[Federal Register: March 24, 2005 (Volume 70, Number 56)]
[Rules and Regulations]               
[Page 15169-15192]
From the Federal Register Online via GPO Access [wais.access.gpo.gov]
[DOCID:fr24mr05-11]                         

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DEPARTMENT OF ENERGY

10 CFR Part 300

RIN 1901-AB11

 
Guidelines for Voluntary Greenhouse Gas Reporting

AGENCY: Office of Policy and International Affairs, U.S. Department of 
Energy.

ACTION: Interim final rule and opportunity for public comment; revised 
general guidelines.

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SUMMARY: Section 1605(b) of the Energy Policy Act of 1992 directed the 
Department of Energy (Department or DOE) to issue guidelines 
establishing a voluntary greenhouse gas reporting program. On February 
14, 2002, the President directed DOE, together with other involved 
Federal agencies, to recommend reforms to enhance the Voluntary 
Reporting of Greenhouse Gases Program established by DOE in 1994. DOE 
is today issuing interim final General Guidelines that incorporate the 
key elements of revised General Guidelines proposed by DOE on December 
5, 2003. DOE also is publishing in the ``Rules and Regulations'' 
section of today's issue of the Federal Register a notice of 
availability inviting public comment on draft Technical Guidelines that 
will, combined with these General Guidelines, fully implement the 
revised Voluntary Reporting of Greenhouse Gases Program.

DATES: The interim final rule will be effective September 20, 2005. The 
incorporation by reference of the Draft Technical Guidelines is 
approved by the Director of the Federal Register as of September 20, 
2005. Written comments should be submitted on or before May 23, 2005.

ADDRESSES: You may submit comment, identified by RIN Number 1901-AB11, 
by any of the following methods:
     E-mail: 1605bguidelines.comments@hq.doe.gov.
     Federal eRulemaking Portal: http://www.regulations.gov. 

Follow instructions for submitting comments.
     Mail: Mark Friedrichs, PI-40; Office of Policy and 
International Affairs; U.S. Department of Energy; 1000 Independence 
Ave., SW., Washington, DC 20585.
    Interested persons also may present oral views and data at public 
workshops DOE will hold for discussing both these interim final General 
Guidelines and the draft Technical Guidelines that DOE is making 
available today. The locations, times, and other details of the public 
workshops are set forth in the Notice of Availability for the draft 
Technical Guidelines published in the ``Rules and Regulations'' section 
of today's issue of the Federal Register.
    You may obtain electronic copies of this notice, the draft 
Technical Guidelines and other related documents, find additional 
information about the planned workshops, and review comments received 
by DOE and the workshop transcripts at the following Web site: http://www.pi.energy.gov/enhancingGHGregistry/.
 Those without internet access 

may access this information by visiting the DOE Freedom of Information 
Reading Room, Rm. 1E-190, 1000 Independence Avenue, SW., Washington, 
DC, 202-586-3142, between the hours of 9 a.m. and 4 p.m., Monday to 
Friday, except Federal holidays.

FOR FURTHER INFORMATION CONTACT: Mark Friedrichs, PI-40, Office of 
Policy and International Affairs, U.S. Department of Energy, 1000 
Independence Ave., SW., Washington, DC 20585, or e-mail: 
1605bguidelines.comments@hq.doe.gov.

SUPPLEMENTARY INFORMATION:

Table of Contents

I. Introduction
    A. Background
    B. Process for Finalizing and Implementing Guidelines
II. Discussion of Revised General Guidelines
    A. Overview and Purpose
    B. Crosscutting Issues and Revisions
    1. Whether to provide for reporting on international emissions 
and reductions
    2. Whether to provide for registered emissions reductions
    3. Whether to modify the proposed basic requirements for 
registration
    a. Requiring large emitters to report entity-wide emissions and 
reductions
    b. Limiting registration to post-2002 reductions
    4. How to assign responsibility for reporting emissions and 
emissions reductions
    5. ``Transferable credits''
    6. Whether to include the General Guidelines in the Code of 
Federal Regulations
    C. Section-by-Section Discussion of the General Guidelines
    1. General (Sec.  300.1)
    2. Definitions (Sec.  300.2)
    3. Guidance for defining and naming the reporting entity (Sec.  
300.3)
    4. Selecting organizational boundaries (Sec.  300.4)
    5. Submission of an entity statement (Sec.  300.5)
    6. Emissions inventories (Sec.  300.6)
    7. Net entity-wide emission reductions (Sec.  300.7)
    8. Calculating emission reductions (Sec.  300.8)
    9. Reporting and recordkeeping requirements (Sec.  300.9)
    10. Certification of reports (Sec.  300.10)
    11. Independent verification (Sec.  300.11)
    12. Acceptance of reports and registration of entity emission 
reductions (Sec.  300.12)
    13. Incorporation by reference (Sec.  300.13)
III. Regulatory Review and Procedural Requirements
    A. Review Under Executive Order 12866
    B. Review Under the Regulatory Flexibility Act
    C. Review Under the Paperwork Reduction Act
    D. Review Under the National Environmental Policy Act
    E. Review Under Executive Order 13132
    F. Review Under the Treasury and General Government 
Appropriations Act, 2001

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    G. Review Under Executive Order 12988
    H. Review Under the Unfunded Mandates Reform Act of 1995
    I. Review Under the Treasury and General Government 
Appropriations Act, 1999
    J. Review Under Executive Order 13211
    K. Congressional Review

I. Introduction

A. Background

    Section 1605(b) of the Energy Policy Act of 1992 (EPACT) directs 
the Department of Energy, with the Energy Information Administration 
(EIA), to establish a voluntary reporting program and database on 
emissions of greenhouse gases, reductions of these gases, and carbon 
sequestration activities (42 U.S.C. 13385(b)). Section 1605(b) requires 
that DOE's Guidelines provide for the ``accurate'' and ``voluntary'' 
reporting of information on: (1) Greenhouse gas emission levels for a 
baseline period (1987-1990) and thereafter, annually; (2) greenhouse 
gas emission reductions and carbon sequestration, regardless of the 
specific method used to achieve them; (3) greenhouse gas emission 
reductions achieved because of voluntary efforts, plant closings, or 
state or federal requirements; and (4) the aggregate calculation of 
greenhouse gas emissions by each reporting entity (42 U.S.C. 
13385(b)(1)(A)-(D)). Section 1605(b) contemplates a program whereby 
voluntary efforts to reduce greenhouse gas emissions can be recorded, 
with the specific purpose that this record can be used ``by the 
reporting entity to demonstrate achieved reductions of greenhouse 
gases'' (42 U.S.C. 13385(b)(4)).
    In 1994, after notice and public comment, DOE issued General 
Guidelines and sector-specific guidelines that established the 
Voluntary Reporting of Greenhouse Gases Program for recording 
voluntarily submitted data and information on greenhouse gas emissions 
and the results of actions to reduce, avoid or sequester greenhouse gas 
emissions. The 1994 General Guidelines and supporting documents may be 
accessed at http://www.eia.doe.gov/oiaf/1605/guidelns.html. The 

Guidelines were intentionally flexible to encourage the broadest 
possible participation. They permit participants to decide which 
greenhouse gases to report, and allow for a range of reporting options, 
including reporting of total emissions or emissions reductions or 
reporting of just a single activity undertaken to reduce part of their 
emissions. From its establishment in 1995 through the 2002 reporting 
year, 381 entities, including utilities, manufacturers, coal mine 
operators, landfill operators and others, have reported their 
greenhouse gas emissions and/or their emission reductions to EIA.
    On February 14, 2002, the President directed the Secretary of 
Energy, in consultation with the Secretary of Commerce, the Secretary 
of Agriculture, and the Administrator of the Environmental Protection 
Agency, to propose improvements to the current section 1605(b) 
Voluntary Reporting of Greenhouse Gases Program. These improvements are 
to enhance measurement accuracy, reliability, and verifiability, 
working with and taking into account emerging domestic and 
international approaches.
    On May 6, 2002, DOE published a Notice of Inquiry soliciting public 
comments on how best to improve the Voluntary Reporting of Greenhouse 
Gases Program (67 FR 30370). Written comments were received from 
electric utilities, representatives of energy, manufacturing and 
agricultural sectors, Federal and State legislators, State agencies, 
waste management companies, and environmental and other non-profit 
research and advocacy organizations.
    DOE held public workshops in Washington, DC, Chicago, San Francisco 
and Houston during November and December of 2002 to receive oral views 
and information from interested persons. In addition, the U.S. 
Department of Agriculture sponsored two workshops in January 2003 to 
solicit input on the accounting rules and guidelines for reporting 
greenhouse gas emissions in the forestry and agriculture sectors. These 
workshops explored in greater depth many of the issues raised in the 
Notice of Inquiry and addressed in the written comments. The public 
comments covered a broad range of issues and views diverged widely on 
some key issues. Generally, there was substantial support for revising 
the current General Guidelines to enhance their utility and to 
accomplish the President's climate change goals.
    On December 5, 2003, DOE proposed revised General Guidelines (68 FR 
68204). A public workshop was held on January 12, 2004, to discuss that 
proposal and to receive public comment. Approximately 200 persons 
attended the workshop. In addition, over 300 written comments were 
received by the close of the public comment period on February 17, 
2004.
    DOE is today issuing interim final revised General Guidelines and, 
in a notice of availability published elsewhere in this issue of the 
Federal Register, makes available for public comment the draft 
Technical Guidelines necessary to fully implement the revisions to the 
Voluntary Program. Together, the General and Technical Guidelines will, 
when effective, replace the guidelines for the Voluntary Reporting of 
Greenhouse Gases issued by DOE in October 1994.
    DOE previously indicated its intent to provide for further public 
comment on the General Guidelines, as revised after a round of public 
comments on the notice of proposed rulemaking published on December 5, 
2003, through a supplemental notice of proposed rulemaking. However, 
DOE subsequently decided to provide for further comment through the 
device of a notice of interim final rulemaking rather than a 
supplemental notice of proposed rulemaking. DOE opted for an interim 
final rule because, after considering the public comments, the main 
revisions to the initially proposed General Guidelines were relatively 
few, involved issues within the scope of the initial proposal, and were 
not significant enough to warrant a re-proposal as another notice of 
proposed rulemaking. DOE also took account of the unusually varied and 
robust opportunities for written and oral comment both before and after 
publication of the proposed General Guidelines. These opportunities for 
public comment make it less likely that members of the public will have 
substantially new or different comments or information to offer in a 
further round of public comments on the revised General Guidelines. DOE 
recognizes that there is a possibility that public review of the draft 
Technical Guidelines may suggest the need for further changes to the 
General Guidelines. By publishing the General Guidelines as an interim 
final rule with a 180-day effective date, DOE has provided for making 
such changes and finalizing the draft Technical Guidelines before the 
end of the 180-day period.
    The Secretary of Energy has approved issuance of this interim final 
rule.

B. Process for Finalizing and Implementing Guidelines

    After full consideration of the public comments received, DOE will 
finalize the General and Technical Guidelines. DOE has allowed 180 days 
after publication of the interim final General Guidelines so that there 
is sufficient time to consider and respond to all comments received. 
DOE will further delay the effective date of the revised General 
Guidelines if the 180-day period proves to be insufficient for 
considering public comments and finalizing the General and Technical 
Guidelines.

[[Page 15171]]

    Before the General and Technical Guidelines become effective, EIA 
will, pursuant to the Paperwork Reduction Act of 1995 (44 U.S.C. 
Chapter 35), solicit public comment on the reporting elements to be 
contained in the reporting forms to be used under the revised program 
Guidelines. With respect to the existing 1994 General Guidelines, DOE 
intends to publish a Federal Register notice of termination that will 
take effect and terminate the existing Guidelines immediately prior to 
the revised General and Technical Guidelines taking effect.

II. Discussion of Revised General Guidelines

    The following section summarizes changes made to the revised 
General Guidelines and responds to public comments on the December 5, 
2003 proposal.

