Key Issues Update For Air And Climate

1. Key Issues Update For Air And Climate Peter Glaser Shook, Hardy & Bacon, L.L.P. EEI 2004 Spring Legal Conference Scottsdale, AZ March 30, 2004

2. Topics • New source review • The three “P’s” • Climate change litigation • Is air pollution a toxic tort? • The environment according to John Kerry

3. New Source Review • The issue: When is routine maintenance, repair and replacement (RMRR) work considered to be a major modification? • $27,500 per occurrence per day if your answer is wrong.

4. New Source Review - The Administration’s Reforms • Quantitative and category approach to bring certainty • D.C. Circuit preliminarily enjoins rule, finding that opponents of rule have “likelihood of success on the merits” • Merits briefing just getting underway. Same panel as issued PI.

5. New Source Review - The Enforcement Lawsuits • The Good: Duke – Routine means routine within the industry. • The Bad: Ohio Edison – Summary Judgment entered against utility. Remedy phase getting underway. • The Ugly: East Kentucky Power Coop – First new NSR case in 3 Years – Other cases could follow.

6. New Source Review - Impact On Your Company • Uncertainty Reigns • Darned if you do: Evidence that industry was undertaking new repair and maintenance work in reliance on Administration reforms was used to support motion to enjoin the reforms • Darned if you don’t: • Given uncertainty, is it prudent to repair and maintain plants? • But if don’t repair and maintain plants, what then? • Ask EPA

7. The Three “Ps” (NOX, SO2 and Mercury) • Administration Clear Skies Proposal • Competing Democratic Proposals • EPA Interstate Air Quality (IAQR) and Mercury Rulemakings • Designed to implement Clear Skies through regulation • IAQR – cap and trade for NOX and SO2 • Mercury - Alternative Proposals: MACT or Cap and Trade

8. Year  Past Emissions/ Business As Usual  S.1844 (Inhofe)  S. 3135 (Carper)  S. 556 (Jeffords)  EPA Rulemaking NOx (million tons) 1990 1999 2008 2010 2012 2015 2018 2020 6.7 5.7 4.0 4.2 2.1 1.7 1.87 1.7 1.5 1.6 1.3 SOx (million tons) 1990 1999 2008 2010 2012 2015 2018 2020 15.9 12.7 9.7 9.0 4.5 3.0 4.5 3.5 2.25 2.25 3.9 2.7 Mercury (tons) 1999 2008 2010 2012 2018 48 34 15 24 5 to 16 5 34 15 CO2 (billion tons) 1990 1999 2008 2010 2012 2020 2.1 2.3 2.8 3.2 2.6 2.3 2.05

9. CO2 Litigation: Is The 4TH “P” a “P”? • Pending Litigation to Force EPA to Regulate CO2 • D.C. Circuit Case: Is CO2 a “Pollutant” that EPA must regulate if it may reasonably be anticipated that CO2 causes or contributes to air pollution that endangers the public health or welfare? • If answer is yes, then further litigation lies in wait in which it will be asserted that EPA must regulate because EPA has assertedly already found that CO2 endangers the public health and welfare. • Other CO2 litigation

10. Is Air Pollution A Toxic Tort? Mercury • Utilities dragged into Thimerasol litigation • AEP-Texas sued for assertedly causing high mercury content in lake

11. Is Air Pollution A Toxic Tort? Particulate Matter “Estimated public health impacts of criteria pollutant air emissions from the Salem Harbor and Brayton Point Power Plants,” Levy and Spangler, Harvard School of Public Health, May 2000.

12. Is Air Pollution A Toxic Tort? Global Climate Change • Columbia Journal of Environmental Law, 1/28/03: “Warming Up To A Not So Radical Idea: Tort Based Climate Change Litigation” “This article…focuses on…applying tort law to hold fossil fuel companies and some of their reliant industries liable for at least some of the harms caused by global warming.” • Climate Change Programme

13. Kerry On The Environment • Kerry for President website: “True Environmental Hero The Senate’s Most Outspoken Environmentalists He has the Highest Score by the League of Conservation Voters (96%) of Any Presidential Candidate” “John Kerry has the courage to take on the polluters that are trying to gut our clean air and water laws.” • Supporter of Carper-Chafee, voted for McCain-Lieberman, would re-engage on Kyoto