Tri-State Electric Utility Environmental Meeting May 4, 2010 Thomas W. Easterly, P.E., DEE, QEP Commissioner, Indiana Department of Environmental Management 1

Discussion Topics Will EPA take over some State Air, Water and Waste programs? Green House Gas Regulations? Budget Issues and Fees. 2

Indiana State Budget Challenges Indiana’s most recent revenue forecast is $1.88 Billion below the budgeted amount for the FY biennium. – State Agencies reduced by 20+% – Higher Education reduced by 6% – K-12 Education reduced by 3% – Budget surplus will need to be spent 3

Response to Reduced State Income Eliminated 2009 & 2010 raises. Strategic Hiring Review—Using attrition to reduce spending. Reduce/eliminate grants, contracts, etc. Restrictions on travel and purchasing. Will maintain essential State services. 4

New IDEM Budget Actions Returning staffing to January 2005 levels through attrition. Moving most of Shadeland staff to IGCN and renegotiating the lease. Canceling or renegotiating a number of service contracts. Voluntary unpaid leave program. 5

IDEM Staffing Levels YEAR Current2010 Target Actual FTE

Potential Regulatory Issues Increased EPA emphasis on enforcement to improve environmental quality. EPA reevaluation of permitting decisions made during the past eight years. IDEM Outdoor Hydronic Heater Rule restart. Increased scrutiny of all coal related activities. Transparency. 7

Potential Regulatory Issues--Air New short term NO x Air Quality Standard. EPA reconsideration of ozone standard and 35 microgram/cubic meter PM 2.5 Air Quality Standards. CAIR replacement rule. CAMR and ICI boiler rules. EPA inaction on redesignation requests. 8

Potential Regulatory Issues--Water Antidegradation Regulations. Algae issues and nutrient regulations. – Great Lakes, Gulf of Mexico, Ohio River, Indiana lakes, rivers and reservoirs. Pharmaceuticals and other trace pollutants. IDEM action on the final six extended permits. More attention to the Great Lakes. 9

Potential Regulatory Issues--Land RISC Guidance and Regulations implementing HB1162. Coal combustion waste regulations. EPA to speed up review of pollutant risk evaluations. 10

Climate Change & GHG Indiana joined the litigation challenging the endangerment finding. Indiana believes that the proposed tailoring rule is fundamentally legally flawed. The current federal administration firmly believes that the science supports the opinion that the earth is warming due to human GHG emissions. 11

Climate Change & GHG An alternative way to frame the discussion is to compare the costs and benefits of deep reductions in GHG emissions with the projected costs and benefits of not making those reductions. Some strategies (i.e. wasting less energy) make sense without the GHG drive and should be encouraged. 12

CO 2 Cap and Trade Concerns CO 2 is different from SO 2 and NO x. – We know how to change gaseous SO 2 to a solid sulfate (SO 4 ) compound such as gypsum which can be sold as a product or landfilled. – We know how to react NO x with NH 4 (ammonia) to form N 2 (nitrogen gas) and H 2 O (water) which can be released to the environment. – We do not have a treatment process for CO 2. 13

CO 2 Cap and Trade Concerns CO 2 is different from SO 2 and NO x. – SO 2 emissions from coal combustion can be reduced by 80% through coal switching and by over 99% through switching to natural gas. – CO 2 emissions from coal combustion can be reduced by 33% by switching to oil and by 50% through switching to natural gas. 14

CO 2 Cap and Trade Concerns CO 2 is different from SO 2 and NO x. – When the acid rain provisions passed, US SO 2 emissions totaled 23 million tons per year and almost 70% were from utilities and 24% from industries. – Current US CO 2 emissions are 7,760 million tons per year (337 times historical SO 2 emissions) with 33% from utilities and 19% from industries. 15

Thank You Tom Easterly Commissioner Indiana Department of Environmental Management