Law and the Environment

EPA Issues Final Greenhouse Gas Monitoring and Reporting Rule

On September 22, 2009, the United States Environmental Protection Agency (EPA)  issued its final greenhouse gas monitoring and reporting rule that will require as many as 10,000 facilities in the United States to measure their greenhouse gases (GHGs) and start reporting them in early 2011 (GHG Reporting Rule).  Some industry groups had asked EPAfor a delay until 2011 to start monitoring and 2012 to start reporting their GHG emissions.  EPA chose not to provide such a delay and regulated facilities only have three and a half months to prepare for the monitoring that they must begin January 1, 2010.  This may be particularly challenging for those companies that must install or modify continuous emission monitors.

Following a Congressional amendment to the Omnibus Spending Bill in December of 2007 that required the EPA to issue a proposed rule by September of last year and a final rule by June of this year, the EPA under the Obama Administration has now moved forward with an initial step in establishing a GHG regulatory system.

In the GHG Reporting Rule, EPA has adopted a substantial program of GHG monitoring and reporting with a publicly available registry.  The program is “economy wide” and covers 85-90 percent of GHG emissions in the United States.

The EPA is in part implementing the GHG Reporting Rule to gather information for future regulatory and policy decisions. Thus, many of those sources that would be required to report under the GHG Reporting Rule may also be those that would be regulated under a federal GHG cap and trade system being discussed by Congress and the Obama Administration.

While the rule does not impose any reduction obligations, as prior reporting rules, such as the Toxic Release Reporting of SARA Title III, have shown, companies reporting emissions “manage what they measure.”  In other words, once companies must publicly report their emissions, they start to invest in ways to reduce those emissions.

I.     WHEN MUST YOU START MONITORING?

As stated above the monitoring must begin on January 1, 2010.

 

II. WHEN MUST YOU START REPORTING TO EPA?

The first report will have to be submitted to EPA by March 31, 2011, and then for subsequent years thereafter.

 

III.    WHAT GASES ARE COVERED?

The EPA has identified the traditional GHGs for reporting: carbon dioxide (CO2), methane, nitrous oxide, sulfur hexafluoride, hydrofluorocarbons, chlorofluorocarbons, perfluorocarbons, and certain other fluorinated gases. For purposes of comparing emissions of the various gases using a single unit, the gases are converted into the equivalent GHG impact of CO2. The conversion is based on the principle that the other gases have a greater impact in terms of causing the greenhouse effect and thereby global warming. As an example, one metric ton of methane emissions would be reported in terms of the carbon dioxide equivalent (CO2e) of 21 metric tons. This is critical in understanding the threshold levels for application of the reporting requirements, as the non-CO2 GHG emissions may need to be converted to CO2e before determining whether the GHG reporting obligations apply to a particular facility.

IV.   WHAT FACILITIES ARE COVERED?

Four categories of facilities are required to measure and report their GHG emissions. In addition, vehicle manufacturers would be required to report the GHG emissions of their vehicles. We will focus on facility-based emitters in this Article.

1. Source Categories

The first category of facilities required to report under the GHG Reporting Rule are facilities that fall under a list of source categories identified by the EPA. These sources include, among others,

• coal-fired electric generating plants subject to the Acid Rain program,
• aluminum,
• ammonia,
• cement,
• electronics,
• lime,
• petrochemical,
• petroleum refining,
• certain underground coal mines, and
• municipal landfills.

2. Other Facilities That Emit 25,000 Tons Per Year or More of CO2e of Combined Emissions From Listed Source Categories

The second category of sources required to report are facilities that emit 25,000 or more metric tons of CO2e per year of combined emissions from stationary fuel combustion units, miscellaneous uses of carbonate, and all source categories that are listed and located at the facility in any calendar year.

These sources include, among others,

• electricity generation,
• electronics,
• ethanol production,
• food processing,
• glass production,
• iron and steel production,
• ferrous alloy production,
• oil and natural gas systems,
• pulp and paper,
• industrial landfills, and
• wastewater treatment.

3. Facilities That Do Not Meet the First Two Source Categories, but That Emit 25,000 Metric Tons of CO2e Per Year From Stationary Fuel Combustion Sources

The third source of facilities required to report are those that meet all of the following conditions:

(1) the facility does not contain any source category designated for the first two groups of categories;

(2) the aggregate maximum rated heat input capacity of stationary fuel combustion units at the facility is 30 mmBtu/hr or greater; and

(3) the facility emits 25,000 metric tons of CO2e per year or more from all stationary fuel combustion sources.

