EPA s New Greenhouse Gas Reporting Rule and Future Steps by EPA to Regulate Greenhouse Gas Emissions

Transcription

1 EPA s New Greenhouse Gas Reporting Rule and Future Steps by EPA to Regulate Greenhouse Gas Emissions By: Mike Nasi, Jacob Arechiga, and Travis Wussow On September 22, 2009, the U.S. Environmental Protection Agency (EPA) finalized a rule that will require the mandatory reporting of greenhouse gases (GHG Reporting Rule) from large sources of GHG emissions throughout all sectors of the economy. Although not a limit on the amount of GHGs that can be emitted, the rule will require costly and extensive monitoring, recordkeeping, and reporting activities. Affected companies will have to move quickly because the rule requires monitoring and recordkeeping to begin on January 1, 2010, with the first annual report on emissions filed by March 31, 2011, for the 2010 calendar year. Besides large industrial and manufacturing facilities, this rule could also directly impact large hospitals, schools, agriculture operations, and any large facility with a boiler, process heater, incinerator, turbine or internal combustion engine. The deadline to begin monitoring is January 1, 2010, but the rule does allow a three month extension for sources to use best available monitoring methods if the source can establish that methods required by the rule are not reasonably feasible. For continued infeasibility, it is possible to seek further extensions beyond March 31, 2010 to continue using best available monitoring methods. As part of the reporting requirements, sources must also maintain records on-site for a period of three years in either electronic or hard-copy format in a form suitable for quick inspection and review. Reporting Requirements The rule identifies some GHG-emitting sources that must report their GHG emissions regardless of the facility s emissions. Other categories of facilities must only report their GHG emissions if they exceed a threshold of 25,000 metric tons of carbon dioxide equivalent (CO 2 e). The rule requires the reporting of other GHGs, such as methane (CH 4 ), nitrous oxide (N 2 O), and fluorinated GHGs, which have a more potent greenhouse effect than CO 2. For instance, one ton of methane emissions is equivalent to 25 tons of CO 2. News reports and press releases have suggested that the 25,000 metric ton CO 2 e threshold will exclude sources like schools, hospitals, and office buildings. Although it is true that many schools and hospitals will not have to report because of this high threshold, there is no firm exclusion for these sources, and if large enough, these sources could still be required to report under this rule. Facilities that must report their GHG emissions regardless of whether they exceed the threshold of 25,000 metric tons of CO 2 e include:

2 Electricity Generation: Electricity generating units subject to the requirements of the Acid Rain Program or required to monitor and report CO 2. Cement Production: Each kiln and each in-line kiln/raw mill at any Portland cement manufacturing facility. Petrochemical Production: All processes including acrylonitrile, carbon black, ethylene, ethylene dichloride, ethylene oxide, or methanol. Petroleum Refineries: Facilities engaged in producing gasoline, gasoline blending stocks, naphtha, kerosene, distillate fuel oils, residual fuel oils, lubricants, or asphalt (bitumen) through distillation of petroleum or through redistillation, cracking, or reforming of unfinished petroleum derivatives (with a few noted exceptions). Municipal Solid Waste Landfills: Municipal solid waste landfills that accepted waste on or after January 1, Does not include hazardous waste landfills, construction and demolition landfills, or industrial landfills. Must also generate methane emissions equivalent to 25,000-ton CO 2 e. Aluminum Production: Facilities that manufactures primary aluminum using the Hall- Héroult manufacturing process. Operations include electrolysis in prebake and Søderberg cells and anode baking for prebake cells. Adipic Acid Production: Facilities that use oxidation to produce adipic acid. Ammonia Manufacturing: Manufacturing processes in which ammonia is manufactured from a fossil-based feedstock produced via steam reforming of a hydrocarbon or manufacturing processes in which ammonia is manufactured through the gasification of solid and liquid raw material. HCFC-22 Production & HFC-23 Destruction: HCFC-22 production processes produce HCFC-22 (chlorodifluoromethane, or CHClF2) from chloroform (CHCl3) and hydrogen fluoride (HF). HFC-23 destruction processes are any processes in which HFC-23 undergoes destruction. Lime Manufacturing: Plants engaging in the manufacture of a lime product (e.g., calcium oxide, high-calcium quicklime, calcium hydroxide, hydrated lime, dolomitic quicklime, dolomitic hydrate, or other products) by calcination of limestone, dolomite, shells or other cacareous substances. Does not include plants located at a kraft pulp mill, soda pulp mill, sulfite pulp mill, or only processes sludge containing calcium carbonate from water softening processes. Nitric Acid Production: Facilities that use one or more trains to produce weak nitric acid (30 to 70 percent in strength) through the catalytic oxidation of ammonia.

