Ethanol Producers Face Current, Future GHG Emissions Reporting Concerns

Thoroughly understanding the EPA's greenhouse gas reporting rules will be critical for ethanol producers in 2010 and beyond.
By Wade Watson | February 09, 2010
  • WARNING: Resizehelper couldn't find requeted file: /datadrive/websites/ethanolproducer.com/app/webroot/uploads/posts/magazine/2935-1292438734.jpg
The U.S. EPA passed its final rule Sept. 22, for mandatory reporting of greenhouse gases (GHG) emissions. Affected companies were required to begin collecting data Jan. 1, with the first GHG emission reports due March 31, 2011. Ethanol was not named as a source category in the final rule, however, the EPA will be reviewing the final rule in 2010 and ethanol may be added as a source category.

For now, ethanol producers must meet GHG reporting requirements if they emit 25,000 metric tons or more of carbon dioxide equivalent (CO2e) per year through stationary fuel combustion. The requirement is specified in the final rule's Subpart C: General Stationary Fuel Combustion Sources.

If a producer supplies carbon dioxide (CO2), it must adhere to the final rule's Subpart PP: Suppliers of Carbon Dioxide. Other final rule subparts may be applicable on a case-by-case basis.

Being aware of the final rule's background, general provisions, reporting and record keeping requirements, available implementation resources, and relevant subparts is crucial for ethanol producers in 2010 and beyond.

Background, Final Rule General Provisions
The proposed rule for mandatory reporting was issued March 10, 2009. Following consideration of comments, the EPA issued its final rule in September and published it in the Federal Register on Oct. 30. The EPA wants to identify sources and volumes of GHG emissions. That information will provide direction in devising future measures to reduce GHG emissions.

Eleven source categories (including ethanol) named in the proposed rule were omitted, leaving 31 source categories cited in the final rule. The EPA set 25,000 metric tons or more of CO2e per year as the threshold for GHG emissions reporting. GHG emissions include CO2, methane (CH4), nitrous oxide (N2O), and fluorinated GHGs (hydrofluorocarbons, perfluorocarbons, sulfur hexafluoride, and other fluorinated gases).

According to EPA projections, total national annualized costs will be approximately $132 million for first-year reporting, and $89 million in subsequent years. Of these costs, 87 percent will fall upon the private sector. Reporting is based on a facility, and a facility may have multiple source categories. Source category totals are aggregated to meet the 25,000 ton threshold. Approximately 10,000 U.S. facilities will meet or exceed that emissions threshold. Stationary combustion sites, landfills, natural gas suppliers, and electricity generators comprise more than 80 percent of the facilities the EPA expects to meet the reporting threshold.

Facilities self-report emissions to the EPA via a Web-based system. No third-party audits or verification are required. There will be an electronic verification system and targeted audits.

For the first quarter of this year, reporters can use the best available monitoring methods if it was not feasible to obtain, install and operate a required piece of monitoring equipment by Jan. 1. Reporters can request extensions for use of best monitoring methods. The deadline for applying for an extension was the end of January. The final rule allows a facility or supplier to exit the reporting requirements by:
>Reporting annual CO2e emissions below 25,000 metric tons for five consecutive years.
>Reporting annual CO2e emissions below 15,000 metric tons for three consecutive years.
>Shutting down GHG-emitting processes or operations.

Compliance and Educational Resources
The EPA established an online tool to help companies determine whether they must report, and also launched a variety of educational resources. The online applicability tool features a detailed questionnaire at www.epa.gov/climatechange/emissions/GHG-calculator/index.html, as well as information sheets on mobile source, suppliers of natural gas, carbon dioxide, coal-based liquid fuels and industrial greenhouse gases.

Online educational resources include information sheets/checklists, frequently asked questions, technical support documents, a general fact sheet, and a PowerPoint presentation for the final rule, which can be accessed at www.epa.gov/climatechange/emissions/resources-tools.html.

The EPA is also offering online and regional training resources at www.epa.gov/climatechange/emissions/training.html. Various webinars address final rule general provisions, more detailed requirements and use of the online applicability tool. Regional training sessions are slated for Atlanta, Chicago, Dallas and San Francisco.

