![](media/image1.wmf) **INTERNATIONAL PLACE 2**

**6400 POPLAR AVENUE**

**MEMPHIS, TN 38197**

**PHONE 901/419-3896**

Mark Friedrichs, PI-40 June 22, 2005

Office of Policy and International Affairs

U. S. Department of Energy

1000 Independence Ave., SW

Washington, D.C. 20585

# 

# Via e-mail: 1605bgeneralguidelines.comments@hq.doe.gov

> Re: International Paper Comments on the Revised Voluntary Greenhouse
> Gas (GHG) Reporting Program: General Guidelines; 10 CFR Part 300
> Interim Final Rule; RIN Number 1901-AB11.

Mr. Friedrichs:

International Paper (IP) is the largest forest products company in the
world operating in over 40 countries with significant manufacturing and
forestry operations in the United States. IP currently participates in
several voluntary greenhouse gas trading and reduction programs
including the EPA Climate Leaders Partnership and the Chicago Climate
Exchange®. International Paper is also a member of the American Forest
and Paper Association (AF&PA), a participant in DOE's Climate VISION
program.

International Paper's experience with voluntary programs in the U.S. and
mandatory programs in Europe gives us broad insights with respect to GHG
programs. Our position as one of the largest private forest landowners
in the U.S./World provides us with a unique and well-founded perspective
on forests that few others possess. The Interim Final Rule and the
associated technical guidelines will impact us more directly than
virtually any other individual commenter. Based on these facts, we ask
that you give our comments, particularly in the area of forest
management, additional consideration.

**GENERAL COMMENTS**

IP believes that the adoption of a practical, functional and
appropriately envisioned national GHG registry is an important task. One
of the fundamental issues confronting DOE is the virtual impossibility
to get this task "right" until a more defined GHG program is developed.
This foundation forms one of the cornerstones of our comments. The
tracking of voluntary initiatives must be proportional to the perceived
value and effort involved. For us, the price, particularly the price
associated with inventorying carbon in our forests, is overly excessive
for a "voluntary" program.

We are also concerned that, once DOE expends such a vast effort on
developing this "voluntary reporting initiative," there will be great
temptation to adopt it into yet-to-be-defined regulatory programs. The
concept of "voluntary" should be just that, not a precursor to a future
hypothetical regulatory regime. To that end, we also find it difficult
to comment thoroughly on the General Guidelines without connecting them
to the Technical Guidelines that are on a different commenting cycle.
Changes to either impact both.

Our experience with voluntary reporting efforts in other countries (e.g.
Canada) is that they have not preserved specified baselines. DOE need
look no farther than the pre-2002 data that were supposed to be
protected by the original 1605(b) to realize that voluntary data
collection is insufficient for regulatory baseline setting. The
exception to this may be those companies, like us, who are participating
in CCX, and/or Climate Leaders, or the regulated utilities already
reporting this information in a verifiable format.

Lastly, it must be recognized that the U.S. pulp and paper industry, as
derived from DOE's 2003 Report on Emissions of GHG in the U.S.,
represents less than 0.5% of U.S. GHG emissions while utilities and
transportation represent the primary sources of GHG emissions in the
U.S. We are an energy intensive industry, however, more than 60% of that
energy comes from biorenewable and carbon dioxide-neutral woodwaste
fuels. IP continues to make steady energy efficiency gains, use more
sustainably managed biorenewable fuels, and reduce consumption of
expensive fossil fuels. Additionally, the forest products industry only
accounts for 9.1% of the forests in the U.S. with most industrial
landowners holding far less than 1%. The requirement for costly and
extensive forestry accounting for the forest products industry is wholly
out of proportion for any benefit that might be realized. Furthermore,
including forest sequestration on an entity-wide basis discriminates
against our industry by requiring inventory and reporting of resources
that do not appreciably affect the GHG profile of the U.S.

**TECHNICAL COMMENTS**

The following comments address specific areas of the interim final rule
or the technical guidelines:

[Consistency of Reporting]{.underline}

International Paper feels strongly that the sole purpose of the registry
should be to serve as a place for entities to report emissions
consistently from year to year. The March 2005 General Guidelines draft
and the interim final rule go well beyond that objective by introducing
prescriptive qualifications and restrictions on registration of
emissions. IP believes that this registry, or any GHG registry, should
be a simple, consistent and transparent reporting tool that does not
overly constrain reporting entities when submitting emissions data from
year to year. DOE has over complicated this process, and as such, has
significantly limited the usefulness of the 1605(b) program.

