This summary provides a detailed synopsis of existing and pending greenhouse gas (GHG) regulations to help you determine which, if any, of these regulations apply to your business.

Regulations in Place

Already in effect, the federal Mandatory Reporting of Greenhouse Gases Rule (MRR) requires reporting of CO2 and other GHG emissions.Affected businesses were required to begin collecting emissions data on January 1, 2010, and the first annual report for calendar year 2010 is due to the U.S. Environmetal Protection Agency (EPA) by March 31, 2011.

Additionally, the Prevention of Significant Deterioration and Title V Greenhouse Gas Tailoring Rule (Tailoring Rule) establishes that for sources requiring a permit under the Clean Air Act (CAA) Prevention of Significant Deterioration (PSD) or Title V permit programs for non-GHG emissions, GHG emissions will also be regulated under the PSD and Title V permit programs beginning on January 2, 2011. Regulation of additional major stationary sources based on GHG emissions will be phased in from July 1, 2011, through July 1, 2013.

The GHGs regulated under both rules are carbon dioxide (CO2), methane (CH4), nitrous oxide (N2O), sulfur hexafluoride (SF2), hydrofluorocarbons (HFCs), and perflurocarbons (PFCs), as well as other fluorinated gases as defined in the EPA rules. For the most part, the rules apply to larger facilities based on their annual emissions of CO2 or its equivalent in other regulated GHGs (CO2e). If your facility emits large quantities of any of these GHGs, you may be subject to regulation under the MRR and/or Tailoring Rule.

Facilities Subject to Regulation

Determining whether your facility meets the threshold for regulation under either the MRR or the Tailoring Rule is an essential first step. In general, sources that annually emit 25,000 metric tons or more of CO2 or CO2e are subject to reporting requirements under the MRR. Under the Tailoring Rule, sources that emit or have the potential to emit 75,000 metric tons or more of CO2e annually are subject to PSD and/or Title V requirements. However, this is only a general characterization of the applicable thresholds. More specifically, the rules apply as follows: Mandatory Reporting Rule The MRR applies to particular facility types, certain of which are required to report based on the quantity of GHGs that they emit while others are required to report regardless of the quantity of their GHG emissions. Regardless of the quantity of GHG emissions, your facility is required to report if it is an electrical generating facility that is subject to the Acid Rain Program or otherwise reports CO2 mass emissions year-round through 40 CFR part 75, or if it is engaged in any of the following:

  • Adipic acid production
  • Aluminum Production
  • Ammonia manufacturing
  • Cement production
  • Certain HFC-23 destruction processes
  • HCFC-22 production
  • Lime manufacturing
  • Petroleum refineries
  • Soda ash production
  • Phosphoric acid production
  • Nitric acid production
  • Petrochemical production
  • Silicon carbide production
  • Titanium dioxide production

Additionally, your facility is required to report if its combined GHG emissions are equal to or greater than 25,000 metric tons CO2e per year and it falls into any of the following categories:

  • Manure Management Systems (combined CH4 and N2O)
  • Municipal Solid Waste Landfills (CH4 only)
  • Ferroalloy Production
  • Glass Production
  • Hydrogen Production
  • Iron and Steel Production
  • Lead Production
  • Pulp and Paper Manufacturing
  • Zinc Production

Another category of facilities subject to reporting under the MRR comprises producers and suppliers of certain fuels and GHGs. This includes all producers of coal-to-liquid fuels, petroleum refiners that distill crude oil, natural gas fractionators and producers of industrial GHGs. On the supply side, importers and exporters of coal-to-liquid fuels and petroleum products, industrial GHGs (N2O, fluorinated GHGs and CO2) that import or export quantities equivalent to 25,000 metric tons of CO2e or more per year, and all natural gas distribution companies must also report.

Stationary fuel combustion facilities are also subject to the MRR if the aggregate maximum rated heat input capacity of all units is 30 million British thermal units per hour (mmBtu/hr) or more and the combined GHG emissions equals 25,000 metric tons CO2e or more per year. While many facilities fall within the category of stationary fuel combustion units, the majority of small businesses likely will not meet the threshold at which reporting is required, as combustion units at small businesses typically have a maximum heat rate of well below 30 mmBTU/hr. For example, 75% of buildings in commercial operations have combustion equipment with an aggregate maximum heat rate of less than 1 mmBtu/hr, and 80% have boilers with an aggregate maximum heat rate of less than 10 mmBtu/hr.