Record Keeping Requirements
Ethanol producers must meet 2010 record keeping and reporting requirements if they emit 25,000 metric tons or more of CO2e annually. The following records must be kept in electronic or hard copy formats for at least three years:

>A listing of units, operations, processes and activities for which GHG emissions are calculated and reported
>GHG emissions calculation data by unit, operation, process, activity, categorized by fuel or material type
>Annual GHG reports
>Missing data computations
>Identified causes for malfunctioning equipment, as well as actions taken to restore equipment, and to prevent or minimize future occurrences
>Certification and quality assurance test results for GHG monitoring systems used to provide report data
>Maintenance records for monitoring instrumentation
>Any other data specified in any applicable subject of the final rule

Reporters must also develop monitoring plans that include:
>Job title/position of responsibility of those collecting GHG data
>Explanation of processes and methodology used for GHG data collection and emissions calculations
>Descriptions of quality assurance, maintenance and monitoring system repair activities as they relate to GHG report data compilation.

Annual GHG Emissions Report Requirements
All GHG annual emissions reports must include:
>Facility name, address, and year and months included in the report
>Annual CO2e facility emissions for facilities that directly emit GHGs; total emissions may be aggregated for all source categories (CO2 from biomass combustion is reported separately)
>Additional information, such as unit- or process-level emission, activity data or quality control, as specified in an applicable subpart
>Data elements and total hours in the year if missing data procedures were used
>A signed and dated certification statement
>GHG supplier reports must contain aggregated sums for all applicable supplier categories, expressed in CO2e metric tons.

Stationary Fuel Combustion Facilities Reporting Requirements
The final rule requires stationary combustion facilities to report the following additional information:
>Annual mass emissions for each GHG for each combustion unit
>All measured inputs used in the emissions calculations
>All certification tests and major quality assurance tests for units using continuous emissions monitoring systems (CEMS).
Emissions may be reported as aggregated mass among multiple units under any of the following conditions: 1) groups of units, if each unit has a maximum rated heat input capacity of 250mm/Btu/hr or less; 2) units that share a common stack and use CEMS; 3) oil-fired or gas-fired units that combust the same fuel, if the fuel is fed through a metered common pipe.

Subpart C-Stationary Fuel Combustion Sources
The final rule defines stationary combustion sources as devices that combust solid, liquid or gaseous fuels to produce energy, electricity, steam, useful heat or reduce waste volumes. For each fuel combustion unit, ethanol producers must annually report:
>Carbon dioxide (CO2).
>Methane (CH4).
>Nitrous oxide (N20).
Those emissions must be reported separately for each fuel combustion type, including biomass. The EPA established a four-tier system for determining CO2 emissions from stationary combustion sources. Those tiers use the following formulas for determining the emission factor:

For tier 1 multiply annual fuel use and a default heating value; for tier 2 multiply annual fuel use and a measured heating value; for tier 3 multiply annual fuel use and measured carbon content; for tier 4 use a CEM.

Calculations for CH4 and N2O emissions are needed only for units required to report CO2 under Subpart C requirements, and only for fuels for which default emission factors are provided.

Subpart PP-Suppliers of Carbon Dioxide
Subpart PP addresses facilities that capture CO2 to supply it for commercial applications. Facilities that supply CO2 must report all GHG emissions associated with CO2 capture, regardless of CO2 capture volume. The EPA recognizes that CO2 concentrations in streams vary throughout the year. In response, the following reporting provisions incorporate numerous quarterly requirements starting with annual CO2 mass (metric tons) for all flow meters.

For each billing or flow meter the following must be recorded:
>Quarterly mass (metric tons) or volumetric flow (standard cubic meters) of CO2
>Equipment used to measure CO2 stream flow
>Standard used for operating and calibrating measurement equipment
>Quarterly CO2 concentration (weight percentage CO2)
>Standard used to measure the CO2 concentration
>Quarterly CO2 stream density (metric tons per standard cubic meter) for volumetric flow meters only
>Method used to measure the stream density for volumetric flow meters only
>Number of days when substitute data procedures were used to measure quantity, concentration and density.
>Percentage of the CO2 stream that is biomass-based
>Annual CO2 quantities transferred to each end-use application.
The Mandatory Reporting of Greenhouse Gases rule requires immediate attention from ethanol producers. As the EPA reviews the final rule, ethanol producers may find themselves facing additional compliance requirements as well. EP

Wade Watson, CPA, CFE, is an audit partner in Weaver's Houston office. Reach him at Wade.Watson@WeaverLLP.com.