Greenhouse Gas Emissions

As North America grapples with the implications of global climate change and a legislative response to reducing greenhouse gas emissions, many Canadian provinces and U.S. States have either begun to implement, or signaled an intention to implement, a cap and trade system to reduce greenhouse gas (GHG) emissions.

One of the first steps in implementing such a system is to require the reporting of GHG emissions. Reporting will not only require technical expertise to identify and measure these emissions, but an additional set of administrative resources to ensure that facilities are complying with the requirements for record keeping and reporting.

Alberta has had mandatory greenhouse gas emission reporting in place since 2004. British Columbia requires reporting commencing 2010, and on December 1, 2009 Ontario filed its Greenhouse Gas Emissions Reporting Regulation.

A GHG cap and trade system is one where the government sets a limit or cap on the amount of emissions. Emitters are issued (or buy at auction) emission permits or allowances (credits), and emitters must hold enough allowances for the emissions that they create.

Those facilities that increase their emissions must find a way to offset them. One way to do so is to buy credits from other organizations. The transfer of the credit or allowance is the trade. The theory is that market forces will determine the most efficient way to reduce GHG emissions: those that can reduce emissions most cheaply will do so, and they can also sell those emission credits to others who may not be able to reduce emissions as cheaply.

Alberta was the first Canadian province to establish a provincial greenhouse gas emission regime, though it was based on reducing emission intensity (the amount of emissions per unit of production) rather than the total amount of emissions. As part of this scheme, those emitting more than 100,000 tonnes of CO2 equivalent (C02E) (the GHG measurement unit), have had to report emissions since 2004.

Starting January 1, 2010, facilities in B.C. that emit GHG over 10,000 tonnes of CO2E are now required to report annually their GHG emissions to the B.C. government. The B.C. threshold is considerably lower than Alberta’s, but for those facilities in B.C. that emit more than 25,000 tonnes of CO2E, there is not only the obligation to report the emissions, but also to verify the emissions using an independent accredited third party verifier.

This initiative is the second step in B.C.’s cap and trade system that was introduced through the Greenhouse Gas Reduction (Cap and Trade) Act. The B.C. system is based on, and is intended to be consistent with, the Western Climate Initiative (WCI), a regional cap and trade regime that started on the U.S. West Coast.

There are similarities between B.C.’s new reporting regulations and those recently announced by the U.S. Environmental Protection Agency. (The U.S. EPA Final Mandatory Reporting of Greenhouse Gases Rule became effective December 29, 2009.) However, there are also significant differences between the regulations as well, and companies operating facilities in different locations will have to review the applicable regulations carefully.

Outline of B.C.’s requirements

The new B.C. reporting regulation sets out the type of greenhouse gases that must be reported, the threshold level of emissions (10,000 tonnes of CO2E), and the types of facilities required to report. It also sets out the quantification methods to be used in reporting, how to report, how to verify the emission reporting, and administrative matters such as record keeping and compliance.

The reporting obligation applies to a range of activities, including: base metal production; cement production; coal mining from underground mines; coal storage at facilities that burn coal; electronics manufacturing; glass manufacturing; industrial wastewater processing; petrochemical production and refining; pulp and paper production; upstream oil and gas; natural gas transmission and distribution; electricity transmission and distribution; oil pipeline transportation.

It is also important to understand the definitions under the reporting regulations, as they will determine what the facility will be required to report. For example, the emissions from “linear facilities” such as oil and gas gathering, processing facilities and distribution, may be aggregated where the facilities are “managed or controlled” by the same company to determine whether the facility 10,000- tonne reporting threshold and the 25,000-tonne verification threshold are met.

Yet, consider a scenario where there are similar numerous facilities, but each facility is managed and controlled by a different company. In this case, the facilities would not be aggregated to determine whether thresholds have been met.

The B.C. reporting regulations indicate that a facility need not include and report emissions from “mobile equipment” as part of its annual emissions. However, an operating mine facility will likely need to report emissions from its ore hauling vehicles because those vehicles are not considered “mobile equipment” for reporting purposes. The regulations appear to exempt biomass in most circumstances, and they do not apply to emissions from landfills managed by the Landfill Gas Management Regulation. Only direct emissions need to be reported i.e. there is no requirement to include indirect emissions from those supplying materials or services to the facility.

Annual reporting begins with the 2010 calendar year, and those annual reports are required by March 31 of the following year. Facilities that had greater than 20,000 tonnes of CO2E for any of the years 2006 to 2009 are also required to report on those prior years’ emissions.

Businesses are required to maintain records for at least seven years. Although the reported emission information will generally become public information, it is possible to request that certain information should remain confidential (in order to protect proprietary information). Companies that fail to comply with the emission reporting requirements face fines of up to $1 million and imprisonment for up to six months.

In Ontario

The Ontario Greenhouse Gas Emissions Reporting Regu- lation, the next step in implementing a cap and trade initiative in the province, was filed on December 1. The regulation applies to sectors including petroleum, electricity, manufacturing and minerals if a facility emits 25,000 tonnes of CO2E or more per year.

If the regulation applies, the facility must:

• use the standard quantification methods to quantify emissions, or for 2010 emissions only, use the best alternative quantification methods, as outlined in a technical guideline that accompanies the regulation;

• prepare annual emissions reports and submit the reports to the Ministry of Environment on or before June 1 in the calendar year following the reporting period, beginning with 2010 emissions; and

• ensure that an annual verification statement is prepared by an accredited verification body in accordance with ISO 14064 and ISO 14065. The statement must be submitted to the Ministry of Environment on or before September 1 in the calendar year following the reporting period, beginning with 2011 emissions.

Although smaller emitters (facilities that emit between 10,000 tonnes and 25,000 tonnes) are not required to report, the Ministry of Environment has announced that it will develop a program to encourage them to report voluntarily. Doing so will enable facilities to adapt to emerging North American-wide requirements.

Ontario’s stated goal is to continue to work with the federal government and other provinces as well as all the Western Climate Initiative Partners to harmonize GHG reporting requirements and methods.

At Miller Thomson, LLP, Tony Crossman is the leader of the national environmental law group and is based in Vancouver (tcrossman@millerthomson.com,604-643-1244); Teresa Meadows deals with GHG emissions and environmental matters in Alberta (780-429-9706). John Tidball is a specialist in environmental law in Ontario (905-415-6710).