Large Emitters
Final rule reporting requirements (Subpart W - Petroleum and Natural
Gas Systems) were signed November 8, 2010. 40 CFR Part 98 covers the regulatory framework program for reporting greenhouse
gas (GHG) emissions. Specifically,
"This final rule requires petroleum and natural gas facilities that emit
25,000 metric tons or more of carbon dioxide (CO2) equivalent per year to report annual methane (CH4) and CO2 emissions from
equipment leaks and venting, and emissions of CO2, CH4, and nitrous oxide (N2O) from gas flaring and from onshore petroleum
and natural gas production stationary and portable combustion emissions and combustion emissions from stationary equipment
involved in natural gas distribution." (EPA)
Due to historical permitting structures the states have been tasked with
permitting and inspection duties. These new requirements continue the transfer of air emissions responsibilities to the
states level. The EPA guidance issued for large emitters encourages states to adopt proven methodologies for GHG emission
reduction strategies. In a November 10, 2010 press release the “EPA recommends that permitting authorities use
the best available control technology (BACT) process to look at all available emission reduction options for GHGs.” The
task is now falling to the states and will create logistical headaches for all parties involved. The sheer magnitude
of managing what could amount to fifty or more different state systems will overwhelm many companies. In a huge leap,
the EPA stated in the same press release that, “EPA anticipates, in most cases, this process (the state transfer of
responsibilities) will show that the most cost effective way for industry to reduce GHG emissions will be through energy efficiency.” That
is a confident statement since few if any states (California has a lead with CARB) have the policy and procedure, let alone
staff in light of state budget constraints, to handle this workload. A source close to Antimony Green said that a particular
east coast state had no clue how they were going to handle these added regulations. The press release went on to say,
“the guidance does not define or require a specific control option for a particular type of source because BACT is determined
on a case-by-case basis.” So, not only are the states expected to manage their respective GHG emissions measuring
programs they will be charged with developing the methodological approaches themselves.
Future Unrealized Costs beyond Large Emitter Regulation
Interrupting this wave of federal-to-state gravitation are the courts. The
efforts by the current administration and the EPA to curb greenhouse gas emissions, which includes the Endangerment Rule,
has already drawn numerous lawsuits [On December 15, 2009, EPA issued a final rule under the Clean Air Act. See
Endangerment and Cause or Contribute Findings for Greenhouse Gases under Section 202(a) of the Clean Air Act; Final Rule.
74 Fed. Reg. 66496, et seq. (Dec.15, 2009) (“Endangerment Finding”)]. According to a recent
Wall Street Journal article more than “90 companies and trade associations” have initiated legal challenges
“giving the courts an opening to shape climate policy in the absence of legislative action.” The main body
of action is centered on four categories, Endangerment Findings, Tailpipe Rule, Timing or Triggering Rule and the Tailoring
Rule, with several other lower impact subcategories.
Endangerment Finding: EPA ruled vehicle GHG emissions are a reasonable
threat to human health and fall under Clean Air Act (CAA) regulation.
Tailpipe Rule: EPA and the National Highway Traffic Safety Administration
(NHTSA) established GHG emissions standards effective 2011 for light duty vehicles for model years 2012 - 2016.
These standards were in part developed with interested stakeholders including the American Trucking Association (ATA). In
addition, there will be future standards for light duty vehicles and new standards for medium and heavy-duty vehicles.
Timing or Triggering Rule: Since GHG control now fell under the CAA
promulgation for a mobile source (i.e. moving vehicles) there became a statutory obligation to regulate a stationary source
(hence the Tailoring Rule).
Tailoring Rule: Initial stationary thresholds were all the argument in
2008 and 2009 and it became apparent the low thresholds would bring compliance on millions of buildings in the U.S. Adjustments
were then made to initially capture only large emitters (power plants, refineries, cement production facilities, etc.).
Allowing the courts to weigh in will in the least give the private sector
time to digest and anticipate to some degree where the horizon will be positioned. To give one example, according to
a Columbia Law case review, “there were seventeen actions filed by either industry groups or states challenging the
EPA GHG endangerment findings” (deadline was Dec. ’09). The cases were consolidated under the Coalition
for Responsible Regulation v. EPA (D.C. Cir. Index No. 09-1322) (Lead parties are the National Association of Manufacturers
v. EPA). The main contention is that entities are being unfairly subjected to new regulatory burdens as a result of the
rulemaking, and, there exists increased risk of lawsuits related to the impacts of greenhouse gas emissions on public health
and welfare. EPA is currently handling many fronts on the GHG topic and numerous challenges to the Endangerment Rule
are currently being held in abeyance.
Regardless, operating in a low carbon renewable energy intensive marketplace
will create massive private sector reporting responsibilities. Below is an abridged workload description example from
just one Fortune 500 company,
1) Monitor new federal, state and local regulations related to emission
controls and climate change
2) Ensure compliance with state-to-state emission requirements (i.e. CARB) and the
EPA Endangerment Rule
3) Provide for greenhouse gas emissions of direct and indirect emission
sources
4) Research emission reporting & permitting requirements
5) Conduct air emissions calculations
6) Perform analysis
related to supply chain, vehicle fleet and facility operations
7) Monitor newly developed GHG inventories and accounting standards/processes
8) Develop internal processes that incorporate evolving global and
US regulations
9) Analyze the relationships of these new GHG regs in relation to
traditional environmental laws
10) Decipher how much emissions management, GHG accounting and sustainability
initiatives are needed
From an operational standpoint external and internal compliance and reporting
will fall into the following ten categories:
1) Cost Controls & Risk Reduction: Manage GHG and environmental costs
and risks now and in the future
2) Customer Support: Keep appropriate external customers up to speed
3) Regulatory Compliance: Liaison between corporate and field operations
to ensure compliance
4) Training and Awareness: Management will need to play leadership
role in environmental excellence
5) Operational Support: Offer direct contact to business units to
discuss day-to-day environmental challenges
6)Energy Management: Manage energy audits, facility upgrade projects
and reduce kWh use and water costs
7) Real Estate: Provide environmental site acquisition, development
and M&A GHG services
8) Climate Change: Develop protocol for the absorption of a constantly
changing base of knowledge
9) Carbon Emissions: Measure direct/indirect, mobile and stationary
GHG emissions and advance carbon reduction and green strategies
10) Funding: Develop criteria for grant writing, public funding and
incentive monies
Based on Antimony Green’s own client informal responses on this topic the main issue is where
to align limited resources. As the horizon remains too fluid to make comprehensive operational climate change investment
the tip toe approach remains the chosen route. This unfortunately is a byproduct of numerous large policy approaches
by the current administration and simply trickles down to the private sector handicapping U.S. competitiveness.