A. Overview and Purpose

    The revised General Guidelines included in this interim final rule 
are designed to enhance the measurement accuracy, reliability and 
verifiability of information reported under the 1605(b) program and to 
contribute to the President's climate change goals. The key elements of 
the revised General Guidelines do the following:
     Enable larger emitters to register reductions if they 
provide entity-wide emissions data and can demonstrate they achieved 
entity-wide emission reductions after 2002 that contribute to the 
President's goal of reducing the greenhouse gas emissions of the U.S. 
economy.
     Provide for simplified procedures for small emitters to 
report and to register reductions.
     Provide for simplified reports from entities that do not 
want to register their reductions.
     Encourage companies and other reporting entities to report 
at the highest level.
     Require participants to ensure the accuracy and 
completeness of their reports, and encourage independent verification.
     Allow participants to report and register reductions 
achieved internationally.
    These key elements of the revised Guidelines, except for the last, 
were included in the December 2003 proposal and, after careful 
consideration by the Department of the public comments received, have 
been retained in the revised General Guidelines contained in this 
notice.
    The President specifically requested that DOE ``enhance measurement 
accuracy, reliability, and verifiability.'' DOE believes that today's 
interim final revised General Guidelines enhance:
     Measurement accuracy by creating a ranking system for 
methods to calculate emissions, incorporating the best available 
inventory methods, and enabling more sources to be covered;
     Reliability by creating a more systematic approach to 
reporting, stressing inventories and entity-wide reporting; and
     Verifiability by creating a more transparent reporting 
system for emissions and reductions, requiring recordkeeping and 
encouraging independent verification.
    The revised General Guidelines establish the basic requirements for 
the enhanced reporting and registration program. The draft Technical 
Guidelines, which are referred to in this preamble and in the text of 
the General Guidelines, when final, will provide the specificity 
necessary to fully implement the emissions inventory and emissions 
reduction guidelines set forth in section 300.6 and section 300.8 of 
the revised General Guidelines. As explained in the notice of 
availability published in the ``Rules and Regulations'' section of 
today's Federal Register, the draft Technical Guidelines have two major 
parts:
     Emissions Inventory Guidelines (Chapter 1), which includes 
detailed guidance on how to measure or estimate greenhouse gas 
emissions; and
     Emission Reductions Guidelines (Chapter 2), which includes 
guidance on the selection and application of methods used to calculate 
emission reductions, including the establishment and modifications of 
base periods and base values.
    After consideration of the hundreds of public comments received on 
the December 2003 proposal, DOE retained the key elements of the 
previously proposed General Guidelines, as described above. However, 
DOE has made a number of important changes, including the addition of 
guidelines to allow reporting and registration of international 
emissions and emission reductions, refinements in the procedures 
governing the definition of ``reporting entity,'' increased specificity 
regarding the requirements for registration, and a modification of the 
de minimis provision to permit the exclusion from emissions inventories 
of up to 3 percent of total emissions, with no quantitative maximum.
    In addition to the changes described above, DOE has made changes to 
reflect or incorporate the further guidance included in the draft 
Technical Guidelines. A few sections of today's revised General 
Guidelines, such as those on entity statements, recordkeeping and 
independent verification, have been expanded to provide additional 
guidance to reporters. In a few instances, the December 5, 2003 
proposed General Guidelines have been modified to reflect changes in 
the requirements for emissions inventories and emission reductions that 
are set forth in the draft Technical Guidelines.
    Once the revised General and Technical Guidelines take effect, the 
1605(b) program will serve as the primary public emission and emission 
reduction reporting mechanism for participants in EPA's Climate Leaders 
program and in DOE's Climate VISION program. The establishment of 
consistent reporting rules for all Federal greenhouse gas reporting 
programs was supported by many of the comments received by DOE. While 
the specific requirements of these other programs for reporting 
emissions and emission reductions may be more prescriptive in some 
areas than the requirements of the revised 1605(b) guidelines, these 
differences should not prevent the use of the 1605(b) program as the 
means by which participating entities publicly report on their 
emissions and emission reduction achievements under the Climate Leaders 
and Climate VISION programs. To support distinct program elements, each 
of these programs is likely, however, to have other additional 
reporting requirements.
    Most of the basic requirements in the December 5, 2003 proposed 
General Guidelines have not changed. To register emission reductions, 
reporting entities with substantial emissions (average annual emissions 
of 10,000 or more tons of carbon dioxide (CO2) equivalent) 
must provide an inventory of their total emissions and calculate the 
net reductions associated with entity-wide efforts to reduce emissions 
or sequester carbon. Entities with average annual emissions of less 
than 10,000 tons of CO2 equivalent (small emitters) are 
eligible, under certain conditions, to register emission reductions 
associated with specific activities without completing an entity-wide 
inventory or entity-wide reduction assessment. DOE believes that these 
registered emission reductions represent the types of ``real 
reductions'' for which the President indicated there should be special 
recognition.
    The revised General Guidelines enable entities to report (but not 
register) emission reductions achieved prior to 2003 as well as report 
emission reductions achieved during or after 2003 that do not qualify 
for registration. They also permit entities to report (but not

[[Page 15172]]

necessarily register) emission reductions associated with specific 
actions or with specific parts of the entity, even if these reports are 
not accompanied by entity-wide emissions and reductions reports.
    For convenience, the basic elements of the revised General 
Guidelines being issued today are graphically represented in Figure 1.

BILLING CODE 6450-01-P

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B. Crosscutting Issues and Revisions

    Many of the comments received on the December 5, 2003 proposed 
General Guidelines were directed at crosscutting issues that affect a 
number of different provisions. A discussion of these issues and DOE's 
response to major comments regarding these issues follows.
1. Whether To Provide for Reporting on International Emissions and 
Reductions
    In the December 5, 2003 proposed General Guidelines, DOE did not 
propose provisions for the reporting or registration of emissions and 
emission reductions occurring outside the United States, but it 
solicited public comment on whether entities should be permitted to 
report and/or register non-U.S. emissions and reductions. DOE also 
solicited comments on other, more specific issues related to the 
inclusion of non-U.S. activities. A large number of commenters 
responded to this request, both at the public workshop and in written 
comments. The vast majority of comments favored the inclusion of 
international emissions and reductions, both for reporting and 
registration. Some comments, however, raised concern about the 
reliability of reports on non-U.S. emissions and reductions, and the 
potential for double-counting reductions that are also recognized or 
credited by other countries.
    DOE has responded to the comments by allowing entities to both 
report and register emissions and emission reductions occurring outside 
the United States, subject to certain requirements. To register such 
international emission reductions, entities must first report on their 
domestic U.S. operations and meet all requirements for registration. 
Entities intending to register emission reductions derived from non-
U.S. operations or offsets must meet all of the requirements for 
registering reductions from U.S. operations. For example, a large 
emitter will have to submit an emissions inventory for all non-U.S. 
operations covered by the entity's report. Registered emission 
reductions must reflect net reductions, based on an entity-wide 
assessment of changes in all emissions, including changes in 
sequestration and avoided emissions. A person or organization without 
domestic U.S. operations is not allowed to report or register 
international emissions and emission reductions, although that person 
or organization's non-U.S. emission reductions may be reported as an 
offset reduction by an entity participating in the 1605(b) program. 
Emissions reductions credited or required under the greenhouse gas 
programs of other countries must be specifically identified as such. 
Because of the need for this disclosure and other national differences, 
all reports on international emissions and emission reductions must be 
compiled and reported on a country-specific basis.
    An entity that chooses to report on some portion of its non-U.S. 
operations must do so in a manner that is consistent with the 
definition of the entity, as set forth in its entity statement (see 
Sec.  300.5). In this regard, the entity's coverage of non-U.S. 
operations must be done in way that is fully consistent with its 
management structure. For example, if an entity chooses to report on 
multiple elements of its North American operations, including some 
elements outside the U.S., then all such operations must be included. 
An entity may register emissions reductions in a portion of the 
countries in which it has operations only if the decision to include or 
exclude countries follows the entity's organizational structure. This 
approach is consistent with how the revised General Guidelines treat 
all parent or holding company relationships with subsidiaries.
2. Whether To Provide for Registered Emissions Reductions
    In the December 5, 2003 proposed General Guidelines, DOE proposed 
to allow reporters to ``register'' reductions if they met specific, 
more stringent, reporting requirements designed to increase the 
credibility of reported emissions and emission reductions. DOE 
explained that allowing the option of registration would provide 
special recognition to those entities that were willing to meet 
additional requirements, while ensuring that all of the program 
elements set forth in section 1605(b) of EPACT would remain available 
to participants that did not choose to register their reductions.
    Public comment on the registration option was mixed. There was some 
support for allowing an option to provide more comprehensive data to 
DOE, but other comments expressed concern that a system that 
differentiated between entities simply reporting and those registering 
would automatically devalue all reductions not registered. Many 
supported only one type of recognition, either reporting alone or 
registration alone, but not two classes of reporting. After considering 
the comments, DOE nevertheless has retained the distinction between 
reporting and registering in the revised General Guidelines. DOE 
continues to believe this is the most effective method for improving 
the program, including improving the accuracy of the reports, as 
directed by the President, while continuing to cover all of the program 
elements required by the statute. The main distinction between 
registering and reporting under the revised guidelines concerns the 
degree to which individual reports cover all of the entity's emissions 
and emission reductions. Under the revised guidelines, large emitters 
interested in ``registering'' reductions must submit entity-wide 
emission inventories and will be recognized only for net reductions in 
their entity-wide emissions. DOE believes that data that reflects 
entity-wide emissions and reductions are better indicators of the 
entity's overall contribution to greenhouse gas reductions and should, 
therefore, be clearly distinguished from reports that are not entity-
wide. DOE believes this characteristic, together with the other 
additional requirements specified in the guidelines, are sufficiently 
significant to warrant a unique designation. Comments on the issue of 
registration were often linked to the issue of transferable credits, 
which is addressed below (II.B.4).
3. Whether To Modify the Proposed Basic Requirements for Registration
    In addition to the general comments received on the desirability of 
allowing reductions to be ``registered,'' a number of more specific 
comments addressed two of the key requirements for registration: (1) 
The requirement for entity-wide reports by large emitters, and (2) the 
limiting of registered emission reductions to only those that were 
achieved after 2002.
    a. Requiring large emitters to report entity-wide emissions and 
reductions. As a prerequisite for registration, DOE proposed to require 
large emitters to submit an inventory of their total emissions and to 
complete an entity-wide assessment of emission reductions. Many 
comments opposed one or both of these requirements. In particular, many 
commenters advocated a change to permit the registration of emission 
reductions resulting from individual projects (or actions), rather than 
reserving registration for those entities that could demonstrate net, 
entity-wide emission reductions.
    Most of the emission reductions that have been reported under the 
existing program are based on identifiable ``projects'' or actions. 
Over 3,000 distinct projects have been reported to DOE since the 
inception of the program. The actions to reduce emissions vary widely 
and include recovery of landfill methane, improved energy efficiency, 
recycling, switching from coal or oil to natural gas, and the 
generation of electricity from nuclear power or

[[Page 15175]]

