The Regulatory Tsunami

1. The Regulatory Tsunami Rich Trzupek Trinity Consultants, Inc.

2. “In 2010, total U.S. greenhouse gas emissions were 6,865.5 Tg or million metric tons CO2 Eq. Total U.S. emissions have increased by 11.0 percent from 1990 to 2010…” Source: USEPA DRAFT INVENTORY OF U.S. GREENHOUSE GAS EMISSIONS AND SINKS: 1990 – 2010 – Executive Summary

3. “In 2010, total U.S. greenhouse gas emissions were 6,865.5 Tg or million metric tons CO2 Eq. Total U.S. emissions have increased by 11.0 percent from 1990 to 2010…” Source: USEPA DRAFT INVENTORY OF U.S. GREENHOUSE GAS EMISSIONS AND SINKS: 1990 – 2010 – Executive Summary

4. GHG Reductions Continue • Directly Targeted Regulations & Programs • GHG Permitting & Limits • Regional Programs • Renewable Portfolio Standards • Renewable Subsidies/Grants/Other Wastes of Money • Indirectly Targeted Regulations • Ambient Air Standards • Industrial and Utility Boiler Rules • Aggressive Enforcement

5. Coal BAD! Gas Good

6. GHG Permitting • Targets plants with 100,000 tpy CO2e emissions or more • Roughly a 10 MW coal plant or larger • VERY small in power generation world • Plants must use “Best Available Control Technology” to reduce GHG emissions • Detailed guidance to permit authorities RIP COAL 300,000,000 BC to 2012 AD

7. GHG Limits • 1,000 lbs CO2e/MW Generated • Combined cycle gas can do • Coal can not • EPA dances around Clean Air Act • 30 year averaging! • Ignores financial reality RIP COAL You Kept Us Warm

8. Regional Programs • Regional Greenhouse Gas Initiative (East Coast) • Trading Program – active since 2009 • Midwest Greenhouse Gas Reduction Accord (Midwest) • Western Climate Initiative (West Coast) • More regional trading on the way? RIP COAL We Dead Dinos

9. Renewable Portfolio Standards

10. RPS Examples

11. Why Subsidies? Solar Wind Cost Gas Coal Nuclear Reliability

12. Obama’s Energy Policy I’m bound to find a parachute somewhere….

13. New Ambient Air Regs. • National Ambient Air Quality Standards (NAAQS) define “clean air” • A moving target • Keeps EPA, enviros and consultants in business • Big projects must model to show compliance • New short term Nitrogen Oxides (NOx) NAAQS • VERY stringent • Coal plants can’t meet • New short term Sulfur Dioxide (SO2) NAAQS • VERY stringent • Compliance by modeling, NOT monitoring! • Coal plants, refineries are targets

14. New Boiler Rules • Boiler MACT • Targets industrial boilers • Stated goal: reduce toxic emissions • Real goal: stick it to coal • Unrealistic emissions limits • Energy efficiency requirements • Will hurt manufacturing • Utility MACT • Targets utility boilers • Stated goal: reduce toxic emissions • Real goal: (see Boiler MACT) • Both rules put EPA in the control room for first time

15. Enforcement • Small coal boilers targeted too • Option 1: switch to biomass • Option 2: shut down • Option 3: enforcement • As rules pile on, enforcement opportunities grow • Less environmental return • BUT – keeps $ flowing in to EPA

16. Result • 50 – 80 GW of Coal Plant Retirements over next ~5 years • Natural Gas fired turbines to fill most of gap • Solar/Wind can’t be base-loaded • Natural Gas meets GHG standards • Natural Gas plants can be built quickly • Much more GHG reductions – 500,000,000 tons + • Natural Gas VERY cheap now, but: • Prices historically not as stable as coal • Current glut will create demand • Increased shale gas regulation can affect price • Grid stability issues? • Unlikely – cost certainty the bigger issue

17. Thank you!