[Baseline Issues]{.underline}

The choice of terms like "Baseline Year", are biased towards future
purposes that are not evident in the scope of the regulatory intent. Two
concepts concerning baselines must be addressed: 1) inventory baselines,
and 2) registered reduction baselines. International Paper strongly
believes that a baseline is unnecessary for registering reductions as
further discussed below. A baseline or starting point for the "inventory
side" of the equation is acceptable if it allows for adjustments
associated with acquisitions and divestitures.

If the 1605(b) program were to adopt the concept of being solely an
"inventory" of emissions, the concept of "registering reductions"
becomes meaningless. Hence, the need for identifying a specific
emissions inventory baseline becomes unnecessary. Any timeframe should
be acceptable. Reductions would then become a matter of simple
arithmetic from year-over-year analysis rather than a complicated
accounting of baseline and registered reductions. With this approach,
all reductions within the entity boundary would be captured in the
entity's inventory in the year-over-year analysis. Such an approach has
been very successfully adopted by the Chicago Climate Exchange®. In
effect, registering specific reductions is unnecessary because the
results of the reductions are subsumed in the entity's annual emissions
profile. Any effort to impose requirements beyond the simple reporting
of emissions seems to look as if DOE were presupposing some future use
of 1605(b) involving the granting of "credits" under a future mandatory
program that would be more complex than current voluntary trading
schemes. Also, the current CO~2~ market does not recognize 2002 or any
other specific year so preserving "reductions" for future "credits" in
this context is meaningless.

At its outset, your Administration set forth programs to promote and
prompt industry to take early action with respect to GHG reductions.
Those programs bore fruit and the early actions taken by industry will
now be penalized by setting a 2002 baseline. The future success of
voluntary initiatives will be compromised if Government does not honor
its commitment to these programs. As a practical matter, if 1605b were
to be used for reporting under Climate Leaders and Climate VISION, as
specified in the preamble, it should allow for the baseline years
established in those program commitments. For participants in EPA's
Climate Leaders program, that baseline year is 2000. It is strongly
encouraged that DOE establish an inventory baseline consistent with the
Climate Leaders and Climate VISION programs.

Baselines are disproportionately troublesome in forest accounting,
particularly if they are not correctly adjusted for acquisitions and
divestitures. Our forestland base is continually changing, both in terms
of inventory and ownership, thus increasing the difficulty and
complexity of forestry accounting compared to the simple accounting
related to tracking mill or factory emissions.

Forests are not inventoried every year. Rather, statistical models are
used to estimate their growth during intervening years. Over time,
forest stands may be remapped, combined with other stands, divided into
multiple new stands, and even replaced with new forests as current
stands (or portions of them) are harvested. Tracking all of these
changes back through a "reverse" modeling effort to adjust a baseline
for land sales would be extraordinarily difficult and costly and is
beyond the current capability of any industrial forest inventory system.
This makes adjusting baselines when forestlands are sold prone to
significant inaccuracy. In most cases adjusting the baseline does not
change the carbon sequestration, either actual or potential, as the land
remains forested, just under different ownership. A broad national
inventory, such as the FIA, is ownership neutral and thus a better and
more supportable estimator of growing stock and carbon sequestration.
Further comments on this topic are included in the following section.

[Sequestration Reporting]{.underline}

As currently written, the General Guidelines require entity-wide
reporting. For entities owning forestland, this would mandate annual, or
at least periodic, accounting of sequestered forest carbon. As such, the
rules would 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 benefits in
terms of carbon sequestration.

It is inadvisable to adopt a government program that would set forth
expectations for determining who, where, when and how carbon
sequestration must be measured on privately-owned real estate when the
property owner is making no sequestration claims and is seeking no
special consideration from the government in this regard.

Some years ago, as the nation began grappling with the issue of
potential climate change in earnest, it became apparent that one of
America's strengths is her abundant, healthy and expanding forests. It
became well recognized that if carbon dioxide in the atmosphere is a
problem, then "fixing" that carbon in trees may be part of the solution.

The U.S. Department of Agriculture has for many years been estimating
the extent and health of America's forests. Through these longstanding,
comprehensive surveys, the government of this country is uniquely
equipped to estimate this carbon sequestration benefit at a national
level.

To the extent the government wishes to claim "credit" for this global
benefit in an international legal or political context, it should. To
the extent the government wishes to grow this international "credit" by
promoting domestic projects that increase the amount of carbon
sequestered in America's trees, it should.

The sequestration accounting requirement, as envisioned in Section
300.6(f) is complex, costly and intrusive. It adds no additional carbon
sequestration benefit above and beyond what is already rolled up into
current national government forest health measures.