4. Entities That Sell, Import, or Export Fossil Fuels, Industrial GHGs, and CO2

The final category of entities required to submit GHG emission reports under the proposed GHG Reporting Rule are suppliers of coal, coal-based liquid fuels, petroleum products, natural gas and natural gas liquids, producers of industrial GHGs as listed in the Rule, importers and exporters of industrial GHGs and CO2, and importers and exporters of industrial GHGs and CO2 exceeding 25,000 metric tons of CO2e per year.

V. WHAT MONITORING AND MEASUREMENT APPROACH MUST BE USED?

The EPA reviewed several monitoring or measurement options in developing the GHG Reporting Rule. The EPA selected the option of combined direct emission measurement and facility-specific calculations. Facilities that already have continuous emission monitoring (CEM) devices are generally required to add a GHG measurement capability. Those that do not have CEM devices would have the choice to install them or to use facility-specific calculation methods.

VI.   WHAT CERTIFICATION AND VERIFICATION IS REQUIRED?

The EPA reviewed several options regarding certification and verification of the GHG emissions reported to the EPA. The agency decided to require certification by a designated representative of the facility submitting the report and to have the EPA verify the emissions report. No third-party verification is currently proposed.

VII.     WILL THE INFORMATION REPORTED TO EPA BE AVAILABLE TO THE PUBLIC?

The information provided by the regulated facilities will be made available to the general public by a website developed by EPA.

VIII. WHAT CORPORATE FINANCIAL DISCLOSURE AND CORPORATE STRATEGIES SHOULD BE DEVELOPED AS A RESULT OF THIS NEW REGULATION?

The GHG Reporting Rule is one of the significant steps made by the Obama Administration into climate change regulation and extends GHG measurement and reporting to a large part of the economy. As companies continue to review and develop their strategies for evaluating the potential risks and opportunities that a GHG regulatory system and potential cap and trade system will present, the GHG Reporting Rule is the one of the first salvos in what will be a concerted effort by Congress and the President to impose a GHG regulatory system in the United States.  Since establishing a company’s “carbon footprint” is now mandatory, understanding the implications of the reporting and public disclosure of the amount of greenhouse gas emissions raises several issues.

With this rule and potential future legislation that may be passed as early as this year or early next year, many publicly traded companies should also consider their disclosures in their filings with the Securities and Exchange Commission to determine if any further description of the risks or opportunities presented by climate change legislation should be discussed in their public filings.

Companies that may be regulated by any future climate change legislation, whether state, federal, or both, should develop a climate change strategy. Such strategies should include an evaluation of the number of GHG or carbon allowances that may be required to comply with climate legislation. One allowance would be required for every ton of emissions of CO2e equivalent. In addition, those companies selling or importing fossil fuels may be required to obtain allowances for every ton of CO2e equivalent of fuel sold. In engaging in this planning, companies should consider the extent to which low cost offsets purchased today could reduce the ultimate liabilities of the company in the future.

Many utilities, oil and gas companies, and other potentially regulated companies are already investing in carbon offset projects or purchasing credits now. In what could be one of the most significant environmental regulatory programs in the history of the United States, planning today could pay off with significant savings or dividends in the future. For many companies, climate change impacts should be a key strategic issue for the board and management.

EPA Issues Finding That Lays Foundation for Regulating Greenhouse Gas Emissions under the Federal Clean Air Act

In a long expected finding, the U.S. Environmental Protection Agency (EPA) issued a regulatory decision that lays the foundation for EPA to regulate greenhouse gas emissions under the federal Clean Air Act (CAA).  The decision announced on Friday, April 17, 2009 is entitled Proposed Endangerment Finding and Cause or Contribute Findings for Greenhouse Gases  and was published in the Federal Register.  This is a major step by the Obama Administration to attempt to force Congress to pass a climate change bill regulating greenhouse gases.  Time magazine may have said it best in an article entitle EPA's CO2 Finding: Putting a Gun to Congress's Head.  Whilee it was known that EPA was working on and would announce the finding, the actual announcement has gained enormous coverage in the media and serves as the Administration's opening salvo in its ultimate work to try to convince enough senators to vote for a bill to get beyond the 60 votes need to bypass a filibuster.

