Final Rule Retains Aggregation Requirements that Catch More Businesses in the Regulatory Net

On November 8, 2010, the U.S. Environmental Protection Agency (EPA) issued its final rule for reporting of greenhouse gas (GHG) emissions from petroleum and natural gas systems. Affected businesses must begin collection of emissions data on January 1, 2011, and the first annual reports are due March 31, 2012.

The Targets - Who Must Report?

The rule impacts businesses in the following categories:

  • Petroleum and natural gas production, both offshore and onshore
  • Natural gas processing, transmission compression, and underground storage  
  • Liquefied natural gas (LNG) storage and import/expert  
  • Natural gas distribution  

Impacted businesses that emit 25,000 metric tonnes (MT) or more of CO2 equivalent per year (or roughly 1,000 MT or more of methane) must report annually. GHGs under the rule include methane, carbon dioxide (CO2), and nitrous oxide. Sources to be measured include equipment leaks, venting, flaring, combustion, and drilling rigs, to name a few examples.

The Catch - Aggregation for Production and Distribution

EPA considers production and distribution “unique” and has defined a single “facility” for these businesses through aggregation of sources:

  • Natural gas distribution - All pipelines and stations operated by a Local Distribution Company (LDC).
  • Onshore petroleum/natural gas production - All equipment on or associated with a well pad (including enhanced oil recovery) under common ownership or control located in a single hydrocarbon basin.

These definitions are unlike any other definitions of “facility” in the GHG Reporting Rules or other Clean Air Act provisions.

The Crunch - Getting Ready to Monitor by January 1

What happens if facilities cannot get ready to monitor by January 1 (i.e., in the next six weeks)? For certain sources, facilities may use best available monitoring methods (BAMM) for a portion of 2011. EPA may also consider petitions to use BAMM for other sources, and the rule outlines the procedures for obtaining clearance to use BAMM.

The Unknown - Will EPA Protect Sensitive Business Information from Public Disclosure?

EPA has not finalized the rule for confidential business information (CBI) the Agency proposed in July 2010. Consequently, this final rule does not address whether any information utilized in determining the quantities of GHG emissions to report will receive CBI treatment.