1. STATE LAW RESOURCES, INC. FALL 2012 MEETING PANEL DISCUSSION: “The Future of Coal” Alexander Macia, Member Spilman Thomas & Battle, PLLC P.O. Box 273 Charleston, WV 25321-0273 Fax: (304) 340-3801 (304) 340-3835 amacia@spilmanlaw.com

2. THE FUTURE OF COAL: AN OVERVIEW I.COAL BASICS II.COAL USES III.COAL FUTURE

3. I.COAL BASICS

4. COAL RESERVES ESTIMATED BY COUNTRY U.S.27.5% Russia18.3% China13.3% Other Non OECD – Europe & Eurasia 10.7% Australia & New Zealand 8.9% India7.0% OECD Europe6.5% Africa3.7% Central & South America0.9% Rest of World3.2% Source:U.S. Energy Information Admin., “International Energy Outlook 2011”

5. MAJOR COAL DEPOSITS IN THE UNITED STATES Source:U.S. Energy Information Admin., “International Energy Outlook 2011”

6. COAL PRODUCING REGIONS IN THE UNITED STATES Appalachian Coal Region – More than 1/3 of production – West Virginia is largest coal producing state in region (2nd in the U.S.) – End-users:power plants, steel mills and export Interior Coal Region – Texas largest producer in region – Illinois Basin coal is high sulfur Western Coal Region – Over ½ of all coal produced in United States – Wyoming is largest coal producer in region and United States – 9 of top 10 largest mines are in Wyoming – Black Thunder Mine and North Antelope Rochelle Mine together produce more coal than West Virginia

7. COAL TYPES FOUND IN THE UNITED STATES ANTHRACITE – Highest carbon content (86-98%) – Heat value of @ 15,000 BTUs per pound – Used for home heating – Mined almost exclusively in North Eastern Pennsylvania BITUMINOUS – High carbon content (45-86%) – Heat value of 10,500-15,5000 BTUs per pound – Used for electricity generation and steel making (as coke) Subbituminous – Low carbon content (35-45%) – Heat value of 8,300-13,000 BTUs per pound – Used for electricity generation – Low sulfur – Located primarily in the Western States (Wyoming’s Powder River Basin) LIGNITE – Lowest carbon content (35-45%) – Heat value of @ 4,000-8,300 BTUs per pound – Used exclusively for electricity generation

8. LARGEST COAL PRODUCERS IN THE UNITED STATES Controlling CompanyProduction (thousands short tons)Percent of Production Peabody Energy191,94317.7 Arch Coal, Inc.173,29516.0 Cloud Peak93,7348.6 Alpha Natural Resources80,6817.4 Consol Energy, Inc.61,2945.7 Alpha Appalachian Holdings*37,7933.5 * Formerly Massey Energy Co.

9. HOW MUCH COAL IS LEFT? 2011 Annual Production: – 1.1 billion short tons Estimated Recoverable Reserves at Producing Mines: – 17.9 billion short tons Estimated Recoverable Reserves: – 259 billion short tons Demonstrated Reserve Base: – 484.5 billion short tons Total Coal Resources – @ 4 trillion short tons

10. Or… – 239 years based upon current production and estimated recoverable reserves

11. II.COAL USAGE But, in 1 st Quarter 2012 coal dropped to 36%

12. III.COAL FUTURE Natural gas prices fell 7.5% in 2011 Mild winter 2011-2012 Increasing stockpiles Environmental Regulations create uncertainty

13. Coal Plant Retirements Since 2010 – 106 coal plants (319 units) – 42,895 MW (13%) of fleet) – Average age: 50 + years THE ENERGY MARKET REACTS

14. Spurred by Cheap Natural Gas – Development of shale gases increased production – Leading to drop in prices – 2008 was $12/1,000 cubic feet – 2012 now @ $4/1,000 cubic feet And…. PRICE PRESSURE INCREASES ON COAL PLANTS

15. Mercury Air Toxics Standard – Issued Final Rule 12/11 and set numeric emission limits for mercury, toxic metals, and acidic gases – Applicable to new sources; targets coal plants – Compliance: 3 years from final rule (3/15) – EPA reconsidering new limits and taking further comments Cross State Air Pollution Rule – Requires states to set emission standards for power plants to reduce ozone and fine particle pollutions – Requiring upwind states to reduce only their own significant contributions to downwind states non-attainment – BUT, in EME Homer City Generation v. EPA, DC Circuit Court of Appeals struck down the rule for exceeding statutory authority – Petition for rehearing en banc is pending INCREASED ENVIRONMENTAL REGULATIONS