Interesting new program the EPA might use to monitor companies’ and manufacturers’ green house gases.  This was provided by the law firm Nelson Mullins.

On January 1, 2010, many manufacturing facilities, facilities emitting green house gases
(GHGs)¹, and suppliers of fossil fuels and industrial GHGs will, for the first time, be required to begin monitoring their emissions of GHGs. Then, on March 31, 2011, these companies must submit the first annual report to the US Environmental Protection Agency (EPA) on the emissions data collected during the prior year.

With the goal of understanding the origin of GHGs, EPA issued these fairly complicated and potentially expensive requirements in a final rule (Rule) on September 22, 2009 pursuant to EPA’s authority under the Clean Air Act to require reporting of GHG emissions (codified at 40 C.F.R. pts. 86, 87, 89, 90, 94, 98, 1033, 1039, 1042, 1045, 1048, 1051, 1054, and 1065).

You can access a copy of the Rule and related analysis and information from EPA at http://www.epa.gov/climatechange/emissions/ghgrulemaking.html.

Companies with facilities emitting or products related to GHGs may consider taking the following initial steps to evaluate appropriate measures related to the Rule. Those not in compliance with the Rule may be required to shutdown facilities and operations until compliance can be achieved.

Step 1-Determine Whether the Rule Applies to You

The Rule applies to a variety of categories of industries and types of facilities; however, in certain categories if the facilities do not emit more than a threshold amount they are exempt from the monitoring and reporting requirements.

Facilities Emitting GHGs:

• Certain industrial facilities (17 different types²) must report GHG emissions regardless of the level that such facilities emit by facility.
• Other specific facilities³ and those not identified in the Rule will only be required to report emissions if they emit in excess of 25,000 metric tons of CO2 equivalent (CO2e) annually from all stationary fuel combustion devices. It is specifically noted in the Rule that any CO2 emitted from the combustion of biogenic fuels is excluded from the applicability calculations for this category (however biomass-related emissions must be included in any report generated by a facility subject to the Rule and should be independently identified).

Suppliers of Fossil Fuels and Industrial GHGs:

• All fossil fuel suppliers, except for suppliers of solid-based coal, are required to report annual amounts of fuel sold and applicable emissions. This includes producers, importers, and exporters of fossil fuels.
• Suppliers of industrialized GHGs who supply more than 25,000 metric tons of CO2e products must report the numbers of such products sold in the market and related emissions. This includes producers, importers, and exporters of industrial GHGs.

Manufacturers of New Vehicles and Engines:

• Makers of heavy-duty trucks and engines must report CO2 emissions beginning in model year 2011 (reporting on additional GHGs will be required for later model years).
• One should keep in mind that some facilities subject to the Rule may be able to continue to maintain timing and substantive reporting consistent with other EPA programs, such as the Acid Rain Program, rather than pursuant to the Rule. Additionally, any research and development activities related to GHG emissions are not covered by the Rule.

Step 2-Readiness for the Start of Monitoring and Reporting in First Quarter 2010

• Equipment Purchases and Installation-Facilities and companies subject to the Rule should be investigating and planning for the purchase and installation of required monitoring equipment. In fact, the EPA estimates that the expected cost to the private sector to comply with the Rule will be $115 million in the first fiscal year. The Rule does provide for the use of “best available” monitoring methods for the first quarter of 2010 and establishes an extension request process should facilities require additional time for purchasing or installing monitoring equipment.⁴
• Processes and Procedures for Evaluating Data and Preparing Reports-Facilities subject to the Rule should begin proposing appropriate processes and procedures for assessing and evaluating data now. While this is an important aspect of determining applicability of the Rule, it will also be critical for preparing reports in a timely manner. Further, records of data and related reports must be maintained for at least three years. The annual reports, which will be submitted electronically, should include:
  • Total facility emissions (without emissions derived from combustion of biomass);
  • Total facility emissions derived from combustion of biomass;
  • Total emissions from all supply categories;
  • Emissions broken down for each type of category; and
  • Certain additional metrics and information (i.e. activity data, unit-based emissions) for particular categories.
• Processes and Procedures for Informing Executives-While independent third-party auditing of collection and reporting methods is not required, similar to Sarbanes-Oxley certification requirements, the Rule requires senior executives to certify that reports were prepared in compliance with the Rule.

