### Statement of Russ Lorince, VP of External Affairs, Arch Coal, Inc.

EPA Hearing: @ 3:55 p.m. July 31, 2014 at Moorhead Federal Building, Pittsburgh, PA 

### Docket Number EPA-HQ-OAR-2013-0602

Good afternoon, I am Russ Lorince, Vice President of External Affairs at Arch Coal's Eastern operations. Our company is one of the world's largest coal producers, selling 131 million tons of coal in 2013, representing roughly 14% of total U.S. coal supply. Arch's production originated from 22 active mines located in seven states operating in each of the major coal-producing regions of the U.S. Power generators' transform our abundant, affordable and reliable coal into a low-cost, stable flow of electricity on which the U.S. economy has been built — an economy which will be jeopardized by EPA's proposal. While all U.S. power plants are responsible for only four percent of global GHG emissions and EPA's proposal will reduce those emissions by less than one percent, the agency projects costs of $4.2 - 8.8 billion per year. In exchange for reducing coal utilization for power generation, the American consumer will have to eat rising electricity prices and suffer reduced electric grid reliability. EPA estimates that its proposal will increase electricity prices between six and seven percent nationally in 2020. While the nationwide average increase looks relatively small, it masks substantially higher increases in individual states. These increases will fall disproportionately on middle class and lower income families, which historically pay proportionally more of their income for electricity. These families are more likely to have more rD-R-A-F-T

children, spend more time at home, have homes with less insulation and appliances with lower efficiency ratings. The increases will also place an immense burden on U.S. businesses which employ those Americans, businesses which depend on affordable energy to provide a critical operating advantage in competitive global markets. Power supply in the U.S. is reliable because of adequate, non-intermittent baseload generating capacity, primarily fueled by coal. EPA proposes, at the expense of coal-fired generation, to increase the share of electricity generated from natural gas, which has a variety of alternative markets outside the power-generation sector. Natural gas is delivered to power plants via pipeline systems on a just-in-time basis and as witnessed during this past severe winter, delivery on particularly cold days can be constrained. In short, a dramatic move away from coal threatens the reliability of the electric power system. It is worthwhile to closely scrutinize what EPA interprets as constituting a Best System of Emission Reduction (BSER). Arch believes that Section 111(d) provides EPA only with narrow authority to set emissions standards based solely on emission reductions that can be achieved "inside-the-fenceline." As such, only the CO 2 emissions reductions resulting from actions taken under Building Block 1 may lawfully be recognized. Building Blocks 2 through 4 as proposed by the agency are "outside-the-fenceline," and the agency does not have the expansive statutory authority to recognize them as BSER. Even if permissible, is it feasible for the states to meet the required emissions reductions? Under Building Block 1, EPA posits that a six percent improvement in heat rates is possible by adopting operating and maintenance best practices and from equipment upgrades. EPA presumes that plant operators do not already run and maintain their facilities according to best

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practices so as to minimize unit power production costs. If they are already doing so, it cancels out projected heat rate improvement. Regarding equipment upgrades, the New Source review process makes equipment upgrades a risky, potentially litigious proposition for operators. Given these reasons, outside-the-fenceline actions as detailed under Building Blocks 2-4 are necessary for states to comply with the proposal. Each of the building blocks, however, is built on questionable assumptions. For example, Building Block 2, increased utilization of combined cycle natural-gas-fired power plants, presupposes that pipeline infrastructure is adequate or can be built to enable plants to operate at 70% capacity factors. Building Block 3 assumes that no units in the existing fleet of nuclear plants will retire, regardless of market conditions. As for renewables, EPA assumes their rapid growth, despite their intermittency making it progressively harder to balance load and run baseload plants efficiently. Finally, for Building Block 4, demand-side energy efficiency, EPA assumes that all states implement the necessary policies to achieve an annualized energy savings rate of 1.5%. Given the economic growth of the past decade,.it remains to be seen whether states will want to continue to embrace policies that inhibit the growth of their economies. In summary, EPA's proposal has no effective impact on reducing GHG emissions, imposes higher electricity costs on U.S. households and industry, threatens the reliability of the grid, and is neither permissible under existing law nor technically feasible. For these reasons, Arch respectfully requests that the agency withdraw its proposed plan. Thank you for your time and attention.

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