Client Alert Newsletter

EPA Opens Comment Period for GHG Reporting Rule

On April 10, 2009, the U.S. Environmental Protection Agency ("EPA") published a proposed rule that would require mandatory monitoring and annual reporting of greenhouse gas ("GHG") emissions by stationary sources that emit 25,000 metric tons of GHGs (measured as CO2 equivalents or "CO2e") in any year starting in 2010. The proposed rule also requires annual reporting by fossil fuel suppliers and engine manufacturers. The almost 300 page notice of proposed rulemaking contains detailed rules, and in many cases options, as to how sources are required to measure and report their annual GHG emissions. With the federal climate change legislation and EPA GHG regulations on the horizon, as well as ongoing state activity in the climate change area, any facility with sources that emit GHGs will want to pay close attention to this rule as it develops because the annual monitoring and reporting requirements have the potential to "lock in" sources for purposes of these GHG programs going forward. Comments on the proposed rule are due to EPA by June 9, 2009.

As a general matter, the GHG reporting rule, which is to be promulgated at 40 C.F.R. Part 98, requires annual reporting of GHG emissions by each facility that falls within one of the following three categories:

• Facilities that contain any specifically identified source categories, such as electric generating facilities subject to the Acid Rain program, aluminum production facilities and petroleum refineries, that EPA believes emit greater than 25,000 tons per year CO2e as part of normal operations;
• Facilities that emit 25,000 CO2e or more from stationary fuel combustion sources and any of a number of industry-specific sources in any calendar year starting in 2010. Such sources include cement production, food processing, glass production, iron and steel production and landfills; and
• Facilities that do not include one of the listed sources, but that include stationary fuel combustion sources with an aggregate maximum rated heat input capacity of 30 mmBTU/hour or greater and emit 25,000 tons per year of CO2e in any calendar year starting in 2010.

Importantly, the proposed rule excludes from the fuel combustion source category portable "emergency generators." However, the proposed definition of "emergency generator" contains provisions designed to ensure that the "emergency generator" is not used for non-emergency uses. Specifically, the equipment must be designated as an "emergency generator" in a permit and must not serve as back-up power sources under conditions of load shedding, peak shaving, or power interruptions pursuant to an interruptible power service agreement. In addition, the proposed rule takes a "once in, always in" approach, meaning that if a facility exceeds the reporting thresholds in any calendar year starting in 2010, that facility is subject to the rule every year the rule remains in effect, even if the facility falls below the applicable thresholds in future years.

The proposed rule also raises a number of other issues related to the use of continuous emission monitoring devices ("CEMS"), GHG emission calculations (including the use of default emission factors and other values for specific industries), and the types of data other than GHG emissions that must be reported and maintained by affected facilities.

The activity in Congress on comprehensive climate change legislation and EPA's recently proposed "endangerment finding" for GHGs, which raises the prospect of EPA regulation of GHGs under the current provisions of the CAA, indicate that the likelihood of mandatory federal GHG regulation is higher than ever. At the same time, a number of states, including Pennsylvania and New Jersey, continue to consider mandatory GHG emission reduction rules. Facilities may be required to report GHG emissions under EPA's proposed reporting rule before any emission reduction rules come on line. Thus, a facility's options with respect to these potential GHG emission reduction programs may be constrained by how the facility has chosen to report its GHG emissions under the GHG reporting rule. Accordingly, facilities that are potentially subject to the EPA's proposed GHG reporting rule may wish to consider carefully its compliance options under the rule and whether it may be useful to submit comments to EPA before the June 9 deadline.