Step 3-Assessing Other Realities of Disclosure

• Disclosure is Public-All information submitted pursuant to the Rule becomes public information, and, as such, will be available to competitors, suppliers, customers, advocacy organizations, and press agencies. Several larger purchasers and investors have begun tracking environmental and social performance data and weighing those considerations when selecting vendors and targets of investment. Further, recent case law suggests that claims against companies emitting large quantities of GHGs, previously not thought to be actionable given various constitutional and common-law obstacles, may be viable under the federal common law of nuisance.⁵ As such, the manner and information disclosed should be carefully assessed under the lens of determining its effect on marketing, business relationships, and potential claimants.
• Federal Requirements Do Not Preempt State Requirements-Certain States have independent monitoring and disclosure requirements for GHGs and the Rule does not preempt State-level requirements or procedures. Therefore, companies subject to the Rule must meet the requirements of both the Federal and State regulations. Companies may consider implementing processes and procedures that generate the most overlap to develop raw data for each of the Federal and State-level requirements.
• Once Subject to the Rule, Reporting Must Continue for a Period-Even where a company is no longer subject to the Rule because GHG emissions have fallen below the 25,000 metric ton threshold, such companies must continue reporting under the Rule. However, after a facility or company maintains 5 consecutive years of emissions below the threshold or 3 consecutive years with emissions of less than 15,000 metric tons, such party may forego reporting emissions to EPA. Additionally, no further reporting is required after the subject GHG processes and machines terminate operations.

¹The gases considered “greenhouse gases” under the Rule are the “Kyoto gases”-carbon dioxide (CO2 ), methane (CH4), nitrous oxide (N2O), hydrofluorocarbons (HFC), perfluorocarbons (PFC), sulfur hexafluoride (SF6), nitrogen trifluoride (NF3), and hydrofluorinated ethers (HFE).

²The types of facilities included in this category are Adipic Acid Production; Aluminum Production; Ammonia Manufacturing; Cement Production; Electricity-Generating Facilities; HCFC-22 Production; HFC-23 Destruction Processes; Lime Manufacturing; Manure Management Systems; Municipal Solid Waste Landfills; Nitric Acid Production; Petrochemical Production; Petroleum Refineries; Phosphoric Acid Production; Silicon Carbide Production; soda Ash Production; and Titanium Dioxide Production.

³The types of facilities included in this category are Ferroalloy Production; Glass Production; Hydrogen Production; Iron and Steel Production; Lead Production; Pulp and Paper Manufacturing; and Zinc Production.

⁴Requests for extensions must be submitted by January 30, 2010.

⁵Connecticut v. American Electric Power Co., — F.3d —-, 2009 U.S. App. LEXIS 20873 (2d Cir. Sept. 21, 2009).

Nelson Mullins’ Sustainable Agriculture and Energy Practice Group will continue to monitor information regarding the Rule and other legislative initiatives impacting and relating to the Agricultural or Energy industries, including updates on the American Clean Energy and Security Act of 2009 and the Clean Energy Jobs and American Power Act. You can find updates on this and other relevant topics at http://www.nelsonmullins.com./

If you have further questions about the Rule and how our professionals can assist you or generally relating to Nelson Mullins’ Agriculture and Energy Sustainability Practice Group, please contact Alexis Gilroy (202-712-2893), Bernie Hawkins (803-255-9581), Mike Bryan (843-720-4313), Chris Cushing (202-545-2974), David Harlow (919-877-3830), Ashley Cooper (843-534-4255), Reed Hollander (919-877-38), Helen Quick (202-712-2894), Congressman Ron Klink (202-712-2886), or Jack Smith (843-534-4309).

The articles published in this newsletter are intended only to provide general information on the subjects covered. The contents should not be construed as legal advice or a legal opinion. Readers should consult with legal counsel to obtain specific legal advice on particular situations.