Pursuant to a congressional mandate in the 2007 Consolidated Appropriations Act, the United States Environmental Protection Agency (“U.S. EPA”) finalized rules establishing mandatory reporting requirements for greenhouse gas (GHG) emissions. Originally published in draft form on April 10, 2009, the GHG rules underwent a number of significant changes based upon approximately 16,800 comments received from interested parties. The final became final on September 22, 2009 and will require approximately 10,000 facilities (including everything from power plants to cement manufacturers) to monitor and report annual emissions of the seven most common greenhouse gases: carbon dioxide; methane; nitrous oxide; sulfur hexafluoride; hydroflourocarbons; perfluorochemicals; and other fluorinated gases. In all, the GHG reporting rules will account for nearly 85% of all GHG emissions in the United States. A copy of the final rule and relevant summaries can be found on U.S. EPA’s website at http://www.epa.gov/climatechange/emissions/ghgrulemaking.html.

Who Must Report?

The GHG reporting rules are designed to target large emitters (i.e. facilities emitting greater than 25,000 metric tons of carbon dioxide equivalent per year). In order to limit the scope of the reporting requirement, the rules establish certain thresholds designed to exclude residential homeowners, municipal operations (i.e. schools, hospitals, domestic wastewater treatment plants), most commercial establishments (i.e. office buildings and retail centers), most small businesses, and much of the agricultural sector.

In order to determine which facilities will be subject to the reporting requirements, the rules specifically identify various types of facilities and various categories of emission sources that will be subject to the rules. For some facilities, reporting is required regardless of the actual GHG emissions levels. These facilities, which must report emissions from all source categories (identified in Table 1 below), include:

  • Certain importers and exporters of fossil fuels, but not retail gas stations. This category includes facilities such as local natural gas distribution companies; importers and exporters of petroleum products (i.e. gasoline, diesel fuel, propane, home heating oil, asphalt, road oil, lubricants); producers, importers, and exporters of certain coal-to-liquid products (i.e. gasoline and diesel); and suppliers of carbon dioxide. (see Subparts LL, MM, NN);
  • Manufacturers of heavy duty mobile sources (i.e. heavy duty vehicles and engines, trains, snowmobiles, motorcycles, and ATVs);
  • Primary aluminum producers (see Subpart F);
  • Manufacturers of ammonia-based fertilizers (see Subpart G);
  • Manufacturers of Portland cement (see Subpart H);
  • Petroleum refineries, but only those that produce crude oil (see Subpart Y);
  • Producers of titanium dioxide, a major source of white pigment in paints (Subpart EE);
  • Municipal solid waste landfills accepting waste after January 1, 1980 and generating methane amounts equivalent to 25,000 metric tons of carbon dioxide (see Subpart HH);
  • Large beef, dairy, poultry and swine manure management systems with certain average animal population values (per head), including: 29,300 for beef cattle; 3,200 for dairy cattle; 34,100 for swine; and 723,000 for layers (see Subpart JJ); and
  • Suppliers of industrial GHG (includes producers, bulk importers, and bulk exporters of fluorinated GHG and nitrous oxide) (see Subpart OO).

Originally, the rules also included: manufacturers of electronics (e.g. semiconductors, LCD, and solar panels); coal suppliers; and underground coal mines. Based upon comments from interested parties, these facilities no longer are required to complete any GHG reporting.

For other facilities, the proposed rules only require reporting if combined emissions from specified source categories (identified in Table 1) are equal to, or greater than, 25,000 metric tons of CO2 equivalent (CO2e). In practical terms, this threshold amount is equal to carbon dioxide emissions from:

  • Burning 131 railcars of coal (which would contain approximately 91 metric tons, or more than 26 million pounds, of coal);
  • 4,579 passenger cars in one year;
  • 1,041,667 propane tanks used from home barbecuing;
  • 1/10 of a coal-fired power plant for one year; or
  • Electricity use at 3,467 homes in one year.1

NOTE: The rules presume that the 25,000 CO2e threshold has not been met when the maximum rated heat capacity of a facility is less than 30 million British thermal units (Btus). In practice, this provision should exempt nearly 80% of commercial buildings that use a boiler for heating water and steam from reporting under the rules.

