Today, the US Environmental Protection Agency (EPA) opened a 60-day public comment period on its Proposed Mandatory Greenhouse Gas Reporting Rule (Proposed Rule).  The Proposed Rule would establish economy-wide reporting requirements for carbon dioxide and other greenhouse gas (GHGs) emissions, broadly impacting industry in the economy, going beyond  the electricity and large emitting industrial sectors, the usual suspects for climate regulations.

While the statutory authority for the Proposed Rule was approved by President Bush in the Fiscal Year 2008 Consolidated Appropriations Act, the Proposed Rule marks another step toward EPA-regulation of carbon dioxide and other GHG emissions.  The Obama EPA has begun  to take concrete action to establish regulatory oversight over GHG emissions under the Clean Air Act.  Earlier this month, in response to the 2007 Massachusetts v. EPA decision, the EPA proposed a finding that such emissions endanger the public health and welfare.  An endangerment finding would establish EPA’s authority to regulate emissions under the CAA, opening the possibility that a GHG cap-and-trade regime and other regulations, such as Best Available Control Technology requirements available under the CAA, would apply to GHG- emitting sources by EPA rule.

EPA’s Proposed Rule and other actions will likely put additional pressure on this Congress to develop politically-feasible legislation to establish an economy-wide program addressing GHGs.  The mandatory GHG emissions reporting set forth in the Proposed Rule will serve to inform EPA’s plans for regulating carbon dioxide and establishing other climate change policies.  Reporting would assist the EPA to better understand sectoral contributions to GHG emissions.  Such emissions reporting may ultimately serve to inform international climate change policies, as it may improve the accuracy of U.S. emissions reporting obligations pursuant to the UN Framework Convention on Climate Change (UNFCCC).

Which Industries are Covered by the Proposed Rule?

If approved, the regulations would cover between 85-90 percent of US GHG emissions, affecting approximately 13,000 emissions sources in a range of industrial sectors.  Examples of covered industries include sectors as diverse as pulp and paper mills, ethanol production, aluminum production, food processing, landfills, waste water treatment, suppliers of coal and suppliers of petrochemical products.  See a list of the covered sectors here. See pages 2-4.

Specifically, GHG emission reporting requirements would apply to upstream and downstream facilities that emit carbon dioxide and other GHGs.  Upstream facilities include suppliers of fossil fuels and industrial GHGs, as well as manufacturers of vehicles and engines.  Upstream facilities are also required to report the estimated amount of GHG emissions by the “downstream” users of the products that they supply.  Downstream emitters subject to reporting emit carbon dioxide and other GHGs, equivalent to 25,000 metric tons of carbon dioxide equivalent per year.  In addition, industries responsible for certain types of GHG emissions, such as cement and electronic manufacturing, will be required to report irrespective of emissions levels.

Requiring both upstream- and downstream- emission reporting will result in an intentional double-reporting of certain GHG emissions.  The EPA explains that double-reporting will provide exhaustive information to the EPA and stakeholders for developing climate change policy and programs.

What is a “Facility”?

The Proposed Rule broadly defines facility to include properties under common ownership or control.  Facility means any physical property, plant, building, structure, source or stationary equipment located on one or more contiguous or adjacent properties in actual physical contact or separated solely by a public roadway or other public right-of-way and under common ownership or common control that emits or may emit any greenhouse gas. 

What is the Timeline for Compliance Under the Proposed Rule?

Under the Proposed Rule, regulated entities would be required to submit their first annual report to EPA in 2011 for the calendar year 2010, except for vehicle and engine manufacturers, which would begin reporting for model year 2011.  Reporting would be at the facility level, except certain suppliers and vehicle and engine manufacturers would report at the corporate level.  Non-compliance will subject the facility to civil and criminal penalties and injunctive relief to compel compliance.

Are there  Penalties for Non-Compliance?

Under the Proposed Rule, non-compliance is subject to the penalty and enforcement provisions set forth in the Clean Air Act (CAA), which provide for civil and criminal penalties and injunctive relief to compel compliance.  Each day a regulated entity fails to monitor, report, collect or retain GHG emissions data will constitute a separate violation.

What are Opportunities for Public Comment?

EPA is developing this Proposed Rule under the authority of the CAA.  The Draft Rule will be open for public comment through June 9, 2009.  The EPA recently held two public hearings on the Proposed Rule on April 6 and 7, 2009 at the EPA Potomac Yard Conference Center in Arlington, VA.  EPA will hold another public hearing on April 16, 2009 at Sacramento Convention Center in Sacramento, CA.

For further information about this topic, please contact Akin Gump.