UNITED STATES DISTRICT COURT FOR THE WESTERN DISTRICT OF TEXAS AUSTIN DIVISION UNITED STATES OF AMERICA, ) ) Plaintiffs, ) ) v. ) ) ALCOA INC., ) ) Defendant. ) ) C IVIL ACTION NO.

NEIGHBORS FOR NEIGHBORS, INC, ) ENVIRONMENTAL DEFENSE, ) PUBLIC CITIZEN, INC. ) ) Plaintiffs, ) ) ) v. ) ) ALCOA INC., ) ) Defendant. ) )

CONSENT DECREE C IVIL ACTION NO. A -01-CA-881-SSTABLE OF CONTENTS I. JURISDICTION AND VENUE ............................................3 I I A P P L I C A B I L I T Y .......................................................4 I I D E F I N I T I O N S ..........................................................4 IV POLLUTION CONTROLS AND REDUCTIONS .............................1 1 A. SELECTION OF POLLUTION REDUCTION APPROACH ..............1 1 B. INSTALLATION OF POLLUTION CONTROLS AT EXISTING SANDOW UNITS ...................................1 2 C. INSTALLATION OF REPLACEMENT SANDOW UNITS ...............1 5 D. SHUTDOW N OF EXISTING SANDOW UNITS .......................1 7 E

. I N T E R I M P O L L U T I O N R E D U C T I O N M E A S U R E S ....................1 7 F. NO x , SO 2 , AND PM EMISSIONS MONITORING ......................1 9 G

. S U R R E N D E R O F E M I S S I O N A L L O W A N C E S ........................2 2 V U S E O F E M I S S I O N A L L O W A N C E S ......................................2 5 VI PROHIBITION ON NETTING CREDITS OR OFFSETS FROM REQUIRED C O N T R O L S ..........................................................2 6 V I I P E R M I T S .............................................................2 7 V I I I R E S O L U T I O N O F P A S T C I V I L C L A I M S ..................................2 9 IX RESOLUTION OF FUTURE CIVIL CLAIMS - COVENANTS NOT TO SUE ......2 9 X P E R I O D I C R E P O R T I N G ................................................3 1 X I E N V I R O N M E N T A L M I T I G A T I O N P R O J E C T S .............................3 3 XII R EVIEW AND APPROVAL OF SUBMITTALS .............................3 7

iiX I I I C I V I L P E N A L T Y ......................................................3 7 X I V S T I P U L A T E D P E N A L T I E S ..............................................3 8 X V F O R C E M A J E U R E .....................................................4 4 X V I D I S P U T E R E S O L U T I O N ................................................4 7 XVII I NFORMATION COLLECTION AND RETENTION .........................5 0 X V I I I N O T I C E S .............................................................5 2 X I X S A L E S O R T R A

N S F E R S O F O W N E R S H I P I N T E R E S T S ......................5 4 X X M O D I F I C A T I O N ......................................................5 5 XXI ENFORCEMENT THROUGH TITLE V PERMIT ............................5 6 X X I I T E R M I N A T I O N .......................................................5 7 X X I I I G E N E R A L P R O V I S I O N S ...............................................5 7 XXIV S IGNATORIES AND SERVICE ..........................................6 0 XXV FINAL JUDGMENT ....................................................6 1

iiiW H EREAS, Alcoa Inc. (“Alcoa”), form erly the Alum inum Com p any of Am erica, is a Pennsylvania corporation that owns and operates certain alum inum sm elting facilities throughout the United States, including a sm elter com p lex in Milam County, Rockdale, Texas; W H EREAS, Alcoa also generates som e of the electricity f o r its Rockdale Sm elter f a cility by m eans of three electricity-generating units at the Rockdale facility known as Sandow Units 1, 2, and 3; W H EREAS, the United States of Am erica (“the United States”) on behalf of the United States Environm ental Protection Agency (“EPA”) is f iling with this Consent Decree a Com p laint against Alcoa, pursuant to Sections 113(b) and 167 of the Clean Air Act, 42 U.S.C. §§ 7413(b) and 7467, against Alcoa for injunctive relief and civil penalties for alleged violations of: the Prevention of Significant Deterioration (“PSD”) provi sions in Part C of Subpart I of the Act, 42 U.S.C. §§ 7470-92; and the federally-enforceable State Im plem entation Plan developed by the State of Texas (the “Texas SIP”), 30 T.A.C. § 116.160; W H EREAS, on October 23, 2001, Neighbors for Neighbors, Inc., Environm ental Defense, and Public Citizen, Inc., (collectively, the “Citizen Groups”) filed a notice of intent to sue Alcoa f o r declaratory and injunctive relief and civil penalties f o r violations of the Clean Air Act’s federal PSD regulations, 40 C.F.R. 52.21 et seq., the federal New Source Perform a nce Standards (“NSPS”), 40 C.F.R. § 60.1 et seq., and the Texas SIP, 40 C.F.R. 52.2270 et seq.; W H EREAS, the Citizen Groups filed their com p laint in this action on Decem ber 26, 2001 alleging violations of the Clean Air Act as set forth in their notice letter; W H EREAS, in both of these Com p laints, Plaintiffs allege, inter alia, that Alcoa f a iled to obtain the necessary perm its and install the controls necessary under the Act to reduce its sulfur

1dioxide, nitrogen oxides, and/or particulate m a tter em issions; W H EREAS, the Plaintiffs’ Com p laints allege claim s upon which relief can be granted against Alcoa under Sections 113, 167, and 304 of the Act, 42 U.S.C. §§ 7413, 7477, and 7604, and 28 U.S.C. § 1355; W H EREAS, on January 29, 2002 Alcoa provided an Answer to the Citizen’s Group Com p laint but has not answered or otherwise responded to the Com p laint of the United States in light of the settlem e nt m e m o rialized in this Consent Decree; W H EREAS, Alcoa denies the violations alleged in the Com p laints, m a intains that it has been and rem a ins in com p liance with the Act and is not liable f o r civil penalties or injunctive relief , and states that it is agreeing to the obligations im posed by this Consent Decree solely to avoid the costs and uncertainties of litigation and to im prove the environm ent; W H EREAS, on or before January 9, 2002, EPA provided Alcoa and the State of Texas with actual notice of Alcoa’s alleged violati ons, in accordance with Section 113(a)(1) of the Clean Air Act, 42 U.S.C. § 7413(a)(1); W H EREAS, on January 9, 2002, the Texas Com m i ssion on Environm ental Quality (“TCEQ”), then known as the Texas Natural Resource Conservation Com m i ssion, issued an adm i nistrative notice of enforcem ent to Alcoa i ndicating that Alcoa had violated Texas Health and Safety Code § 382.085; W H EREAS, the Parties recognize, and the Court by entering this Consent Decree finds, that this Consent Decree has been negotiated in good faith and at arm ’ s length and that this Consent Decree is fair, reasonable, consistent with the goals of the Act, and in the public interest;

2W H EREAS, the United States, the Citizen Groups and Alcoa support this settlem e nt and agree that the provisions of this Consent Decree are in the public interest; W H EREAS, the United States, the Citizen Groups, and Alcoa have consented to entry of this Consent Decree without trial of any issue; NOW , THEREFORE, without any adm i ssion of fact or law, and without any adm i ssion of the violations alleged in the Com p laint, it is hereby ORDERED, ADJUDGED, AND DECREED as follows: I. JURISDICTION AND VENUE 1. This Court has jurisdiction over the subject m a tter herein and over this action pursuant to 28 U.S.C. §§ 1331, 1345, 1355, and 1367, and pursuant to Sections 113, 167, and 304 of the Act, 42 U.S.C. §§ 7413, 7477 and 7604. This Court also has personal jurisdiction over Alcoa. 2. Venue is proper under Section 113(b) of the Act, 42 U.S.C. § 7413(b), and under 28 U.S.C. § 1391(b) and (c). Solely for the purposes of this Consent Decree and the underlying Com p laints, Alcoa waives all objections and defenses that it m a y have to the claim s set f o rth in the Com p laints, the jurisdiction of the Court, or to venue in this District. Alcoa and the Citizen Groups shall not challenge the term s of this Consent Decree or this Court’s jurisdiction to enter and enforce this Consent Decree. Upon entry, no Party shall challenge the term s of this Consent Decree. 3. The Court shall retain jurisdiction of this case af ter entry of this Consent Decree to enforce com p liance with the term s and conditions of this Consent Decree and to take any action necessary or appropriate for its enforcem ent, interpretation, execution,

3m odification, or adjudication of disputes. During the term of this Consent Decree, any Party m a y apply to the Court for any relief necessary to construe or effectuate this Consent Decree. II. APPLICABILITY 4. The provisions of this Consent Decree shall apply to and be binding upon the United States and the Citizen Groups, and upon Alcoa, its successors and assigns, as well as Alcoa’s of f i cers, em ployees, and agents solely in their capacities as such. 5. Alcoa shall provide a copy of this Consent Decree to all vendors, suppliers, consultants, contractors, agents, and any other com p any or other organization perform i ng any of the work described in Sections IV (Pollution Controls and Reductions) or XI (Environm ental Mitigation Projects) of this Consent Decree. 6. Notwithstanding any retention of contractors, subcontractors, or agents to perform any work required under this Consent Decree, Alcoa shall be responsible for ensuring that all work is perf orm e d in com p liance with th e requirem e nts of this Consent Decree. 7. In any action to enforce this Consent Decree, Alcoa shall not assert as a defense the failure of its officers, directors, em ployees, servants, agents, or contractors to take actions necessary to com p ly with this Consent Decr ee, unless Alcoa establishes that such failure resulted from a Force Majeure event as defined in this Consent Decree. III. DEFINITIONS 8. “30-Day Rolling Average Em ission Rate” for a Unit m eans and is calculated by (a)

sum m i ng the total pounds of pollutant in question em itted from the Unit during an Operating Day and the previous twenty-nine (29) Operating Days; (b) sum m i ng the total

4heat input to the Unit in m m B TU during the Operating Day and during the previous twenty-nine (29) Operating Days; and (c) dividing the total num ber of pounds of pollutants em itted during the thirty (30) Operating Days by the total heat input during the thirty (30) Operating Days, and (d) converting the resulting figure to lbs/m m B TU. A new 30-Day Rolling Average Em ission Rate shall be calculated for each new Operating Day. Each 30-Day Rolling Average Em ission Ra te shall include all periods of startup, shutdown, and Malfunction that occur during an Operating Day. A Malfunction shall be excluded from this Em ission Rate, however, if it is determ ined to be a Force Majeure Event and satisfies the Force Majeure provisions of this Consent Decree. 9. “30-Day Rolling Average Rem oval Efficiency” for a Unit m eans and is calculated by (a)

sum m i ng Rem oval Efficiency for a pollutant at a Unit during an Operating Day and the previous twenty-nine (29) Operating Days and (b) dividing sum by thirty (30). A new 30-Day Rolling Average Rem oval Efficiency shall be calculated for each new Operating Day. Each 30-Day Rolling Average Rem oval Efficiency shall include all periods of startup, shutdown, and Malfunction that occur during an Operating Day. A Malfunction shall be excluded from this Rem oval Efficiency, however, if it is determ ined to be a Force Majeure Event and satisfies the Force Majeure provisions of this Consent Decree. 10. “Act” or the “Clean Air Act” shall m ean the Federal Clean Air Act, 42 U.S.C. §§ 7401 through 7671q, and its im plem enting regulations. 11. “BACT” or “Best Available Control Technology” shall m ean the em ission lim itations determ ined by technical study, analysis, review, and selection of pollution control

recom m e ndations perform e d in connection with an application for a federal PSD perm it.