3 Phosphoric Acid Production: Facilities with a wet-process phosphoric acid process line used to produce phosphoric acid. Silicon Carbide Production: Production processes that produce silicon carbide for abrasive purposes. Soda Ash Production: Facilities with manufacturing lines that produce soda ash by calcining trona, calcining sodium sesquicarbonate, or using a liquid alkaline feedstock process that directly produces CO2. Titanium Dioxide Production: Facilities that use the chloride process to produce titanium oxide. Facilities that must report their GHG emissions if they exceed the threshold of 25,000 metric tons of CO 2 e include: General Stationary Fuel Combustion Sources: Facilities operating boilers, process heaters, incinerators, turbines, and internal combustion engines, including: health services (large hospitals), educational services (large schools/universities), manufacturers of lumber and wood products, chemical manufacturers, steel works, and others. Iron and Steel Production: Facilities with taconite iron ore processing, integrated iron and steel manufacturing, or cokemaking and electric arc furnace steelmaking not collocated with an integrated iron and steel manufacturing process. Manure Management: Emissions estimated based on the number of animals. Farms must contain a minimum of 29,300 head of beef or 3,200 head of dairy cattle or 34,100 swine, various amounts of heads of poultry depending on type, or a weighted combination of all of the above. Must generate combined methane and nitrous oxide emissions equivalent to 25,000-ton CO 2 e. Pulp and Paper Manufacturing: Facilities that produce market pulp, manufacture pulp and paper, paper products from purchased pulp, secondary fiber from recycled paper, converted paperboard products, or operate coating and laminating processes. Ferroalloy Production: Facilities that use pyrometallurgical techniques to produce any of the following metals: ferrochromium, ferromanganese, ferromolybdenum, ferronickel, ferrosilicon, ferrotitanium, ferrotungsten, ferrovanadium, silicomanganese, or silicon metal. Glass Production: Facilities that manufacture flat glass, container glass, pressed and blown glass, or wool fiberglass by melting a mixture of raw materials to produce molten glass. Hydrogen Production: Facilities that produce hydrogen gas sold as a product to other entities; process units that produce hydrogen by reforming, gasification, oxidation, reaction,

4 or other transformations of feedstocks; and merchant hydrogen production facilities, within a petroleum refinery, not owned or controlled by the refinery. Lead Production: Primary lead smelters producing lead metal from lead sulfide ore concentrates through the use of pyrometallurgical techniques and secondary lead smelters using recycling lead-bearing scrap materials into elemental lead or lead alloys. Zinc Production: Zinc smelters and secondary zinc recycling facilities. Miscellaneous Uses of Carbonate: Equipment that emits carbon dioxide using the carbonates limestone, dolomite, ankerite, magnesite, siderite, rhodochrosite, or sodium carbonate. Must consume 2,000 tons per year of carbonates heated to a temperature sufficient to allow the calcination reaction to occur. The rule also provides a third category for fuel combustion sources that must report GHG emissions under the General Stationary Fuel Combustion Source category if: the source is not defined under the two reporting requirements described above; the aggregated heat input capacity of the stationary fuel combustion units at the facility is 30 mmbtu/hr or greater; the facility emits 25,000 metric tons CO 2 e or more per year in combined emissions from all stationary fuel combustion sources. Suppliers of products that could result in GHG emissions are also regulated under this rule. This includes importers and exporters of the products. These source categories include: Suppliers of Coal-Based Liquid Fuels: All producers of coal-to-liquid products. Also includes all importers or exporters of an annual quantity of coal-to-liquid products that is equivalent to 25,000 metric tons CO 2 e or more. Suppliers of Petroleum Products: All petroleum refineries that distill crude oil. Also includes importers or exporters of an annual quantity of petroleum products that is equivalent to 25,000 metric tons CO 2 e or more. Suppliers of Natural Gas and Natural Gas Liquids: All natural gas fractionators and all local natural gas distribution companies. Suppliers of Industrial Greenhouse Gases: All producers of industrial greenhouse gases. Also includes importers or exporters of industrial greenhouse gases with annual bulk imports of N 2 O, fluorinated GHG, and CO 2 that in combination are equivalent to 25,000 metric tons CO 2 e or more.