renewable energy, and many others. Because most large companies and 
institutions regularly take actions that have as one of their effects 
the reduction of greenhouse gas emissions, there are always many 
candidates for project-based emission reductions. But the net effect of 
such project-based reductions on an entity's total emissions is often 
questioned, because large entities may be taking actions that reduce 
certain emissions, while simultaneously taking other actions that 
increase other emissions. Furthermore, it is impossible to evaluate the 
significance of a particular entity's actions to reduce emissions 
unless the total emissions of that entity are known. For these reasons, 
a number of commenters favored retaining the entity-wide focus of the 
proposed revisions to the General Guidelines. DOE continues to find 
these arguments persuasive, and therefore has retained the provision 
requiring large emitters who register to complete an entity-wide 
inventory of emissions and to calculate emission reductions on the 
basis of an entity-assessment of changes in emissions.
    The focus on entity-wide emission reductions does not, however, 
preclude entities from including in their entity-wide assessment the 
effects of ``projects,'' whether they are captured indirectly in 
measures of changes in greenhouse gas emissions intensity or their 
total emissions, or directly through the calculation of increased 
carbon storage resulting from tree plantings, increased avoided 
emissions from nuclear power and renewable energy generation, or 
reductions calculated using various action-specific methods, such as 
the recovery of landfill methane, that are specified in the draft 
Technical Guidelines.
    b. Limiting registration to post-2002 reductions.
    In the December 5, 2003 proposed General Guidelines, DOE proposed 
to permit the registration of only those emission reductions achieved 
after 2002. Most public comments opposed restricting registration to 
post-2002 reductions. Most argued that the revised guidelines should 
provide full recognition to any reduction achieved after the statutory 
base year of 1990, as long as the entity complied with the requirements 
of the revised guidelines. DOE has retained this restriction, however, 
because it believes the arguments against such restriction are contrary 
to the intended focus of the revised Guidelines. The restriction is 
intended to focus the program on recent and future efforts to reduce 
greenhouse gas emissions, rather than on actions taken many years ago. 
Limiting registered reductions to those achieved after 2002 will also 
provide an indication of reporting entities' contributions to the 
President's goal of reducing the greenhouse gas emissions intensity of 
the U.S. economy by 18 percent between 2002 and 2012. In addition, this 
forward-looking focus helps enhance the transparency and verifiability 
of the reported data. Even if the guidelines permitted entities to 
register reductions achieved prior to 2003, DOE believes it is unlikely 
that most entities would be technically capable of meeting all of the 
requirements of the revised guidelines for earlier years, unless they 
already had extensive emission measurement and recordkeeping processes 
in place. The revised General Guidelines still permit reporting of 
historical activity, however, and therefore fully comply with the 
statutory requirements of section 1605(b).
4. How To Assign Responsibility for Reporting Emissions and Emission 
Reductions
    In the December 5, 2003 proposed General Guidelines, DOE proposed 
that: emission inventories cover all emissions from stationary or 
mobile sources within the organizational boundaries of the entity 
(proposed section 300.6(b)); and the entity responsible for emission 
reductions, avoided emissions or sequestered carbon would be the legal 
owner of the facility, land or vehicle which generated the affected 
emission, generated the energy that was sold so as to avoid other 
emissions, or was the place where the sequestration action occurred 
(proposed section 300.8(e)).
    Few comments were received on these proposals and the revised 
General Guidelines contain provisions that closely parallel those 
included in the December 5 proposal (see sections 300.6(d) and 
300.8(k)).
    The draft Technical Guidelines further amplify the revised General 
Guidelines provisions and, in some cases, identify exceptions to these 
general rules. The relevant technical guidance falls into the following 
categories: indirect emissions, biogenic (or natural) emissions, 
avoided emissions, emissions from manufactured products and transfers 
of greenhouse gases to other entities.
    Indirect Emissions: The draft Technical Guidelines specify that 
both the users and generators of electricity, steam and hot/chilled 
water report the emissions associated with these forms of distributed 
energy, and that each report a portion of the associated reductions. 
The guidelines recognize that the emission inventories associated with 
indirect emissions will overlap with those associated with the 
generation of electricity and other forms of distributed energy. This 
overlap is explicit and will be clearly identified in EIA's database of 
entity reports. With respect to emission reductions, the draft 
Technical Guidelines specify methods that will attribute reductions 
associated with the declines in the emissions intensity of generation 
to the owners of the energy generating facilities that resulted in 
these declines. Emission reductions associated with reductions in the 
use of electricity or other forms energy would be attributed to the end 
users.
    Biogenic (or natural) Emissions: Emissions associated with the 
combustion or decay of biomass is another area where the draft 
Technical Guidelines would establish some special rules. Most of the 
carbon sequestered in growing trees is eventually reemitted after the 
trees have been harvested. These emissions occur at many sites: on the 
land where the trees grew, at lumber mills and other wood processing 
facilities, at landfills, and some in waste-to-energy plants or in 
plants burning methane recovered from landfills. Since entities that 
grow trees would report the reductions associated with sequestration 
but most of such sequestered carbon eventually would be reemitted if 
the trees were harvested, the guidelines would assign most of the 
responsibility for such emissions to the tree growers, rather than to 
the users or disposers of wood products. The guidelines would require 
most users and disposers of wood products to treat any resulting carbon 
emissions as biogenic. For example, any entity that directly combusted 
wood or wood products would treat the resulting emissions of carbon 
dioxide as biogenic. However, there is a further exception to this 
rule. The guidelines specify that increased production and distribution 
of methane recovered from landfills should be presumed to substitute 
for natural gas, based on its heat content. Note that methane emissions 
from landfills would be considered anthropogenic, while the carbon 
dioxide produced by the flaring of such methane would be considered 
biogenic.
    Avoided Emissions: ``Changes in avoided emissions'' is one of the 
five methods of calculating emission reductions. While avoided 
emissions are not included in emission inventories, the draft Technical 
Guidelines would enable entities that increase the generation of 
electricity or other forms of distributed energy to account for the 
effects of this increased generation on the emissions of other 
generators. For example, the owner of the wind farm or

[[Page 15176]]

nuclear power plant may qualify to register the avoided emissions 
associated with these facilities, while the competing generator (that 
reduces its total generation and emissions directly), the utility that 
distributes the renewable or nuclear power to users, and the ultimate 
user may not register reductions resulting from the actions of the wind 
farm or nuclear power plant owner.
    Emissions from Manufactured Products: A number of manufactured 
products or materials contain anthropogenic greenhouse gases that are 
emitted to the atmosphere during their normal life cycle. In general, 
the draft Technical Guidelines require the owner, rather than the 
manufacturer, of the product or material to report as part of its 
emissions inventory these emissions at the time the emissions occur.
    Transfers of Greenhouse Gases to Other Entities: Entities that 
capture greenhouse gases and sell or otherwise transfer them to another 
entity usually would have to report such transactions, but their total 
emissions inventory would reflect only those gases actually released by 
the reporting entity, not those quantities transferred. Entities that 
purchase or otherwise receive greenhouse gases from other entities 
would also have to report such transactions, but should also include in 
their emissions inventory only those quantities of gases actually 
released. The receiving entity should also record the amount of 
transferred gas either destroyed or permanently sequestered. To qualify 
for a registered emission reduction in such cases, an entity would have 
to increase the net quantity of emissions destroyed or permanently 
sequestered relative to its base period. The entity responsible for the 
destruction or sequestration may report or register such reductions, or 
may assign the reporting rights for such reductions to other entities, 
such as the entity that initially captured the gas.
5. ``Transferable Credits''
    DOE received many public comments on whether the December 5, 2003 
proposed General Guidelines would faithfully carry out the President's 
February 14, 2002 statement that the Government would give 
``transferable credits'' to entities that can show real reductions of 
greenhouse gas emissions. Although there appears to be a deeply felt 
disagreement on this question, the disagreement seems to be completely 
over form, and not substance. There is substantial if not complete 
agreement among the commenters on the permissible reach of the 
Guidelines, on what the President intended the Guidelines to 
accomplish, and on the extent of and limitations on the Guidelines' 
ability to provide protection to reporting entities in some future 
potential greenhouse gas legal or regulatory regime.
    No commenter on the December 5, 2003 proposal argued that DOE has 
the legal authority to give emissions reductions that are reported or 
registered in the 1605(b) program a regulatory or financial value under 
some future climate policy. For example, the Edison Electric Institute 
(EEI), which has argued that DOE's Guidelines should do something more 
to award ``transferable credits'' (and ``baseline protection'') to 
entities reporting or registering reductions in the 1605(b) program, 
has also stated that the 1605(b) program can only provide ``a 
nonbinding hedge against current and future climate regulatory 
policy.'' (EEI, Feb. 17, 2004). EEI incorporated earlier written 
comments of the Electric Power Industry Climate Initiative (EPICI) that 
also reflected the view that DOE may not issue ``transferable credits'' 
guaranteed to have value under a future climate policy:

    [W]e know of no plans by the President, in calling for these 
distinctly different reforms [transferable credits and baseline 
protection], to attempt by guidelines to bind a future President or 
Congress, and we are not suggesting that he attempt to do so. A 
recognition or certification by DOE of reductions reported 
accurately pursuant to revised 1605 guidelines could not be said to 
have such a binding effect.

EPICI, Sept. 25, 2002, at 16. Similarly, the Competitive Enterprise 
Institute (CEI), the Natural Resources Defense Council (NRDC), and 
several other commenters who urged that the Guidelines either could not 
or should not do anything further with respect to ``transferable 
credits'' also conclude that DOE lacks the authority to provide credits 
that would have a regulatory or financial value under a future climate 
policy. CEI, Jan. 9, 2004; NRDC, Feb. 17, 2004; NESCAUM, Feb. 16, 2004; 
Pew Center, Feb. 11, 2004; and State of New Jersey, Feb. 17, 2004.
    DOE has carefully considered all of these comments and has decided 
that its revised General Guidelines and draft Technical Guidelines 
appropriately meet the objectives the President sought to accomplish on 
this point. In particular, the Guidelines provide more detail on the 
criteria by which reporting entities can be credited with ``registered 
reductions''. DOE believes that its substantial revisions to the 
1605(b) General Guidelines, accompanied by the detailed Technical 
Guidelines, including the provisions regarding registered reductions, 
fully carry out the President's objectives for improvements to the 
program.
    As stated by the Chairman of the Council on Environmental Quality 
in his opening remarks at the Washington workshop on the Notice of 
Inquiry in this proceeding, the revised 1605(b) Guidelines can ``create 
a building block of recognition that * * * will be acknowledged and 
recognized with respect to any future climate policy'' (Transcript 3-4, 
November 18, 2002). By establishing a more credible database of 
emission inventories and net, entity-wide emission reductions, the 
reductions that may be registered under the revised General Guidelines 
and draft Technical Guidelines appropriately carry out the policy 
objectives set forth by the President's statement. It is important to 
note that under both current law and the President's policy, the 
decisions to make and report emission reductions remain voluntary.
6. Whether To Include the General Guidelines in the Code of Federal 
Regulations
    Some commenters argued that it is unlawful or inappropriate for DOE 
to issue the revised General Guidelines as a proposed rule and, when 
final, place them in the Code of Federal Regulations. One commenter 
wrote to the Director of the Federal Register, who oversees the 
publication of both the Federal Register and the Code of Federal 
Regulations, asserting that it is unlawful and inappropriate to codify 
the General Guidelines. The Director responded in a letter that has 
been added to the other public comments filed in this proceeding (see 
Letter, Raymond A. Mosley, Director of the Federal Register, to William 
L. Fang, January 23, 2004).
    DOE has considered these comments, but continues to believe it is 
both lawful and desirable that the revised General Guidelines be 
included in the Code of Federal Regulations. The revised General 
Guidelines clearly are a ``rule'' within the meaning of that term in 
the Administrative Procedure Act (5 U.S.C. 551(4)), and they were 
properly classified as a ``rule document'' by the Office of the Federal 
Register. The Director of the Federal Register also concluded that it 
is proper under the Federal Register Act (44 U.S.C. 1501-1511) for DOE 
to include the revised General Guidelines in the Code of Federal 
Regulations. The revised General Guidelines will be more accessible to 
the public if they are preserved in the Code of Federal Regulations. 
Placing the General Guidelines in the Code of Federal

[[Page 15177]]

Regulations also will not affect the rights of reporting entities 
because codification of rule documents does not affect their nature as 
substantive or procedural or legally-binding or non-binding. Lastly, 
codification is handled by the Office of the Federal Register, and it 
will not add any time to the notice and comment process required by 
section 1605(b).