5Such study, analysis, review, and selection of recom m e ndations shall be carried out in conform a nce with all applicable federal and state regulations and guidance describing the process and analysis for determ ining BACT, as that term is defined in the Clean Air Act at 42 U.S.C. § 7479(3) and 40 C.F.R. § 52.21(b)(12), and in the Texas State Im plem entation Plan at 40 C.F.R. § 52.2270(c), and 30 T.A.C. § 116.160(a). 11. “CEMS” or “Continuous Em ission Monitori ng System ,” for obligations involving NO and SO 2 under this Consent Decree, shall m ean “CEMS” as defined in 40 C.F.R. § 72.2 and installed and m a intained as required by 40 C.F.R. Part 75. x

12. “Coal” shall include lignite. 13. “Com m e rcial Operation” shall m ean the generation of electricity for use at Alcoa’s Rockdale f acility or f o r sale within or outside of Alcoa. 14. “COMS” or “Continuous Opacity Monitoring System ” shall m ean equipm ent that

sam p les, analyzes, m easures, and provides, by readings taken at frequent intervals, a perm anent record of the opacity of Alcoa’s em issions, in accordance with 40 C.F.R. Part 60, Appendix B, Specification 1. 15. “Construction” shall m ean physical, on-site construction. 16. “Consent Decree” shall m ean this Consent Decree. 17. “Em i ssion Rate” shall m ean the num ber of pounds of pollutant em itted per m illion BTU of heat input (“lb/m m B TU”), m easured incom p liance with this Consent Decree. 18. “EPA” shall m ean the United States Environm ental Protection Agency. 19. “ESP” shall m ean electrostatic precipitator, a pollution control device for the reduction of particulate m a tter (PM).

620. “Existing Sandow Units” shall m ean the three lignite-fired, approxim a tely 125-MW electricity generating units operated by Alcoa at its Milam County, Rockdale, Texas facility as of the date of l odging of this Consent Decree. 21. “Flue gas desulfurization system ,” or “FGD,” m eans an add-on em ission control device used to rem ove sulfur dioxide (SO 2 ) from a Unit’s flue gas. 22. “Fossil fuel” shall m ean any hydrocarbon fuel, including Coal, petroleum coke, petroleum oil, lignite, or natural gas. 23. “lb/m m B TU” shall m ean pounds per m illion British Therm a l Units of heat input, based on higher heating value (“hhv”). 24. “MW ” m eans a m e gawatt, or one m illion W a tts. Each W a tt is a unit of power equal to

one am pere per volt. 25. “NO x ” shall m ean oxides of nitrogen, as m easured in com p liance with the provisions of this Consent Decree . 26. “NO x Allowance” shall m ean an authorization under state or federal law to em it an

am ount of nitrogen oxide, where each allowance can be sold, traded, or otherwise transf erred to achieve com p liance with state or f e deral em issions lim itations. 27. “NO x Em ission Rate” shall m ean the num ber of pounds of NO of heat input (“lb/m m B TU”), with no bypass of NO x em ission control equipm ent,

m easured as required by this Consent Decree. x em itted per m illion BTU

28. “NSR” shall m ean the nonattainm e nt area new source review program within the

m eaning of Part D of Subchapter I of the Act, 42 U.S.C. §§ 7510-7515, 40 C.F.R. Part 51, and 30 T.A.C. § 116.160

.

729. “Operating Day” shall m ean any calendar day in which Coal is com busted in the boiler of a Unit for m o re than 12 hours including periods of startup, shutdown, and Malfunction. If Coal is com busted for m o re than 12 but less than 24 hours during a calendar day, the calculation of that day' s em issions for the Unit shall be based upon the hourly CEMS data collected during hours in which Coal was com busted in the Unit, and shall not include any tim e in which Coal was not com busted. Any period of Malfunction shall be excluded f r om an Operating Day, however, if the Malf unction constitutes a Force Majeure Event and satisfies the Force Majeure provisions of this Consent Decree. 30. “Parties” shall m ean the United States, the Citizen Groups, and Alcoa. “Party” shall refer to any one of these Parties. 31. “Perm it Am endm ent” shall m ean the uncontested final agency action respecting Alcoa’s application, filed on Novem b er 1, 2002, to am end TCEQ Perm it No. 48437. A challenge by Alcoa of such final agency action shall render the final agency action “uncontested” for purposes of this Consent Decree. 32. “Plaintiffs” shall m ean the United States and the Citizen Groups. 33. “PM” shall m ean total particulate m a tter, as m easured in com p liance with the provisions of this Consent Decree. 34. “PM CEMS” or “PM continuous em ission m onitoring system ” shall m ean equipm ent that

sam p les, analyzes, m easures, and provides, by readings taken at frequent intervals, a perm anent record of PM em issions. 35. “PM Em ission Rate” shall m ean the average num ber of pounds of PM em itted per m illion BTU of heat input (“lb/m m B TU”), with no bypass of PM em ission control equipm ent, as

8m easured in com p liance with the provisions of this Consent Decree. 36. “Project Dollars” shall m ean Alcoa’s expenditures and paym ents incurred or m a de in carrying out the projects identif ied in Section XI (Environm ental Mitigation Projects) of this Consent Decree to the extent that such expenditures or paym ents both: (a) com p ly with the Project Dollar and other requirem e nts established in this Section of the Consent Decree f o r such expenditures and paym ents; and (b) constitute Alcoa’s docum ented external costs for contractors, vendors, as well as equipm ent, and its internal costs consisting of em ployee tim e, travel, and other out-of-pocket expenses specifically attributable to these particular projects and docum ented according to generally accepted accounting principles. 37. “PSD” shall m ean Prevention of Significant Deterioration within the m eaning of Part C, Subpart I of the Clean Air Act, 42 U.S.C. §§ 7470-7492 and 40 C.F.R. Part 52. 38. “Rem oval Ef f i ciency” shall m ean the percent reduction in the em itted m a ss of a pollutant achieved by a Unit’s pollution control device that Alcoa operates at a Unit. This percentage shall be calculated by subtracting the outlet Em ission Rate from the inlet Em ission Rate, dividing the dif f e rence by the inlet Em ission Rate, and then m u ltiplying the result by 100. 39. “Replacem ent Sandow Units” shall m ean the Units installed at Alcoa’s Rockdale operations in Milam County, Rockdale, Texas to replace the Existing Sandow Units, such that the new Units generate electricity through the use of a fluidized-bed boiler or other

com p arable technology that reduces NO x, SO 2 , and PM em issions, and that is in

com p liance with this Consent Decree and any other requirem e nts contained in any perm it

9issued by TCEQ to Alcoa for that Unit and with any other federal or state requirem e nts. The Replacem ent Sandow Units m a y utilize all existing ancillary equipm ent or system s necessary for the production of electricity, in cluding coal pulverizers or other equipm ent, but shall not use the existing lignite dryers after the shutdown of the Existing Sandow Units. 40. “SCR” shall m ean a pollution control device that em ploys selective catalytic reduction

x . technology for the reduction of NO 41. “SO 2 " shall m ean sulfur dioxide, as m easured in com p liance with this Consent Decree. 42. “SO 2 Allowance” shall m ean “allowance,” as defined at 42 U.S.C. § 7651a(3): an authorization, allocated to an affected Unit, by the Adm i nistrator of EPA under Subchapter IV-A of the Act, to em it, during or after a specified calendar year, one ton of sulfur dioxide. 43. “SO 2 Em ission Rate” shall m ean the pounds of SO 2 em itted per m illion BTU of heat input (“lb/m m B TU”), with no bypass of SO 2 em ission control equipm ent, m e asured as required by this Consent Decree. 44. “State” shall m ean the State of Texas. 45. “State Perm itting Process” shall m ean the perm itting procedures required by State regulations, which shall include, at a m i nim u m , (a) a BACT determ ination for the Unit(s) in question, and (b) public notice and comm e nt on the proposed perm it. 46. “TCEQ” shall m ean the Texas Com m i ssion on Environm ental Quality. 47. “Title V Perm it” shall m ean the perm it required of Alcoa’s m a jor sources under Subchapter V of the Clean Air Act, 42 U.S.C. §§ 7661-7661e and T.A.C. § 122.

1048. “Unit” shall m ean, collectively, the coal pulverizer, the stationary equipm ent that feeds coal to the boiler, the boiler that produces steam for the steam turbine, the steam turbine, the generator, the equipm ent necessary to operate the generator, steam turbine and boiler, and all ancillary equipm ent, including lignite dryers and pollution control equipm ent, or system s necessary for the production of electricity. IV. POLLUTION CONTROLS AND REDUCTIONS A. SELECTION OF POLLUTION REDUCTION APPROACH 49. W ithin twelve (12) m onths of the issuance of the Perm it Am endm ent, Alcoa shall select one of the three pollution reduction options set forth below for the Existing Sandow Units, and shall notify the Plaintiffs and TCEQ in writing as to which option Alcoa has selected for these Units:

a. the continued utilization of the Existing Sandow Units, and the installation of pollution control equipm ent at these Units in com p liance with Paragraphs 51 through 59 of this Consent Decree (“Option A”); b. the installation of Replacem ent Sandow Units for the Existing Sandow Units, with the installation and operation of pollution controls as required by the State Perm itting Process, in com p liance with Paragraphs 60 through 67 of this Consent Decree (“Option B”); or

c. the shutdown of the Existing Sandow Units, in com p liance with Paragraph 68 of this Consent Decree (“Option C”). 50. Af ter providing Plaintif f

s and TCEQ with wr itten notice of its selected approach, Alcoa shall im plem ent the selected approach in com p liance with the schedule set f o rth in this

11Consent Decree for that selected approach. B. INSTALLATION OF POLLUTION CONTROL EQUIPMENT AT EXISTING SANDOW UNITS - Option A 51. If Alcoa elects to continue to utilize its Existing Sandow Units under Option A in Paragraph 49, above, Alcoa shall install and operate pollution control equipm ent for such Units in com p liance with Paragraphs 52 through 59 of this Subsection, IV(B). i. NO x Em ission Lim its 52. By no later than the dates specified in the table below, Alcoa shall comm e nce physical, on-site construction and install and com m e nce operation of SCRs on the Existing Sandow Units in com p liance with the requirem e nts of this Consent Decree. Beginning on the dates specified below, Alcoa shall operate each SCR (or SCR-alternative technology approved by Plaintiffs pursuant to Paragraph 54 of this Consent Decree) to achieve and m a intain a 30-Day Rolling Average NO x Em ission Rate of no greater than 0.10 lb/m m B TU at each of these Units. Existing SandowUnit Unit 1 Unit 2 Unit 3 Construction Commencement Deadline J une 30, 2004 J une 30, 2005 S eptem b er 1, 2005 NO xCompliance Deadline

Decem ber 31, 2005 Decem ber 31, 2006 March 1, 2007 53. Alcoa shall continuously operate each SCR at all tim es that Alcoa operates such Units, except that, as long as Alcoa is m a xim i zing heat transfer to the SCR, Alcoa need not operate an SCR whenever the tem p erature of the flue gas at the SCR system inlet is less than the m i nim u m operating tem p erature specified by the SCR catalyst m a nufacturer.

12W ithin 30 days of executing a contract for each SCR, Alcoa shall provide to Plaintiffs the

m i nim u m operating tem p erature specified by the SCR catalyst m a nufacturer, as well as Alcoa’s and the catalyst m a nufacturer’s technical support and justification for this specified tem p erature. 54. Alcoa m a y install technology other than SCRs in satisfaction of the NO x control obligations of this Section if the alternative technology is designed to achieve the sam e or better NO x Em ission Rate required in Paragraph 52, above, and is approved in writing by Plaintiffs prior to the tim e a contract for its purchase is executed. ii. SO 2 Em ission Lim its 55. By no later than the dates specified in the table below, Alcoa shall comm e nce physical on-site construction and install and comm e nce operation of flue gas desulfurization system s (“FGDs”) on Existing Sandow Units in com p liance with the requirem e nts of this Consent Decree. Beginning on these sam e dates, Alcoa shall operate each FGD (or FGD-alternative technology approved by Plaintiffs pursuant to Paragraph 57 of this Consent Decree) to achieve and m a intain at each of these Units (a) a 30-Day Rolling Average SO 2 Em ission Rate of no greater than 0.20 lb/m m B TU and (b) a 30-Day Rolling Average Rem oval Efficiency of 95%. Existing Sandow Unit Unit 1 Unit 2 Unit 3 Construction Commencement Deadline J une 30, 2004 J une 30, 2005 S eptem b er 1, 2005 SO 2 Compliance Deadline

Decem ber 31, 2005 Decem ber 31, 2006 March 1, 2007

1356. Alcoa shall operate each FGD required by this Consent Decree at all tim es that the Unit it serves is in operation, except that following the startup of a Unit, Alcoa need not operate the FGD while the Unit it serves is not f i ring Coal. 57. Alcoa m a y install technology other than FGDs in satisfaction of the SO 2 control obligations of this Section if the alternative technology is designed to achieve the sam e or better SO 2 Em ission Rate and Rem oval Efficiency required in Paragraph 55, above, and is approved in writing by Plaintiffs prior to its installation. iii. PM Em ission Controls 58. Beginning on the dates specified in the table below, Alcoa shall com m e nce physical onsite construction and operate all necessary controls at each of the Existing Sandow Units to achieve and m a intain at each of these Units (a) a PM Em ission Rate of no greater than 0.030 lb/m m B TU and (b) an opacity lim it of 10 percent on a 6-m i nute average, with only those exceptions as allowed by law. Alcoa shall com p lete all necessary upgrades to the PM em ission control equipm ent at each of the Existing Sandow Units to ensure

com p liance with the PM Em ission Rate, opacity lim it and schedule. Existing Sandow Unit Construction Commencement Deadline PM Compliance Deadline Unit 1 J une 30, 2004 Decem ber 31, 2005 Unit 2 J une 30, 2005 Decem ber 31, 2006 Unit 3 S eptem b er 1, 2005 March 1, 2007 59. Alcoa shall operate the PM control equipm ent at all tim es that the Unit it serves is in operation.

