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DEPARTMENT OF ENERGY

Veterans Affairs Department

CFR Citation: 10 CFR Part 300

RIN ID: RIN 1901-AB11

NOTICE: Part V

DOCUMENT ACTION: Proposed rule and opportunity for public comment; proposed revised guidelines.

SUBJECT CATEGORY: General Guidelines for Voluntary Greenhouse Gas Reporting

DATES: Interested persons should submit written e-mail or written comments by February 3, 2004 to the addresses given below. You may present oral views and data at a public workshop that will be held at the Washington Plaza Hotel, 10 Thomas Circle, NW., Massachusetts Avenue at 14th Street, Washington, DC 20005, on January 12, 2004, from 8 a.m. to 5 p.m.

DOCUMENT SUMMARY: Section 1605(b) of the Energy Policy Act of 1992 (EPACT), 42 U.S.C. 13385(b), directed the Department of Energy (DOE or Department) to issue guidelines establishing a voluntary greenhouse gas reporting program. The guidelines issued by the Department in 1994 to establish the Voluntary Reporting of Greenhouse Gases Program were intentionally flexible to encourage the broadest possible participation. On February 14, 2002, the President directed DOE, together with other involved Federal agencies, to recommend reforms to enhance this voluntary reporting program. The purposes of the proposed revised Guidelines are to establish revised procedures and reporting requirements for filing voluntary reports, and encourage corporations, government agencies, nonprofit organizations, households and other private and public entities to submit annual reports of their total entitywide greenhouse gas emissions, net emission reductions, and carbon sequestration activities that are complete, reliable and consistent. Public comments on these proposed revised Guidelines are solicited and a public workshop has been scheduled to encourage an open exchange of views on this subject.

SUMMARY: Energy Department,

SUPPLEMENTAL INFORMATION

Table of Contents
I. Introduction

A. Background.

B. Process for Finalizing and Implementing Guidelines. II. Discussion of Proposal and Requests for Comments

A. Overview.

B. Defining Reporting Entities.

C. Defining Entity Boundaries.

D. Emission Sources and Sinks Covered.

E. EntityWide Reporting of Emissions Inventories.

F. EntityWide Emission Reductions.

G. Guidelines for Small Emitters.

H. Emission Reduction Calculations.

1. Reductions in Emissions Intensity.

2. Absolute Reductions in Emissions.

3. Increased Carbon Storage.

4. Avoided Emissions.

5. Project Emission Reductions.

I. Recordkeeping, Report Certification, and Verification.

J. Starting to Report.

K. Report Acceptance.

L. Registration of Emission Reductions.

M. Sustaining Entity Reports of Emissions and Emission Reductions.

N. EIA Database and Summary Reports.

O. Crosscutting and Other Important Issues.

1. Entitywide v. SubEntity or ProjectOnly Reporting.

2. Treatment of Certain Small Emissions.

3. Excluding the Effects of Changes in Output on Emissions.

4. Emissions and Reductions Associated With Electricity Generation and Use.

5. Reporting and Registering Changes in Terrestrial Carbon Stocks.

6. Recognizing Emission Offsets.

7. International Emission Reductions.

8. Relationship of Proposed Guidelines to Climate VISION, Climate Leaders and Other Voluntary Programs To Reduce Greenhouse Gas Emissions.
III. Opportunity for Public Comment

A. Written Comments.

B. Participation in Public Workshop.
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.
I. Introduction

A. Background

Section 1605(b) of the Energy Policy Act of 1992 (EPACT) directed 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) required that DOE's Guidelines provide for the ``accurate'' and ``voluntary'' reporting of information on: (1) Greenhouse gas emission levels for a baseline period (19871990) 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 sectorspecific guidelines that established the Voluntary Reporting of Greenhouse Gases Program for recording voluntarily submitted data and information on greenhouse gas emissions and the
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results of actions to reduce, avoid or sequester greenhouse gas emissions. The 1994 General Guidelines are appended to today's proposal to provide information with regard to reports that were filed under those Guidelines (The General Guidelines and supporting documents may be accessed at http://www.eia.doe.gov/oiaf/1605/guidelines.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 2001 reporting year, 365 entities, including utilities, manufacturers, coal mines, landfill operators and others, have reported their greenhouse gas emissions and/or their emission reductions to EIA.

On February 14, 2002, the President announced a series of programs and initiatives to address the issue of global climate change, including a greenhouse gas intensity reduction goal, energy technology research programs, targeted tax incentives to advance the development and adoption of new technologies, voluntary programs to promote actions to reduce greenhouse gases, and international initiatives. In addition, the President directed the Secretary of Energy, in consultation with the Secretary of Commerce, the Secretary of Agriculture, and the Administrator of the Environmental Protection Agency, to propose improvements to the current Voluntary Reporting of Greenhouse Gases Program required under section 1605(b) of EPACT. 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 Greenhouse Gas Reporting 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 nonprofit research and advocacy organizations.

On July 8, 2002, after considering public comments, the Secretaries of Energy, Commerce and Agriculture, and the Administrator of the Environmental Protection Agency provided the President with ten recommendations on improvements to the Voluntary Greenhouse Gas Reporting Program. The four agencies also outlined a public process for developing specific revisions to the program Guidelines. Following are the ten recommendations for improving the greenhouse gas reporting program:
[sbull] Develop fair, objective and practical methods for reporting baselines, reporting boundaries, calculating real results, and awarding transferable credits for actions that lead to real reductions. [sbull] Standardize widely accepted, transparent accounting methods.
[sbull] Support independent verification of registry reports. [sbull] Encourage reporters to report greenhouse gas intensity (emissions per unit of output) as well as emissions or emissions reductions.
[sbull] Encourage corporate or entitywide reporting.
[sbull] Provide credits for actions to remove carbon dioxide from the atmosphere as well as actions to reduce emissions.
[sbull] Develop a process for evaluating the extent to which past reductions may qualify for credits.
[sbull] Assure the voluntary reporting program is an effective tool for reaching the 18 percent goal.
[sbull] Factor in international strategies as well as Statelevel efforts; and
[sbull] Minimize transaction costs for reporters and administrative costs for the Government, where possible, without compromising the foregoing recommendations.

