Measured Expectations

The U.S. EPA will begin requiring participants of its mandatory greenhouse gas emissions reporting program to use prescribed methods on April 1. How do these methods differ from the best practices that have been used until now and what changes should producers look out for in the future?
By Kris Bevill | March 16, 2010
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The word "flexible" doesn't necessarily spring to mind when describing U.S. EPA regulations. The agency is known more for its hard-line stance on following the rules, but perhaps that is because EPA rule usually isn't a lead-in for future regulation, as is the case for its greenhouse gas (GHG) emissions reporting rule. The Mandatory Reporting of Greenhouse Gases Rule required all identified participants to begin collecting emissions data using "best available monitoring methods" on Jan. 1. The agency stresses that its goals for this program are to be flexible with reporters while at the same time acquiring the most accurate data available. By early February, most reporters seemed to have a handle on what was expected of them, but it remains to be seen just how flexible the agency really is when it comes to implementing the required reporting procedures.

Starting April 1, participants who have not received an extension must begin using the EPA's required monitoring methods to measure emissions. The EPA plans to analyze the emissions data on an annual basis beginning March 31, 2011, and use it to develop a range of potential Clean Air Act GHG policies and programs. It is vital the agency obtain the most consistent and accurate data possible, which is why it developed the required emissions monitoring methods.

When finalizing its methodologies, the agency considered the short timeframe participants had for compliance as well as existing methodologies available through other emissions reporting programs. "Our view was that we did not need, in most cases, to reinvent the wheel," says Bill Irving, chief of the program integration branch in the EPA's climate change division. "We looked at the purpose of the rule, which was to provide rigorous and accurate information on economy-wide emissions for the development of future policies and programs under the Clean Air Act [and] we noted that we had an accuracy requirement, but also that this was not a cap and trade program or other reduction program. We think the outcome strikes an appropriate balance in terms of accuracy and cost to the reporters. There is not full flexibility with these methodswe do need a base level of accuracy and rigor. But within certain subparts there are choices reflecting the circumstances of different types and sizes of facilities. We think that's a good thing."

Who, What and How
So what are these choices and methods? As EPA standards go, it's complicated to say the least. There are approximately 42 source categories for emissions and each has its own required monitoring methods, as outlined in the EPA's 261-page final rule. "It's one of those devil in the detail' things where you really need to go to the specific source category to figure out what your compliance obligations are," says Jonathan Dettman, a partner at Minneapolis-based Faegre & Benson LLP and lead lawyer for the firm's climate change and sustainability practice. Because ethanol was left out of the final rule as a source category, only producers whose facilities emit more than 25,000 tons of carbon dioxide equivalent (CO2e) annually from stationary combustion sources are required to participate in the reporting program. Those producers are lumped into the EPA's general stationary source category for reporting. The stationary source category covers about one-third of all of the approximately 10,600 facilities subject to the rule. "It's a pretty significant category and even that category is split out into four separate tiers depending on what sort of facility and the size of the facility and the amount of emissions that a facility may have," adds Dettman.

Tier 1 of the stationary source category allows the reporter to use company records to show annual fuel consumption. Those records, together with fuel-specific default high heat values and default CO2 emission factors, can be utilized to calculate annual emission rates. Tier 2 also allows company records to be used to demonstrate annual fuel consumption, but also requires measured fuel-specific high heat values along with default CO2 emission factors.

Tier 3 begins the required use of measuring equipment. Producers in this category may use company records to show annual fuel consumption for solid fuels, but must use fuel flow meters to measure liquid or gas fuel consumption. In addition, Tier 3 participants must periodically measure fuel carbon content.

Tier 4 is the most stringent reporting category for stationary combustion sources . Reporters at this level must use Continuous Emission Monitoring Systems for data collection. However, the EPA is giving facilities additional time to upgrade their CEMS by allowing them to use lower tier level calculation methods for 2010. All Tier 4 reporters must begin using CEMS on Jan. 1, 2011.

The good news for ethanol producers who must report is that the vast majority fall into Tiers 1 or 2 of the rule, which allows for the simplest compliance measures. "The ethanol facilities that we've worked with are all falling into Tier 2," says James Wu, GHG services manager at Air Resource Specialists. His company has advised approximately 20 ethanol producers on reporting compliance, at facilities with production capacities ranging from 50 MMgy to around 100 MMgy. "The plants that produce 100 MMgy or more have the potential to be kicked into Tiers 3 or 4, however, they pipeline natural gas so they're exempted [from those tiers]," he says.

No Big Deal?
Because the required monitoring methods for Tiers 1 and 2 of the stationary source category allow the use of company records, it's expected that compliance shouldn't be difficult for ethanol producers. However, every kind of compliance comes with a cost. The EPA estimates that total national annualized cost for participants in the first year will be $132 million and $89 million in subsequent years. Stationary combustion sources are expected to incur approximately 26 percent of the costs in the first year. This equates to just "cents on the ton" according to Irving. However, Dettman points out that the EPA might not have considered the indirect costs of compliance in its calculations.

"While the EPA appears to have done its homework, it remains to be seen whether the implementation costs of this new rule will be as advertised," he says. "In terms of monitoring equipment, it isn't really expensive. But I don't know if the EPA is factoring in the other compliance costs that may go with it. For example, implementing a system within a facility to systematically gather this type of data may mean developing record-keeping requirements or systems. There's also a learning curve. The initial expense for the first couple of years may be greater in terms of investment of personnel and time. So, there will be some upfront investment for companies, especially those that fall within the more rigorous requirements. These are regulatory compliance obligations and companies are going to want to be sure they get this right. That's going to involve some investment on their part."

Wu says that while compliance may not be exactly difficult, managing it might be a bit more than a typical plant manager can handle. "It's not overly complexthe EPA has clarified some aspects of the rule but it's difficult for a plant manager to track something that's very new and still being clarified by the EPA." He adds that once the ethanol-specific category becomes finalized, there will probably be more requirements for producers.

Noncompliance and Future Considerations
The EPA has endeavored to educate program participants on the reporting rule's requirements. In February, the agency said it had connected with 6,500 people through webinars and seminars disseminating compliance details to those affected by the rule. "We think it is critical to get the understanding of the provisions and rule out there to the affected sources," Irving says. "That's by far the most important thing for ensuring compliance with the rule. [However,] it's inevitable that there's not always 100 percent compliance with every rule."

Noncompliance can range from failure to report to failure to calculate emissions following the specified methodologies. The Clean Air Act allows flexibility in determining the appropriate punishment for noncompliance, according to Irving. The agency will take a facilitative approach as its first step and save the maximum punishment, fines of $37,500 per day, as a last resort.

While producers begin collecting data on their stationary combustion sources this year, it will be important to keep an eye on changes to the current rule and possible additional compliance measures for 2011. The EPA continues to evaluate ethanol as a specific source category and expects to issue its final decision later this year. This could mean producers will be responsible for collecting more data on emission sources throughout their facilities and the category could be expanded to include plants not currently required to report. Also, pending legislation could change the rules. "It was Congress that requested this rule and if they give us more instructions then, yes, we'd have to come back and look at whether this reporting program meets all the requirements of any additional Congressional action," Irving says. EP

Kris Bevill is an editor at BBI International. Reach her at or (701) 850-2553.