Since promulgating the MRR, the EPA has added several categories of sources that are subject to the MRR, and plans to add more categories in the future. In June of 2010, the EPA added four new categories of sources (industrial landfills, industrial wastewater treatment facilities, underground coal mines and magnesium production facilities) where their annual emissions exceed 25,000 metric tons of CO2e. These facilities are required to begin measuring their GHG emissions on January 1, 2011, and file their first report on March 31, 2012. Coal suppliers and ethanol production and food processing facilities, which were listed in the proposed rule, are not yet subject to the MRR.

The EPA has issued guidance to assist facility owners in making the initial determination as to whether the MRR applies to their facilities. The MRR final rule includes a table containing examples of affected entities by descriptive category and NAICS code. In addition, the EPA offers an applicability tool to guide people in determining whether the reporting rule applies to a given business. For facility owners that have been collecting data since January 1 of this year, the data will show whether you must report in March of next year.

Tailoring Rule

The Tailoring Rule phases in regulation of GHG emissions from stationary sources under the CAA PSD and Title V permitting programs. The implementation phases are as follows:

Phase I – January 2, 2011

PSD and Title V requirements will apply to GHG emissions only if the source is subject to PSD and Title V programs based on its non-GHG emissions. Best Available Control Technology (BACT) will be required for GHG emissions under the PSD program only where new sources and major modifications will result in a net increase of 75,000 tons or more per year of CO2e.

Phase II – July 1, 2011

New and existing sources that emit or have the potential to emit at least 100,000 tpy CO2e will be subject to both PSD and Title V requirements even if they do not exceed the permitting threshold for any other pollutant. Existing sources that undergo a modification resulting in a net increase of GHG emissions of at least 75,000 tpy CO2e will also be subject to PSD requirements even if the modification does not significantly increase emissions of any other pollutant.

Phase III and Beyond – January 1, 2013

Phase III will subject additional sources to regulation, although standards have not yet been developed. The EPA will complete an additional rulemaking to establish standards for Phase III by July 1, 2012. The EPA has, however, committed that sources with GHG emissions below 50,000 tpy CO2e and modifications resulting in a net increase of less than 50,000 tpy CO2e will not be subject to regulation under the PSD or Title V programs before April 30, 2016.

Facilities covered under the Tailoring Rule would already be subject to the MRR and, as a result, should have the necessary data to determine whether their emissions meet the thresholds for permitting under the PSD and Title V permitting programs when the Tailoring Rule takes effect at the beginning of 2011. As a general rule of thumb, combustion of fossil fuels at the following rates will result in a potential to emit 100,000 tpy CO2e:

  • Natural gas—196 MMBtu/h
  • Diesel—136 MMBtu/hr
  • Bituminous coal—108 MMBtu/hr

The biggest unknown for facilities covered under the EPA GHG regulations, however, is the scope of control technologies that will be required under the permitting programs. Facilities will be required to install BACT, determined on a case-by-case basis, as a condition of the permit. At this time, it is uncertain what BACT will be, but it is important for owners of existing and proposed facilities to begin considering the impact of BACT requirements.

What to Watch For

The EPA continues to develop the GHG regulatory scheme and, with Congress’s inaction, is under increasing pressure to create a workable structure.

The EPA recently released two proposed rules to integrate existing state programs into the soon-to-be effective federal program for regulation of GHGs. The first rule requires 13 states—Alaska, Arizona, Arkansas, California, Connecticut, Florida, Idaho, Kansas, Kentucky, Nebraska, Nevada, Oregon and Texas—to make changes to their state implementation plans under the CAA to cover GHG emissions.

The second rule is a temporary measure to account for the fact that some states may not be able to revise their state implementation plans prior to the January 2, 2011, effective date. The rule creates a federal implementation plan, giving permitting oversight authority to the federal government until such states revise their implementation plans to cover GHG emissions. The proposed rules are to be effective January 2, 2011.

Furthermore, the EPA is in the process of making determinations regarding what controls will be required. The EPA is currently determining whether it will develop new source performance standards for specific industry sectors. Such new source performance standards would set the floor for emissions control requirements for new and modified sources within a specific industry sector. If the EPA opts to develop new source performance standards, it will develop the standards for only the largest emitters such as power plants, refineries and cement kilns.

The EPA is also expected to release guidance on BACT for control of GHG emissions under the Title V and PSD programs. While it is unclear what the scope of the guidance will be, it will serve to eliminate some of the uncertainty involved in case-by-case BACT determinations by providing insight into the technology requirements for particular source categories. EPA guidance is expected sometime this fall, although the EPA has indicated that carbon capture and sequestration technology will not be required as BACT at this time, and that the guidance will focus on improving energy efficiency.

Additional rulemakings may be forthcoming as the EPA pieces together the regulatory scheme in advance of the January 2, 2011, effective date. .