Less than an hour after President Obama’s September 22, 2009 United Nations speech stressing his commitment to strong climate protection, EPA released its long-awaited final rule mandating greenhouse-gas (GHG) monitoring and reporting. Approximately 10,000 facilities in all sectors of the economy will be required to monitor and report their GHG emissions beginning in 2010. The new rule requires reporting of GHG emissions over defined “threshold levels” on an annual basis. The requirements are estimated to cover 85 percent of total U.S. GHG emissions, at a cost to the private sector of $115 million in the first year and $72 million in subsequent years.
EPA’s new rule responds to a congressional mandate buried in the FY 2008 Consolidated Appropriations Act, which directed EPA to issue regulations for “mandatory reporting of greenhouse gas emissions above appropriate thresholds in all sectors of the economy.” Pub. L. No. 110-161, 121 Stat. 1844, 2128 (2008). The rule relies on EPA’s existing Clean Air Act (CAA) authority. It does not require controls or limits on GHG emissions, but EPA has several programs for GHG controls in its CAA regulatory “pipeline,” and Congress may enact new global climate legislation. Thus, the inventory of data collected by this new rule will serve as the foundation for the nation’s future climate control programs, whether based on regulations under the existing CAA or new legislation.
The rule requires data collection beginning January 1, 2010, with the first annual reports due March 31, 2011. The reporting requirements generally apply to facilities within one of 31 source categories that emit at least 25,000 metric tons of carbon dioxide equivalent (CO2e) per year. (As explained further below, final action on 11 additional source categories has been deferred.)
The 25,000-ton threshold applies to cumulative emissions for the calendar year; thus, if there is a possibility that a facility may meet or exceed the threshold by the end of the year, it will need to collect data beginning January 1, 2010. Most commercial buildings and small businesses are expected to be below the threshold (25,000 metric tons CO2e is equivalent to the annual GHG emissions from the energy use of approximately 2,300 homes or 4,600 passenger vehicles). EPA stressed in its Fact Sheet accompanying the final rule that the only type of agricultural facilities covered would be livestock operations with manure management systems. Additionally, EPA is not requiring mobile sources, including fleet operators and vehicle owners, to report at this time because such emissions will be covered by reports from fuel suppliers and engine manufacturers.
Although most facilities will be required to report annually, facilities already reporting under other mandatory programs such as the CAA Acid Rain Program will be required to report quarterly. Facilities are no longer required to report if they shut down or report less than 25,000 metric tons CO2e for five consecutive years, or less than 15,000 metric tons CO2e for three consecutive years.
Reports must be submitted directly to EPA through an electronic system still under development. The rule does not, however, preempt states from requiring their own GHG reporting. Reports must be made at the facility level, with the exception of certain source categories required to report at the corporate level. These include certain suppliers of fossil fuels, and vehicle and engine manufacturers outside the light-duty sector. The GHGs that must be reported include carbon dioxide, methane, nitrous oxide, hydrofluorocarbons, perfluorocarbons, and sulfur hexafluoride as well as other fluorinated gases.
The rule also includes provisions to ensure the accuracy of emissions data through monitoring, recordkeeping, and verification. “Best available” monitoring methods may be used through March 31, 2010. After that time, facilities must comply with the monitoring methods specified in the regulations. Records generally must be maintained for three years. Third-party verification is not required; reporters are required to self-certify using a designated representative. The rule includes requirements for establishing the designated representative including submittal of a certificate of representation to EPA at least 60 days prior to the deadline for submission of the emission report.
The CAA provides EPA with authority to take enforcement action for non-compliance with the new rule. EPA will consider the following to be violations: failure to report, failure to collect data needed to calculate emissions, failure to continuously monitor and test as required, failure to retain records, and failure to calculate emissions following the methodologies specified in the regulations. Each day of a violation may constitute a separate violation.
The final rule follows an April 2009 proposed rule and departs from the proposed rule in several significant respects in that it:
- Adds a mechanism for exiting the program
- Allows the use of “best available” monitoring methods through March 31, 2010
- Excludes research and development activities from reporting
- Adds a provision to require submittal of revised reports to correct errors
- Changes the records retention period from five to three years
EPA had been pressured by certain interest groups to require independent third-party verification of annual reports, but has decided not to take this step in its final rule.
Finally, EPA deferred final action on 11 industrial source categories in its September 22, 2009 final rule. EPA stated that it will “further consider comments and options” before deciding whether to subject facilities in these sectors to the mandatory reporting requirements: electronics manufacturing, ethanol production, fluorinated greenhouse gas production, food processing, magnesium production, oil and natural gas systems, sulfur hexafluoride (sf6) from electrical equipment, underground coal mines, industrial landfills, wastewater treatment, and suppliers of coal.
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If you have any questions about this alert or would like to discuss the topic further, please contact your Foley attorney or the following individuals:
Richard G. Stoll
Mark A. Thimke
Julie Solmer Stine