C. Section by-Section Discussion of the General Guidelines

1. General (Sec.  300.1)
    A new paragraph (f) has been added to this section to indicate that 
DOE intends to periodically review and update the General Guidelines 
and the Technical Guidelines. These periodic reviews would consider 
possible additions to the list of covered greenhouse gases, changes to 
the minimum, quantity-weighted quality rating for emission inventories, 
modifications to the benchmarks specified by DOE, changes to the 
minimum requirements for registered emission reductions, and other 
possible changes to the General and Technical Guidelines. DOE intends 
to coordinate any changes to the Guidelines in order to minimize the 
number of times such changes are made and to ensure that such changes 
are made only after a thorough, public review by DOE and interested 
stakeholders.
2. Definitions (Sec.  300.2)
    The Definitions section of the revised General Guidelines defines 
the key terms used in the General Guidelines. The draft Technical 
Guidelines contain a Glossary that references all of the terms defined 
in the General Guidelines and contains additional terms used only in 
the draft Technical Guidelines. Although comparatively few changes have 
been made to the definitions contained in the proposed General 
Guidelines published on December 5, 2003 a few new terms have been 
added in response to public comments on the proposal and the completion 
of the draft Technical Guidelines. The new terms defined in today's 
revised General Guidelines are: ``aggregator,'' ``start year,'' ``base 
period,'' and ``base value.'' The definitions of other terms have been 
modified to improve their clarity.
    Aggregator. Under the existing program, a number of organizations 
have aggregated the emission reductions of many small entities and 
submitted a single report to EIA. Some comments suggested that a role 
for such aggregators be more clearly defined under the revised General 
Guidelines. In response to these comments, DOE has defined and used the 
term ``aggregator'' in the revised General Guidelines. As defined, an 
aggregator might be any trade association, company or organization that 
collects or compiles information and reports to EIA on behalf of 
businesses, organizations, households or other entities that could 
report directly, but have chosen not to do so. Because the aggregator 
would be the entity reporting to EIA, EIA would recognize the 
aggregator as the entity responsible for any registered emission 
reductions. An aggregator may be a small or a large emitter and must 
report on its own emissions in accordance with whatever rules are 
applicable to its entity type, except that an aggregator that is a 
small emitter may choose not to report on any of its own emissions. In 
reporting on behalf of third-party businesses, organizations, or 
households, the aggregator must follow the reporting rules that would 
apply to those entities if they had themselves reported. DOE encourages 
trade associations and other organizations to serve as aggregators or 
to assist third parties to report directly.
    Start year. ``Start year'' is a new term introduced to identify 
when an entity begins to report under the revised guidelines and to 
establish more clearly the first year for which an entity reports an 
emissions inventory. The start year is the last year of the base 
period(s) initially established by an entity and the year immediately 
preceding the first year for which an entity reports emissions 
reductions. For a particular entity, the start year remains fixed, even 
if changes in the entity require adjustments in base periods or base 
values.
    Base period and Base value. In the December 5, 2003 proposed 
General Guidelines, the terms ``base year'' and ``base period'' were 
used, but definitions for those terms were not included in section 
300.2. ``Base year'' was a single year upon which emission reduction 
calculations were often based. ``Base period'' was a period of 2-4 
years that might also be the basis for emission reduction calculations. 
In today's revised General Guidelines, the term ``base year'' has been 
dropped and the term ``base period'' has been modified to include time 
periods of 1-4 years. Consequently, the term ``base period'' now 
encompasses the meanings originally given to both terms. DOE also has 
included a definition for the term ``base value,'' which is used to 
specify the quantitative value (e.g., emissions, emissions intensity, 
megawatt hours (MWhs), carbon stock) used to calculate reductions. This 
value is usually derived from emissions and/or performance of an entity 
(or subentity) during the base period. The following graphic depicts 
the relationships between a start year, base period, first reduction 
year and reporting years.

[GRAPHIC] [TIFF OMITTED] TR24MR05.001


[[Page 15178]]


    De minimis emissions. The revised General Guidelines include a de 
minimis provision that allows reporters to omit emissions from their 
inventories that are, in total, less than 3 percent of the entity's 
emissions. This provision spares reporters the sometimes 
disproportionate cost of accounting for small emission quantities whose 
contribution to total emissions is small. The definition has been 
changed from the initial proposal as a result of public comment. Public 
comments supported a variety of modifications to the earlier proposal 
to allow exclusion of 3 percent or 10,000 tons, whichever is less. Some 
favored expanding the de minimis level to 5 percent of total emissions, 
although some also endorsed the 3 percent de minimis level, with no 
physical maximum, and a few opposed any de minimis exclusion. The 
revised General Guidelines retain the 3 percent level, but eliminate 
the 10,000-ton maximum exclusion. The 3 percent level appears to be the 
minimum level considered practical by many potential reporters. Given 
the inherent uncertainty of some of the measurement and estimation 
methods specified in the guidelines, emissions representing less than 3 
percent of an entity's total could be considered immaterial. This 
approach ensures that all reporters may exclude the same percentage 
share of their total emissions. The revised General Guidelines also 
make clear that a large emitter, when starting to report, must provide 
an estimate of the emissions that are being excluded, and that de 
minimis emissions must be periodically re-estimated, at least every 
five years, to ensure that they do not exceed the 3 percent maximum. 
The de minimis exemption would not be applicable to small emitters that 
choose to report on the emissions of specific activities, rather than 
on their total, entity-wide emissions.
    Greenhouse gases. This definition has been slightly modified from 
the proposal to indicate that entities may report on other gases or 
particles that have been demonstrated to have significant, quantifiable 
climate forcing effects when released to the atmosphere in significant 
quantities only if DOE has established or approved methods for 
estimating the emissions and emission reductions associated with such 
greenhouse gases. DOE will consider public recommendations on 
appropriate methods for estimating the emissions and emission 
reductions associated with any gases that have significant, 
quantifiable climate forcing effects. Once DOE has concluded that an 
anthropogenic emission meets the definition of greenhouse gases 
specified in the guidelines and has modified the Technical Guidelines 
to establish methods for accurately quantifying such emissions, DOE 
will begin accepting reports on such emissions and will initiate the 
interagency and public review process necessary to add the new emission 
to the list of gases in section 300.5 of the General Guidelines. Only 
after DOE has formally added the identified emission to the list of 
greenhouse gases specifically identified in the General Guidelines 
would entities be permitted to register reductions associated with such 
emissions.
3. Guidance for Defining and Naming the Reporting Entity (Sec.  300.3)
    Public comments on this section of the revised General Guidelines 
varied widely. Some advocated that DOE require entities to report only 
at the highest meaningful level of aggregation, while others 
recommended that entities be given more flexibility in determining how 
best to define themselves. As revised, this section of the General 
Guidelines now addresses three distinct issues: (1) The basis for 
defining entities; (2) the level of aggregation; and (3) the choice of 
an entity name. This section also has been modified from the December 
5, 2003 proposal to accommodate entities with non-U.S. operations that 
report reductions from those operations.
    With respect to the basis for defining entities, public comments 
have suggested that DOE consider a variety of different bases, both 
more general and more specific than the ``legal basis'' originally 
proposed and now included in the definition of ``entity'' in section 
300.2. DOE has made no change in this section because it continues to 
believe that the basis for defining a reporting entity should be found 
in existing Federal, State, or local law. DOE believes it is reasonable 
to define entities according to their legal status because that status 
provides a definable, identifiable basis for determining reporting 
parameters.
    A variety of comments were also submitted on DOE's guidance 
regarding the appropriate level of aggregation of entities. DOE had 
proposed to encourage entities to report at the highest meaningful 
level of aggregation, but to provide entities with the flexibility to 
choose an appropriate level of aggregation. Some comments supported 
requiring that entities report at the highest level of aggregation, 
such as parent or holding company, while others wanted the flexibility 
to define their entity at the subsidiary or plant level. DOE is 
allowing reporting entities to decide on the level of aggregation, 
subject to the condition that they report at the next higher level of 
aggregation any time they choose to report on two or more subsidiaries 
of that level. For example, an entity may be the aggregation of three 
subsidiary entities: A, B, and C. If A and B want to report together, 
then they must also include C. DOE chose this approach because it 
permits entities some flexibility in determining how to define 
themselves, while at the same time it discourages entities from 
reporting only on those subsidiaries that had achieved significant 
reductions in emissions.
    Finally, this section now includes guidance on the selection of a 
name for reporting entities, which previously appeared in the 
requirements for the Entity Statement.
4. Selecting Organizational Boundaries (Sec.  300.4)
    Because many entities are involved in joint or shared financial 
and/or managerial operations, such as joint ventures, partnerships, 
leases, and parent/subsidiary relationships, guidelines are needed for 
defining entity boundaries. DOE has considered several options, 
including operational control; financial control; and equity share, as 
these terms are used in the Greenhouse Gas Protocol developed by the 
World Business Council for Sustainable Development/World Resources 
Institute (WBCSD/WRI). Public comments voiced support for all the 
options, though the comments provided little input on ways to preserve 
flexibility in the establishment of boundaries while also preventing or 
further discouraging the shifting of emissions to non-reporting parts 
of the entity in order to create the appearance of net emission 
reductions. Some comments argued in favor of fixed rules for deciding 
whether to include leased and partially owned operations, while others 
argued that the choice should be left to the discretion of the 
reporting entity. Commenters also raised concerns regarding the 
differences between the terminology used in DOE's proposed General 
Guidelines and the terms used in the WBCSD/WRI Protocol.
    A number of changes have been made to respond to these comments. 
The term ``operational'' used in the DOE's original proposal has been 
changed to ``organizational'' in the revised General Guidelines. The 
section now indicates that the primary basis for defining 
organizational boundaries should be financial control, although 
entities retain the flexibility to use other approaches, such as equity 
share or operational control if necessary. DOE believes that financial 
control should be

[[Page 15179]]

used where feasible because it is the best indicator of which entity is 
most likely to control both the operational and investment decisions 
necessary to affect greenhouse gas emissions. The use of a single 
method, financial control, also minimizes potential conflicts between 
different entities that share ownership of a facility. In such 
situations, the use of different methods for determining organization 
boundaries might lead to conflicting claims regarding reported emission 
reductions.
5. Submission of an Entity Statement (Sec.  300.5)
    A range of comments touched on DOE's proposed requirements for the 
entity statement, including some that advocated differentiating among 
large emitters intent on registering emissions reductions, small 
emitters intent on registration, and entities that do not intend to 
register emission reductions. In response to these comments and in an 
effort to more clearly define the early steps in the reporting process, 
DOE has made a number of changes to this section.
    Two new sub-sections, ``Choosing a start year'' and ``Determining 
the type of reporting entity,'' have been added to more clearly define 
the first steps in the reporting process, and the requirements for 
entity statements have been differentiated for each of the three major 
categories of reporters.
    DOE solicited comments concerning whether, and at what cutoff 
level, small emitters should be allowed to report emissions and 
register emissions reductions without having to meet all of the 
requirements for large emitters. Little feedback was received. DOE has 
retained the simplified reporting requirements for small emitters in 
the revised General Guidelines. EIA will provide a method that entities 
can use to quickly and inexpensively estimate their emissions to 
determine whether they qualify as small emitters. This method, the 
Simplified Emissions Inventory Tool (SEIT), will enable entities to 
prepare a rough estimate of their emissions inventory based on readily 
available quantities of fuel use, land type, livestock, or type and 
size of building(s) owned, although such rough estimates would not meet 
the minimum requirements for an emissions inventory. The SEIT is 
defined and referenced in the revised General Guidelines and discussed 
in Chapter 1 of the draft Technical Guidelines.
6. Emissions Inventories (Sec.  300.6)
    A number of comments were received on this section of the proposed 
General Guidelines. Some opposed the requirement for entity-wide 
inventories as a precondition to the registration of emission 
reductions, while many others favored some type of inventory 
requirement. Because emission inventories provide a comprehensive 
assessment of an entity's total emissions in a given year, DOE is 
proposing to retain the requirement that large emitters complete an 
emissions inventory if they intend to register emission reductions. The 
major changes to section 300.6 involve the emissions estimation method 
rating system.
    DOE has modified this section of the revised General Guidelines to 
reflect the quality rating system incorporated into Greenhouse Gas 
Emissions Inventory Guidelines (Chapter 1 of the draft Technical 
Guidelines). The emissions rating system is designed to: (1) Help 
achieve the President's stated objective of improving the ``accuracy, 
reliability, and verifiability'' of reported emissions; (2) ensure that 
the bulk of reported emissions that meet this standard are as accurate 
as available estimation methods permit; (3) create an incentive for 
reporters to use more accurate methods over time; and (4) be cost-
effective and practical to implement.
    The rating system is based on DOE rankings of available emissions 
and sequestration estimation methods by considering accuracy, 
reliability, verifiability, and practical application. Using these 
criteria, the best available methods are usually rated ``A,'' and given 
a value of 4 points. The next best methods are usually rated ``B'' and 
given a value of 3 points; the next best rated ``C'' and given a value 
of 2 points; and the least desirable methods rated ``D'' and given a 
value of 1 point. The revised General Guidelines require the weighted 
average rating of all reported emissions and sequestration to be 3.0 or 
higher to qualify for registration. This provision reflects DOE's 
belief that methods given an A or B rating are sufficiently accurate to 
serve as the basis for entity-wide reporting, while methods given a C 
or D rating should be used only for those gases or sources that 
represent a small share of the reporting entity's total emissions.
    The emissions rating system is an ordinal rating system in the 
sense that while an A rating is considered better than a B rating, and 
B is better than C, the rating system doesn't specify how much better A 
is than B. Similarly, two ``A'' rated methods for different sources may 
not be of comparable quality. Both will be the best method available 
for a given source, but they may vary in degree of accuracy, 
reliability, verifiability or cost.
    Paragraph (c) of section 300.6 permits and describes how reporters 
may obtain approval for the use of estimation methods not included in 
the Technical Guidelines. DOE encourages reporters to improve their 
emissions inventory methods over time, and DOE will periodically 
consider the desirability of raising the minimum acceptable weighted 
average.
7. Net Entity-Wide Emission Reductions (Sec.  300.7)
    A number of comments addressed entity-wide reductions, including 
the requirement for entity-wide assessments of emission reductions by 
large emitters, the simplified requirements proposed for small 
emitters, the procedures for third party emission reductions (offsets), 
and adjusting for year-to-year increases in net emissions. After full 
consideration of these comments, DOE has made changes to its original 
proposal.
    DOE proposed to allow the reporting of third party emissions 
reductions, referred to as offsets, because it would encourage large 
emitters to actively support emission reductions by non-reporting 
entities, especially small emitters. Comments were received both in 
support of and in opposition to DOE's proposal. Some advocated that DOE 
permit reporting entities to register the ``project-based'' emission 
reductions achieved by third parties, without requiring those third 
parties to meet the requirements of reporting directly to the program. 
Others felt that offset reductions, especially if based on individual 
projects, should meet ``additionality'' tests, to try to ensure that 
the reductions would not have occurred anyway, or at least that there 
be some assurance that the third party did not have net increasing 
emissions.
    DOE has retained the provision allowing reporters to register the 
emission reductions achieved by third parties, as long as those third 
parties meet the requirements of reporting directly to the program. DOE 
believes that this provision will provide an incentive for emitters 
with limited options for reducing their own emissions to support other 
efforts to reduce or sequester greenhouse gas emissions. The revised 
General Guidelines state that the third party achieving the offset 
reductions cannot also report directly to the program, at least not in 
the same year as the offset reductions are reported (see related 
discussion on Aggregators in II.B.4 of this preamble).
    The provision that requires entities to adjust for year-to-year 
increases in net

