[Federal Register Volume 71, Number 77 (Friday, April 21, 2006)]
[Rules and Regulations]
[Pages 20784-20817]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 06-3745]



[[Page 20783]]

-----------------------------------------------------------------------

Part III





Department of Energy





-----------------------------------------------------------------------



10 CFR Part 300



Guidelines for Voluntary Greenhouse Gas Reporting; Final Rule

  Federal Register / Vol. 71, No. 77 / Friday, April 21, 2006 / Rules 
and Regulations  

[[Page 20784]]


-----------------------------------------------------------------------

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: Final rule.

-----------------------------------------------------------------------

SUMMARY: Section 1605(b) of the Energy Policy Act of 1992 directed the 
Department of Energy (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 issued interim final 
General Guidelines on March 24, 2005, and also on that date published a 
notice of availability inviting public comment on draft Technical 
Guidelines needed to fully implement the revised Voluntary Reporting of 
Greenhouse Gases Program. This notice of final rulemaking responds to 
public comments on the interim final General Guidelines and draft 
Technical Guidelines; sets forth the final General Guidelines; and 
announces the availability of the final Technical Guidelines.

DATES: Effective Date: The final General Guidelines and Technical 
Guidelines are effective June 1, 2006. The incorporation by reference 
of the Technical Guidelines is approved by the Director of the Federal 
Register as of June 1, 2006.

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: 
[email protected]

SUPPLEMENTARY INFORMATION:

Table of Contents

I. Introduction
    A. Background
    B. Process for Implementing the Guidelines
II. Overview of Major Changes Made in Response to Comments
III. Discussion of Public Comments and the Final Revised Guidelines
    A. Implementation Schedule
    B. Process for Updating or Amending the Guidelines
    C. Distinction Between Reporting Under the Program and 
Registering Reductions
    1. Reporting Under the Program
    2. Registration Requirements
    D. Entity Definitions, Boundaries and Statements
    1. Entity Definition
    2. Entity Boundaries--General
    3. Entity Boundaries--U.S. and Non-U.S. Emissions
    4. Entity Statements
    E. Large v. Small Emitters
    F. Aggregators
    G. Other Definitions
    H. Start Year and First Reduction Year
    I. Electricity Dactors and Benchmarks
    J. Inventories
    1. Requirement for Entity-Wide Inventories With a Quality Rating 
of at Least 3.0
    2. De minimis Exclusion From Entity-Wide Emission Inventories
    3. Ratings for Estimation Methods Using Default Values
    4. References to Continuous Emissions Monitoring Systems (CEMS)
    5. Citations of Protocols and Emission Factors Developed by 
Other Organizations
    6. Options for Simplifying Emission Reports
    7. Eliminate Requirements To Report Emissions From Biogenic 
Sources and To Report Certain Non-Fuel Uses of Fossil Fuels
    8. Treatment of Agriculture and Forestry
    9. Stationary Source Combustion
    10. Mobile Sources
    11. Industrial Processes
    12. Indirect Emissions
    13. Geologic Sequestration
    K. Reductions
    1. Selecting Appropriate Reduction Calculation Methods
    2. Base Periods and Base Values
    3. Enabling Reporters To Choose More Stringent Base Values
    4. Emissions Intensity
    5. Absolute Emissions
    6. Changes in Carbon Stocks
    7. Avoided Emissions
    8. Action-Specific Methods
    9. Estimating Reductions From Energy Generation and Distribution
    L. Offset Reductions
    M. Certification and Verification
    1. Certification
    2. Independent Verification
    N. Reporting and Recordkeeping
    O. Report Review and Acceptance Process
    P. Publication of General Guidelines in the Code of Federal 
Regulations
IV. 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
    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 2004 reporting 
year, 417 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

[[Page 20785]]

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 information and hear the views of 
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.
    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 published interim final revised General Guidelines on March 24, 
2005 (70 FR 15169), and, in a notice published in the Federal Register 
on the same day, made available for public comment the draft Technical 
Guidelines necessary to fully implement the revisions to the Voluntary 
Program (70 FR 15164). DOE sponsored a public workshop on these revised 
guidelines on April 26 and 27, 2005, and USDA and DOE co-sponsored 
another workshop on May 5, 2005. In response to public comments, DOE 
extended the period for comments on the revised guidelines by 30 days 
to June 22, 2005. Ultimately, DOE received over 90 written comments, 
totaling over 1000 pages. All written comments and transcripts of the 
public workshops are available on the Web and can be accessed at: 
http://www.pi.energy.gov/enhancingGHGregistry/. On September 19, 2005, 
DOE published a notice in the Federal Register delaying the effective 
date of the interim final guidelines until June 1, 2006 (70 FR 54835).
    DOE now publishes final General Guidelines and announces the 
availability of final Technical Guidelines that are incorporated by 
reference in the General Guidelines. The revised General and Technical 
Guidelines 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 guidelines remain the same as those present 
in the interim final General Guidelines:
     Enable larger emitters to register reductions if they 
provide entity-wide emissions data and can demonstrate they achieved 
entity-wide emission reductions 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.
    Based on the framework set forth by the interim final guidelines 
and the various improvements made in response to the public comments 
received, today's final revised guidelines will 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 Secretary of Energy has approved issuance of this final rule.

B. Process for Implementing the Guidelines

    The General Guidelines set forth in this notice and the Technical 
Guidelines incorporated by reference will go into effect on June 1, 
2006. In the near future, EIA intends to make available for public 
review and comment draft forms for collecting the data covered by these 
guidelines, including the Simplified Emissions Inventory Tool (SEIT) 
referenced in the guidelines. After taking into account any public 
comments it receives and complying with the requirements of the 
Paperwork Reduction Act of 1995, EIA anticipates that final forms will 
be issued before the end of 2006. In addition, EIA will be developing 
the software necessary to permit electronic reporting and the creation 
of an automated and widely accessible data base. EIA does not 
anticipate completing the necessary software until mid-2007. If time 
and resources permit, EIA may conduct cognitive testing of beta 
versions of the reporting software. Should EIA conduct such testing, 
EIA will solicit potential participants via a public notice, postings 
to its website, or some other means. According to the forms and 
software schedule currently anticipated by EIA, the revised guidelines 
will be used to govern the 2007 reporting cycle. Until then, entities 
interested in reporting under the program during the 2006 reporting 
cycle should use the existing guidelines and forms.

II. Overview of Major Changes Made in Response to Comments

    The public comments received by DOE expressed considerable support 
for the emphasis of the revised guidelines on entity-wide reporting on 
all greenhouse gas emissions, including the added requirements imposed 
on entities that are seeking to register reductions. There was also 
substantial support for DOE's efforts to enhance the quality, 
consistency and credibility of the emission inventories and reductions 
being reported. The comments, however, raised a number of concerns 
regarding the potential burdens of reporting under the revised 
guidelines, possible incompatibilities with various existing reporting 
programs or protocols, and the limitations on reporting certain types 
of emission reductions, especially those occurring outside the 
boundaries of the reporting entity. While the basic framework of the 
guidelines remains the same, DOE has made a number of changes designed 
to address these concerns, and has adopted many of the specific 
recommendations made during the comment period.

[[Page 20786]]

    To reduce the potential burdens of reporting under the revised 
guidelines, DOE's final guidelines:
     Enable entities that have their reports independently 
verified or that certify their use of higher quality inventory methods 
to file less detailed reports;
     Increase the ratings of some commonly used methods for 
estimating emissions;
     Enable reports on non-U.S. emissions to be consolidated 
regionally or globally (as long as U.S. data is kept separate); and
     Clarify the flexibility available to reporters that wish 
to avoid or minimize the complexities of accounting for changes in 
carbon stock or other provisions.
    To increase the compatibility of the revised guidelines with 
various existing reporting programs and protocols, DOE's final 
guidelines update its references to existing protocols and update the 
emission factors drawn from such protocols; provide an exception in 
section 300.5(b) for participants in EPA's Climate Leaders or DOE's 
Climate VISION who may wish to use base periods that end as early as 
2000; and attempt to increase the alignment of various definitions and 
methods with those used by other existing programs.
    To expand the opportunities for reporting offset emission 
reductions, DOE's final guidelines, among other things: (1) Add new 
action-specific methods for demand-side management programs, the 
substitution of fly ash for cement by concrete mixers, and anaerobic 
digestion of waste at agricultural facilities and wastewater treatment 
plants; (2) enable multiple reporting entities to register portions of 
the offset reductions achieved by a single other entity, as long as the 
other entity complies with all of the requirements for registration and 
has entered into an agreement with each of the reporting entities; and 
(3) permit the accelerated reporting of carbon stock increases expected 
to occur on land that is being reforested, restored and permanently 
protected.
    DOE has not adopted the recommendation of commenters who advocated 
that DOE mandate participation in the 1605(b) program because such a 
mandate is beyond the statutory authority of DOE.

III. Discussion of Public Comments and the Final Revised Guidelines

    This section of the Supplementary Information discusses the issues 
raised by the public comments on the interim final General Guidelines 
and the draft Technical Guidelines and any changes to the guidelines 
that DOE has made in response to the comments.

A. Implementation Schedule

    A few comments suggested that DOE consider a delay in the start of 
the revised program or a phased implementation of the new requirements. 
DOE does not consider either a delayed or phased implementation of the 
revised guidelines to be necessary or practical. Starting the program 
in calendar year 2007 should give most reporters sufficient time to 
prepare to meet the requirements of the new program. If individual 
reporters require additional time, they may delay their own 
participation. Entities that are unable to meet all of the requirements 
for registration may simply choose to meet only the requirements for 
reporting under the program until such time as they are prepared to 
meet all of the requirements for registration. Another available option 
would be to take more time to complete the entity's first or second 
annual reports. For example, an entity could decide to submit its 
report on 2006 emissions during 2008, rather than by the 2007 deadline 
for reports that are to be included in EIA's first public report on 
2006 emissions (likely to be issued in late 2007 or early 2008). 
Entities may submit reports on prior year emissions and emission 
reductions at any time.

B. Process for Updating or Amending the Guidelines

    DOE intends to review and, if necessary, update the guidelines 
approximately every three years, although exceptional circumstances may 
require amendment of the guidelines at other times. Modifications to 
either the General Guidelines or the Technical Guidelines will be 
subject to public notice and comment. Some commenters noted that this 
public process might be too cumbersome and time consuming for the 
adoption of routine updates to the many emission factors and protocols 
cited by the guidelines. To address this concern, DOE has modified some 
provisions of the Technical Guidelines to direct reporters to use the 
most current version of certain government-sponsored or consensus-based 
factors, methods and protocols.

C. Distinction Between Reporting Under the Program and Registering 
Reductions

    The revised guidelines set forth the requirements for all reporters 
under the 1605(b) program as well as requirements that must be met by 
only those reporters that are seeking to register emission reductions 
(see section 300.1(b) and (c) of this rule for a description of the 
requirements for reporting and registering emissions and reductions). 
More specifically, while some new requirements are imposed on all 
reporters by the revised guidelines, the requirements for entity-wide 
reports and use of high quality emission inventory and reduction 
methods are imposed only on those entities that are seeking to register 
reductions. The distinct requirements for reporting under the program 
and for registering reductions are key to achieving DOE's objective of 
enhancing the overall quality and credibility of the reductions 
documented by the program, while at the same time preserving most of 
the flexibility available to reporters under the original program 
guidelines.
    Some commenters recommended that the distinction between reporting 
under the program and registering emission reductions be eliminated, 
which would enable all reporters to receive the same level of 
recognition, regardless of whether or not they met the entity-wide 
reporting requirements. DOE believes that the elimination of this 
distinction would significantly diminish the incentive for large 
emitters to improve the overall quality of their reports by undertaking 
the more costly activities associated with emission inventories and 
entity-wide assessments of reductions, which are required for 
registration.
    In addition to objecting on policy grounds to the distinction 
between reported registered reductions and other reported reductions, 
one commenter argued that in the absence of express authorization, 
there is no legal basis in section 1605(b) for changing from a unitary 
system of reporting to a two-tier system that distinguishes between two 
types of reported emissions and reductions. Other commenters contended 
that because section 1605(b) expressly includes reductions from plant 
closings among the information that entities may report under the 
program, DOE may not exclude such reductions from the reductions that 
can be registered under the revised guidelines.
    DOE rejects the comments arguing that DOE may not distinguish among 
different types of reported emissions and reductions within EIA's 
database because there is no express authority for such differentiation 
in section 1605(b). Section 1605(b) broadly charges DOE with issuing 
guidelines, after opportunity for public comment, for the ``voluntary 
collection and reporting of information on sources of greenhouse

[[Page 20787]]

gases.'' 42 U.S.C. 13385(b)(1). Further, the guidelines must include:

Procedures for the accurate voluntary reporting of information on--
(A) greenhouse gas emissions [starting with a statutorily-prescribed 
baseline period and annually thereafter]; (B) annual reductions of 
greenhouse gas emissions and carbon fixation achieved through any 
measures, including [a list of such measures]; (C) reductions in 
greenhouse gas emissions achieved as a result of--(i) voluntary 
reductions; (ii) plant or facility closings; and (iii) State or 
Federal requirements; and (D) an aggregate calculation of greenhouse 
gas emissions by each reporting entity.

42 U.S.C. 133385(b)(1)(A)-(D) (emphasis added).
    Nothing in the statute limits the information on sources of 
greenhouse gases reported under the program to that described in 
section 1605(b)(1)(A)-(D). Rather, the information described in (A) 
through (D) is the minimum information that may be reported under DOE's 
procedures. While the text of section 1605(b) does not specifically 
address the question of whether DOE may create categories of reported 
greenhouse gas information within the EIA database, DOE's procedures 
must provide for the accurate voluntary reporting of information. One 
of the goals of registration under the final revised guidelines is to 
enhance the accuracy and reliability of greenhouse gas emissions and 
reductions information. Thus, the text of section 1605(b), read in its 
entirety, supports DOE's view that establishment of a category of 
registered emissions for emissions and reductions that meet certain 
requirements for entity-wide reporting is implicitly authorized by the 
statute.
    DOE also rejects the comment that because section 1605(b) expressly 
includes reductions from plant and facility closings among the 
information that entities may report under DOE's procedures, DOE may 
only establish categories of reported information that include 
reductions from plant and facility closings. DOE's textual analysis 
stated above in rejecting the argument that DOE may not establish a 
two-tiered reporting system applies here as well. Nothing in the 
statute limits DOE's authority to go beyond the minimum information 
categories in section 1605(b)(1)(A)-(D), and the requirement that DOE's 
procedures provide for the accurate voluntary reporting of information 
is implicit authorization for DOE to establish a system of registration 
that enhances the accuracy and reliability of information reported on 
an entity-wide basis.
    Several commenters suggested that the revised program guidelines 
should include a summary of the guidelines' requirements for reporting 
and for registering emissions and reductions. In response, DOE is 
providing a summary of the requirements in section 300.1 of today's 
General Guidelines. The requirements for reporting and registering 
emissions and reductions are described in the following sections of 
this Supplementary Information.
1. Reporting Under the Program
    Each reporter under the program must be an ``entity,'' as defined 
in the guidelines and must file an entity statement. Reporters not 
intending to register emission reductions must, at minimum, meet the 
entity statement, record keeping, and certification requirements set 
forth in sections 300.5(f), 300.9, and 300.10, respectively. They may 
choose to report their emissions and/or their emission reductions on an 
entity-wide basis or for selected elements of their entities, selected 
gases or selected sources. Emission inventories for any year back to 
1990 may be reported, and emission reductions may be reported for any 
year back to 1991, relative to base periods of one to four years, 
ending no earlier than 1990. All reporting entities, whether or not 
they intend to register reductions, must use the emission inventory and 
emission reduction calculation methods specified in the Technical 
Guidelines. For example, as discussed in section III.K.8. of this 
Supplementary Information, the guidelines now provide for the reporting 
of the emissions and reductions associated with chlorofluorocarbons 
(CFCs), although such reductions are not eligible for registration. In 
the future, DOE may revise the guidelines to add methods that permit 
the reporting and, in some cases, the registration of reductions 
associated with other gases. While entities that do not intend to 
register reductions need not ensure that their emission inventories 
achieve a weighted average quality rating of 3.0 or higher (a 
requirement that is discussed in section III.J.1 below), they must 
calculate and report the weighted average quality rating of any 
emission inventories they do report. In most situations, entities not 
registering reductions may choose an emissions intensity, absolute 
emissions or generic action-specific method to calculate the emission 
reductions they report. However, in those situations where a special 
calculation method is provided, such as sequestration, the sale of 
distributed energy, or an action-specific method, the entity must use 
the appropriate method provided in the Technical Guidelines. Entities 
not intending to register reductions may also report (but not register) 
offset reductions achieved by third parties outside their boundaries as 
long as such reductions are reported separately and calculated in 
accordance with methods specified in the guidelines. The third party 
that achieved these reductions must agree to their being reported as 
offset reductions, and must also meet all of the other minimum 
requirements of reporting under the program, including the provision of 
an entity statement, the maintenance of records, and necessary 
certifications as stipulated in Sec. Sec.  300.9 and 300.10.
2. Registration Requirements
    Entities that intend to register reductions must meet a number of 
additional requirements, although these requirements differ depending 
on whether the entity is a large or small emitter.
    To be eligible for registration, a reduction must have been 
calculated using a base period ending no later than 2002, unless the 
entity has committed under the Climate Leaders or Climate VISION 
programs to reduce its entity-wide emissions relative to a base period 
that ends earlier than 2002, but no earlier than 2000.
    In order to register reductions, large emitters must submit entity-
wide emission inventories that meet or exceed the minimum quality 
requirements specified in Sec.  300.6(b) and the Technical Guidelines. 
Any registered reductions must be based on entity-wide assessments of 
annual changes in net emissions, determined in accordance with 
Sec. Sec.  300.7 and 300.8 and the Technical Guidelines. They must also 
meet the entity statement and certification requirements specified in 
Sec. Sec.  300.5 and 300.10.
    Small emitters must also submit emission inventories that meet 
minimum quality requirements and base their registered reductions on 
assessments of annual changes in net emissions, but small emitters may 
restrict these inventories and assessments to a single type of 
activity, such as forest management, building operations or 
agricultural tillage, rather than covering all of their entity's 
emissions. Small emitters must also submit entity statements, certify 
the accuracy of their reports and meet other requirements of reporting 
and registering.
    Both large emitters and small emitters that have met the 
requirements for registering their own reductions may also register 
offset reductions achieved by other entities, as long as they have an 
agreement with the third party to do

[[Page 20788]]

so and these third parties have met all of the requirements for 
registration. Small emitters that serve as aggregators may register 
offset reductions without reporting on their own emissions. Entities 
that report offset reductions achieved by very small emitters (those 
typically emitting less than 500 metric tons of CO2 
equivalent emissions per year) as a result of demand management or 
other programs that reduce greenhouse gas emissions, may register such 
reductions as long as they are calculated in accordance with the 
action-specific method identified in section 300.8(h)(5).

