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Recent Developments Will "Turn Up the Heat" in Debate Surrounding Federal Climate Change Legislation

October 27, 2009

New regulatory reporting requirements may affect your business; greenhouse gas emissions may be subject to tort suits.

A recent Second Circuit decision suggests that emitters of greenhouse gases could be held liable under federal common law nuisance claims for their contributions to climate change. State of Connecticut v. Am. Elec. Power Co., Inc., Docket Nos. 05-5104, -5119, slip op. at 4 (2d Cir. Sept. 21, 2009). In keeping with the court's suggestion that federal common law on greenhouse gas emissions may soon be made obsolete by new federal laws, id. at 139, the case may provide additional impetus for legislation on climate change that has passed the House and is currently working its way through the Senate.

In another development that will continue to intensify the focus on climate change, on September 22, 2009 the Environmental Protection Agency ("EPA") issued a rule requiring certain industries to report greenhouse gas ("GHG") emissions. Emission reporting under this rule will require reporting from both "downstream" emitters -- those who emit GHGs directly -- and from "upstream" industries -- for example, those who manufacture certain industrial engines or supply fossil fuels to the market. The final rule does not contain provisions to control GHG emissions; rather, the EPA intends to use reported data to formulate any future controls and respond to climate change. However, EPA has already formulated a draft rule that, if passed, would require large GHG sources to acquire operating and construction permits.

Who will be affected by the new rule?
EPA estimates that mandatory reporting under the new final rule will capture about 85% of the country's GHG emissions. Some industries are automatically required to report. These include petroleum refineries, cement producers, and petrochemical producers. Industries not categorically required to report must determine whether they emit over 25,000 metric tons of carbon dioxide equivalent (CO2e) per year. This determination will generally be made at the facility level by considering emissions from each free-standing plant or property. As noted above, the rule requires reporting from both downstream and upstream sources of GHGs. Affected upstream industries include manufacturers of new highway motorcycles, heavy-duty highway engines, and suppliers of petroleum products.

The rule requirements are directed at commercial and industrial emissions; private home and vehicle owners are not affected. EPA predicts that most small businesses will not be affected. The rule does not currently include reporting requirements for emissions from food processing, coal suppliers, or industrial landfills. In general, reporting of emissions from research and development activities will not be required.

What is required by the new rule?
Affected companies must monitor their emissions according to industry-specific methodologies laid out in the rule. Companies must self-certify the emission data they submit and EPA will verify that data. From January to March of 2010, companies may track the best available data instead of gathering data by the required methods. In general, affected companies must retain emission information for three years.

When must affected companies begin reporting?
Data collection requirements will begin January 1, 2010. The first reports must be sent electronically to EPA on March 31, 2011. However, affected vehicle manufacturers will begin data collection in model year 2011.

Most reports will be submitted annually. Entities that are already submitting reports under other federal or applicable state requirements must continue to timely comply with those programs and with the new rule. However, EPA may soon design systems to share data between state and federal agencies.

Where is further information located?
EPA has made further guidance information available on its website.

Godfrey & Kahn's attorneys are tracking these developments and have the expertise to assist your company in determining whether these changes will affect you and how you can comply with these requirements. If you have questions, please contact Arthur Harrington at (414) 287-9414 or Jessica Franklin at (414) 287-9571 in our Milwaukee office.

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