[[Page 15180]]

emissions has been modified and expanded to improve its clarity.
8. Calculating Emission Reductions (Sec.  300.8)
    A number of comments were received on this section. In response to 
these comments and its own further analysis, DOE has significantly 
expanded this section in order to more clearly define the necessary 
steps in the process of calculating emission reductions. It now begins 
with guidance on the selection of the appropriate calculation methods 
and the establishment of subentities for the purpose of calculating 
reductions.
    The revised General Guidelines are now clearer about how 
subentities are defined and used in the calculation of emissions 
reductions. An entity is required to define a subentity, which is a 
discrete component of the reporting entity with clearly defined 
emissions and reductions, if the entity must use more than one 
emissions reduction calculation method. This approach provides the 
flexibility needed by many entities whose reductions cannot be 
comprehensively estimated with a single calculation method, while at 
the same time creating a transparent way to track multiple types of 
reductions. Reporting entities have considerable flexibility in 
defining such subentities, but they must ensure that they are not 
overlapping and that the sum of the emissions of all subentities equals 
the total emissions reported by the entity.
    Changes have been made to the descriptions of the five calculation 
methods identified in the proposal. Because of the important 
interactions between the emission intensity and avoided emissions 
methods in the energy distribution sector, the revised General 
Guidelines provide, in section 300.8(h)(4), that this interaction must 
be accounted for by using the special calculation methods described in 
Chapter 2 of the draft Technical Guidelines, which provides detailed 
guidance on the selection and application of calculation methods. This 
technical guidance and some of the issues upon which DOE hopes to focus 
public comment are described in the separate Notice of Availability 
published in today's Federal Register.
    The name for the fifth calculation method has been changed to 
Action-Specific Method. DOE hopes that this term will help minimize 
some of the confusion that seems to accompany the use of the term 
``project''.
9. Reporting and Recordkeeping Requirements (Sec.  300.9)
    DOE received comparatively few comments on this section of the 
proposed guidelines, but DOE has included additional guidance in the 
revised General Guidelines to clarify the intent of these requirements, 
especially with respect to the types of records that must be 
maintained. Because the purpose of the 3-year record maintenance 
requirement is to permit verification of entity reports, DOE applies 
this requirement only to entities intent on registering their emission 
reductions.
    Some comments noted the absence from the proposed General 
Guidelines of any provision on protection of confidential business 
information that may be included in an entity's section 1605(b) report. 
Section 1605(b)(3) of the Energy Policy Act of 1992 provides that any 
trade secret or commercial or financial information in 1605(b) reports 
shall be protected as provided in 5 U.S.C. 552(b)(4), one of the 
exemptions from mandatory disclosure set forth in the Freedom of 
Information Act (see 42 U.S.C. 13385(b)(3)). DOE, therefore, has added 
section 300.9(e) to the revised General Guidelines to address the 
protection of confidential information submitted in entity reports. The 
new paragraph references the statute and DOE's procedures for making 
determinations about information claimed by submitters to be entitled 
to exemption from public disclosure. If an entity requests 
confidentiality for information in its report, and DOE determines that 
the information falls within 5 U.S.C. 552(b)(4), then EIA will not make 
the information publicly available in its database. Because the primary 
purpose of the 1605(b) voluntary reporting program is to enable 
reporting entities to demonstrate achieved reductions of greenhouse 
gases, DOE believes few reporters will request confidentiality. This 
has been the experience under the current guidelines.
10. Certification of Reports (Sec.  300.10)
    Public comments encouraged DOE to not require CEO certification of 
1605(b) reports, but instead to require an entity officer or manager 
with signing authority for the entity and responsibility for ensuring 
environmental compliance to provide entity certification. One reason 
given for this suggested change was the burden it would place on a CEO 
and other senior managers. Some also indicated that the CEO may not be 
the most knowledgeable officer of the organization with respect to 
greenhouse gas emissions and reductions. In response to these comments, 
which DOE finds persuasive, DOE has modified the certification 
requirement to provide that the certifying official may be the officer 
or employee of the company or organization who is responsible for 
reporting the entity's compliance with environmental regulations.
    A second concern voiced in the public comments was that reporting 
entities might not be able to certify that no double-reporting (double-
counting or duplicate reporting) occurred because events may transpire 
beyond the reporting entity's knowledge and boundaries. DOE has 
retained the proposed requirement that entities take reasonable steps 
to assure that no double-reporting has occurred. For example, 
communicating with other companies or organizations that share 
financial or operational control of the facilities covered by an 
entity's report regarding the need to avoid double-reporting would be 
considered a reasonable step.
    DOE has revised section 300.10 to include more detailed 
certification requirements for entities that request to have their 
emissions reductions registered. DOE believes the more specific 
certification statement requirements will enhance the reliability of 
reported reductions.
11. Independent Verification (Sec.  300.11)
    Public comments generally supported DOE's proposal of optional, 
rather than mandatory, independent verification. In response to these 
comments and as a result of DOE's further consideration of this issue, 
DOE has substantially revised and expanded the guidance on independent 
verification to ensure that the revised General Guidelines contain 
sufficient guidance for full implementation of these requirements by 
EIA. Because of the terminology used by national standards 
organizations, DOE has revised the verification text to clarify that 
the independent verifier would ``attest'' to the accuracy and 
reliability of reports as established by professional standards. DOE 
also recognizes that independent ``verifiers'' cannot ensure a priori 
that reporting entities will keep verifiable records for at least three 
years. They can only attest to whether the current records, if kept for 
three years, would allow for verification. The reporting entity must 
certify it will keep verifiable records for at least three years.
12. Acceptance of Reports and Registration of Entity Emission 
Reductions (Sec.  300.12)
    DOE received few substantive comments on this section of the 
proposed General Guidelines, but DOE has made some changes to more 
clearly

[[Page 15181]]

specify the procedures EIA should follow in reviewing and accepting or 
rejecting reports.
13. Incorporation by Reference (Sec.  300.13)
    Although the rules of the Director of the Federal Register require 
incorporation by reference of the draft Technical Guidelines in these 
interim final General Guidelines, DOE plans to issue final General 
Guidelines that incorporate the final Technical Guidelines before the 
effective date of the interim final General Guidelines. If necessary, 
DOE will amend the effective date of the interim final General 
Guidelines in order to provide adequate time to fully consider all 
comments and issue final General and Technical Guidelines.

III. Regulatory Review and Procedural Requirements

A. Review Under Executive Order 12866

    Today's action has been determined to be ``a significant regulatory 
action'' under Executive Order 12866, ``Regulatory Planning and 
Review'' (58 FR 51735, October 4, 1993). Accordingly, this action was 
subject to review under that Executive Order by the Office of 
Information and Regulatory Affairs of the Office of Management and 
Budget (OMB).
    Because of new requirements associated with the revised General 
Guidelines and the Technical Guidelines, it is anticipated that the 
costs for participants to report and register reductions are likely to 
increase. The anticipated benefits of the new requirements include 
enhanced data quality associated with reported and registered 
reductions. The magnitude of these effects has not been assessed.

B. Review Under the Regulatory Flexibility Act

    The Regulatory Flexibility Act (5 U.S.C. 601 et seq.) requires 
preparation of an initial regulatory flexibility analysis for any rule 
that by law must be proposed for public comment, unless the agency 
certifies that the rule, if promulgated, will not have a significant 
economic impact on a substantial number of small entities. As required 
by Executive Order 13272, ``Proper Consideration of Small Entities in 
Agency Rulemaking'' (67 FR 53461, August 16, 2002), DOE published 
procedures and policies to ensure that the potential impacts of its 
draft rules on small entities are properly considered during the 
rulemaking process (68 FR 7990, February 19, 2003), and has made them 
available on the Office of General Counsel's Web site: http://www.gc.doe.gov
.

    DOE has reviewed today's revised General Guidelines for the 
Voluntary Greenhouse Gas Reporting Program under the provisions of the 
Regulatory Flexibility Act and the procedures and policies published on 
February 19, 2003. The Guidelines establish procedures and guidance for 
the accurate voluntary reporting of information on greenhouse gas 
emissions and reductions. The Guidelines are voluntary, and the Agency 
anticipates that the small entities will weigh the benefits and costs 
when deciding to participate. On the basis of the foregoing, DOE 
certifies that these Guidelines will not have a significant economic 
impact on a substantial number of small entities. Accordingly, DOE has 
not prepared a regulatory flexibility analysis for this rulemaking.

C. Review Under the Paperwork Reduction Act

    EIA previously obtained Paperwork Reduction Act clearance by the 
Office of Management and Budget (OMB) for forms used in the current 
Voluntary Reporting of Greenhouse Gases program (OMB Control No. 1905-
0194). EIA is preparing new forms and associated instructions to 
implement the revised guidelines for the program, and it will publish a 
separate notice in the Federal Register requesting public comment on 
the proposed collection of information in accordance with 44 U.S.C. 
3506 (c)(2)(A). After considering the public comments, EIA will submit 
the new forms, instructions, and related guidelines to OMB for approval 
pursuant to 44 U.S.C. 3507 (a)(1).

D. Review Under the National Environmental Policy Act

    DOE has concluded that these revised General Guidelines fall into a 
class of actions that will not individually or cumulatively have a 
significant impact on the human environment, as determined by DOE's 
regulations implementing the National Environmental Policy Act of 1969 
(42 U.S.C. 4321 et seq.). This action deals with the procedures and 
guidance for entities that wish to voluntarily report their greenhouse 
gas emissions and their reduction and sequestration of such emissions 
to EIA. Because the Guidelines relate to agency procedures, the 
Guidelines are covered under the Categorical Exclusion in paragraph A6 
to subpart D, 10 CFR part 1021. Accordingly, neither an environmental 
assessment nor an environmental impact statement is required.

E. Review Under Executive Order 13132

    Executive Order 13132, ``Federalism'' (64 FR 43255, August 4, 1999) 
imposes certain requirements on agencies formulating and implementing 
policies or regulations that preempt State law or that have federalism 
implications. Agencies are required to examine the constitutional and 
statutory authority supporting any action that would limit the 
policymaking discretion of the States and carefully assess the 
necessity for such actions. The Executive Order also requires agencies 
to have an accountable process to ensure meaningful and timely input by 
State and local officials in the development of regulatory policies 
that have federalism implications. On March 14, 2000, DOE published a 
statement of policy describing the intergovernmental consultation 
process it will follow in the development of such regulations (65 FR 
13735). DOE has examined today's action and has determined that it does 
not preempt State law and does not have a substantial direct effect on 
the States, on the relationship between the national government and the 
States, or on the distribution of power and responsibilities among the 
various levels of government. No further action is required by 
Executive Order 13132.

F. Review Under the Treasury and General Government Appropriations Act, 
2001

    The Treasury and General Government Appropriations Act, 2001 (44 
U.S.C. 3516, note) provides for agencies to review most disseminations 
of information to the public under guidelines established by each 
agency pursuant to general guidelines issued by OMB. OMB's guidelines 
were published at 67 FR 8452 (February 22, 2002), and DOE's guidelines 
were published at 67 FR 62446 (October 7, 2002). DOE has reviewed 
today's notice under the OMB and DOE guidelines and has concluded that 
it is consistent with applicable policies in those guidelines.