14C. INSTALLATION OF REPLACEMENT SANDOW UNITS - Option B 60. If Alcoa elects to install the Replacem ent Sandow Units under Option B of Paragraph 49, above, Alcoa shall shut down the boilers at the Existing Sandow Units, and shall construct the Replacem ent Sandow Units in com p liance with Paragraphs 61 through 67 of this Subsection, IV(C). Alcoa shall install and operate em ission controls on each of the Replacem ent Sandow Units to achieve and m a intain the em ission lim itations established as BACT for SO 2 , NO x , and PM. 61. On Novem b er 1, 2002, Alcoa subm itted an application to am end the Voluntary Em issions Reduction Perm it (“VERP”) , TCEQ Perm it No. 48437 (“Perm it”). This

am endm ent application was subm itted to determ ine the appropriate pollution controls and other requirem e nts for each of the Replacem ent Sandow Units, and to com p ly with this Consent Decree’s State Perm itting Process requirem e nts f o r the construction and operation of the Replacem ent Sandow Units. 62. W ithin 30 days of EPA’s receipt of TCEQ’s issuance of an am endm ent to Alcoa’s VERP under the State Perm itting Process, EPA shall notify Alcoa and TCEQ if it wishes to dispute TCEQ’s determ ination of BACT in the Perm it Am endm ent. Such disputes shall be governed by Paragraph 147 in Section XVI (Dispute Resolution) of this Consent Decree. If EPA prevails in the dispute, Alcoa shall subm it a revised perm it application to TCEQ within 30 days that is consistent with the Court’s determ ination. If Alcoa prevails, it shall install pollution controls and achieve em ission reductions that com p ly with the requirem e nts of the perm it issued by TCEQ. 63. Regardless of the em ission rates and other lim itations set forth in the Perm it Am endm ent 15issued by TCEQ, Alcoa shall operate its Replacem ent Sandow Units to achieve and

m a intain 30-Day Rolling Average Em ission Rates that are no less stringent than the following 30-Day Rolling Average Em ission Rates: 0.10 lbs/m m B TU NO x , 0.20 l b s / mmB T US O 2 , and 0.015 lbs/m m B TU PM. Alcoa shall have six m onths from the

com m e ncem ent of com m e rcial operation of each Replacem ent Sandow Unit to achieve

com p liance with these Em ission Rates. 64. All em ission rates and lim itations within the Perm it Am endm ent, as well as all subsequent renewals and revisions of the requirem e nts in the Perm it Am endm ent, shall be enforceable under this Consent Decree by the United States and, subject to the lim itations of this Consent Decree, the Citizen Groups. 65. On or before forty-three (43) m onths after receiving the Perm it Am endm ent, Alcoa shall (a) begin operation of the first Replacem ent Sandow Unit in accordance with all State perm it requirem e nts and (b) shut down the sam e am ount of electricity generating capacity (in MW ) at the Existing Sandow Units as the electricity generating capacity of the first Replacem ent Sandow Unit. 66. On or before forty-seven (47) m onths af ter receiving the Perm it Am endm ent, but no later than Decem ber 31, 2007, Alcoa shall (a) operate each Replacem ent Sandow Unit in accordance with all State perm it requirem e nts and (b) com p lete the perm anent shutdown of all of the Existing Sandow Units. 67. No later than the dates specified in the table below, Alcoa shall comm e nce physical, onsite construction and operate all necessary controls at the Replacem ent Sandow Units to achieve and m a intain at each of these Units the em ission rates and other lim itations and

16requirem e nts in accordance with the State perm its. Unit Construction Commencement Deadline Commencement of Operation First Replacem ent Sandow Unit 19 m onths after Perm it Am endm ent issuance 43 m onths after Perm it Am endm ent issuance Other Replacem ent Sandow Units 23 m onths after Perm it Am endm ent issuance 47 m onths after Perm it Am endm ent issuance or by Decem ber 31, 2007, whichever is earlier

D. SHUTDOW N OF ELECTRICITY GENERATING UNITS - Option C 68. If Alcoa elects to shut down the Existing Sandow Units under Option C of Paragraph 49, above, Alcoa shall com p lete the shutdown of these Units by no later than Decem ber 31, 2006. E. INTERIM POLLUTION REDUCTION MEASURES i. NO x Reductions 69. Com m e ncing January 1, 2003, Alcoa shall operate low-NO x burners and overfire air on each of the Existing Sandow Units to achieve and m a intain a NO x Em ission Rate of no greater than 0.60 lbs/m m B TU and shall not em it m o re than 9,730 tons of NO x from all three Existing Sandow Units on a calendar year basis (“annual NOx tonnage lim itation”). The annual tonnage of NO x em itted by Alcoa in a calendar year shall be calculated using Alcoa’s NO x Em ission Rate(s) for that year in accordance with TCEQ Agreed Order No. 2000-0032-SIP. For periods of tim e less than a calendar year, com p liance with the annual NO x tonnage lim itation shall be determ ined on a prorated basis.

17ii. SO 2 Reductions and Fuel Lim itations 70. Alcoa shall not burn Coal or other Fossil Fuel having a sulfur content greater than any

am ount authorized by regulation or perm it at the Existing or Replacem ent Sandow Units. The sulfur content of Coal or other fuels shall be expressed as pound(s) of SO 2 per mmB T U( l b S O 2 / m m BTU) as determ ined by the testing requirem e nts described in TCEQ Agreed Order No. 95-0583-SIP, as inco rporated into the Texas SIP at 40 C.F.R. § 52.2270(c)(101). In addition, Alcoa shall not burn any fuel other than Coal, except as authorized by regulation or perm it, at the Existing or Replacem ent Sandow Units. 71. Beginning three m onths after the entry of this Consent Decree, Alcoa shall operate the Existing Sandow Units to lim it annual tons of SO 2 em itted to an am ount equal to or less than the product of 3.50 lbs of SO 2 /m m B TU m u ltiplied by the total annual heat input of lignite com busted at Alcoa’s Existing Sandow Units in a particular calendar year. For periods of tim e less than a calendar year, com p liance with this annual SO 2 tonnage lim itation shall be determ ined on a prorated basis. The obligation in this Paragraph term inates as follows: If Alcoa elects and com p lies with Com p liance Option A, Decem ber 31, 2005. If Alcoa elects and com p lies with Com p liance Option B, Decem ber 31 of the year Alcoa com m e nces Com m e rcial Operation of the first Replacem ent Sandow Unit. If Alcoa elects and com p lies with Com p liance Option C, Decem b er 31, 2006. iii. PM Reductions 72. W ithin 45 days after entry of this Consen t Decree and continuing thereafter, Alcoa shall operate each of the Existing Sandow Units to m a xim i ze PM em ission reductions, consistent with the operational and m a intenance lim itations of the Units. Specif i cally,

18Alcoa shall, at a m i nim u m : (a) energize each section of the ESP for each of the Existing Sandow Units, regardless of whether that action is needed to com p ly with opacity lim its, and (b) m a intain the energy or power levels delivered to the ESPs for each of the Existing Sandow Units to achieve the greatest possible rem oval of PM; and (c) m a ke best efforts to expeditiously repair and return to service transf orm e r-rectif ier sets when they f a il. iv. Opacity Com p liance 73. Beginning on the date of entry of this Consent Decree, Alcoa shall not allow em issions from the Existing Sandow Units to exceed an opacity lim itation of 30 percent on a 6-

m i nute average, with only those exceptions as allowed by law. 74. Alcoa shall dem onstrate com p liance with the interim opacity lim its in this Consent Decree with Continuous Opacity Monitors at each stack. F. NO x , SO 2 , AND PM EMISSIONS MONITORING 75. If Alcoa elects to install pollution controls on its Existing Sandow Units (Option A), Alcoa shall com m e nce operation of CEMS for NO x and SO 2 and PM, and COMS for opacity, no later than the date required by this Consent Decree for the comm e ncem ent of operation of the pollution control equipm ent at these Units. If Alcoa elects to install Replacem ent Sandow Units (Option B), Alcoa shall com m e nce operation of CEMS for NO x and SO 2 and PM, and COMS for opacity, no later than the date required by this Consent Decree for the com m e ncem ent of operation of the Replacem ent Sandow Units. If Alcoa elects to perm anently shut down the Existing Sandow Units (Option C), Alcoa shall not be required to install and operate CEMS for NO x and SO 2 and PM CEMS at any of

the existing Units.

1976. At least six (6) m onths prior to the installation of CEMS for NO x , SO 2, and PM, and COMS for opacity, at the Existing or Replacm ent Sandow Units, Alcoa shall subm it to EPA f o r approval pursuant to Section XII (Review and Approval of Subm ittals) a plan showing the proposed placem ent of the CEMS on these Units and the protocol that shall be followed in calibrating such CEMS. Upon approval by EPA, after EPA consults with the Citizen Groups and TCEQ, Alcoa shall install, calibrate, and operate the CEMS in

com p liance with the EPA-approved protocol and all applicable statutes, regulations, and EPA guidance governing such CEMS. EPA shall approve or disapprove the plan within 180 days of receipt. 77. Following installation of each CEMS for NO x , SO 2, and PM at the Existing or Replacem ent Sandow Units, Alcoa shall include in its periodic reports to the Plaintiffs pursuant to Section X (Periodic Reporting) of this Consent Decree all data recorded by the CEMS in electronic form at. A. For purposes of determ ining com p liance with the NO x Em ission Rates in this Consent Decree, Alcoa shall m easure all NO x em issions using CEMS certified and operated in com p liance with 40 C.F.R. Part 75 and the NO x CEMS protocol subm itted by Alcoa and approved by EPA. B. For the purposes of determ ining com p liance with the SO 2 Em ission Rates in this Consent Decree, Alcoa shall m easure all SO 2 em issions using CEMS certified and operated in com p liance with 40 C.F.R. Part 75 and the SO 2 CEMS protocol subm itted by Alcoa and approved by EPA. C. For the purposes of determ ining com p liance with the PM Em ission Rates in this

20Consent Decree, Alcoa shall m easure PM em issions using stack testing and the reference m e thods in 40 C.F.R. Part 60; provided, however, that Alcoa shall

m easure PM em issions using PM CEMS once EPA issues a final rulem a king prom ulgating a reference m e thod or m e thods for PM CEMS. Alcoa shall install and calibrate such PM CEMS protocol subm itted by Alcoa and approved by EPA. 78. Beginning in 2003, and sem i -annually every calendar year thereafter until one year after the PM CEMS required by Paragraphs 75 are operational (or, if Alcoa elects Option C, until Alcoa shuts down the Existing Sandow Units), Alcoa shall conduct stack testing for PM em issions at the Existing and Replacem ent Sandow Units in com p liance with the reference m e thod and em ission calculation set forth in Paragraph 77, above, the requirem e nts set forth in Alcoa’s perm its issued by TCEQ, and State regulations. A. Alcoa shall calculate the PM Em ission Rates f r om all stack tests in com p liance with 40 C.F.R. § 60.8(f). B. Alcoa shall report to EPA the results of its stack tests within 60 days of conducting such tests, unless EPA provides Alcoa with additional tim e in which to subm it such test results. Alcoa’s stack tests conducted as required by its perm its from the State of Texas m a y be used to satisfy the annual stack test requirem e nt im posed by this Paragraph. 79. For the purposes of determ ining com p liance with the opacity lim its in this Consent Decree, Alcoa shall m a intain, calibrate and operate Continuous Opacity Monitors to

m easure accurately the opacity of em issions at the Existing Sandow Units (and, if Alcoa elects Option B, the Replacem ent Sandow Units) in com p liance with the requirem e nts

