On Sept. 22, 2009, EPA issued its final Mandatory Greenhouse Gas Reporting
Rule, setting up a complex structure for companies in certain industries to
report direct, and in some cases indirect, emissions of Greenhouse Gases (GHGs).
While the rule is generally similar to the proposal issued on April 10, 2009
(74 Fed. Reg. 16448).(For related discussion, see our
2009 news item.) EPA made a number of changes generally to provide greater
flexibility to describe how it is applied to certain types of sources. The final
rule will become effective 60 days from publication in the Federal Register,
which should be next week.
The final rule retains the basic structure and requirement of the proposed
rule. Specified sources in certain industries, sources which emit more than
25,000 tons per year of carbon dioxide equivalents from combustion either alone
or in combination with other specified sources, must begin monitoring their GHG
emissions in January 2010, and submit their first annual report on March 31,
Fuel production sources must report not only their own process emissions, but
also emissions from all fuel they produce, import or export. Heavy duty engine
manufacturers must also report their own process emissions, as well as emissions
from the engines they produce. The rule defines each specialized source category
and includes requirements for monitoring, data verification and reporting.
In response to comments, EPA modified their proposal in several significant
ways. First, EPA changed its rigid “once in, always in” approach and established
several thresholds by which facilities could eventually escape reporting
requirements. These include reporting emissions less than 25,000 tons per year
for five straight years, or less than 15,000 tons per year for three straight
years, or by shutting down all GHG emitting sources at a facility. EPA further
clarified that, in contrast to most other emission rules, GHG reporting was
based purely on actual emissions and not the facility’s potential to emit.
Second, in response to concerns that sources would have insufficient time to
install the required monitoring systems by the initial monitoring start date of
January 2010, EPA allowed sources limited flexibility to use best available
monitoring methodologies from January through March of 2010. EPA intends to
issue rules on criteria for determining best available monitoring methods. In a
related discussion about data quality, EPA also provided further clarification
on required QA/QC for internal measuring systems such as flow meters and reduced
record retention requirements from five to three years.
Third, EPA deferred regulation of numerous sources based primarily on the
lack of data or consensus on how these sources would monitor their GHG
emissions. The deferred sources include electronics manufacturing, ethanol
production, underground coal mines, oil and natural gas systems, food
processing, industrial landfills, and waste water treatment facilities. In its
preamble, EPA asserted that it would continue to develop requirements for these
sources, but provided no time line on when rules would be issued.
EPA also deferred another key issue, the protection of confidential business
information (CBI). Numerous companies expressed concerns that the monitoring
methodologies required the disclosure of data such as throughput or raw material
inputs, which companies generally maintain as significant trade secrets. EPA
rules preclude protecting “emissions data” used to document emissions reporting
or compliance as CBI, thus threatening broad disclosure of the information
supporting GHG reporting. In the final rule, EPA acknowledged the concern but
said it would address the issue in rules it intended to promulgate shortly.
While the GHG reporting rule will be the first federal requirement imposed on
industry with respect to GHG emissions, its implications for EPA’s authority to
adopt other GHG regulations is less clear. Its adoption shines no light on the
question of the ability of the EPA to regulate GHG under the Clean Air Act (CAA),
since the rule was adopted pursuant to specific authority in an appropriations
act. Further, the rule will not in and of itself authorize control of GHG
emissions through Title V air permits, since EPA specifically stated that the
rule did not constitute an “applicable regulation” under the air permit
At the same time, EPA trumpeted the rule’s implications for the political
process considering GHG controls. EPA noted that the data would inform its
decisions on how or whether to use CAA authority to adopt New Source Performance
Standards and “would inform future climate change policy decisions,” a clear and
unmistakable message that EPA is prepared to act through the CAA, if Congress
does not adopt another program.
EPA sent another message when it claimed that the information would encourage
companies to evaluate their GHG emissions, and that the publication of GHG
emissions data would encourage greater awareness similar to other programs. This
is a not-so-subtle reference to the Toxics Release Inventory program in which
companies report the amount of specified toxic materials they emit. While these
emissions are typically within legal and permitted limits, companies have chosen
to voluntarily reduce emissions to avoid prominent positions on lists of large
emitters. EPA clearly hopes that companies will voluntarily reduce GHG emissions
in order to avoid similar notoriety.
In short, the rule marks a very significant step in the march toward
regulation of GHG emissions, and in contrast to other such steps, imposes
requirements that must be met within the next four months.
McGuireWoods LLP Clean Air Act Team
McGuireWoods LLP is a full service law firm with a specialty practices in
Climate Change and Clean Air Act matters. For further information on EPA's
proposed Endangerment Finding and its implications, please contact the authors
or any member of our
Clear Air Act team.