# February 19, 2003

# 

# Mr. Mark Friedrichs

PI-40

Office of Policy and International Affairs

U.S. Department of Energy

Room 1E190

1000 Independence Ave., S.W.

Washington DC 20585

RE: Comments on General Guidelines for Voluntary Greenhouse Gas
Reporting; Proposed Rule (68FR68203)

Dear Mr. Friedrichs:

Dominion submits the following comments in response to the
above-referenced proposal and request for comment by the U.S. Department
of Energy (DOE) in the development of revisions to the existing
voluntary guidelines under Section 1605(b) of the Energy Policy Act.

There are many references in the proposed guidelines to the Technical
Guidelines that have yet to be developed. The absence of these Technical
Guidelines makes it very difficult to assess the workability and
implications of the revised 1605(b) program. We note DOE's intention,
issued in a January 29^th^ *Federal Register* notice, to make available
for public comment a further revision to these General Guidelines later
this year. We welcome this additional opportunity, but urge the DOE not
to make any final policy decisions until after the conclusion of the
final comment period on the Technical Guidelines, and not before it has
provided an opportunity for public review and comment on the entire
package of revised guidance (General and Technical Guidelines). For
these reasons, these comments should be considered "preliminary
comments", which may be modified subsequent to our review of the
forthcoming additional guidelines.

## General Comments

-   The proposed General Guidelines (hereto referred to as "the
    guidelines") do not adequately encompass all of the objectives of
    the President\'s policy outlined in February 2002. We believe the
    guidelines as currently proposed will fail to encourage increased
    participation in voluntary greenhouse gas (GHG) reduction programs.
    Although the scope of the reporting requirements has been increased,
    the guidelines are more vigorous than practical. While the
    President's directive to the DOE called for program enhancements
    that would ensure that registered reductions are not penalized under
    future climate policy, the revised guidelines are noticeably silent
    on the issues of baseline protection and transferable credits to
    entities that report reductions. These elements are important policy
    incentives that would help promote participation in voluntary
    reduction programs while providing companies a hedge against current
    and future climate regulatory policies. Although the guidelines
    speak of "special recognition" for companies that register, the
    nature of such recognition is not described. Absent assurances that
    companies that voluntarily take actions to reduce GHG emissions will
    be credited for early action and not be penalized under a future
    climate policy, the guidelines provide little incentive for
    achieving GHG reductions and participating in the program.

-   The proposed guideline revisions also fail to adequately recognize
    past voluntary actions reported under the previous guidelines. The
    July 8, 2000 four-agency letter to the President recommended that
    DOE develop a process for evaluating the extent to which past
    reductions may qualify for credits. Yet, the proposed guidelines do
    not permit the [registering]{.underline} of reductions reported to
    the 1605(b) program under the previous (current) guidelines in the
    revised program. While it allows such previous reductions to be
    reported under the revised program, provided the reductions are
    recast to fully comply with the revised guidelines, such reductions
    will not be recognized as registered. We urge DOE to reconsider this
    policy. As long as reductions reported under the previous guidelines
    are recalculated to conform to the requirements of the revised
    guidelines, they should be granted the same recognition and equity
    as reductions reported and registered under the revised program. The
    treatment of previous reductions in the policy currently proposed
    serves as an additional deterrent toward participation in voluntary
    programs since it sets a precedent for offering participants in a
    voluntary emission reduction program no assurances that their
    efforts will have any value or benefit in any future program,
    whether voluntary or regulatory.

## Tiered Reporting

-   In comments filed in response to DOE's Notice of Inquiry (NOI) on
    Voluntary Reporting of Greenhouse Gas Emissions published in the May
    6, 2002 *Federal Register*, we supported the concept of establishing
    a tiered approach to the voluntary reporting program that would
    provide different levels of reporting requirements and stringency
    depending on the purpose for which the reductions are
    [registered]{.underline}. We suggested as an example that it may be
    necessary to establish more prescriptive requirements for reductions
    that are registered for transferable credits that could be traded to
    other entities or used in a future GHG market-based program.
    However, we also advocated that such criteria be developed in a way
    that minimizes administrative burdens to the greatest extent
    possible. Our previous comments in support of a tiered approach
    contemplated that [all]{.underline} reductions could be
    [registered]{.underline}.

-   The reporting vs. registered tiered approach proposed in the revised
    guidelines will significantly hinder participation in the voluntary
    reporting program. First, it restricts the actual
    [registration]{.underline} of reductions to reporters who submit to
    entity-wide reporting of emissions, among other onerous requirements
    addressed later in these comments. The guidelines are then silent on
    the value and use of reductions that are only allowed to be
    "reported", and strongly imply that reductions that are reported but
    not registered would not (or could not) be considered for use in
    demonstrating progress with the President's voluntary goal of
    reducing GHG emission intensity. We believe all reductions should be
    registered so long as they meet appropriate criteria in terms of
    quality and verifiability, and that the ability to register
    reductions in a [voluntary]{.underline} program should not be
    governed by requirements to report on an entity-wide basis, or on
    requirements that "net reductions" be attained for
    [each]{.underline} reporting year. Again, while it may be
    appropriate to establish more prescriptive requirements for
    registering reductions that a reporter wishes to register for
    transferable credits, it should not preclude allowing reductions
    that conform to appropriate reporting criteria from being registered
    in the 1605(b) program and used, for example, to demonstrate
    progress toward a [voluntary]{.underline} reduction goal.