DOE held public workshops in Washington, D.C., Chicago, San Francisco and Houston during November and December of 2002 to receive oral views and information from interested persons. In addition, the U.S. Department of Agriculture sponsored two meetings 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 and meetings explored in greater depth many of the issues raised in the Notice of Inquiry and addressed in the written comments. The public comment covered a broad range of issues and views diverged widely on some key issues. Generally, there was substantial support for revising the current General Guidelines to enhance their utility and to accomplish the President's climate change goals.

DOE today is proposing revised General Guidelines, and subsequently will propose Technical Guidelines, that when effective will modify and replace the guidelines for the Voluntary Reporting of Greenhouse Gases issued by DOE in October 1994. The proposed revised General Guidelines would continue to provide procedures for entities to report their greenhouse gas emissions inventories and a wide range of actions they have taken to reduce, avoid or sequester greenhouse gas emissions. In addition, the proposal would enable entities that meet criteria established by DOE to register such reductions in a database maintained by the Energy Information Administration (EIA). The criteria established by DOE will ensure that units of registered reductions will be comparable with regard to the standards of accuracy, reliability and verifiability. Registered reductions will be recorded in a publicly accessible database.

The Secretary of Energy has approved issuance of this notice. B. Process for Finalizing and Implementing Guidelines

After full consideration of the public comments received, DOE will develop and issue final revised General Guidelines. In parallel, DOE intends to propose Technical Guidelines that will, when finalized, specify the methods and factors to be used in measuring and estimating greenhouse gas emissions, emission reductions, and carbon
sequestration. Concurrently with development of the General and Technical Guidelines, DOE's Energy Information Administration will, pursuant to the Paperwork Reduction Act of 1995 (44 U.S.C. Chapter 35), solicit public comment on the reporting elements to be contained in the reporting forms to be used under the revised program Guidelines. With respect to the existing 1994 General Guidelines, DOE intends to publish a Federal Register notice of termination on the same day that DOE publishes the notice of final rulemaking setting forth the revised guidelines under section 1605(b) of EPACT. Both the notice of termination and the notice of final rulemaking will contain an effective date, which will be the beginning of a future reporting period.

II. Discussion of Proposal and Requests for Comments

The following section describes the proposed revised General Guidelines, summarizes the rationale for the key elements of the proposal and solicits public comments on a wide range of specific issues.

A. Overview

The proposed revisions to the General Guidelines are designed to enhance the measurement accuracy, reliability and verifiability of information reported
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under the 1605(b) program and to contribute to the President's climate change goals. The proposed revised Guidelines will continue to provide considerable flexibility to entities that wish to report emissions or emission reductions in the future, as they have in the past. In addition, the revised Guidelines will provide a means for entities that are able to meet additional requirements to register emission reductions achieved after 2002. This registry will provide special recognition to such emission reductions.

To register emission reductions, reporting entities with substantial emissions (average annual emissions of over 10,000 tons of carbon dioxide (CO2) equivalent) will need to provide an inventory of their total emissions and calculate the net reductions associated with entitywide efforts to reduce emissions or sequester carbon. Entities with average annual emissions of less than 10,000 tons of CO2 equivalent (small emitters) would be eligible, under certain conditions, to register emission reductions associated with specific activities even without completing an entitywide inventory or reduction assessment.

The proposed revised Guidelines would enable and encourage entities to report (but not register) emission reductions achieved prior to 2003. The revised Guidelines would also permit entities to report (but not necessarily register) emission reductions associated with specific actions or with specific parts of the entity, even if these reports were not accompanied by entitywide emissions and reductions reports.

The chief executive officer of the company or institution, an agency head, head of household or other responsible official would be required to certify that the reporting entity accurately followed the revised Guidelines for determining emissions, emission reductions and sequestration. Entities would be encouraged to obtain independent verification of the accuracy of their reports, and their compliance with DOE Guidelines.

For convenience, the basic elements of the proposed revised guidelines are graphically represented in Figure 1. DOE solicits public comments on this approach and any suggestions of alternative means of achieving the objectives outlined above.
BILLING CODE 645001P
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[GRAPHIC] [TIFF OMITTED] TP05DE03.000
BILLING CODE 645001C
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B. Defining Reporting Entities

Under the proposed revised Guidelines, the first step in the reporting process is the definition of the corporation, institution, household or other entity that will be submitting reports. At a minimum, entities would have to be legally distinct businesses, institutions, organizations or households, although reporters would be encouraged to define themselves at the highest meaningful level of aggregation. The legal basis for determining whether an entity (or its subparts) is distinct could be derived from any Federal, state or local law (or regulation) governing the entity, including regulations applicable to corporations, partnerships, cooperatives, government agencies, nonprofit organizations, households, or other entities. This approach would permit a legallydistinct company, plant or activity to define itself as an entity, even if it is partiallyor whollyowned by another company. In such cases, any registered reductions would accrue only to the reporting entity, rather than the parent company.

