EPA Wades Through Comments on its Draft Greenhouse Gas Reporting Rule

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Written by John Egan for Industrial Info Resources (Sugar Land, Texas)--A wide range of industries would pay an estimated total of $160 million in first-year costs to report their greenhouse gas emissions, according to a draft rule issued this spring by the U.S. Environmental Protection Agency (EPA). Affected industries, ranging from electric utilities to oil and gas producers, coal mines, cement manufacturers, iron and steel producers, and pulp and paper manufacturers, also would incur total estimated annual costs of $127 million to report emissions for each subsequent year.

The draft rule, "Mandatory Reporting of Greenhouse Gases," (docket EPA-HQ-OAR-2008-0508), is available online, but only covers reporting greenhouse gas emissions; it makes no provision for reducing those emissions. The draft rule would become effective January 1, 2010, with the first report due in 2011.

The proposed rule would apply to so-called "downstream" facilities that emit more than 25,000 tons of carbon dioxide equivalent per year, as well as so-called "upstream" suppliers of fossil fuels and industrial greenhouse gases (GHGs). Also covered would be manufacturers of vehicles and engines. Reporting would be at the facility level, with the exception of certain suppliers and vehicle and engine manufacturers, which would report at the corporate level.

The draft rule was published in the Federal Register on April 9; the 60-day comment period ended June 9. Late comments may still be submitted on the proposed rule, however the Clean Air Act does not require the EPA to consider comments submitted past the end of the official comment period when developing the final rule.

More than 16,000 comments on the draft rule have been filed since it was published in April. At least several hundred form letters expressing support were orchestrated by the Sierra Club. The EPA has not determined its schedule for issuing a final rule. The impetus for the draft rule was contained in a funding authorization signed by then-President Bush in December 2007.

The EPA says it "believes that establishing a mandatory reporting program for facilities emitting GHGs or supplying fuel and chemicals that will eventually be emitted as GHGs is necessary in order to inform and analyze future climate policy. This rule intends to provide a comprehensive data that cover a broad range of sectors in the economy, thereby establishing a solid foundation on which informed future climate decisions may be made."

Although it was able to estimate first-year and subsequent-year reporting costs for the proposed rule, the EPA was unable to quantify the estimated benefits the rule might bring. However, the agency noted that the GHG-reporting literature has concluded that the public, industry, government and investors all reaped important qualitative benefits from mandatory reporting of emissions.

"Benefits to the public include building public confidence through clear and transparent emission measures and reports and the ability of the public to make facilities accountable for their emissions," EPA says in its regulatory impact analysis of the draft rule. "Benefits to industry include the identification of GHG reduction opportunities and disclosure, which provides firms with incentives to reduce emissions voluntarily, and provides emissions data to service industries, such as insurance and financial markets.

"A GHG reporting system will also have the benefit of providing policy makers and analysts with a comparable data set that is comprehensive and reduces the potential for policy bias due to non-reporting by certain sectors," continues the agency. "In addition, a mandatory reporting system is a key element to an overall GHG policy; no effort can succeed without it."

EPA says the informational and economic benefits of its proposed rule outweighed the costs to set up and administer such a system. It notes that the reporting costs would be spread across virtually the entire economy, and in total, those estimated costs amounted to 0.001% of the U.S. gross domestic product in 2007.

The draft rule covers emissions of six gases covered under the United Nations Framework Convention on Climate Change:

• Carbon Dioxide (CO2)
• Methane (CH4)
• Nitrous Oxide (N2O)
• Hydrofluorocarbons (HFC)
• Perfluorochemicals (PFC)
• Sulfur Hexafluoride (SF6)

Because these gases have different impacts on global warming, they are expressed in terms of metric tons of carbon dioxide equivalent for the purposes of the proposed rule.

In drafting its rule, the EPA considered four GHG emissions thresholds for facilities:

• 1,000 metric tons of CO2 equivalent per year
• 10,000 metric tons of CO2 equivalent per year
• 25,000 metric tons of CO2 equivalent per year
• 100,000 metric tons of CO2 equivalent per year

In selecting a reporting threshold of 25,000 metric tons of CO2 equivalent, the EPA estimated that a total of 13,205 specific sources, accounting for an estimated 85-90% of greenhouse gas emissions, would be covered. These sources emitted an estimated 3.87 billion metric tons of carbon dioxide equivalent in 2006. Adopting lower reporting thresholds would have significantly increased estimated first-year reporting costs while only marginally increasing the percentage of GHG emissions covered.

Industrial groups expressed varying levels of support for and concern about the draft rule, which in draft form exceeds 300 pages. The regulatory impact analysis of the draft rule comprised an additional 275 pages.

Trade groups expressed concern about costs, inequitable regulatory burdens, impracticable implementation dates, the potential to over-report or double-count certain types of emissions, loss of confidential business information, and other burdens of the proposed rule. The EPA held more than 100 meetings with 250 stakeholders during the development of the draft rule.

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