D. Entity Definitions, Boundaries and Statements

    Most of the comments on these provisions of the interim final 
guidelines were generally supportive, although a few significant 
concerns were raised and a number of specific changes were recommended.
1. Entity Definition
    Several commenters urged DOE to require entities to report at their 
highest level of aggregation within the United States, while other 
commenters urged DOE to provide entities even more flexibility in how 
they define themselves for the purpose of reporting under the program. 
The final guidelines retain the basic approach put forward in the 
interim final General Guidelines: entities must have a legal basis and 
are encouraged--but not required--to report at their highest level of 
aggregation within the United States. If an entity chooses to report at 
a lower level of aggregation, the reporting entity must have a legal 
basis and must be defined in a way that is consistent with the 
management structure of the parent company or organization.
    Section 300.2 of the interim final rule defines ``entity or 
reporting entity'' as the whole or part of any business, institution, 
organization or household that is recognized as an entity under any 
U.S. Federal, State or local law that applies to it; is located, at 
least in part, in the United States; and whose operations affect U.S. 
emissions of greenhouse gases. Some commenters argued that the 
``legally distinct entity'' test is too inflexible and urged DOE to 
abandon the test. One stated that electricity providers may have 
different reporting options due to differences in State regulation or 
the absence of such regulation. The commenter recommended revising the 
definition to allow an entity to consist of a set of corporate business 
and other organizational units that comprise a single business 
activity, even though they may not be legally distinct. Another 
commenter stated that the definition of ``entity'' would pose a problem 
for global corporations that are legally structured by product line, 
rather than by country. A large industry association did not criticize 
the substance of DOE's definition of ``entity or reporting entity,'' 
but rather offered drafting guidance that it considered would better 
accomplish DOE's intent. It also suggested a separate definition of 
``reporting entity.''
    After considering the comments, DOE has retained the requirement 
that an entity that reports under the 1605(b) program must be 
recognized as an entity under a U.S. Federal, State or local law. In 
light of changes to the provisions for reporting non-U.S. emissions 
(discussed elsewhere in this Supplementary Information), DOE does not 
believe the definition of ``entity'' in the final guidelines will pose 
a problem for global corporations. While not necessarily agreeing with 
many of the criticisms of the interim final guideline definition of 
``entity or reporting entity,'' DOE found the suggested drafting 
improvements to be helpful and has included several of them in revised 
definitions for the terms ``entity'' and ``reporting entity.'' These 
changes include increased emphasis on the coverage of government 
bodies, agencies or other institutions, which DOE always intended to be 
encompassed by the broad definition of entity included in the 
guidelines.
2. Entity Boundaries--General
    The organizational boundaries of reporting entities largely 
determine which emissions and sources are covered by the entity's 
reports. DOE's interim final General Guidelines encourage entities to 
use financial control as the primary basis for determining the 
organizational boundaries of the reporting entity. While the interim 
guidelines encourage the use of financial control as the basis for 
setting organizational boundaries, they permit entities to use other 
methods, such as equity share or operational control, as long as they 
are explained.
    Boundary definitions are important because they determine what 
emission and emission reductions a particular reporting entity may 
assume responsibility for when reporting under the program. As a 
voluntary reporting program, however, 1605(b) boundaries do not 
determine the legal rights of reporting entities to emissions or 
emission reductions. They are used only as the basis for DOE 
recognition of any registered reductions reported under the program. 
The comments received by DOE on these provisions of the guidelines were 
generally supportive of DOE's approach, although some encouraged even 
more flexibility. No changes have been made to the provisions included 
in the interim final guidelines.
    Financial control encompasses all buildings, facilities, lands, 
vehicles and equipment that are wholly owned by the entity or in which 
the entity has a controlling financial interest. Conversely, it usually 
does not include buildings, facilities, lands, vehicles and equipment 
that are wholly owned by a different entity or in which another entity 
has a controlling financial interest. However, financial control would 
exist if an entity has a long-term lease or other long-term agreement 
that gives it effective control over capital investment and operational 
decisions.
    An alternative method for determining entity boundaries is equity 
share, where more than one entity has a financial interest in a 
particular facility or emission source, and each of the entities takes 
responsibility for reporting only a portion of the facilities emissions 
and reductions. Operational control, where an entity controls the day-
to-day operations of facility or source, but does not exercise long 
term financial control might also be an option under certain 
circumstances. If either equity share or operational control is chosen 
as the method for determining boundaries, the reporting entity must 
inform the other entities that share responsibility for particular 
sources of its intention to report under the 1605(b) in order to ensure 
that the sources emissions or reductions are not double-counted under 
the program. Finally, the General Guidelines have been modified to 
provide further guidance regarding the coverage of partially-owned or 
leased sources, and sources that are neither owned nor leased by the 
reporting entity.
3. Entity Boundaries--U.S. and Non-U.S. Emissions
    The interim final guidelines permit entities to define their entity 
so as to include operations, and their associated emissions, located 
outside of the United States. They also permit certain non-U.S. 
entities to be the source of offset emission reductions, as long as 
they meet all of the requirements of the revised guidelines. The 
interim final General Guidelines would allow entities to both report 
and register emissions and emission reductions occurring outside of the 
United States, subject to certain requirements. One of these 
requirements is that non-U.S. emissions

[[Page 20789]]

and reductions must be reported separately from U.S. emissions and 
reductions. DOE has clarified the guidelines to indicate that this does 
not mean that the U.S. and non-U.S. emissions and reductions must be 
submitted in separate reports. Under the final guidelines, non-U.S. 
emissions and reductions must be included in one or more distinct 
subentities identified in the entity's report to EIA and must be 
separately sub-totaled before being considered as part of the entity's 
net emission reductions qualifying for registration. Unless 
specifically identified by the report, EIA will presume that all non-
U.S. reductions are governed, at least in part, by national or 
international greenhouse gas regulations, and that such reductions 
might be eligible for transfer or trading to other entities. However, 
reporters will not be able to register emission reductions that do not 
meet the requirements of these guidelines, whether or not they are 
eligible for transfer or trading under a foreign national or multi-
national scheme.
    In allowing entities to both report and register emissions and 
emission reductions occurring outside of the United States, the interim 
final General Guidelines require that emissions and reductions for each 
country be segregated in the report submitted to EIA. One stakeholder, 
a large multinational corporation, argued that this would place an 
undue burden on companies having operations in numerous countries, 
particularly where business units that provide an appropriate level of 
aggregation (i.e., as separate subentities) cross national borders. In 
the final guidelines, DOE encourages entities that wish to report or 
register non-U.S. activities to segregate emissions and reductions from 
each country in a separate subentity. However, reporters are permitted 
to aggregate non-U.S. emissions and reductions at regional and even 
non-U.S. global levels, as long as they identify each of the countries 
covered and the country-specific factors used to generate their 
reports.
4. Entity Statements
    DOE's interim final guidelines include a number of specific 
requirements for the contents of the entity statements to be submitted 
by all reporters, although the specific requirements vary somewhat 
depending on whether the reporter is a large or small emitter 
interested in registering reductions, or a reporter that is not 
intending to register reductions. Very few comments were received on 
the requirements and no significant changes have been made to the 
provisions concerning the entity statement.

E. Large v. Small Emitters

    Under the interim final guidelines, ``small emitters'' are a 
special category of reporters that are exempted from certain 
requirements for the registration of reductions, including entity-wide 
emission inventories and entity-wide assessments of reductions. DOE 
received a substantial number of comments on these provisions. Several 
of these comments were critical of the exemptions and argued that small 
emitters deserve no special treatment. These were countered by a number 
of other comments that argued that the burdens on small emitters under 
the interim final guidelines are too onerous, and the exemptions should 
be expanded. After considering these comments, DOE believes that the 
provisions in the interim final guidelines strike the proper balance 
between relieving the burden on small emitters and requiring the 
submission of emissions information for registration. Consequently, DOE 
has not significantly altered these provisions of the guidelines. It 
should be noted that small emitters seeking to register reductions are 
only required to report on the emissions and reductions associated with 
a single, chosen ``activity,'' rather than all of the entity's 
activities. Finally, the guidelines continue to permit entities to use 
a Simplified Emissions Inventory Tool (SEIT), to be provided by the 
Energy Information Administration, to estimate their emissions for 
purposes of determining whether the entity is a small or large emitter, 
and for estimating the quantity of emissions excluded as de minimis. 
The guidelines now clearly state that the SEIT may not be used for the 
preparation of emission inventories.

F. Aggregators

    In the interim final guidelines, DOE provides some special guidance 
for entities that register reductions on behalf of other entities, so-
called ``aggregators.'' Large emitters that serve as aggregators must 
meet all of the requirements for registration, including submission of 
entity-wide emission inventories and entity-wide assessment of their 
emission reductions. However, entities that are small emitters can 
register the offset reductions of other entities and not report on any 
of their own emissions or reductions, although such small emitters 
would have to submit an entity-statement and an estimate of their total 
emissions indicating that they qualified as a small emitter. While 
aggregators can be either small or large emitters, DOE believes that 
most are likely to be small organizations or companies that would 
qualify as small emitters. Some aggregators, such as trade 
associations, might report on behalf of large emitters, but the 
potential benefits of such indirect reporting by large emitters are 
limited because essentially the same data and certifications would have 
to be provided to DOE, whether the entity reported directly or through 
an aggregator. DOE received some requests for clarification of these 
requirements, but none of the comments suggested major changes.

G. Other Definitions

    The interim final General Guidelines, and the Glossary accompanying 
the draft Technical Guidelines, define terms used in the guidelines. 
These definitions were the focus of considerable comment, and many 
comments offered specific suggestions for changes. Others recommended 
the addition of new definitions of terms or, in some cases, the 
transfer of a definition that appeared in the Glossary to the 
definition section of the General Guidelines. A few comments noted 
differences between terms and definitions used in the DOE guidelines 
and comparable terms and definitions used in other protocols for the 
reporting of greenhouse gas emissions. While DOE has attempted to 
minimize such differences, DOE has concluded that in some situations, 
it is necessary to use a new term or define a term in a way that 
differs from the usage or definition of the term used by other 
programs. For this reason, DOE urges reporters and other users to 
carefully review the definitions contained in both the final General 
Guidelines and the final Technical Guidelines.
    The following sections summarize the comments received on 
definitions and DOE's response to the comments.
    Activity of a small emitter. This term is used to define the 
minimum scope of reports by small emitters interested in registering 
reductions. It has been modified slightly to more clearly indicate that 
it applies to anthropogenic actions that result in emissions or 
sequestration.
    Anthropogenic. This definition has been moved from the Glossary to 
the General Guidelines and has been modified to more closely parallel 
the definition of this term under the Climate Leaders and Climate 
VISION programs.
    Avoided emissions. The definition of this term has been modified to 
enable it to encompass more types of ``avoided emissions'' in the 
future. Its practical scope is still strictly limited by the reduction 
calculation methods

[[Page 20790]]

specifically identified and permitted under the guidelines. As 
modified, the term encompasses any emission reduction that occurs 
outside an entity's boundary that results from changes in the activity 
of an entity, but in practice avoided emissions is still strictly 
limited to the emissions displaced by increases in the distribution of 
various types of energy that have been derived from renewable, nuclear 
or other low or non-emitting sources.
    Carbon dioxide equivalent. A definition for this term has been 
added to the General Guidelines.
    Carbon stocks. The definition of this term has been slightly 
modified to clarify its scope in the context of these guidelines, as 
suggested by public comment.
    Climate Leaders and Climate VISION. The definitions of these 
programs have been modified and moved to the General Guidelines.
    Direct emissions. The definition has been modified to link such 
emissions to sources within the organizational boundaries of reporting 
entities.
    Distributed energy. A definition for this term has been added to 
the General Guidelines. The term ``exported energy,'' sometimes used in 
the interim final guidelines, is no longer used.
    The definition for ``entity-level reporting,'' which previously 
appeared in the Glossary, has been deleted.
    The definition of ``entity statements'' that appears in the 
Glossary has been deleted. The meaning of the term ``Entity 
Statements'' is fully described in section 300.5(d) and (e).
    Greenhouse gases. The definition has been modified to more clearly 
identify the gases that may be the subject of reports under the 
guidelines.
    Incidental lands. A definition for this term has been added to the 
General Guidelines.
    Indirect emissions. The definition for this term has been modified 
to parallel similar modifications made to the definition of ``direct 
emissions.'' The definition of ``emission, indirect'', which appears in 
the Glossary, is repetitive and has been deleted. While the indirect 
emissions are currently limited to those associated with the generation 
of energy by another entity that is ultimately used by the reporting 
entity, the definition leaves open the possibility that other types of 
indirect emissions may be added in the future.
    Intergovernmental Panel on Climate Change (IPCC). The definition 
for the IPCC that appears in the Glossary has been modified in response 
to comments received.
    Net emission reductions. This refers to the sum of all reductions 
in a given year that qualify for consideration as registered 
reductions. It has been only slightly modified to improve its clarity.
    Offset. The definition has been modified to improve its clarity.
    Registration. A definition for this term has been added to the 
General Guidelines.
    Reporting entity. A definition for this term has been added to the 
General Guidelines.
    Sequestration. The definition has been simplified, but its intended 
scope remains broad.
    Source. The definition has been slightly expanded to emphasize its 
broad scope.
    Small emitter and large emitter. Definitions for both of these 
terms have been added to the General Guidelines.
    Start year. The definition has been simplified to improve its 
clarity, as suggested by public comments.
    Total emissions. The definition has been modified to correct an 
error, as suggested by public comments.

H. Start Year and First Reduction Year

    The interim final General Guidelines provide that reporters not 
intending to register reductions can establish base periods as early as 
the 1987-1990 timeframe identified in section 1605(b) and can report 
reductions beginning as early as 1991. However, the interim final 
guidelines provide that entities intent on registering reductions must 
establish base periods of no more than four years that end no earlier 
than 2002, and may not register reductions that were achieved prior to 
2003.
    DOE received a number of comments on these provisions of the 
interim final guidelines, most of which recommended that entities be 
allowed to report emissions and emission reductions that occurred prior 
to 2002/2003. Some commenters indicated that they had made commitments 
under the Climate Leaders or Climate VISION programs that used base 
periods that ended prior to 2002 and that they were able to report the 
progress made toward the achievement of these commitments prior to 
2003. In response to these comments, DOE has modified the guidelines to 
permit entities that have made a commitment to reduce entity-wide 
emissions under the Climate Leaders or Climate VISION to establish base 
periods that end as early as 2000. This exception would permit most, 
but not all participants in these programs to use the same base periods 
used in such voluntary programs in their reports to DOE under the 1605b 
program.
    DOE believes that even with this exception, the program will 
continue to be focused on recent and future efforts to reduce 
greenhouse gas emissions and consistent with providing an indication of 
the reporting entities' contributions to the President's goal of 
reducing greenhouse gas emissions intensity of the U.S. economy by 18 
percent between 2002 and 2012. The revised General Guidelines still 
permit reporting of historical activity, however, and therefore fully 
comply with the statutory requirements of section 1605(b).

I. Electricity Factors and Benchmarks

    The interim final guidelines establish several different kinds of 
emission factors and benchmarks intended to approximate the emissions 
associated with electricity use, the emissions avoided as a result of 
reduced electricity demand, or the emissions avoided by increasing 
generation from non-emitting or low-emitting sources. For emission 
inventories, the interim final guidelines provide that entities should 
convert their electricity demand to emissions using factors supplied by 
DOE that would be based on the regional averages of electric sector 
emissions intensities. DOE stated that entities should use factors that 
were derived from the national average emissions intensity of the 
electric sector as a whole for calculating reductions associated with 
reduced electricity demand or increased generation from non-emitting or 
low-emitting sources. DOE indicated that the national average emissions 
intensity was considered to be a better indicator of the actual 
emissions likely to be displaced by reduced demand or increased 
generation.
    Many commenters recommended making the factors used for inventories 
and for calculating reductions the same, although some supported the 
DOE's rationale for proposing different factors. Some advocated 
regional factors as better indicators of the emissions and reductions 
associated with specific sources. Others advocated national factors as 
good indicators of actual emissions and reductions, and as a way of 
simplifying the reporting burden of entities that operated in multiple 
regions. Some utilities recommended that the benchmark used for 
estimating avoided emissions be based on the regional averages of 
fossil-fired generating plants, which they argued would be a better 
indictor of the emissions being displaced. Other utilities recommended 
that entities be permitted to choose either a system-specific 
benchmark, based on the emissions intensity of marginal plants, or a 
regional average.
    After careful consideration of the comments, DOE has adopted the

[[Page 20791]]

recommendation of some utilities to base the factors used to estimate 
the emissions avoided by reduced electricity demand or increased 
generation from non-emitting or low-emitting sources on the regional 
average emissions intensities of fossil-fired generating plants, with 
the proviso that no regional value may exceed 0.9 metric tons of 
CO2 per megawatt hour (MWH). The maximum value of 0.9 metric 
tons per MWH is designed to ensure that all utilities have a clear 
incentive to build new capacity that is at least as efficient as the 
most efficient coal-fired generating plants. DOE chose not to provide 
generators with the flexibility to choose national or regional values, 
or to develop their own, system-specific values in order to avoid the 
significant self-selection bias that would result from such 
flexibility.
    The definition of the U.S. regions to be used in calculating the 
indirect emissions associated with electricity use and avoided emission 
benchmarks is an important technical issue. In the draft Technical 
Guidelines, DOE indicated its intent to use North American Electric 
Reliability Council (NERC) regions as the basis for the indirect 
emission factors used in preparing emission inventories. Some comments 
suggested that NERC subregions, especially for the western United 
States would be more appropriate. Others urged DOE to consider the use 
of EPA's eGRID regions. In choosing among these and other options, DOE 
considered whether: (1) It would be possible to provide meaningful 
values for all possible reporting years (the earliest possible 
reporting year is 1987) based on readily available public data; (2) 
reporters would be able to readily determine which factor applied to 
specific facilities or operations; and (3) the resulting factors would 
provide a good approximation of the indirect emissions associated with 
electricity use or demand reductions in a particular region. After 
careful consideration, DOE concluded that basing indirect emission 
factors on either NERC or eGRID regions would not achieve one or more 
of these three objectives. For example, because the NERC and eGRID 
regions cut across state lines, it will likely be difficult for 
reporters to determine which region is applicable to a specific 
facility.
    Consequently, DOE decided to base these factors on the electric 
sector emission intensities of state-based regions that approximate the 
most current NERC regions and, in the case of the western United 
States, appropriate subregions. The purpose of these state-based 
regions is to approximate the actual emissions associated with the 
electricity supplied to users, while also utilizing data that is 
readily available for all reporting years and boundaries that are well 
recognized by potential reporters. EIA will determine the most 
appropriate State groupings for the development of the indirect and 
avoided emission factors based on NERC regions and applicable 
subregions, as defined in June 2006. Generally, those states that are 
split among two or more NERC regions or subregions should be assigned 
to the state grouping that contains most of the state's population. One 
possible grouping that will be considered by EIA is: (1) New York, 
Connecticut, Rhode Island, Massachusetts, Vermont, New Hampshire and 
Maine; (2) New Jersey, Delaware, Pennsylvania, Maryland, West Virginia, 
Ohio, Indiana and Michigan; (3) Illinois and Wisconsin; (4) Missouri, 
Kentucky, Virginia, Arkansas, Tennessee, North Carolina, South 
Carolina, Louisiana, Mississippi, Alabama and Georgia; (5) Florida; (6) 
Texas; (7) Oklahoma and Kansas; (8) North Dakota, South Dakota, 
Nebraska, Minnesota and Iowa; (9) Colorado, Utah, Nevada, Wyoming and 
Montana; (10) New Mexico and Arizona; (11) Oregon, Washington and 
Idaho; (12) California; (13) Hawaii; and (14) Alaska. EIA will provide 
factors for 1999 and subsequent data years and will periodically (e.g., 
every three to five years) update these factors to reflect what they 
determine to be significant and lasting changes in the electric sector 
emissions intensity of the established state groupings. EIA will also 
provide a set of values to be used for all data years prior to 1999.
    Several comments focused on the treatment of transmission and 
distribution (T&D) losses in the calculation of the factors used to 
represent the emissions associated with electricity demand (to be 
included in emission inventories) and reductions in electricity demand 
(to be included in emission reduction calculations). Some noted that 
T&D losses were not included in the emission factors widely used by the 
Climate Leaders program. Others favored the inclusion of such T&D 
losses in the factors representing emissions associated with 
electricity demand and reductions. DOE decided to continue to include 
such losses in the factors used to estimate both the inventories and 
reductions associated with electricity use. By including such losses, 
these factors will provide a better indicator of the emissions 
resulting from electricity demand. Entities that wish to include both 
generation and T&D losses in their reporting of indirect emissions to 
the Climate Leaders program may do so, as long as they note that their 
reports include both types of losses, based on the factors provided by 
DOE.

