Complying with a congressional mandate included in the Fiscal 2008 Omnibus Appropriations Bill, the US Environmental Protection Agency (EPA or the Agency) has finalized its mandatory greenhouse gas (GHG) reporting rule under existing Clean Air Act authorities. The final rule was published in the October 30, 2009 issue of the Federal Register. The rule goes into effect on December 29, 2009, with the first annual report from covered facilities coming due on March 31, 2011 for calendar year 2010 emissions (with the exception of vehicle and engine manufacturers, who would begin reporting for vehicle model year 2011). Each covered facility must have a compliant emissions monitoring plan in place no later than April 1, 2010.

EPA is requiring annual reporting at the facility level for GHG emitters that meet a minimum threshold of 25,000 metric tons of carbon dioxide equivalent per year. In addition to carbon dioxide, the carbon dioxide equivalent (CO2e) measurement captures methane, nitrous oxide, hydrofluorocarbons, perfluorocarbons, sulfur hexafluoride, and other fluorinated gases. The 25,000 metric ton reporting threshold means that most small businesses and commercial building owners will not be required to comply. EPA estimates that about 10,000 facilities – responsible for approximately 85 percent of national GHG emissions – are covered by the final rule. The Agency has developed an online “applicability tool” (available at http://www.epa.gov/climatechange/emissions/GHG-calculator/index.html) to assist facilities in determining whether they are required to report GHG emissions under the rule.

According to EPA, the primary purpose of the mandatory reporting rule is to collect “accurate and timely emissions data to inform future policy decisions.” The data collected will likely assist Congress and EPA in developing an appropriate cap on GHG emissions as part of a future national cap-and-trade system for emissions. Any facilities that presently report emissions data more frequently (e.g., quarterly) in compliance with other national programs or state and regional programs are required to continue those reports in addition to submitting annual reports under this final rule.

The final rule lays out specific reporting methodologies for emissions source categories that include the following:

• Large industrial emitters, including those in the metal, mineral and chemical industries;

• Power plants;

• Vehicle and engine manufacturers outside of the light-duty sector;

• Livestock operations that have manure management systems (the only component of the farming and agricultural sector that is included in the final rule);

• Upstream suppliers, including natural gas processors, coal mines and petroleum refineries; and

• Importers and exporters of at least 25,000 metric tons CO2e/year.

Only 31 of the 42 emissions sources that were listed in the Agency’s proposal are included in the final rule; the remaining sources were the subject of considerable public input and EPA is still considering relevant information. Notably, food processors and ethanol producers (among others) are currently not covered by the final rule although they were included in the proposed rule.

Another significant difference between the proposal and the final rule is the addition of a mechanism for a covered facility to exit the reporting program by reducing its GHG emissions. For example, if a facility records five consecutive years of emissions below the threshold of 25,000 metric tons CO2e/year, it will be permitted to cease its annual reporting to the Agency. A covered facility also may cease reporting after three consecutive years of emissions below 15,000 metric tons CO2e/year.

The Agency finalized the program with a self-certification requirement and EPA verification of emissions, rather than relying on a third-party verification approach. Each covered facility must have a designated representative self-certify with each annual report that the data being submitted are accurate. EPA will verify the emissions data using a combination of electronic review and on-site auditing. The Agency is currently developing a Web-based system for reporters to submit their annual data in an electronic format.

For more information about the potential impact of federal GHG regulation on your industry or company, please contact Joanne Hawana or Rachel Lattimore.