The EPA regulatory decision follows a U.S. Supreme Court decision two years ago that concluded the EPA under the Bush Administration had failed to articulate why greenhouse gases should not be regulated as emissions from automobiles.  In so doing, the Court indicated that greenhouse gases were pollutants under the Clean Air Act.  Now that EPA is going to issue a final regulatory decision after 60 days of public comment and several public hearings, it is clear that EPA can, and will, take action absent Congressional action.

Regulation under the Clean Air Act is messy and may not include a cap and trade program, but simple command and control in the form of emission reductions without the ability to trade for other facility allowances or domestic or international offsets.  This would not be good for industry.

Certain industry groups have already begun to work to promote their version of a cap and trade program.  The group USCAP, which stands for United States Climate Action Partnership, has issued a document entitled A Blueprint for Legislative Action, providing a general outline of a climate change program based on cap and trade.

The one question that will likely play out is how the world will look if Congress does not pass a bill or passes late next year or even later.  Permits for coal=fired power plants and other greenhouse gas-emitting facilities are already being challenged, and environmental groups and other plaintiffs are challenging the permits in court as not meeting CAA requirements to address all pollutants including greenhouse gases.  If EPA issues a final decision that greenhouse gases are an air pollutant, do these cases then have a much greater change of success?  Will EPA and the states be required to address greenhouse gas emissions in federal Title V permits?  These are the types of questions that will come to the fore relatively quickly.

What about cement kilns, lime plants, refineries, natural gas processing plants, manufacturing plants, will they be challenged as well?  Coal-fired power plants may not be the only plants whose permits are challenged.

One need not look beyond the administrative case of In re Deseret Power Cooperative.  This was a case in which the permit for a power plant in Utah that was challenged because the plant permit did not address CO2 emissions under the Prevention of Significant Deterioration program under the CAA. the challengers argued the plant should implement the Best Available Control Technology or "BACT" to achieve greenhouse gas, largely CO2 emissions. 

The EPA Appeals Board remanded the issue back to the EPA, then under the Bush Administration, not to require such technology or reductions as the Appeals Board concluded that the decision was not supported by the administrative record.  The Appeals Board called on EPA to address the issue of CO2 and other greenhouse gases being pollutants governed by the CAA.

Other cases have been brought against various sources and several petitions have been filed with the EPA to regulate mobile sources and stationary sources.

With the finding by EPA, all such permits, petitions, and proceedings could be affected.  Could this be a snowball effect with EPA and states finding themselves forced to regulate greenhouse gas emissions before Congress makes any final decisions whether to regulate greenhouse gas emissions?  The next year promises to be a challenging time for industry as they face a great deal of uncertainty as to how greenhouse gases will be regulated and how individual facilities and companies will be affected.  It appears more likely that some form of greenhouse gas regulation will be required.  For those companies that may be affected, it is time to develop a corporate strategy to address the risks and any opportunities that greenhouse gas regulation may bring.

Climate Change and Environmental Law and Policy in Brazil

I want to introduce Antonio Reis and Luiz Gustavo Bezarra, two of our attorneys in our Rio de Janeiro, Brazil office, who focus on environmental law, sustainability issues, climate change, and carbon trading. They have prepared the following summary of Climate Change and Environmental Law and Policy in Brazil. I hope you enjoy this guest article.

Environmental laws and regulations that have been adopted in Brazil are very strict, however, a long-term effort will be required to improve their enforceability and effectiveness. In the past 50 years, Brazil has developed extensive environmental policies and regulation, promoting innovative solutions and technologies connected with sustainable development and actions to address global warming. Such new trends offer opportunities for socially responsible companies to make sustainable development a standard part of their business practices.

Brazil has developed one of the largest renewable energy programs in the world (PROALCOOL – for the production of ethanol and its use in replacing gasoline in light vehicles). The use of ethanol as fuel powering automobiles, introduced in the 70’s, has evolved incredibly in the last decade with the new flex-fuel light vehicle technology. In addition, the Brazilian government has adopted the Brazilian National Program of Production and Use of Biodiesel that establishes a mandatory addition of 5 percent of biodiesel into petroleum diesel by 2013.  This decision provides a strategic mechanism to stimulate employment and income, to reduce greenhouse gas emissions, and to decrease dependence on fossil fuels.

Other policies include creation of PROINFA – a program with the purpose of increasing the amount of electrical energy generation from wind, small hydro plants, and biomass. Additionally,Brazil has instituted several recycling initiatives and programs to reduce the use of fossil fuels.