Given the flexibility inherent in this definition, some companies and institutions could be all or part of a reporting entity at any one of several different levels. For example, an individual electric power generating plant might be owned by a partnership of several different companies or individuals. One of these partners might be an electric utility that owns and operates several other electric generating plants, and a transmission and distribution system. And this utility might, in turn, be owned by a regional holding company that also owns other utilities, as well as other nonelectric generating companies. In this case, the reporting entity could be defined as the electric generating plant, the utility or the holding company. The program encourages reporting entities to report at the highest level of meaningful financial and operational control, which in this case is likely to be either the utility or the holding company. DOE solicits comment on whether the proposed guidelines are likely to cause entities to establish boundaries that reflect a higher level of corporate or institutional aggregation, as is desired. DOE also solicits recommendations on what additional provisions might preserve flexibility in the establishment of boundaries while also preventing or further discouraging the shifting of emissions to nonreporting parts of the entity in order to create the appearance of net emission reductions. Finally, DOE solicits comment on the desirability of more prescriptive approaches to the definition of entities, such as a requirement that entity definitions correspond to those used for Federal tax purposes.

The Guidelines would require that the name chosen to represent the entity generally correspond to the activity covered by the report. For example, a large multiproduct manufacturer should not use its corporate name to report the emissions and emission reductions of just one of its many subsidiaries. However, there may be instances when some, but not all subsidiaries of a large corporation may want to report as a single entity. One reason to report as a single entity might be that certain subsidiaries have a common business activity, while others do not. However, another reason might be that some subsidiaries could demonstrate emission reductions, while others could not. DOE solicits comments on how the Guidelines might provide the flexibility needed by entities with special circumstances, while discouraging abuses of this flexibility that could produce misleading impressions of entity performance.

Another question concerns the possible role of trade associations and other third parties as consolidators of entityspecific reports into an aggregate report to DOE. While associations may report information collectively for their memberships under the current guidelines, this may have implications for the accuracy and reliabilityand transparencyof reports submitted under the revised guidelines. Should trade associations and other third parties be required to submit some or all of the entityspecific data that might be required by the revised Guidelines? Should the CEOs, other senior officials, or heads of entities be required to certify the accuracy of their companies' reports when submitted to or through trade associations? Should trade associations and other third parties be able to ``register emission reductions'' or only file reports for the record?

C. Defining Entity Boundaries

To report on an entitywide basis and to register emissions reductions, reporting entities would have to provide an ``entity statement'' that meaningfully defines the operations and facilities (such as office buildings or vehicle fleets) covered by their entity wide reports, and the greenhouse gas sources and sinks encompassed by these operations and facilities. Such operations would include those wholly owned and operated by the entity, and might include those operations that are partiallyowned, leased or operated by the entity. Entities would be required to coordinate with other entities that shared ownership of particular operations to ensure that no double counting occurred. Entities would also have to ensure that each annual report consistently used the boundaries identified in prior year reports, unless an explicit description of any changes made and their effects on emissions accompanied the report. In cases where an entity undergoes a significant structural change, it may have to establish a new base year for all or part of its operations, or, in the case of acquisitions, recalculate its original baseline based on the prior year emissions of the acquired plant.

D. Emission Sources and Sinks Covered

Reports would be able to cover any greenhouse gas or sink that is consistent with the definitions established in the General Guidelines. An entitywide inventory would need to cover all significant (determined by share of total emissions or absolute quantity of emissions), anthropogenic greenhouse gas emission sources within the entity's defined boundaries. Entitywide reports must also cover all significant emission sinks. Entitywide reports must encompass, at minimum, all six greenhouse gases specified in the Guidelines, whether emitted directly by the entity's operations and facilities, or indirectly in the generation of purchased electricity, steam or hot (or chilled) water used by the entity. Indirect emissions other than those specifically cited in the Guidelines may be reported separately, but reductions associated with such other indirect emissions may not be registered. Entities also may separately report, but not register, emissions and emission reductions associated with other gases (e.g. chlorofluorocarbons, black soot) that may have significant, quantifiable climate forcing effects, provided that DOE's Technical Guidelines specify the methods for measuring and reporting their emissions. DOE is soliciting comment on criteria for identifying such gases and on procedures for developing the necessary Technical Guidelines. All DOE proposals to permit the reporting of additional gases will be made available for public comment before being put into effect. DOE solicits comment on this approach and on a possible alternative that would permit participating entities to report (but not register) the emissions and emission reductions associated with other gases, even if DOE's Technical Guidelines did not specifically cover such other gases.
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E. EntityWide Reporting of Emissions Inventories

To be eligible to register emission reductions, entities with substantial emissions (an annual average in excess of 10,000 tons of CO2 equivalent) would need to report annual entitywide inventories of their emissions and sequestration. Such inventories would provide a basis for assessing the significance of reported emission reductions relative to the entity's total emissions. F. EntityWide Emission Reductions

To register emissions reductions, entities with average annual emissions over 10,000 tons of CO2 equivalent would be required to demonstrate, to the maximum extent practicable, that the reported reductions represent an actual net decrease in entitywide emissions, as calculated using one or more of the methods allowed by the General and Technical Guidelines. Some entities, such as electricity generators, would be expected to calculate net emission reductions for their entire entity (using one or more of the methods described below and in the Technical Guidelines). Others, such as multiproduct manufacturers, may not be able to determine the net emission reductions achieved by all elements of their entity using the methods allowed by the Guidelines. These types of reporters could report the net emission reductions for as much of their entity as was practicable, in addition to reporting their entitywide emission inventories.

