Facilities in "All Sectors of the Economy" Subject to Upcoming Mandatory Greenhouse Gas Emissions Reporting

Facilities emitting carbon dioxide, methane, nitrous oxide, fluorocarbons, and other “greenhouse” gases will be regulated, potentially affecting tens of thousands of manufacturing, agricultural, mining, waste management, and other entities.

An interesting twist in the national global climate debate is a “sleeper” arising out of Congress’ recent rush-to-recess before Christmas 2007. By virtue of a new congressional directive buried deeply in a FY 2008 appropriations bill, the U.S. Environmental Protection Agency (EPA) is now required to issue regulations for “mandatory reporting of greenhouse gas emissions above appropriate thresholds in all sectors of the economy of the United States.” EPA must issue a proposed rule by September 2008 and a final rule by June 2009. (H.R. 2764, December 26, 2007).

Under current law, only steam-generating electric utilities are subject to any form of mandatory greenhouse gas (GHG) reporting at the federal level. There also is a purely voluntary GHG reporting program administered by the U.S. Department of Energy, but in more than a decade of implementation, only 417 facilities nationwide have reported. Under the new program required by Congress, it appears that tens of thousands of all types of facilities and other sources may be regulated (again, the legislative mandate is to reach “all sectors” of the economy).

Many in Congress have been increasingly frustrated by the Bush administration’s reluctance to move aggressively on GHG emissions. Members of the California congressional delegation have been particularly piqued by EPA’s recent refusal to grant a waiver under the Clean Air Act (CAA) allowing the State of California to clamp down on motor vehicle GHG emissions.

Senators Diane Feinstein (D. Cal.) and Barbara Boxer (D. Cal.) have taken credit for the new mandatory GHG reporting provision. They view this new “economy-wide GHG emissions registry” as an “important first step” towards obtaining data needed to develop a national GHG cap-and-trade program.

Early reports in the environmental trade press indicate that few people — even those who represent entities that will be regulated — were aware that this broad new mandatory program was under consideration and many are still unaware the program is now law. EPA personnel have just begun to organize for the intra- and inter-agency coordination and deliberation that will be necessary to produce a proposed rule less than eight months from now.

The terms of the legislation leave much discretion to EPA’s rulemaking process. For instance, it will be up to EPA to set “appropriate thresholds” for reporting from various sectors. It would appear contrary to the purposes of the legislation, however, for EPA’s rules to include overly generous exemptions because the legislative language requires that “all sectors of the economy” (not just major industrial sources) must be covered. And the California senators have stressed that the purpose of the new program is to obtain “solid baseline data” for an “economy-wide” GHG registry.

Moreover, the congressional “Joint Explanatory Statement” accompanying the appropriations act specifies that EPA is “directed” to require “reporting of emissions resulting from upstream production and downstream sources” as appropriate. Just a few of the many additional issues to be resolved through the rulemaking would be the frequency of reporting, the level of detail in reporting, emission measurement techniques, the types of recordkeeping that would be required, and whether and to what extent continuous emissions monitors (which can be quite expensive) must be utilized at each facility.

The Joint Explanatory Statement also specifies that EPA is to issue these mandatory requirements under its CAA authority. Under CAA §113, a facility that fails to file GHG reports in accordance with the new regulations could be subject to civil penalties of $32,500 per day, and any person who knowingly fails to comply could be subject to criminal fines and imprisonment.

Thus, the EPA rules that emanate from this new legislation could range from light to heavy in their costs and burdens, and could perhaps treat some types of sources differently than others. Those who could be affected would be well advised to begin addressing these issues with EPA sooner rather than later, because key decisions made by the time the rule is officially proposed may become difficult to alter in the future.