1. Texas Lignite Industry

2. Texas Lignite  Because >95% of lignite mining operations in Texas are in support of electric generation…..whatever impacts the electric generators impacts lignite mining  40 coal-fired electric generating units - produce 21,238 MW  19 operating lignite mines  37% of Texas electric generation from coal  Texas is the 5 th largest coal producer in US

3. Economic Impacts - Texas

4. Economic Impacts – Northeast Texas

5. Texas: Our Growing State

6. Texas: No Megawatts to Spare

7. Pending and Proposed Regulations  Cross-State Air Pollution Rule - EPA  Greenhouse Gas Rules – EPA New power generation units Existing power generation units  Mercury Rule - EPA

8. Cross-State Air Pollution Rule  National regulation of power plant's impacting downwind regions.  Strict limits on SO 2 and NO X emissions from power plants in 27 states  SO 2 precursor to PM2.5 and NO X precursor to both ozone and PM2.5  Proposal phase, Texas was only included for seasonal compliance. Without notice, in final rule EPA forced Texas to comply with strict annual compliance

9. CSAPR Regulated States

10. CSAPR Legal Wrangling  Finalized July 8, 2011 with compliance by January 1, 2012  Stayed by US District Court of Appeals on December 30, 2011  August 21, 2012, the D.C. Circuit Court of Appeals vacated CSAPR, finding that EPA exceeded its CAA statutory authority  EPA appealed to Supreme Court, oral argument on December 10, 2013, with decision is expected within the next few weeks

11. CSAPR Potential Outcome  EPA estimates annualized costs of more than $800 million  Electric Reliability Council of Texas (ERCOT) predicted rule would cause between 1,200 to 1,400 MW loss during the peak demand  Potential for rolling blackouts  De-rate or idle electric generation units  Lignite mining operations would see significantly reduced tonnage demands

12. Greenhouse Gas Rule: New Electric Utility Generating Units  Sets standards for CO 2 for new coal and gas fired power plants  Prosed rule published April 13, 2013 received 2.5 million comments  Revised rule Published January 8, 2014  Ties CO 2 emissions to climate change  Allowable emission limits lower than those achieved by any currently existing coal-fired electric generation unit

13. Greenhouse Gas Rule: Existing Electric Utility Generating Units  Prosed rule to be published Fall 2014  Sets standards for CO 2 for existing coal and gas fired power plants  Allowable emissions limits could idle or de-rate existing units  No real plan for lost megawatts  Reduced tonnage demands for lignite mining operations

14. Mercury and Air Toxic Standards  Finalized December 16, 2011  Implementation delayed, anticipated 2016  Strict limits on Hg and other hazardous emissions from power plants  Standards are at lowest measurable detection limits of lab equipment  Allowable emission limits would idle or de- rate existing units  1,100 coal units to be affected nationwide

15. Potential Impacts  Combination of rules will lead to premature retirement of coal-fired units  Texas’s economy and projected growth indicate no megawatts to spare – would impact future economic growth potential  Jobs and economy of local communities will be hardest hit by pending rules

16. Potential Impacts  With so many pending regulations, predictable energy costs is impossible  Ultimately, regulations will result in a decline in lignite mining  Less mining means reduction in the $6.2B economic impact of lignite mining and coal-fired electric generation industry

17. Questions