What the proposed 1605(b) rules risk is drawing the federal government
into the realm of private property takings. A proposed regulation that
specifically dictates to private real estate owners how to account for
their provision of a free public benefit sets the stage for an
expectation that landowners shall provide these benefits in perpetuity.
Should such a regulatory expectation limit the future uses of the
property without fair compensation, then an economic taking will have
occurred. We do not believe this is the intent of the Administration.

We urge you to delete the language found in Section 300.6(f) that
advocates the need for private property owners to conduct an inventory
of "annual changes in managed terrestrial carbon stocks." Such a
requirement on landowners provides no benefit to the landowner or the
public or the government, is unnecessarily burdensome and duplicative of
current national forest inventory assessments, and is potentially
inconsistent with out core values of private property rights.

International Paper further opposes mandatory inclusion of forest
sequestration in entity level reporting for the following reasons:

1.  Annual carbon accounting for "on-going" forestry operations is prone
    to reflect short-term changes in growth, age structure, and harvest
    cycles that have no long-term impact on forest carbon.

2.  Detecting meaningful periodic change in large forest inventories is
    a daunting task, both logistically and statistically, even for
    entities with sophisticated commercial timberland inventories.

3.  The cost of forest carbon accounting is overly burdensome for large
    forest landowners when compared with carbon accounting for the
    manufacturing sector.

4.  It seems unlikely that private non-industrial landowners will choose
    to voluntarily report forest sequestration changes. Yet, these
    owners are projected to hold over 80% of private forest inventory
    volumes by 2010 (Haynes, R. W. 2003. *An analysis of the timber
    situation in the United States, 1952 to 2050*, USDA Forest Service,
    Gen. Tech. Rep. PNW-GTR-560). Non-industrial private landowners hold
    54.2% of the nation's forestland.

5.  It is also unclear whether entities such as the U.S. Forest Service,
    U.S. Park Service, Bureau of Land Management and various state-owned
    forest properties will participate in voluntary reporting of forest
    sequestration; without them the overall forestry carbon picture will
    be incomplete. The breakdown of U.S. forestland by ownership is:
    Forest Industry - 9.1%; Non-industrial Private -- 54.2%; Federal --
    27.4%; and Other Public -- 9.3%.

6.  The National Forest Inventory Assessment (FIA) used to report GHG to
    the international community as part of the U.S. obligations under
    the Climate Change Agreement of 1992 provides a more complete
    characterization of forest carbon change than any aggregation of
    voluntary reports, such as 1605(b).

7.  Forest ownership has become increasingly fluid, and can be
    associated with change in subsequent land use. Such changes may be
    far more important than annual inventory variation in on-going
    forest operations, but tracking them would be costly and
    impractical.

Given that forest inventories have been increasing in all U.S.
ownerships and are projected to continue to do so through 2050,
International Paper remains unconvinced that DOE has adequately weighed
the costs and benefits of "mandatory" inclusion of forest sequestration
in entity-wide reports and believes that such a requirement will be a
serious disincentive to voluntary reporting under 1605(b).

Included among other options that DOE might consider is the concept of
simplifying the forest sequestration accounting process based upon
sustainable management of forests. We recognize that the Technical
Guidelines allow reporters to assume that sustainably managed
forestlands are carbon neutral. Given that forest certification systems
all require owners to adhere to specific actions intended to preserve or
improve the quality and sustainability of their forestlands, it seems
more reasonable to accept the proviso that forestlands certified as
sustainably managed will generally not exhibit large negative swings in
carbon stock over time.

The critical section in the 1605(b) Technical Guideline language is in
1.I.3.5. IP firmly supports this allowance, but is concerned with the
language in the first paragraph which seems to imply that changes to
independent certification standards may be needed. IP believes that the
listed certification systems are adequate in themselves and that a
specific carbon indictor is not required. IP also believes that this
language would represent an inappropriate intrusion of the government
and DOE into independent forest certification programs and could
potentially complicate those systems. Such changes are entirely
unacceptable in our view and could potentially interfere with efforts to
increase the acreage certified forestlands in all states where we
conduct business.

