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March 13, 2009Client Alert

EPA Announces It Will Propose a Mandatory GHG Reporting Rule

On March 10, 2009, EPA announced that it will propose a rule that will require mandatory reporting of greenhouse gas (GHG) emissions in the United States. The proposed rule, being developed pursuant to the FY2008 Consolidated Appropriations Act, would require all facilities in 19 source categories and all facilities that emit 25,000 metric tons or more of carbon dioxide equivalent per year to submit annual emission reports to EPA. More information on source categories, which include suppliers of fossil fuel or industrial gases, pulp and paper mills, municipal landfills, and manufacturers of vehicles and engines, is available at http://www.epa.gov/climatechange/emissions/downloads/GeneralProvisions.pdf

Pursuant to the EPA proposal, affected facilities would be required to report emissions of the following GHGs: carbon dioxide, methane, nitrous oxide, hydrofluorocarbons, perfluorocarbons, sulfur hexafluoride, and other fluorinated gases. A “carbon dioxide equivalent” (mtCO2e) has been developed for each GHG and provides a standard by which to measure such emissions. For example, one metric ton of methane emissions is equal to 21 mtCO2e; a facility emitting 1,200 metric tons of methane would exceed the 25,000 mtCO2e threshold and be subject to mandatory reporting under the proposed rule. EPA estimates that the 25,000 mtCO2e reporting threshold is equivalent to annual energy use of 2,200 homes, or consumption of 58,000 barrels of oil or 131 railcars of coal. Approximately 13,000 facilities, collectively emitting 85-90% of all GHGs in the United States, are expected to be subject to mandatory reporting.

An interesting element of the reporting scheme is that it requires both downstream and upstream reporting of GHG emissions which will result in some double counting. Downstream reporting is based on the point of emission, e.g., burning fuel to produce electricity. Upstream reporting is based on emissions expected from products that the reporting facilities supply, e.g., suppliers of fossil fuels and industrial GHGs and manufacturers of vehicles and engines.

For affected facilities, the proposed rule would not require control of greenhouse gas emissions, only monitoring and reporting to EPA. Many believe this is the first step in collecting baseline data to support comprehensive GHG reduction legislation. As stated by EPA, the purpose of this rule is to “collect comprehensive and accurate data on GHG emissions that can be used to inform future policy decisions.” If this rule is finalized, data collection would begin January 1, 2010, and mandatory GHG reporting would begin in March 31, 2011.

Once this proposed rule is published in the Federal Register, the public can submit written comments for 60 days. EPA plans to hold two public hearings on the proposed rule: April 6 and 7, 2009, at the EPA Potomac Yard Conference Center, Arlington, VA; and April 16, 2009, at the Sacramento Convention Center, Sacramento, CA. Additional information on the proposed rule is available at http://www.epa.gov/climatechange/emissions/ghgrulemaking.html.

In January 2009, Representative Tammy Baldwin (D-WI) introduced a bill to the U.S. House of Representatives that would require broad categories of emitters to report their GHG emissions to a federal registry using a 10,000 mtCO2e reporting threshold. This phenomenon of parallel federal proposals, at the legislative and rulemaking levels, may continue as climate change regulation evolves.

A number of states have separate GHG reporting requirements and Wisconsin and Iowa are currently the only states in the Upper Midwest that have mandatory GHG reporting requirements. Wisconsin law requires facilities emitting 100,000 or more metric tons of carbon dioxide to report their emissions to the Wisconsin Department of Natural Resources (“WDNR”) (Wis. Admin. Code ch. NR 438). In addition, Governor Doyle recently signed Executive Order #191 directing WDNR and the Wisconsin Public Service Commission to lead the effort to establish an inventory of GHG emissions by sector and source type. Finally, the regional initiatives, RGGI (northeastern states), WCI (western states) and MGGA (Governors of Wisconsin, Minnesota, Michigan, Kansas, Illinois, and Iowa) have or are developing reporting thresholds for GHG emissions. Given the differing GHG reporting thresholds and methodologies among the various state, regional and federal initiatives, we can expect a debate on the merits of a single national GHG reporting scheme.

Additional client alerts will be forthcoming as the state, regional and federal GHG reporting initiatives move forward. What has emerged is that some form of greatly expanded GHG reporting is on the horizon, and businesses must begin the process of identifying their GHG emissions. There are principles which can be found in most of the GHG reporting proposals which offer some guidance as how to measure GHG emissions.

For assistance in determining your GHG emissions, drafting written comments on the proposed EPA rule or other GHG initiatives or discussing how climate change legislation may affect your business in the future, please contact:

Raymond R. Krueger
Direct Dial: 414.225.2786
Email: rrkrueger@michaelbest.com

David A. Crass
Direct Dial: 608.283.2267
Email: dacrass@michaelbest.com

Linda H. Bochert
Direct Dial: 608.283.2271
Email: lhbochert@michaelbest.com

Anna J. Wildeman
Direct Dial: 608.283.0109
Email: ajwildeman@michaelbest.com

Director of Government Affairs
Laura L. Riske
Direct Dial: 608.283.2265
Email: llriske@michaelbest.com

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