Update on Federal Regulations Impacting the Electric Industry September 21, 2011 Thomas W. Easterly, P.E., BCEE, QEP Commissioner, Indiana Department of Environmental Management

2 IDEM’s Mission We Protect Hoosiers and Our Environment IDEM’s mission is to implement federal and state regulations to protect human health and the environment while allowing the environmentally sound operations of industrial, agricultural, commercial and government activities vital to a prosperous economy.

How Does IDEM Protect Hoosiers and Our Environment? Develop regulations and issue permits to restrict discharges to the environment to safe levels. Inspect and monitor permitted facilities to ensure compliance with the permits. 3

How Does IDEM Protect Hoosiers and Our Environment? Use compliance assistance and/or enforcement when people exceed their permit levels or violate regulations. Educate people on their environmental responsibilities. 4

25 Years of Progress 5

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7 REMARKABLE AND CURIOUS TIMES Power plants are getting cleaner and cleaner. Air quality is getting better and better. The economy is on its back. Worldwide debate over the future of energy policy. Increasing restrictions on the mining and burning of coal and the disposal of coal ash. An avalanche of new action directly against power generation in general and coal-fired generation, in particular.

8 UNPRECEDENTED FEDERAL INITIATIVES Clean Air Act o CAIR (Clean Air Interstate Rule)/Transport rule/CSAPR (Cross State Air Pollution Rule) o NAAQS revisions—SO 2, NO x, Ozone, PM 2.5 o Mercury / HAPS (Hazardous Air Pollutants) o Greenhouse Gasses including CO 2 Clean Water Act o Intake structures (316(b)) o Effluent guidelines Resource Conservation and Recovery Act (RCRA) o Coal combustion residuals (CCR)

IN Air Quality Progress At the end of 2009, for the first time since ambient air quality standards were developed, all of Indiana met all of the health based ambient air quality standards (including the ozone standard). During 2010, the new 0.15 microgram per cubic meter lead standard became effective and almost 700 people may be breathing air above that new standard. IDEM is working to make sure that those Hoosiers have clean air to breathe. 9

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Protection of Downwind States The concept of the series of air transport rules: – Clean Air Interstate Rule (CAIR) – Transport Rule – Cross States Air Pollution Rule (CSPAR) is that emissions in some states were interfering with the attainment of air quality standards in other states. 12

Protection of Downwind States In 2005 a number of Counties including three in Indiana did not meet all ozone and PM 2.5 air quality standards. U.S. EPA projected that over 100 counties would still not meet standards by By the end of 2009 air quality in Indiana and much of the country had improved to meet the Ozone and PM 2.5 air quality standards. 13

Protection of Downwind States OzonePM 2.5 (Annual)PM 2.5 (24-Hour) EPA predicted 2012 Non Attainment counties (based upon 2005 air quality) Counties Attaining by Counties still needing improvement

Protection of Downwind States Modeled projections by some groups indicate that all areas of the country impacted by transport may achieve the Ozone and PM standards without the emission reductions being required by CSAPR. The use of the 2005 as the base year instead of a more recent year and U.S.EPA’s triple weighting of the base year are bad for Indiana. 15

16 CAIR/Transport Rule/CSAPR IDEM expected to meet the Transport Rule Statewide caps for 2012 without additional controls, CSAPR reduced those caps by 29%--not currently achievable. IDEM expected that we would need one current project completed and another source controlled to meet the 2014 caps. CSAPR reduced the caps by 20%. CSAPR annual cost estimated to be $2.4 billion.

17 CAIR/Transport Rule/CSAPR U.S. EPA is implementing CSAPR through a Federal Implementation Plan (FIP) before allowing the States to implement the rule. The State has no role in CSAPR unless we modify our State Implementation Plan (SIP). U.S. EPA has told us that they will approve our requests to redesignate the State of Indiana to attainment for PM 2.5 now that CSAPR is in effect. This rule will also allow U.S. EPA to approve our BART SIP submission.

18 NAAQS Revisions At the end of 2009, all of Indiana met every currently effective NAAQS for the first time since NAAQS were established in the 1970’s. –New 75 ppb 1 hour SO 2 Air Quality Standard (2010). –New 100 ppb short term NO x Air Quality Standard (2010). –U.S. EPA reconsideration of ppm ozone Air Quality Standard. –U.S. EPA review of the 15 microgram/cubic meter annual PM 2.5 Air Quality Standard.

1-Hour Sulfur Dioxide (SO 2 ) – Maximum 1-Hour Design Value Trends 19

Indiana Preliminary Designation Recommendations SO2 1-Hour Standard 20 June 6, 2010: U.S. EPA Announced A New SO2 1-Hour Standard Set At 75 ppb

21 NAAQS REVISIONS - OZONE o Administrator Jackson stated that the current ppm (8 hour average)ozone standard did not protect public health and would be reconsidered. o On January 19, 2010 U.S. EPA proposed a new standard (0.060 – ppm). o Good news: On September 2, 2011, President Obama cancelled the reconsideration—next ozone standard revision will be on the normal schedule (2013).

