CAIR Talking Points

1. CAIR Talking Points

2. CAIR Talking Points • ARIPPAis a trade association representing the overwhelming majority of the waste coal power production industry in the country. • Alternate Energy Plants that generate electricity by utilizing Waste Coal are found in various Congressional Districts in Pennsylvania (PA), WV, UT, MO, and CA • Provide a unique environmental benefit by burning waste coal as fuel (removing a principal source of contamination to surface water and groundwater) and utilizing state-of-the-art, clean coal technology boilers (minimized air emissions) known as circulating fluidized bed (“CFB”) technology • Utilize coal refuse from both past and current mining activities, and thereby reclaim abandoned strip mines and abate acid mine drainage from waste coal piles at no cost to taxpayers. • On average: Directly employ 30-50 local taxpayers and Indirectly contractwith hundreds of local vendors and merchants; supply electricity for hundreds of thousands of local households; significantly affect the local economy, and increase energy diversification.

3. FACTORS LEADING TO THE DEVELOPMENT OF “BENEFICIAL USE” OF WASTE COAL: In 1978, Congress enacted “PURPA,” the Public Utility Regulatory Policies Act, to encourage “greater use of highly efficient low emitting co-generation technology “to meet nations electricity needs” • Technology, coordinated legislative activity, and private investors together developed a cost effective, environmentally friendly, “beneficial use” solution to the millions of tons of waste coal. • Electrical sales were guaranteed at an “avoided cost price” through Power Purchase Agreements (many such agreements have expired or will over the next decade) between large utility generators and the new alternate energy non-utility generators (the generating capacity size of these generators were purposely limited through PURPA) • Perceived to be a ‘win-win-win’ situation: political, business, consumer and environmental aspects. • From 1985 to 1995, most electric generating plants utilizing waste coalwere constructed • In 2001, PURPA was reaffirmed as a means to increase cogeneration capacity

4. CAIR Talking Points • FACTORS LEADING TO THE DILEMMA FACING THE “BENEFICIAL USE” OF WASTE COAL: • 1990 amendments to the Clean Air Act: many electric utility generating power plants were required to participate in the ‘Acid Rain Program’ for control of Sulfur Dioxide (SO2). • The Acid Rain Program established an allowable nationwide cap on SO2 emissions from regulated sources, and provided affected existing Utility Plants with emission “allowances” to demonstrate compliance with acid rain SO2 standards. • Congress specifically exempted from the Acid Rain Program the newer alternate energy plants developed under “PURPA”: • Recognition of clean-burning nature and benefits of energy diversification provided by these sources. • Desire to expand non-utility electric generation. • Although these sources were exempt from the Acid Rain program, they were made subject to NOx emission trading programs, developed initially by the Northeastern States (the OTC), and subsequently by EPA. These programs appropriately provided “allowances” to all affected sources, including the waste coal IPPs, necessary for compliance with the new programs.

5. CAIR Talking Points • In 2005, EPA promulgated the Clean Air Interstate Regulation (CAIR). • Intent to further reduce SO2 & NOx emissions from EGUs • Proposal includes electric generating plants utilizing waste coal(CFB’s) • The CAIR program included a NOx emission control program that is generally consistent with the earlier NOx trading programs applicable to EGUs -- affected sources are provided NOx allowances proportionate to their “baseline” heat input. • The CAIR program also included an SO2 emission control program. However, rather than using the approach applied in all other emission trading programs developed by EPA under Title I of the Clean Air Act, including the NOx provisions of CAIR, EPA linked the SO2 provisions of CAIR to the existing acid rain program. • EPA only partially incorporated the acid rain program -- sources that received allowance allocations under the Acid Rain program would continue to receive those allocations and could apply those toward compliance with CAIR. • However, EGUs exempt from the acid rain program would not be exempt from CAIR, but would receive no allowance allocation because they are exempt from the acid rain program. • Therefore, higher SO2 emitting sources will receive allowances under CAIR that are needed for compliance -- at not cost to these sources -- while lower emitting sources that Congress determined deserved preferential treatment under the acid rain program receive no allocation of allowances, solely because Congress determined that such sources should be exempt from the acid rain program. • In addition, for the first time under Title I of the Clean Air Act, EPA dictates to states that they have no real discretion in developing and implementing this SO2 trading program, but rather must use the acid rain program for CAIR implementation.

6. CAIR Talking Points • In order to comply with CAIR, plants that receive no acid rain allocation will have to: • Purchase allowances from electric utility generating power plants, (even though electric generating plants utilizing waste coal(CFB’s) are emitting SO2 at rates lower than these utility units). • Compete with electric utility generating power plants without ‘parity’ for emission expense purposes. Note: utility plants “compliance costs” will actually be “passed on” to the consumer rate payers…non utility plants cannot “pass on” costs! (Newer alternate energy non utility plants developed under “PURPA” (including “waste coal” plants) were ‘size limited’ from inception). • These alternate energy, non-utility plants lack the capacity to generate a revenue stream comparable to the larger electric utility generating power plants in order to afford purchasing allowances. (In fact, the larger electric utility generating power plants could conceivably withhold sales of allowances to eliminate any future competition)

7. WE SEEK AND ASK YOUR ASSISTANCE: • ARIPPA members do not oppose the promulgation of stringent air quality control regulations to ensure the adequate protection of human health and the environment…we only request and ask your assistance in the application of these regulations in an equitable and consistent matter, and not to unduly burden waste-coal fired sources . • ARIPPA requests that you consider both the unique nature of the CFB technology employed by the ARIPPA facilities, and the environmental benefit that these companies provide to our nation by combusting waste coal. In addition, the waste coal-fired sources are loweremitting than the coal-fired EGUs that receive preferential treatment from EPA under CAIR.

8. WE SEEK AND ASK YOUR ASSISTANCE: • We ask, therefore, for your assistance either through legislative efforts or regulatory revision to either: • Create parity through the granting of SO2 allowances based on baseline heat input rates -or- • Ensure that the acid rain program exemption is incorporated into the CAIR program.

9. WE SEEK AND ASK YOUR ASSISTANCE: • Unfortunately, to date, direct discussion with EPA has yielded no relief. ARIPPA has been placed in the uncomfortable yet necessary position of filing appropriate legal challenges; such legal challenge has received support from the PA Department of Environmental Resources as a “Friend of the Court” • Failure to ensure equitable and consistent application of the CAIR proposed program will significantly jeopardize future operation of waste coal, non utility plants developed under “PURPA” , without any plan in place to address the ongoing “waste coal” environmental problem.