In one of the country’s most important environmental initiatives, in early December 2008, Brazil enacted its National Plan for Climate Change (PNMC), introducing ambitious targets for reducing deforestation, Brazil’s main source of greenhouse gases. The goal is to reduce deforestation by 72% in the Amazon by 2017. It is too early to know if these new targets are achievable in a country that faces serious problems with enforceability and effectiveness of environmental laws and policies. The PNMC is also intended to make Brazil a more influential player in global climate change debates, helping to push developed countries to agree to more ambitious emissions cuts and encouraging wealthy countries to essentially pay Brazil to preserve the forest for the benefit of all countries.

With respect to actions linked with the Kyoto Protocol, the country is, together with China and India,, one of the key players helping developed countries to attain their carbon reduction targets through the Clean Development Mechanism (CDM) of the Kyoto protocol. Many CDM projects have already been approved in Brazil and subsequently at the UN CDM Executive Board. The most representative Brazilian CDM projects are flaring of landfill gas and the use of biomass (e.g., sugar cane bagasse) as an energy source.

Brazil has an incomparable potential for CDM projects, which represents an opportunity for developed countries with obligations to reduce their emissions. The Kyoto Protocol has become part of the Brazilian legal system. The country was one of the first to create procedures to approve CDM projects by establishing a strong national authority with the participation of the most important Ministries – Inter-ministerial Commission on Climate Change (Comissão Interministerial de Mudança Global do Clima– “CIMGC”). The CDM projects are also an efficient way to provide the transfer of clean technologies to non-industrialized countries and a great opportunity for Brazil.

Since the negotiations prior to the adoption of the Kyoto Protocol, Brazil has been supporting proposals to include all forest and forestry projects in the CDM. However, due to the controversy associated with these issues, only afforestation and reforestation practices were accepted as possible CDM projects. The main concerns expressed were that forest and forestry activities are difficult to monitor, they provide cheap carbon credits inhibiting stronger domestic mitigation action, and the fear that those projects could lead to deforestation. However, CDM forest and forestry projects can provide benefits that overcome their downsides, such as positive revenue alternatives for local communities.

Besides the regulatory market for carbon credits (under Kyoto Protocol’s CDM and other flexible trading mechanisms), there has been renewed interest for credits from reducing emissions from deforestation and degradation (REDD) that are eligible for credits traded in voluntary carbon markets, operating outside international agreements. Brazil has a key role to play in developing future REDD projects that produce voluntary carbon credits. The benefits of carbon credits must always be analyzed in light of environmental benefits and not as an end in themselves. Emission trading programs cannot replace strong domestic policies toward ambitious emission reduction targets. At Thompson & Knight, we are involved with clients in developing carbon credit projects under the CDM and voluntary standards. Our projects include avoided deforestation projects, fuel switching, landfill gas projects, and other means of reducing emissions and monetizing those emissions in the form of carbon credits. Our Firm further provides advice as to existing and possible future local, national, and international environmental laws and treaties, including those relating to climate change and greenhouse gas emissions.

Thompson & Knight assists its clients in all of these areas whether involving transactions, financing, project development, carbon trading, and litigation or arbitration. Our experience extends to renewable energy projects as well. For further information on developments on Climate Change Law and Policy in Brazil, you may contact Luiz Gustavo Bezerra and Antonio Augusto Reis.

Xcel Energy Settlement with New York Attorney General Requires Greater Climate Risk Disclosure

Xcel Energy entered into a settlement with Andrew Cuomo, the Attorney General of New York, as a result of an investigation of several publicly traded utility companies that the Attorney General's office alleged failed to properly disclosure climate risk in the companies' public filings.  The other utility companies that are being investigated are AES Corporation, Dominion Resources, Dynegy, and Peabody Energy.  In the settlement, Xcel Energy agreed to a variety of additional disclosures relating to climate risk.

The agreement requires that Xcel provide detailed disclosure of climate change and associated risks in its “Form 10-K” filings, the annual report required under securities laws and regulations issued by the Securities and Exchange Commission (SEC) to provide financial performance information to investors. 

The climate risk disclosure agreed to by Xcel includes analysis of the impact of the following: 

the potential impact of present and probable future climate change regulation and legislation;

climate-change related litigation;

physical impacts of climate change;

current carbon (or greenhouse gas) emissions;

projected increases in carbon emissions from planned coal-fired power plants;

company strategies for reducing, offsetting, limiting, or otherwise managing its global warming pollution emissions and expected global warming emissions reductions from these actions; and

corporate governance actions related to climate change, including whether environmental  performance is incorporated into officer compensation.

