• EPA Proposes Mandatory Greenhouse Gas Reporting Rule; Public Hearings to be Held Today, Tomorrow and April 16th
  • April 21, 2009 | Authors: Michael S. McDonough; Rick R. Rothman
  • Law Firms: Bingham McCutchen LLP - Los Angeles Office; Bingham McCutchen LLP - Boston Office
  • On March 10, 2009, the Environmental Protection Agency (EPA) issued an advance copy of its proposed rule for mandatory reporting of greenhouse gas (GHG) emissions. Issuance of this proposed rule was required by the Consolidated Appropriations Act of FY 2008, and permitted by section 114(a)(1) of the Clean Air Act (CAA). According to the EPA, the primary purpose of the rule is to collect information to “support a range of future climate change policies and regulations.” The rule is the first major step by the Obama administration toward formal regulation of GHGs, and likely presages coming regulations to incorporate GHGs as regulated pollutants under the CAA.

    As written, the proposed rule generally requires suppliers of fossil fuels and industrial chemicals, manufacturers of motor vehicles and engines, and facilities that emit 25,000 metric tonnes (MT) of carbon dioxide equivalent (CO2e) a year, to submit annual GHG emission reports to the EPA. The proposed threshold is consistent with other GHG reporting programs, such as the AB 32 program implemented in California earlier this year. GHGs to be considered in the reports include carbon dioxide (CO2), methane (CH4), nitrous oxide (N2O), hydrofluorocarbons (HFC), perfluorocarbons (PFC), and sulfur hexafluoride (SF6), as well as other fluorinated gases (e.g., nitrogen trifluoride and hydrofluorinated ethers).

    At the currently proposed threshold, approximately 13,000 entities are likely to be affected. According to the EPA, these entities are generally significant GHG emitters, who collectively produce over 85 percent of the GHG emissions in the United States each year. These entities operate in various industries, including, but not limited to the following:

    • Cement Production
    • Electricity Generation
    • Ethanol Production
    • Electronics Manufacturing
    • Petrochemical Production
    • Petroleum Refining
    • Pulp and Paper Manufacturing
    • Underground Coal Mining

    According to the EPA, small businesses and the agricultural sector are not likely to be affected by the proposed rule, although the EPA has proposed requiring reporting from manure management systems with emissions at or above the 25,000 MT threshold.

    At over 1,400 pages, the proposed rule is complex and detailed. In general, however, it requires regulated entities to submit annual reports detailing (1) their GHG emissions (MT CO2e), aggregated for all the source categories and for all supply categories; and (2) their mass GHG emissions, by GHG, for each source and supply category. The proposed rule also requires suppliers of fossil fuels and industrial chemicals to report the volume of fuel (coal, coal liquids, petroleum, natural gas, and/or natural gas liquids) produced, imported, and/or exported over the course of the year, and the GHG emissions associated with the complete oxidation of that fuel.

    Reporting under the proposed rule would be required at the facility level. However, manufacturers of vehicles and engines would be permitted to report mobile source GHG emissions at the corporate level. Reports would be submitted directly to the EPA on EPA forms and/or in accordance with the EPA electronic submission procedures. All reporting would be separate and apart from reporting schemes required by states and/or regional organizations. In other words, the reporting scheme set forth in the proposed rule could create overlapping GHG emissions reporting requirements, and may, in some cases, create new or different GHG emission accounting protocols from those already required at the state or regional level. The EPA intends to address part of this problem by working with The Climate Registry and the National Environmental Information Exchange Network on a “data exchange standard for reporting,” but substantial redundancy is likely to remain. All told, the private sector cost of complying with these requirements is estimated to be $160 million in the first year, and $127 million in subsequent years.

    The EPA has created information sheets for several industries. These information sheets explain in detail which facilities are required to submit annual GHG emission reports, which GHG emissions must be reported, and how such emissions are to be calculated. These information sheets can be accessed on the EPA’s website at http://www.epa.gov/climatechange/emissions/ghg_infosheets.html.

    At present, the first annual reports will be due on March 31, 2011, and will cover calendar year 2010. Reports from vehicle and engine manufacturers will not be required until after the 2011 model year. The EPA intends to verify the reports at this time, but has requested comments as to whether third-party verification should be required. Other GHG reporting programs, such as California’s program, require such third-party verification.

    The EPA currently intends to conduct two public hearings on the proposed rule. The first will take place today, Monday, April 6th and tomorrow, Tuesday, April 7th, at the EPA Potomac Yard Conference Center in Arlington, Virginia, at 9 a.m. EST. The second will take place on Thursday, April 16th at the Sacramento Convention Center, in Sacramento, California. The time for the second public hearing has yet to be announced. The public hearings may be viewed via the EPA’s website. The public will also be able to submit written comments on the proposed rule for 60 days following publication in the Federal Register. The EPA has not disclosed the date on which it intends to publish the rule, but publication is anticipated by late April or early June.

    Assuming the proposed rule is adopted in some form by the EPA as a formal regulation, it will constitute the Obama administration’s first major step toward national regulation of GHGs. The EPA’s interaction with state and regional authorities in developing reporting protocols and procedures may provide insight into the future direction of the Obama administration’s national climate change policy, and how that policy may mesh with, duplicate, or even supplant existing GHG regulatory efforts. Equally significant is the fact that the proposed reporting rule is designed to be a precursor to more comprehensive national regulation of GHG emissions, a development which will need to be reconciled with, or incorporated into, the existing CAA enforcement structure. Accordingly, the development of the mandatory GHG reporting rule not only will have significant short-term impacts on those industry stakeholders required to report, but also a longer-term impact on the development of national climate change policy and CAA enforcement.