G. Review Under Executive Order 12988

    With respect to the review of existing regulations and the 
promulgation of new regulations, section 3(a) of Executive Order 12988, 
``Civil Justice Reform'' (61 FR 4729, February 7, 1996), imposes on 
Federal agencies the general duty to adhere to the following 
requirements: (1) Eliminate drafting errors and ambiguity; (2) write 
regulations to minimize litigation; and (3) provide a clear legal 
standard for affected conduct rather than a general standard and 
promote simplification and burden reduction. Section 3(b) of

[[Page 15182]]

Executive Order 12988 specifically requires that Executive agencies 
make every reasonable effort to ensure that the regulation: (1) Clearly 
specifies the preemptive effect, if any; (2) clearly specifies any 
effect on existing Federal law or regulation; (3) provides a clear 
legal standard for affected conduct while promoting simplification and 
burden reduction; (4) specifies the retroactive effect, if any; (5) 
adequately defines key terms; and (6) addresses other important issues 
affecting clarity and general draftsmanship under any guidelines issued 
by the Attorney General. Section 3(c) of Executive Order 12988 requires 
Executive agencies to review regulations in light of applicable 
standards in section 3(a) and section 3(b) to determine whether they 
are met or it is unreasonable to meet one or more of them. DOE has 
completed the required review and determined that, to the extent 
permitted by law, these revised General Guidelines meet the relevant 
standards of Executive Order 12988.

H. Review Under the Unfunded Mandates Reform Act of 1995

    Title II of the Unfunded Mandates Reform Act of 1995 (Pub. L. 104-
4) requires each Federal agency to assess the effects of a Federal 
regulatory action on state, local, and tribal governments, and the 
private sector. The Department has determined that today's action does 
not impose a Federal mandate on state, local or tribal governments or 
on the private sector.

I. Review Under the Treasury and General Government Appropriations Act, 
1999

    Section 654 of the Treasury and General Government Appropriations 
Act, 1999 (Pub. L. 105-277) requires Federal agencies to issue a Family 
Policymaking Assessment for any rule that may affect family well-being. 
These revised General Guidelines would not have any impact on the 
autonomy or integrity of the family as an institution. Accordingly, DOE 
has concluded that it is not necessary to prepare a Family Policymaking 
Assessment.

J. Review Under Executive Order 13211

    Executive Order 13211, ``Actions Concerning Regulations That 
Significantly Affect Energy Supply, Distribution, or Use'' (66 FR 
28355, May 22, 2001) requires Federal agencies to prepare and submit to 
the OMB, a Statement of Energy Effects for any proposed significant 
energy action. A ``significant energy action'' is defined as any action 
by an agency that promulgated or is expected to lead to promulgation of 
a final rule, and that: (1) Is a significant regulatory action under 
Executive Order 12866, or any successor order; and (2) is likely to 
have a significant adverse effect on the supply, distribution, or use 
of energy, or (3) is designated by the Administrator of OIRA as a 
significant energy action. For any proposed significant energy action, 
the agency must give a detailed statement of any adverse effects on 
energy supply, distribution, or use should the proposal be implemented, 
and of reasonable alternatives to the action and their expected 
benefits on energy supply, distribution, and use. Today's regulatory 
action would not have a significant adverse effect on the supply, 
distribution, or use of energy and is therefore not a significant 
energy action. Accordingly, DOE has not prepared a Statement of Energy 
Effects.

K. Congressional Review

    As required by 5 U.S.C. 801, DOE will report to Congress the 
promulgation of this rule prior to its effective date. The report will 
state that it has been determined that the rule is not a ``major rule'' 
as defined by 5 U.S.C. 804(2).

List of Subjects in 10 CFR Part 300

    Administrative practice and procedure, Energy, Gases, Incorporation 
by reference, Reporting and recordkeeping requirements.

    Issued in Washington, DC, on March 16, 2005.
Karen A. Harbert,
Assistant Secretary for Policy and International Affairs.

0
For the reasons set forth in the preamble, DOE amends Chapter II of 
Title 10 of the Code of Federal Regulations by adding a new Subchapter 
B consisting of part 300 to read as follows:

Subchapter B--Climate Change

PART 300--VOLUNTARY GREENHOUSE GAS REPORTING PROGRAM: GENERAL 
GUIDELINES

Sec.
300.1 General.
300.2 Definitions.
300.3 Guidance for defining and naming the reporting entity.
300.4 Selecting organizational boundaries for registering.
300.5 Submission of an entity statement.
300.6 Emissions inventories.
300.7 Net emission reductions.
300.8 Calculating emission reductions.
300.9 Reporting and recordkeeping requirements.
300.10 Certification of reports.
300.11 Independent verification.
300.12 Acceptance of reports and registration of entity emission 
reductions.
300.13 Incorporation by reference.

    Authority: 42 U.S.C. 7101, et seq., and 42 U.S.C. 13385(b).


Sec.  300.1  General.

    (a) Purpose. This part and the Technical Guidelines referenced in 
paragraph (c) of this section govern the Voluntary Reporting of 
Greenhouse Gases Program authorized by section 1605(b) of the Energy 
Policy Act of 1992 (42 U.S.C. 13385(b)). The purpose of the Guidelines 
is to establish the procedures and requirements for filing voluntary 
reports, and to encourage corporations, government agencies, non-profit 
organizations, households and other private and public entities to 
submit annual reports of their greenhouse gas emissions, emission 
reductions, and sequestration activities that are complete, reliable 
and consistent. Over time, it is anticipated that these reports will 
provide a reliable record of the contributions reporting entities have 
made toward reducing their greenhouse gas emissions.
    (b) Registration option. An entity may request to have its emission 
reductions registered under Sec.  300.12(b) of this part if it complies 
with all of the requirements of this part, including the entity-wide 
reporting standards set forth in Sec. Sec.  300.6 and 300.7. The 
requirements for registration, as distinguished from other reporting, 
are clearly stated in the provisions of these General Guidelines.
    (c) Technical Guidelines. Further guidance on the interpretation 
and application of these General Guidelines is provided in the Draft 
Technical Guidelines for the Voluntary Reporting of Greenhouse Gases 
Program (hereafter ``Draft Technical Guidelines'' (incorporated by 
reference, see Sec.  300.13).
    (d) Forms. Annual reports of greenhouse gas emissions, emission 
reductions, and sequestration must be made on forms or software that 
are available from the Energy Information Administration of the 
Department of Energy (EIA).
    (e) Status of reports under previous Guidelines. EIA continues to 
maintain in its Voluntary Reporting of Greenhouse Gases database all 
reports received pursuant to DOE's October 1994 Guidelines. Those 
Guidelines are available from the EIA at http://www.eia.doe.gov/oiaf/1605/guidelns.html
.

    (f) Periodic review and updating of General and Technical 
Guidelines. DOE intends periodically to review the General Guidelines 
and the Technical

[[Page 15183]]

Guidelines to determine whether any changes are warranted; DOE 
anticipates these reviews will occur approximately once every three 
years. These reviews will consider any new developments in climate 
science or policy, the participation rates of large and small emitters 
in the 1605(b) program, the general quality of the data submitted by 
different participants, and any changes to other emissions reporting 
protocols. Possible changes could include, but are not limited to:
    (1) The addition of greenhouse gases that have been demonstrated to 
have significant, quantifiable climate forcing effects when released to 
the atmosphere in significant quantities;
    (2) Changes to the minimum, quantity-weighted quality rating for 
emission inventories;
    (3) Modifications to the benchmarks or emission conversion factors 
used to calculate avoided and indirect emissions; and
    (4) Changes in the minimum requirements for registered emission 
reductions.


Sec.  300.2  Definitions.

    This section provides definitions for commonly used terms in this 
part.
    Activity means any single category of economic production or 
consumption that produces measurable emissions of greenhouse gases or 
sequestration, the annual changes of which can be assessed generally by 
using a single calculation method.
    Aggregator means an entity that reports to the 1605(b) program on 
behalf of non-reporting third parties, usually small emitters.
    Avoided emissions means the emissions displaced by increases in the 
generation and sale of electricity, steam, hot water or chilled water 
produced from energy sources that emit fewer greenhouse gases per unit 
than other competing sources of these forms of distributed energy.
    Base period means a period of 1-4 years used to derive the average 
annual base emissions, emissions intensity or other values from which 
emission reductions are calculated.
    Base value means the value from which emission reductions are 
calculated for an entity or subentity. The value may be annual 
emissions, emissions intensity, kilowatt-hours generated, or other 
value specified in the 1605(b) guidelines. It is usually derived from 
actual emissions and/or activity data derived from the Base Period.
    Biogenic emissions mean emissions that are naturally occurring and 
are not significantly affected by human actions or activity.
    Carbon stocks are the quantity of carbon stored in biological and 
physical systems including: trees, plants, wood products and other 
terrestrial biosphere sinks, soils, oceans, sedimentary and geological 
sinks, and the atmosphere.
    De minimis emissions means emissions from one or more sources and 
of one or more greenhouse gases that, in aggregate, are less than or 
equal to 3 percent of the total annual carbon dioxide (CO2) 
equivalent emissions of a reporting entity.
    Department or DOE means the U. S. Department of Energy.
    Direct emissions means greenhouse gas emissions resulting from 
stationary or mobile sources within the organizational boundary of an 
entity, including but not limited to emissions resulting from 
combustion of fuels, process emissions, and fugitive emissions.
    EIA means the Energy Information Administration within the U.S. 
Department of Energy.
    Emissions mean direct release of greenhouse gases to the atmosphere 
from any anthropogenic (human induced) source and certain indirect 
emissions (releases) specified in this part.
    Emissions intensity means emissions per unit of output, where 
output is defined as the quantity of physical output, or a non-physical 
indicator of an entity's or subentity's productive activity.
    Entity or reporting entity means the whole or part of any business, 
institution, organization or household that:
    (1) Is recognized as an entity under any U.S. Federal, State or 
local law that applies to it;
    (2) Is located, at least in part, in the United States; and
    (3) Whose operations affect U.S. emissions of greenhouse gases.
    First reduction year means the first year for which an entity 
intends to register emission reductions; it is the year that 
immediately follows the start year.
    Fugitive emissions means uncontrolled releases to the atmosphere of 
greenhouse gases from the processing, transmission, and/or 
transportation of fossil fuels or other materials, such as HFC leaks 
from refrigeration, SF6 from electrical power distributors, and methane 
from solid waste landfills, among others, that are not emitted via an 
exhaust pipe(s) or stack(s).
    Greenhouse gases means:
    (1) Carbon dioxide (CO2)
    (2) Methane (CH4)
    (3) Nitrous oxide (N2O)
    (4) Hydrofluorocarbons (HFCs)
    (5) Perfluorocarbons (PFCs)
    (6) Sulfur Hexafluoride (SF6)
    (7) Other gases or particles that have been demonstrated to have 
significant, quantifiable climate forcing effects when released to the 
atmosphere in significant quantities and for which DOE has established 
or approved methods for estimating emissions and reductions (Sec.  
300.1(f)) describes plans for periodically considering the addition of 
other gases or particles to this list).
    Indirect emissions means greenhouse gas emissions from stationary 
or mobile sources outside the organizational boundary of an entity, 
including but not limited to the generation of electricity, steam and 
hot/chilled water that are the result of an entity's energy use or 
other activities.
    Net emission reductions means the sum of all annual changes in 
emissions, avoided emissions and sequestration of the greenhouse gases 
specifically identified in Sec.  300.6(f), and determined to be in 
conformance with Sec. Sec.  300.7 and 300.8 of this part.
    Offset means an emission reduction that meets the requirements of 
this part, but is achieved by a party other than the reporting entity 
and has not otherwise been reported under this program.
    Reporting Year means the year that is the subject of a report to 
DOE.
    Sequestration means the removal of atmospheric CO2 
(carbon dioxide), either through biologic processes or physical 
processes, including capture, long-term separation, isolation, or 
removal of greenhouse gases from the atmosphere, such as through 
cropping practices, forest and forest products management or injection 
into an underground reservoir.
    Simplified Emission Inventory Tool (SEIT) is a computer-based 
method, to be developed and made readily accessible by EIA, for 
translating common physical indicators into an estimate of greenhouse 
gas emissions.
    Sink means an identifiable discrete location, set of locations, or 
area in which carbon dioxide (CO2) or some other greenhouse 
gas is sequestered.
    Source means any process or activity that releases a greenhouse 
gas.
    Start year means the year upon which the initial entity statement 
is based. For large emitters, it is the first year for which the entity 
submits a complete emissions inventory under this part. For all 
entities, it is the year immediately preceding the first year for which 
the entity intends to register reductions and the last year of the 
initial base period(s).
    Subentity means a component of any entity, such as a discrete 
business line,

[[Page 15184]]

facility, plant, vehicle fleet, or energy using system, which has 
associated with it emissions of greenhouse gases that can be 
distinguished from the emissions of all other components of the same 
entity; and, when summed with the emissions of all other subentities, 
equal the entity's total emissions.
    Total emissions means the total annual contribution of the 
greenhouse gases specifically identified in Sec.  300.6(f) to the 
atmosphere by an entity, including both direct and indirect entity-wide 
emissions.
    United States or U.S. means the 50 States, the District of 
Columbia, the Commonwealth of Puerto Rico, and the Commonwealth of the 
Northern Mariana Islands, Guam, American Samoa, and any other territory 
of the United States.