Example: A multiproduct manufacturer has instituted company wide efforts to reduce emissions, but because its U.S. output is growing rapidly, its absolute U.S emissions have not declined. By using different calculation methods (intensity for many facilities and absolute emissions for others, as well as some projectspecific calculations) it can quantify the emission reductions associated with 90% of its total emissions. It would report its total emissions and quantified emission reductions to DOE, and explain that it is not practicable to quantify the emission reductions associated with the remaining 10% of its operations because there are no yearto year measures of output for these operations (because they involved the production of totally new products). In this case, the entity could register its reported emission reductions, but the data submitted in its report would clearly indicate that these reductions were based on an assessment of just 90 percent of the entity's emissions.

Net emission reductions achieved by third parties (offsets) could be included in an entity's report and be registered as long as the third party or other entity involved observed all of the rules that would have applied had it chosen to report its net emission reductions directly, and the entities involved have agreed that the reporting entity can register the emission reductions identified (see section II.O.5 below for additional discussion on the treatment of offsets).

The proposed Guidelines indicate that the owner of the facility, land or vehicle that generated the emission reductions or sequestration is the entity presumed to have the right to report and register any emission reductions or sequestration. For example, the owner of a wind turbine that sells its power to the grid is presumed to have the right to register such resulting emission reductions, even though this wind generated electricity might be purchased at a premium by a local utility and, ultimately, resold at a premium rate to a local manufacturer. This presumption can be altered, however, if there is a written agreement between the entities involved to transfer this right. G. Guidelines for Small Emitters

Entities with average annual emissions of less than 10,000 tons of CO2 equivalent, such as many farms and forest operations, small businesses and individuals, could report and register emission reductions that have occurred during and after 2003 without submitting the results of an entitywide emissions inventory or an entitywide assessment of the annual changes in their emissions, avoided emissions and sequestration. Entities reporting under this provision would be required to determine the total annual emissions and sequestration associated with the type of activities on which they choose to report, the net emission changes associated with these specific activities, and to certify that the changes reported were not caused by actions likely to cause increases in emissions elsewhere within the entity's operations. Small emitters would be required to use the same methods for calculating emission reductions available to other reporters. DOE's Technical Guidelines will provide a list of the types of activities about which small emitters might report. It is expected that households and many small businesses, farms, and forest operations would be exempt from the requirement to submit entitywide inventories. The use of a multiyear average rate of emissions is intended to enable certain small entities that have periodic spikes in their annual emissions (for example, a land owner that periodically harvests trees) to qualify for this exemption. Comments are specifically solicited on (1) whether 10,000 tons of CO2equivalent emissions would be the appropriate threshold quantity to achieve this objective, and (2) the appropriate period of time over which small entities should be permitted to average their annual emission rates. DOE is also soliciting comments on whether these special rules for small emitters are appropriate and how to ensure that reductions reported by small emitters are not a result of shifting emissions to nonreporting parts of the entity.

H. Emission Reduction Calculations

All reported and registered emission reductions would have to be calculated using one of the methods identified below, together with the procedures to be set forth in DOE's Technical Guidelines. The proposed revised General Guidelines recommend the use of emission intensity indicators as the basis for determining emission reductions, but would permit the use of several other methods to calculate emission reductions and sequestration as long as the method used excludes reductions caused by reductions in output. Regardless of the method used, a reporting entity would have to certify that none of the reported emission reductions were: Double counted by the reporting entity (or, to its knowledge, by any other reporting entity); or were the result of shifts in operations or activity from one part of the entity to another part of the entity, or to outside the boundaries of the entity. Entities would be required to report each emission reduction and sequestration calculation by type, indicate the types of actions taken that resulted in the reported emission reduction, and explain the selection of each indicator of output used. Comments are invited on the appropriateness of each of the methods described below and on the definitions provided in the proposed Guidelines. Additional guidance on each of these methods will be provided in the Technical Guidelines, including lists of possible output indicators, calculation methods for determining reductions associated with agricultural, forestry and geologic sequestration, methods and emission factors for calculating avoided emissions, and projectbased methods, among others.

1. Reductions in emissions intensity, as long as the reporting entity demonstrates that the intensity metrics used are based on measured (or estimated) emissions and measured indicators of output that accurately represent the physical (or, in some cases, economic) output associated with the covered emissions, and that acquisitions, divestures or changes in products have not contributed significantly to the reductions.

2. Absolute reductions in emissions, as long as the entity demonstrates that these measured reductions were not caused by declines in its U.S. output.

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3. Increased carbon storage (for actions within entity boundaries), as long as the entity demonstrates the sequestration measured or estimated represents a net increase in the quantity stored by the entity and has not been rereleased to the atmosphere (ongoing, annual reports would be required).

4. Avoided emissions (for actions within entity boundaries that reduce emissions outside entity boundaries) that reflect the indirect emission reductions achieved as a result of a measured increase in the net sales of energy generated by lowor noemission technologies.

5. Project emission reductions (for actions taken to reduce direct or indirect emissions within entity boundaries), as long as they exclude any reductions that might have resulted from reduced output or from shifting emissions to operations not included in the reported projects, and are derived from measured performance data or by using estimation methods consistent with DOE Technical Guidelines. In the context of entitywide reports, this last calculation method is intended only for use when none of the other methods is practicable. I. Recordkeeping, Report Certification, and Verification

Reporters under the existing program must certify the accuracy of their reports, but are not required to maintain records. Under the proposed revised Guidelines, the chief executive officer, agency head, head of household or person responsible for the reporting entity's compliance with environmental regulations would certify that reports are complete, accurate and consistent with DOE guidelines, and that sufficient records will be maintained for at least three years to enable independent verification. Reporting entities are strongly encouraged to obtain independent verification of their reports. The proposed Guidelines describe what would constitute such verification, including a description of the types of firms or institutions that might be qualified to independently verify the entity's reports, and the elements of an entity's records and reports that should be verified.