21found at 40 C.F.R. Part 60, Appendix B, Specification 1 and Part 75. G. SURRENDER OF EMISSION ALLOW ANCES 80. The requirem e nts of Paragraphs 81 through 87 of this Subsection regarding the surrender of em ission allowances shall apply only to the extent that the Units participate in a state or federal em issions trading program such as the Acid Rain Program under Title IV of the Act. 81. For purposes of this Subsection, the term “surrender of allowances” m eans perm anently surrendering allowances from the Existing Sandow Units or Replacem ent Sandow Units accounts adm i nistered by EPA or the State of Texas so that such allowances can never be used to m eet any com p liance requirem e nt under the Clean Air Act, the Texas State Im plem entation Plan, or this Consent Decree. i. Surrender of SO 2 Allowances 82. Beginning during the year specified in Paragraph 55 for the comm e ncem ent of operation of an FGD on each Existing Sandow Unit if Alcoa elects Option A, or beginning during the year specified in Paragraphs 65 and 66 for the comm e ncem ent of the Replacem ent Sandow Units if Alcoa elects Option B, Alcoa shall retain SO 2 Allowances for those Units only for purposes of com p liance with federal law, and shall surrender all other SO 2 Allowances. Alcoa shall not sell, trade, or otherwise transfer any SO 2 Allowances to a third party or use such SO 2 Allowances in any other f acility owned or operated by Alcoa or by any affiliate of Alcoa, except as provided in Paragraph 89, below. By March 30 of the year following the calendar year for which the SO 2 Allowances were allocated, Alcoa shall surrender to the EPA any SO 2 Allowances required to be surrendered under this

22Consent Decree, or transfer them to a non-profit third party selected by Alcoa for purposes of surrender. 83. If any SO 2 Allowances are transferred directly to a non-profit third party, Alcoa shall subm it a report of such transfer to Plaintiffs within seven (7) business days of such transfer, in com p liance with Section XVIII (No tices) of this Consent Decree. Such report shall: (i) provide the identity of the non-profit third-party recipient(s) of the SO 2 Allowances and a listing of the serial num bers of the transferred SO 2 Allowances; and (ii) include a certif ication by the third-party recipient(s) stating that the recipient will not sell, trade, or otherwise exchange any of the SO 2 Allowances and will not use any of the SO 2 Allowances to m eet any obligation im posed by any environm ental law. Alcoa shall also dem onstrate, in the periodic reports subm itted to EPA pursuant to Section X (Periodic Reporting) of this Consent Decree, that the third-party recipient(s) surrendered the SO 2 Allowances f o r perm anent surrender to EPA within one year af ter Alcoa transf erred the SO 2 Allowances to them

. Alcoa shall not have com p lied with the SO 2 Allowance surrender requirem e nts of this Paragraph until all third-party recipient(s) shall have actually surrendered the transferred SO 2 Allowances to EPA for surrender. 84. For all SO 2 Allowances surrendered to EPA, Alcoa shall first subm it an SO 2 Allowance transfer request form to EPA’s Office of Ai r and Radiation’s Clean Air Markets Division directing the transfer of the SO 2 Allowances held or controlled by Alcoa to the EPA Enforcem ent Surrender Account or to any other EPA account that the Agency m a y direct. As part of subm itting these transf er requests, Alcoa shall irrevocably authorize the transfer of these SO 2 Allowances and identify -- by nam e of account and any applicable

23serial or other identification num bers or station nam e s -- the source and location of the SO 2 Allowances being surrendered. ii. Surrender of NO x Allowances 85. Beginning during the year specified in Paragraphs 52 for the comm e ncem ent of operation of an SCR on each Existing Sandow Unit if Alcoa elects Option A, or beginning during the year specified in Paragraphs 65 and 66 for the comm e ncem ent of the Replacem ent Sandow Units if Alcoa elects Option B, Alcoa shall retain NO x Allowances for those Units only for purposes of com p liance with federal law, and shall surrender all other NO x Allowances. Alcoa shall not sell, trade, or otherwise transfer any NO x Allowances to a third party or use such NO x Allowances in any other f acility owned or operated by Alcoa or by any affiliate of Alcoa, except as provided in Paragraph 89, below. By March 30 of the year following the calendar year for which the NO x Allowances were allocated, Alcoa shall surrender to the EPA (or to the State, if the State is the authority granting the NO x Allowances) any NO x Allowances required to be surrendered under this Consent Decree, or transfer them to a non-profit third party selected by Alcoa for purposes of surrender. 86. If any NO x Allowances are transferred directly to a non-profit third party, Alcoa shall subm it a report of such transfer to Plaintiffs within seven (7) business days of such transfer, in accordance with Section XVIII (Noti ces) of this Consent Decree. Such report shall: (i) provide the identity of the non-profit third-party recipient(s) of the allowances and a listing of the serial num bers of the transferred NO x Allowances; (ii) dem onstrate that the third-party recipient(s) will not sell, trade, or otherwise exchange any of the NO x Allowances; (iii) dem onstrate that the third party recipient(s) will not use any of the NO x

24Allowances to m eet any obligation im posed by any environm ental law; and (iv) dem onstrate that the third-party recipient(s) will surrender the NO x Allowances for perm anent surrender to EPA within one year after Alcoa transfers the NO x Allowances to the third-party recipient(s). Alcoa shall not have com p lied with the NO x Allowance surrender requirem e nts of this Paragraph until all third-party recipient(s) shall have actually surrendered the transferred NO x Allowances to EPA for surrender. 87. For all NO x Allowances surrendered to EPA, Alcoa shall first subm it a NO x Allowance transfer request form to EPA’s Office of Ai r and Radiation’s Clean Air Markets Division directing the transfer of the NO x Allowances held or controlled by Alcoa to the EPA Enforcem ent Surrender Account or to any other EPA account that the Agency m a y direct. As part of subm itting these transf er requests, Alcoa shall irrevocably authorize the transfer of these NO x Allowances and identify - by nam e of account and any applicable serial or other identification num bers or station nam e s - the source and location of the NO x Allowances being surrendered. V. USE OF EMISSION ALLOWANCES 88. For any and all actions taken by Alcoa pursuant to the term s of this Consent Decree,

x or SO 2 Allowances in any em ission trading

or m a rketing program of any kind. Alcoa shall not use or sell any resulting NO

89. Nothing in this Consent Decree shall preclude Alcoa from using, selling, or transferring

em ission allowances allocated to the Existing Sandow Units or to the Replacem ent Sandow Units arising from either: (a) Alcoa’s em ission reductions at these Units that occur prior to the date of entry of this Consent Decree; or (b) Alcoa’s em ission

25reductions at these Units to the extent that they go beyond the requirem e nts of this Consent Decree and that occur after the date of entry of this Consent Decree. If Alcoa elects Option B, for exam ple, Alcoa m a y use, sell, or transfer NO x or SO 2 Allowances allocated to the Replacem ent Sandow Units to the extent that Alcoa reduces its NO x or SO 2 em issions beyond the reductions required by this Consent Decree. 90. Nothing in this Consent Decree shall preclude Alcoa from purchasing em ission allowances from another source or obtaining th em from the EPA or any state with respect to facilities other than Sandow for purposes of com p lying with state or federal Clean Air Act requirem e nts. VI. PROHIBITION ON NETTING CREDITS OR OFFSETS FROM REQUIRED CONTROLS 91. For any and all actions taken by Alcoa to com p ly with the term s of this Consent Decree, including but not lim ited to the upgrade or installation of particulate m a tter controls, FGDs, and SCRs, any em ission reductions generated shall not be considered as a creditable contem poraneous em ission decrease f o r the purpose of obtaining netting credits or offsets under the Act’s PSD or NSR program s. This prohibition shall not prohibit Alcoa from seeking to am end its existing VERP for any and all actions taken by Alcoa to com p ly with the term s of this Consent Decree under Option B, including the construction of Replacem ent Sandow Units, any em ission reductions generated shall be considered as a creditable contem poraneous em ission decrease for the purpose of obtaining netting credits or offsets under the Act' s PSD or NSR program s solely to the extent that such credits are necessary under the State Perm itting Process for authorization of the Perm it Am endm ent. In addition, this prohibition shall not preclude Alcoa from 26applying em ission decreases from the elim ination of its lignite dryers to potential

em ission increases from any ancillary equipm ent at the source necessary for the operation of the Replacem ent Sandow Units. VII. PERMITS Tim e ly Application f o r Perm its 92. Except as otherwise stated in this Cons ent Decree, in any instance where otherwise applicable law or this Consent Decree requires Alcoa to secure a perm it to authorize the construction, m odification, or operation of any Unit or Unit com ponent under this Consent Decree, Alcoa shall m a ke such application in a tim ely and com p lete m a nner. Such applications shall be com p leted and subm itted to the appropriate authorities to allow sufficient tim e for all legally required processing and review of the perm it request. Any failure by Alcoa to subm it a tim ely perm it application for the Existing Sandow Units or Replacem ent Sandow Units shall bar any use by Alcoa of the Force Majeure provisions of this Consent Decree to allege that it failed to install or operate a Unit as required by this Consent Decree because a perm itting authority failed to issue a necessary perm it in a tim ely m a nner. Nothing in this Consent Decree shall be construed to relieve Alcoa of any obligation to com p ly with Texas’s perm itting requirem e nts pursuant to 30 Tex. Adm i n. Code. § 116. Title V Perm its

. 93. W ithin sixty (60) days of entry of this Consent Decree, Alcoa shall am end its existing Title V Perm it application covering the Existing Sandow Units or apply for an

am endm ent of its Title V Perm it covering the Existing Sandow Units, to include a

27schedule for interim perform a nce, operational, m a intenance, and control technology requirem e nts established by this Consent Decree, including but not lim ited to em ission lim its, lim its on fuel use, and operation and m a intenance requirem e nts. 94. W ithin sixty (60) days after comm e ncem ent of operation of each pollution control device in Section IV (Pollution Controls and Re ductions) of this Consent Decree, and in

com p liance with 30 Tex. Adm i n. Code § 122, Alcoa shall subm it a proposed

m odif i cation to its Title V perm it f o r the Rockdale f acility to ref l ect the em ission lim itations and other requirem e nts for each Sandow Unit as set forth in Section IV, which shall becom e federally-enforceable under Alcoa’s Title V perm it once it is m odified. Such proposed m odification shall include, to the extent applicable, the surrender of allowances under Subsection IV(G) (Surrender of Em ission Allowances) of this Consent Decree. Alcoa shall also include the em ission lim itations and other requirem e nts in Section IV of this Consent Decree in any subsequent renewal or revision of its Title V perm it. 95. Except as this Consent Decree requires a State Perm itting Process for the replacem ent of the Existing Sandow Units with Replacem ent Sandow Units, this Consent Decree shall not be construed to require Alcoa to apply for or obtain a perm it pursuant to Parts C and D in Title I of the Clean Air Act f o r any work perf orm e d by Alcoa within the scope of the Resolution of Claim s provisions of Paragraphs 96 and 97, below. Nothing in this Consent Decree shall be construed to relieve Alcoa of any obligation to com p ly with Title V of the Clean Air Act and TCEQ’s im plem enting regulations.

