1. www.all4inc.com Kimberton, PA | 610.933.5246 Columbus, GA | 706.221.7688 Strategic Air Planning: Where Do We Grow From Here? Colin McCall | cmccall@all4inc.com | (706) 221-7688, x14 November 7, 2012 Presented to the Manufacture Alabama Environmental Conference by All4 Inc.

2. 2 Your environmental compliance is clearly our business.  NAAQS  Boiler MACT/CISWI/NHSM  MACT Regulations/Residual Risk  GHG Regulation  Visibility/Regional Haze  Utility MACT/NSPS  Multi-pollutant Rules  More… Air Pressure

3. 3 Your environmental compliance is clearly our business.  Focus on these areas that create liability and are obstacles to growth Construction Permitting (New Source Review) National Ambient Air Quality Standards (NAAQS) Agenda

4. 4 Your environmental compliance is clearly our business.  Reform Rules: “Actual-to-Projected-Actual”  Baseline Actual Emissions: 10 year lookback  Projected Actual Emissions Should be based on business projections Exclude emissions “that could have been accommodated” Tracked for 5 or 10 years New Source Review Permitting

5. 5 Your environmental compliance is clearly our business.  Source Reporting and Tracking Obligations  Are business or accounting projections available?  Project Aggregation Considerations Technical and Economic Dependence  Individual projects are “easier” to permit but multiple projects can cause confusion New Source Review Permitting

6. 6 Your environmental compliance is clearly our business.  Recommendations Know your 5 year capital plan Consider relationships between projects Think like an auditor Be careful about internal documentation Consider flexible permitting options New Source Review Permitting

7. 7 Your environmental compliance is clearly our business.  The “newer” NAAQS levels are extremely stringent  NAAQS are health based and are unlikely to be reversed (e.g., recent court cases)  Single biggest air regulatory obstacle to industrial growth for the foreseeable future  Very few projects can increase emissions without an offsetting emissions decrease NAAQS Summary

8. 8 Your environmental compliance is clearly our business.  1-Hour Sulfur Dioxide (SO 2 ) 196 micrograms per cubic meter (  g/m 3 ) 99 th %tile of Daily Maximum 1-Hour Concentration  1-Hour Nitrogen Dioxide (NO 2 ) 188  g/m 3 98 th %tile of Daily Maximum 1-Hour Concentration  24-Hour and Annual PM 2.5 35  g/m 3 (24-Hour) – 98 th Percentile 15  g/m 3 (Annual) Important NAAQS Levels

9. 9 Your environmental compliance is clearly our business.  NAAQS Implementation: designating areas as attainment or nonattainment and establishing SIP regulations Typically evaluated using ambient monitors to measure real pollutant concentrations Process implemented by ADEM  PSD Permitting: evaluating the NAAQS levels for specific projects and facilities Evaluated using dispersion models and EPA guidance Process performed by individual facilities NAAQS Big Picture

10. 10 Your environmental compliance is clearly our business.  Dispersion models can be conservative, particularly for short-term concentrations  Modeling is based on potential-to-emit, not actual emission rates  Results can be very sensitive to inputs such as meteorological data  Ambient background concentrations are summed with modeled concentrations  Generally difficult to model compliance NAAQS Modeling

11. 11 Your environmental compliance is clearly our business.  PSD permitting projects for major facilities  NAAQS Implementation Process (specifically for the 1-Hour SO 2 NAAQS)  Modeling at the discretion of State agencies for minor construction permitting  Modeling triggered when a nearby facility performs PSD permitting  Modeling performed by environmental groups When is Modeling Required?

12. 12 Your environmental compliance is clearly our business.  Common theme: For most facilities, future emissions will decrease from historic actual levels as a result of new and developing air regulations and standards and other influences, regardless of growth in productivity. NAAQS Implications

13. 13 Your environmental compliance is clearly our business.  1-Hour SO 2 update: Process that was originally based on dispersion modeling awaits EPA rulemaking An enhanced ambient monitoring network is likely, possibly paid for and operated by facilities  PM2.5 annual NAAQS levels is proposed to be tightened (11 to 13  g/m 3 ) NAAQS Current Events

14. 14 Your environmental compliance is clearly our business.  Understand your dispersion modeling status relative to the NAAQS  Use that knowledge early in the planning process for new capital projects  Follow the 1-Hour SO 2 NAAQS implementation process to understand how it impacts you  Consider the implications and benefits of ambient pollutant and meteorological monitoring  Don’t make any changes (e.g., Boiler MACT) without considering the NAAQS NAAQS Takeaways

15. 15 Your environmental compliance is clearly our business.  Ability to change operations/equipment quickly and as needed  Long range targets for planning: Internal - production/energy/economics External - rule driven costs to comply  Clarity in regulatory requirements particularly for permitting Facility Needs

16. 16 Your environmental compliance is clearly our business.  “Plantwide Applicability Limitation” (PAL) is an available regulatory option that can potentially ease air permitting PSD cycle  Federal PSD rule provides for PALs based on historic actual emissions  PALs are pollutant specific and could be a critical part of a strategic plan  PALs are another permitting option that shouldn’t be immediately dismissed PAL Option

17. 17 Your environmental compliance is clearly our business.  For a facility with a PAL permit that maintains emissions below PAL, physical changes and changes in method of operation are not major modifications and do not require approval under PSD  Possibilities of a competitive advantage PAL Advantages

18. 18 Your environmental compliance is clearly our business.  PALs historically worked for relatively simple industries with limited sources and where technology was driving emissions lower per unit of production  New air quality world we are in is forcing facilities to realization that future emissions will be lower per unit of production driven by rules, standards, permitting, technology… PAL Considerations

19. 19 Your environmental compliance is clearly our business.  Same baseline actual emissions used in PSD applicability assessment: Adjust for current applicable requirements Add PSD significance threshold Justify PAL and provide method of compliance Establishing a PAL

20. 20 Your environmental compliance is clearly our business.  PAL established for 10 year period  Increased emissions tracking, testing, and monitoring obligations  PAL can be adjusted down to account for new applicable requirements  Getting out of a PAL can have serious ramifications  ADEM approval of projects is still required  PAL can be ratcheted down at the end of the permit term based on actual emissions PAL Concerns

21. 21 Your environmental compliance is clearly our business.  Develop historic facility-wide baseline emission rates and potential PAL levels  Address potential NAAQS issues  Consider new rules, facility operations plans, potential energy efficiency improvements, new technologies, low hanging fruit for emissions reductions  Weigh value of PAL for each pollutant PAL Approach

22. 22 Your environmental compliance is clearly our business.  Know your projects and how they relate to one another  Understand how your facility relates to the NAAQS levels (and discuss meteorological monitoring)  Talk about air requirements early and often in the planning process for projects  Understand where emission reductions are available within your fenceline  Consider all permitting options (including PALs) Final Thoughts

23. www.all4inc.com Kimberton, PA | 610.933.5246 Columbus, GA | 706.221.7688 Questions/Comments Colin McCall| cmccall@all4inc.com | (706) 221-7688, x14