The proposed General Guidelines would require reports to EIA that are sufficiently detailed to enable EIA to review and confirm the final emission reduction calculations for each method and output measure utilized, and to review and confirm the rates of conversion used for each category of greenhouse gas covered and for electricityrelated use or emissions avoidance, by region. EIA's review of the data submitted would be intended to assure consistency with the requirements specified in the General and Technical Guidelines. This level of reporting would indicate the basic components of each entity's emission inventory and of its entitywide emission reductions. Entities would be required to maintain more detailed records, sufficient to permit an independent verification. The proposed levels of data reporting and recordkeeping represent a middle ground between the views of stakeholders who favor summary data and those stakeholders who prefer more detailed data that would be the basis for independent verification.

The proposal limits the recordkeeping requirement to three years. Of course, reporting entities may keep their records for a longer period of time if they deem it in their interest to do so.

The proposed Guidelines would require that the chief executive officer or other senior official of the reporting entity certify the accuracy, consistency and completeness of all reports. In addition, the Guidelines would encourage, but not require, independent verification of all reports. The proposed Guidelines would provide only general guidance on what DOE considers the necessary qualifications of verifiers and the information that they must verify. This guidance is intended to provide some assurance that such verifiers are independent and appropriately qualified, while still giving entities considerable flexibility in the selection of the type of firm most appropriate to perform such an independent verification. DOE invites comments on whether the general guidance provided is sufficient to achieve this objective.

While some stakeholders believe that independent verification should be required of all reports, many felt that independent verification is only necessary if entities seek to sell their registered emission reductions and, in such cases, private markets are likely to specify the type of independent verification required. While DOE received many comments that questioned the credibility of many of the emission reductions reported under the existing program, most of these concerns related to the methodology used to calculate the reported reductions, rather than the validity of the data used or reported. While DOE believes that requiring a senior officer to certify reports will provide adequate assurance that the data reported are reliable, the proposed Guidelines would strongly encourage reporters to obtain independent verification. DOE solicits public comment on this approach and on whether further consideration should be given to requiring independent verification of emission reductions prior to registration.

J. Starting To Report

Under the proposed revised Guidelines, entities would be permitted to begin reporting their prioryear emissions and emission reductions at any time. In general, the first full year for which an emissions inventory is available would be considered the entity's base year, although DOE would encourage entities to determine their base year by calculating the average emissions or emissions intensity during a base period of up to four years in length. This flexibility would permit a reporter to select the base year or base period most representative of actual operations. It may also, however, allow a reporter to select the most advantageous base year or base period (i.e., a period that would enable the reporter to register the greatest amount of reductions). DOE solicits comments on whether this flexibility is appropriate and, if not, what steps might be taken to limit this flexibility. To focus the program on current and future efforts to reduce greenhouse gas emissions, entities would be permitted to register only those emission reductions calculated using a base year no earlier than 2002 (or base period of up to four sequential years ending no earlier than 2002). However, entities may still report emission inventories and reductions for previous years, as long as any prior year emission reductions are calculated using a base year no earlier than 1990 (or a base period no earlier than 19871990). To be accepted as entitywide reports under the revised Guidelines, emission reductions already reported to the 1605(b) registry must be recast to fully comply with the revised Guidelines.

K. Report Acceptance

Upon receipt, EIA would review all reports to ensure consistency with the revised Guidelines. If EIA determines the report follows the General and Technical Guidelines, and EIA's Reporting Form Instructions, the report would be classified as either an entitywide report or otherwise, and accepted.

L. Registration of Emission Reductions

Accepted entitywide reports and reports from small emitters would then be further reviewed to determine if reductions were eligible to be registered. Entitywide reports and reports from small entities that have used the methods identified in the General and Technical Guidelines, as well as EIA's Reporting Form Instructions, to [[Page 68211]]
demonstrate they have achieved emission reductions after 2002 and have met all other applicable requirements would have the identified reductions registered in the 1605(b) database under the name of reporting entity and the year the reduction was achieved.

Registering only reductions that are achieved after 2002 would focus the program on those reductions most likely to contribute to the achievement of the President's goal for reducing U.S. emissions intensity by 18% between 2002 and 2012. In addition, because all of the data required to register reductions would be relatively recent, it would help ensure that all entities have an equal opportunity to register emission reductions under the new program. Nevertheless, the revised Guidelines would continue to permit entities to report emission reductions back to 1991, the earliest year permitted by the authorizing statute, and reports that comply with the Guidelines would be made publicly available by EIA. DOE solicits public comments on this approach and any suggestions of alternative means of achieving the objectives outlined above.
M. Sustaining Entity Reports of Emissions and Emission Reductions

To register emission reductions in any future year, an entity would be required to submit ongoing annual reports that document the net, cumulative emission reductions achieved relative to the entity's base year (or base period). Only additions to cumulative emission reductions (relative to the chosen base year or base period) would be recognized in future years. This requirement would reduce the quantity of emission reductions eligible for registration in future years if the reporting entity experiences a net increase in outputadjusted emissions after beginning to report. This approach would preserve the recognition given to all previously registered emission reductions, even if an entity experienced net emission increases in the future or stopped reporting. DOE solicits comments on this approach and possible alternatives, including those that might permit or require DOE to delete previously registered emission reductions if an entity did not continue to submit annual reports. Ongoing, annual reporting would be required to maintain recognition for registered emission reductions resulting from sequestration.

N. EIA Database and Summary Reports.

The EIA Administrator would establish a public database including all data that meets the definitional, measurement, calculation and certification requirements of the revised Guidelines. The database would provide summary information on each reporting entity's greenhouse gas emissions and its registered emission reductions, by year, according to the categories described above. The database would also provide access to all accepted reports.

