The US's Environmental Protection Agency (EPA) has posted to the Federal Register final details of a mandatory reporting rule (MRR) that will extend the Clean Air Act (CAA) to cover the emissions of greenhouse gases (GHG's). The rule to be effective from 29 December 2009 will be codified under Section 40 of the Code of Federal Regulations, Part 98 and will require the owners or operators of plants that emit more than 25,000 metric tons per year of carbon dioxide or equivalent gases (CO2e) to record and submit annual reports to the EPA. The figure is similar to the 20 MW thermal capacity limit for industrial plants set by the European Union under its emissions trading scheme (ETS).
Further reviews of the scheme can be found in articles published by Jenner & Block and Jones Day. The EPA also plans to use the data received to generate an information baseline that could be used with other programs designed to regulate the emissions of GHGs that the US Congress and Senate might formulate and vote to adopt at some future date.
Exemptions
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After extensive consultation with stakeholders earlier in the year, the EPA has decided to exempt 11 source categories from the new reporting regime until it has had more time to review the comments and information received. They include the oil and natural gas sector, coal suppliers, underground coal mines, as well as producers of fluorinated GHGs. Reasons for the exemptions can be found in the EPA's responses to the many comments it received and which can be accessed via a link on its mandatory reporting page (location cited above). Amongst these are the existence of other reporting schemes such as the Western Climate Initiative (WCI) and an oil and gas production (O&GP) protocol under development by the Climate Registry (TCR), duplication of reporting to other federal agencies such as the EIA, as well as debates over the definition of facilities and the scope of operational boundaries. The latter includes the omission of Phase 3 and the double reporting of emissions. |
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The American Petroleum Institute (API) appears to have been a particularly effective lobbyist during the consultative phase of the MRR. However in the author's opinion, the organisation may have overplayed its hand by submitting an overly legalistic and detailed technical response, a copy of which (all 136 pages) can be located here.
Authority of the EPA to Regulate GHG Emissions
Although not designed originally to cover such emissions, the US Supreme Court ruled in April 2007 (Massachusetts v. EPA) that the EPA did have authority under the Clean Air Act (CAA) to regulate greenhouse gases as pollutants since they posed a hazard to human health.
US Regional Climate Initiatives. Source: API Pipeline Conference, 2008.  |
The EPA has implemented the MRR and under the authority of the Clean Air Act, has started an exercise that could lead to a point some time next year where it may be able to withhold permits if an operator cannot show that it had used best practice and technologies to reduce its emissions of greenhouse gases. This is something that industry will wish to challenge, arguing that the Agency does not have an authority to regulate carbon emissions in such a way.
Jones Day in their commentary also point out that the implementation of mandatory reporting will strengthen the requirement for US companies to disclose financial details of their exposure to climate change risk when lodging returns with the Securities and Exchange Commission (SEC). |
It is to be expected that US industry will be concerned about this because it increases significantly the potential for climate change litigation in the civil courts. Seemingly, US industry may be caught in a pincer trap that could see it preferring the enactment of a 'cap-and-trade' bill, rather than the emergence of a 'command and control' scheme regulated by the EPA. With a review of environmental legislation ongoing in the Senate, events may already have moved in a direction where industry will have to accept some measure of regulation.
Future Plans
The EPA has also released details of a proposal to regulate the issue of operating permits for new and existing plants that emit more than 25,000 tonnes of greenhouse gases a year. This would further extend obligations for owners under the Clean Air Act to show that they were using best practices and technologies to minimise the emissions of such gases when designing, constructing and operating facilities such as power plants, refineries and factories. A 60 day consultation period began in October and can be expected to be enacted sometime in 2010.
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