J. Inventories

    The interim final guidelines provide detailed guidelines for the 
conduct of emission inventories. DOE received a large number of 
comments that touched on emission inventory guidelines in some way. 
Most comments were generally supportive of the framework for emission 
inventories set forth in the General Guidelines and the more detailed 
provisions of the draft Technical Guidelines. However, some commenters 
raised concerns regarding the start year and de minimis requirements of 
the interim final guidelines, while others suggested various 
improvements to the methods cited or the quality ratings assigned to 
these methods.
    In the final guidelines, an emissions inventory is an accounting of 
an entity's actual emissions (direct, indirect and sequestered) during 
a specified year. An emissions inventory provides, by itself, a useful 
record of an entity's actual emissions over time, but it also serves as 
one of the inputs necessary for the calculation of the base values used 
in determining emission reductions. For this reason, an emissions 
inventory is usually a major element of an entity's first report under 
the program.
    Since emission inventories are a critical part of calculating 
emission reductions, all reports under the revised program should 
include some kind of inventory. Entities that do not intend to register 
reductions and small emitters may restrict their inventory data to 
those sources or activities that will be the focus of future emission 
reduction calculations. However, large emitters that intend to register 
reductions must submit entity-wide emission inventories and may exclude 
from such inventories only de minimis emissions. Any entity that wishes 
to register reductions must ensure that its annual inventories meet the 
minimum quality requirements specified in the guidelines.
    The following sections summarize the major comments that addressed 
the emission inventory requirements of the interim final guidelines and 
DOE's responses to the comments.
1. Requirement for Entity-Wide Inventories With a Quality Rating of at 
Least 3.0
    The interim final guidelines established a quality rating system 
for emission inventories. Reporters could choose among a range of 
different methods for measuring or estimating the emissions from 
specific sources. Each

[[Page 20792]]

different method was assigned a rating of A, B, C or D and each of 
these ratings was assigned a numerical value from 4.0 (for A rated 
methods) to 1.0 (for D rated methods). Entities that were intent on 
registering reductions would be required to complete emission 
inventories that had a quantity-weighted quality rating of at least 
3.0.
    Most comments received by DOE supported the emphasis of the interim 
final guidelines on quality entity-wide inventories. The final rule 
retains the requirement for a 3.0 quality rating for the emissions 
inventories that large emitters must submit as a prerequisite for 
registering reductions. DOE believes 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. Several commenters suggested that the A and B 
methods available for specific sources or industrial sectors are too 
burdensome and will make it difficult for some entities to prepare 
inventories that meet the 3.0 quality rating. DOE has made some 
modifications to the ratings for the available methods to ensure that a 
cost-effective and practical A- or B-rated method is available for 
every emissions source.
    As the table below demonstrates, three very different companies 
with diverse emission profiles could meet the 3.0 quality rating 
threshold using an inventory approach specific to their company. 
Company A is a large electric utility, with a vast preponderance of 
emissions attributable to stationary fossil fuel combustion. As a 
result, this company may use lower rated (and lower cost) methods for 
estimating emissions from its smaller sources, such as fleet vehicles 
and sulfur hexafluoride used as an insulator on transmission lines. 
Similarly, a landfill operator could achieve the quality-rating 
threshold by ensuring that it uses ``B'' or better-rated methods for 
estimating methane emissions from the landfill. Company C, a large 
Federal defense contractor, is able to offset its lower rated estimates 
of emissions from mobile sources with higher rated methods for 
estimating emissions from stationary combustion at its lone 
manufacturing facility.

----------------------------------------------------------------------------------------------------------------
                                                           Emissions
                         Source                           metric tons     Method      Emissions weighted grade
                                                              CO2e        grade
----------------------------------------------------------------------------------------------------------------
                Company A (Large Utility)
Direct Emissions:
    Stationary Combustion...............................      300,000        A = 4         300,000*4 = 1,200,000
    Fleet Vehicles......................................       10,000        C = 2             10,000*2 = 20,000
    Sulfur Hexafluoride on T&D System...................          500        C = 2                 500*2 = 1,000
Indirect Emissions:
    Electricity in Commercial Offices...................        1,000        B = 3               1,000*3 = 3,000
                                                         -------------------------------------------------------
        Total...........................................      311,500         3.92      1,224,000/311,500 = 3.92
                                                         =======================================================
              Company B (Landfill Operator)
Direct Emissions:
    Methane from Decomposition..........................       50,000        B = 3            50,000*3 = 150,000
    Heavy Duty Vehicle Fuel Use.........................          200        B = 3                   200*3 = 600
Indirect Emissions:
    Electricity Consumption.............................           50        A = 4                    50*4 = 200
                                                         -------------------------------------------------------
        Total...........................................       50,250         3.00         150,800/50,250 = 3.00
                                                         =======================================================
      Company C (Large Federal Defense Contractor)
Direct Emissions:
    Vehicle Fuel Use....................................          500        C = 2                 500*2 = 1,000
    Stationary Combustion at Manufacturing Facility.....          800        A = 4                 800*4 = 3,200
Indirect Emissions:
    Electricity in Commercial Offices...................        9,000        B = 3              9,000*3 = 27,000
                                                         -------------------------------------------------------
        Total...........................................       10,300         3.03          31,200/10,300 = 3.03
----------------------------------------------------------------------------------------------------------------

    DOE has modified the guidelines to enable entities that obtain 
independent verification to simplify their inventory reports and to 
permit entities that certify their use of only A or B methods to forego 
the reporting or calculation of a quantity-weighted quality rating. 
Finally, DOE has made some clarifying changes to emphasize that prior 
year inventories may be modified only to correct significant errors, 
and that entities may choose at any time to modify the methods used to 
prepare their current and future year inventories. DOE hopes that such 
modifications lead to improvements in inventories over time.
2. De Minimis Exclusion From Entity-Wide Emission Inventories
    Numerous comments proposed changes to the provision of the interim 
final General Guidelines that allows entities to exclude from their 
entity-wide emission inventories up to 3 percent of their total 
emissions. Many of these commenters recommended that entities be 
permitted to exclude up to 5 percent of their total emissions, while 
others proposed to permit entities to exclude certain types of sources 
entirely, such as motor vehicles that are not an integral part of the 
production process or small tracts of undeveloped land. On the other 
hand, a number of commenters requested that the de minimis exclusion be 
removed from the guidelines, and that all entities be required to 
inventory all of their emissions every year. Still others recommended 
the use of some kind of ``materiality'' test to determine whether or 
not certain emissions could be excluded. After serious consideration of 
all of these comments, DOE decided not to make any change in the de 
minimis provisions of the General Guidelines. DOE believes that the 3 
percent de

[[Page 20793]]

minimis exclusion is appropriate because a larger de minimis exclusion 
risks ignoring sources that could affect the assessment of entity-wide 
emission reductions. DOE emphasizes that it will be possible for 
entities to achieve an overall 3.0 quality rating with limited use of 
low cost, D-rated estimation methods for small emission sources. A 
major reason for the introduction of the quality rating system is that 
it gives entities the ability to complete inventories that are more 
comprehensive without incurring the high costs of applying high quality 
measurement methods to comparatively small, dispersed sources. With 
respect to land holdings, the guidelines do provide for the exclusion 
of incidental, forested lands, as long as they are not actively managed 
for wood production or otherwise developed.
3. Ratings for Estimation Methods Using Default Values
    The interim final Technical Guidelines contain a rating system for 
determining the quality of emission inventories reported under the 
1605(b) program. Up to four methods are identified and rated for 
measuring or estimating the emissions from every source, with the 
highest rating being an A (worth 4 points) and the lowest a D (worth 1 
point). For each distinct source, the ratings are ordinal--meaning that 
the best method received an A rating and the poorest method received a 
D. Under the interim final guidelines, this approach results in some 
very large disparities between the ``A'' methods of different sources. 
For some sources, where field measurement methods are not practical and 
estimation methods are not well developed, a method that relies on 
default factors is given an ``A'' rating because it is the best 
available method. In other cases, such as forest ecosystems, the use of 
well-researched default factors rate a ``C'' or ``D'', unless they have 
been validated by independent data from the specific site and 
management condition. These disparities were the focus of a number of 
critical comments.
    In response to these comments, the final guidelines have been 
modified to restrict ``A'' ratings to methodologies where computations 
are based primarily on values indicative of on-site conditions measured 
continuously or over multiple periods. In cases where no methodology 
qualifies for an A rating, the best method will be rated ``B'' and 
given a value of three points. Using this approach, the best methods 
for certain agricultural sources warrant only a B.
    A related issue concerns the quality ratings given methods that 
rely upon default factors that have been widely reviewed and adopted by 
a public agency, a standards-setting organization or an industry group. 
The draft Technical Guidelines could have made it difficult for 
reporters in certain industries to receive a 3.0 quality rating or 
above, even though they utilized methods and factors that were 
generally accepted within the relevant industry as being the most 
practical and effective means of estimating emissions from certain 
sources. For example, in many cases, the draft technical guidelines 
provided a C rating for widely accepted default factors, even though 
source-specific emission measurements would be very costly or 
impractical. To correct this problem, the final guidelines raise 
certain consensus-based default factors to ``B'' ratings where more 
accurate methods are not considered cost-effective and where the 
default factors have been established by an industry-wide peer review 
process, with public documentation.
4. References to Continuous Emissions Monitoring Systems (CEMS)
    A number of commenters pointed out that CEMS are not practical for 
many industrial applications. For such applications, mass balance or 
default emission factors may be the only practical options. In the oil 
and gas exploration and production industry, for example, estimating 
emissions by using measured activity data and emission factors 
available through government (AP-42, available at: http://www.epa.gov/ttn/chief/ap42/) or industry (API Compendium, available at: http://api-ec.api.org/policy/index.cfm?objectid=C79E99D5-E714-40ED-81C8C32F1492851C&method=display_body&er=1&bitmask=001001004001000000 bitmask=001001004001000000) approved methodologies is the most accurate 
method available and warrants a high rating.
    If CEMS are used, albeit rarely, for a particular source, direct 
measurement is kept in the final guidelines as an A-rated option, while 
other methods for this source that use mass balance or default emission 
factors methods are also given an ``A'' rating, as long as they are 
derived from site-specific measurements.
5. Citations of Protocols and Emission Factors Developed by Other 
Organizations
    The interim final guidelines include citations to several other 
protocols or standards, and include a number of emission factors drawn 
from such protocols or standards. Numerous comments noted that some of 
the documents and emission factors cited in the guidelines had not been 
subsequently updated. Many of these comments recommended that DOE 
update these citations and some recommended that DOE's guidelines 
direct reporters to use future updates of such protocols or standards, 
as they become available.
    The final guidelines do include a number of updated references and 
emission factors, as recommended by commenters. In addition, they 
direct reporters to use the most current methods established by 
specified government agencies (EPA, USDA) or independent standards-
setting organizations (IPCC) and direct EIA to periodically update 
forms/instructions to reflect such methods/factors. With regard to 
methods in other sources, the final guidelines provide that DOE will 
review and update, as appropriate, the guidelines periodically and in 
response to specific requests.
6. Options for Simplifying Emission Reports
    A number of entities expressed concerns regarding the potential 
burdens of reporting detailed, entity-wide inventories and a few 
suggested options for reducing these burdens. In the final guidelines, 
DOE provides for two approaches that will enable entities to reduce the 
detail of the reports submitted to DOE. First, if an entity certifies 
that it has used only A or B rated emission inventory methods, it need 
not calculate or report the quantity-weighted average quality rating of 
its emissions inventory. When accepted, EIA will indicate in the 
database that the quality rating of the inventory meets or exceeds the 
3.0 level. Second, if an entity has its report independently verified, 
including the quantity-weighted quality rating of its inventory, it may 
report its inventory data at a higher level of aggregation (by 
greenhouse gas, rather than by source category).
7. Eliminate Requirements To Report Emissions From Biogenic Sources and 
To Report Certain Non-Fuel Uses of Fossil Fuels
    The interim final guidelines require the reporting of many uses of 
fossil fuels and a determination of whether a non-fuel use of a fossil 
fuel involves a sequestering, non-sequestering, or partially 
sequestering activity. The interim final guidelines also require the 
reporting of certain biogenic emissions, such as the carbon dioxide 
emitted by combusting ethanol in vehicles. To reduce the burdens of 
reporting, the final guidelines require reporters to

[[Page 20794]]

report only anthropogenic emissions of greenhouse gases. Entities 
should not report biogenic emissions or non-emitting uses of fossil 
fuels, such as fuels used to create materials used to manufacture 
products.
8. Treatment of Agriculture and Forestry
    The draft Technical Guidelines would provide extensive new 
methodologies for estimating greenhouse gas emissions and carbon 
sequestration from the forest and agriculture sectors. A number of 
commenters expressed appreciation for the improvements in the draft 
guidelines, noting specifically the benefit of the COMET model for 
estimating changes in carbon stocks on agricultural soils and new 
advances in estimating forest carbon. Several comments proposed 
improvements in the technical methods and underlying coefficients and 
data. Some commenters expressed concern that the methods proposed were 
too complex and detailed. Other commenters maintained that the methods 
were not adequate and included significant uncertainties that would 
limit their use under a potential future regulatory system.
    USDA and DOE reviewed the inventory methods for forestry and 
agriculture in light of these comments and made changes where 
appropriate to reflect new information. The review noted that 
relatively simple inventory methods are available for virtually all of 
the sources and sinks in the agriculture and forest sectors. The 
availability of methods for all greenhouse gas emission sources and 
carbon sinks was important to enable entities to provide comprehensive 
entity-wide inventories. The review also noted that alternative methods 
are provided for many sources and that these alternative methods vary 
from the simple to the complex. The complex methods generally provide 
entities with the ability to reduce uncertainties. For some 
agricultural sources, the guidelines only provide simple default 
methodologies. In the draft guidelines, these methods were given an 
``A'' rating. In the final guidelines, these methods are given a ``B'' 
rating. The explanation for these changes is explained in section J.3., 
above.
    a. Sustainable forest management. Provisions of the draft Technical 
Guidelines would allow entities to report a default carbon flux value 
of ``zero'' for forestlands that are verified through third-party 
certification as being sustainably managed. DOE received comments 
questioning the credibility of certain sustainable forest certification 
systems and the assumption that it is ``highly unlikely'' that carbon 
stocks decline in sustainably managed forests. Other comments agreed 
with this assumption and recommended that Sec.  300.6(g)(1) be modified 
to clearly state that any changes in sequestration for forests managed 
under certified sustainable management systems are de minimis and need 
not be a part of entity's annual report.
    The USDA Forest Service reviewed four existing certification 
systems and determined that while there are some differences among the 
major certification programs in their goals and technical details, all 
of the programs set high standards, have rigorous third-party audit 
protocols, are generally viewed as credible by many stakeholder groups, 
and can assure (with reasonable confidence) long-term carbon 
neutrality. Therefore, the final guidelines specify that any changes in 
sequestration for forests managed under certified sustainable 
management systems need not be part of an entity's annual report. All 
or part of an entity's forest land can be certified as being managed 
sustainably. If an entity chooses to use the assumption that 
sustainable forest lands are de minimis on part of their lands and 
report actual changes in carbon stocks on other lands, the entity 
should document that the certification of sustainability applies to the 
lands being considered de minimis, independent of the entity's other 
lands. Once an entity classifies a portion or all of its lands as 
sustainably managed forest, it may not report carbon sequestration on 
the lands categorized as sustainably managed in future reports. If a 
portion of certified land is sold or loses its certification, these 
changes must be reported to EIA and the remaining land must either be 
recertified or the entity must report actual changes in carbon stocks 
on all the affected land.
    DOE received comments urging it to eliminate provisions of the 
interim final guidelines that require reporting of carbon stock changes 
on forestlands. These comments contend that the sequestration 
accounting requirement in Sec.  300.6(f) is complex, costly and 
intrusive. The comments further contend that detecting meaningful 
periodic change in large forest inventories is a daunting task, both 
logistically and statistically, even for entities with sophisticated 
commercial timberland inventories.
    No changes were made to the guidelines in response to these 
comments. The guidelines provide three classes of methods to estimate 
changes in carbon stocks from forests. The guidelines provide default 
lookup tables, guidance on the use of models, and procedures for 
applying sampling techniques. In addition, the guidelines allow land 
that has been certified by third parties as being sustainably managed 
to be considered de minimis for reporting purposes. These options 
provide sufficient flexibility to entities in reporting changes in 
carbon stocks on forested land that they own or control, while 
maintaining consistency with overall objectives of the program for 
comprehensive reporting of greenhouse gas emissions and sinks. DOE 
notes that the guidelines do not require entities to continue to 
account for changes in the carbon stock that occur on land no longer 
owned by the entity, although the entity must ask EIA to remove from 
its records any carbon stock increases (or decreases) that were 
attributed to such lands in prior year reports.
    b. Wood products. DOE received comments regarding the allocation of 
carbon embedded in wood products. In particular, commenters noted that 
manufacturers should be provided the option to register the carbon 
embedded in products and treat it as carbon sequestration. Under the 
interim final guidelines, forest landowners are responsible for 
reporting carbon emissions from wood products. The forest land owner 
can simply assume that the carbon embedded in products, such as 
building materials, is emitted when harvested or use one of the methods 
provided to estimate rates of emissions from such wood products over 
time. Allowing the manufacturer of wood products to treat the 
manufacturing process as a sequestration activity would require that 
the forest land owner treat the harvesting activity as an emission. The 
broader implication of this interim final guideline provision is that 
all transfers (sales of wood products) would need to be tracked and 
reported by entities as either emissions or sequestration. DOE and USDA 
viewed this option as overly complex and one that would require a 
significant amount of additional record keeping and reporting. The 
final guidelines maintain the original provisions for the reporting of 
carbon embedded in wood products.
    c. Inclusion of forest sequestration. One commenter recommended 
that terrestrial sequestration be removed from the inventory guidelines 
for large entities. They asserted that by requiring large entities to 
report changes in terrestrial carbon stocks, the guidelines place the 
federal government squarely in the middle of private land use and 
property rights issues, and establish complex, costly, and intrusive 
regulatory burdens for no apparent