28VIII. RESOLUTION OF PAST CLAIMS 96. Com p liance with this Consent Decree shall re solve Alcoa’s civil liability f o r violations at the Existing Sandow Units that have arisen from its actions at these Units prior to the date on which this Consent Decree is lodge d with the Court of: (a) the Prevention of Significant Deterioration (“PSD”) or Non- Attainm e nt New Source Review (“NSR”) provisions of Parts C and D in Title I of the Clean Air Act; and (b) the Federally-enforceable PSD and NSR provisions incorporated into 30 Tex. Adm i n. Code § 116.160. IX. RESOLUTION OF FUTURE CIVIL CLAIMS - COVENANTS NOT TO SUE 97. As long as Alcoa rem a ins in com p liance with the deadlines contained in Section IV (Pollution Controls and Reductions) of this Consent Decree, and subject to the lim itations specified in Paragraphs 98 and 99, the Plaintiffs covenant not to sue Alcoa and its successors and assigns for civil claim s arising from the PSD or Nonattainm e nt NSR provisions of Parts C and D in Title I of the Clean Air Act, 42 U.S.C. § 7401 etseq ., at the Existing Sandow Units or Replacem ent Sandow Units based on failure to obtain PSD or Nonattainm e nt NSR perm its for:

a. physical changes or changes in the m e thod of operation at the Existing Sandow Units or the Replacem ent Sandow Units, after the date of lodging of this Consent Decree, that this Consent Decree expressly directs Alcoa to undertake; or b. physical changes or changes in the m e thod of operation at the Existing Sandow Units or the Replacem ent Sandow Units, after the date of lodging of this Consent Decree, that are not required by this C onsent Decree, if and only if Alcoa is

29otherwise in com p liance with: Section IV (Pollution Controls and Reductions), other than the 30-Day and PM Em ission Rates contained in Paragraphs 52, 55, and 58 (if Alcoa elects Option A) and Pa ragraphs 60, 62, and 63 (if Alcoa elects Option B); and Section VII (Perm its) of this Consent Decree. Lim itations on the Future Covenant Not To Sue 98. The covenant not to sue in Paragraph 97 does not apply to physical changes or changes in the m e thod of operation, either individually or collectively for a Unit, at the Existing Sandow Units or the Replacem ent Sandow Units which constitute a “m odification” as determ ined according to 40 C.F.R. § 60.14(h), and which increase by m o re than 10 percent the m a xim u m hourly em ission rates for NO x , SO 2 , or any other pollutant regulated under the applicable New Source Perform a nce Standard. 99. Notwithstanding any other provisions of this Consent Decree, the covenant not to sue in Paragraph 97 shall continue in effect until, and term inate on, Decem ber 31, 2009, and is without any force or effect as to any phys ical change or change in the m e thod of operation of a Unit com m e nced or com p leted after that date. Effect of this Section on Alcoa

. 100. This Section of the Consent Decree does not: (a) im pose any affirm ative obligation on Alcoa; (b) preclude Alcoa from obtaining a PSD or Nonattainm e nt NSR perm it for a

m odification of a Unit that would be subject to the lim itations contained in Paragraphs 98 and 99 of this Section; or (c) relieve Alcoa of any obligation im posed on it by other Sections of this Consent Decree.

30X. PERIODIC REPORTING 101. W ithin 180 days after each date established by this Consent Decree for Alcoa to achieve and m a intain a certain Em ission Rate or lim it at the Existing Sandow Units or the Replacem ent Sandow Units, Alcoa shall: (a) conduct perform a nce tests to determ ine its

com p liance with the Em ission Rate or lim it required by this Consent Decree; and (b) subm it the results of the perform a nce test to EPA, TCEQ, and the Citizen Groups at the addresses specified in Section XVIII (Notices) of this Consent Decree. 102. Beginning thirty days after the end of the first full calendar quarter following the entry of this Consent Decree and continuing on a sem i -annual basis, Alcoa shall subm it to the Plaintiffs a report containing the following inform ation:

a. all inf o rm ation necessary to determ in e com p liance with Section IV (Pollution Controls and Reductions) of this Consent Decree; b. all inf o rm ation necessary to determ ine whether Alcoa has com p lied with the future covenant restriction and reopener contained in Paragraph 98; and

c. all inf o rm ation relating to em ission allowances and credits that Alcoa claim s to have generated in accordance with Paragraph 89 by com p liance beyond the requirem e nts of this Consent Decree. 103. In any periodic progress report subm itted pursuant to this Section, Alcoa m a y incorporate by reference inform ation previously subm itted under its Title V perm itting requirem e nts, provided that Alcoa attaches the Title V perm it report and provides a specif i c ref e rence to the provisions of the Title V perm it report that are responsive to the inform ation sought in the periodic progress report.

31104. In addition to the progress reports required pursuant to this Section, Alcoa shall report to the Plaintiffs any violation of the requirem e nts of this Consent Decree, including excedances of the required Em ission Rates, within 10 days of when Alcoa knew or should have known of any such violation or excedance. In this report, Alcoa shall explain the cause or causes of the violation or excedance and all m easures taken or to be taken by Alcoa to prevent such event in the future. Alcoa shall also report, in the periodic progress reports subm itted pursuant to this Section, any violations of this Consent Decree that Alcoa anticipates regarding the deadlines for installing and

com m e ncing operation of any new or upgraded pollution control device required by this Consent Decree. 105. Each Alcoa report shall be signed by Alcoa’s Rockdale Power and Mine Manager, or, in his or her absence, a higher ranking official, and shall contain the following certification: This inform ation was prepared either by m e or under my direction or supervision in accordance with a system designed to assure that qualified personnel properly gather and evaluate the inform ation subm itted. Based

on my evaluation, or the directions and my inquiry of the person(s) who

m a nage the system , or the person(s) directly responsible for gathering the inform ation, I hereby certify under penalty of law that, to the best of my knowledge and belief, this inform ation is true, accurate, and com p lete. I understand that there are significant penalties for subm itting false, inaccurate, or incom p lete inform ation to the United States. 106. If any allowances are surrendered to any th ird party pursuant to Subsection IV(G) of this

32Consent Decree, the third party’s certification shall be signed by a m a naging officer of the third party and shall contain the following language: I certify under penalty of law that _____________ [nam e of third party] will not sell, trade, or otherwise exchange any of the allowances and will not use any of the allowances to m eet any obligation im posed by any environm ental law. I understand that there are significant penalties for

m a king false, inaccurate, or incom p lete inform ation to the United States. XI. ENVIRONMENTAL MITIGATION PROJECTS 107. W ithin 30 days of entry of this Consent Decree, Alcoa shall deposit the sum of $2,500,000 into an interest bearing escrow account within the Court registry. Such

am ount and all accrued interest shall be dedicated to the environm ental m itigation projects set forth in this Section of the Consent Decree. 108. W ithin 60 days of entry of this Consen t Decree Alcoa shall direct the Court escrow registry to provide funding in the am ount of $1,750,000, plus accrued interest, to the Trust for Public Land for the purchase and/or m a intenance of property and/or conservation easem ents designed to extend and protect the clean air and existing Houston toad habitat of the "Lost Pines" and Post Oak Savannah areas of Bastrop and Lee Counties in Central Texas. Alcoa shall further specify in its directions to the Court escrow registry the following: A. All purchases or projects undertaken with these funds by the Trust for Public Land m u st first be approved by Pines & Prairies Land Trust; B. All deeds and easem ents purchased by the Trust for Public Land m u st be held

33jointly by the Pines & Prairies Land Trust and the Trust for Public Land; C. the Trust for Public Land m a y convey its property interest to Pines and Prairie Land Trust; and D. The Trust for Public Lands and the Pines & Prairies Land Trust m a y not

encum b er any property or property interest acquired pursuant to this Consent Decree with any deed of trust, m o rtgage, pledge, security interest, or other lien or interest of sim ilar nature granted to secure any loan, financing or other indebtedness (referred to herein as a "Lien"). The Trust for Public Land and Pines and Prairie Land Trust m u st encum b er each property and easem e nt acquired pursuant to this Consent Decree with a restrictive covenant prohibiting the grant of any Lien upon such property or easem ent, and further providing that the grant of any such Lien shall be null and void, ab initio. The restrictive covenant m a y be created in the deed for the acquisition of the property or easem ent, or created in a separate instrum e nt recorded in the appropriate real property records, and shall provide that it is enforceable by the Trust for Public Lands, the Pines & Prairies Land Trust, and the Parties. Furtherm ore, the Trust for Public Lands and the Pines & Prairies Land Trust shall create a conditional lim itation in each acquisition of property pursuant to the Consent Decree (either in the deed or by separate instrum e nt recorded in the appropriate real property records) providing that, for the seventy-five (75) year peri od following such acquisition, if either the Trust for Public Lands or the Pines & Prairies Land Trust dissolve, becom e insolvent, or grants or attem p ts to grant a Lien upon any property interests

34acquired pursuant to this Consent Decree (a "Dissolving/Defaulting Trust Entity"), then the subject property interest, if held by the Dissolving/Def aulting Trust Entity, shall autom a tically revert to and vest in the other trust entity (the "Conform i ng Entity") without the necessity of any further act on the part of or behalf of either entities. If for any reason this conditional lim itation does not create a determ inable estate, then it shall be deem ed to grant and create in the Conform i ng Entity an option to purchase such property interest for $10.00. 109. W ithin 60 days of entry of this Consent Decree, Alcoa shall direct the Court escrow registry provide funding in the am ount of $750,000, plus accrued interest, to im plem ent a school bus em ission reduction program for the greater Austin, Texas area sim ilar to the Adopt-A-School-Bus program in the Dallas, Texa s area. W ithin 120 days of entry of this Consent Decree, the Parties shall agree on an adm i nistrator (the “Adm inistrator”) f o r this school bus em ission reduction program

. The school bus em ission reduction program shall cover at least the following counties: Milam , Lee, Bastrop, Caldwell, Hays, Travis, and W illiam s on. In providing this funding, Alcoa shall specify that the following conditions m u st be m e t:

a. $700,000 is to be used directly for bus im provem e nt projects and not for any adm i nistrative costs; b. W h ile the Adm i nistrator m a y use adm i nistrative funds for the greater Austin program , with respect to the funds specified in Subparagraph (a) above, the Adm i nistrator shall first seek to obtain em ission reductions from the school bus fleets for the public school districts in Rockdale Independent School District,

35Lexington Independent School District, Elgin Independent School District, Cam e ron Independent School District, a nd McDade Independent School District. If any funds rem a in, the Adm i nistrator shall obtain em ission reductions from school bus fleets in other public school districts in Milam , Lee, and Bastrop Counties, in that order;

c. The Adm i nistrator shall expend the funds in a way to m i nim i ze the cost per unit of pollution reduced from the school bus fleets identified in Subparagraph (b) above; and d. The school bus im provem e nt projects funded m u st be other than those already required by law or already under contract. 110. All plans and reports prepared by Alcoa pursuant to the requirem e nts of this Section of the Consent Decree shall be publicly available without charge. 111. Alcoa shall certify, as part of each plan subm itted to Plaintiffs for any Mitigation Project, that it is unaware that any person other than Alcoa is required by law to perform the Project described in the plan. 112. Alcoa acknowledges that it will receive credit for the expenditure of such funds as Project Dollars only if Alcoa dem onstrates that the funds have been actually spent by either Alcoa or by the person or instrum e ntality receiving them , and that such expenditures m e t all requirem e nts of this Consent Decree. 113. No later than the periodic report due sixty (60) or m o re days following the com p letion of each approved Project, Alcoa shall subm it to Plaintiffs for review and approval pursuant to Section XII (Review and Approval of Subm ittals) of this Consent Decree a report that

36docum ents the date that all aspects of the project were im plem ented, Alcoa’s results in im plem enting the project, including the em ission reductions or other environm ental benefits achieved, and the Project Dollars expended by Alcoa in im plem enting the project. XII. REVIEW AND APPROVAL OF SUBMITTALS 114. Alcoa shall subm it a com p lete plan, report, or other item to EPA, TCEQ, and the Citizen Groups whenever such a docum ent is required to be subm itted to EPA for review and approval pursuant to this Consent Decree. EPA m a y approve the subm ittal or decline to approve it and provide written com m e nts. W ithin 60 days of receiving EPA’s written

com m e nts, Alcoa shall either: (i) alter the subm ittal consistent with the written com m e nts and provide the revised subm ittal to EPA f o r f i nal approval; or (ii) subm it the m a tter f o r dispute resolution, including the period of inform al negotiations, under Section XVI (Dispute Resolution) of this Consent Decree. 115. Upon receipt of EPA’s final approval of the subm ittal, or upon com p letion of the subm ittal pursuant to dispute resolution, Alcoa shall im plem ent the subm ittal in

com p liance with the approved subm ittal. XIII. CIVIL PENALTY 116. W ithin thirty (30) calendar days of entry of this Consent Decree, Alcoa shall pay to the United States a civil penalty in the am ount of $1.5 m illion. The civil penalty shall be paid by Electronic Funds Transfer ("EFT") to the United States Departm e nt of Justice, in

com p liance with current EFT procedures, referencing the USAO File Number and DOJ Case Num b er 90-5-2-1-07723, and the civil action case nam e s and case

