In July, the Senate pushed back the cap-and-trade bill vote that many believed was the best offer utilities could anticipate for legislative reform to the existing emission control scheme under the Clean Air Act. The absence of this defined federal framework has set the stage for the passage of a number of administrative and state sponsored mandatory emission disclosure requirements. Some of those controls will relate to cap and trade programs. For instance, in July, the Western Climate Initiative (WCI) unveiled a highly developed plan to allow individual jurisdictions (both US and Canadian based) to adopt mandatory disclosure requirements and trade emission credits across jurisdictions. This trading scheme would seem to be a viable option that would allow jurisdictions seeking a free market approach to adopt legislation, and those desiring to wait for federal regulations to do so.

However, the existing Clean Air Act laws that presently cover air emissions will likely cause a very different outcome than the free market approach. A full administrative sponsored command and control regime is likely in the works by the EPA. This reality was evidenced last month when a major hurdle to issuing emission monitoring and reduction mandates was cleared by the EPA's Denial of Petitions for Reconsideration of the Endangerment and Cause or Contribute Findings for Greenhouse Gases under Section 202(a) of the Clean Air Act. http://epa.gov/climatechange/endangerment/petitions.html.

This denial of the petitions for reconsideration means that the EPA's finding that greenhouse gas emissions endanger the general public's health and safety remains unchanged. Accordingly, under the Clean Air Act, the EPA must implement controls to reduce that impact and protect the citizens. Examples of these controls are already in effect, as is demonstrated by the continued expansion of the EPA's mandatory disclosure rules, see 40 CFR Part 98. Over time, these reporting rules will expand to cover an increasingly greater number of industry sectors and inevitably place requirements for the sectors finding themselves under the scope of the regulations to adopt the best available technology to meet standardized thresholds for emissions.

For those unfamiliar with the best available technology requirements, the technological arms race that typically follows can be highly significant and expensive. Moreover, the costs associated with reducing emissions by a few parts per million can be substantial, as can the fines and lawsuits related to non-compliance. With this regulatory regime on the horizon, it is best practice to take proactive action to avoid the impact of future control regulations.

If you would like to know more, feel free to contact Foresite Systems' environmental compliance team's manager Travis Miller, travis.miller@foresitesystems.com or (408) 377-7400.