On March 10, 2009, the U.S. Environmental Protection Agency proposed the first national comprehensive system for reporting emissions of carbon dioxide and other greenhouse gases produced by major sources in the United States. The regulation is open for comment, and if adopted it will require that companies with significant greenhouse gas emissions keep careful tabs on those emissions and report them to the EPA. Depending on future action by the Congress of the United States, this could be the opening round of extensive greenhouse gas regulation at the federal level, and attendant cost for years to come.

EPA says that approximately 13,000 facilities, accounting for roughly 85 percent of greenhouse gases emitted in the United States, would be covered under the proposal. The Agency said in a press release that, “The new reporting requirements would apply to suppliers of fossil fuel and industrial chemicals, manufacturers of motor vehicles and engines, as well as large direct emitters of greenhouse gases with emissions equal to or greater than a threshold of 25,000 metric tons per year. This threshold is roughly equivalent to the annual greenhouse gas emissions from just over 4,500 passenger vehicles. The vast majority of small businesses would not be required to report their emissions because their emissions fall well below the threshold.”

The authority for the reporting requirements originates in the FY 2008 Appropriations Bill signed in December 2007 by President Bush. The Obama Administration is reportedly backing legislation that would require purchase of permits to emit greenhouse gasses, and consideration of such legislation is under way in Congress.

Just over half of the affected “greenhouse gas” emissions in the country are estimated to come from electric generation and industry, while not quite 30 percent come from transportation related sources, such as automobiles, trains and airplanes. Greenhouse gasses subject to regulation include carbon dioxide (CO2), methane (CH4), nitrous oxide (N2O), sulfur hexafluoride (SF6), hydrofluorocarbons (HFCs), perfluorochemicals (PFCs), and other fluorinated gases (e.g., nitrogen trifluoride, hydrofluorinated ethers [HFEs]). These gasses are aggregated for accounting purposes in the rule under the denomination of CO2 Equivalents (CO2e). A wide variety of sources, ranging from electricity production, to landfills, to chemicals, foods, and other industries, will be covered.

One key aspect of the proposal is that it will emphasize facility specific reporting, rather than corporate wide reporting. This may cause some companies that have voluntarily begun to assemble and monitor their “green” data to amplify or revise their systems. Data collection is required to begin as of January 1, 2010, with reporting in March 2011 for the 2010 calendar year (except for automobile manufacturers, who would report by model year). EPA will verify the data reported, and false or incomplete reporting would result in possible enforcement action.

Another aspect of the proposal is that reporting companies will need to aggregate, or include, upstream and downstream GHG production related to their facilities. Producers of coal, coal-based liquid fuels, petroleum products, and producers, importers and exporters of industrial greenhouse gases would also be required to report.

Under the proposal, the annual emission report would include the following information:

• Total facility emissions in metric tons of CO2e aggregated for all source categories.
• Total emissions in metric tons of CO2e aggregated for all supply categories.
• Emissions from each source category and supply category expressed in metric tons of each GHG.
• Onsite electricity generation in kilowatt-hours.
• Total pounds of synthetic fertilizer produced and total nitrogen contained in the fertilizer.
• Any additional information, including unit-or process-level emissions, activity data (e.g., fuel use, feedstock inputs), or quality assurance/quality control data that are specified in an applicable subpart.

EPA consulted with multiple stakeholders in developing its proposed regulations. EPA indicates that any companies which have already begun carbon conscious measurements using protocols of the more well-known greenhouse gas initiatives around the country should be in a position to make a relatively smooth transition to the EPA required reports.

Further information and details of the proposal are available on the EPA website. There will be public hearings, and a 60-day comment period from the date of Federal Register publication, which is imminent.

Hinshaw & Culbertson LLP’s Environmental Law Practice Group can assist clients with understanding, commenting on and complying with the eventual regulations. We are also tracking the unofficial debate on the scientific basis for requiring greenhouse gas control. 

For further information, please contact Harvey M. Sheldon or your regular Hinshaw attorney.

This alert has been prepared by Hinshaw & Culbertson LLP to provide information on recent legal developments of interest to our readers. It is not intended to provide legal advice for a specific situation or to create an attorney-client relationship.