[[Page 20795]]

benefits in terms of carbon sequestration. This comment was not 
adopted. DOE believes that the proposal would undermine the entire 
objective of encouraging comprehensive reporting. It is important to 
note that the program is voluntary, not mandatory. Also, the program 
places no legal restrictions on landowners regarding carbon sequestered 
on their lands, even if that carbon has been reported to the 1605(b) 
program.
    d. Accelerated reporting of carbon stock changes on permanently 
restored land. Normally, entities may include in their annual 
assessments of emission reductions only those changes in emissions or 
carbon stocks that occurred during the year that is the subject of the 
report. Comments recommended, however, that entities be permitted to 
accelerate the reporting of carbon stock increases on land that was 
being reforested, especially if it was to be permanently restored and 
protected. Because of the very long term carbon sequestration and other 
benefits associated with such permanent restoration and protection, DOE 
has modified the guidelines to permit entities that have undertaken 
such a restoration project and established a permanent easement or deed 
restriction to protect the land to report, during the next reporting 
cycle, carbon stock increases that are equal to 50% of the total carbon 
stock increases expected on that land over the next 50 years. The 50% 
discounting of the 50-year carbon stock increases closely approximates 
the present value of a 50-year stream of annual benefits discounted at 
a rate of 3 percent per year. The sequestration occurring on such lands 
would still have to be reported as part of the entity's annual 
emissions inventory, but would be excluded from all future assessments 
of emission reductions.
9. Stationary Source Combustion
    Several changes to the ``Stationary Source Combustion'' part of the 
inventory guidelines were made in response to comments. Some were 
motivated by a desire to simplify the reporting process or render it 
more accurate. For example, the draft Technical Guidelines would have 
required entities to identify and report emissions from non-fuel use of 
fossil fuels. Several commenters felt that the requirement placed too 
great a burden given the small amount of potential emissions involved. 
While DOE has modified the guidelines to indicate that biogenic 
emissions and non-fuel uses of fossil fuels need not be reported, the 
final guidelines continue to require the reporting of all emissions for 
which measurement or estimation methods are identified. The draft 
Technical Guidelines would have required that combined heat and power 
(CHP) plants assume an 80% thermal generating efficiency. The final 
guidelines follow the World Resources Institutes and World Business 
Council for Sustainable Development (WRI/WBCSD) Greenhouse Gas Protocol 
of allowing plants to enter their own estimated efficiency values. 
Also, the draft Technical Guidelines would not provide for the 
registering of avoided emissions associated with the use of coal 
combustion products. The final guidelines recognize fly ash use through 
an action-specific method.
    Some changes were made to make the rating system for methods used 
to measure stationary combustion emissions compatible with the new 
procedure outlined above. The mass balance approach was raised to an 
``A'' status for emissions from hydrogen plants and certain non-CEMS 
methods were given the same rating or raised to a ``B'' if based on 
regular site-specific measurements and fuel use default values derived 
through a consensus process. Some suggested changes, such as the 
proposal to treat methane from landfills as a biogenic emission, were 
not accepted. Here the wording of the draft Technical Guidelines was 
retained because DOE views the emissions of methane from landfills as 
anthropogenic. Only the CO2 emissions from the combustion of 
landfill methane is treated as biogenic.
    One commenter sought clarification on the exclusion from entity-
wide inventories of carbon dioxide emissions from biomass combustion. 
Another wanted to ensure that non-combustion biomass oxidation was also 
excluded from entity-wide inventories. The DOE has revised the 
Technical Guidelines to clearly confirm the exclusion of these biogenic 
emission sources.
10. Mobile Sources
    One major change in the ``Mobile Sources'' part of the inventory 
guidelines was made in response to comments that specific emission 
factors were outdated, according to the most recent government or 
private industry publications. DOE has updated many of these emission 
factors and has revised the guidelines to provide that reporters and 
EIA should use to develop their inventories future updates to factors 
made by certain government agencies or consensus-based standards 
organizations. However, the final guidelines do not provide for the 
automatic updating of factors developed by trade groups or other 
industry sources, such as the American Petroleum Institute's Compendium 
of Greenhouse Gas Emission Methodologies. DOE will consider updates of 
such industry-developed values during DOE's planned periodic updates to 
the guidelines.
    Another suggestion made by commenters was to exclude vehicles 
unless they were ``integral to production.'' Several commenters state 
that it is overly burdensome for emission inventories to include mobile 
source related emissions where mobile sources are not an entity's 
dominant greenhouse gas emitting activity. DOE disagrees with the 
comment that mobile sources should be excluded. While mobile source 
emissions may be a small share for many reporters, they may be large in 
absolute terms, and they are a substantial source of emissions for some 
entities. Therefore, the final guidelines continue to require 
inventories to include all vehicles within the organizational 
boundaries defined by the reporting entity, which would normally 
include all vehicles that are owned or under the financial control of 
the entity. DOE notes that under the final guidelines, entities are 
permitted to exclude such emissions as de minimis if they are less than 
3% of total emissions.
    DOE received comments requesting clarification on the effect on 
inventory quality ratings of using default emission factors versus 
measured data on heat content, density, or carbon content of fuel data 
for mobile source emissions. The draft Technical Guidelines have been 
revised to provide such clarification.
11. Industrial Processes
    Some of the same issues that arose in the Stationary Source 
Combustion and Mobile Sources parts of the guidelines also appeared in 
the comments on the Industrial Processes part. Several commenters 
pointed out that CEMS methods are not appropriate or practical for many 
industrial applications because of cost considerations. After 
considering these comments, DOE has dropped CEMS as an ``A'' method for 
some industrial sources, and elevated the rating of other methods. The 
final guidelines allow direct measurements (for mass balance or default 
factors) an ``A'' rating if they are based on site-specific, periodic 
measurements. Several comments on this part of the Technical Guidelines 
also urged DOE to use the most recent emission factors established by 
other government, consensus or industry protocols. These factors have 
been updated and the final guidelines provide that values from

[[Page 20796]]

government agency or consensus-based sources will be automatically 
updated by EIA, while updates contained in industry-developed protocols 
will be considered during DOE's periodic updates to the guidelines.
    The National Lime Association (NLA) recommended that the guidelines 
adopt its method for estimating CO2 emissions from lime 
production. The NLA asserts that its method is more accurate because it 
relies on the specific characteristics of the lime produced (calcium 
oxide and magnesium oxide content) rather on default values for 
different classes of lime. DOE agrees and has adopted the NLA method 
for the ``A'' rated method for estimating CO2 emissions from 
lime production.
    One commenter from the pulp and paper industry requested that a 
statement be added to the guidelines indicating that the emissions from 
the manufacture of lime in the Kraft pulping process are biogenic and 
that emissions from this source should not be included in emission 
inventories. The pulp and paper mill module prepared under the auspices 
of the Climate Change Working Group of the International Council of 
Forest and Paper Associations (ICFPA), which has been adopted by the 
WRI/WBCSD Greenhouse Gas Protocol Initiative, states that ``the carbon 
released from CaCO3 is biomass carbon that originates in 
wood and should not be included in GHG emissions totals.'' \1\ DOE 
agrees with this recommendation and has added the appropriate language 
to the Industrial Process Emissions part of the Technical Guidelines 
(Section 1.E.3.3).
---------------------------------------------------------------------------

    \1\ National Council for Air and Stream Improvement, Inc. 
(NCASI), Calculation Tools for Estimating Greenhouse Gas Emissions 
from Pulp and Paper Mills, The Climate Change Working Group of The 
International Council of Forest and Paper Associations, Version 1.1, 
July 8, 2005, p. 23.
---------------------------------------------------------------------------

    The industry trade group noted the absence of methods for 
estimating methane emissions from petrochemical production and DOE has 
added these methods to the Industrial Process part of the Technical 
Guidelines.
12. Indirect Emissions
    The treatment of indirect emissions under the interim final 
guidelines was the subject of a number of comments. Some expressed 
concern about the mixing of indirect and direct emissions and 
reductions. In response to these comments, DOE has modified the 
guidelines to emphasize that indirect emissions must be reported 
separately from direct emissions in inventories, although they are 
added together to determine the total emissions of a reporting entity. 
Direct and indirect emissions are often combined in a single emission 
reduction calculation formula, but emission factors used for indirect 
emissions ensure that there is no double-counting by electricity 
generators and users.
    Some comments were directed at the emission factors used to 
calculate the emissions associated with electricity use. Although some 
comments suggested that these emission factors exclude the losses 
associated with electricity transmission and distribution (T&D) losses, 
the final guidelines continue to include these losses because they 
provide a better indication of the total emissions avoided by 
reductions in electricity consumption.
    Some commenters suggested that the owners of electricity T&D 
systems be required to include in their emission inventories the 
indirect emissions associated with T&D system losses. Because such 
indirect emissions would overlap with the direct emissions of some 
entities (that both generate and distribute electricity) and because 
T&D system losses are often associated the transmission of power from 
one system to another, DOE has decided not to require the indirect 
emissions associated with T&D system losses to be included in the 
inventories of owners of electricity T&D systems at this time. However, 
if an entity chooses to report (or register) the emission reductions 
associated with its efforts to reduce such losses, then it must 
calculate such reductions based on a system-wide assessment, as 
specified in the action-specific method provided for this purpose in 
the Technical Guidelines.
13. Geologic Sequestration
    Geologic sequestration is still an emerging field with few 
generally recognized standards for accounting and monitoring. As a 
result, several comments requested that DOE clarify and/or add 
information to the interim final guidelines and regularly review work 
by other governments and organizations for relevant guidance. 
Recognizing that this is a rapidly developing and changing field, DOE 
will continue to monitor the development of new accounting standards 
for geologic sequestration and, whenever appropriate, revise the 
reporting guidelines accordingly. DOE also has clarified the inventory 
guidance for geologic sequestration in the final Technical Guidelines. 
For example, in response to a request that naturally occurring carbon 
dioxide emissions near, but unrelated to, an enhanced oil recovery 
field should be excluded from an entity's inventory, DOE added text 
specifically stating that entities may exclude emissions of 
CO2 that have been demonstrated to be naturally occurring. 
Only emissions caused by the entity itself should be addressed in the 
inventory.
    The monitoring approaches for geologic sequestration in the draft 
Technical Guidelines were the subject of a number of comments. One 
commenter argued that to avoid excessive monitoring, entities should be 
able to use technical, site-specific monitoring approaches developed in 
response to rules by relevant regulatory agencies. Accordingly, DOE has 
added text to permit other monitoring plans that have been agreed to by 
a relevant Federal or state agency, if these plans have specific 
provisions for tracking the amount of carbon dioxide being re-released 
from the storage site.
    Another commenter objected to the requirement that reporters assume 
that all stored carbon dioxide will be re-emitted to the atmosphere and 
to include all such future emissions in the current inventory year. 
According to this commenter, reporters have enough understanding of 
reservoir characteristics to generate a reasonable prediction of future 
losses.
    In October 2005, the Intergovernmental Panel on Climate Change 
(IPCC) published its Special Report on Carbon Dioxide Capture and 
Storage, which includes a comprehensive discussion of available 
monitoring techniques for geologic sequestration. Noting that all 
monitoring options recommended by the IPCC are based on site 
monitoring, DOE revised the final guidelines to also require site-
specific monitoring to be an element of any acceptable method. For 
entities that do not wish to report reductions associated with geologic 
sequestration, DOE has retained the requirement that they assume that 
all injected carbon dioxide will be reemitted over time and report such 
emissions in the current year. However, if an entity wishes to report 
reductions associated with geologic sequestration, they must use a 
method that includes an active monitoring component, as required in the 
final guidelines.

K. Reductions

    The interim final guidelines identify five categories of methods 
for calculating emission reductions: emissions intensity, absolute 
emissions, changes in carbon stocks, avoided emissions and action-
specific methods. They also specify the use of an integrated method--
combining emissions intensity and avoided emissions--by electricity and 
other generators of distributed energy that

[[Page 20797]]

were increasing the quantity of energy they had generated and exported 
to other entities.
    DOE received a large number of comments on its guidelines for 
calculating emission reductions, some of which raised broad concerns. 
One commenter urged DOE to focus emission reductions calculations on 
either emissions intensity or absolute emissions, and to exclude 
emission reductions resulting from increases in carbon stock, energy-
related avoided emissions or other action-specific methods until a 
comprehensive project accounting framework is established. On the other 
hand, a number of other commenters urged DOE to retain and expand the 
provisions for recognizing reductions from sequestration, avoided 
emissions and additional action-specific methods. While DOE agrees that 
most reporters can and should rely primarily on emissions intensity or 
absolute emissions methods to assess annual changes in their emissions, 
we also see a need for the retention of other emission reduction 
calculation methods in order to permit the reporting and registration 
of reductions associated with certain special sources and actions.
    A few commenters continued to urge DOE to permit the registration 
of reductions resulting from stand-alone projects, especially when 
undertaken to reduce emissions outside the boundaries of the reporting 
entity (offset reductions). Other commenters, however, supported DOE's 
emphasis on an assessment of entity-wide emission trends, rather than 
on the results of individual projects. While DOE recognizes that 
entities are undertaking a wide range of actions that can reduce its 
emissions of greenhouse gases, DOE believes that the enhanced program, 
to be consistent with the objectives established by the President's 
Global Climate Change Initiative of February 2002, should focus on the 
net result of such actions on an entity's overall emissions and 
sequestration, and its contribution to the goal of reducing the 
nation's emissions intensity. Therefore, DOE has not changed the 
requirement that large emitters calculate their registered reductions 
on the basis of an entity-wide assessment. It has, however, modified 
the guidelines to permit the reporting and registration of additional 
types of action-specific reductions, and to emphasize that all 
reporters have the option to continue to report, but not register, the 
emission reductions resulting from a wide array of action-specific 
efforts.
1. Selecting Appropriate Reduction Calculation Methods
    The interim final guidelines emphasize that entities must choose 
among the five categories of reduction calculation methods identified 
in the guidelines. Some of the public comments received by DOE 
indicated that there was some confusion regarding the degree of choice 
available to individual reporters. DOE provides the following guidance 
to clarify how it views reporters' selection of calculation methods 
under the final guidelines. The appropriate calculation methods a 
reporter uses should be determined largely by the characteristics of 
the reporting entity and its emission sources and sinks. Most reporters 
will find it advantageous, where feasible, to use an emissions 
intensity metric as the basic calculation tool for determining the 
emission reductions achieved by most or all of the entity. Changes in 
absolute emissions may be used as an alternative, as long as the 
economic output associated with the emissions is not declining. If 
output is flat or increasing, the reductions calculated using the 
absolute emissions method should always be equal to or less than the 
reductions calculated using an emission intensity method. For all 
terrestrial sequestration, entities should assess the annual changes in 
carbon stock. Entities that generate electricity, steam, hot or chilled 
water for distribution to other entities should use the energy-related 
avoided emissions method or the integrated method to assess the 
reductions associated with such generation. Finally, entities should 
use the action-specific methods only in situations specifically 
addressed by the methods provided in Sec.  300.8(h)(5), or situations 
where no other methods are applicable.
2. Base Periods and Base Values
    The interim final guidelines describe how entities should establish 
and use base periods and base values in the process of calculating and 
reporting emissions reductions. They also define the circumstances that 
might require some entities to adjust their base values or, under 
certain circumstances, establish new base periods and base values.
    In all cases, the final year of the chosen base period must 
immediately precede the first year of reported or registered 
reductions. Some commenters suggested that entities be permitted to 
establish base periods that ended one or more years prior the first 
reduction year. DOE did not adopt this suggested change because it 
believes that all reductions should be based on an uninterrupted record 
of emissions from the base period onward.
    Several commenters expressed concerns about the provisions covering 
revisions to base periods, base values, and methods due to boundary 
changes, such as acquisitions, divestitures, mergers, and the 
outsourcing or insourcing of emissions-producing operations. Some 
commenters argued that assigning a different base period for acquired 
operations other than that used by the original entity would impose a 
significant administrative burden for some reporters. Other commenters 
suggested that requiring an entity to adjust its base value to include 
the emissions of an acquisition would make that entity responsible for 
any changes in the acquisition's emissions that had occurred between 
the base period and the year of acquisition.
    DOE has retained a degree of flexibility in the final guidelines 
regarding whether an entity must recalculate base values and change 
base periods. The Technical Guidelines establish some general 
principles in section 2.3.3 regarding whether and how base values and 
base periods should be adjusted to reflect boundary changes. However, a 
reporting entity may incorporate a new acquisition into an existing 
base value only if the reporting entity has all of the required 
emissions and other data for the established base period. If this 
historical data do not exist, the reporting entity must establish a new 
base period for the acquired subentity. Whenever base values and base 
periods are adjusted, the reporting entity must include a discussion of 
the rationale for the adjustment in the report it submits to EIA.
    Several stakeholders expressed concern that they will be required 
to recalculate reductions and resubmit prior year reports to reflect 
boundary changes. DOE has clarified Sec.  300.8(f) of the final rule to 
indicate that resubmission of previous years' reports revised to 
reflect boundary changes occurring in subsequent years is not required. 
In general, the final guidelines provide that previously reported or 
registered emission reductions may not be altered unless such an 
alteration is necessary to correct a significant reporting error.
    One stakeholder proposed providing a grace period of 18 months 
before a reporter is required to adjust base values or base periods to 
reflect a boundary change to allow time for emissions accounting 
systems to be reconfigured. DOE recognizes that such boundary changes 
can pose significant problems

[[Page 20798]]

for reporters regarding the integration of emissions accounting systems 
and, therefore, it has amended the guidelines (section 300.5(g)) to 
provide for a grace period of at least 18 months before such changes 
must be reflected in 1605(b) reports. For boundary changes occurring 
after May 31 of a particular calendar year, base values would not have 
to be adjusted until the report that is submitted for the following 
calendar year. For example, for an acquisition made after May 31, 2005, 
a reporter would not be required to make any adjustments to its base 
value or values until it reports on its 2006 activities.
3. Enabling Reporters To Choose More Stringent Base Values
    One commenter requested that DOE allow reporters to establish base 
values that are more stringent than those derived from historical 
performance. While it is unlikely that many reporters would take 
advantage of such flexibility, DOE concedes that using a more stringent 
base value could be desirable under some circumstances (e.g., where 
another voluntary program establishes an emission reduction target 
based on improvements compared to an industry-wide benchmark). 
Therefore, DOE has revised the guidelines to permit selection of a more 
stringent base value, provided the reporter demonstrates that the base 
value is indeed more stringent than that required by the relevant 
method specified by the guidelines.
4. Emissions Intensity
    In 2002, the President set a goal of reducing U.S. emissions 
intensity by 18 percent in 2012, relative to 2002. Establishing methods 
for tracking the contribution that individual entities are making to 
this national goal is one of the key objectives of the revised 
guidelines for the 1605(b) program. Thus, the interim final General 
Guidelines and draft Technical Guidelines define a method for 
calculating emission reductions based on declines in emissions 
intensity.
    Most comments were generally supportive of the guidelines for 
calculating reductions based on emission intensity, including the 
flexibility to use either physical or monetary methods for calculating 
reductions. Some commenters, however, opposed the registration of 
reductions based on declining emissions intensity because it would 
permit entities with rising output to qualify for registered reductions 
even though their net, absolute emissions might be increasing. Others 
pointed out that since most industries experienced declining emissions 
intensity over time, as a result of technological and productivity 
improvements, emission reductions derived from declines in emissions 
intensity do not necessarily reflect any new efforts to reduce 
emissions by the reporting entity. Still others appeared to oppose such 
reductions because they implicitly exclude reductions attributable to 
declining output. After considering the comments, many of which raised 
some valid concerns, DOE has nonetheless concluded that emissions 
intensity remains the best approach to measuring emission reductions 
because it avoids adverse economic impacts on entities. DOE also has 
concluded that the basic methodology set forth in the interim final 
guidelines is valid.
5. Absolute Emissions
    The interim final guidelines provide a method for calculating 
reductions from declines in absolute emissions, as long as the output 
associated with these emissions had not declined. The requirement for 
output to be level or increasing was the focus of most of the comments 
received on these provisions of the guidelines. Some companies stated 
that this requirement would prevent them from registering reductions 
that were recognized under other reporting programs. Several companies 
also raised concerns about the apparent exclusion in the draft 
inventory guidelines of emission reductions associated with plants or 
other facilities that are closed.
    Since a key objective of the revised program is to give special 
recognition to reductions that contribute to the national goal defined 
by the President, DOE has retained the provision that permits the 
registration of reductions calculated using the absolute emissions 
method only if the economic output associated with such reductions is 
not declining. However, since some plant closings can contribute to 
reduced emissions intensity or to declines in absolute emissions, even 
if the output of an entity is stable or increasing, DOE has struck the 
language in the inventory guidelines that appeared to exclude such 
emission reductions from the reductions calculation. In addition, DOE 
has modified the guidelines to more clearly permit entities to report 
(but not register) absolute emission reductions when output is 
declining.
    One entity suggested that DOE permit entities to adjust the base 
value used in calculating absolute emission reductions to reflect the 
prior year emissions of acquisitions, even if the data available for 
the acquired entity does not match the base period used by the 
reporting entity. DOE has not accepted the suggestion because it would 
lead to base values that were no longer tied to specific base periods. 
In such circumstances, an entity should establish a new sub-entity to 
account for each acquisition. The new sub-entity could have its own 
unique base period and base value.
6. Changes in Carbon Stocks
    The draft Technical Guidelines allow entities to register 1/100th 
of the base year/base period carbon stocks on preserved forestland plus 
any incremental carbon stocks gained in the reporting year. Comments 
received on the draft guidelines were critical of this provision, 
citing it as arbitrary and stating that only increases (or decreases) 
in existing carbon stocks should be eligible for registration; that an 
easement in and of itself is not an adequate basis for assessing 
avoided emissions; and that the approach is not scientifically valid.
    In response to these comments, USDA conducted a further review of 
this provision and has determined that preserved forests are not static 
with respect to carbon stocks. Vegetation growth and mortality will 
occur, and the balance between those two factors will determine whether 
the net carbon flow is positive or negative. Preserved forests are 
likely to be affected by natural disturbances that affect growth and 
mortality rates, and, therefore, carbon stocks can be altered both 
positively and negatively by such changes. USDA also concluded that 
there is no technical basis for the registration of 1/100th, or any 
fraction, of the base period carbon stocks in preserved forests. DOE 
has eliminated from the final guidelines the provision providing 
special treatment of forest preservation. Entities reporting and 
registering forest preservation should follow the methods described in 
section 1.I.2 of the Technical Guidelines.
    Another commenter expressed concern that DOE had not made a clear 
enough distinction between increases in carbon sequestration and 
emission reductions achieved through other forestry-related activities. 
Detailed methods for calculating changes in carbon storage as well as 
methods for calculating emission reductions from other forestry-related 
activities are included under individual sections of the Technical 
Guidelines. The distinction between these multiple methods of reducing 
atmospheric carbon loadings is included in multiple sections of the 
General Guidelines and most specifically in Part I of the Technical 
Guidelines.

