California Requires Mandatory Greenhouse Gas Emissions Reporting In 2009

On December 2, 2008, the California Air Resources Board (CARB) approved final regulations for the mandatory monitoring and reporting of greenhouse gas (GHG) emissions. The regulations require certain operators, retail providers and marketers involved in electric generation within California or the import or export of electricity across California borders to comply with monitoring and reporting guidelines associated with their GHG emissions. Those entities that fall under the regulation must submit Emission Data Reports summarizing their 2008 GHG emissions by either April 1 or June 1, 2009 and on an annual basis thereafter. California intends to use the mandatory reporting requirements to assist in the development and implementation of future strategies to reduce GHG emissions under the California Global Warming Solutions Act of 2006 (the Act), also known as California Assembly Bill No. 32 (AB 32).

AB 32 establishes a multi-step initiative with the ambitious goal of reducing statewide GHG emissions to 1990 levels by the year 2020. Pursuant to AB 32, CARB – the state agency tasked with monitoring and regulating sources of greenhouse gas emissions – is required to adopt regulations for the mandatory monitoring and reporting of GHG emissions and "to achieve the maximum technologically feasible and cost-effective greenhouse gas emissions reductions." The text of AB 32 does not include specific detail as to how the electricity sector will be affected. However, the recently promulgated mandatory reporting regulations and CARB's "Climate Change Proposed Scoping Plan" provide some insight.

AB 32 Monitoring and Reporting Requirements

AB 32 requires CARB to adopt regulations that 1) require the monitoring and annual reporting of GHG emissions from the sources that "contribute the most to statewide emissions" and 2) account for the GHG emissions from all electricity consumed in California, including transmission and distribution line losses from electricity generated within the state or "imported from outside the state." Pursuant to AB 32, the Greenhouse Gas Mandatory Reporting Regulation (the Regulation) was approved by CARB in December 2007. The Regulation proceeded through the rulemaking process, including public notice and comment, with the final Regulation being approved on December 2, 2008. The Regulation requires certain entities to "establish, document, implement, and maintain data acquisition and handling activities for the calculation and reporting of greenhouse gas emissions and electricity transactions." Generally, the Regulation:

1. identifies the entities that are required to report
2. establishes calculation methods and guidelines for collecting and recording data
3. provides for a Web-based reporting system
4. requires third-party verification of data submitted

The Regulation marks yet another step forward for California in meeting the rather aggressive timeline set by the Act.

Under the Regulation, certain operators, retail providers, and marketers are required to comply with GHG emission monitoring and reporting requirements. Specific requirements depend on the class of entity, including the following classes from the electricity sector:

• operators of electricity-generating facilities located inside California

• retail providers who sell retail electricity to California end-users only

• multi-jurisdictional retail providers who sell retail electricity to California and non-California end users

• marketers who import or export electric power across California's borders

• out-of-state generating facilities if they are operated by a California-only retail provider or a multi-jurisdictional retail provider

Depending on the class, the Regulations either set out a required method for monitoring emissions or offer a choice between methods. Generally, facilities are required to either use a fuel-based calculation or a continuous emissions monitoring system (CEMS) to monitor the GHG emissions. During the process of implementing a monitoring and reporting program under the Regulation, CARB recommends that entities:

• identify data collection and retention requirements and calculation procedures

• identify existing data sources and any additional data needs, which may include monthly fuel bills, laboratory information management systems, and data acquisition systems

• choose appropriate instrumentation that meet the + 5% accuracy requirement

• install instruments and establish data collection procedures and analytical methodologies where applicable

• establish an appropriate maintenance and calibration procedure

Although reporting requirements do begin in 2009, CARB recognizes that some facilities do not have the requisite monitoring and record-keeping equipment in place to record 2008 emissions data. Therefore, the Regulations provide for a one-year transition period where GHG emissions may be calculated based on "best available data and methods."¹ Additionally, although third-party verification is required for subsequent reporting years, CARB has made it optional for 2009 Reports. Electricity generating and cogeneration facilities must submit their Emissions Data Reports by April 1, 2009, while electricity retail providers and marketers have until June 1, 2009 to report.

The Emissions Data Report should include general information pertaining to the facility, operator and parent company. Emissions must be reported from combustion, process, fugitive and de minimis stationary sources. Additionally, information related to fuel consumption is required; however, that data may be subject to additional accuracy requirements if it is utilized in emissions calculations. In the electricity sector specifically, operators of electricity generating facilities must report on their direct emissions and wholesale exports. Retail providers are required to report the direct emissions of operated facilities, their wholesale power purchases and sales, as well as some other non-emissions data. Marketers are required to report their direct emissions of SF6 from inside California as well as their wholesale power purchases and sales.

In addition to reporting, the Regulation also institutes document retention and record keeping requirements. Specifically, any entity that is required to report must also ensure that its data management system can reproduce all emissions calculations. Therefore, entities must maintain records related to fuel use data, emissions factors, instrument manuals, and maintenance and calibration records for a period of five years. As of January 1, 2009, reporting entities must maintain a log that details any changes to their GHG accounting methods or instrumentation.

Summary

The mandatory monitoring requirements mark the first regulation to be adopted that is associated with AB 32. However, the strict timeline set out by AB 32 means that other regulations associated with GHG emissions will be here sooner rather then later. In fact, in October 2008 CARB published the "Climate Change Proposed Scoping Plan" (Scoping Plan). The Scoping Plan represents the next step in implementing the broad initiative under AB 32 and it provides insight into CARB's proposed methods of achieving the near 30% reductions in GHG emissions required under the Act. With specific regard to the electricity sector, CARB proposes

1. the use of energy efficiency standards and programs
2. an increase of the Renewable Portfolio Standard to 33% by 2020
3. a cap-and-trade program that includes imported electricity as a component.

These proposals are expected to be used by CARB as the starting point for crafting regulations for controlling GHG emissions. Considering this, it is important for entities that may be affected by such future regulations to assess any implications early on so that they can play a meaningful role during the notice and comment stage.

Footnotes

1 Per the Definitions section of the Regulations, "Best available data and methods" means CARB methods for emissions calculations set forth in the regulations where reasonably feasible; or, facility fuel use and other facility process data in conjunction with CARB provided emission factors and other data; or other generally accepted methods for calculating GHG emissions.

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