## Entity-Wide Reporting 

-   We strongly object to the [requirement]{.underline} for entities to
    report entity-wide emissions in order to register reductions. A
    reduction in GHG emissions registered in a voluntary program should
    not be subject to any type of "litmus test" in terms of the
    significance of the reported reduction relative to total GHG
    emissions. A reduction is a reduction regardless of whether such
    reduction is achieved by a large or small overall emitter, and
    regardless of whether the reduction represents a small or larger
    fraction of an entity's total emissions.

-   Furthermore, the requirement to report entity-wide emissions appears
    to apply only to large emitters. Entity-wide reporting should remain
    a [flexible option]{.underline} for [all]{.underline} reporting
    entities, large or small.

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-   Should DOE pursue such a requirement, we urge the DOE to limit the
    scope of reporting requirements. The deminimus levels proposed in
    the guidelines are inadequate and burdensome, especially for the
    electric power sector. For most electric power generating companies,
    the 10,000 tons deminimus threshold is less than one-tenth of a
    percent of the entity's total GHG emissions. This will require many
    power generating companies to report virtually all of their GHG
    emissions, even though non-generation emissions are insignificant
    relative to emissions from generation and would be administratively
    time-consuming and costly to inventory. Requiring the culling of GHG
    emissions from fleet vehicles, employee travel, barge traffic, coal
    transport and fuels processing, SF6 from transmission systems,
    methane from transmission pipelines, carbon storage as a result of
    land sales, purchases or development activities as well as other
    (fugitive) emissions places a huge administrative,
    resource-intensive and costly burden on electric generating
    companies. Such an enormous burden certainly will discourage
    participation in the voluntary reduction program, which again is
    counter to the President\'s policy directive to enhance and
    encourage future participation.

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-   Since emissions from fossil-fired generation typically encompass a
    significant portion of GHG emissions from electric generators, and
    since this information is already reported under EPA's Title IV
    program, we believe that, should DOE pursue entity-wide reporting,
    such requirements limited to emissions data that are already public
    knowledge would be reasonable. To the extent the DOE pursues
    establishing a more specific deminimus threshold, we urge DOE to
    consider a more suitable and reasonable deminimus threshold, such as
    the [greater]{.underline} of 10,000 tons or 5% of total emissions.

-   We do support the addition of entity-wide
    [intensity-based]{.underline} reporting in the guideline as a
    reporting [option]{.underline}.

-   The guidelines should continue to allow project-based reporting [and
    registering]{.underline} of reductions, avoidances and
    sequestration. Project-based reporting should receive equal
    treatment with entity-wide reporting, as under the current
    guidelines. We note that participants in the January 12^th^ DOE
    workshop were virtually unanimous in their support of project-based
    reporting.

# **[Defining Reporting Entities]{.underline}**

-   The guidelines indicate that a reporting entity "must be composed of
    one or more legally distinct businesses, institutions, organizations
    or households". It further strongly encourages reporters to define
    themselves at the "highest meaningful level of aggregation
    appropriate". We believe that any stipulated requirements for
    defining reporting entity levels should remain as flexible as
    possible. In fact, the current guidelines already define entity as a
    "legal U.S. entity" including "any company, organization, or group
    incorporated under or recognized by U.S. law; or any U.S. Federal,
    state, or local government entity".

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-   The guidelines also note that DOE is considering more prescriptive
    approaches to the definition of entities, such as a requirement that
    the entity definitions correspond to those used for tax purposes. We
    urge DOE not to pursue such an approach.

-   In the case of multiple ownership, we believe entities should have
    the flexibility and option of reporting emissions based on either
    equity (percentage ownership of the emitting facility) or control
    basis (ownership and operational responsibilities), although
    measures would be required to prevent double counting of actual
    emissions or emission reductions.

-   The entity statement requirements under Section 300.5(7) of the
    proposed guidelines are burdensome and require excessive detail. An
    amended entity statement requirement appears unnecessary if rules
    are established for making baseline adjustments for transfers or
    acquisitions of operating facilities or activities.