In order to determine whether combined emissions are equal to, or greater than, 25,000 metric tons of CO2 equivalent, a facility must calculate combined annual emissions from all of the Table 1 source categories located within the physical boundary of the facility, including stationary fuel combustion units and miscellaneous carbonate uses.

Among other things, the rules also included: food processing; magnesium production; industrial landfills; and industrial wastewater treatment system. Based upon comments from interested parties, these facilities no longer are required to complete any GHG reporting.

NOTE: The rule does not require facilities to report electricity purchases or indirect emissions from electricity consumption.

General Reporting Requirements

Measuring Greenhouse Gases: The general monitoring approach adopted by the proposed rules involves both direct emission measurement and facility-specific estimations. For detailed information regarding facility-specific monitoring approaches and/or emission calculations, you should consult the subparts applicable to your facility. Notably, the rules do allow for the use of best available data in lieu of facility-specific monitoring methods from January through March 2010.

Reporting Schedule: Facilities subject to the reporting rules will be required to begin collecting emissions data on January 1, 2010. The first annual report will be due on March 1, 2011, and will be based upon data collected during calendar year 2010. The lone exception to the annual reporting requirement is a facility with an electric generating unit (EGU) and subject to the Acid Rain Program (i.e. reporting of NOX and SOX emissions). Because facilities subject to the Acid Rain Program must report CO2 emissions on a quarterly basis, the proposed GHG reporting rules will not change the quarterly reporting requirement.2

No Longer “Once in, always in”: The proposed rules required that, once a facility becomes subject to the GHG reporting requirements, it must continue to report even if it later falls below the reporting threshold. This absolute “once in, always in” standard was abandoned in the final rules. Now, the rules contain a mechanism that allows facilities to cease annual reporting by reducing their GHG emissions. A facility can stop reporting if the facility:

  1. Has 5 consecutive years of emissions below 25,000 metric tons CO2e/year;
  2. Has 3 consecutive years of emissions below 15,000 metric tons CO2e/year; or
  3. Shuts down its GHG-emitting processes and/or operations.

The Annual Report: Annual reports must be submitted at the facility (rather than corporate) level. he annual report must contain the following information:

  • Total facility emissions in metric tons of carbon dioxide equivalent aggregated for all source ategories
  • Total facility emissions in metric tons of carbon dioxide equivalent aggregated for all supply categories (i.e. supply/importing/exporting fossil fuels)
  • Annual emissions from each source category and supply category expressed in metric tons or each of the 6 GHG, listed by GHG
  • Onsite electricity generation in kWh
  • Total pounds of synthetic fertilizer produced and total nitrogen in fertilizer
  • Any additional information (i.e. unit/process-level emissions, activity data such as fuel use or feedstock inputs, quality assurance/control data)

Self-certification, EPA verification: All annual reports must be submitted electronically and certified by a designated representative of the owner or operator of the reporting facility. The certification requirement requires all reporters to acknowledge the contents of the annual report as truthful, accurate and complete. Once submitted, it is the responsibility of U.S. EPA to verify the completeness and accuracy of the report, as well as whether it satisfies the reporting requirements in the proposed rules. By accepting responsibility as the sole verifier of the GHG reports, EPA explicitly rejected calls for third-party verification, which has become common in the cap-and-trade arena.

Expected Costs of Reporting: U.S. EPA estimates that the average reporting cost will be approximately $0.02/metric ton, which will cost the private sector about $132 million in the first year, and $89 million each subsequent year. Industry sectors expected to bear the greatest burden include general station combustion (24%), pulp and paper manufacturers (10%), and motor vehicle and engine manufacturers (10%).

Record Retention: In the spirit of the free flow of information, the rules establish a three-year record retention schedule for all reporters. The materials that must be retained include the annual reports themselves, as well as all materials used to generate those reports.

Enforcement: The enforcement of the proposed rule will be under the Clean Air Act (Sections 113 and 203-205). Under the Clean Air Act, enforcement mechanisms include administrative, civil and criminal penalties up to $32,500 per day, as well as injunctive relief to compel compliance with the rules.