37num bers referenced in the caption of this C onsent Decree. The costs of such EFT shall be Alcoa’s responsibility. Paym ent shall be m a de in com p liance with instructions provided to Alcoa by the Financial Litigation Unit of the U.S. Attorney' s Of f i ce f o r the W e stern District of Texas. Any funds received after 4:00 p.m . (CST) shall be credited on the next business day. At the tim e of paym ent, Alcoa shall provide notice of paym ent, referencing the USAO File Num b er, DOJ Case Num b er, and the civil action case nam e and case num ber, to the Departm e nt of Justice and to EPA, as provided in Section XVIII (Notices) of this Consent Decree. 117. Failure to tim ely pay the civil penalty shall subject Alcoa to interest accruing from the date paym ent is due until the date paym ent is m a de at the rate prescribed by 28 U.S.C. § 1961, and shall render Alcoa liable for all charges, costs, fees, and penalties established by law for the benefit of a creditor or of the United States in securing paym ent. XIV. STIPULATED PENALTIES 118. For any failure by Alcoa to com p ly with the term s of this Consent Decree, and subject to the provisions of Sections XV (Force Maje ure) and XVI (Dispute Resolution), Alcoa shall pay, within 30 days af ter written dem a nd to Alcoa by either by the United States or by the United States and the Citizen Groups jointly, the following stipulated penalties to EPA:

Consent Decree Violation S tipulated Penalty (Per day per violation, unless otherw ise specified) A. Failure to pay the civil penalty as specif i ed in Section XIII (Civil Penalty) of this Consent Decree $10,000

38B. Each 30-Day Rolling Average Em ission Rate, each 30- Day Rolling Average Rem oval Efficiency, and any other Em ission Rate or em ission lim itation (including any em issions lim itation in any State perm it relating to the Replacem ent Sandow Units) that is less than 5% in excess of

the lim its set f o rth in this Consent Decree $2,500

C. Each 30-Day Rolling Average Em ission Rate, each 30- Day Rolling Average Rem oval Efficiency, and any other Em ission Rate or em ission lim itation (including any em issions lim itation in any State perm it relating to the Replacem ent Sandow Units) that is greater than 5% but less than 10% in excess of the lim its set f o rth in this Consent Decree $5,000

D. Each 30-Day Rolling Average Em ission Rate, each 30- Day Rolling Average Rem oval Efficiency, and any other Em ission Rate or em ission lim itation (including any em issions lim itation in any State perm it relating to the Replacem ent Sandow Units) that is greater than 10% in excess of the lim its set f o rth in this Consent Decree $10,000

E. Violation of an applicable opacity lim it, as required by Paragraph 73 (opacity com p liance) $5,000 per each six m i nute period F. Failure to m eet the annual SO 2 em ission lim itations in Paragraph 71 The acquisition and retirem ent, in accordance with this Consent Decree, of one and one half SO 2 Allowances for every ton of SO 2 in excess of the annual SO 2 em issions lim itation. G. Burning any fuel other than Coal, except as authorized by regulation or perm it, as required in Paragraph 70 $10,000

H. Failure to install, com m e nce operation, or continue operation of the NO x and PM pollution control devices on the Existing Sandow Units, as specified in Subsection IV(E) (Interim Pollution Reduction Measures), unless Alcoa elects to shut down these Units in accordance with Subsection IV(A) (Selection of Pollution Reduction Approach) $10,000 during the first 30 days, $27,500 thereafter

39I. Failure to com m e nce physical, on-site construction of the NO x , SO 2 , and PM pollution control devices on the Existing Sandow Units, in accordance with the schedule in Paragraphs 52, 55, and 58 (Option A); or Failure to com m e nce physical, on-site construction of the Replacem ent Sandow Units, in accordance with the schedule in Paragraph 67 (Option B); or Failure to shut down the Existing Sandow Units in accordance with the schedule in Paragraph 68 (Option C) Paym ent by Alcoa of either (a) $2,500 directly to the United States or (b) $5,000 placed by Alcoa in an escrow account. Any am ounts placed by Alcoa into escrow shall be be refunded to Alcoa when Alcoa either (i) com m e nces tim ely operation of the em ission controls on the Existing Sandow Units (Option A) or com m e nces operation of the Replacem ent Sandow Units (Option B) in accordance with the schedules and Em ission Rates set f o rth in this Consent Decree; or (ii) perm anently shuts down by the Existing Sandow Units by Decem ber 31, 2006.

J. Failure to install or operate CEMS or COMS as required by Paragraphs 75 through 77, and 79 $1,000

K. Failure to conduct any stack test or annual perform a nce test of PM em issions, as required in Paragraph 78 $2,500

L. Failure to apply for the perm its required by Paragraphs 92 through 94 $1,000

M. Failure to tim ely subm it, m odify, or im plem ent as approved the reports, plans, studies, analyses, protocols, or other subm ittals required by this Consent Decree $750 for the first ten days $1,500 for the eleventh through the 30th day $2,000 thereafter N. Using, selling, or transferring SO 2 Allowances, except as perm itted by Paragraphs 80 through 84, and 88 through 91 (a) $2,000 per SO 2 Allowance ton, plus (b) the surrender, pursuant to the procedures set forth in Subsection IV(G) of this Consent Decree, of SO 2 Allowances in an am ount equal to the SO 2 Allowances used, sold, or transferred in violation of this Consent Decree

40O. Using, selling, or transferring NO x Allowances or credits, except as perm itted in Paragraphs 85 through 91 (a) $4,000 per NO x Allowance or credit ton, plus (b) the surrender, pursuant to the procedures set forth in Subsection IV(G) of this Consent Decree, of NO x Allowances or credits in an am ount equal to the NO x Allowances or credits used, sold, or transferred in violation of this Consent Decree P. Failure to dem onstrate the third party surrender of a SO 2 Allowance to EPA within one year after Alcoa’s transfer of such Allowance to the third party pursuant to Paragraph 83 (a) $2,000 per SO 2 Allowance ton, plus (b) the surrender, pursuant to the procedures set forth in Subsection IV(G) of this Consent Decree, of SO 2 Allowances in an am ount equal to the SO 2 Allowances used, sold, or transferred in violation of this Consent Decree Q. Failure to dem onstrate the third party surrender of a NO x Allowance or credit to EPA within one year af ter Alcoa’s transfer of such allowance or credit to the third party as required by Paragraph 86 (a) $4,000 per NO x Allowance or credit ton, plus (b) the surrender, pursuant to the procedures set forth in Subsection IV(G) of this Consent Decree, of NO x Allowances or credits in an am ount equal to the NO x Allowances or credits used, sold, or transferred in violation of this Consent Decree R. Failure to undertake and com p lete any of the Environm ental Mitigation Projects in com p liance with Section XI (Environm ental Mitigation Projects) $2,500 for the first 15 days, $5,000 thereafter
S. Any other violation of this Consent Decree $1,000 119. Violation of an Em ission Rate or Rem oval Efficiency that is based on a 30-Day Rolling Average is a violation on every day of the 30-day period on which the average is based. 120. W h ere a violation of a 30-Day Rolling Aver age Em ission Rate or Rem oval Efficiency 41(for the sam e pollutant and from the sam e source) recurs within periods less than 30 days, Alcoa shall not pay a daily stipulated penalty for any day of the recurrence for which a stipulated penalty has already been paid. 121. All stipulated penalties shall begin to accrue on the day after the perform a nce is due or on the day a violation occurs, whichever is applicable, and shall continue to accrue until perform a nce is satisfactorily com p leted or until the violation ceases. Nothing herein shall prevent the sim u ltaneous accrual of separate penalties for separate violations of this Consent Decree. 122. Alcoa shall pay all stipulated penalties due to the United States under Paragraph 118 within 30 days of any violation of this Cons ent Decree, and shall continue to m a ke such paym ents every 30 days thereafter until the violation(s) no longer continues, unless Alcoa elects within 20 days of the violation to dispute the accrual of stipulated penalties in accordance with the provisions in Section XVI (Dispute Resolution) of this Consent Decree. 123. Penalties shall continue to accrue as provided in accordance with Paragraph 121 during any dispute, with interest on accrued penalties payable and calculated at the rate established by the Secretary of the Treasury, pursuant to 28 U.S.C. § 1961, but need not be paid until the f o llowing:

a. If the dispute is resolved by agreem ent or by a decision of the United States, or by agreem ent of the Plaintif f

s if stipulated penalties are jointly assessed by the Plaintiffs, and the agreem ent or decision is not appealed to the Court, accrued penalties determ ined to be owing, together with accrued interest, shall be paid to

42the United States within thirty (30) days of the ef f ective date of the agreem ent or the receipt of EPA’s decision or order; b. If the dispute is appealed to the Court, and the United States prevails in whole or in part, (or, if the Plaintif f

s jointly assess stipulated penalties, the Plaintif f

s prevail in whole or in part), Alcoa shall, within sixty (60) days of receipt of the Court’s decision or order, pay all accrued penalties determ ined by the Court to be owing, together with accrued interest, except as provided in Subparagraph c, below;

c. If the District Court’s decision is appealed by any Party, Alcoa shall, within fifteen (15) days of receipt of the final appellate court decision, pay all accrued penalties determ ined to be owing to the United States, together with accrued interest. 124. All stipulated penalties m u st be paid in the m a nner set forth in Section XIII (Civil Penalty) of this Consent Decree. 125. Should Alcoa fail to pay stipulated penalties in com p liance with the term s of this Consent Decree, the United States shall be entitled to collect interest on such penalties, as provided for in 28 U.S.C. § 1961, together with the costs (including attorneys fees) incurred in any action necessary to collect any such stipulated penalties or interest thereon. 126. The stipulated penalties provided for in this Consent Decree shall be in addition to any other rights, rem e dies, or sanctions availabl e to any Plaintiff by reason of Alcoa’s failure to com p ly with any requirem e nt of this Consen t Decree or applicable law, except that for any violation of the Act for which this Consent Decree also provides for paym ent of a

43stipulated penalty, Alcoa shall be allowed a credit f o r stipulated penalties paid against any statutory penalties im posed for such violation. XV. FORCE MAJEURE 127. Force Majeure . For purposes of this Consent Decree, a “Force Majeure Event” shall

m ean an event that has been or will be caused by circum stances beyond the control of Alcoa, its contractors, or any entity controlled by Alcoa that delays com p liance with any provision of this Consent Decree or otherwis e causes a violation of any provision of this Consent Decree despite Alcoa’s best efforts to fulfill the obligation. “Best efforts” include using best efforts to anticipate any potential Force Majeure Event and to address the effects of any such event (a) as it is occurring and (b) after it has occurred, such that the delay or violation is m i nim i zed to the greatest extent possible. 128. Notice

. If any event occurs or has occurred that m a y delay com p liance with or otherwise cause a violation of any obligation under this Consent Decree, as to which Alcoa intends to assert a claim of force m a jeure, Alcoa shall notify the Plaintiffs in writing as soon as practicable, but in no event later than seven (7) business days following the date Alcoa first knew, or by the exercise of due diligence should have known, that the Force Majeure Event caused or m a y cause such delay or violation. In this notice Alcoa shall reference this Paragraph of this Consent Decree and desc ribe the anticipated length of tim e that the delay or violation m a y persist, the cause or causes of the delay or violation, all m easures taken or to be taken by Alcoa to prevent or m i nim i ze the delay or violation, the schedule by which those m easures will be im plem ented, and Alcoa’s rationale f o r attributing a delay or violation to Force Majeure Event. Alcoa shall adopt all reasonable m e asures to

44avoid or m i nim i ze such delays or violations. Alcoa shall be deem ed to know of any circum stance of which Alcoa, its contractors, or any entity controlled by Alcoa knew or should have known. 129. Failure to Give Notice

. Failure by Alcoa to com p ly with the notice requirem e nts of this Section shall render Alcoa’s claim of Force Majeure voidable by any Plaintiff as to the specific event for which Alcoa has failed to com p ly with such notice requirem e nt. 130. Plaintiffs’ Response

. The United States shall notify the Parties, in writing, of its position regarding Alcoa' s claim of Force Majeure within (30) thirty business days of receipt of the notice provided under Paragraph 128. Any Party that disagrees with the stated position of the United States m a y invoke the dispute resolution provisions of this Consent Decree. If the Parties agree that a delay in perf orm a nce has been or will be caused by a Force Majeure Event, then the Parties shall stipulate to an extension of deadline(s) f o r perform a nce of the affected com p liance requirem e nt by a period not to exceed the delay actually caused by the event. 131. Burden of Proof

