The U.S. Environmental Protection Agency (EPA) announced its final rule requiring mandatory Greenhouse Gas (GHG) emissions monitoring and reporting on September 22, 2009. Although there are a few changes from the proposed rule, which was published on March 10, 2009, the essence of the rule remains the same. The rule establishes the first national GHG emissions tracking and reporting program.
Emissions Tracking Requirements and National Impact
The rule regulates GHG emissions, which includes carbon dioxide (CO2), methane, nitrous oxide, sulfur hexafluoride, hydrofluorocarbons, perfluorochemicals, and other fluorinated gases, including nitrogen trifluoride and hydrofluorinated ethers. In general, the rule applies at the facility level and regulates entities that emit more than 25,000 metric tons of CO2 equivalents (CO2e). It is important to note that all of a facility’s GHG emissions, not just CO2, are combined to calculate the total amount of CO2e emitted. Regulated entities must begin monitoring GHG emissions starting January 1, 2010 and submit an annual report for all 2010 emissions to the EPA by March 31, 2011.
The EPA estimates that this rule will cover approximately 85 percent of the nation’s GHG emissions and apply to roughly 10,000 facilities. The rule is designed to identify sources of GHGs. Although the rule does not require emission reductions, the information gathered from the reports will be used to inform future climate regulations or legislation.
Facilities covered by this rule are fossil fuel and industrial GHG suppliers, motor vehicle and engine manufacturers (starting with model year 2011), and facilities that emit more than 25,000 metric tons of CO2e per year. The final rule decreased the number of covered source categories from 42 in the proposed rule to 31 in the final rule. The following categories are not covered under the final rule:
Oil and natural gas systems
Coal suppliers and underground coal mines
Wastewater treatment facilities
Fluorinated GHG producers and magnesium producers
Sulfur hexafluoride emissions from electrical equipment
Research and development activities (R&D)
Important Changes to the Rule
Two important changes to the rule are the inclusion of an exemption option and the use of best available data. The “once-in, always in” policy was dropped and instead facilities may opt out of the program if their emissions are (1) reduced below 25,000 metric tons of CO2e per year for five consecutive years; (2) reduced below 15,000 metric tons of CO2e per year for three consecutive years; or (3) eliminated due to the shutting down of the GHG-emitting processes or operations. In addition, the final rule provides that facilities may use the best available data until March 31, 2010 and monitoring data beginning April 1, 2010. This will provide some facilities extra time to put in place systems for recording required data. Furthermore, some facilities may qualify for an extension through the end of 2010 if they can show that it is not feasible to install the equipment in time.
Although some groups fought hard for the addition of a third-party verification requirement, the EPA chose not to incorporate this element. Instead, the EPA will verify the emissions data and will also have the ability to audit facilities. But the EPA refused to preempt state and local governments from imposing third-party verification.
The rule will go into effect 60 days after publication in the Federal Register. The EPA may bring enforcement actions for non-compliance, including but not limited to inaccurate reporting, failure to collect or calculate emissions data, or failure to report.
How Can WNJ Help?
The Climate and Energy Practice at Warner Norcross & Judd LLP is ready to assist clients that have questions regarding the final rule, its requirements, and its applicability to your business. Our attorneys have been involved in this rulemaking during its development, including assisting clients with the submission of comments to the EPA on the proposed rule and its precursors, including the Climate Registry’s reporting protocol. Our attorneys can help you develop a strategy to determine whether the rule applies to you, and if so, navigate the requirements in the most cost-effective manner possible. For more information, contact Steve Kohl, at 248-784-5141 or firstname.lastname@example.org, or any member of Warner's Climate and Energy Practice.