[[Page 20799]]

7. Avoided Emissions
    The interim final guidelines provide a method for calculating the 
emissions avoided by generating electricity, steam, or hot/chilled 
water from non-emitting or low-emitting sources of energy and 
distributing these secondary forms of energy to users. To estimate the 
quantity of emissions that would be avoided by the distribution of 
electricity generated from non-emitting or low-emitting sources, the 
draft Technical Guidelines used a ``benchmark'' value based on the 
average emissions intensity of the U.S. electricity generating sector, 
approximately 0.6 metric tons of CO2 per megawatt hour (MWH) 
of power generated.
    Numerous comments were received on the avoided emissions method and 
the benchmark value for distributed electricity in the draft Technical 
Guidelines. Several commenters noted that the national average 
intensity of the U.S. electricity generating sector is not necessarily 
a good indicator of the emissions avoided by the distribution of non-
emitting or low-emitting generation. They stated that regional averages 
of fossil-fired generation are likely to be a better indicator, because 
such averages exclude hydro-electric, nuclear and other sources of 
power that tend to be fully utilized, regardless of changes in 
electricity usage or the availability of other forms of generation. DOE 
has decided to change the avoided emissions benchmark for electricity 
to the regional fossil-fired averages for the electric sector, but the 
final guidelines impose a maximum value of 0.9 metric tons of 
CO2 per MWH. State-based regions that approximate 
appropriate NERC regions and subregions, together the specific factors 
to be used by reporters, will be specified by EIA. This maximum value, 
which approximates the average emissions intensity of fossil-fired 
electric power generating plants in the United States, will provide an 
incentive for all utilities to build new generating capacity at least 
as efficient as the most efficient coal-fired generating technologies.
    Other commenters expressed concerns regarding assignment of all 
reductions associated with avoided emissions to the generator, rather 
than to the buyer or ultimate user. DOE has not changed this aspect of 
the guidelines, but it has attempted to provide a workable mechanism by 
which the generators of avoided emissions can permit registered 
reductions to be registered by buyers or users, if they so choose.
    Some commenters recommended that DOE expand the concept of avoided 
emissions to encompass other areas where conventional fossil-fuels are 
being replaced by fuels generated from low-emitting and largely 
renewable resources. The interim final guidelines provide an action-
specific method for recognizing the emissions avoided by the productive 
use of methane recovered from landfills. The final guidelines provide 
additional action-specific methods to recognize the emissions avoided 
by the expanded production of methane from anaerobic digestion of waste 
at agricultural facilities and wastewater treatment plants. These 
methods are described in more detail in the action-specific methods 
section that follows. During the development of these guidelines, DOE 
also considered the possibility of changing the treatment of ethanol 
used in the transportation sector so as to shift the recognition for 
the emission reductions that result from increased ethanol supply and 
use from vehicle-owners to producers. Recognition of producers might 
encourage such companies to participate and report on all of their 
emissions, including those associated with ethanol production. While 
the guidelines continue to consider the emissions from ethanol 
combustion as biogenic and the responsibility of users, DOE may 
reconsider the treatment of ethanol in the future.
    Several commenters also pointed out that actions taken by an entity 
affecting the emissions of one or more other entities are not limited 
to the export or import of energy products. These commenters provided 
examples such as the reuse of fly ash as a substitute for Portland 
cement in concrete, which displaces emissions from the manufacture of 
Portland cement, and post-consumer materials recycling, which reduces 
emissions associated with the manufacture of materials from virgin 
resources. Many of these actions are not conducive to the use of 
entity-wide methods to estimate emissions reductions. DOE has modified 
the definition of ``avoided emission'' to make it more clearly 
applicable to these other types of avoided emissions, and it has 
included an action-specific method for estimating reductions associated 
with fly ash reuse as a substitute for Portland cement in concrete. DOE 
may consider in the future additional action-specific methods for 
estimating reductions of indirect emissions from such activities as 
manufacturing of energy efficient products and increased recycling of 
certain materials.
    With respect to the increased manufacturing of energy efficient 
products, DOE may seek to develop methods capable of quantifying the 
net emission reductions realized by very small emitters as a result of 
the efforts of some manufacturers to increase the average efficiency of 
their products to levels well above Federally-mandated efficiency 
standards. Such very small emitters are very unlikely to participate 
directly in the 1605(b) reporting program, so doublecounting of such 
emission reductions would not be likely.
    For recycled materials, DOE may seek to develop methods capable of 
quantifying the net emission reductions that result from increased use 
of recycled materials in new products, taking into account the full 
life cycle emissions associated with production, recovery, transport 
and reprocessing of the affected materials, while also ensuring that 
the double registration of reductions associated with increased 
recycling is prevented.
8. Action-Specific Methods
    The interim final guidelines provide for the use of action-specific 
methods under a number of different circumstances. A generic method is 
provided that was designed to be used in estimating the reductions that 
resulted from a variety of different types of actions, such as fuel 
switching or efficiency investments. In addition, several other methods 
included in the interim final guidelines are designed to estimate the 
reductions resulting from specific types of actions, including landfill 
gas recovery, coal mining gas recovery, geologic sequestration, and 
transmission and distribution losses. It was DOE's intent in the 
interim final guidelines to permit reporters not planning to register 
reductions to use action-specific methods wherever they are applicable. 
Reporters intending to register reductions, however, are permitted to 
use action-specific methods only when none of the other four methods 
are applicable. As a result of this limitation, it was expected that 
entities registering reductions would generally use action-specific 
methods only for sources or activities for which they were specifically 
designed. In general, entities were strongly encouraged to report on an 
entity-wide basis and use emissions intensity or absolute emission 
methods as their primary means of estimating their reductions.
    DOE received a large number of comments on these provisions of the 
interim final guidelines. Many of these comments urged DOE to expand 
the opportunities to register emission reductions estimated using 
action-specific (or project-based) methods.

[[Page 20800]]

Several reporters argued that project-based reporting should be an 
accepted basis for registered reductions, noting that project reporting 
is contemplated by section 1605(b) and much of the greenhouse gas 
emissions trading being conducted in the U.S. is project-based. Other 
comments urged the addition of action-specific methods capable of 
estimating reductions from other types of actions, such as anaerobic 
digesters or demand-side management programs.
    The final guidelines retain the provisions of the interim final 
guidelines that strictly limit the use of action-specific methods as 
the basis for registered reductions, while not restricting the use of 
other action-specific methods by reporters not interested in 
registering reductions. The experience under the existing 1605(b) 
reporting program has shown that the relationship between individual 
projects and an entity's overall emissions is ambiguous, because so 
many factors other than emission reduction projects conducted by the 
entity can affect these emissions. DOE believes that allowing 
registration of project-based reductions would invite criticism similar 
to that directed at the existing 1605(b) program, namely that it allows 
entities to ``cherry-pick'' activities that achieve emission reductions 
while obscuring the overall emission performance of the organization. 
However, DOE recognizes that data on project-level emission reductions 
can be useful in disseminating information on effective ways to reduce 
emissions of greenhouse gases, and DOE has clarified the final 
guidelines to place more emphasis on the two ways that reporters can 
highlight individual actions that they believe have contributed to 
their improved greenhouse gas emissions profile. First, they can 
quantify the effects of specific actions or projects by reporting, but 
not registering, reductions using a reporter-defined action-specific 
method; and, second, they can provide anecdotal information regarding 
emission reduction activities in the summary description of actions 
taken to reduce emissions required by Sec.  300.8(i).
    Section 300.8(h)(5) of the interim final guidelines states that an 
entity-wide reporter may use the action-specific approach to estimate 
emission reductions for actions within the entities boundaries only if 
it is not possible to measure accurately emission changes based on 
changes in emissions intensity, changes in absolute emissions, changes 
in carbon storage, or changes in avoided emissions as outlined in 
section 300.8, paragraphs (h)(1) through (h)(4). In the draft Technical 
Guidelines accompanying the interim final General Guidelines, DOE 
identified several specific actions for which it will be difficult to 
accurately measure emission reductions using the methods in section 
300.8 paragraphs (h)(1) through (h)(4). They are: coalmine methane 
recovery, landfill methane recovery, geologic sequestration, and 
transmission and distribution improvements.
    a. Integrating action-specific emission reductions with other 
emission reductions. Comments sought clarification on the integration 
of action-specific emission reductions with those measured using 
methods set forth in section 300.8, paragraphs (h)(1) through (h)(4) of 
the interim final General Guidelines. Entities may add action-specific 
reductions to their net entity-wide registered reductions if they meet 
all other requirements of these guidelines for registration and 
estimate action-specific reductions using methods contained in the 
Technical Guidelines. Among the constraints the final Technical 
Guidelines place on the use of action-specific reductions are: (1) The 
emissions affected by the action may not appear in any other subentity 
or entity-wide emission reduction calculation submitted by the 
reporter; and (2) emission reductions using this calculation may not be 
reported by any other entity on an entity-wide or sub-entity basis.
    b. Expanding the range of action-specific reductions. A number of 
comments sought expansion of the range of action-specific reductions. 
Some commenters cited the language of section 1605(b) that directs the 
Secretary of Energy to establish procedures for the accurate voluntary 
reporting of information on annual reductions of greenhouse gas 
emissions and carbon fixation achieved through any measures, including 
fuel switching, forest management practices, tree planting, use of 
renewable energy, manufacture or use of vehicles with reduced 
greenhouse gas emissions, appliance efficiency, methane recovery, 
cogeneration, chlorofluorocarbon capture and replacement, and power 
plant heat rate improvement. Elsewhere in this Supplementary 
Information (see II. C. above, on the distinction between reporting 
under the program and registering reductions), DOE addresses comments 
that question DOE's authority under section 1605(b) to establish 
separate classes of reporting in the database maintained by EIA. That 
discussion is relevant here. DOE reiterates that entities may report 
reductions resulting from a broad range of specific actions under the 
revised guidelines; it is only registered reductions that limit the use 
of action-specific methods to those reductions which cannot be captured 
by one of the other emission reduction calculation methods.
    Other comments sought to expand the range of action-specific 
reductions allowed to be registered. DOE was persuaded that methods for 
several of these actions should be added to the guidelines. These 
include a method for measuring action-specific reductions from 
anaerobic digestion of waste at agricultural facilities or wastewater 
treatment plants. DOE views this method as similar to and a logical 
extension of methods for estimating reductions from coal mine and 
landfill gas recovery. DOE was also persuaded that the volume and 
magnitude of reductions attributable to residential and commercial 
demand-side management and other programs, and the limited likelihood 
that individual residential and small commercial end-users would be 
participants in the program, justified a method for electric power 
generators and others that implement such programs to register 
emissions reductions that can be reliably attributed to those efforts. 
However, the final guidelines provide that reporting entities must 
certify that the program was directed at residential or other very 
small emitters (such as small businesses or other entities that the 
reporter estimates typically emit less than 500 metric tons of 
CO2 annually). The new action-specific method established in 
the Technical Guidelines attempts to ensure that the reductions 
reported are only those that can be attributed to the specific effects 
of the demand-side management or other program evaluated, and not to 
other market or regulatory changes. DOE has also provided a new action-
specific method for calculating reductions associated with increased 
use of flyash by concrete mixers.
    Several commenters sought inclusion of action-specific methods for 
registering reductions from increases in the manufacturing and sale of 
energy efficient products such as home appliances and automobiles, and 
others requested a method for registering reductions from increased 
materials recycling. Although DOE has not adopted these additional 
methods, DOE expects in the future to solicit comment on methods for 
calculating reductions from energy efficient products and materials 
recycling and will then consider incorporating suitable methods in the 
Technical Guidelines.
    c. Changes to proposed action-specific methods. Several comments 
offered alternative methods for calculating

[[Page 20801]]

action-specific reductions from landfill gas recovery and transmission 
and distribution improvement. For landfill gas recovery, commenters 
recommended methods placing a greater reliance on modeled emissions. 
However, DOE did not adopt these recommendations because it is 
concerned they would add uncertainty and reduced transparency of 
action-specific reductions from this source. Similarly, a request for 
quantifying emission reductions for displacing coal or oil with 
landfill gas by a landfill gas purchaser was not adopted because those 
reductions will be captured in changes in the purchaser's emission 
intensity, and inclusion would result in double counting. DOE, however, 
has adjusted the method for estimating reductions from transmission and 
distribution improvements to emphasize changes in system-wide 
transmission and distribution emission intensity.
    Comments related to geologic sequestration were also provided, 
focusing on monitoring and ownership. One commenter asked whether 
available monitoring methods only apply to enhanced oil recovery, or to 
all geologic sequestration projects. DOE clarified that the monitoring 
methods should be used for all types of geologic sequestration. Another 
commenter argued that site-specific monitoring should be required of 
all available monitoring options, including those based on estimating 
future losses of carbon dioxide after injection has been completed. The 
argument is that the data and methodologies for undertaking such 
estimates of future losses are insufficient. In October 2005, the IPCC 
published a Special Report on Carbon Dioxide Capture and Storage, which 
includes a comprehensive discussion of available monitoring techniques 
for geologic sequestration. Noting that all monitoring options 
recommended by the IPCC are site-specific, DOE has revised the 
guidelines to also require site-specific monitoring for all of its 
monitoring methods. In addition, DOE has clarified its guidelines to 
ensure that entities may not claim offset or other types of reductions 
associated with the capture and sale of CO2 unless they have 
an agreement with the entity that is permanently sequestering the 
CO2, in accord with DOE's Technical Guidelines.
    d. Ozone-depleting gases. One commenter argued for inclusion of 
ozone depleting gases, such as chlorofluorocarbons (CFCs) and 
hydrochlorofluorocarbons (HCFCs), because it would encourage recovery 
and destruction of these greenhouse gases. Section 1605(b) expressly 
permits reporting of annual reductions of greenhouse gas emissions 
achieved through chlorofluorocarbon capture and replacement. While 
these gases have radiative forcing properties, they also destroy 
stratospheric ozone, which may influence global climate. The IPCC has 
not determined definitive global warming potential (GWP) for CFCs and 
HCFCs. It has, instead, estimated these gases in broad ranges. For 
example, the IPCC Third Assessment Report gives the net 100-year GWP 
for CFC-11 as a minimum of -600 and a maximum of 3600.
    Because of the development of rated methods for calculating 
emissions and emission reductions of ozone depleting substances would 
be complex and time-consuming, the final guidelines do not permit the 
registration of reductions of these gases. However, DOE has included an 
action-specific method for calculating reductions from the destruction 
of CFCs that have been captured or replaced, and these reductions may 
be reported under the 1605(b) program. DOE may in the future solicit 
comment on methods for calculating reductions of other ozone depleting 
substances and will consider incorporating suitable methods in the 
Technical Guidelines.
9. Estimating Reductions From Energy Generation and Distribution
    For electricity generators, the interim final guidelines provide a 
single formula that integrates the emissions intensity and avoided 
emissions methods. DOE considered this integrated formula to be 
necessary to provide the same opportunity for recognition to any 
generator of additional electric power, regardless of the 
characteristics of that entity's base period generation. Some utilities 
objected to the use of the integrated formula and proposed that DOE 
permit utilities to base the emission reduction calculations on any 
decline in the entity's base period emissions intensity, regardless of 
whether the entity had increased its power generation. After careful 
consideration of these comments, DOE has decided to retain the 
integrated formula. Because the electricity generating sector is both 
very diverse and is given special recognition for emissions avoided by 
addition of new generation from non-emitting or low-emitting sources, 
the integrated formula is necessary to give all generators a roughly 
equal opportunity to qualify for registered reductions.
    The integrated formula uses the same benchmark value used for the 
calculation of avoided emissions from electricity generation. In 
response to comments, DOE has decided to change this benchmark to the 
regional average emissions intensity of fossil-fired generation. This 
decision is described in more detail in the section on avoided 
emissions, above.
    One commenter asserted that the method for allocating emissions to 
thermal and electric streams for combined heat and power (CHP) 
generators does not accurately reflect actual thermal efficiencies. The 
method included in the interim final guidelines requires reporters to 
assume the efficiency of the thermal component of CHP systems to be 80 
percent. The final guidelines are more flexible and allow the reporter 
to use the actual efficiency of thermal energy generation, if known. 
Reporters may use a default value for thermal efficiency of 80 percent 
if this value is unknown.

L. Offset Reductions

    The interim final guidelines provide a mechanism by which a 
reporting entity could register the reductions achieved by another 
entity that was willing to forego this recognition. To ensure that this 
mechanism for reporting offset reductions did not undermine the 
emphasis on entity-wide reporting, the interim final guidelines require 
that the other entity complete annual reports that meet all of DOE's 
requirements and that these reports be submitted to DOE by the 
reporting entity.
    A broad range of commenters noted that this mechanism was simply 
not practical for use in a number of situations, such as:
     When multiple entities are supporting the offset 
reductions achieved by a single entity (such as a group of utilities 
supporting reforestation projects on the land of single public agency, 
or when a number of different electric power users seek recognition for 
the offset reduction reductions created by a single renewable or 
nuclear power generator).
     When a reporting entity supports the offset reductions 
achieved by a large number of very small emitters, such as a utility 
that supports a demand-side management program that provides incentives 
for the purchase of energy efficient lights by homeowners.
    To address these problems, DOE has made a few modifications to the 
offset reduction provisions of the guidelines. The final guidelines now 
provide an action-specific method to enable utilities to register the 
reductions that can be attributed specifically to the effects of 
utility-sponsored demand-side management programs. The guidelines also 
permit more than one entity to be the recipient of offset reductions 
from a

[[Page 20802]]

single other entity. The assignment of registered reductions to 
multiple reporting entities, as offset reductions, can only be done at 
the time they are initially reported to EIA. In addition, DOE has made 
it clear that the guidelines permit other Federal agencies or even 
smaller operational units, such as a wildlife refuge, to generate 
registered reductions that are reported by other entities as offsets.