O. CrossCutting and Other Important Issues

This section discusses various issues that affect more than one provision of the proposed revised Guidelines or were not highlighted in any of the preceding sections. DOE is seeking public comment on all of these issues, and certain specific questions are posed.

1. EntityWide v. SubEntity or ProjectOnly Reporting

The proposed Guidelines would highlight the net contribution of reporting entities to reducing greenhouse gas emissions, rather than subentity reductions resulting from actions taken in only some parts (rather than the whole) of the entity. This reflects the
Administration's interest in fostering broad efforts by corporations, institutions and other entities to reduce their total emissions. Over time, individual companies and other entities often take many actions that either increase or decrease their emissions of greenhouse gases. It is the net effect of all of these actions on an entity's emissions that is the most important indicator of an entity's contribution to the President's goal of reducing U.S. emissions intensity. Under the revised Guidelines, most reporters would be able to register emission reductions only if they could demonstrate they had achieved a net reduction in their total emissions, relative to their physical or economic output. Small emitters, such as households, and some farms, forest operations, and small businesses, would be permitted to register the reductions achieved in just one area of activity, such as building operations or forestry, rather than accounting for all of their emissions, so long as they certify that these reductions are not a product of shifting emissions to nonreporting parts of the entity. In addition, the proposed Guidelines would continue to provide a mechanism for large emitters to report, but not register, the reductions resulting from individual actions or projects affecting a part of the entity's emissions, even if they could not demonstrate that they had achieved a net reduction in their total emissions, relative to their physical or economic output. DOE solicits comments on this approach and on possible alternatives to this approach, including circumstances under which projectbased or subentity reductions might be registered in the absence of net entity wide reductions.

2. Treatment of Certain Small Emissions

The proposed Guidelines would permit reporters to exclude certain emissions that are comparatively small, as well as all non
anthropogenic emissions. Specifically, an entity could exclude emissions from multiple sources (and multiple gases) as long as the total emissions excluded did not exceed 3% of its total emission inventory or 10,000 tons of CO2 equivalent, whichever was smaller. This exclusion is intended to enable entities to exclude small, and possibly widely dispersed, emissions that are likely to be especially costly to monitor and report, but which would have little effect on the total emissions or emission reductions reported. However, this approach has some potential drawbacks. For example, very large emitters, such as large power generators or large energy intensive industries applying this standard would have to account for a very high percentage of their total emissions (in some cases over 99.9%). Accounting for such a high percentage of total emissions could be burdensome and would have little effect on the totals reported. Several possible alternatives exist. One option might be to provide for uniform percentage exclusion, such as permitting all entities to exclude up to 3 percent of their emissions. This could lead some large utilities or industries to exclude large quantities of emissions that would be relatively easy to include in their reports. Another possible alternative is the addition of a minimum percentage exclusion, such as 1 percent. Still another alternative might be to permit firms to exclude up to 3 percent or 10,000 tons of CO2 equivalent, whichever is greater. DOE solicits comments on the approach proposed, as well as various alternatives approaches.

3. Excluding the Effects of Changes in Output on Emissions

The proposed Guidelines would strongly encourage the use of emissions intensity indicators as the basis for calculating emission reductions and would require that any method used to calculate emission reductions ensure that reductions caused by declines in the reporting entity's output be excluded. This would require entities to develop useful physical (and/or possibly economic) indicators of the output associated with the emissions being assessed. For power generators [[Page 68212]]
supplying electricity to the grid, the preferred measure of output is clear: kilowatt hours. Certain large manufacturers also have well established measures of output that have already been widely used for many years, such as tons of cement. But many product manufacturers may have some difficulty identifying useful output indicators especially if they desire to develop indicators that represent the output associated with a large a number of different processes and products. Broad physical units, such a pounds of product (sometimes used by chemical manufacturers), often encompass a wide range of different products, and a similarly wide range of production processes and product values. As a result, some important shifts between processes or product types may not be captured by such a broad indicator. As an alternative, some entities might consider the use of economic indicators, although analysis of some entitylevel economic indicators suggests that they may be significantly affected by changes in market conditions and may serve as poor indicators of productionrelated changes by individual entities. DOE intends to identify in the Technical Guidelines various output indicators and provide guidance on the selection of appropriate indicators. DOE may specify the use of particular indicators for certain types of economic activity, but is likely to give most reporters the flexibility to adopt the best indicators for their particular circumstances. Given the potential deficiencies of some output indicators, DOE invites public comment on what information entities should be required to provide to justify the selection of their output indicators and what criteria DOE should use to determine whether a particular output measure is acceptable.

A related issue concerns entities that base their emission reductions on changes in their ``absolute'' emissions. The proposed Guidelines would require such entities to demonstrate that any reported reductions were not associated with declines in the output associated with those emissions. Because entities should only use this approach if they could not develop an output indicator that would enable them to track their emissions intensity, they may have difficulty demonstrating that their output had not declined. Again, DOE is interested in receiving comments on what output measures or other information such entities should be required to provide to demonstrate that their output has not declined and what criteria DOE might use to determine whether the information provided was sufficient.
4. Emissions and Reductions Associated With Electricity Generation and Use

Several key provisions of the Guidelines deal with how entities are to report emissions and emission reductions associated with electricity generation and use. Approximately 32 percent of total U.S. emissions of greenhouse gases are released in the generation of electricity. As there are substantial opportunities to reduce the emissions associated with both the generation and use of electricity, it is important that the program cover both electricity generators and consumers. In doing so, however, it is also important to ensure: (1) That electricity related emissions and emission reductions are not double counted; (2) that the conversion factors used to translate kilowatt hours into emissions are accurate indicators of the actual emissions associated with the generation of the electricity; and (3) that recognition for reductions is given to those entities primarily responsible for those reductions. Both these proposed General Guidelines and the Technical Guidelines, to be proposed subsequently, will attempt to achieve these objectives.