. In any dispute regarding Force Majeure, Alcoa shall bear the burden of proving by a preponderance of the evidence that any delay in perform a nce or any other violation of any requirem e nt of this Consent Decree was caused by or will be caused by a Force Majeure Event. Alcoa shall also bear the burden of proving that Alcoa gave the notice required by this Section and the duration and extent of any delay(s) attributable to a Force Majeure Event. An extension of one com p liance date based on a particular event

m a y, but will not necessarily, result in an extension of a subsequent com p liance date. 132. Events Excluded

. Unanticipated or increased costs or expenses associated with the

45perform a nce of Alcoa' s obligations under this Consent Decree shall not constitute a Force Majeure Event. 133. Potential Force Majeure Events

. The Plaintiffs agree that, depending upon the circum stances related to an event and Alcoa’s response to such circum stances, the kinds of events listed below could qualify as Force Majeure Events within the m eaning of this Section: construction, labor, or equipm ent delays; acts of God; acts of war; acts of terrorism ; and Malfunctions, as defined herein. 134. Failure of a perm itting authority to issue a necessary perm it in a tim ely fashion m a y constitute a Force Majeure Event where the f a ilure of the perm itting authority to act is beyond the control of Alcoa and Alcoa has taken all steps available to it to obtain the necessary perm it, including, but not lim ited to, subm itting a com p lete perm it application, responding to requests for additional inform ation by the perm itting authority in a tim ely fashion, accepting lawful perm it term s and conditions, and prosecuting in an expeditious fashion appeals of any allegedly unlawful term s and conditions im posed by the perm itting authority. Notwithstanding the foregoing, no Force Majeure Event arising f r om perm itting delays shall alter Alcoa’s obligations to com p ly with the deadline and requirem e nts set forth in Paragraph 66 of this Consent Decree regarding the shut down of the Existing Sandow Units. 135. In the event any Force Majeure Event or Events cause Alcoa to fail to com p ly with any deadline in this Consent Decree for m o re than six m onths, any Plaintiff m a y go to this Court to seek f u rther relief consistent withthe objectives of this Consent Decree. 136. Notwithstanding any other provision of this Consent Decree, this Court shall not draw

46any inferences nor establish any presum ptions adverse to any Party as a result of Alcoa delivering a notice pursuant to this Section or the inability of Alcoa and the Plaintif f

s to reach agreem ent on a dispute under this Section. 137. For purposes of this Section, a “Malfunction” shall have the m eaning set forth in 40 C.F.R. § 60.2: any sudden, infrequent, and not reasonably preventable failure of air pollution control equipm ent, process equipm ent, or a process to operate in a norm a l or usual m a nner. Failures that are caused in part by poor m a intenance or careless operation are not Malfunctions. 138. As part of the resolution of any m a tter subm itted to this Court under this Section, the Plaintiffs and Alcoa by agreem ent, or this Court by order, m a y in appropriate circum stances extend or m odify the schedule for com p letion of work under this Consent Decree to account for the delay in the work that occurred as a result of any delay agreed to by the United States or approved by this Court. Alcoa shall be liable for stipulated penalties f o r its f a ilure thereaf ter to com p lete the work in com p liance with the extended

or m odified schedule. XVI. DISPUTE RESOLUTION 139. The dispute resolution procedure provided by this Section shall be available to resolve all disputes arising under this Consent Decree, provided that the Party m a king such application has first m a de a good faith attem p t to resolve the m a tter with the other Parties. 140. The dispute resolution procedure required he rein shall be invoked by a Plaintiff giving written notice to Alcoa or by Alcoa giving no tice to Plaintif f

s advising of a dispute

47pursuant to this Section. The notice shall describe the nature of the dispute and shall state the noticing Party' s position with regard to such dispute. The Party receiving such a notice shall acknowledge receipt of the notice, and the Parties shall expeditiously schedule a m eeting to discuss the dispute inform ally not later than fourteen (14) days following receipt of such notice. 141. Disputes subm itted to dispute resolution under this Section shall, in the first instance, be the subject of inform al negotiations am ong the Parties. Such period of inform al negotiations shall not extend beyond thirty (30) calendar days from the date of the first

m eeting am ong the Parties’ representatives unless they agree to shorten or extend this period. 142. If the Parties are unable to reach agreem ent during the inform al negotiation period, the Plaintif f

s shall provide Alcoa with a written sum m a ry of their position regarding the dispute. In disputes between the Citizen Groups and Alcoa, Alcoa shall file with this Court a petition which describes the nature of the dispute and seeks resolution, within 30 days of receiving the written sum m a ry of the Citizen Groups’ position. In disputes between the United States and Alcoa, the written position of the United States shall be considered binding unless Alcoa f iles with this Court a petition which describes the nature of the dispute and seeks resolution, within thirty (30) calendar days of receiving the United States’ written summ a ry of its position. In either case, the Plaintiffs m a y respond to a petition by Alcoa within forty-five (45) calendar days of its filing. 143. W h ere the nature of the dispute is such that a m o re tim ely resolution of the issue is required, the tim e periods set out in this Section m a y be shortened upon m o tion of one of

48the Parties to the dispute. 144. This Court shall not draw any inferences nor establish any presum ptions adverse to either Party as a result of invocation of this Section or the Parties' inability to reach agreem ent. 145. The Court shall decide all disputes pursuant to applicable principles of law for resolving such disputes. The Parties, in their initial filings with the Court under Paragraph 142, above, shall state their position regarding what the applicable standard of law should be for resolving the particular dispute. 146. As part of the resolution of any dispute under this Section, in appropriate circum stances the Parties m a y agree, or this Court m a y order, an extension or m odification of the schedule for com p letion of work under this Consent Decree to account for the delay that occurred as a result of dispute resolution. Alcoa shall be liable for stipulated penalties f o r its f a ilure thereaf ter to com p lete the work in com p liance with the extended or

m odified schedule. 147. As to disputes by the United States regarding the Perm it Am endm ent issued by TCEQ, the following provisions shall apply:

a. EPA shall have the a right to dispute the BACT determ ination in the State Perm itting Process and to resolve such dispute bef o re this Court. b. W ithin 30 days of receipt of the Perm it am endm ent issued by TCEQ under the State Perm itting Process, if EPA does not agree with any provision of the TCEQ-issued perm it, including but not lim ited to TCEQ' s determ ination of the Best Available Control Technology (BACT), EPA shall notify Alcoa and TCEQ. The notice shall describe the reason for disagreeing with the provisions in the TCEQ-issued Perm it

49Am endm ent. The EPA, TCEQ, and Alcoa shall endeavor to resolve the dispute inform ally for not m o re than twenty (20) days following issuance of such notice. If the parties do not reach an agreem ent during this inform al process, EPA shall provide Alcoa with a written sum m a ry of their positions regarding their objections to the TCEQ-issued Perm it Am endm ent.

c. If EPA disputes TCEQ’s Perm it Am endm ent pursuant to Subparagraph 147(b), above, then the written position(s) provided by the United States shall be considered binding unless, within fifteen (15) calendar days thereafter, Alcoa files with this Court a petition which describes the nature of the dispute and seeks resolution. EPA shall respond to Alcoa’s petition within fifteen (15) calendar days of its filing. d. Disputes arising under this Paragraph shall be determ ined by this Court under a de

novo standard of review. This Court shall not draw any inferences nor establish any presum ptions adverse to either party as a result of invocation of this Section or the parties' inability to reach agreem ent. XVII. INFORMATION COLLECTION AND RETENTION 148. Any authorized representative of United States or TCEQ, including their attorneys, contractors, and consultants, upon presentation of credentials, shall have a right of entry upon the Rockdale Plant, at any reasonable tim e for the purpose of:

a. m onitoring the progress of activities required under this Consent Decree; b. verifying any data or inform ation subm itted in accordance with the term s of this Consent Decree;

c. obtaining sam p les; and

50d. assessing Alcoa’s com p liance with this Consent Decree. 149. Until five (5) years after the expiration of the covenant not to sue in Paragraph 97, Alcoa shall retain, and instruct its contractors and agents to preserve, all non-identical copies of all records and docum ents (including records and docum ents in electronic form ) now in its or its contractors’ or agents’ possession or control, and that relate in any m a nner to Alcoa’s perform a nce of its obligations under this Consen t Decree. This record retention requirem e nt shall apply regardless of any corporate docum ent-retention policy to the contrary. 150. At the conclusion of the docum ent-retention period provided in the preceding Paragraph, Alcoa shall notify EPA at least ninety (90) days prior to the destruction of any records or docum ents subject to the requirem e nts of the preceding Paragraph, and, upon request by EPA, Alcoa shall deliver any such records or docum ents to EPA. Alcoa m a y assert that certain docum ents, records, or other inform ation are privileged under the attorney-client privilege or any other privilege recognized by federal law. If Alcoa asserts such a privilege, it shall provide the f o llowing: (a) the title of the docum ent, record, or inf o rm ation; (b) the date of the docum ent, record, or inf o rm ation; (c) the nam e and title of the author of the docum ent, record, or inform ation; (d) the nam e and title of each addressee and recipient; (e) a description of the subject of the docum ent, record, or inform ation; and (f) the privilege asserted by Alcoa. No docum ents, reports, or other inform ation created or generated pursuant to the requirem e nts of this Consen t Decree, however, shall be withheld on the grounds that they are privileged. 151. Public Docum e nts

. All inf o rm ation and docum ents subm itted by Alcoa to the United States pursuant to this Consent Decree shall be publicly available unless subject to legal privileges

51or protection or identified and supported as business confidential by Alcoa in com p liance with 40 C.F.R. Part 2. 152. Nothing in this Consent Decree shall lim it the authority of EPA to conduct tests and inspections at Alcoa’s facilities under Section 114 of the Act, 42 U.S.C. § 7414, or any other applicable federal or state laws, regulations, or perm its. XVIII. NOTICES 153. Notices

. Unless otherwise provided herein, whenever notifications, subm issions, or

com m unications are required by this Consent Decree, they shall be m a de in writing and addressed as follows: As to the United States of Am erica: Chief Environm ental Enforcem ent Section Environm ent and Natural Resources Division U.S. Departm e nt of Justice P.O. Box 7611, Ben Franklin Station W a shington, D.C. 20044-7611 DJ# 90-5-2-1-07723 and Director, Com p liance Assurance and Enforcem ent Division U.S. EPA Region 6 1445 Ross Avenue, Suite 1200 Dallas, TX 75202 As to the Citizen Groups Regional Director Environm ental Defense 44 East Avenue Austin, TX 78701

52(Alcoa agrees to send e-m a il notification of these subm issions to counsel for Citizen Groups: rzars@lariat.org for Reed Zars and georgehays@m indspring.com for George Hays. No stipulated penalties shall apply to this obligation.) As to TCEQ : Director, Field Operations Division P.O. Box 13087, MC-174 Austin, TX 78711-3087 As to Alcoa: Environm ental Superintendent Alcoa Inc. Rockdale Operations Off Route 79, FM 1786 P.O. Box 1231 Rockdale, Texas 76567-1231 154. Notwithstanding any other provision of this C onsent Decree, Alcoa shall supply to TCEQ a copy of all notices, reports, applications, elections, and any other written statem ent that the Consent Decree requires Alcoa to supply to any Plaintiff. Such copies shall be sent to the address noted in Paragraph 153, above. 155. Notifications, com m unications, and subm issions subm itted pursuant to this Section shall be deem ed subm itted on the date they are postm arked and sent either by overnight m a il, return receipt requested, or by certified or register ed m a il, return receipt requested, unless otherwise provided by m u tual agreem ent of the Parties in writing. 156. Any Party m a y change either the notice recipient or the address for providing notices to it by serving all other Parties with a notice setting forth such new notice recipient or address.