“This landmark agreement sets a new industry-wide precedent that will force companies to disclose   the true financial risks that climate change poses to their investors,” said Attorney General Andrew Cuomo. “Coal-fired power plants can significantly contribute to global warming and investors have the right to know all the associated risks. I commend Xcel Energy for working with my office to establish a standard that will improve our environment and our marketplace over the long-term.” 

Ceres has been a proponent of increased climate risk disclosure.  Ceres is a nonprofit organization, supported by what it asserts is institutional investors with more than $6 trillion in capital, including the treasurers and  comptrollers of Newy York, California, Florida, Maryland, Rhode Island and five other states, and two of the country's largest pension funds--CalPERS and CalSSTRS. 

Ceres President Mindy S. Lubber said, “This groundbreaking settlement will send ripples far beyond Xcel Energy. It serves notice that all companies face financial exposure from climate change and will be expected to better inform investors of their strategies for dealing with it.”

The Director of the Natural Resources Defense Council's State Climate Change Program and the Deputy General Counsel of the Environmental Defense Fund, cheered the settlement.

Obviously, these statements reflect the views of parties that are promoting greater disclosure and hope they will be successful in forcing some form of change in the corporate emissions of greenhouse gases. Industry reaction has not been published as yet.  Many industries may find this development to raise additional questions as to disclosure obligations when it comes to the potential physical impact of climate change, the financial impact of current and future regulations, and future potential litigation.

These questions are particularly important for utilities that operate coal-fired power plants.  The degree to which other publicly traded companies feel compelled to consider similar disclosure will be something that will unfold over the next year or so.    At present, there is perhaps considerable uncertainty as to what is legally required.  In 2009, we may see developments that help reduce the uncertainty as to what degree of climate disclosure is necessary as new federal greenhouse gas reporting requirements will be issued and climate change legislation may be passed.  Many proposed bills offered in Congress require that the SEC create guidance and then regulations governing climate risk disclosure.

Andrew Cuomo’s investigation of the financial disclosure of Xcel and the other utilities is only one part of a larger attack by environmental groups, certain state governments, and public pension and other public funds on coal-fired power plants and the companies that owne and operate them.  As Congress and the Whitehouse had been an impossible place to achieve any climate change legislation, the environmental groups moved to the state legislatures, have filed lawsuits to try to force action under federal and state statutes, and have brought public nuisance suits.  Finally, they have tried to force action through shareholder initiatives and petitions and through an attempt to pressure public companies, especially those that operate coal-fired power plants to disclose what the environmental groups believe to be significant financial risk from operating plants that emit significant greenhouse gases.

If these actions are successful, the use of coal may be curtailed or the operators of coal-fired plants may begin to install a means of capturing the carbon dioxide emissions from the plants and injecting it underground.  If either occurs, alternative forms of producing electricity or capturing and “sequestering” carbon dioxide may lead to higher electricity prices.  Any federal legislation that places controls on carbon dioxide emissions from coal-fired power plant will likely increase power prices as well.

Georgia State Court Rejects Air Permit for Coal-Fired Power Plant for Lack of Regulation of Carbon Dioxide

On June 30, 2008,  the Fulton County Superior Court in Georgia revoked a permit for construction of a proposed 1200-megawatt coal-fired power plant in the state.  The court truled that the permit issued to Longleaf Energy by the Georgia Environmental Protection Division failed to consider the best available pollution control technology (BACT) for reducing the proposed plant’s estimated annual emissions of 8-9 million tons of carbon dioxide (CO2).  The defense had argued that a BACT analysis was not required because CO2 is not a pollutant subject to regulation under the federal Clean Air Act. The court found that the U.S. Supreme Court’s decision in Massachusetts v. EPA, in which the Court found that CO2 met the definition of pollutant under the Act.  The ruling by the Georgia court appears to be the first time a court has rejected an air emissions permit as a result of the environmental agency to regulate CO2 emissions.

The defendants reportedly will appeal the court’s decision.

New Federal Greenhouse Gas Reporting Regulations

EPA is set to propose new federal greenhouse gas reporting rules in September.  Under a provision inserted into the Omnibus Spending Bill in late 2007, the EPA must propose rules by September of this year and issue final rules by June 2009.  I have been keeping in touch with my contacts at EPA and the draft rule will be issued in little over a month..

