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April 2009


GREENHOUSE GAS REPORTING PROPOSAL

 
 

INSIGHTS  ALERT

  


On March 10, 2009, EPA released a proposed regulation that would require nearly all sectors of the economy to report their annual greenhouse gas (“GHG”) emissions.  The  1,410-page proposal would require approximately 13,000 facilities to monitor and report their carbon dioxide, methane, and other GHG emissions listed below.  This is a major policy effort with significant potential impacts, beyond reporting, on the carbon cap and trading debates in Congress. We suggest that the proposal, summarized below, is worthy of your attention and participation.  Comments must be received within 60 days after publication in the Federal Register.  EPA will hold two public hearings on April 6 and 7, 2009, in Washington, D.C., and one public hearing on April 16, 2009, in Sacramento, California. 

If you would like further information or assistance, please e-mail or call Henry Chajet (hchajet@pattonboggs.com) at 202.457.6511, John Martin (jmartin@pattonboggs.com) at 202.457.6032, Susan Mathiascheck (smathiascheck@pattonboggs.com) at 202.457.6124), Carolyn McIntosh (cmcintosh@pattonboggs.com) at 303.894.6127, or Michele Walter (mwalter@pattonboggs.com) at 202.457.5281.


SUMMARY 

EPA issued this proposal in response to the FY2008 Consolidated Appropriations Amendment and pursuant to its authority under Clean Air Act Sections 114 and 208.  EPA’s proposal covers the following GHGs:  carbon dioxide (CO2), methane (CH4), nitrous oxide (N2O), hydrofluorocarbons (HFC), perfluorocarbons (PFC), sulfur hexafluoride (SF6), and other fluorinated gases, including nitrogen trifluoride (NF3) and hydrofluorinated ethers (HFE). 

Data collection for all covered entities (except manufacturers of vehicles and engines) would begin January 1, 2010, with the first reports submitted to EPA by March 31, 2011, and annually thereafter.   Manufacturers of vehicles and engines would begin collecting data in 2011.  In general, reporting would be at the facility level, except for certain upstream suppliers and vehicle and engine manufacturers for whom corporate-level reporting would be required.  EPA estimates that the average cost of reporting would be approximately $0.04 per metric ton. 

Who Must Report

The rule would apply to:

  • Upstream fossil fuel suppliers and industrial gas suppliers.  For the GHG reporting rule, “upstream emissions” refers to the potential quantity of GHG emissions supplied to the economy.  For fossil fuels, for example, the emissions potential is the amount of CO2 that would be produced from complete combustion or oxidation of the carbon in the fuel. 

  • Downstream direct GHG emitters that emit more than 25,000 metric tons of carbon dioxide or carbon dioxide equivalents (“CO2e”).  The majority of these direct emitters are facilities in the electricity generating or industrial sectors.  EPA recognizes that some of the electricity generators already are reporting their CO2 emissions under existing regulations, so EPA’s proposed GHG reporting rule will only have a minimal increase in the amount of data that they report. 

  • Manufacturers of vehicles and engines (by incorporating existing requirements).

EPA recognizes that there will be double-reporting of emissions by some sources that include both upstream and downstream emissions.  For example, a coal mine would be required to report the CO2 from the combustion of coal that it supplies to the economy, and the receiving power plant will report emissions from burning the coal for electricity. 

EPA’s proposal identifies five categories of entities that would be covered by the reporting requirements:    

  1. Identified source categories:  For the following identified source categories, which are automatically covered, EPA has provided calculation methodologies at 40 C.F.R. Part 98, subparts B through JJ: 

  • Electricity generating facilities that are subject to the Acid Rain Program, or that contain electric generating units that collectively emit 25,000 metric tons of CO2e or more per year;

  • Adipic acid production;

  • Aluminum production;

  • Ammonia manufacturing;

  • Cement production;

  • Electronics:  semiconducutors, microelectricmechanical system (“MEMs”) and LCD manufacturing facilities with an annual production capacity that exceeds certain identified thresholds;

  • Electric Power systems that include electrical equipment with a total nameplace capacity that exceeds 17,820 lbs (7,838 kg) of SF6 or PFCs;

  • HCFC-22 production

  • HFC-23 destruction processes that are not collocated with a HCFC-22 production facility and that destroy more than 2.14 metric tons of HFC-23 per year;

  • Lime manufacturing;

  • Nitric acid production;

  • Petrochemical production;

  • Petrochemical refineries;

  • Phosphoric acid production;

  • Silicon carbide production;

  • Soda ash production;

  • Titanium dioxide production;

  • Underground coal mines that are subject to quarterly or more frequent sampling by MSHA of ventilation systems;

  • Municipal landfills that generate CH4 in amounts equivalent to 25,000 metric tons of CO2e or more per year; and

  • Manure management systems that emit CH4 and N2O in amounts equivalent to 25,000 metric tons CO2e or more per year. 

  1. Downstream facilities above a certain threshold:  Owners and operators of downstream facilities that emit 25,000 metric tons CO2e or more per year in combined emissions from stationary fuel combustion units, miscellaneous use of carbonates and all of the source categories listed below that are located at the facility in any calendar year starting in 2010.  The reports must cover all source categories for which EPA has provided calculation methodologies in 40 C.F.R. Part 98, Subparts B through JJ:

  • Electricity generation (excluding portable equipment or generating units designed as emergency generators in a permit issued by a state or local air pollution control agency);

  • Electronics:  Photovoltaic manufacturing;

  • Ethanol production;

  • Ferroalloy production;

  • Fluorinated green house gas production;

  • Food processing;

  • Glass production;

  • Hydrogen production;

  • Iron and steel production;

  • Lead production;

  • Magnesium production;

  • Oil and natural gas systems;

  • Pulp and paper manufacturing;

  • Zinc production;

  • Industrial landfills; and

  • Wastewater

  1. Other facilities meeting certain thresholds and heat input capacity:  Owners and operators of facilities that meet all three of the following conditions in any calendar year.  For these facilities, reporting would be required only for GHG emissions from stationary fuel combustion sources:

  • The facility does not fall under one of the first two categories above;

  • The aggregate maximum rated heat input capacity of the stationary fuel combustion units at the facility is 30 mmBtu/hr or greater; and

  • The facility emits 25,000 metric tons CO2e or more per year from all stationary fuel combustion sources. 