M. Certification and Verification

    Most comments supported the need for reporting entities to certify 
the accuracy of their reports, although there were different views on 
which representatives of an entity should be required to provide such 
certifications and the nature of these certifications. Similarly, there 
was widespread support for DOE's decision to encourage, but not 
require, independent verification of reports, and a number of specific 
comments addressed how DOE should define such an independent 
verification.
1. Certification
    Section 300.10 of the interim final General Guidelines states that 
all reports must be certified by the head of household, chief executive 
officer, agency head, or an officer or employee of the entity who is 
responsible for reporting the entity's compliance with environmental 
regulations. DOE received comments calling for a higher level of 
corporate certification and others calling for more flexibility in the 
identity of a certifier. DOE believes that it has properly addressed 
the need for a high level of certification while granting sufficient 
flexibility to participating entities.
    More narrow comments sought a definition of ``reasonable steps,'' 
in Sec.  300.10(c)(1) of the interim final General Guidelines, that a 
reporter must have taken to ensure emissions, emission reductions and/
or sequestration are not double-counted, and asked that certification 
requirements on third parties that are redundant with those for 
reporting entities be removed to limit reporter burden. DOE has revised 
the final guidelines language to address these concerns by explaining 
what it considers to be ``reasonable steps'' and by eliminating certain 
redundant certification requirements.
    Several commenters expressed concerns that the certification 
requirements would discourage farmers, ranchers, and small woodland 
owners from participating in the 1605(b) program. DOE has included 
provisions for aggregators and offsets (described above) that should 
mitigate these concerns.
2. Independent Verification
    Section 300.11 of the interim final General Guidelines states that 
reporting entities are encouraged to have their annual reports reviewed 
by independent and qualified auditors and then defines the 
characteristics required for an auditor to be viewed by DOE as both 
independent and qualified. That section also enumerates the expected 
scope of an independent verification.
    DOE received a substantial number of comments on independent 
verification. Some comments expressed the view that independent 
verification is necessary for data credibility, and, therefore, should 
be required rather than encouraged. Other comments argued against 
requiring independent verification. DOE recognizes the value of 
independent verification but remains sensitive to the cost and burden 
it may impose on prospective program participants. DOE seeks in the 
final guidelines to encourage independent verification, while limiting 
reporter burden, by permitting reporting entities to register 
reductions without reporting and rating emissions estimates at the 
individual source or sink level if they receive independent 
verification that the quantity-weighted average of methods used for 
preparing their emissions inventory meet or exceed 3.0. Further, DOE 
has extended the July 1 annual reporting deadline to September 1 for 
independently verified reports.
    Other comments sought inclusion of additional detail on the 
processes and procedures that verifiers must follow when undertaking an 
independent verification, and expressed a desire for consistency with 
existing standards. DOE wishes to provide greater flexibility than 
could be obtained through the adoption of a single existing standard, 
but it also wishes its guidelines to be generally consistent with 
current domestic and international practices. Accordingly, the final 
guidelines direct independent verifiers to refer to such sources as the 
California Climate Action Registry Certification Protocol, the Climate 
Leaders Inventory Management Plan Checklist and the draft ISO 14064.3 
standard when completing a verification.
    DOE received comments suggesting that a separate and distinct set 
of rules for ``accrediting'' verifiers should be prepared by DOE. DOE 
believes this approach is too prescriptive and deterministic for a 
rapidly developing and evolving field of expertise. Moreover, DOE 
recognizes that many potential reporters may seek independent 
verification of data submitted to other domestic and international 
programs, in addition to the Voluntary Reporting of Greenhouse Gases 
Program, and does not wish to preclude verifiers accepted by other 
programs from performing an independent verification under these 
guidelines. Consistent with that approach, DOE has not created a new 
set of rules for accrediting independent verifiers; instead, the final 
guidelines incorporate and reference elements of the California Climate 
Action Registry requirements and the draft ISO 14064.3 guidance.

N. Reporting and Record Keeping

    Section 300.9 of the interim final General Guidelines requires 
entities intending to register reductions to maintain adequate 
supporting records for at least three years to enable verification of 
all information reported. A number of comments voiced concern that the 
three-year requirement was not long enough to support the transition to 
a future regulatory program. The comments sought a five-year or longer 
recordkeeping requirement. Meanwhile, other comments noted the 
potential burden of even a three-year recordkeeping requirement. It was 
not DOE's intent to envisage the existence or design of a future 
regulatory regime, but rather to ensure that reports submitted to this 
program be verifiable for a number of years subsequent to submission. 
In addition, DOE believes many entities are likely to retain records 
beyond the period required by DOE guidelines in anticipation that there 
may be a regulatory program in the future. Thus, DOE was not persuaded 
to extend the overall recordkeeping requirement. However, several of 
the comments pointed out that such verification would require base 
period data that may pre-date the three year recordkeeping requirement. 
In response, DOE has extended the recordkeeping requirement for base 
period data to the duration of an entity's participation in the 
program.

O. Report Review and Acceptance Process

    Section 300.12 of the interim final General Guidelines states that 
EIA will review all reports to ensure that they are consistent with the 
General Guidelines and Technical Guidelines. Subject to the 
availability of adequate resources, EIA intends to notify reporters of 
the acceptance or rejection of any report within six months of receipt 
and sooner if feasible. If EIA does not accept a report or if it 
determines that emission reductions intended for registration do

[[Page 20803]]

not qualify, the report will be returned with an explanation of its 
inadequacies. The reporting entity may resubmit a modified report for 
further consideration at any time.
    Comments indicated concern that the EIA review process would not be 
sufficiently rigorous in the absence of independent verification. More 
generally, comments sought inclusion of more detail on the review 
process to be undertaken by EIA. In response to these comments, DOE has 
included additional language on the specifics of EIA's review process.

P. Publication of General Guidelines in the Code of Federal Regulations

    Several commenters claim that by publishing the General Guidelines 
as a rule for codification in the Code of Federal Regulations, DOE 
exceeded its authority under section 1605(b) to issue voluntary 
guidelines for reporting. In their view, the use of mandatory words in 
the General Guidelines is inconsistent with a voluntary program.
    DOE addressed the question of publication in the Code of Federal 
Regulations in the preamble to the notice of interim final guidelines 
published on March 24, 2005 (70 FR 15176). In addition to giving 
reasons favoring codification, DOE related that the Director of the 
Federal Register had written a letter in response to a request from an 
interested person that stated his conclusion that it is proper for DOE 
to include the revised General Guidelines in the Code of Federal 
Regulations. DOE has placed the Director's letter in the administrative 
record for this rulemaking.
    DOE rejects the comments contending that mandatory language may not 
be used in the revised guidelines, for two reasons. First, the revised 
guidelines are largely procedural rules, and procedural rules usually 
are stated in mandatory terms. Second, the requirements in the revised 
guidelines do not alter the voluntary nature of the 1605(b) program. 
Entities, in their sole discretion, may decide to report under the 
Voluntary Reporting of Greenhouse Gases Program. Those who do decide to 
report may, again in their sole discretion, decide to seek the greater 
credibility that would be associated with registering their emissions 
and reductions. Their participation is voluntary, but if they decide to 
report or register their emissions and reductions, then they must abide 
by any requirements in the revised guidelines. This is entirely 
consistent with section 1605(b).

IV. 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. Participation in the reporting program is 
voluntary, and the Department anticipates that small entities will 
weigh the benefits and costs when deciding to participate. To minimize 
the burden on small entities that choose to participate, the guidelines 
exempt ``small emitters'' (usually small businesses or organizations) 
from requirements for an entity-wide inventory and an entity-wide 
assessment of emission reductions. These exemptions mean that small 
emitters can participate at a significantly lower cost than otherwise. 
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, they 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

[[Page 20804]]

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 final rule under the OMB and DOE guidelines and has concluded 
that it is consistent with applicable policies in those guidelines.
    One organization commented on DOE's interim final and draft 
Technical Guidelines and sought clarification on whether and how DOE 
and EIA information quality guidelines apply to information submitted 
under section 1605(b). The organization criticized the interim final 
guidelines for failing to address issues that it thought would arise 
when third parties challenge the quality of publicly disseminated 
emissions reduction data voluntarily submitted to DOE by business and 
industry stakeholders. In this commenter's view, third party challenges 
will require EIA to request substantiation of the validity of the 
reported data and possibly lead to disclosure of confidential business 
information or trade secrets. This, it argued, could cause business and 
industry stakeholders to be reluctant to take part in the voluntary 
reporting program or, at least, add to the cost of doing business. This 
commenter also felt the perceived value of registered reductions would 
be called into question if, as a result of data quality challenges, the 
underlying data were viewed as unreliable.
    As requested, DOE clarifies here the application of DOE and EIA 
information quality guidelines to information submitted under section 
1605(b). Agency information quality guidelines apply to information 
disseminated by DOE based on the voluntary reports of greenhouse gas 
emissions information reported to EIA under section 1605(b) of the 
Energy Policy Act of 1992. When EIA disseminates information reported 
under section 1605, the public has the opportunity to utilize DOE's 
established administrative mechanisms to seek and obtain, where 
appropriate, timely correction of information maintained and 
disseminated by EIA that does not comply with applicable information 
quality guidelines. As set forth in DOE's Information Quality 
Guidelines, requests for correction must: (1) Specifically identify the 
information in question and the document(s) containing the information; 
(2) explain with specificity the reasons why the information is 
inconsistent with the applicable quality standards in the OMB, DOE, or 
EIA guidelines; (3) present substitute information, if any, with an 
explanation showing that such information is consistent with the 
applicable quality standards in the OMB, DOE, or EIA guidelines; and 
(4) justify the necessity for, and the form of, the requested 
correction.
    While DOE and EIA seek to ensure the transparency and accuracy of 
1605(b) information by specifying the methods that must be used to 
calculate emission reductions that are to be registered and by 
requiring certain information about the entity that produced the 
emissions, section 1605(b)(2) requires self-certification by reporting 
entities and does not authorize or direct EIA to verify the accuracy of 
information in reports. In addition, section 1605(b)(3) provides that 
trade secret and commercial or financial information that is privileged 
or confidential shall be protected as provided in 5 U.S.C. 552(b)(4). 
If a member of the public seeking correction submits information that 
calls into question the accuracy of information in a particular 1605(b) 
report, then EIA may ask the person who submitted the report to respond 
to the issues raised and, if appropriate, submit corrected 1605(b) 
information.

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 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 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 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

[[Page 20805]]

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 April 13, 2006.
Karen A. Harbert,
Assistant Secretary for Policy and International Affairs.

0
Accordingly, the interim final rule published at 70 FR 15169 on March 
24, 2005, which added a new Subchapter B to Title 10 of the Code of 
Federal Regulations, is adopted as a final rule with changes. 
Subchapter B consisting of part 300 is revised 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.
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. The General Guidelines in this part and the Technical 
Guidelines incorporated by reference in Sec.  300.13 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) Reporting under the program. (1) Each reporting entity, whether 
or not it intends to register emissions as described in paragraph (c) 
of this section, must:
    (i) File an entity statement that meets the appropriate 
requirements in Sec.  300.5(d) through (f) of this part;
    (ii) Use appropriate emission inventory and emission reduction 
calculation methods specified in the Technical Guidelines (incorporated 
by reference, see Sec.  300.13), and calculate and report the weighted 
average quality rating of any emission inventories it reports;
    (iii) Comply with the record keeping requirements in Sec.  300.9 of 
this part; and
    (iv) Comply with the certification requirements in Sec.  300.10 of 
this part;
    (2) Each reporting entity, whether or not it intends to register 
emissions as described in paragraph (c) of this section, may report 
offset reductions achieved by other entities outside their boundaries 
as long as such reductions are reported separately and calculated in 
accordance with methods specified in the Technical Guidelines. The 
third-party entity that achieved these reductions must agree to their 
being reported as offset reductions, and must also meet all of the 
requirements of reporting that would apply if the third-party entity 
reported directly under the 1605(b) program.
    (3) An entity that intends to register emissions and emission 
reductions must meet the additional requirements referenced in 
paragraph (c) of this section.
    (4) An entity that does not intend to register emissions and 
emission reductions may choose to report its emissions and/or emission 
reductions on an entity-wide basis or for selected elements of the 
entity, selected gases or selected sources.
    (5) An entity that does not intend to register emissions may report 
emission inventories for any year back to 1990 and may report emission 
reductions for any year back to 1991, relative to a base period of one 
to four years, ending no earlier than 1990.
    (c) Registration requirements. Entities that seek to register 
reductions must meet the additional requirements in this paragraph; 
although these requirements differ depending on whether the entity is a 
large or small emitter.
    (1) To be eligible for registration, a reduction must have been 
achieved after 2002, unless the entity has committed under the Climate 
Leaders or Climate VISION programs to reduce its entity-wide emissions 
relative to a base period that ends earlier 2002, but no earlier than 
2000.
    (2) A large emitter must submit an entity-wide emission inventory 
that meets or exceeds the minimum quality requirements specified in 
Sec.  300.6(b) and the Technical Guidelines (incorporated by reference, 
see Sec.  300.13). Registered reductions of a large emitter must be 
based on an entity-wide assessment of net emission reductions, 
determined in accordance with Sec.  300.8 and the Technical Guidelines.
    (3) A small emitter must also submit an emission inventory that 
meets minimum quality requirements specified in Sec.  300.6(b) and the 
Technical Guidelines (incorporated by reference, see Sec.  300.13) and 
base its registered reductions on an assessment of annual changes in 
net emissions. A small emitter, however, may restrict its inventory and 
assessment to a single type of activity, such as forest management, 
building operations or agricultural tillage.
    (4) Reporting entities may, under certain conditions, register 
reductions achieved by other entities:
    (i) Reporting entities that have met the requirements for 
registering their own reductions may also register offset reductions 
achieved by other entities if:
    (A) They have an agreement with the third-party entities to do so 
and these

[[Page 20806]]

third-party entities have met all of the requirements for registration; 
or
    (B) They were the result of qualified demand management or other 
programs and are calculated in accordance with the action-specific 
method identified in Sec.  300.8(h)(5).
    (ii) Small emitters that serve as an aggregator may register offset 
reductions achieved by non-reporting entities without reporting on 
their own emissions, as long as they have an agreement with the third-
party entities to do so and these third-party entities have met all of 
the requirements for registration.
    (d) Forms. Annual reports of greenhouse gas emissions, emission 
reductions, and sequestration must be made on forms or software made 
available by 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 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 Guidelines (incorporated by reference, see Sec.  
300.13) 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 may 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) Updates to emission inventory methods, emission factors and 
other provisions that are contained in industry protocols or standards. 
The review may also consider updates to any government-developed and 
consensus-based emission factors for which automatic updating is not 
provided in the Technical Guidelines;
    (4) Modifications to the benchmarks or emission conversion factors 
used to calculate avoided and indirect emissions; and
    (5) 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 of a small emitter means, with respect to a small emitter, 
any single category of anthropogenic production, consumption or other 
action that releases emissions or results in 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 entities. An aggregator may be a large or small 
emitter, such as a trade association, non-profit organization or public 
agency.
    Anthropogenic means greenhouse gas emissions and removals that are 
a direct result of human activities or are the result of natural 
processes that have been affected by human activities.
    Avoided emissions means the greenhouse gas emission reductions that 
occur outside the organizational boundary of the reporting entity as a 
direct consequence of changes in the entity's activity, including but 
not necessarily limited to the emission reductions associated with 
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.
    Boundary means the actual or virtual line that encompasses all the 
emissions and carbon stocks that are to be quantified and reported in 
an entity's greenhouse gas inventory, including de minimis emissions. 
Entities may use financial control or another classification method 
based on ownership or control as the means of determining which sources 
or carbon stocks fall within this organizational boundary.
    Carbon dioxide equivalent means the amount of carbon dioxide by 
weight emitted into the atmosphere that would produce the same 
estimated radiative forcing as a given weight of another radiatively 
active gas. Carbon dioxide equivalents are computed by multiplying the 
weight of the gas being measured by its estimated global warming 
potential.
    Carbon stocks mean the quantity of carbon stored in biological and 
physical systems including: trees, products of harvested trees, 
agricultural crops, plants, wood and paper products and other 
terrestrial biosphere sinks, soils, oceans, and sedimentary and 
geological sinks.
    Climate Leaders means the EPA sponsored industry-government 
partnership that works with individual companies to develop long-term 
comprehensive climate change strategies. Certain Climate Leaders 
Partners have, working with EPA, set a corporate-wide greenhouse gas 
reduction goal and have inventoried their emissions to measure progress 
towards their goal.
    Climate VISION means the public-private partnership initiated 
pursuant to a Presidential directive issued in 2002 that aims to 
contribute to the President's goal of reducing greenhouse gas intensity 
through voluntary frameworks with industry. Climate VISION partners 
have signed an agreement with DOE to implement various climate-related 
actions to reduce greenhouse gas emissions.
    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 are emissions from sources within the 
organizational boundaries of an entity.
    Distributed energy means electrical or thermal energy generated by 
an entity that is sold or otherwise exported outside of the entity's 
boundaries for use by another entity.
    EIA means the Energy Information Administration within the U.S. 
Department of Energy.
    Emissions means the direct release of greenhouse gases to the 
atmosphere from any anthropogenic (human induced) source and certain 
indirect

[[Page 20807]]

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 means the whole or part of any business, institution, 
organization, government agency or corporation, or household that:
    (1) Is recognized under any U.S. Federal, State or local law that 
applies to it;
    (2) Is located and operates, at least in part, in the United 
States; and
    (3) The emissions of such operations are released, at least in 
part, in the United States.
    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 the gases that may be reported to the 
Department of Energy under this program. They are:

(1) Carbon dioxide (CO2)
(2) Methane (CH4)
(3) Nitrous oxide (N2O)
(4) HydrofluorocarbonsHFC-23 [trifluoromethane-(CHF3]HFC-32 
[trifluoromethane-CH2F2], 
CH2CF3, CH3F, 
CHF2CF3, CH2FCF3, 
CH3FCF3, CHF2CH2F, 
CF3CH3, CH2FCH2F, 
CH3CHF2, CH3CH2F, 
CF3CHFCF3, 
CH2FCF3CF3, 
CHF2CHFCF3, 
CF3CH2CF3, 
CH2FCF2CHF2, 
CHF2CH2CF3, 
CF3CH2CF2CH3, 
CH3 CHFCHFCF2)
(5) Perfluorocarbons (perfluoromethane-CF4, perfluoroethane-
C2F6, C3F8, 
C4F10, c-C4F8, 
C5F12, C6F14)
(6) Sulfur hexafluoride (SF6)
(7) Chlorofluorocarbons (CFC-11 [trichlorofluoromethane-
CCl3F], CCl2F2, CClF3, 
CCl2FCClF2, CClF2CClF2, 
ClF3CClF2,)
(8) 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. (Note: As 
provided in Sec.  300.6(i), chlorofluorcarbons and other gases with 
quantifiable climate forcing effects may be reported to the 1605(b) 
program if DOE has established an appropriate emission inventory or 
emission reduction calculation method, but reductions of these gases 
may not be registered.)