EPA will be proposing several approaches to measuring and reporting greenhouse gas emissions, and then will recommend an approach.  The Agency then will be looking for comments from the public and industry on the approach they will ultimately take in the final rules that will be issued next year.

According to my contacts at EPA, several issues will arise:

• Threshold of emissions that will have to be reported--EPA is looking at 1,000, 10,000, or 100,000 tons per year as a cutoff, below which no reporting would be necessary.  Since proposed legislation in Congress would regulate sources at or above 10,000 tons per year, this may be the likely threshold that EPA will adopt.
• Who reports, the individual facility or the company?--This an issue EPA will address in the proposed rule.
• Data flow--this is a question of to whom will the information be submitted, whether to EPA or to states.
• Methodology for estimating emissions--EPA is planning on using established methodologies as much as possible, whether from the API, the Climate Registry, or those adopted by California.
• Reporting frequency--the agency is evaluating whether reports will be submitted annually or more frequently.
• Which gases must be measured and reported?--EPA appears to be leaning toward regulating all six greenhouse gases, including CO2, methane, and nitrous oxides.
• Verification--the agency is debating whether a third party must verify the emissions estimates.  As EPA is anticipating climate change legislation and carbon credit trading, EPA may require third-party verification in preparation for award of carbon allowances and a carbon credit trading market.

Thes rules will potentially impact a significant portion of industry and business and the US economy.  Numerous comments on the proposed rules are expected.  The final outcome will not be known until June of next year.  It is also possible that a new presidential administration will alter the approach proposed by the Bush Administration. 

In any event, these rules once proposed will have a significant effect on many businesses.  Companies with significant emissions may want to begin the process of identifying sources of greenhouse gas emissions and estimating those emissions in preparation of future reporting obligations, particulalry those with numerouls sources at numerous facilities.

EPA Plans for Issuing Draft and Final Greenhouse Gas Emission Reporting Rule

As mentioned in a prior post, the U.S. Environmental Protection Agency (EPA) is currently working on a draft rule to establish a federal, nationwide, and economy-wide greenhouse gas emission rule.  EPA has announced a schedule for the process and the existing protocols it is considering.  The Agency appears determined to move forward with issuing a draft rule by September of this year. 

The schedule is as follows:

January 2008 to September 2008:  Establish EPA Work group (completed);

                                                   Develop draft rule and supporting analysis;

                                                   Conduct outreach; and

                                                   Conduct inter and intra-Agency review of the draft rule.

September 2008:                          Propose and publish draft rule.

October 2008 to June 2009:          Conduct public comment period and hearings;

                                                   Review comments;

                                                   Develop final rule and supporting analysis;

                                                   Conduct inter and intra-Agency review of the final rule.

June 2009:                                   Publish final rule.

One of the critical issues is establishing the protocols that must be used for different types of sources and industry sectors.  The EPA is looking to regulate all six greenhouse gases:  carbon dioxide, methane, nitrous oxide, hydroflourocarbons, perflourocarbons, and sulfur hexafluoride.  The Agency is looking at regulating both upstream sources--fossil fuel and chemical producers and importers, and downstream sources--direct emitters--large industrial emitters.

The threshold amount of emissions that will bring a facility or source into the reporting regime must be determined by EPA. The Agency has stated that it is reviewing thresholds of existing mandatory and voluntary reporting programs to determine the appropriate trigger or threshold above which reporting will be required.  EPA has further said, "The rule is not expected to affect smaller operations where emissions are difficult to measure or where there are a large number of small sources."

The frequency of reporting must also be addressed.  EPA is reviewing the frequency of reporting under other programs to determine the frequency (annual or quarterly) of greenhouse gas emission reporting under the developing rule.

Finally, the protocols for estimating emissions from various sources must be adopted by the Agency. EPA has the discretion to use existing methodologies under Section 821 of the Clean Air Act for electric generating facilities.  Other sources that are being considered include:  federal programs--such as Title IV ; state programs--such as the Climate Registry, California's system, and RGGI; corporate programs--such as the World Resources Institute/World Business Council for Sustainable Development; industry programs--such as the American Petroleum Institute, the CSI protocol (cement), and the International Aluminum Institute.

Companies who have not already begun to take measure of their greenhouse gas emissions can refer to the above-mentioned protocols and begin to evaluate the level of emissions from relevant facilities and sources at those facilities.  This will allow future planning as to the potential for their operations to be required to make federal reports once the reporting rule is issued.

