On September 22, 2009, the U.S. Environmental Protection Agency (“EPA”) released the final Mandatory Greenhouse Gas Reporting Rule (“GHG Reporting Rule”), which requires monitoring beginning in the first quarter of 2010 and first-ever GHG reporting starting on March 31, 2011, for 2010 emissions. The GHG reporting rule will apply to roughly the same universe of sources that would be covered under proposed cap and trade programs-around 10,000 sources constituting roughly 85% of U.S. GHG emissions. Thus, the final rule will allow for expedited implementation of a cap and trade program.

Applicability

The final rule generally requires facilities that emit more than 25,000 metric tons of carbon dioxide, methane, nitrous oxide, and assorted fluorinated GHGs (measured in carbon dioxide equivalents, or CO₂e) to report those emissions to EPA on an annual basis. The rule includes source-specific requirements and general combustion requirements. Generally, sources will combine source specific emissions (e.g. process emissions) with combustion emissions in determining applicability. However, facilities in some specific source categories must report regardless of annual GHG emissions (e.g. electricity generation). Corporate level (rather than facility level) reporting is also required for suppliers of fossil fuels and industrial GHGs, as well as vehicle and engine manufacturers.

To simplify applicability determinations for a large number of commercial and industrial facilities, the final rule exempts facilities with an aggregate heat input capacity of less than 30 mmbtu/hr from all combustion sources. Importantly, this exemption only applies to facilities whose only source of reportable emissions would be from combustion sources.

Notably, the rule eliminates the “Once-In-Always-In” nature of the proposal and allows facilities that fall below applicability thresholds for a minimum period to cease reporting. If a facility emits less than 25,000 tons of GHGs/year for five consecutive years or less than 15,000 tons/year for three consecutive years, it may cease reporting under the rule. Facilities that close all GHG emitting sources may also cease reporting on an expedited basis.

2010 Reporting Requirements

Facilities must begin monitoring emissions on January 1, 2010. In response to comments that there was insufficient lead time to report 2010 emissions and implement reporting procedures, the final rule allows reporting using “best available data” through March 31, 2010, for parameters that cannot reasonably be measured in accordance with the rule’s requirements. In addition, facilities may petition EPA within 30 days of the effective date of the GHG Reporting Rule - sixty days after publication in the Federal Register (which is expected shortly) - to allow the use of “best available data” through the end of the 2010 calendar year. EPA will not grant extensions beyond 2010.

The rule also contains abbreviated 2010 reporting requirements for facilities that only have combustion sources. Facilities with only combustion sources can file simplified reports relying on emission factors and company fuel consumption records.

Source-Specific Emissions

The proposed rule contained 42 separate reporting protocols. These include source category-specific protocols (e.g. iron and steel production, petroleum refining, cement manufacturing, etc.) and general requirements for stationary combustion sources. Many facilities will likely have to report through both the general combustion and source-specific provisions.

EPA has finalized requirements for 31 of 42 source categories included in the proposal.^[1] EPA will take additional time to evaluate comments on the remaining 11 source categories and will finalize those requirements at a later time.^[2] Facilities in source categories that have not been finalized should be mindful that GHG Reporting Rule would still apply if they meet the reporting threshold through general combustion emissions (or through a combination of emissions from another applicable source category and general combustion emissions). For example, an ethanol facility would not have to report process emissions at this time but would still be required to report emissions from combustion. If there were a co-located feedlot located at the facility, manure management reporting provisions might also apply.

Combustion Emissions

Facilities that are not included within one of the listed source categories must only report GHG emissions from combustion operations, and only if those emissions are above the 25,000 ton threshold.

If reporting thresholds are met, GHG emissions from all stationary source combustion sources must generally be reported, with the exception of portable generators, emergency generators, emergency equipment, and R&D units. Generally, combustion units with a capacity less than 250 mmbtu/hr are subject to less stringent reporting. Larger units are subject to more rigorous fuel metering and testing requirements, and in some cases must have Continuous Emission Monitoring Systems (CEMS) installed.

GHG Monitoring Plan

Facilities subject to the rule must develop and maintain a written GHG Monitoring Plan that includes identification of individuals responsible for GHG monitoring, an explanation of the methods used to collect GHG data, and a description of procedures for quality assurance, repair, and maintenance of instrumentation used to compile data. The rule is silent as to when GHG Monitoring Plans are required. Thus, facilities should prepare a GHG Monitoring Plan by the effective date of the rule, which is sixty days after publication in the Federal Register.

EPA Certification

The rule includes provisions that require EPA certification of submitted data. EPA opted not to include provisions that would have required more onerous third-party certification.

Designated Representatives

Similar to the Title V program, facilities must designate a representative that will be responsible for submitting annual GHG reports. Facilities are required to submit certificates of representation to EPA at least 60 days before the initial emission report is due (i.e., no later than January 31, 2011).

Conclusion

The GHG Reporting Rule provides significantly less lead time to prepare for than most other regulations, particularly with the need to start collecting data in January 2010. Accordingly, facilities should promptly start to develop GHG reporting and recordkeeping procedures. We would be happy to answer other questions or assist in developing such programs.

If you have any questions or would like additional information, please do not hesitate to contact us.

Kelley Drye & Warren LLP

Kelley Drye’s Environmental Law Practice Group specializes in providing comprehensive solutions to complex problems. We provide both advice and representation for clients participating in rule-making and policy-making activities by federal regulatory agencies, including the U.S. Environmental Protection Agency and the Occupational Safety & Health Administration, and similar state agencies.

For more information about this Client Advisory, please contact:

John L. Wittenborn
(202) 342-8514
jwittenborn@kelleydrye.com

Joseph J. Green
(202) 342-8849
jgreen@kelleydrye.com

^[1] Finalized source categories include stationary fuel combustion, electricity generation, adipic acid production, ammonia manufacturing, cement production, ferroalloy production, glass production, HCFC-22 production and HFC-23 destruction, hydrogen production, iron and steel production, lead production, lime manufacturing, miscellaneous uses of carbonates, nitric acid production, petrochemical production, petroleum refineries, phosphoric acid production, pulp and paper manufacturing, silicon carbide production, soda ash manufacturing, titanium dioxide production, zinc production, MSW landfills, manure management, suppliers of coal-based liquid fuels, suppliers of petroleum products, suppliers of natural gas and natural gas liquids, suppliers of industrial GHGs, suppliers of carbon dioxide, and manufacturers of engines used in mobile sources (all categories except light-duty vehicles, light-duty trucks, and medium-duty passenger vehicles).^[2] Source categories for which the rule is not being finalized include electronics manufacturing, ethanol production, fluorinated GHG production, food processing, magnesium production, oil and natural gas systems, sulfur hexafluoride from electrical equipment, underground coal mines, industrial landfills, wastewater treatment, and suppliers of coal.

EPA Finalizes Greenhouse Gas Reporting Rule