To avoid double counting, the proposed General Guidelines would require users to distinguish between the ``indirect'' emissions associated with electricity purchases (as well as purchased steam, and chilled/hot water) and their direct emissions. This will enable entity level emission inventories to include such indirect emissions, while permitting DOE to exclude such emissions from compilations of multiple reports, if desired. In the Technical Guidelines, DOE will specify the factors to be used to convert purchased electricity use to greenhouse gas emissions. For the purposes of emission inventories, DOE is likely to specify a factor based on the average emissions per kilowatt hour for the region in which the electricity was consumed. However, for the purpose of calculating emission reductions associated with reduced electricity demand, DOE may specify an alternative factor, such as one based on the emissions associated with regional electricity supplies at the margin (largely excluding electricity generated by hydro, nuclear power plants and some coal, which tend to be fully utilized, regardless of changes in regional demand for power). These factors might change annually and could be required to be used by all consumers of purchased electric power, unless the reporter could demonstrate special circumstances.

There may be two methods for determining emission reductions associated with the generation of electricity. One method might be used to calculate reductions in the emissions intensity of existing power production (e.g., through fuel switching or increased efficiency) and the other might be used to calculate the indirect reductions (or avoided emissions) that result from increasing the electric power generation from nonemitting or lowemitting sources. DOE is seeking to provide recognition to existing power generators that reduce their emissions intensity, while also establishing a level playing field among producers of new or additional power supplies, and endusers of electricity that reduce their demand.

DOE intends to provide, through its Technical Guidelines, clear direction on how to calculate emission reductions associated with the generation and purchase of electricity. While the specific methodologies and factors to be used have yet to be defined, DOE is soliciting suggested approaches that would achieve the objectives identified, as well as specific recommendations on how to develop the conversion factors described and how to most appropriately distinguish between existing and new power production and emissions.
5. Reporting and Registering Changes in Terrestrial Carbon Stocks

The proposed guidelines would require entitywide emission inventories to include emissions and sequestration associated with terrestrial carbon stocks. Changes in the amount of carbon stored in sinks within the entity's boundaries over the inventory year would determine the quantities of such emissions and sequestration included in inventories. Entities that meet all of the relevant requirements in the general and technical guidelines may also register yeartoyear increases in carbon stocks as ``registered reductions.'' Ongoing reporting will be required to ensure that any future changes in these stocks are fully reflected in the entity's emission inventories and registered emission reductions. The Department seeks comments on this provision as well as alternatives. For example, one alternative approach would calculate registered reductions as the change in carbon stocks during an inventory year relative to the change in stocks during a base year or period.
[[Page 68213]]

6. Recognizing Emission Offsets

As proposed, the General Guidelines would permit entities to report and register emission reductions achieved by others, as long as the entity that achieved the reductions observed all of the requirements applicable to reporters and the entities involved indicated that they had an agreement stipulating who would report the emission reductions. These provisions are designed to enable and encourage large emitters to support efforts to reduce emissions outside the boundaries of their entities. DOE believes this may be especially desirable when the opportunities for reducing emissions within an entity's boundaries are comparatively limited or costly. However, these provisions raise a number of issues upon which DOE is seeking public comment.

Most of these issues concern the information that must be submitted by a reporting entity about the emission reductions achieved by a non reporting entity. For example, must the reporting entity provide all of the information that the nonreporting entity would have been required to submit directly, including an Entity Statement, an emissions inventory (unless exempted), and an entitywide assessment of emission reductions (unless exempted)? Must the chief executive officer or other senior manager of the nonreporting entity certify to the accuracy of all of the information reported by the reporting entity? Could a non reporting entity enter into agreements permitting some of its emission reductions to be registered by one entity and the remainder by one or more other entities? Must the reporting entity demonstrate that it helped finance or manage the achievement of the emission reductions achieved by some other entity? One approach that might avoid many of these potential issues would be to require direct reporting by all entities that generate emission reductions. This approach would ensure that complete reports, submitted directly by the entity that owned the facilities or land that produced the emission reductions, would be available for all registered emission reductions. But requiring direct reports by all entities might discourage emission reductions by entities that are unwilling to report directly and might discourage support for such offset projects by large emitters, such as utilities. DOE solicits comments on the approach proposed and on possible alternatives.

7. International Emission Reductions

The proposed revised Guidelines do not address either the reporting of nonU.S. emissions and emission reductions or the registration of nonU.S. emissions reductions. DOE is soliciting public comments on whether nonU.S. emissions and emission reductions should continue to be eligible for reporting under the revised program, recognizing that the current guidelines provide for reporting of international activities.\1\ DOE is also soliciting public comments on whether non U.S. emissions and emission reductions should qualify for registration and, if so, what procedures and requirements should be established for registration of such emissions and emission reductions.
\1\ Since the current Guideline became effective in 1994, DOE has interpreted the Congressional intent underlying the statute to allow for the reporting of international activities.

Many factors are relevant to how nonU.S. emissions and emission reductions should be treated under the program with respect to both reporting and registration. Since 1994, many entities have reported on overseas activities; many companies likely to participate in the revised program have substantial business operations both inside and outside the United States. At the same time, reporting and registration of nonU.S. emissions and emission reductions raise certain issues that do not arise in the context of the reporting and registration of U.S. emissions and emission reductions. (For example, certifying the accuracy of data may be more complicated.)

