STATE LAW RESOURCES, INC. FALL 2012 MEETING PANEL DISCUSSION: “The Future of Coal” Alexander Macia, Member S pilman Tho

1. STATE LAW RESOURCES, INC. FALL 2012 MEETING PANEL DISCUSSION: “The Future of Coal” Alexander Macia, Member SpilmanThomas & 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 • COAL BASICS • COAL USES • COAL FUTURE

3. I. COAL BASICS

4. COAL RESERVES ESTIMATED BY COUNTRY • U.S. 27.5% • Russia 18.3% • China 13.3% • Other Non OECD • Europe & Eurasia 10.7% • Australia & New Zealand 8.9% • India 7.0% • OECD Europe 6.5% • Africa 3.7% • Central & South America 0.9% • Rest of World 3.2% 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 * 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 1st 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. THE ENERGY MARKET REACTS • Coal Plant Retirements Since 2010 • 106 coal plants (319 units) • 42,895 MW (13%) of fleet) • Average age: 50 + years

14. PRICE PRESSURE INCREASES ON COAL PLANTS • 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….

15. INCREASED ENVIRONMENTAL REGULATIONS • 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