On March 10, 2009, the U.S. Environmental Protection Agency (EPA), pursuant to its power under the Clean Air Act (CAA), released a proposed rule that would create the United States’ first comprehensive system for reporting carbon dioxide (CO2) and other greenhouse gas (GHG) emissions (Proposed Rule). The Proposed Rule directly impacts major GHG emitters from all sectors of the economy, including electric cooperatives and other entities involved in electricity generation. Although the Proposed Rule has garnered considerable media attention, the expected burden of additional obligations on the electric generation sector, already subject to considerable emissions regulation, will likely not be substantial.
The proposed federal reporting regime would create reporting obligations in addition to any applicable state and/or regional reporting requirements. If implemented, the data reported could help guide the thresholds that would apply to a future federal cap-and-trade program.
The reporting obligations under the Proposed Rule are sector-specific. Facilities in the Electric Generation source category would be required to report annual emissions of carbon dioxide, methane (CH4) and nitrous oxide (N2O). To determine whether reporting thresholds are met, emissions must be converted to carbon dioxide equivalents (CO2e), measured in metric tons (mt). The conversion scale for CO2e is based on the atmospheric heat-trapping properties of each GHG relative to CO2. EPA has proposed a table setting forth these values.
Regulated Parties and Emissions Thresholds
The Proposed Rule applies to a wide range of emission sources. It imposes annual monitoring and reporting requirements, at the facility level, for covered facilities. It does not establish a single emissions threshold; rather, reporting obligations are based on enumerated source categories. EPA has proposed to define the Electricity Generation source category to include:
- Facilities with electricity generating units (EGUs) subject to EPA’s Acid Rain program;
- Facilities containing EGUs that collectively emit 25,000 metric tons of CO2e or more per year; or,
- Facilities, with one or more EGUs, that emit 25,000 mt CO2e or more per year in combined emissions from stationary fuel combustion units (e.g., boilers, combustion turbines, engines, incinerators and process heaters), miscellaneous uses of carbonate, and all other source categories at the facility.
Portable equipment or generating units designated as emergency generators in a permit issued by a state or local air pollution control agency are not included in this source category.
Determining Emissions Levels
In the Preamble to the Proposed Rule, EPA noted that it attempted to reduce additional reporting burdens by building upon existing regulatory programs, where possible. EGUs subject to EPA’s Acid Rain program would continue to monitor CO2 emissions pursuant to that program and need only convert CO2 emissions reported on the fourth quarter Acid Rain program reports from short tons to metric tons.
EGUs not subject to the Acid Rain program would determine CO2 emissions using the methods EPA has specified for stationary fuel combustion sources. The Proposed Rule outlines four methodological tiers and the conditions for their applicability. Generally, the Proposed Rule allows the use of default assumptions on fuel carbon content and heating values for smaller EGUs (generally, this applies to units with a maximum rated heat input capacity of 250 mmBtu/hr or less), while direct measurement and/or emissions monitoring is required for larger EGUs. Of particular interest to some electric cooperatives, the Proposed Rule allows certain facilities that generate electricity from the combustion of biomass fuels, regardless of size, to calculate emissions in a manner consistent with the reporting requirements of smaller EGUs. EGUs not subject to the Acid Rain program must also separately determine CO2 emissions from sorbent use.
All EGUs must determine and report their N2O and CH4 emissions using the methods EPA has specified for stationary fuel combustion sources. Generally, this would be determined by reference to a default N2O or CH4 emissions factor and the measured heat value of the fuel combusted. For facilities not subject to the Acid Rain program, a default heat value for the fuel may be used, if specified by EPA, unless an actual heat measurement is available.
The Proposed Rule also references or specifies quality assurance/quality control requirements to ensure the accuracy of these reports.
Report Content and Frequency
Regulated parties would electronically file annual reports. The first report would be due on or before March 31, 2011, with respect to emissions for the 2010 calendar year. The Proposed Rule includes requirements similar to those in effect under the Acid Rain program requiring joint owners of EGUs to appoint a designated representative responsible for the reporting obligations.
The Proposed Rule would require the following information for EGU reports:
- Each type of fuel combusted in the unit during the year;
- The calculated CO2, N2O and CH4 emissions for each type of fuel combusted, expressed in metric tons of each gas and in metric tons of CO2e;
- The method used to calculate CO2 emissions for each type of fuel combusted;
- The monitoring or reporting methodologies under the Acid Rain program, if applicable, that were used to quantify CO2 emissions; and
- Total GHG emissions from the unit for the reporting year, expressed in metric tons of CO2e.
This list is not exhaustive; for example, additional requirements apply to EGUs that are not subject to the Acid Rain program. It should also be noted that, in certain circumstances, the Proposed Rule allows for aggregation of multiple units’ emissions and specifies alternative reporting requirements.
Any facility that fails to report under the Proposed Rule could potentially be subject to an enforcement action by EPA under the CAA. The CAA outlines several remedies that include administrative, civil and criminal penalties. The CAA also allows for civil and administrative penalties up to $37,500 per day (each day of a violation may constitute a separate violation) as well as injunctive relief to compel compliance with the reporting requirements.
The Proposed Rule is open for comment for 60 days from the initial date of publication in the Federal Register.
For a more general overview of the Proposed Rule, please click here to view a related Legal Alert that was distributed on March 11, 2009.