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Environmental Regulatory Update

Sarah S. Markham, P.E.

Mercury Seminar, Birmingham, AL October 30, 2012

OverviewOverview

• Southern Company Environmental Program

• Current Industry Challenges

• MATS Litigation and Reconsideration

– Timeline

– Main Issues

• Other Air Regulatory Drivers

$0

$1,000

$2,000

$3,000

$4,000

$5,000

$6,000

$7,000

$8,000

$9,000

-100%

-80%

-60%

-40%

-20%

0%

20%

40%

60%

80%

100%

1990 1995 2000 2005 2010

No

min

al M

$

Perc

en

t C

han

ge f

rom

1990 L

ev

els

*

SO2 Emissions NOx Emissions Southern Company Generation Mercury Emissions* Population Carbon Dioxide Emissions Cumulative Environmental Capital Spending

-76%

-72%

-56%

41%

30%

$8.3B

Southern Company Emission Reductions Historical through 2011, Base Year 1990

* For Mercury, Percent Change from 2005 Levels

Challenges Facing the Industry

Regardless of business model, utilities are facing critical decisions with tremendous uncertainty.

• Federal Policy

– MATS timing starts the decisions – CSAPR/CAIR/NAAQS – CCBs/Ash – Water – GHG – Renewables – Environmental justice – Permitting – Litigation

• Commodity Costs

– Natural Gas – Coal

• Construction Issues

– Cost Uncertainty – Labor Cost/Availability – Materials – NIMBY (Transmission issues)

• Technology

– Emission Controls – Renewable Advancements – CCS – Disruptive Technology – Reserve Margins

• Other Issues

Considerations Decisions

Control/Retrofit Coal Units?

Retire Coal Units?

Add Transmission?

Install Gas?

Invest in Energy Efficiency?

Build Nuclear?

Invest in Renewables?

Hedge Fuel Prices?

Challenges and

Risks Coal prices

Natural gas prices

NSR/PSD permit

requirements

MATS compliance

Extensions

Final future

environmental

rules

Compliance order

requirements

Reliability

Customer impacts

Possible MATS Litigation & Reconsideration Schedule

30 Petitions for Review

White Stallion Energy Center, LLC

v. EPA

3 state (24 states total)

24 industry

3 private party

New Source MATS Issues

Severed 6/28

Expedited Briefing

Briefing Scheduled July

27- Oct. 4

Abeyance 9/12

Oral Argument

(Decision 2014)

Existing Source MATS Issues

Briefing Schedule 8/24

Briefing Oct. 23- April 8 Oral

Argument Decision

2012 2013

19 Petitions for Recons.

1 state

17 industry

1 enviros

New Source MATS Issues

Granted 7/20

Stay 8/2

3 Month Admin. Stay

Final Rulemaking

March 2013

Existing Source Issues

??????

Briefing

Summer 2013

• Industry

– Startup and shutdown definitions a work practice standards

– Unachievable new source limits

– “Appropriate and necessary” finding

– Facility averaging for Hg

– Various errors in the rule

• Vendors

– Inability to accurately measure Hg, PM, and/or HCl for new units

• Environmental Groups

– Filterable PM standard

– Use of parametric monitoring for PM

– Facility averaging provisions

– Use of work practice standards for organics

Major Issues Raised in Reconsideration Petitions

• Industry and States

– “Appropriate and necessary” finding

– Failure to distinguish area and major sources

– Existing source Hg standard

– Startup and shutdown work practice standards

– Refusal to set health-based standards for acid gases

– Denial of delisting petition

– Subcategories related to CFB, lignite, and pet-coke

– Public power specific issues

• Environmental Groups

– Facility wide emissions averaging alternative

– Monitoring for non-mercury metal HAPs

Major Issues Raised in Existing Source Litigation

Possible MATS Litigation & Reconsideration Schedule

30 Petitions for Review

White Stallion Energy Center, LLC

v. EPA

3 state (24 states total)

24 industry

3 private party

New Source MATS Issues

Severed 6/28

Expedited Briefing

Briefing Scheduled July

27- Oct. 4

Abeyance 9/12

Oral Argument

(Decision 2014)

Existing Source MATS Issues

Briefing Schedule 8/24

Briefing Oct. 23- April 8 Oral

Argument Decision

2012 2013

19 Petitions for Recons.

1 state

17 industry

1 enviros

New Source MATS Issues

Granted 7/20

Stay 8/2

3 Month Admin. Stay

Final Rulemaking

March 2013

Existing Source Issues

??????

Briefing

Summer 2013

• Cross-State Air Pollution Rule (SO2 and NOX reductions)

– Final rule in July 2011 with compliance slated for 2012

– August 21, 2012 CSAPR vacated by D.C. Circuit Court, EPA ordered to

continue administering CAIR, and the proceeding remanded to EPA

– EPA appealed October 5; Petitioner replies due Nov. 16

– Mandate has not issued

• National Ambient Air Quality Standards (NAAQS)

– Next Ozone NAAQS in 2014; EPA recommending a stringent standard

– New PM NAAQS in December 2012

– Stringent SO2 NAAQS finalized in 2010

Other Air Regulatory Highlights

Questions?