OLENDER REPORTING, INC. 1100 Connecticut Ave., N.W., Suite 810, Washington, D.C. 20036 Washington: (202) 898-1108 / Baltimore: (410) 752-3376

Toll Free: (888) 445-3376 1

U.S. ENVIRONMENTAL PROTECTION AGENCY

Public Hearing Greenhouse Gas Mandatory Reporting Rule

1:32 p.m. to 2:49 p.m. Thursday, February 3, 2011

United States Environmental Protection Agency 1310 L Street, N.W. Washington, D.C.OLENDER REPORTING, INC. 1100 Connecticut Ave., N.W., Suite 810, Washington, D.C. 20036 Washington: (202) 898-1108 / Baltimore: (410) 752-3376

Toll Free: (888) 445-3376 2

C O N T E N T S

PAGE Welcoming Remarks Pamela Franklin, Presiding Officer............3

Introductory Remarks Pamela Franklin...............................3

Public Comments

Leslie Ritts, National Environmental Development Group......6 Lorraine Gershman, American Chemistry Council...................14 Karin Ritter, American Petroleum Institute.................23 Craig Segall, Sierra Club......................32 R. Gillem Lucas, Recovery IR...................48 Mandy Warner, Environmental Defense Fund ......60OLENDER REPORTING, INC. 1100 Connecticut Ave., N.W., Suite 810, Washington, D.C. 20036 Washington: (202) 898-1108 / Baltimore: (410) 752-3376

Toll Free: (888) 445-3376 3

P R O C E E D I N G S 1 Welcoming Remarks 2 MS. FRANKLIN: Good afternoon. I’d like 3 to begin this afternoon’s public hearing. My 4name is Pamela Franklin and I will be providing 5 some brief remarks before we begin the formal 6 hearing itself. On behalf of the Environmental 7 Protection Agency and the Office of Air and 8 Radiation, the Office of Atmospheric Programs and 9 the Climate Change Division, I’d like to welcome 10you to today’s public hearing. 11 12 Introductory Remarks 13 The purpose of this hearing is to receive 14 oral testimony from interested parties in 15 response to the Call for Information on Inputs to 16 Emission Equations that we published on December 17 27t h, 2010. We are only taking comment on the 18 Call for Information in this hearing today. 19 Again, my name is Pamela Franklin. I’m a 20 team leader in the Climate Change Division and I 21 will be the presiding officer for a short portion 22OLENDER REPORTING, INC. 1100 Connecticut Ave., N.W., Suite 810, Washington, D.C. 20036 Washington: (202) 898-1108 / Baltimore: (410) 752-3376

Toll Free: (888) 445-3376 4
of today’s hearing after which point my 1 colleague, Jessica Gordon, the Climate Change 2 Division’s legal advisor, will the presiding 3 officer. I’m also joined on the panel today by 4 Jennifer Bowman, the program analyst with the 5 Climate Change Division. 6 EPA is using its authority under Section 7 114 of the Clean Air Act to collect data from 8 stationary sources. We are conducting this 9 hearing in accordance with the Clean Air Act 10 under which EPA provides interested persons the 11 opportunity for the oral presentation of views 12 and arguments as well as the opportunity to 13 submit written comments. This hearing provides 14 the form for these oral presentations. We are 15 having this hearing recorded and the transcript 16will be available for public inspection and 17 copying in EPA’s Air and Radiation docket, Docket 18 number EPAHQOAR2010-0964. The transcript will 19 also be available electronically on their 20 Regulations.gov website. 21 This hearing will be conducted informally 22OLENDER REPORTING, INC. 1100 Connecticut Ave., N.W., Suite 810, Washington, D.C. 20036 Washington: (202) 898-1108 / Baltimore: (410) 752-3376