Sec.  300.3  Guidance for defining and naming the reporting entity.

    (a) A reporting entity must be composed of one or more legally 
distinct businesses, institutions, organizations or households that are 
located, at least in part, in the United States and whose operations 
affect U.S. emissions of greenhouse gases. For the purposes of this 
program, a legally distinct entity is any holding company, corporation, 
subsidiary, partnership, joint venture, business, operating entity, 
government, government agency, institution, organization or household 
that is treated as a distinct entity under an existing U.S. Federal, 
state or local law. Businesses may be defined by a certificate of 
incorporation or corporate charters, Federal tax identification 
numbers, or other level of organization recognized by specific laws. 
Similarly, public or private institutions and organizations can define 
their scope by referencing their charter, tax identification, or other 
legal basis.
    (b) Entities that intend to register reductions are strongly 
encouraged to define themselves at the highest level of aggregation. To 
achieve this objective, DOE suggests the use of a corporate-level 
definition of the entity, based on filings with the Securities and 
Exchange Commission, or comparable institutional charters. While 
reporting at the highest level of aggregation is encouraged, it is 
recognized that certain businesses and institutions may conclude that 
reporting at some lower level is desirable. However, once an entity has 
determined the level of corporate or institutional management at which 
it will report (e.g., the holding company, subsidiary, regulated 
stationary source, state government, agency, etc.), the entity must 
include all elements of the organization encompassed by that management 
level and exclude any organizations that are managed separately. For 
example, if two subsidiaries of a parent company are to be covered by a 
single report, then all subsidiaries of that parent company must also 
be included. Similarly, if a company decides to report on the U.S. and 
Canadian subsidiaries of its North American operations unit, it must 
also report on any other subsidiaries of its North American unit, such 
as a Mexican subsidiary.
    (c) A name for the defined entity must be specified. For entities 
that intend to register reductions, this should be the name commonly 
used to represent the activities being reported, as long as it is not 
also used to refer to substantial activities not covered by the 
entity's reports. While DOE believes entities should be given 
considerable flexibility in defining themselves at an appropriate level 
of aggregation, it is essential that the name assigned to the reporting 
entity correspond closely to the scope of the operations and emissions 
covered by its report. If, for example, an individual plant or 
operating unit is reporting as an entity, it should be given a name 
that corresponds to the specific plant or unit, and not to the 
responsible subsidiary or corporate entity. In order to distinguish 
parent company from its subsidiaries, the name of the parent company 
generally should not be incorporated into the name of the reporting 
subsidiary, but if it is, the name of the parent company usually should 
be secondary.
    (d) An entity that does not intend to register reductions must 
report the legal basis for their entity and must specify a name for 
reporting purposes.


Sec.  300.4  Selecting organizational boundaries for registering.

    (a) An entity that intends to register its entity-wide emissions 
reductions must determine, document, and maintain its organizational 
boundary for accounting and reporting purposes.
    (b) Each such entity must disclose in its entity statement the 
approach used to establish its organizational boundaries, which should 
be consistent with the following guidelines:
    (1) In general, entities should use financial control as the 
primary basis for determining their organizational boundaries, with 
financial control meaning the ability to direct the financial and 
operating policies of the entity with a view to gaining economic or 
other benefits from its activities. This approach should ensure that 
all sources, including subsidiaries, that are wholly or largely owned 
by the entity are covered by its reports.
    (2) Entities may establish organizational boundaries using 
approaches other than financial control, such as equity share or 
operational control, but must disclose how the use of these other 
approaches result in organizational boundaries that differ from those 
resulting from using the financial control approach.
    (3) Emissions from facilities or vehicles that are partially owned 
or leased, or not directly controlled or managed by the entity, may be 
included at the entity's discretion, provided that the entity has taken 
reasonable steps to assure that doing so does not result in the double 
counting of emissions, sequestration or emission reductions.
    (4) If the scope of a defined entity extends beyond the United 
States, the reporting entity should use the same approach to 
determining its organizational boundaries in the U.S. and outside the 
U.S.


Sec.  300.5  Submission of an entity statement.

    (a) Determining the type of reporting entity. The entity statement 
requirements vary by type of entity. For the purposes of these 
guidelines, there are three types of entities:
    (1) Large emitters that intend to register emission reductions;
    (2) Small emitters that intend to register emission reductions; and
    (3) Emitters that intend to report, but not register emission 
reductions.
    (b) Choosing a start year. Entities that intend to register 
reductions must first choose a start year. The first entity statement 
describes the make-up, operations and boundaries of the entity, as they 
existed in the start year. For a large emitter, the start year is the 
first year for which the entity submits a complete emissions inventory 
under this part. For all entities, it is the year immediately preceding 
the first year for which the entity intends to register emission 
reductions and the last year of the initial base period(s). The 
entity's emissions in its start year or its average annual emissions 
over a period of up to four years ending in the start year determine 
whether it qualifies to begin reporting as a small emitter. For 
entities intending to register emission reductions, the start year may 
be no earlier than 2002. For entities not intending to register 
reductions, the start year may be no earlier than 1990.
    (c) Determining and maintaining large or small emitter reporting 
status. (1) Any entity that intends to register emission reductions can 
choose to participate as a large emitter, but only entities that have 
demonstrated that their annual emissions are less than or equal to 
10,000 metric tons of CO2

[[Page 15185]]

equivalent may participate as small emitters. To demonstrate that its 
annual emissions are less than or equal to 10,000 metric tons of 
CO2 equivalent, an entity must submit either an estimate of 
its emissions during its chosen start year or an estimate of its 
average annual emissions over a continuous period not to exceed four 
years of time ending in its chosen start year, as long as the 
operations and boundaries of the entity have not changed significantly 
during that period.
    (2) An entity must estimate its total emissions using methods 
specified in Chapter 1 of the Draft Technical Guidelines (incorporated 
by reference, see Sec.  300.13) or by using the Simplified Emission 
Inventory Tool (SEIT) provided by EIA and also discussed in Chapter 1. 
The results of this estimate must be reported to EIA. [Note that 
emission estimates developed using SEIT would have quality ratings of 
less than 3.0 and therefore would not meet the emissions inventory 
requirements of the revised Guidelines.]
    (3) After starting to report, each small emitter must annually 
certify that the emissions-related operations and boundaries of the 
entity have not changed significantly since the previous report. A new 
estimate of total emissions must be submitted after any significant 
increase in emissions, any change in the operations or boundaries of 
the small emitter, or every five years, whichever occurs first. Small 
emitters with estimated annual emissions of over 9,000 metric tons of 
CO2 equivalent should re-estimate and submit their emissions 
annually. If an entity determines that it must report as a large 
emitter, then it must continue to report as a large emitter in all 
future years in order to ensure a consistent time series of reports. 
Once a small emitter becomes a large emitter, it must begin reporting 
in conformity with the reporting requirements for large emitters.
    (d) Entity statements for large emitters intending to register 
reductions. When a large emitter intending to register emission 
reductions first reports under these guidelines, it must provide the 
following information in its entity statement:
    (1) The name to be used to identify the participating entity;
    (2) The legal basis of the named reporting entity;
    (3) The criteria used to determine:
    (i) The organizational boundaries of the reporting entity, if other 
than financial control; and
    (ii) The sources of emissions included or excluded from the 
entity's reports, such as sources excluded as de minimis emissions.
    (4) The names of any parent or holding companies the activities of 
which will not be covered comprehensively by the entity's reports;
    (5) The names of any large subsidiaries or organizational units 
covered comprehensively by the entity's reports. All subsidiaries of 
the reporting entity must be covered by the entities reports, but only 
large subsidiaries must be specifically identified in the entity 
statement;
    (6) A list of each country where operations occur, if the entity is 
including any non-U.S. operations in its report;
    (7) A description of the entity and its primary U.S. economic 
activities, such as electricity generation, product manufacturing, 
service provider or freight transport; for each country listed under 
paragraph (d)(6) of this section, reporters should describe the 
economic activity in that country.
    (8) A description of the types of emission sources or sinks to be 
covered in the entity's emission inventories, such as fossil fuel power 
plants, manufacturing facilities, commercial office buildings or heavy-
duty vehicles;
    (9) The names of other entities that substantially share the 
ownership or operational control of sources that represent a 
significant part of the reporting entity's emission inventories, and a 
certification that, to the best of the certifier's knowledge, the 
direct greenhouse gas emissions and sequestration in the entity's 
report are not included in reports filed by any of these other entities 
to the 1605(b) program; and
    (10) Identification of the start year.
    (e) Entity statements for small emitters intending to register 
reductions. When a small emitter intending to register emission 
reductions first reports under these guidelines, it must provide the 
following information in its entity statement:
    (1) The name to be used to identify the participating entity;
    (2) An identification or description of the legal basis of the 
named reporting entity;
    (3) An identification of the entity's control over the activities 
covered by the entity's reports, if other than financial control;
    (4) The names of any parent or holding companies the activities of 
which will not be covered comprehensively by the entity's reports;
    (5) An identification or description of the primary economic 
activities of the entity, such as agricultural production, forest 
management or household operation; if any of the economic activities 
covered by the entity's reports occur outside the U.S., a listing of 
each country in which such activities occur;
    (6) An identification or description of the specific activity (or 
activities) and the emissions, avoided emissions or sequestration 
covered by the entity's report, such as landfill gas recovery or forest 
sequestration;
    (7) A certification that, to the best of the certifier's knowledge, 
the direct greenhouse gas emissions and sequestration in the entity's 
report are not included in reports filed by any other entities 
reporting to the 1605(b) program; and
    (8) Identification of the start year.
    (f) Entity statements for reporters not registering reductions. 
When a participant not intending to register emission reductions first 
reports under this part, it must, at a minimum, provide the following 
information in its entity statement:
    (1) The name to be used to identify the reporting entity;
    (2) A description of the entity and its primary economic 
activities, such as electricity generation, product manufacturing, 
service provider, freight transport, agricultural production, forest 
management or household operation; if any of the economic activities 
covered by the entity's reports occur outside the United States, a 
listing of each country in which such activities occur; and
    (3) A description of the types of emission sources or sinks, such 
as fossil fuel power plants, manufacturing facilities, commercial 
office buildings or heavy-duty vehicles, covered in the entity's 
reports of emissions or emission reductions.
    (g) Changing entity statements. (1) Reporters are required to 
annually review and, if necessary, update their entity statements.
    (2) From time to time, an entity may choose to change the scope of 
activities included within the entity's reports or the level at which 
the entity wishes to report. An entity may also choose to change its 
organizational boundaries, its base period, or other elements of its 
entity statement. For example, companies buy and sell business units, 
or equity share arrangements may change. In general, DOE encourages 
changes in the scope of reporting that expand the coverage of an 
entity's report and discourages changes that reduce the coverage of 
such reports unless they are caused by divestitures or plant closures. 
Any such changes should be reported in amendments to the entity 
statement, and major changes may warrant or require changes in the base 
values used to calculate emission reductions and, in some cases, the 
entity's base periods. However, in no case should there be an

[[Page 15186]]

interruption in the annual reports of entities registering emission 
reductions. Chapter 2 of the Draft Technical Guidelines (incorporated 
by reference, see Sec.  300.13), the Emission Reduction Guidelines, 
provides more specific guidance on how such changes should be reflected 
in entity statements, reports, and emission reduction calculations.
    (h) Documenting changes in amended entity statements. A reporter's 
entity statement in subsequent reports should focus primarily on 
changes since the previous report. Specifically, the subsequent entity 
statement should report the following information:
    (1) For significant changes in the entity's scope or organizational 
boundaries, the entity should document:
    (i) The acquisition or divestiture of discrete business units, 
subsidiaries, facilities, and plants;
    (ii) The closure or opening of significant facilities;
    (iii) The transfer of economic activity to or from specific 
operations covered by the entity's reports, such as the transfer of 
operations to non-U.S. subsidiaries;
    (iv) Significant changes in land holdings (applies to entities 
reporting on greenhouse gas emissions or sequestration related to land 
use, land use change, or forestry);
    (v) Whether the entity is reporting at a higher level of 
aggregation than it did in the previous report, and if so, a listing of 
the subsidiary entities that are now aggregated under a revised 
conglomerated entity, including a listing of any non-U.S. operations to 
be added and the specific countries in which these operations are 
located; and
    (vi) Changes in its activities or operations (e.g., changes in 
output, contractual arrangements, equipment and processes, outsourcing 
or insourcing of significant activities) that are likely to have a 
significant effect on emissions, together with an explanation of how it 
believes the changes in economic activity influenced its reported 
emissions or sequestrations.