53XIX. SALES OR TRANSFERS OF OWNERSHIP INTERESTS 157. If Alcoa proposes to sell or transfer part or a ll of its ownership interest in any of the Existing Sandow Units or Replacem ent Sandow Units (“Ownership Interest”), it shall advise the purchaser or transferee in writing of the existe nce of this Consent Decree prior to such sale or transfer, and shall send a copy of such written notification to the Plaintiffs pursuant to Section XVIII (Notices) at least sixty (60) days before such proposed sale or transfer. Plaintif f

s shall m a intain the conf identiality of any inf o rm ation in such notice that is identified and supported by Alcoa as business confidential in com p liance with 40 C.F.R. Part 2. 158. No sale or transfer of an Ownership Interest shall take place before the purchaser or transferee and the United States has executed, and the Court has approved, a m odification pursuant to Section XX (Modification) of this Consent Decree m a king the purchaser or transferee a party defendant to this Consent Decree and jointly and severally liable with Alcoa for all the requirem e nts of this Consent Decree that m a y be applicable to the transf erred or purchased Ownership Interests, including joint and several liability with Alcoa for all requirem e nts specific to the Existing Sandow Units and the Replacem ent Sandow Units, as well as all requirem e nts in this Consent Decree that are not specific to these Units. 159. This Consent Decree shall not be construed to im pede the transfer of any Ownership Interests between Alcoa and any purchaser or transferee as long the requirem e nts of this Consent Decree are m e t. The Citizen Groups expressly waive and hereby consent to any transfer of any Ownership Interests between Al coa and any purchaser or transferee agreed to

54by the United States under the provisions of this Section. This Consent Decree shall not be construed to prohibit a contractual allocation – as between Alcoa and any purchaser or transferee of Ownership Interests – of the bur dens of com p liance with this Consent Decree, provided that both Alcoa and such purchaser or transferee shall rem a in jointly and severally liable to the Plaintif f

s f o r the obligations of this Consent Decree applicable to the transf erred or purchased Ownership Interests. 160. If the United States agrees, the United States, Alcoa, and a purchaser or transferee that has becom e a party defendant to this Consent Decree pursuant to Paragraph 158, above, m a y execute a m odification that relieves Alcoa of its liability under this Consent Decree for, and

m a kes the purchaser or transf eree liable f o r, all obligations and liabilities applicable to the purchased or transferred Ownership Interests. Notwithstanding the foregoing, however, Alcoa m a y not assign, and m a y not be released from , any obligation under this Consent Decree that is not specific to the purchased or transferred Ownership Interests, including the obligations set f o rth in Sections XI (Environm ental Mitigation Projects) and XIII (Civil Penalty). Alcoa m a y propose and the United States m a y agree to restrict the scope of joint and several liability of any purchaser or transf eree f o r any obligations of this Consent Decree that are not specific to the Existing or Replacem ent Sandow Units, to the extent such obligations m a y be adequately separated in an enforceable m a nner. XX. MODIFICATION 161. Except as provided in Section XIX (Sales or Tr ansfers of Ownership Interests), this Consent Decree m a y be m odif i ed only by a subsequent written agreem ent signed by all the Parties and approved by the Court.

55XXI. ENFORCEMENT THROUGH TITLE V PERMIT 162. Once Alcoa has dem onstrated that: (a) all requirem e nts of the Consent Decree have been satisfied, including but not lim ited to either (i) all of the Existing Sandow Units achieved and m a intained com p liance with the em ission lim itations set forth in Paragraphs 52, 55, and 58 of this Consent Decree for at least 24 consecutive m onths, (ii) all of the Replacem ent Sandow Units achieved and m a intained com p liance with the em issions lim itations set forth in Paragraphs 60, 62, and 63 for at least 24 consecutive m onths, or (iii) the Existing Sandow Units have been perm anently shut down, in accordance with Paragraphs 68 of this Consent Decree; and (b) that the requirem e nts of this Consent Decree have been incorporated into Alcoa’s Title V operating perm it f o r the Rockdale f acility pursuant to Paragraphs 93 and 94 of this Consent Decree, then Alcoa shall so certif y these f acts to the Plaintif f

s and to this Court. If Alcoa is in com p liance with all the requirem e nts set forth above, Alcoa m a y request that Plaintif f

s join with it to seek a shorter tim e f r om the court by which such certification can be m a de.

a. If the Plaintiffs do not object in writing w ith specific reasons within sixty (60) days of receipt of Alcoa’s certification, or re quest additional inform ation from Alcoa, then, for any violations that occur after the filing of certification, Plaintiffs shall pursue enforcem ent of the requirem e nts contained in the Title V perm it through only the applicable Title V perm it, and not this Consent Decree. b. In the event that som e aspect of the Title V perm it does not allow f o r enf o rcem ent of a requirem e nt found in this Consent D ecree, however, or if a Consent Decree requirem e nt was intended to be part of the Title V perm it and did not becom e or

56rem a in part of such perm it, then the United States, or the Citizen Plaintif f

s jointly with the United States, m a y enforce such requirem e nt under this Consent Decree.

c. If the Plaintiffs object in writing to Alcoa’s certification, then the m a tter shall be subm itted to this Court for resolution under Section XVI (Dispute Resolution) of this Consent Decree. In such case, Alcoa shall bear the burden of proving that it has

com p lied with the requirem e nts referenced in this Paragraph. XXII. TERMINATION 163. No later than sixty (60) days after com m e ncem ent of operation of each pollution control device in Subsections IV(B), IV(C), and IV(F ) (Pollution Controls and Reductions) of this Consent Decree, Alcoa shall subm it to TCEQ a request for a source-specific revision to the Texas SIP to reflect the em ission lim itations and em issions m onitoring requirem e nts for each Sandow Unit as set forth in this Consent Decree. Notwithstanding any other provision of this Consent Decree, this Consent Decree m a y be term inated upon m o tion of a Party and further Order of this Court upon (1) the incorporation of the em ission lim itations and

em issions m onitoring requirem e nts of this Consent Decree into the Texas SIP, and (2) Alcoa’s dem onstration of continuous com p liance with these em ission lim itations and

em issions m onitoring requirem e nts for a period of at least 24 m onths. XXIII. GENERAL PROVISIONS 164. This Consent Decree is not a perm it. Com p liance with its term s does not guarantee

com p liance with all applicable Federal, State or local laws or regulations. 165. Nothing in this Consent Decree shall preclude the Citizen Groups, or any m e m b er or representative thereof, from providing com m e nt or otherwise participating in any public,

57adm i nistrative, legislative, regulatory or j udicial forum pertaining to Alcoa’s Rockdale operations on any subject that is open to comm e nt or participation by any appropriate

m e m b er of the public not a party to this Consent Decree; provided, however, that the Citizen Groups shall not challenge or oppose the TCEQ’s issuance of the Voluntary Em ission Reduction Perm it (TCEQ Perm it No. 48437), the BACT analysis for the Perm it Am endm ent, or the issuance of Perm it Am endm ent under the State Perm itting Process if the Perm it Am endm ent includes em issions lim itations at least as stringent as those specified in Paragraph 63. The Citizen Groups further agree to not challenge or oppose TCEQ’s perm itting of the facilities ancillary to the Re placem ent Sandow Units, with the exception of any perm its related to the lignite m i nes, ancillary m i ning equipm ent, or conveyors from the

m i nes to the Rockdale power plant f acility. 166. This Consent Decree does not apply to any claim ( s) of alleged crim inal liability. 167. In any subsequent adm i nistrative or judicial action initiated by any Plaintiff for injunctive relief or civil penalties relating to the f acilities covered by this Consent Decree, Alcoa shall not assert any defense or claim based upon principles of waiver, res judicata , collateral estoppel, issue preclusion, claim preclusion, claim splitting, or other defense based upon any contention that the claim s raised by that Plaintiff in the subsequent proceeding were brought, or should have been brought, in the instant cases; provided, however, that nothing in this Paragraph is intended to affect the enforceability of the Resolution of Future Civil Claim s provisions in Section IX of this Consent Decree. 168. Other Laws . Except as specifically provided by this Consent Decree, nothing in this Consent Decree shall relieve Alcoa of its obligation to com p ly with all applicable Federal, State, and

58Local laws and regulations. Subject to the resolution of claim s in Paragraphs 96 and 97, nothing contained in this Consent Decree shall be construed to prevent or lim it any Plaintiff’s rights to obtain penalties or injunctive relief under the Act or other federal or state statutes, regulations, or perm its. 169. Except as expressly provided otherwise by this Consent Decree, provisions of law expressly cited in this Consent Decree shall be construed to m ean the provision as it exists on the date of entry of this Consent Decree. 170. Third Parties

. This Consent Decree does not lim it, enlarge or affect the rights of any Party to this Consent Decree as against any third parties. 171. Com p lete Agreem ent . This Consent Decree constitutes the f i nal, com p lete and exclusive agreem ent and understanding between the Parties with respect to the settlem e nt em bodied in this Consent Decree, and supercedes all prior agreem ents and understandings am ong the Parties related to the subject m a tter herein. No docum ent, representation, inducem ent, agreem ent, understanding, or prom ise, constitutes any part of this Consent Decree or the settlem e nt it represents, nor shall they be used in construing the term s of this Consent Decree. 172. Effective Date . The Effective Date of this Consent Decree shall be the date upon which this Consent Decree is entered by the Court. 173. Public Notice and Com m e nt

. The Parties agree and acknowledge that final approval by United States and entry of this Consent Decree is subject to the procedures of 28 C.F.R. § 50.7, which provides for notice of the lodging of this Consent Decree in the Federal Register, an opportunity for public com m e nt, and the right of the United States to withdraw

59or withhold consent if the com m e nts disclose fact s or considerations that indicate that the Consent Decree is inappropriate, im proper, or inadequate. 174. Alcoa’s W a iver of Objection to Entry

. Alcoa agrees not to oppose entry of this Consent Decree by this Court or to challenge any provision of this Consent Decree unless the United States has notified the Alcoa in writing that the United States no longer supports entry of the Consent Decree. XXIV. SIGNATORIES AND SERVICE 175. Each undersigned representative of Alcoa certifies that he or she is fully authorized to enter into the term s and conditions of this Consent Decree and to execute and legally bind Alcoa to this docum ent. 176. This Consent Decree m a y be signed in counterparts, and such counterpart signature pages shall be given full force and effect. 177. Alcoa hereby agrees to accept service of process by m a il with respect to all m a tters arising under or relating to this Consent Decree and to waive the form al service requirem e nts set forth in Rule 4 of the Federal Rules of Civil Procedure and any applicable Local Rules of this Court including, but not lim ited to, service of a sum m ons. XXV. FINAL JUDGMENT 178. Upon approval and entry of this Consent D ecree by the Court, this Consent Decree shall constitute a final judgm ent between the United States, the Citizen Groups, and Alcoa. SO ORDERED, THIS _________ DAY OF _______________, 2003.

UNITED STATES DISTRICT COURT JUDGE 60Signature Page for Consent Decree in United States v. Alcoa, Inc. (W .D. TX)

FOR THE UNITED STATES OF AMERICA:

THOMAS J. SANSONETTI Assistant Attorney General Environm ental and Natural Resources Division United States Departm e nt of Justice

MATTHEW W

. MORRISON Senior Counsel Environm ental Enforcem ent Section Environm ental and Natural Resources Division United States Departm e nt of Justice

61Signature Page for Consent Decree in United States v. Alcoa, Inc. (W .D. TX)

JOHN PETER SUAREZ Assistant Adm i nistrator Office of Enforcem ent and Com p liance Assurance United States Environm ental Protection Agency

BRUCE C. BUCKHEIT Director, Air Enforcem ent Division Office of Enforcem ent and Com p liance Assurance United States Environm ental Protection Agency

RICHARD ALONSO Attorney Advisor Air Enforcem ent Division Office of Enforcem ent and Com p liance Assurance United States Environm ental Protection Agency

62Signature Page for Consent Decree in United States v. Alcoa, Inc. (W .D. TX)

LAW R ENCE STARFIELD Regional Adm i nistrator Region 6 United States Environm ental Protection Agency

63Signature Page for Consent Decree in United States v. Alcoa, Inc. (W .D. TX)

FOR NEIGHBORS FOR NEIGHBORS, INC.

Billie W oods President, Neighbors for Neighbors, Inc. P.O. Box 661 Elgin, Texas 78621

64Signature Page for Consent Decree in United States v. Alcoa, Inc. (W .D. TX)

FOR ENVIRONMENTAL DEFENSE

Jam e s D. Marston Director, Texas Office Environm ental Defense 44 East Avenue Austin, Texas 78701

65Signature Page for Consent Decree in United States v. Alcoa, Inc. (W .D. TX)

FOR PUBLIC CITIZ E N, INC.

Thom as “Sm itty” Sm ith Director, Public Citizen’s Texas Office 1002 W e st Avenue Austin, Texas 78701

66Signature Page for Consent Decree in United States v. Alcoa, Inc. (W .D. TX)

FOR ALCOA INC.

Bernt Reitan Vice President Alcoa Inc. President, Prim ary Metals

67