EPA Proposes to Add Oil and Natural Gas, Carbon Sequestration, and Fluorinated Gas-Emitting Facilities to Greenhouse Gas Reporting System

On March 23, 2010, the U.S. Environmental Protection Agency ("EPA") announced a set of proposed rules1 that would expand the scope of the nation's new greenhouse gas ("GHG") reporting system, codified at 40 C.F.R. part 98. EPA finalized the first mandatory GHG reporting rule2 on October 9, 2009, for 31 source categories including direct GHG-emitting facilities, fossil fuel and industrial gas suppliers, and manufacturers of heavy-duty and off-road motor vehicles.3 Now, EPA is proposing to add new reporting requirements for oil and natural gas systems (Subpart W), carbon dioxide (CO2) injection and geologic sequestration facilities (Subpart RR), and facilities that produce or use fluorinated gases (Subparts I, L, DD, OOa, and SS). Owners and operators of these facilities will need to begin collecting data on their GHG emissions on January 1, 2011, if the proposal is finalized. The first reports would be due on March 31, 2012, for the 2011 reporting year.

Questions Raised in Earlier Proposal

EPA's original proposal4 for a GHG reporting system, in April 2009, included requirements for some of the same facilities that are the subject of EPA's latest proposal. EPA decided to remove the requirements for these source categories from the original GHG reporting rule in October 2009 because the agency received a large number of public comments on the logistics and technical feasibility of compliance. For example, entities in the oil and natural gas sector asked for clarification on how EPA would define the scope of a "facility" when requiring facility-level reporting of fugitive emissions, given that oil and natural gas production and transmission equipment is typically spread across long distances. Entities in this sector also explained that their fugitive and vented emissions come from a large number of diffuse sources and would be difficult to measure directly. Comments submitted for the CO2-injection source category debated whether CO2-enhanced oil and gas recovery and certain other uses of CO2 injection should be subject to mandatory reporting, given that they are potentially non-emissive or "closed" systems. With respect to fluorinated GHGs, entities using electric transmission and distribution equipment raised questions about which parts of an electric power system would be subject to the proposal.

Rather than delaying the issuance of the original rule while it considered public comments, EPA decided to address oil and natural gas, CO2 injection, and fluorinated GHGs in a later proposed rulemaking. EPA issued that proposal on March 23, 2010, setting forth the following requirements for each of the "postponed" source categories.

Oil and Natural Gas Systems (Subpart W)

Coverage and What To Report. EPA's new proposal for Subpart W requires reporting of fugitive and vented emissions from facilities engaging in oil and natural gas production (both onshore and offshore), onshore natural gas processing, onshore natural gas transmission compression, underground natural gas storage, liquefied natural gas storage and import/export, and natural gas distribution. Facilities in these industry segments would need to report under Subpart W only if their fugitive or vented GHG emissions meet or exceed 25,000 metric tons of CO2e per year. EPA is soliciting comments, however, on the appropriate thresholds for all segments of the sector.

Defining "Facility." Reporting under Subpart W would occur at the...