November 2009

EPA Issues Final Rule Mandating Reporting of Greenhouse Gas Emissions; Proposes New Rule Requiring Use of Best Technologies by Large GHG Facilities

On September 22, 2009, EPA Administrator Lisa Jackson signed a final rule that requires annual reporting of greenhouse gas (GHG) emissions from certain facilities and suppliers beginning next year. This rule is intended to collect accurate and timely emissions data to provide a better understanding of emissions of carbon dioxide (CO2), methane (CH4), nitrous oxide (N2O), hydrofluorocarbons (HFC), perfluorocarbons (PFC), sulfur hexafluoride (SF6), and other fluorinated gases and to guide the development of the best possible policies and programs to reduce such emissions.

Three types of facilities and certain suppliers are required to submit GHG reports to EPA pursuant to the new rule:

• “Source category” facilities - Facilities that perform the following processes will be required to submit an annual GHG report regardless of the amount of emissions generated: electricity generation; adipic acid production; aluminum production; ammonia manufacturing; cement production; HCFC-22 production; certain HFC-23 destruction processes; lime manufacturing; nitric acid production; petrochemical production; petroleum refining; phosphoric acid production; silicon carbon production; soda ash production; titanium dioxide production; certain municipal solid waste landfills; and certain manure management systems.
• “Threshold category” facilities - Facilities where the following specific processes result in the emission of at least 25,000 metric tons of CO2 equivalent (CO2e) annually: ferroalloy production; glass production; hydrogen production; iron and steel production; lead production; pulp and paper manufacturing; and zinc production.
• “Combustion” facilities - Facilities that are not source category or threshold category facilities but which contain stationary fuel combustion sources that have an aggregate maximum rated heat input capacity of 30 mmBtu/hr or greater and emit at least 25,000 metric tons of CO2e annually.
• Certain suppliers of coal-to-liquid products, petroleum products, natural gas and natural gas liquids, industrial greenhouse gases and carbon dioxide.

EPA plans to add the following additional “source category” processes and suppliers within the ambit of the rule in 2010: electronics manufacturing; ethanol production; fluorinated GHG production; food processing; magnesium production; oil and natural gas systems; sulfur hexafluoride from electrical equipment; underground coal mining; industrial landfilling; wastewater treatment; and coal suppliers.

The rule sets forth equations to be used in determining its applicability to any specific facility. Of note, applicability determinations are made by using estimates of actual emissions, not the potential to emit. Available company information from 2009, including predictive production data, accounting records and engineering data, may be used in determining applicability of the rule to a facility for 2010. Information demonstrating that the rule is not applicable to a facility does not need to be submitted to EPA, but should be maintained so that it can be produced to EPA on request.

Subject facilities and suppliers are to begin collecting data on January 1, 2010 through use of best available monitoring methods, and the first emissions report is due to EPA on March 31, 2011. After this date, subject facilities are required to use monitoring methods set forth in the rule unless an extension is granted to the facility. GHG reports are then to be submitted to EPA annually by all subject facilities. The rule includes provisions to ensure the accuracy of the data through monitoring, record keeping and verification requirements. Reporting is to be conducted at the facility level, except that certain suppliers of fossil fuels and industrial greenhouse gases and vehicle and engine manufacturers will report at the corporate level. Reporters are required to self-certify that the data submitted to EPA is consistent with other Clean Air Act programs.

Facilities and suppliers may exit the program and cease annual reporting by demonstrating that their CO2e emissions have been below 25,000 metric tons for five consecutive years or below 15,000 metric tons for three consecutive years, or that the subject processes have been discontinued at the facility.

A week after issuing the new GHG reporting rule, EPA Administrator Jackson announced a proposed new permitting rule which would require industrial facilities that emit at least 25,000 tons of GHGs per year to obtain construction and operating permits covering these emissions. These permits will require that the facilities at issue use “best available” control technologies and energy efficiency measures to minimize GHG emissions when the facilities are constructed or significantly modified.

The proposed permitting rule addresses many of the same greenhouse gases as the new GHG reporting rule: carbon dioxide (CO2), methane (CH4), nitrous oxide (N2O), hydrofluorocarbons (HFCs), perfluorocarbons (PFCs), and sulfur hexafluoride (SF6). Based on the proposed emissions thresholds for these GHGs in the new permitting rule, EPA estimates that 400 new sources and modifications to existing sources would be subject to review each year for GHG emissions. In total, approximately 14,000 large sources such as power plants, refineries, and factories would need to obtain operating permits that include GHG emissions. Most of these sources are already subject to clean air permitting requirements because they emit other pollutants. Small businesses such as farms and restaurants, and many other types of small facilities, are exempted from the requirements set forth in the proposed rule. EPA will accept comments on this proposed rule for 60 days after publication in the Federal Register.