                                                   

Representative Markey Announces Plan to File Climate Change Legislation That Would Reduce US Greenhouse Gas Emissions by 85 Percent

Representative Edward Markey, Massachusetts Democrat, announced that he is going to file a bill that would require an 85 percent reduction in greenhouse gas emissions in the United States by 2050.   Like almost all other bills filed in Congress, Markey’s bill would rely on a cap-and-trade system to achieve the emission reductions.  Markey is chairman of the House Select Committee on Energy Independence and Global Warming.

Will EU Mandate Carbon Capture and Storage?

The European Union (EU) is reported in Reuters to be preparing to debate laws that would require all utilities to capture and store carbon dioxide (CO2) by 2025.  According to the article, Carbon Capture and Storage (CCS) would eliminate a third of global greenhouse emissions.  Such a step would take a substantial bite out of what scientists at the National Academy of Science, the American Association for the Advancement of Science, the Royal Society, and the International Panel on Climate Change assert is causing climate change, global warming, and will cause substantial to the Earth and future generations.  Whatever the science, the EU has established and is moving forward with more restrictive greenhouse gas emission limits and restrictions.  A future requirement for power plants to capture the CO2 they emit would reduce the emissions, but some parties question the technology to capture and store the gases and the impact of any potential leakage back into the atmosphere.

In CCS, the CO2 can be used to enhance oil and gas recovery.  CO2 has long been used for this purpose over many decades.  Much of this CO2 is from natural sources.  Already many small scale and a few larger scale CCS projects are in operation or under construction. 

Alliance Bernstein, a US investment firm, has conducted a study on climate change and investment opportunities and has found that CCS is a necessary step to address climate change.  Moreover, the firm has identified those industries that will likely prosper in this new CCS and carbon-constrained world, and those that will likely suffer in such a new world. Those entities that can invest in, develop, and profit from the construction of collection, pipelines, and injection facilities for CCS, will be highly profitable.

The potential for a European plan would certainly spur investment in research and construction to achieve this goal.  Oil company representatives believe the injection and storage of CO2 is a well-established technology, based on many decades of experience.  Others question whether the much larger scale of CCS will pose new challenges.

One of the challenges is the concern of liability if the CO2 leaks and returns to the surface, say into someones home.  In Texas, the Legislature seeking to gain selection for the FutureGen project that was to be in large part funded by the US government, passed a law providing liability protection for the project.  Some industry experts have called for a sort of "Price-Anderson Act" that protected or at least set a cap for nuclear power plants in the United States.

The initial proposal was to only require new power plants built after a certain date to install CCS.  It appears there is some talk about requiring all plants to retrofit by 2025.  The cost may be steep, depending on the approach used. One estimate was a $1.5 billion investment per plant, which may be hard to finance without government assistance.

Other technologies and approaches may in fact be able to achieve CCS for much less.  The area is still in initial development, and new ideas and innovative approaches may make CCS a reality.  To achieve the goals suggested by the IPCC, CCS would have to be required more globally, in the US, China, India, and perhaps other countries. 

At a recent climate change seminar in Austin, Texas, the Chairman of the Texas Railroad Commission spoke out in favor of taking steps to assist the oil and gas industry in finding ways to implement a system of installing a system to use capture CO2 in enhanced oil and gas recovery programs.  The Lieberman-Warner bill that will be debated in the US Senate in June of this year contains provisions for encouraging CCS.  Thus, whatever political argument exists over climate change, the concept of CCS to attempt to address this issue has some support on more than one side of the political spectrum.

In Australia, the State of Victoria, which has about a 500-year supply of coal, is considering investing $120 million Australian dollars in CCS.

If the EU passes a law with future deadlines for installing CCS, this industry will take off, and investment capital will follow--assuming the right incentives, and perhaps public financing, are used to spur this new approach to reducing greenhouse gas emissions.

Guest Column on EnergyLaw360

I recently published a guest column on EnergyLaw360 entitled Laws Set Stage for Carbon Trading Opportunities.  The article discusses the new federal greenhouse gas emissions reporting law that was enacted and how EPA must publish final rules by September 2009.  These rules will serve as the foundation for coming climate change legislation that will create a cap-and-trade system for regulating greenhouse gas emissions, and create significant opportunities in developing greenhouse gas emission reductions that can be monetized in the form of carbon credits.