    Incidental lands are entity landholdings that are a minor component 
of an entity's operations and are not actively managed for production 
of goods and services, including:
    (1) Transmission, pipeline, or transportation right of ways that 
are not managed for timber production;
    (2) Land surrounding commercial enterprises or facilities; and
    (3) Land where carbon stock changes are determined by natural 
factors.
    Indirect emissions means greenhouse gas emissions from stationary 
or mobile sources outside the organizational boundary that occur as a 
direct consequence of an entity's activity, including but not 
necessarily limited to the emissions associated with the generation of 
electricity, steam and hot/chilled water used by the entity.
    Large emitter means an entity whose annual emissions are more than 
10,000 metric tons of CO2 equivalent, as determined in 
accordance with Sec.  300.5(c).
    Net emission reductions means the sum of all annual changes in 
emissions, eligible avoided emissions and sequestration of the 
greenhouse gases specifically identified in Sec.  300.6(i), and 
determined to be in conformance with Sec. Sec.  300.7 and 300.8 of this 
part.
    Offset means an emission reduction that is included in a 1605(b) 
report and meets the requirements of this part, but is achieved by an 
entity other than the reporting entity. Offset reductions must not be 
reported or registered by any other entity and must appear as a 
separate and distinct component of an entity's report. Offsets are not 
integrated into the reporting entity's emissions or net emission 
reductions.
    Registration means the reporting of emission reductions that the 
EIA has determined meet the qualifications for registered emission 
reductions set forth in the guidelines.
    Reporting entity means an entity that has submitted a report under 
the 1605(b) program that has been accepted by the Energy Information 
Administration.
    Reporting year means the year that is the subject of a report to 
DOE.
    Sequestration means the process by which CO2 is removed 
from the atmosphere, either through biologic processes or physical 
processes.
    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 CO2 or some other greenhouse gas is 
sequestered.
    Small emitter means an entity whose annual emissions are less than 
or equal to 10,000 metric tons of CO2 equivalent, as 
determined in accordance with Sec.  300.5(c), and that chooses to be 
treated as a small emitter under the guidelines.
    Source means any land, facility, process, vehicle or activity that 
releases a greenhouse gas.
    Start year means the year upon which the initial entity statement 
is based and the last year of the initial base period(s).
    Subentity means a component of any entity, such as a discrete 
business line, 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 (as defined in this section) 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, 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 businesses, 
public or private institutions or organizations, households, or other 
entities having operations that annually release emissions, at least in 
part, in the United States. Entities may be defined by, as appropriate, 
a certificate of incorporation, corporate charter, corporate filings, 
tax identification number, or other legal basis of identification 
recognized under any Federal, State or local law or regulation. If a 
reporting entity is composed of more than one entity, all of the 
entities included must be responsible to the same management hierarchy 
and all entities that have the same management hierarchy must be 
included in the reporting entity.
    (b) All reporting entities are strongly encouraged to define 
themselves at the

[[Page 20808]]

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 institutional charters. 
While reporting at the highest level of aggregation is encouraged, DOE 
recognizes that certain businesses and institutions may conclude that 
reporting at some lower level is desirable. Federal agencies are 
encouraged to report at the agency or departmental level, but distinct 
organizational units (such as a Department of the Interior Fish and 
Wildlife Service National Wildlife Refuge) may report directly if 
authorized by their department or agency. 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, refuge, 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 by all 
reporters. 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 an 
entity that intends to register reductions corresponds 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 a 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.


Sec.  300.4  Selecting organizational boundaries.

    (a) Each reporting 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 all elements of the entity with a view to gaining 
economic or other benefits from its activities over a period of many 
years. This approach should ensure that all sources, including those 
controlled by subsidiaries, that are wholly or largely owned by the 
entity are covered by its reports. Sources that are under long-term 
lease of the entity may, depending on the provisions of such leases, 
also be considered to be under the entity's financial control. Sources 
that are temporarily leased or operated by an entity generally would 
not be considered to be under its financial control.
    (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 results 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 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. Emissions reductions or sequestration associated with land, 
facilities or other sources not owned or leased by an entity may not be 
included in the entity's reports under the program unless the entity 
has long-term control over the emissions or sequestration of the source 
and the owner of the source has agreed that the emissions or 
sequestration may be included in the entity's report.
    (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.
    (b) Each reporting entity must keep separate reports on emissions 
or emission reductions that occur within its defined boundaries and 
those that occur outside its defined boundaries. Entities must also 
keep separate reports on emissions and emission reductions that occur 
outside the United States and those that occur within the United 
States.
    (c) An entity that intends to register its entity-wide emissions 
reductions must document and maintain its organizational boundary for 
accounting and reporting purposes.


Sec.  300.5  Submission of an entity statement.

    (a) Determining the type of reporting entity. The entity statement 
requirements vary by type of reporting 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. The first entity statement describes the 
make-up, operations and boundaries of the entity, as they existed in 
the start year.
    (1) 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).
    (2) For entities intending to register emission reductions, the 
start year may be no earlier than 2002, unless the entity has made a 
commitment to reduce its entity-wide emissions under the Climate 
Leaders or Climate VISION program. An entity that has made such a 
commitment may establish a start year derived from the base period of 
the commitment, as long as it is no earlier than 2000.
    (i) For a large emitter, the start year is the first year for which 
the entity submits a complete emissions inventory under the 1605(b) 
program.
    (ii) 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.
    (3) 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 an entity that has 
demonstrated that its annual emissions are less than or equal to 10,000 
metric tons of CO2 equivalent may participate as a small 
emitter. 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

[[Page 20809]]

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 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: emission 
estimates developed using SEIT may not be used to prepare, in whole or 
part, entity-wide emission inventories required for the registration of 
reductions.]
    (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 entity;
    (3) The criteria used to determine:
    (i) The organizational boundaries of the 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 entity must be covered by the entity's 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, the large emitter 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) The legal basis of the named 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 reporting entities 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) The legal basis of the entity;
    (3) An identification of the entity's control over the activities 
covered by the entity's reports, if other than financial control;
    (4) 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
    (5) 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) Reporting entities are required 
to annually review and, if necessary, update their entity statements.
    (2) From time to time, a reporting 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. A reporting 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. Changes in the scope of reporting 
made on or before May 31 of a given calendar year must be reflected in 
the report submitted

[[Page 20810]]

covering emissions and reductions for the following calendar year. 
Reporting entities may choose to postpone incorporating changes in the 
scope of reporting made after May 31 until submitting the report 
covering emissions and reductions for the year after the following 
calendar year. However, in no case should there be an interruption in 
the annual reports of entities registering emission reductions. Chapter 
2 of the Technical Guidelines (incorporated by reference, see Sec.  
300.13) 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 reporting 
entity'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 reporting 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 
subentities 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 reporting 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 the first six categories of gases listed 
in the definition of ``greenhouse gases'' 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 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 (although a reporting entity 
often makes these types of adjustments when calculating emission 
reductions under the guidelines). Entity-wide inventories are a 
prerequisite for the registration of emission reductions by entities 
with average annual emissions of more than 10,000 metric tons of 
CO2 equivalent. Entities that have average annual emissions 
of less than or equal to 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, but such entities should inventory and report the emissions 
associated with the specific activity(ies) they do cover in their 
reports.
    (b) Quality requirements for emission inventories. The 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 quality rating of at least 3.0.
    (1) Entities may at any time choose to modify the measurement or 
estimation methods that they use for their current or future year 
emission inventories. Such modifications would enable entities to 
gradually improve the quality of the ratings over time, but prior year 
inventories may be modified only to correct significant errors.
    (2) Entities that have had their emission quantities and the 
quantity-weighted quality rating of their emissions inventory 
independently verified may report their emissions and average quality 
ratings by greenhouse gas, indirect emissions and sequestration, rather 
than by source or sink category.
    (3) Entities that certify that they have used only A or B methods, 
may forego indicating in their reports the quality ratings of the 
methods used and may forego calculating the quantity-weighted average 
quality of their emission inventories.
    (c) Using estimation methods not included in the Technical 
Guidelines. An entity may obtain DOE approval for the use of an 
estimation method not included in the Technical Guidelines 
(incorporated by reference, see Sec.  300.13) if the method covers 
sources not described in the Technical Guidelines, or if the method 
provides more accurate results for the entity's specific circumstances 
than the methods described in the Technical Guidelines. If an entity 
wishes to propose the use of a method that is not described in the 
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 entity 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, an entity must 
include the indirect emissions from the consumption of purchased 
electricity, steam, and hot or chilled water in the entity's inventory 
as indirect emissions. To avoid double counting among entities, the 
entity must report all indirect emissions separately from its direct 
emissions. Entities should use the methods for quantifying indirect 
emissions specified in the Technical Guidelines (incorporated by 
reference, see Sec.  300.13).

[[Page 20811]]

    (2) 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 may not 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 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 Technical 
Guidelines (incorporated by reference, see Sec.  300.13).
    (g) Treatment of de minimis emissions and sequestration. (1) 
Although the goal 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. 
An 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 Technical Guidelines (incorporated by 
reference, see Sec.  300.13) or by using the Simplified Emissions 
Inventory Tool (SEIT). The results of this estimate of the entity's 
total excluded annual emissions must be reported to DOE together with 
the entity's initial entity statement.
    (2) After starting to report, each reporting 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. 
Non-U.S. emissions included in an entity's emission inventory must be 
separately reported and clearly distinguished from emissions 
originating in the U.S. Entities must identify any country-specific 
factors used in the preparation of such reports.
    (i) Covered gases. Entity-wide emissions inventories must include 
the emissions of the first six categories of named gases listed in the 
definition of ``greenhouse gases'' in Sec.  300.2. Entities may report 
chlorofluorocarbons and other greenhouse gases with quantifiable 
climate forcing effects as long as DOE has established a method for 
doing so, 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 Technical 
Guidelines (incorporated by reference, see Sec.  300.13). Entities 
should specify the units used (e.g., kilograms, or metric tons). 
Entities may need to use the standard conversion factors specified in 
the 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 calculated by region (from the list 
provided by DOE in the 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 Technical Guidelines). 
Entities must convert purchased energy to CO2 equivalents 
using the conversion factors in the 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 
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 for years prior to the 
earliest year permitted for registration. 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 
other entities (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 
first six categories of gases listed in the definition of ``greenhouse 
gases'' 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 of 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, eligible 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, although the reductions 
achieved by non-U.S. operations must be separately totaled prior to 
being integrated with the net emission reductions achieved by U.S. 
operations. It must include the annual changes in the total emissions 
of the entity, including 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 of this part.
    (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 of this part, the entity may exclude 
them from its estimate of net emission reductions. The 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

[[Page 20812]]

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 at least a full year, a base period and base 
value(s) for the new plant could be established and its emission 
changes assessed in the following year. Until the emission changes of 
this new subentity can 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) In calculating its net annual emission reductions, an entity 
should exclude any emissions or sequestration that have been excluded 
from the entity's inventory. The entity should also exclude all de 
minimis and biogenic emissions that are excluded from the entity's 
inventory of greenhouse gas emissions 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, eligible avoided emissions and sequestration to 
qualify for registered reductions. These entities may register emission 
reductions that have occurred since 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 quality requirements 
applicable to entity-wide emission inventories; and
    (ii) Determine the changes in the emissions, eligible 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 and is encouraged, but not required to report 
on all activities occurring within the entity boundary. Examples of 
small emitter activities include: vehicle operations; product 
manufacturing processes; building operations or a distinct part 
thereof, such as lighting; livestock operations; crop management; and 
power generation. For example, a farmer managing several woodlots and 
also producing a wheat crop may report emission reductions associated 
with managing an individual woodlot. However, the farmer must also 
assess and report the net sequestration resulting from managing all the 
woodlots within the entity's boundary. The small emitter is not 
required to report on emissions or reductions associated with growing 
the wheat crop.
    (3) A small emitter must certify that the reductions reported were 
not caused by actions likely to cause increases in emissions elsewhere 
within the entity's operations. This certification should be based on 
an assessment of the likely direct and indirect effects of the actions 
taken to reduce greenhouse gas emissions.
    (d) Net emission reductions achieved by other entities (offset 
reductions or emission reductions submitted by aggregators). A 
reporting entity or aggregator under certain conditions may report or 
register all or some of the net emission reductions achieved by 
entities that choose not to report under the section 1605(b) program. 
In all cases, an agreement must exist between the reporting entity or 
aggregator and the other entity that specifies the quantity of the 
emission reductions (or increases) achieved by the other entity that 
may be reported or registered as an offset reduction by the reporting 
entity or aggregator. A large emitter that is reporting on behalf of 
other entities must meet all of the requirements applicable to large 
emitters, including submission of an entity statement, an emissions 
inventory, and an entity-wide assessment of emission reductions. If an 
aggregator is a small emitter, it may choose to report only on the 
activities, emissions and emission reductions of the entities on behalf 
of which it is reporting and not to report on any of its own activities 
or emission reductions. The reporting entity or aggregator must include 
in its report all of the information on the other entity, including an 
entity statement, an emissions inventory (when required), and an 
assessment of emission reductions that would be required if the other 
entity were directly reporting to EIA. The net emissions reductions (or 
increases) of each other entity will be evaluated separately by EIA to 
determine whether they are eligible for registration in accordance with 
the guidelines of this part. Those registered reductions (or increases) 
assigned by the other entity, by agreement, to a reporting entity or 
aggregator will be included in EIA's summary of all registered offset 
reductions for that entity or aggregator. If the agreement between the 
reporting entity and other entity is discontinued, for any reason, the 
reporting entity must inform EIA and must identify any emission 
reductions previously reported that could be attributable to an 
increase in the carbon stocks of the other entity. Such reductions will 
be removed by EIA from the records of the reporting entity's offset 
reductions.
    (e) Net emission reductions to be reported by other entities as 
offset reductions. Entities must identify in their report the quantity 
of any net emission reductions covered by the report, if any, that 
another entity will report as an offset reduction, including the name 
of the other entity;
    (f) Adjusting for year-to-year increases in net emissions. (1) 
Normally, net annual emission reductions for an entity are calculated 
by summing the net annual changes in emissions, eligible avoided 
emissions and sequestration, as determined using the calculation 
methods identified in Sec.  300.8 and according to the procedures 
described in paragraph (b) of this section for large emitters, 
paragraph (c) for small emitters of this section for small emitters, 
and paragraph (d) of this section for offsets. However, if the entity 
experienced a net increase in emissions for one or more years, these 
increases must be reported and taken into account in calculating any 
future year reductions. If the entity subsequently achieves net annual 
emission reductions, the net increases experienced in the preceding 
year(s) must be more than offset by these reductions before the entity 
can once again register emission reductions. For example, if an entity 
achieved a net emission reduction of 5,000 metric tons of 
CO2 equivalent in its first year, a net increase of 2,000 
metric tons in its second year, and a net reduction of 3,000 metric 
tons in its third year, it would be able to register a 5,000 metric ton 
reduction in its first year, no reduction in its second year, and a 
1,000 metric ton reduction in its third year (3,000-2,000). The entity 
must file full reports for each of these three years. Its report for 
the second year would indicate the net increase in emissions and this 
increase would be noted in EIA's summary of the entity's report for 
that year and for any future year, until the emissions increase was 
entirely offset by subsequent emission reductions. If this same entity 
achieved a net reduction of only 1,000 metric tons in its third year, 
it would not be able to register additional reductions until it had, in 
some future year, offset more than its second year increase of 2,000 
metric tons.
    (2) [Reserved]

[[Page 20813]]

Sec.  300.8  Calculating emission reductions.

    (a) Choosing appropriate emission reduction calculation methods. 
(1) An entity must choose the method or methods it will use to 
calculate emission reductions from the list provided in paragraph (h) 
of this section. Each of the calculation methods has special 
characteristics that make it applicable to only certain types of 
emissions and activities. An entity should select the appropriate 
calculation method based on several factors, including:
    (i) How the entity's subentities are defined;
    (ii) How the reporter will gather and report emissions data; and
    (iii) The availability of other types of data that might be needed, 
such as production or output data.
    (2) For some entities, a single calculation method will be 
sufficient, but many entities may need to apply more than one method 
because discrete components of the entity require different calculation 
methods. In such a case, the entity will need to select a method for 
each subentity (or discrete component of the entity with identifiable 
emission or reductions). The emissions and output measure (generally a 
physical measure) of each subentity must be clearly distinguished and 
reported separately. Guidance on the selection and specification of 
calculation methods is provided in Chapter 2 of the Technical 
Guidelines (incorporated by reference, see Sec.  300.13).
    (b) Identifying subentities for calculating reductions. If more 
than one calculation method is to be used, an entity must specify the 
portion of the entity (the subentity) to which each method will be 
applied. Each subentity must be clearly identified. From time to time, 
it may be necessary to modify existing or create new subentities. The 
entity must provide to EIA a full description of such changes, together 
with an explanation of why they were required.
    (c) Choosing a base period for calculating reductions. In general, 
the base period used in calculating emission reductions is the single 
year or up to four-year period average immediately preceding the first 
year of calculated emission reductions.
    (d) Establishing base values. To calculate emission reductions, an 
entity must establish a base value against which to compare reporting 
year performance. The minimum requirements for base values for each 
type of calculation method are specified in Chapter 2 of the Technical 
Guidelines (incorporated by reference, see Sec.  300.13). In most 
cases, an historic base value, derived from emissions or other data 
gathered during the base period, is the minimum requirement specified. 
Entities may, however, choose to establish base values that are more 
stringent than the base values derived from the methods specified in 
Chapter 2 of the Technical Guidelines as long as their report indicates 
the rationale for the alternative base value and demonstrates that it 
would result in a smaller quantity of emission reductions.
    (e) Emission reduction and subentity statements. For each 
subentity, an entity must submit to EIA the following information:
    (1) An identification and description of the method used to 
calculate emission reductions, including:
    (i) The type of calculation method;
    (ii) The measure of output used (if any); and
    (iii) The method-specific base period for which any required base 
value will be calculated.
    (2) The base period used in calculating reductions. When an entity 
starts to report, the base period used in calculating reductions must 
end in the start year. However, over time the reporting entity may find 
it necessary to revise or establish new base periods and base values in 
response to significant changes in processes or output of the 
subentity.
    (3) A description of the subentity and its primary economic 
activity or activities, such as electricity generation, product 
manufacturing, service provider, freight transport, or household 
operation; and
    (4) A description of the emission sources or sinks covered, such as 
fossil fuel power plants, manufacturing facilities, commercial office 
buildings or heavy-duty vehicles.
    (f) Changes in calculation methods, base periods and base values. 
When significant changes occur in the composition or output of 
reporting entities, a reporting entity may need to change previously 
specified calculation methods, base periods or base values. A reporting 
entity should make such changes only if necessary and it should fully 
document the reasons for any changes. The Technical Guidelines 
(incorporated by reference, see Sec.  300.13) describe when such 
changes should be made and what information on such changes must be 
provided to DOE. In general, such changes should not result in any 
alterations to previously reported or registered emission reductions. A 
reporting entity may alter previously reported or registered emission 
reductions only if necessary to correct significant errors.
    (g) Continuous reporting. To ensure that the summation of entity 
annual reports accurately represents net, multi-year emission 
reductions, an entity must submit a report every year, beginning with 
the first reduction year. An entity may use a specific base period to 
determine emission reductions in a given future year only if the entity 
has submitted qualified reports for each intervening year. If an 
interruption occurs in the annual reports of an entity, the entity must 
subsequently report on all missing years prior to qualifying for the 
registration of additional emission reductions.
    (h) Calculation methods. An entity must calculate any change in 
emissions, avoided emissions or sequestration using one or more of the 
methods described in this paragraph and in the Technical Guidelines 
(incorporated by reference, see Sec.  300.13).
    (1) Changes in emissions intensity. An entity may use emissions 
intensity as a basis for determining emission reductions as long as the 
entity selects a measure of output that is:
    (i) A reasonable indicator of the output produced by the entity;
    (ii) A reliable indicator of changes in the entity's activities;
    (iii) Related to emissions levels; and
    (iv) Any appropriate adjustments for acquisitions, divestitures, 
insourcing, outsourcing, or changes in products have been made, as 
described in the Technical Guidelines (incorporated by reference, see 
Sec.  300.13).
    (2) Changes in absolute emissions. An entity may use changes in the 
absolute (actual) emissions (direct and/or indirect) as a basis for 
determining net emission reductions as long as the entity makes only 
those adjustments required by the Technical Guidelines (incorporated by 
reference, see Sec.  300.13). An entity intending to register emission 
reductions may use this method only if the entity demonstrates in its 
report that any reductions derived from such changes were not achieved 
as a result of reductions in the output of the entity, and certifies 
that emission reductions are not the result of major shifts in the 
types of products or services produced. Entities may report, but not 
register, such reductions even if the output associated with such 
emissions is declining.
    (3) Changes in carbon storage (for actions within entity 
boundaries). An entity may use changes in carbon storage as a basis for 
determining net emission reductions as long as the entity uses 
estimation and measurement methods that comply with the Technical 
Guidelines (incorporated by reference, see Sec.  300.13), and has 
included an