## Additional Reporting and Registering Requirements

-   The requirement for an entity to achieve entity-wide emission
    decreases [each]{.underline} reporting year (whether in terms of
    actual emissions or emissions intensity) and to offset any increases
    with future decreases in order to register reductions, is
    prohibitive . There is currently no regulatory or legislative
    [mandate]{.underline} capping GHG emissions on a national level.
    Therefore, it is unreasonable to require reporting entities to
    realize net actual emission or emission intensity reductions [each
    year]{.underline} with respect to a baseline year in order to
    register emission reductions. An entity may experience years when
    its emissions increase or its emission intensity rate may rise above
    the baseline level due to a number of circumstances that are beyond
    its control. For example, the year-to-year ability of an electric
    generating company to achieve net reductions in emission intensity
    relative to a baseline can be affected by fluctuations in weather,
    the economy and fuel prices, even though actions or measures are
    taken that over the course of a longer time period (several years)
    will reduce overall emission intensity.

-   If DOE does go forward with such an approach requiring net
    reductions and offsets for year-to-year increases, it must include
    provisions that would allow banking.

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-   We reiterate our concerns with the proposed guidelines preclusion of
    registering GHG reductions achieved prior to 2003. The rationale for
    this appears to center on the need to focus the 1605(b) program
    solely on measuring progress with the President's goal of reducing
    emission intensity. While we applaud DOE for recognizing the
    importance of this goal and the need to incorporate methods to
    report and register reductions commensurate with an emission
    intensity approach, the intent of the 1605(b) program is to serve
    many purposes, not only to register reductions to measure progress
    toward President's goal to reduce emission intensity. Therefore,
    there is no precedent for DOE to ignore reductions achieved prior to
    2003.

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-   In terms of determining a baseline for reporting reductions going
    forward under the revised program, we urge the DOE to allow
    reporting entities as much flexibility as possible. We support a
    multi-year approach as opposed to the use of a single year.

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-   The proposed guidelines should not prejudge certain emission
    reduction strategies that companies and reporters may choose to
    exercise to reduce GHG emissions or emission intensity, and should
    not preclude the incorporation and consideration of these activities
    in the program. This includes the preclusion in the guidelines of
    such actions as unit or plant closures, acquisitions, divestitures
    and changes in products. For example, companies registering emission
    intensity reductions are required to demonstrate that actions such
    as acquisitions "have not contributed significantly to changes in
    emissions intensity". We see no point to such a requirement. Closure
    of facilities, changes in products and acquisitions are all part of
    routine business decisions that occur in a market-based economy. If
    these activities result in emission or emission intensity decreases,
    they should be fully recognized as such.

-   Furthermore, the requirement that no emission reduction be the
    result of a shift in operation from one part of the entity to
    another part would actually prohibit reporting/registration of
    reductions achieved by an electric generator from replacing fossil
    generation with non-emitting generation. We do not believe this is
    the intent of the guidelines and would urge the DOE to re-examine
    this provision.

-   Reporting of all six greenhouse gases should not be required. This
    requirement places unnecessary burdens on companies who emit certain
    gases in deminimus quantities but would nevertheless be required to
    expend considerable effort and resources to inventory these
    emissions.

-   We support the inclusion of avoided emissions in the proposed
    guidelines as a basis for determining net emission reductions. We
    also believe the guidelines should allow projects that realize
    avoided emissions (such as nuclear uprates) to be reportable and
    registered as project-based reductions. We reserve further comment
    on this issue following the release of the Technical Guidelines.

-   In terms of the proposed requirements to report indirect emissions
    including purchased power, we await further specification of how
    these issues will be addressed in the Technical Guidelines before
    offering any specific comment regarding this issue. Indirect
    emissions are difficult to quantify in terms of how emissions and
    emission reductions are divided between producer and end-user, and
    could result in double counting.

# **[Certification Requirements]{.underline}**

-   The requirement for certification of reports under the program at
    the CEO level is onerous, particularly for a voluntary program. Even
    mandatory reporting under environmental regulatory statutes such as
    the Clean Air Act does not require CEO certification. We believe the
    certification requirements under the current guidelines should
    continue to apply under the revised program.

-   The requirements to certify that none of the reductions reported or
    registered by an entity have been double counted by another
    entity/party are impractical. Electric generating companies, for
    example, are likely to have a number of industrial customers that
    may report under the Section 1605(b) program. Even if the other
    reporting entities are known, expecting all of the entities involved
    to expend the time and resources to cross-check their reports to
    assure there is no double counting is simply unreasonable. (This is
    an inherent problem with requiring the reporting of indirect
    emissions).

## Verification

-   The proposed guidelines encourage entities to have their reports
    verified by independent and qualified auditors. We believe that
    third party verification should continue to be optional, as under
    the current program. Requiring such independent verification adds to
    the cost of participating in this voluntary program, and could
    discourage participation.

# 

Thank you for this opportunity to comment. If you have any questions,
please call me at (804)273-3022.

Sincerely,

Leonard R. Dupuis

Manager, Environmental Policy

Cc:
[1605bgeneralguidelines.comments@hq.doe.gov](mailto:1605bgeneralguidelines.comments@hg.doe.gov)

P.F. Faggert -- Dominion

M.J. Sheeley - Dominion