Energy and Carbon Management Blog

Could New EPA Regulations Drive Congress to Pass Carbon Legislation?

Just one day after Senators John Kerry and Joe Lieberman released the details of the American Power Act, the U.S. EPA made headlines related to greenhouse gas regulation.  On May 13, 2010, EPA finalized its plan to regulate 70% of all U.S. greenhouse gas (GHG) output through the implementation of Clean Air Act permitting programs for stationary sources.  These efforts stem from the Supreme Court's 2007 decision in Massachusetts v. EPA where the Court concluded that GHGs are "pollutants" under the Clean Air Act, and ordered EPA make a determination as to whether GHG emissions contribute to an endangerment of public health and welfare.  EPA issued such an endangerment finding in December 2009 and triggered an obligation for to regulate GHG emissions. 

What does the EPA "Tailoring Rule" mean for the energy, industrial, and manufacturing sectors?

• Generally, the rule requires large GHG emitting facilities to obtain permits that demonstrate they are using best available technologies (BACT) to reduce emissions.
• Phase 1 (January 2, 2011 to June 30, 2011) - permitting rules apply to facilities with existing permit requirements for non-GHG emissions and where modifications will increase GHG emissions by 75,000 tons carbon dioxide-equivalent (CO2e) per year or more.
• Phase 2 (July 1, 2011 to June 30, 2013) - permitting requirements apply to new sources emitting at least 100,000 tons CO2e per year.
• Phase 3 (2013) - Beginning in 2011, EPA will develop additional rules to phase in permitting requirements for sources below the 75,000 and 100,000 ton thresholds. 

Challenges are present. The definition of what constitutes BACT for GHGs at various facilities has not been resolved.   Currently, such technologies generally are not available for controlling GHG emissions.  Furthermore, it is anticipated that legal hurdles will evolve from petitions to challenge EPA's endangerment finding.  And, initiatives in Congress may be employed in an attempt block or suspend EPA's authority to regulate GHG emissions from stationary sources.     

While EPA is obligated to regulate GHG emissions, clearly passage of legislation through Congress is viewed as the preferable approach.  The American Power Act, which would preempt EPA's efforts, may represent a more appealing option as Senators consider their positions on the newest cap-and-trade bill. 

Mounting Energy and Carbon Complexities are Changing Data Quality Standards

Pace announced its successful completion of a rigorous Statement on Auditing Standards No. 70 (SAS 70) Type II audit, demonstrating Pace's commitment to safeguarding client data by meeting the strictest of industry standards.  The SAS 70 Type II certification confirms that effective operational controls are in place for its Energy and Carbon management (Pace ECM) services that are provided to its client portfolio, which includes leaders in the industrial, commercial, and utility sectors.

As energy markets become more volatile and uncertain and carbon reporting mandates are established by the EPA, SEC, and key customers, the management of energy and carbon data is fast becoming a critical requirement for many businesses - a requirement that companies are unprepared to meet with existing systems and resources.  For most companies, spreadsheets have provided a low-cost stop gap for the past decade, however, it is clear that the quality standards and sheer volume of data are too great for any company to reasonably manage without proven processes and web accessible management systems that provide transparency to high quality information.   

In today's economy, companies are looking to leverage the most cost effective solutions, which have them looking more toward outsourced solutions that can better leverage business scale to maximize value and minimize cost.  As such, more and more customers require assurance that a service provider's processes and activities are documented, tested, and will stand up to the rigors of internal or external audit procedures.  Service providers that do not have a SAS 70 Type II Audit in accordance with the American Institute of Certified Public Accountants' (AICPA) guidelines will not meet the necessary quality standards required to support such critical reporting requirements in the future.  Additionally, the comprehensive Type II audit report can assist its clients in complying with Sarbanes-Oxley requirements

The scope of Pace's SAS-70 audit incorporates controls from every aspect of Pace's operational process. These areas include: Organization and Administration, Human Resources Security, Physical Access, Environment Security, Backup and Recovery, Computer Operations, Logical Access, Infrastructure Change Management, Media and Document Destruction, Disaster Recovery Preparedness, Customer Support, Invoice and Data Management, Commodity Services Management and Account Reconciliation.

Developments in energy and carbon strategies introduce complexities that require data and processes to be highly credible, rigorous and dependable.  SAS 70 Type II certification is an important way of validating that Pace ECM services are made of the right stuff that the market requires going forward. 

Read full report.

U.S. Businesses Await Release of Final EPA GHG Reporting Rule

Pace has learned through multiple channels that the long-awaited final EPA mandatory greenhouse gas (GHG) reporting rule is expected to be released this week.  This GHG reporting regulation will cover 85 - 90% of the nation's GHG emissions.  Facility-level reporting requirements will be triggered by specific industrial processes and/or stationary combustion emissions in excess of 25,000 metric tons of CO₂e. When the proposed GHG reporting rule was published in March 2009, U.S. businesses from a wide range of industry sectors were caught off guard by the complexity of data management, calculation, and record retention requirements

The proposed methodologies for calculating GHG emissions go well beyond the requirements of the leading voluntary reporting programs like The Climate Registry.  Impacted facilities will be expected to collect, manage, and report facility-level and unit-level details such as fuel carbon and high heat value results, monitoring and QA/QC records, and data collection and emission calculation methodologies.  Complicating the matter further, EPA established unique reporting methodologies for several industrial process emission sources (e.g. cement production, electric generation, petroleum refineries, food processing, electronics manufacturing, metals production, pulp and paper manufacturing, and others).

Now, with just over three months remaining in the year, it is apparent that affected U.S. companies will be challenged to prepare for this groundbreaking and complex regulatory requirement.  While Pace does not anticipate wholesale changes between the draft and final versions of the rule, EPA clearly solicited comments associated with several aspects of the rule.  These areas included, but were not limited to the following:

• Program schedule: EPA proposed options that would delay or relax 2010 data collection and reporting requirements in the event that the release schedule for the final rule does not allow sufficient time for entities to comply with methods described in the rule.
• Third party verification: Currently, reporters are expected to self-certify submittals and EPA would then perform audits of reports; EPA sought feedback on the need for third party verification.
• Scope 2 (purchased electricity) emissions: The draft rule does not require that facilities report indirect GHG emissions from electricity consumption, but EPA specifically asked for comments on this issue.

Even subtle changes in the rule could have significant implications to affected businesses.   Download a summary of the EPA rule and learn how Pace can help you address these complex challenges.