[[Page 20814]]

assessment of the net changes in all sinks in its inventory.
    (4) Changes in avoided emissions (for actions within entity 
boundaries). An entity may use changes in avoided emissions to 
determine its emission reductions. Avoided emissions eligible to be 
included in the calculation of net emission reductions that qualify for 
registration include those associated with the sale of electricity, 
steam, hot water or chilled water generated from non-emitting or low-
emitting sources as a basis for determining net emission reductions as 
long as:
    (i) The measurement and calculation methods used comply with the 
Technical Guidelines (incorporated by reference, see Sec.  300.13);
    (ii) The entity certifies that any increased sales were not 
attributable to the acquisition of a generating facility that had been 
previously operated, unless the entity's base period includes 
generation values from the acquired facility's operation prior to its 
acquisition; and
    (iii) Generators of distributed energy that have net emissions in 
their base period and intend to report reductions resulting from 
changes in eligible avoided emissions, use a method specified in the 
Technical Guidelines (incorporated by reference, see Sec.  300.13) that 
integrates the calculation of reductions resulting from both changes in 
emissions intensity and changes in avoided emissions.
    (5) Action-specific emission reductions (for actions within entity 
boundaries). A number of source- or situation-specific methods are 
provided in the Technical Guidelines and these methods must be used to 
assess the annual changes in emissions for the specific sources or 
situation addressed by these methods. In addition, a generic action-
specific method is identified in the Technical Guidelines. An entity 
intending to register reductions may use the generic action-specific 
approach only if it is not possible to measure accurately emission 
changes by using one of the methods identified in paragraphs (h)(1) 
through (h)(4) of this section. Entities that intend to register 
reductions and that use the generic action-specific approach must 
explain why it is not possible to use any of these other methods. An 
entity not intending to register reductions may use the generic action-
specific method to determine emission reductions, as long as the entity 
demonstrates that the estimate is based on analysis that:
    (i) Uses output, utilization and other factors that are consistent, 
to the maximum extent practicable, with the action's actual performance 
in the year for which reductions are being reported;
    (ii) Excludes any emission reductions that might have resulted from 
reduced output or were caused by actions likely to be associated with 
increases in emissions elsewhere within the entity's operations; and
    (iii) Uses methods that are in compliance with the Technical 
Guidelines (incorporated by reference, see Sec.  300.13).
    (i) Summary description of actions taken to reduce emissions. Each 
reported emission reduction must be accompanied by an identification of 
the types of actions that were the likely cause of the reductions 
achieved. Entities are also encouraged to include in their reports 
information on the benefits and costs of the actions taken to reduce 
greenhouse gas emissions, such as the expected rates of return, life 
cycle costs or benefit to cost ratios, using appropriate discount 
rates.
    (j) Emission reductions associated with plant closings, voluntary 
actions and government (including non-U.S. regulatory regimes) 
requirements. (1) Each report of emission reductions must indicate 
whether the reported emission reductions were the result, in whole or 
in part, of plant closings, voluntary actions, or government 
requirements. EIA will presume that reductions that were not the result 
of plant closings or government requirements are the result of 
voluntary actions.
    (2) If emission reductions were, in whole or in part, the direct 
result of plant closings that caused a decline in output, the report 
must identify the reductions as such; these reductions do not qualify 
for registration. EIA will presume that reductions calculated using the 
emissions intensity method do not result from a decline in output.
    (3) If the reductions were associated, in whole or part, with U.S. 
or non-U.S. government requirements, the report should identify the 
government requirement involved and the effect these requirements had 
on the reported emission reductions. If, as a result of the reduction, 
a non-U.S. government issued to the reporting entity a credit or other 
financial benefit or regulatory relief, the report should identify the 
government requirement involved and describe the specific form of 
benefit or relief provided.
    (k) Determining the entity responsible for emission reductions. The 
entity that EIA will presume to be responsible for emission reduction, 
avoided emission or sequestered carbon is the entity with financial 
control of the facility, land or vehicle which generated the reported 
emissions, generated the energy that was sold so as to avoid other 
emissions, or was the place where the sequestration action occurred. If 
control is shared, reporting of the associated emission reductions 
should be determined by agreement between the entities involved so as 
to avoid double-counting; this agreement must be reflected in the 
entity statement and in any report of emission reductions. EIA will 
presume that an entity is not responsible for any emission reductions 
associated with a facility, property or vehicle excluded from its 
entity statement.


Sec.  300.9  Reporting and recordkeeping requirements.

    (a) Starting to report under the guidelines. An entity may report 
emissions and sequestration on an annual basis beginning in any year, 
but no earlier than the base period of 1987-1990 specified in the 
Energy Policy Act of 1992. To be recognized under these guidelines, all 
reports must conform to the measurement methods established by the 
Technical Guidelines (incorporated by reference, see Sec.  300.13).
    (b) Revisions to reports submitted under the guidelines. (1) Once 
EIA has accepted a report under this part, it may be revised by the 
reporting entity only under the circumstances specified in this 
paragraph and related provisions of the Technical Guidelines 
(incorporated by reference, see Sec.  300.13). In general:
    (i) Revised reports may be submitted to correct errors that have a 
significant effect on previously estimated emissions or emission 
reductions; and
    (ii) Emission inventories may be revised in order to create a 
consistent time series based on improvements in the emission estimation 
or measurement techniques used.
    (2) Reporting entities must provide the corrected or improved data 
to EIA, together with an explanation of the significance of the change 
and its justification.
    (3) If a change in calculation methods (for inventories or 
reductions) is made for a particular year, the reporting entity must, 
if feasible, revise its base value to assure methodological consistency 
with the reporting year value.
    (c) Definition and deadline for annual reports. Entities must 
report emissions on a calendar year basis, from January 1 to December 
31. To be included in the earliest possible EIA annual report of 
greenhouse gas emissions reported under this part, entity reports that 
have not been independently verified must be submitted to DOE no later 
than July 1 for emissions occurring during the previous calendar year. 
Reports that have been independently verified must

[[Page 20815]]

be submitted by September 1 for emissions occurring during the previous 
year.
    (d) Recordkeeping. Entities intending to register reductions must 
maintain adequate supporting records of base period data for the 
duration of their participation in the 1605(b) program. Supporting 
records for all reporting year data must be maintained for at least 
three years subsequent to the relevant reporting year to enable 
verification of all information reported. The records should document 
the basis for the entity's report to EIA, including:
    (1) The content of entity statements, including the identification 
of the specific facilities, buildings, land holding and other 
operations or emission sources covered by the entity's reports and the 
legal, equity, operational and other bases for their inclusion;
    (2) Information on the identification and assessment of changes in 
entity boundaries, processes or products that might have to be reported 
to EIA;
    (3) Any agreements or relevant communications with other entities 
or third parties regarding the reporting of emissions or emission 
reductions associated with sources the ownership or operational control 
of which is shared;
    (4) Information on the methods used to measure or estimate 
emissions, and the data collection and management systems used to 
gather and prepare this data for inclusion in reports;
    (5) Information on the methods used to calculate emission 
reductions, including the basis for:
    (i) The selection of the specific output measures used, and the 
data collection and management systems used to gather and prepare 
output data for use in the calculation of emission reductions;
    (ii) The selection and modification of all base years, base periods 
and baselines used in the calculation of emission reductions;
    (iii) Any baseline adjustments made to reflect acquisitions, 
divestitures or other changes;
    (iv) Any models or other estimation methods used; and
    (v) Any internal or independent verification procedures undertaken.
    (e) Confidentiality. DOE will protect trade secret and commercial 
or financial information that is privileged or confidential as provided 
in 5 U.S.C. 552(b)(4). An entity must clearly indicate in its 1605(b) 
report the information for which it requests confidentiality. DOE will 
handle requests for confidentiality of information submitted in 1605(b) 
reports in accordance with the process established in DOE's Freedom of 
Information regulations at 10 CFR Sec.  1004.11.


Sec.  300.10  Certification of reports.

    (a) General requirement and certifying official: All reports 
submitted to EIA must include a certification statement, as provided in 
paragraph (b) of this section, signed by a certifying official of the 
reporting entity. A household report may be certified by one of its 
members. All other reports must be certified by the chief executive 
officer, agency head, or an officer or employee of the entity who is 
responsible for reporting the entity's compliance with environmental 
regulations.
    (b) Certification statement requirements. All entities, whether 
reporting or registering reductions, must certify the following:
    (1) The information reported is accurate and complete;
    (2) The information reported has been compiled in accordance with 
this part; and
    (3) The information reported is consistent with information 
submitted in prior years, if any, or any inconsistencies with prior 
year's information are documented and explained in the entity 
statement.
    (c) Additional requirements for registering. The certification 
statement of an entity registering reductions must also certify that:
    (1) The entity took reasonable steps to ensure that direct 
emissions, emission reductions, and/or sequestration reported are 
neither double counted nor reported by any other entity. Reasonable 
steps include telephone, fax, letter, or e-mail communications to 
ensure that another entity does not intend to report the same 
emissions, emission reductions, and/or sequestration to DOE. Direct 
communications of this kind with participants in demand-side management 
or other programs directed at very small emitters are not required;
    (2) Any emission reductions reported or registered by the entity 
that were achieved by another entity (other than a very small emitter 
that participated in a demand-side management or other program) are 
included in the entity's report only if:
    (i) The other entity does not intend to report or register theses 
reductions directly;
    (ii) There exists a written agreement with each other entity 
providing that the reporting entity is the entity entitled to report or 
register these emission reductions; and
    (iii) The information reported on the other entity would meet the 
requirements of this part if the entity were reporting directly to DOE;
    (3) None of the emissions, emission reductions, or sequestration 
reported were produced by shifting emissions to other entities or to 
non-reporting parts of the entity;
    (4) None of any reported changes in avoided emissions associated 
with the sale of electricity, steam, hot or chilled water generated 
from non-emitting or low-emitting sources are attributable to the 
acquisition of a generating facility that has been previously operated, 
unless the entity's base period includes generation values from the 
acquiring facility's operation prior to its acquisition;
    (5) The entity maintains records documenting the analysis and 
calculations underpinning the data reported on this form and records 
documenting the analysis and calculations underpinning the base values 
used in calculating annual reductions are maintained in accordance with 
Sec.  300.9(d) of this part; and
    (6) The entity has, or has not, obtained independent verification 
of the report, as described in Sec.  300.11.


Sec.  300.11  Independent verification.

    (a) General. Entities are encouraged to have their annual reports 
reviewed by independent and qualified auditors, as described in 
paragraphs (b), (c), and (f) of this section.
    (b) Qualifications of verifiers. (1) DOE envisions that independent 
verification will be performed by professional verifiers (i.e., 
individuals or companies that provide verification or ``attestation'' 
services). EIA will consider a report to the program to be 
independently verified if:
    (i) The lead individual verifier and other members of the 
verification team are accredited by one or more independent and 
nationally-recognized accreditation programs, described in paragraph 
(c) of this section, for the types of professionals needed to determine 
compliance with DOE's 1605(b) guidelines;
    (ii) The lead verifier has experience managing an auditing or 
verification process, including the recruitment and allocation of other 
individual verifiers, and has been empowered to make decisions relevant 
to the provision of a verification statement; and
    (iii) All members of a verification team have education, training 
and/or professional experience that matches the tasks performed by the 
individual verifiers, as deemed necessary by the verifier accreditation 
program.
    (2) As further guidance, all members of the verification team 
should be familiar with:

[[Page 20816]]

    (i) The subject matter covered by the scope of the verification;
    (ii) The requirements of this part;
    (iii) Greenhouse gas emission and emission reduction 
quantification;
    (iv) Data and information auditing sampling methods; and
    (v) Risk assessment and methodologies and materiality analysis 
procedures outlined by other domestic and international standards.
    (3) An individual verifier should have a professional degree or 
accreditation in engineering (environmental, industrial, chemical), 
accounting, economics, or a related field, supplemented by specific 
training and/or experience in emissions reporting and accounting, and 
should have his or her qualifications and continuing education 
periodically reviewed by an accreditation program. The skills required 
for verification are often cross-disciplinary. For example, an 
individual verifier reviewing a coal electric utility should be 
knowledgeable about mass balance calculations, fuel purchasing 
accounting, flows and stocks of coals, coal-fired boiler operation, and 
issues of entity definition.
    (4) Companies that provide verification services must use 
professionals that possess the necessary skills and proficiency levels 
for the types of entities for which they provide verification services. 
Continuing training may be required to ensure all individuals have up-
to-date knowledge regarding the tasks they perform.
    (c) Qualifications of organizations accrediting verifiers. 
Organizations that accredit individual verifiers must be nationally 
recognized certification programs. They may include, but are not 
limited to the: American Institute of Certified Public Accountants; 
American National Standards Institute's Registrar Accreditation Board 
program for Environmental Management System auditors (ANSI-RAB-EMS); 
Board of Environmental, Health and Safety Auditor Certification: 
California Climate Action Registry; Clean Development Mechanism 
Executive Board; and the United Kingdom Accreditation Scheme.
    (d) Scope of verification. (1) As part of any independent 
verification, qualified verifiers must use their expertise and 
professional judgment to verify for accuracy, completeness and 
consistency with DOE's guidelines of:
    (i) The content of entity statements, annual reports and the 
supporting records maintained by the entity;
    (ii) The representation in entity statements (or lack thereof) of 
any significant changes in entity boundaries, products, or processes;
    (iii) The procedures and methods used to collect emissions and 
output data, and calculate emission reductions (for entities with 
widely dispersed operations, this process should include on-site 
reviews of a sample of the facilities);
    (iv) Relevant personnel training and management systems; and
    (v) Relevant quality assurance/quality control procedures.
    (2) DOE expects qualified verifiers to refer to the growing body of 
literature on methods of evaluating the elements listed in paragraph 
(d)(1) of this section, such as the California Climate Action Registry 
Certification Protocol, the Climate Leaders Inventory Management Plan 
Checklist, and the draft ISO 14064.3 Protocol for Validation, 
Verification and Certification.
    (e) Verification statement. Both the verifier and, if relevant, an 
officer of the company providing the verification service must sign the 
verification statement. The verification statement shall attest to the 
following:
    (1) The verifier has examined all components listed in paragraph 
(d) of this section;
    (2) The information reported in the verified entity report and this 
verification statement is accurate and complete;
    (3) The information reported by the entity has been compiled in 
accordance with this part;
    (4) The information reported on the entity report is consistent 
with information submitted in prior years, if any, or any 
inconsistencies with prior year's information are documented and 
explained in the entity statement;
    (5) The verifier used due diligence to assure that direct 
emissions, emission reductions, and/or sequestration reported are not 
reported by any other entity;
    (6) Any emissions, emission reductions, or sequestration that were 
achieved by a third-party entity are included in this report only if 
there exists a written agreement with each third party indicating that 
they have agreed that the reporting entity should be recognized as the 
entity entitled to report these emissions, emission reductions, or 
sequestration;
    (7) None of the emissions, emission reductions, or sequestration 
reported was produced by shifting emissions to other entities or to 
non-reporting parts of the entity;
    (8) No reported changes in avoided emissions associated with the 
sale of electricity, steam, hot or chilled water generated from non-
emitting or low-emitting sources are attributable to the acquisition of 
a generating facility that has been previously operated, unless the 
base year generation values are derived from records of the facility's 
operation prior to its acquisition;
    (9) The verifying entity has procedures in place for the 
maintenance of records that are sufficient to document the analysis and 
calculations underpinning this verification. The verifying entity shall 
maintain such records related to base period data submitted by the 
reporting entity for the duration of the reporting entity's 
participation in the 1605(b) program and records related to all other 
verified data for a period of no less than three years; and
    (10) The independent verifier is not owned in whole or part by the 
reporting entity, nor provides any ongoing operational or support 
services to the entity, except services consistent with independent 
financial accounting or independent certification of compliance with 
government or private standards.
    (f) Qualifying as an independent verifier. An independent verifier 
may not be owned in whole or part by the reporting entity, nor may it 
provide any ongoing operational or support services to the entity, 
except services consistent with independent financial accounting or 
independent certification of compliance with government or private 
standards.


Sec.  300.12  Acceptance of reports and registration of entity emission 
reductions.

    (a) Acceptance of reports. EIA will review all reports to ensure 
they are consistent with this part and with the Technical Guidelines 
(incorporated by reference, see Sec.  300.13). EIA will also review all 
reports for completeness, internal consistency, arithmetic accuracy and 
plausibility. Subject to the availability of adequate resources, EIA 
intends to notify entities of the acceptance or rejection of any report 
within six months of its receipt.
    (b) Registration of emission reductions. EIA will review each 
accepted report to determine if emission reductions were calculated 
using an acceptable base period (usually ending no earlier than 2002), 
and to confirm that the report complies with the other provisions of 
this part. EIA will also review its records to verify that the 
reporting entity has submitted accepted annual reports for each year 
between the establishment of its base period and the year covered by 
the current report. EIA will notify the entity that reductions meeting 
these requirements have been credited to the entity as ``registered 
reductions'' which can be held by the reporting entity for use 
(including transfer to other entities) in the event a future program 
that recognizes such reductions is enacted into law.

[[Page 20817]]

    (c) Rejection of reports. If EIA does not accept a report or if it 
determines that emission reductions intended for registration do not 
qualify, EIA will return the report to the sender with an explanation 
of its inadequacies. The reporting entity may resubmit a modified 
report for further consideration at any time.
    (d) EIA database and summary reports. The Administrator of EIA will 
establish a publicly accessible database composed of all reports that 
meet the definitional, measurement, calculation, and certification 
requirements of these guidelines. EIA will maintain separate subtotals 
of direct emissions, indirect emissions and carbon fluxes. A portion of 
the database will provide summary information on the emissions and 
registered emission reductions of each reporting entity.


Sec.  300.13  Incorporation by reference.

    The Technical Guidelines for the Voluntary Reporting of Greenhouse 
Gases Program (March 2006), referred to throughout this part as the 
``Technical Guidelines,'' have been approved for incorporation by 
reference by the Director of the Federal Register in accordance with 5 
U.S.C. 552(a) and 1 CFR part 51. You may obtain a copy of the Technical 
Guidelines from the Office of Policy and International Affairs, U.S. 
Department of Energy, 1000 Independence Ave., SW., Washington, DC 
20585, or by visiting the following Web site: http://www.policy.energy.gov/enhancingGHGregistry/technicalguidelines/. The 
Technical Guidelines also are available for inspection at the National 
Archives and Record Administration (NARA). For more information on the 
availability of this material at NARA, call 202-741-6030, or go to: 
http://www.archives.gov/federal_register/code_of_federal_regulations/ibr_locations.html.

[FR Doc. 06-3745 Filed 4-20-06; 8:45 am]
BILLING CODE 6450-01-P