Coal Ash EPA 5/4/10 proposes two alternative means of regulation Neither addresses filling at mines - to be addressed separately Comment period ends 90 days after publication of the proposals in the Federal Register Likely a year or more before chosen regulation is implemented

10. Option 1 Regulate coal ash as a “special waste” under “Subtitle C” of RCRA, the regulatory section addressing “hazardous” wastes Complex, comprehensive, and costly Would effectively signal the end for surface disposal of wet coal ash Allows “encapsulated” reuse, but this may be more theoretical than factual

11. Option 2 Coal ash would be subject to existing RCRA standards similar to those for municipal and non-hazardous solid waste. EPA’s role largely advisory; states have enforcement authority. Less costly and onerous requirements. Likely lead to phase out of wet handling and disposal in favor of landfills.

12. Carbon Endangerment Finding Litigation Auto Rule Johnson Memorandum Reconsideration Tailoring Rule GHG BACT Guidance NSPS

13. Endangerment Finding Litigation Finding issued December 7, 2009 Court challenges from Texas, Alabama, Virginia and numerous industry groups 17 states on each side Don’t expect decision in litigation until 2012

14. Auto GHG Rule Published in Fed. Reg. May 7, 2010 DOT MPG - EPA gCO2/mi. standard According to EPA, makes six GHGs “regulated air pollutants” under the PSD and Title V programs Will subject most of industrial capacity in U.S. to GHG regulation under these programs, yet EPA refuses to do an economic study Lawsuits 60 days after publication in Fed. Reg. Some already filed.

15. Johnson Memo Reconsideration Reconsideration issued 3/2/10. GHGs will be deemed to be regulated beginning 1/2/11 when auto rule “takes effect.” Will apply to any PSD permit then in process. Phase in per tailoring rule. Numerous lawsuits filed, including by enviro organization that will continue argument that GHGs already regulated.

16. Tailoring Rule Published in Fed. Reg. 6/3/10. Phase in of PSD and Title V: - 1/2/11: Sources subject to PSD “anyway” will be required to do GHG BACT if increase emissions by 75,000 tons per year. - 7/1/11: New sources above 100,000 tpy and existing sources that increase emissions by 75,000 subject to PSD. - EPA will do future rulemaking and future study to determine whether lower emitting sources will be regulated and how, but commits that no source below 50,000 tpy will be regulated for six years. Statutory thresholds are 100/250 tpy, so questionable legal validity…but will anyone challenge?

17. EPA GHG BACT Guidance Technical guidance will begin rolling out later this summer. Policy guidance by end of yea.r Stakeholder input, but no commitment to formal notice and comment.

18. NSPS EPA has agreed to promulgate NSPS for coal EGUs that will include GHG standards Commence rulemaking probably next year Will apply to new and modified sources and could also apply eventually to existing-unmodified sources

19. Will Congress Preempt EPA GHG Regulation? Murkowski Resolution to Disapprove Endangerment Finding. Rockefeller bill to delay regulation for 2 years. Casey-Carper to …? Debate on Murkowski today!

20. 20 Environmental Regulatory Timeline for Coal Units Ozone PM 2.5 '08'09'10 '11'12'13 '14 '15 '16 '17 Beginning CAIR Phase I Seasonal NOx Cap HAPs MACT proposed rule Beginning CAIR Phase II Seasonal NOx Cap Revised Ozone NAAQS Begin CAIR Phase I Annual SO 2 Cap -- adapted from Wegman (EPA 2003) Beginning CAIR Phase II Annual SO 2 & NOx Caps Next PM- 2.5 NAAQS Revision Next Ozone NAAQS Revision SO 2 Primary NAAQS SO 2 /NO 2 Secondary NAAQS NO 2 Primary NAAQS SO 2 /NO 2 New PM-2.5 NAAQS Designations CAMR & Delisting Rule vacated Hg/HAPS Final EPA Nonattainment Designations PM-2.5 SIPs due (‘06) Proposed CAIR Replacement Rule Expected HAPS MACT final rule expected CAIR Vacated HAPS MACT Compliance 3 yrs after final rule CAIR Remanded CAIR Begin CAIR Phase I Annual NOx Cap PM-2.5 SIPs due (‘97) 316(b) proposed rule expected 316(b) final rule expected 316(b) Compliance 3-4 yrs after final rule Effluent Guidelines proposed rule expected Water Effluent Guidelines Final rule expected Effluent Guidelines Compliance 3-5 yrs after final rule Begin Compliance Requirements under Final CCB Rule (ground water monitoring, double monitors, closure, dry ash conversion) Ash Proposed Rule for CCBs Management Final Rule for CCBs Mgmt Final CAIR Replacement Rule Expected Compliance with CAIR Replacement Rule CO 2 CO 2 Regulation Reconsidered Ozone NAAQS