Alert > Environmental and Natural Resources
EPA Adopts National Greenhouse Gas Reporting Rules
On September 22, 2009, the Environmental Protection Agency (EPA) adopted final regulations requiring the monitoring and reporting of annual greenhouse gas (GHG) emissions from large GHG emitters and suppliers across the United States. GHGs subject to these new requirements include CO2, methane (CH4), nitrous oxide (N2O), sulfur hexafluoride (SF6), hydrofluorocarbons (HFCs), perfluorocarbons (PFCs) and other fluorinated gases. The rule does not impose any GHG emissions limits or actual reduction of GHG emissions. However, many see this comprehensive tracking and reporting of both direct and indirect GHG emissions as the first step toward federal regulations to reduce the emission of GHGs.
Who Is Covered?
Starting in January 2010, the following sources will be required to collect GHG emissions data for annual reporting, which begins in March 2011:
- Listed facilities (including electric generating facilities, petroleum refineries, cement producers and petrochemical producers);
- Other listed facilities (including iron and steel producers, ferroalloy producers, pulp and paper manufacturing, and hydrogen producers) that emit 25,000 metric tons of CO2e or more per year of combined emissions from listed facility sources, which include stationary fuel combustion units;
- Facilities not listed above from which emissions are covered only from all of a facility’s stationary fuel combustion sources which, combined, (i) emit 25,000 metric tons of CO2e or more per year and (ii) have an aggregate rated heat input capacity of 30 mmBtu/hr or greater;
- “Suppliers” of listed products, including CO2, industrial GHGs, petroleum products, coal-to-liquids, and natural gas liquids;
- Most manufacturers of heavy-duty engines and vehicles, off-road engines and vehicles, and motorcycles (starting in model year 2011).
EPA estimates that the rule covers about 10,000 facilities nationwide, accounting for about 85 percent of U.S. GHG emissions. In response to public comments, EPA chose not to finalize portions of the proposed rule related to certain source categories it had proposed to include in the mandatory GHG reporting regime. Nonetheless, facilities that would otherwise have had reporting obligations under these non-finalized portions may still have reporting obligations if they come within another provision of the final rule. EPA also provided exemptions for certain types of operations like research and development activities, some small businesses, and small vehicle and engine manufacturers. While most agricultural sources fall outside the coverage of the rule, such as dairy and beef producers, a livestock facility that emits 25,000 metric tons of CO2e or more per year from manure management systems is required to report.
This will not be a “once in always in” system. The final rule was amended to provide that any facility may stop reporting its GHG emissions if it can show less than 25,000 metric tons of CO2e for five consecutive years, less than 15,000 metric tons CO2e for three consecutive years, or closure or removal of all sources covered by the rule.
What Must Be Reported?
In addition to basic facility information, regulated sources will be required to report annual GHG emissions, by GHG, for each source category covered by the rule. With some exceptions, most facilities that have continuous emissions monitoring systems (CEMS) will now be required to directly monitor CO2 emissions. Facilities without CEMS will have a choice of monitoring via CEMS or calculating GHG emissions using emissions factors.
The rule does contain a few special provisions applicable to the first few months of reporting. There is a one-time-only option to use “best available monitoring methods” (including alternative monitoring, supplier data or engineering calculations) from January through March 2010 if a given parameter cannot feasibly be measured as provided in the rule. This provision was designed to facilitate compliance by facilities that cannot practicably install and operate required GHG monitoring equipment by January 1, 2010. EPA can grant waivers to allow such “best available monitoring methods” on a case-by-case basis after April 1, 2010, but these waivers cannot extend beyond December 31, 2010. The rule also allows facilities containing only stationary fuel combustion sources to submit an abbreviated GHG report for the 2010 reporting year only.
