Complying with a congressional mandate included in the Fiscal 2008 Omnibus Appropriations Bill, the US Environmental Protection Agency (EPA or the Agency) has developed a proposed mandatory greenhouse gas (GHG) reporting rule under existing Clean Air Act authorities. EPA released an advance copy of the proposal on March 10, 2009, stating that the primary purpose of the rule is to collect “comprehensive and accurate data” on GHG emissions in order to “inform future policy decisions.” The data collected would 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.  

EPA is proposing to require 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 threshold means that most small businesses will not be required to comply; EPA expects approximately 13,000 facilities to be affected. EPA estimates that the emissions sources covered by the proposal are responsible for 85 to 90 percent of national GHG emissions. 

The proposed 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;

• Ethanol producers;

• Food processors;

• Livestock operations that have manure management systems (the only component of the farm sector currently included in the proposal); and

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

The first annual report for covered facilities would be due in early 2011 for calendar year 2010 emissions (with the exception of vehicle and engine manufacturers, who would begin reporting for vehicle model year 2011). Any facilities that presently report emissions data more frequently (e.g., quarterly) in compliance with other national programs or state and regional programs would be required to continue those reports in addition to submitting annual reports under this proposed rule. 

EPA plans to verify the emissions data; each covered facility would be required to self-certify that the data are accurate with each annual report. The Agency did not include third-party verification in the current proposal due to concerns about timeliness, transparency, and the additional costs that such a requirement would create. EPA may, however, revisit the third-party verification issue in the future if necessary. 

EPA published the proposed rule in the Federal Register on April 10, 2009, and affected parties and the public must submit any comments to the Agency by June 9th. Under the Fiscal 2008 Omnibus Appropriations language, EPA is required to issue the final rule by June 26, 2009, but it is highly unlikely that the Agency will meet that deadline.

Arent Fox is closely monitoring the development of this rule and urges companies that would be affected to engage EPA on specific issues. For more information about the potential impact of federal GHG regulation on your industry or company, please contact Joanne Hawana or Rachel Lattimore.