In addition to requesting comment on the overall issue of whether to include international activities, DOE specifically requests comment on the following questions: How would the concept of ``entitywide'' reporting be extended to include nonU.S. activities? Should an entity wishing to report nonU.S. emission reductions achieved in its own non U.S. operations be required to inventory and report on all nonU.S. emissions and to assess changes in its emissions worldwide? Or should such entity only be required to report on its nonU.S. operations in specific countries? What requirements should thirdparty nonU.S. offsets be required to meet? To be eligible for registration, should reports of nonU.S. emissions reductions require independent verification? What would be the implications, including for participation in the 1605(b) program, if nonU.S. activities were excluded from reporting and/or registration?
8. Relationship of Proposed Guidelines to Climate VISION, Climate Leaders and Other Voluntary Programs To Reduce Greenhouse Gas Emissions

DOE, the Environmental Protection Agency and other Federal agencies have established programs to encourage companies, trade associations and other nongovernment organizations to take voluntary actions to reduce, sequester, or avoid greenhouse gas emissions. For example, industry participants in DOE's ``Climate VISION'' program, a Presidential initiative launched in February 2003, and EPA's Climate Leaders program have made voluntary commitments to reduce GHG emissions or emissions intensity by a specified amount, and to monitor and report on their progress.

The Administration intends to use the 1605(b) program to document, where possible, the progress of participants in these voluntary Federal programs. This is consistent with the President's desire that the 1605(b) registry be a ``tool that goes handinhand with voluntary business challenges * * * by providing a standardized, credible vehicle for reporting and recognizing progress.'' However, additional reporting may be required for other specific voluntary Federal programs in order to provide distinct benefits to program participants.

DOE is soliciting comment on the merits of using the 1605(b) program for documenting progress of participants in voluntary Federal programs towards meeting their emissions reduction goals.
III. Opportunity for Public Comment

A. Written Comments

You should submit written comments by February 3, 2004. Because we continue to experience occasional mail delays due to extra processing required for delivery of mail to Federal agencies, we encourage you to submit comments electronically by email at 1605bgeneralguidelines. comments@hq.doe.gov. We will consider comments received after the comment deadline only to the extent practicable. Comments should be submitted to the email or street addresses given in the ADDRESSES section of this notice. Written comments should be identified on the documents themselves and on the outside of the envelope, or in the e mail message, with the designation [insert name of rulemaking and docket number]. All comments received and transcripts of any public workshop held will be available for public inspection at the following Web site: http://www.pi.energy.gov/ [[Page 68214]]
enhancingghgregistry/ proposedGuidelines/comments. Persons without access to the internet can obtain such access to this Web site by visiting the DOE Freedom of Information Reading Room, Room 1E190, Forrestal Building, 1000 Independence Avenue, SW., Washington, DC 20585, (202) 5863142, between 9 a.m. and 4 p.m., Monday through Friday, except Federal holidays.

If you submit information that you believe to be exempt by law from public disclosure, you should submit one complete hardcopy and two hardcopies from which the information claimed to be exempt by law from public disclosure has been deleted. DOE is responsible for the final determination with regard to disclosure or nondisclosure of the information and for treating it accordingly under the DOE Freedom of Information Act regulations at 10 CFR 1004.11.

B. Participation in Public Workshop

You will find the time and place of the public workshop at the beginning of this notice. We invite any person who has an interest in today's notice, or who is a representative of a group or class of persons that has an interest in these issues, to participate in the workshop. Because space may be limited, persons wishing to participate in the workshop should inform DOE by identifying the person or persons likely to attend, an email or phone number for followup contacts, and providing a brief description of the specific issues of particular interest. This information may be provided electronically at the following Web site: http://www.pi.energy.gov/ enhancingGHGregistry/ proposedguidelines/general guidelines.html or may be provided in writing to the person listed in the beginning of this notice.

DOE will designate a DOE official to preside at the workshop, and may also use a professional facilitator to facilitate discussion. The workshop will not be conducted under formal rules governing judicial or evidentiarytype proceedings, but DOE reserves the right to establish procedures governing the conduct of the workshop. The workshop will be organized so as to encourage the open discussion of specific issues by the range of stakeholders and government representatives present. Prior to the workshop a draft agenda, identifying specific issues for discussion, will be made available at the following Web site: http://www.pi.energy.gov/ enhancingGHGregistry/ proposedguidelines/general
guidelines.html. There will also be opportunities during the workshop for the identification and discussion of issues not specifically identified on the agenda. The presiding official will announce any further procedural rules, or modification of the above procedures, needed for the proper conduct of the workshop. Statements for the record of the workshop will be accepted at the workshop.

DOE will make the entire record of the rulemaking, including the workshop transcript, available for inspection at the following Web site: http://www.pi.energy.gov/ enhancingGHGregistry/ proposedguidelines/general guidelines.html. In addition, any person may purchase a copy of the transcript from the transcribing reporter. 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).

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 proposed Guidelines under the
provisions of the Regulatory Flexibility Act and the procedures and policies published on February 19, 2003. Although section 1605(b)(1) of EPACT mandates a public comment opportunity before Guidelines can be issued, the proposed guideline provisions are policy statements and procedural rules. They are not substantive regulatory requirements that would have an economic impact on small entities. On the basis of the foregoing, DOE certifies that the proposed Guidelines, if promulgated, would 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

The Energy Information Administration 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. 19050194). EIA will prepare 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

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 email: 1605bgeneralguidelines. comments@hq.doe.gov [Please indicate if your e mail is a request for information, rather than a public comment.]