EPA is proposing a rule to require mandatory reporting of greenhouse gas (GHG) emissions in the United States (the "Proposed GHG Rule"). EPA is developing this rule in accordance with the FY2008 Consolidated Appropriations Act, which was signed into law in December 2007. The Proposed GHG Rule would require reporting of anthropogenic GHG emissions covered under the United Nations Framework Convention on Climate Change (UNFCCC).

Almost all the literature set forth by EPA and commentators under this proposed regulation carefully considers the question, "Who would report?" But an equally important question—about which there is far less discussion—is, "How do you establish that you don't have to report?"

Large Sources: EPA is proposing mandatory reporting for facilities that emit 25,000 mtCO2e or more annually. For reference sake, 25,000 mtCO2e is equivalent to emissions from annual energy use of about 2,200 homes. It is also equivalent to just more than 58,000 barrels of oil consumed or 131 railcars' worth of coal.

In addition, for some 19 source categories created by the proposed rule, all of the facilities with that particular source category within their boundaries would be subject to the reporting requirements. These source categories include large manufacturing operations such as petroleum refineries and cement production.

If your facility is not in one of these 19 source categories, you need to report only if you emit 25,000 mtCO2e or more annually.

Small Sources: EPA is clear that very small sources – households, certain commercial buildings, and individual vehicle owners – will not need to report. The average annual household emissions in the United States are about 11.3 mtCO2e, well below the threshold for reporting. Also, if your facility simply has "stationary fuel combustion units" (boilers, combustion turbines, engines, incinerators, and process heaters) and no other emission sources within their boundary—say, commercial office space—you do not need to report if the aggregate maximum rated heat input capacity of the stationary fuel combustion units summed is less than 30 mmBtu/hr. If a building does have an aggregate maximum rated heat input capacity equal to or greater than 30 mmBtu/hr, then that facility may need to do further calculations to determine if it meets the threshold for reporting. However, EPA is seeking further comment on this strategy in the proposal.

Mid-Size Sources: What about mid-size manufacturing facilities—will they have to report? The short answer is that some mid-size facilities will have to report, and others will not.

How do you determine whether your mid-size facility will have to report? Under the proposed regulations, there is an affirmative obligation on the owner or operator of a facility to review the "appropriate records" to determine whether the threshold has been exceeded. The question, of course, is whether your facility has these "appropriate records" for review, or whether such records will need to be generated in the first reporting year.

Annual Emissions Estimates: In general terms, to determine the applicability of the thresholds, a facility will have to estimate the annual emissions of CO2, CH4, N2O, and fluorinated GHG (as defined in §98.6) in metric tons from stationary fuel combustion units, miscellaneous uses of carbonate, and any applicable source category listed in the Proposed GHG Regulations. (See Proposed GHG Regulation, §98.2(b))

A facility would then sum the GHG emissions totals from each of these three subcategories and determine if its facility-wide emissions are under 25,000 mtCO2e.1

Exemptions from Emission Reports: The Proposed GHG Rule expressly states that the owners and operators of a facility that does not meet the 25,000 mtCO2e threshold are not required to submit an emission report for the facility. However, such owners and operators must reevaluate the applicability of reporting (which reevaluation must include the revising of any relevant emissions calculations or other calculations) whenever there is any change to the facility or supplier that could cause the facility or supplier to meet the applicability requirements of reporting. Such changes include, but are not limited to, process modifications, increases in operating hours, increases in production, changes in fuel or raw material use, addition of equipment, and facility expansion.

Penalties: Are there penalties for those who fail to estimate and collect the data needed to decide whether or not to report? The Proposed GHG Rule states:

Any violation of the requirements of this part shall be a violation of the Clean Air Act. A violation includes, but is not limited to, failure to report GHG emissions, failure to collect data needed to calculate GHG emissions, failure to continuously monitor and test as required, failure to retain records needed to verify the amount of GHG emission, and failure to calculate GHG emissions following the methodologies specified in this part. Each day of a violation constitutes a separate violation.

(emphasis added) Thus, there are potentially serious consequences for failing to collect appropriate data and properly calculate GHG emissions to determine whether reporting requirements apply to your facility. The proposed regulations are silent with regard to record-retention requirements for non-reporting facilities; however, particularly if the facility falls just slightly short of a threshold, a prudent owner or operator of the facility should follow the recordkeeping provision for reporting entities – in case the facility's responsibility to report is called into question.

GHG Reporting ("Once in, always in"): Also note that EPA is adopting a "once in, always in" approach to GHG reporting: Once a facility is subject to the reporting requirements, the owners and operators of the facility must continue for each year thereafter to comply with all requirements of this part, including the requirement to submit GHG emission reports, even if the facility does not meet the applicability threshold for reporting in a future year. (See Proposed GHG Regulation, §98.2(g))

A final point bears mentioning that the threshold requirements for reporting under this Proposed GHG Rule have a strong likelihood of being repeated as the thresholds for permitting under the federal cap and trade system when it is eventually enacted. Therefore, determinations of applicability with regard to threshold reporting under the Proposed GHG Rule may have implications with regard to whether your facility is a "covered source" for purposes of the expected federal cap and trade system.

For all the reason stated above, mid-sized manufacturing facilities that are close to the reporting thresholds would be well served to carefully analyze and sufficiently document their determination with regard to "near misses" of the threshold, and discuss such determination with counsel. In fact, even though third-party verification of calculations and emissions—or even opinions from legal counsel—are not required under the Proposed GHG Rule, they should be considered by certain mid-sized facilities.