Ozone – Maximum Design Value Trends 22

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March 15, 2010: U.S. EPA Announced It Would Reconsider The Annual PM2.5 Standard Within A Range Of µg/m 3 PM2.5 Annual Design Values (3-yr Average) Based on Monitoring Data Standard at 13 µg/m 3 25

Fine Particle (PM2.5) – Maximum Annual Design Value Trends 26

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29 MERCURY MACT (NESHAP) Proposal Published: May 3, 2011 Final Deadline: November 16, 2011 Annual rule cost $10.9 billion. Annual rule HAP benefit $5,000 to $6,000,000 ( IQ points per exposed person or IQ points per year in US out of 31 billion IQ points) Rule cost is between $1,211 and $2,180,000 per $1 of HAP benefit. Estimated annual co-benefits $53 to $140 billion.

30 MERCURY MACT (NESHAP) HAPS: Hg, HCL, PM, THC, Dioxins / Furans Rule requires about 90% reduction in mercury emissions. No MACT trading (except units at a single site). Mercury emissions in Indiana have decreased by approximately 20% over the past 14 years, but measured mercury deposition has decreased by only 7% and there is no apparent change in mercury fish concentrations in Indiana.

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34 CO 2 (Green House Gasses) U.S. EPA Clean Air Act initiatives: Mandatory reporting rule – annual report for facilities emitting more than 25,000 TPY. Light duty vehicle rule – GHG’s become “regulated NRS pollutants” triggering PSD. Tailoring rule – GHG permitting for facilities emitting more than 25,000 TPY. BACT Guidance issued November Other initiatives temporarily tabled.

35 CO 2 (Green House Gasses) The National Academy of Sciences report, “America’s Climate Choices” recommends that actions be taken now to start reducing U.S. greenhouse gas emissions to levels between 50% and 80% below 1990 levels. Achieving an 80% reduction from 1990 levels would require a 81.4% reduction from 1999 levels. If we converted all U.S. fossil fuel use from coal and oil to natural gas, we would achieve a 23.9% reduction from 1999 levels.

36 CO 2 (Green House Gasses) The remaining emissions would need to be reduced by 73.8% to reach the 80% target. Apparent choices are: –Energy conservation. –Increasing non-hydro renewable energy sources from the current 5.5% market share. –Carbon sequestration. –Nuclear electricity. Is it possible to achieve the additional 73.8% reduction?

37 Clean Water Act – (316(b)) 316(b) is a section of the Clean Water Act designed to reduce the damage to aquatic organisms from impingement on the intake structures and entrainment in the water passing through a facility. Factors to be considered in a 316(b) assessment: –Is through screen velocity sufficiently low to allow fish to escape? –What is the mortality rate of aquatic life impinged/entrained? –Has there been a sufficient reduction in the amount of aquatic life impinged/entrained? –Has there been a sufficient reduction in the mortality of aquatic life impinged/entrained?

38 Clean Water Act – (316(b)) Proposed: April 20, 2011 Good news: Does not mandate retrofitting closed-cycle cooling to address entrainment at all facilities covered by the rule. Bad news: Inflexible one-size-fits-all approach to minimizing impacts due to impingement of aquatic organisms by cooling water systems.

39 CLEAN WATER ACT – EFFLUENT GUIDELINES (technology based effluent limits) Notice of plan availability: Preliminary 2010 Effluent Guidelines Program Plan December 28, 2009 (74 Fed. Reg ) Request for information : Questionnaire for Steam Electric Power Generating Effluent Guidelines March 9, 2010 (75 Fed. Reg ) Highlights: “high levels” of toxic weighted pollutants Caused by air pollution control systems Various wastewater treatment systems under investigation

40 Coal Combustion Residuals (CCR) Proposed rule: June 21, 2010 (75 Fed. Reg ) Beville amendment and actual waste characteristics have historically exempted CCR from Subtitle C (hazardous waste) regulation. December 2008 coal ash spill in Tennessee has caused that exemption to be reviewed Options being considered include: -phase out all surface impoundments in favor of landfills. -allow surface impoundments, but with stricter controls.

41 Coal Combustion Residuals IDEM data indicates that CCR do not exhibit hazardous characteristics, therefore, they should not be regulated under Subtitle C. IDEM believes that U.S. EPA should develop reasonable minimum national management standards for surface impoundments and landfills under Subtitle D. Due to volume of public comments, U.S. EPA will not publish a final rule until sometime in 2012.

Questions? 42