*[We believe that the following language changes are absolutely
necessary for this provision to be valid and avoid complicated and
difficult issues associated with introducing additional "indicators"
into independent forest certification schemes.]{.underline}*

> **1.I.3.5 Sustainably Managed Forests**
>
> Some entities' forest land is managed sustainably, which is determined
> separately from the 1605(b) process in certification procedures that
> involve assessment of numerous indicators. If a land area is certified
> sustainable, it is highly unlikely the inventory of carbon on that
> land is declining. In this case the reporter may assume there is
> neither an increase nor decrease in carbon flow and report a default
> flux of "zero" for those lands. **~~Reporters using third-party
> certification as a basis for reporting zero net carbon flux should
> verify that the certification process includes indicators that would
> detect long-term declines in carbon stocks~~**. Third-party
> certification systems, such as the following, **~~should~~**
> **\[may\]** be used to determine that lands are sustainably managed
> **\[and report such lands as "zero" carbon flux for the purpose of
> meeting 1605(b) reporting criteria**\]:
>
> 1\. The Sustainable Forestry Initiative (SFI)
>
> 2\. Forest Stewardship Council
>
> 3\. The American Tree Farm System
>
> 4\. Green Tag Forestry, National Woodlands Owners Association
>
> Sustainably managed land may also experience an increase in carbon
> stocks through better management, improved technologies, and increased
> productivity. In those instances it may benefit the entity to include
> sustainably managed lands in its carbon inventories.

The above language is partially responsive to our primary position;
however it falls short of that much simpler approach, deleting Section
300.6(f) and the requirement for forest sequestration accounting on an
entity basis.

[Forest Preservation]{.underline}

International Paper does not believe that forest preservation activities
as defined in the Technical Guidelines should receive any special
consideration relative to other forestlands where harvesting is
constrained. Such constraints might be legally mandated under state
forest practices regulations, or they might be voluntarily imposed as
best management practices. In any event, lands thus constrained are not
afforded the same treatment under the Guidelines as areas under
preservation easements, though the effect is the same. The provision
allowing forest preservation projects to meter baseline carbon into its
sequestration reports is similarly without scientific or logical merit
and should be dropped.

[Emissions Intensity Reductions]{.underline}

International Paper supports DOE's allowance for reporting reductions in
either intensity or absolute emission terms. Intensity metrics may be
appropriate for some business types but inappropriate for our industry
and others with multiple product types. In many cases, intensity is not
valuable unless measured and reported by product line which can be
difficult and burdensome, but in other cases intensity may be the ideal
metric. It is suggested that DOE not impose additional qualifiers on the
use of emissions intensity as long as an entity reports every year using
the consistent metrics.

Section 300.8(h)(1) allows reductions associated with emissions
intensity as long as appropriate adjustments have been made for "changes
in products." IP feels this qualifier is discriminating to industries
with product lines that adjust to market demands. Paper products change
often as they are market driven and must reflect the needs of the
customers e.g. increased recycle content, thickness, fiber content etc.
Changes in products, such as these, should not be penalized. In fact,
some product changes (e.g. increased recycle content) may be very
beneficial and valid GHG reduction strategies. It is unclear why DOE
wishes to restrict such changes.

[Absolute Emissions Reductions]{.underline}

International Paper supports 1605(b)'s allowance for reporting
reductions in either intensity or absolute emission terms. The choice
for using either metric should be left to the reporting entity without
restrictions. As with emissions intensity reductions, DOE has placed
unnecessary restrictions and qualifiers on reporting absolute emission
reductions.

If DOE insists on the registration of emission reductions, it must make
allowance and accommodation for reporting the reductions in absolute
terms. Reporting reductions in absolute terms should not be so
prescriptive such that they require ties to production levels or exclude
plant closures. Absolute reductions are the most beneficial to the
environment and real impacts on climate change will not be made with
real reductions in the concentration of CO~2~. By imposing artificial
limitations which tie absolute reductions to production, DOE fails to
recognize this benefit.

In § 300.8(h)(2), absolute emissions reductions are allowed if changes
were not achieved as a result of "reductions in the output of the
reporting entity and certifies that emission reductions are not the
result of major shifts in the types of products or services produced."
If an entity has a valid inventory based on a standard protocol, changes
in acquisitions, divestitures and plant closures will be routinely and
predictably reflected in the inventory. If DOE is concerned about
movement of production and emissions out of the country, this may be
addressed through transparency of reporting for all operations owned by
an entity both domestic and international. It can also be reflected in
the inventory of the country where production ultimately resides.

[Plant Closures]{.underline}

Section 300.8(j)(2) disqualifies the reporting of reductions generated
by facility closures. This reflects a significant bias by DOE. By
precluding the reporting and registration of carbon reductions from
plant closures DOE has failed to recognize the nature of capital
investment cycles and fundamental technology changes that are necessary
to achieve a goal of reducing global carbon emissions. International
Paper's operations are global in scope and it is our intent to capture
significant emissions accordingly.