5 Suppliers of Carbon Dioxide: All producers of CO 2. Also includes importers or exporters of CO 2 with annual bulk imports of N 2 O, fluorinated GHG, and CO 2 that in combination are equivalent to 25,000 metric tons CO 2 e or more. Next Steps for Regulation of GHGs by EPA The Consolidated Appropriations Act of 2008 ordered the EPA to create a rule requiring the mandatory reporting of GHG emissions. In the preamble to the final GHG Reporting Rule, however, the EPA explicitly rejected reliance on the Appropriations Act and instead promulgated the rule under Clean Air Act (CAA) Sections 114 (recordkeeping, inspections, monitoring, and entry) and 208 (motor vehicle information collection). These sections provide broad authority for the EPA to require information that will serve as their basis to carry out a wide variety of CAA provisions that have not previously been invoked to support GHG regulation. This likely signals EPA s legal strategy as it embarks on a suite of rules targeting GHG emissions, including: (1) finalization of the EPA s proposed endangerment finding which states that GHG emissions endanger the public health and welfare; (2) proposal of the Corporate Average Fuel Economy (CAFE) standards which will be the first time carbon dioxide is directly regulated under the Clean Air Act; and, (3) the Prevention of Significant Deterioration (PSD) tailoring rule which will increase emission levels of GHGs required to trigger the PSD permitting process. Even with the PSD tailoring rule, these new developments create a three step process that could result in the PSD regulation of GHG emissions for a very large percentage of businesses in the U.S. 1. Final Endangerment Finding On April 17, 2009, the EPA issued a proposal for a formal finding that GHG emissions endanger the public health and welfare. This finding, if finalized, would both give the EPA the authority to regulate GHG emissions through the Clean Air Act and would force EPA to regulate GHG emissions under certain Clean Air Act programs. Although the EPA has not stated when it plans to finalize its proposed Endangerment Finding, we expect this action any time between now and the end of Corporate Average Fuel Economy (CAFE) standards will trigger GHG regulation for the entire U.S. economy. The final Endangerment Finding will give EPA the authority to regulate GHGs under the Clean Air Act. Signaling the forthcoming final Endangerment Finding, on September 15, 2009, the EPA proposed a new set of rules that would require automakers to produce vehicles with better fuel economy and that emit less carbon dioxide. These rules will go into effect for model year These rules, while significant in and of themselves, are critically important because of their impact on other Clean Air Act programs. The PSD permitting program applies to all regulated air pollutants. To be a regulated air pollutant, it is EPA policy that only pollutants that are controlled under the Clean Air Act will be subject to the PSD program. This policy was first expounded in the controversial Johnson Memo

6 in December 2008 by then EPA Administrator Stephen Johnson. On September 30, 2009, this policy was reaffirmed by EPA under Administrator Lisa Jackson. Therefore, if, or when, the CAFE standards are finalized, CO 2 will be considered a controlled pollutant, which will automatically trigger the PSD permitting process for all emission sources meeting the other PSD requirements. 3. PSD tailoring rule as an attempt to limit the effects of CAFE on PSD permitting program The PSD permitting program automatically applies to any air pollutant that exceeds the emission threshold of 100 or 250 tons per year, depending on the source. Once that threshold is exceeded, sources must obtain a PSD permit and also install the Best Available Control Technology (BACT) to reduce emissions of the pollutant. For GHGs, even very small sources will exceed the 100 or 250 tons per year threshold. The EPA has proposed its tailoring rule increasing the threshold to 25,000 metric tons per year. For large emitters of GHGs, this provides no protection from PSD requirements. Furthermore, it is still unclear whether the EPA has authority to issue this rule as it may be found to inappropriately conflict with the Clean Air Act itself. If the tailoring rule is not upheld, and the EPA follows through on the CAFE rule, then literally thousands of new sources, including schools, restaurants, and commercial and residential buildings, will be required to obtain air quality permits and install potentially expensive emissions control technology for GHGs.