Sec.  300.6  Emissions inventories.

    (a) General. The objective of an emission inventory is to provide a 
full accounting of an entity's emissions for a particular year, 
including direct emissions of all six categories of greenhouse gases 
identified in Sec.  300.2, indirect emissions specified in paragraph 
(e) of this section, and all sequestration or other changes in carbon 
stocks. An emission inventory must be prepared in accordance with 
Chapter 1 of the Draft Technical Guidelines (incorporated by reference, 
see Sec.  300.13). An inventory does not include avoided emissions or 
any offset reductions, and is not subsequently adjusted to reflect 
future acquisitions, divestitures or other changes to the reporting 
entity. Entity-wide inventories are a prerequisite for the registration 
of emission reductions by entities with average annual emissions of 
more that 10,000 metric tons of CO2 equivalent. Entities 
that have average annual emissions of less than 10,000 metric tons of 
CO2 equivalent are eligible to register emission reductions 
associated with specific activities without also reporting an inventory 
of the total emissions.
    (b) Quality requirements for emission inventories. The Draft 
Technical Guidelines (incorporated by reference, see Sec.  300.13) 
usually identify more than one acceptable method of measuring or 
estimating greenhouse gas emissions. Each acceptable method is rated A, 
B, C or D, with A methods usually corresponding to the highest quality 
method available and D methods representing the lowest quality method 
that may be used. Each letter is assigned a numerical rating reflecting 
its relative quality, 4 for A methods, 3 for B methods, 2 for C methods 
and 1 for D methods. Entities that intend to register emission 
reductions must use emission inventory methods that result in a 
quantity-weighted average data quality rating of at least 3.0. Each 
emission source or sink that uses a distinct emissions measurement or 
estimation method must be reported separately to permit independent 
calculation of the entity's quantity-weighted quality rating.
    (c) Using estimation methods not included in the Technical 
Guidelines. A reporting entity may obtain DOE approval for the use of 
an estimation method not included in the Draft Technical Guidelines 
(incorporated by reference, see Sec.  300.13) if the method covers 
sources not described in the Draft Technical Guidelines, or if the 
proposed method provides more accurate results for the entity's 
specific circumstances than the methods described in the Draft 
Technical Guidelines. If an entity wishes to propose the use of a 
method that is not described in the Draft Technical Guidelines, the 
entity must provide a written description of the method, an explanation 
of how the method is implemented (including data requirements), 
empirical evidence of the method's validity and accuracy, and a 
suggested rating for the method to DOE's Office of Policy and 
International Affairs (with a copy to EIA). DOE reserves the right to 
deny the request, or to assign its own rating to the method. By 
submitting this information, the reporter grants permission to DOE to 
incorporate the method in a future revision of the Technical 
Guidelines.
    (d) Direct emissions inventories. Direct greenhouse gas emissions 
that must be reported are the emissions resulting from stationary or 
mobile sources within the organizational boundaries of an entity, 
including but not limited to emissions resulting from combustion of 
fossil fuels, process emissions, and fugitive emissions. Process 
emissions (e.g., PFC emissions from aluminum production) must be 
reported along with fugitive emissions (e.g., leakage of greenhouse 
gases from equipment).
    (e) Inventories of indirect emissions associated with purchased 
energy. (1) To provide a clear incentive for the users of electricity 
and other forms of purchased energy to reduce demand, the indirect 
emissions from the consumption of purchased electricity, steam, and hot 
or chilled water must be included in a reporting entity's inventory as 
indirect emissions. To avoid double counting among entities, the 
reporting entity must report all indirect emissions separately from its 
direct emissions. Reporting entities should use the methods for 
quantifying indirect emissions specified in the Draft Technical 
Guidelines (incorporated by reference, see Sec.  300.13).
    (2) Reporting entities may choose to report other forms of indirect 
emissions, such as emissions associated with employee commuting, 
materials consumed or products produced, although such other indirect 
emissions are not to be included in the entity's emission inventory and 
may not be the basis for registered emission reductions. All such 
reports of other forms of indirect emissions must be distinct from 
reports of indirect emissions associated with purchased energy and must 
be based on emission measurement or estimation methods identified in 
the Draft Technical Guidelines (incorporated by reference, see Sec.  
300.13) or approved by DOE.
    (f) Entity-level inventories of changes in terrestrial carbon 
stocks. Annual changes in managed terrestrial carbon stocks should be 
comprehensively assessed and reported across the entity and the net 
emissions resulting from such changes included in the entity's 
emissions inventory. Entities should use the methods for estimating 
changes in managed terrestrial carbon stocks specified in the Draft 
Technical Guidelines (incorporated by reference, see Sec.  300.13).
    (g) Treatment of de minimis emissions and sequestration. (1) 
Although the goal

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of the entity-wide reporting requirement is to provide an accurate and 
comprehensive estimate of total emissions, there may be small emissions 
from certain sources that are unduly costly or otherwise difficult to 
measure or reliably estimate annually. A reporting entity may exclude 
particular sources of emissions or sequestration if the total 
quantities excluded represent less than or equal to 3 percent of the 
total annual CO2 equivalent emissions of the entity. The 
entity must identify the types of emissions excluded and provide an 
estimate of the annual quantity of such emissions using methods 
specified in the Draft Technical Guidelines (incorporated by reference, 
see Sec.  300.13) or by the Simplified Emissions Inventory Tool (SEIT). 
The results of this estimate of the entity's total annual emissions 
must be reported to DOE together with the entity's initial entity 
statement.
    (2) After starting to report, each entity that excludes from its 
annual reports any de minimis emissions must re-estimate the quantity 
of excluded emissions after any significant increase in such emissions, 
or every five years, whichever occurs sooner.
    (h) Separate reporting of domestic and international emissions. Any 
non-U.S. emissions included in an entity's emission inventory must be 
separately reported, by country of origin, and clearly distinguished 
from emissions originating in the U.S.
    (i) Covered gases. Entity-wide emissions inventories must include 
all emissions of the named greenhouse gases listed in Sec.  300.2 or 
subsequently included in this list through the process described in 
Sec.  300.1(f). Entities may report other greenhouse gases, but such 
gases must be reported separately and emission reductions, if any, 
associated with such other gases are not eligible for registration.
    (j) Units for reporting. Emissions and sequestration should be 
reported in terms of the mass (not volume) of each gas, using metric 
units (e.g., metric tons of methane). Entity-wide and subentity 
summations of emissions and reductions from multiple sources must be 
converted into CO2 equivalent units using the global warming 
potentials for each gas in the International Panel on Climate Change's 
Third Assessment (or most recent) Report, as specified in the Draft 
Technical Guidelines (incorporated by reference, see Sec.  300.13). 
Entities should specify the units used (e.g., kilograms, or metric 
tons). Reporting entities may need to use the standard conversion 
factors specified in the Draft Technical Guidelines to convert existing 
data into the common units required in the entity-level report. 
Emissions from the consumption of purchased electricity must be 
reported by region (from the list provided by DOE in the Draft 
Technical Guidelines) or country, if outside the United States. 
Consumption of purchased steam or chilled/hot water must be reported 
according to the type of system and fuel used to generate it (from the 
list provided by DOE in the Draft Technical Guidelines). Entities must 
convert purchased energy to CO2 equivalents using the 
conversion factors in the Draft Technical Guidelines. Entities should 
also provide the physical quantities of each type of purchased energy 
covered by their reports.


Sec.  300.7  Net emission reductions.

    (a) Entities that intend to register emission reductions achieved 
after 2002 must comply with the requirements of this section. Entities 
may voluntarily follow these procedures if they want to demonstrate the 
achievement of net, entity-wide reductions prior to 2003. Only large 
emitters must follow the requirements of paragraph (b) of this section, 
but small emitters may do so voluntarily. Only entities that qualify as 
small emitters may use the special procedures in paragraph (c) of this 
section. Entities seeking to register emission reductions achieved by 
third parties (offsets) must certify that these emission reductions 
were calculated in a manner consistent with the requirements of 
paragraph (d) of this section and use the emission reduction 
calculation methods identified in Sec.  300.8. All entities seeking to 
register emission reductions must comply with the requirements of 
paragraph (e) of this section. Only reductions in the emissions of the 
named greenhouse gases listed in Sec.  300.2 are eligible for 
registration.
    (b) Assessing net emission reductions for large emitters. (1) 
Entity-wide reporting is a prerequisite for registering emission 
reductions by entities with average annual emissions more than 10,000 
metric tons of CO2 equivalent. Net annual entity-wide 
emission reductions must be based, to the maximum extent practicable, 
on a full assessment and sum total of all changes in an entity's 
emissions, avoided emissions and sequestration relative to the entity's 
established base period(s). This assessment must include all entity 
emissions, including the emissions associated with any non-U.S. 
operations covered by the entity statement. It must include the annual 
changes in the total emissions of the entity or, alternatively, the 
total emissions of each of the subentities identified in its entity 
statement. All changes in emissions, avoided emissions, and 
sequestration must be determined using methods that are consistent with 
the guidelines described in Sec.  300.8.
    (2) If it is not practicable to assess the changes in net emissions 
resulting from certain entity activities using at least one of the 
methods described in Sec.  300.8, the reporting entity may exclude them 
from its estimate of net emission reductions. The reporting entity must 
identify as one or more distinct subentities the sources of emissions 
excluded for this reason and describe the reasons why it was not 
practicable to assess the changes that had occurred. DOE believes that 
few emission sources will be excluded for this reason, but has 
identified at least two situations where such an exclusion would be 
warranted. For example, it is likely to be impossible to assess the 
emission changes associated with a new manufacturing plant that 
produces a product for which the entity has no historical record of 
emissions or emissions intensity (emissions per unit of product 
output). However, once the new plant has been operational for a full 
year, a base period and base value(s) for the new plant could be 
established and its emission changes might be assessed in the following 
year. Until the emission changes of this new subentity could be 
assessed, it should be identified in the entity's report as a subentity 
for which no assessment of emission changes is practicable. The other 
example involves a subentity that has reduced its output below the 
levels of its base period. In such a case, the subentity could not use 
the absolute emissions method and may also be unable to identify an 
effective intensity metric or other method.
    (3) A reporting entity should also exclude from the entity-wide 
assessment of changes in emissions, avoided emissions and sequestration 
any emissions or sequestration that have been excluded from the 
entity's inventory. All de minimis or biogenic emissions excluded from 
the entity's inventory of greenhouse gas emissions should also be 
excluded from its assessments of emission changes.
    (c) Assessing emission reductions for entities with small 
emissions. (1) Entities with average annual emissions of less than or 
equal to 10,000 metric tons of CO2 equivalent are not 
required to inventory their total emissions or assess all changes in 
their emissions, avoided emissions and sequestration to qualify for 
registered reductions. These entities may register emission reductions 
that have occurred since

[[Page 15188]]

2002 and that are associated with one or more specific activities, as 
long as they:
    (i) Perform a complete assessment of the annual emissions and 
sequestration associated with each of the activities upon which they 
report, using methods that meet the same data quality requirements 
applicable to entity-wide emission inventories; and
    (ii) Determine the changes in the emissions, avoided emissions or 
sequestration associated with each of these activities.
    (2) An entity reporting as a small emitter must report on one or 
more specific activities