Proposal Targets Wide Range of Industrial Facilities
Last week, the Environmental Protection Agency (EPA) released a new, comprehensive proposal for a national registry of greenhouse gas (GHG) emissions. This proposal, developed under the Clean Air Act, will affect a wide range of industrial GHG sources, including upstream producers of fossil fuels and industrial gases, manufacturers, electricity generators, and producers of chemicals, cement and metals.
Purpose of the Registry
The GHG registry would compile, for the first time, a relatively comprehensive, mandatory, federal database of GHG emissions based on annual reports submitted by industry to EPA and the public. A number of voluntary and mandatory reporting initiatives already exist, but none is as sweeping as the current proposal.
The proposed rule is intended to lay a factual foundation for resolving the national debate on federal strategies for controlling anthropogenic sources of GHGs. Additional purposes may be to stimulate the political discussion, to show progress in regulating GHGs two years after the Supreme Court's Massachusetts v. EPA decision and to call attention to companies that have a substantial carbon footprint.
How the Registry Works
The concept of the registry is simple. The proposed rule defines the sources that must report their GHG emissions annually, and it defines the methods of measurement or calculation that are to be used in reporting the emissions. In practice, the rule will prove difficult to apply in the initial rounds. The culprit is policy complexity born of the rule's numerous compromises and hybrid approaches, as well as the many alternative technical methods defined for calculation or measurement of emissions. It appears that EPA went to great lengths to write a rule that honors the existing patchwork of reporting regimes and that balances the need for a comprehensive accounting of emissions against the desire to avoid imposing high costs on thousands of sources.
The starting principle is that companies with facilities in designated sectors (e.g., aluminum production or electronics manufacturing) must report their GHG emissions annually, regardless of the amount of emissions. Companies with non-designated facilities must report their GHG emissions if they exceed 25,000 metric tons of CO2-equivalent per year. The proposed rule covers carbon dioxide (CO2), methane (CH4), nitrous oxide (N2O), hydrofluorocarbons (HFC), perfluorocarbons (PFC) and sulfur hexafluoride (SF6), as well as certain other fluorinated gases like nitrogen trifluoride and hydrofluorinated ethers. The emissions are typically reported on a per-facility basis (the 25,000-ton threshold applies on a per-facility basis, not a corporate basis), but in some instances the reporting reaches down to the level of individual units or process lines.
In addition to the designated sources and the threshold sources, the proposed rule covers upstream producers of fossil fuels and industrial gases, as well as manufacturers of certain mobile sources and engines. The result is that some double-counting of GHGs will occur, since fossil fuels will be "counted" both before and after combustion, as it were.
As a general matter, 25,000 tons is low enough to capture most serious industrial facilities and power plants, but high enough not to capture individual homes or small office buildings. The area in between – large commercial buildings, warehouses, hospitals, universities and so forth – is not so clear. EPA has tried to simplify the applicability determination for these sorts of sources by assuming that most of these sources will contribute GHGs mainly through heat/steam generation. On that assumption, EPA established a threshold of 30 mmBtu/hour aggregate maximum rated heat input capacity per facility. If the facility's capacity is lower, no reporting is required (unless the facility is in a designated sector); if the facility's capacity is greater, reporting may be necessary, but more detailed analysis is needed.
Conclusion
The foregoing is a basic analysis of a proposed rule that is as comprehensive as it is long, reaching 593 pages, with a preamble of more than 800 pages. Corporations that exceed the rule's 25,000-ton threshold should keep in mind that this rule is a proposed rule: comments may be filed until sixty days after publication in the Federal Register. As Bracewell & Giuliani continues to study and monitor this important new development, we would be pleased to assist you with any concerns you have about the new proposal.
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