Fixed facilities and qualifying “suppliers” will be required to report both their direct GHG emissions and indirect GHG emissions that could result from downstream combustion of a fossil fuel or use of a product the facility supplies. So, suppliers of petroleum products (e.g., petroleum refineries) will be required to report both their own direct GHG emissions and the anticipated GHG emissions from eventual downstream combustion of the fuel, while a large downstream consumer of that same fuel also will be required to report its actual GHG emissions from combusting that fuel. EPA acknowledged that this would introduce “inherent double-reporting of emissions” in some situations, but claims the GHG information to be collected is still valuable to assess facility- and regional-level GHG emissions from the “bottom up,” and not a replacement for other “top-down” national level GHG inventories.
When and How Are Reports to be Submitted?
The first annual GHG emission reports must be submitted to EPA electronically by March 31, 2011. Annual reports are required every March 31 thereafter. Though most data will be collected at the facility level, in some cases the rule provides for reporting at the corporate level (e.g., certain fuel suppliers and GHG importers, and off-road/heavy duty vehicle and engine manufacturers), and in a few cases, reporting is required for individual units or process lines.
Regarding certification of data, although EPA included third-party certification as a possible alternative in the proposed rule, EPA decided not to require it, and instead adopted its preferred approach of self-certification. Facilities only will be required to self-certify the accuracy and authenticity of the GHG data they report to EPA. EPA will retain the right to independently verify any data submitted, including through on-site audits.
How Does the Rule Impact Existing Emissions Reporting Requirements?
EPA notes that the mandatory reporting rule is not meant to replace or preempt existing state emissions reporting programs, but will be enforced alongside those existing reporting requirements. Facilities will report GHG emissions directly to EPA. EPA has expressed its intent to harmonize this mandatory federal reporting program with existing GHG reporting programs in California and other states and regions, to coordinate implementation to the extent possible. Though EPA intends to coordinate with these states and regions, at this time EPA is not delegating responsibility to the states for implementing and enforcing federal GHG reporting.
Next Steps for EPA and Stakeholders
EPA anticipates that much of this information will be used to implement and fine-tune future legislation and regulations requiring substantive GHG limits and imposing minimum control standards. It is likely that any national GHG standards emerging from Congress will incorporate monitoring, recordkeeping and reporting standards contained in the mandatory reporting rule. In addition, EPA has left the door open to revisit a number of the exemptions provided in this rule to allow for data gathering from additional sources at a later date.
Facilities and suppliers potentially subject to mandatory reporting will now have the remainder of 2009 to determine whether they are covered by the rule, which sources are required to report and steps the facility must take to meet the monitoring standards provided in the rule.
To learn more about how this development could impact your business, please contact any of the following attorneys:
Rick Rothman, Partner
rick.rothman@bingham.com, 213.680.6590
Chuck Knauss, Partner
chuck.knauss@bingham.com, 202.373.6644
Edward Strohbehn, Partner
edward.strohbehn@bingham.com, 415.393.2059
Mike McDonough, Partner
michael.mcdonough@bingham.com, 213.680.6600
Circular 230 Disclosure: Internal Revenue Service regulations provide that, for the purpose of avoiding certain penalties under the Internal Revenue Code, taxpayers may rely only on opinions of counsel that meet specific requirements set forth in the regulations, including a requirement that such opinions contain extensive factual and legal discussion and analysis. Any tax advice that may be contained herein does not constitute an opinion that meets the requirements of the regulations. Any such tax advice therefore cannot be used, and was not intended or written to be used, for the purpose of avoiding any federal tax penalties that the Internal Revenue Service may attempt to impose.
© 2009 Bingham McCutchen LLP
To communicate with us regarding protection of your personal information or if you would like to subscribe or unsubscribe to some or all of Bingham McCutchen LLP’s electronic and email notifications, please notify our Privacy Administrator at privacyUS@bingham.com or privacyUK@bingham.com. Our privacy policy is available at www.bingham.com. We can also be reached by mail in the U.S. at One Federal Street, Boston, MA 02110-1726, ATTN: Privacy Administrator, or in the U.K. at 41 Lothbury, London, England EC2R 7HF, ATT: Privacy Administrator.
This communication is being circulated to Bingham McCutchen LLP’s clients and friends and may be considered advertising. It is not intended to provide legal advice addressed to a particular situation.