  1. Suppliers of certain products:  Suppliers of any of the following products, for which calculation methodologies are provided in 40 C.F.R. Part 98, subparts KK through FF:

  • Coal;

  • Coal-based liquid fuels;

  • Petroleum products;

  • Natural gas and NGLs;

  • Industrial GHGs, which includes all producers and importers and exporters with total bulk imports or total bulk exports that exceed 25,000 metric tons CO2e per year;

  • CO2, including all producers and importers and exporters of CO2, or a combination of CO2 and other industrial GHGs with total bulk imports or total bulk exports that exceed 25,000 metric tons CO2e per year;

  1. Vehicle and engine manufacturers:  Manufacturers of mobile sources and engines, who are required to report emissions from the vehicles and engines produced.  The proposal specifies certain types of manufacturers of vehicle and engine types that would need to report. 

It is important to understand that a company or facility may be subject to reporting for more than one source category.  For example, a petroleum refinery would be subject to reporting requirements for several of the source categories identified above:  general stationary fuel combustion; hydrogen; landfills; wastewater treatment; and supplier of petroleum products.  The calculation methodologies for determining emissions for each source category are found at 40 C.F.R. Part 98, Subparts B through QQ in EPA’s proposal.

EPA believes that most small businesses will fall under the 25,000 metric ton reporting requirement and, thus, will be exempt.  EPA’s proposal also does not require reporting from certain agricultural sources and land uses, but does include reporting for emissions from manure management systems.    

What Must Be Reported

All covered entities would be required to begin collecting data on January 1, 2010, and to submit their first report by March 31, 2011, except for manufacturers of vehicles and engines, whose reporting requirements will begin with the 2011 model year. 

Specific reporting requirements will vary across the source categories, but in general, the facility’s report would include:

  • The total annual GHG emissions in metric tons, aggregated, for all source categories for which emission calculation methodologies are provided in EPA’s proposed regulations at 40 C.F.R. Part 98;

  • The annual mass GHG emissions for each source category broken down by GHG;

  • A breakout of emissions at the level required by, e.g., each individual unit or process line; and

  • Data on certain activities, e.g., fuel use, feedstock inputs, used to generate the emissions data. 

All reports must be certified and EPA proposes to be able to audit the data that it receives.  Once a facility is subject to the reporting requirements, it will remain obligated to submit annual reports, even if it falls below the reporting thresholds in subsequent years.  The only exception to this continued reporting is for abandoned underground coal mines. 

Failure to report GHG emissions, collect data, continuously monitor, keep records or estimate GHG emissions, or any falsification of reports, would be subject to enforcement by EPA under the Clean Air Act.  Enforcement actions could require injunctive relief and/or assess civil penalties (up to $32,500/day/violation) or criminal penalties.   

Relevant Areas On Which EPA Is Seeking Comment    

There are numerous issues on which EPA seeks comment, which vary according to each source category; but, overall, EPA seeks comment on the following issues: 

  • Whether the reporting thresholds are appropriate or whether thresholds should be applied based on emissions or capacity;

  • Whether EPA’s methodologies, including monitoring methodologies, are appropriate, particularly the technical feasibility, costs, and improvement in accuracy of direct measurements at facilities;

  • The frequency and year of reporting, i.e., whether reports should be submitted annually on an ongoing basis, or whether there should be a sunset provision;  

  • Verification options; and

  • Duration of the program

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If you would like further information or assistance, please e-mail or call Henry Chajet (hchajet@pattonboggs.com) at 202.457.6511, John Martin (jmartin@pattonboggs.com) at 202.457.6032, Susan Mathiascheck (smathiascheck@pattonboggs.com) at 202.457.6124), Carolyn McIntosh (cmcintosh@pattonboggs.com) at 303.894.6127, or Michele Walter (mwalter@pattonboggs.com) at 202.457.5281.

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The Patton Boggs Health and Safety Law Group consists of attorneys who have resolved client problems in environmental, energy, natural resource, and safety and health law since the late 1960s. With lawyers in Washington, D.C., Alaska, Colorado, Texas, New Jersey, New York, and Northern Virginia, we have experience with EPA, OSHA, MSHA, NIOSH, DOT, OPS, Coast Guard, NTSB, FAA, FDA, CSP, the Chemical Safety Board, and almost every other federal and state government health and safety agency in the United States and throughout the world. We speak a variety of languages; have backgrounds in business, science, engineering, industry, and government; and combine preventive law counseling with courtroom and lobbying expertise to achieve results. For more information go to: http://www.pattonboggs.com or contact Henry Chajet (hchajet@pattonboggs.com) at 202-457-6511, Mark Savit (msavit@pattonboggs.com) at 202-457-5269,  or John Austin (jaustin@pattonboggs.com) at 202-457-6167.

Important Note: This ALERT does not constitute legal advice and counsel should be consulted regarding specific factual situations which will determine the compliance advice applicable to any particular question regarding the subject matter. If you would like additional information or advice and counsel on training, compliance or audits, please let us know. 

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