EPA Finalizes Mandatory GHG Reporting Rule Requiring Compliance Starting January 1, 2010

October 27, 2009
by TODD KANTORCZYK
MGKF Special Alert

Recently, the United States Environmental Protection Agency (EPA) finalized its mandatory greenhouse gas (GHG) reporting rule, which, among other things, requires stationary sources that emit 25,000 metric tons of GHGs (measured as CO2 equivalents or "CO2e") per year to begin to monitor GHG emissions starting January 1, 2010, and to report these emissions and other operational information to EPA annually. The over 700-page rule includes detailed requirements, and in some cases options, as to how sources must measure and report their annual GHG emissions. In light of the January 1, 2010 compliance date, facilities that believe they are subject to the rule should immediately begin planning and putting systems in place to comply with the rule's specific requirements. At the same time, facilities that believe they fall below the rule's applicability threshold or are otherwise exempt from annual reporting should consider what efforts will be necessary, again starting in January 2010, to prove that annual reporting will not be required. This is particularly important for facilities with large fossil fuel fired combustion capacity, such as office complexes, hospitals and universities, that one would not normally associate with GHG control issues.

As a general matter, the GHG reporting rule, which is to be promulgated at 40 C.F.R. Part 98, requires annual reporting of stationary source GHG emissions by each facility that falls within one of the following three categories:

  • Facilities that contain any specifically identified source categories, such as electric generating facilities subject to the Acid Rain program, aluminum production facilities and petroleum refineries, that EPA believes emit greater than 25,000 tons per year CO2e as part of normal operations;
  • Facilities that emit 25,000 CO2e or more from stationary fuel combustion sources and any of a number of industry-specific sources in any calendar year starting in 2010. Such sources include cement production, food processing, glass production, iron and steel production and landfills; and
  • Facilities that do not include one of the listed sources, but that include stationary fuel combustion sources with an aggregate maximum rated heat input capacity of 30 mmBTU/hour or greater and emit 25,000 tons per year of CO2e in any calendar year starting in 2010.

In the preamble of the proposed rule, EPA states that facilities that fall below the 30 mmBTU/hour level will not be required to engage in monitoring and/or reporting activities under the rule. The final rule also notes, however, that facilities with aggregate stationary combustion capacity that exceeds the 30 mmBTU/hour threshold will be required to calculate their annual GHG emissions starting on January 1, 2010 in accordance with the final rule to determine whether they are required to report their annual GHG emissions.

Importantly, the proposed rule excludes from the fuel combustion source category portable "emergency generators." However, the proposed definition of "emergency generator" contains provisions designed to ensure that the "emergency generator" is not used for non-emergency uses. Specifically, engines that serve as back-up power sources under conditions of load shedding, peak shaving, or power interruptions pursuant to an interruptible power service agreement are not considered emergency generators. Thus, if for example, a commercial building possesses over 30 mmBtu/hr of "emergency generation" capacity, but those units are also fired during the year for peak shaving purposes, the facility will be required, at a minimum, to calculate its annual GHG emissions in accordance with the methods prescribed by the final rule to determine whether or not those emissions exceed the 25,000 tons per year threshold.

The nature of the potential exceptions to and other issues associated with EPA's final GHG reporting rule underscore the need to obtain and maintain the right operational records. Moreover, with the prospect of federal climate change legislation and EPA GHG regulations on the horizon, as well as ongoing state activity in the climate change area (including proposed state-specific GHG action plans and reporting rules in Pennsylvania and New Jersey), strategic calls on these monitoring and reporting issues carry added significance because any annual GHG emission reports have the potential to "lock in" sources for purposes of these GHG programs going forward.

If you have any questions about EPA's final GHG reporting rule, please contact Todd D. Kantorczyk at tkantorczyk@mgkflaw.com or (484) 430-2359.