The EU adopted a similar position and is already having to rethink this
politically motivated decision as capital and production is moved among
members. We would expect DOE to recognize this fact most of all since
they are actively involved in "technology transitions." Such transition
only occurs in the context of facility/equipment closure and movement to
improved products/plants.

[Entity Statement]{.underline}

The general entity statement requirements under § 300.5 of the Interim
Final Rule remain excessive and require too much detail for a voluntary
reporting program. The need for this level of detail and complexity
continues to discourage entities from reporting.

[Certification of Reports]{.underline}

Section 300.10 requires a certification statement signed by the "chief
executive officer,...." for "all other reports." This requirement seems
overly excessive for a "voluntary" program. DOE's concern for accurate
and consistent data is misplaced by the requirement of "high level"
certifications. Chief Executive Officers et. al. will not be the "number
crunchers". It is more appropriate for persons more closely tied to the
collection and submission of the data to "sign off" on the intended
accuracy of the data.

[Reporting for other entities, such as trade associations, and
consistency with other voluntary programs]{.underline}

Although DOE has attempted to more clearly define the intended use of
the registry as a reporting platform for other government voluntary
programs, most specifically EPA's Climate Leaders Partnership and DOE's
Climate VISION program, the registry lacks consistency with those
programs and will be an encumbrance to all voluntary program
participation.

International Paper believes that a consistent platform is appropriate
for reporting for various government climate change programs. The
1605(b) registry, however, must be able to accommodate the requirements
of these programs without adding additional encumbrances. International
Paper further encourages DOE to amend the registry to reflect the
principles established by the EPA in the Climate Leaders program
including minimal data submission for independently verified
inventories. The current reporting framework under 1605(b) will force
participants to re-evaluate current commitments to the EPA program. We
believe this is contradictory to the President's intention for revision
to the 1605(b) registry.

IP disagrees with the current "aggregator" strategy in the interim final
rule as applied to third parties such as trade associations reporting
under Climate VISION. Absolutely no rights of "ownership" or
responsibility should be conferred to a trade association when they
report on the progress of an industrial sector toward a stated goal. The
1605(b) rule does not recognize this reality and will, subsequently,
place Climate VISION commitments made by trade associations and others
in jeopardy if the rule is not amended.

As a participant in both EPA Climate Leaders program and the AF&PA
Climate VISION commitment, IP has the following specific concerns:

1.  Goals or commitments under both programs were based on an
    understanding of the rules for each program and the associated
    reporting framework. The fact that 1605(b) reporting guidelines
    differ from standard reporting requirements and those of other
    government programs will require reassessment of all publicly stated
    goals.

2.  The required accounting and reporting of forest carbon under 1605(b)
    is inconsistent with general practice and is not included in the EPA
    Climate Leaders program.

3.  The starting year is inconsistent with other programs. Entities that
    intend to register reductions must choose a start year or the first
    year that an emissions inventory is submitted. To register
    reductions the start year can be no earlier than 2002. The AF&PA
    commitment to Climate VISION is based on a start year of 2000 and
    IP's commitment under EPA Climate Leaders is also 2000. \[§ 300.5 --
    Entity Statement\]

4.  Aggregated reporting does not fit with AF&PA's intended collective
    Climate VISION commitment. \[§ 300.7 Net Emission Reductions\] For
    example, an aggregator must submit the following information on
    parties it is reporting for: Entity statement, emissions inventory,
    assessment of emission reductions and appropriate certifications,
    that would be required if third party were directly reporting to
    EIA. Such commitments were not included in the AF&PA commitment to
    report under Climate VISIOIN.

[Independent Verification]{.underline}

International Paper has no specific position with respect to including
the concept of independent verification. The 1605(b) registry is
intended to be a voluntary program and as such, it should not be
required for reporting entities to seek independent verification. DOE
should keep the reporting burden for entities to a minimum.

**SUMMARY & CONCLUDING REMARKS**

IP appreciates continued effort by DOE to establish flexibility in the
Guidelines and to incorporate the concerns of all stakeholders. We
believe, however, that additional revisions are still necessary to make
the 1605(b) Guidelines consistent with other widely accepted protocols,
other voluntary reduction programs and international expectations.

For questions regarding these comments you may contact Jeffrey Lynn at
(901) 419-3956 (<jeffrey.lynn@ipaper.com>), Karen Risse at (901)
419-3958 (<karen.risse@ipaper.com>), Douglas Stilwell at (901) 419-3897
(<douglas.stilwell@ipaper.com>) or myself at (901) 419-3896
(duane.marshall@ipaper.com).

Sincerely,

![](media/image3.png)

Duane Marshall

Director, Corporate Environment

cc: David Struhs -- VP Environmental Affairs