Toll Free: (888) 445-3376 5
and formal rules of evidence do not apply. 1 However, as presiding officer, I am authorized to 2 strike from the record statements which are 3 deemed irrelevant or needlessly repetitious and 4 to enforce reasonable limits on the duration of 5 statements of any witness. 6 Witnesses will be allowed to make oral 7 statements which they may later expand in writing 8 for the record. Witnesses are requested to state 9 their names and affiliation prior to making their 10 oral statements. When a witness has finished his 11 or her presentation, members of this panel may 12 ask the person questions concerning the issues 13 raised in the testimony. If your oral comments 14 are different from your written comments, we ask 15 that you submit your written comments directly to 16 the docket. Comments will be taken in the same 17 order as registration and I’ll just over that 18 order right now. First we will have Leslie 19 Ritts, second Lorraine Gershman, third Karin 20 Ritter, fourth, Craig Segall, fifth, R. Gillem 21 Lucas and sixth, Mandy Warner. To begin, I would 22OLENDER REPORTING, INC. 1100 Connecticut Ave., N.W., Suite 810, Washington, D.C. 20036 Washington: (202) 898-1108 / Baltimore: (410) 752-3376

Toll Free: (888) 445-3376 6

like to ask Leslie Ritts to come to the front for 1 your presentation. Thank you. 2 MS. RITTS: Thank you. I’m Leslie Ritts. 3 I’m the Counsel for the National Environmental 4 Development Group’s Clean Air Project. NEDA/CAP 5 is a multi-section manufacturing coalition. We 6were formed in 1979 to address clean air 7 implementation issues and offer a balanced 8perspective on protecting the environment while 9 giving appropriate attention to issues that 10manufacturers face in the global economy. 11 We appreciate the opportunity to testify 12 on the need for rescinding the requirement for 13 EPA’s collection of confidential business 14 information that companies use to calculate 15 greenhouse gas emissions under the Mandatory 16 Recordkeeping and Reporting Rule. At this 17 juncture, we appreciate that agency officials 18 have recognized that the release of this 19 information over its website could harm 20 individual companies and the domestic economy, 21 and therefore have decided to investigate further 22OLENDER REPORTING, INC. 1100 Connecticut Ave., N.W., Suite 810, Washington, D.C. 20036 Washington: (202) 898-1108 / Baltimore: (410) 752-3376

Toll Free: (888) 445-3376 7

whether the collection of this information – the 1 importance of collecting this information 2 outweighs compromising economic interests of 3 manufacturers in their proprietary processes and 4 raw material use. 5 NEDA/CAP submits to EPA that the 6 critically sensitive nature of information about 7 processes, raw materials and production rates 8 used to calculate GHGs, which EPA’s proposed July 9
7t hrule would have made available instantly over 10 the agency’s website, would substantially harm 11 the U.S. economy. If it is posted by the Agency, 12 competitors at home and abroad can and will use 13 this information to steal trade secrets on 14proprietary processes through reverse engineering 15 and to engage in price fixing by calculating 16production costs to undercut competitors in the 17 marketplace. I will use three examples to 18 illustrate how sensitive this information is and 19 how it can be used in an anticompetitive manner. 20 The first example comes from the aluminum 21 industry. For each of these I’ll describe the 22OLENDER REPORTING, INC. 1100 Connecticut Ave., N.W., Suite 810, Washington, D.C. 20036 Washington: (202) 898-1108 / Baltimore: (410) 752-3376

Toll Free: (888) 445-3376 8
process and then I’ll describe how greenhouse 1 gases are calculated and then talk about the 2 implications. For aluminum, aluminum is made by 3 dissolving aluminum oxide in molten cryolite at 4 1740 degrees Fahrenheit and using electrolysis to 5 produce pure aluminum from the alumina ore. The 6process takes place in electrolyte cells or 7 “pots” where carbon cathodes form the bottom of 8 the pot and act as a negative electrode. Carbon 9 anodes which are the positive electrodes are held 10 at the top of the pot and are consumed during the 11 process when they react with oxygen coming from 12 the alumina. So, as the aluminum is produced, 13 the carbon forms C02 that is released from the 14process and emitted to the atmosphere. The 15 formula is pretty simple. It’s two molecules of 16 alumina or aluminum oxide, plus carbon yields 17 four molecules of aluminum and three molecules of 18 CO2. Note that this is basically the same 19 formula used to calculate GHGs reported to EPA. 20 In other words, GHG emissions reported to EPA are 21 calculated from net carbon anode consumption per 22OLENDER REPORTING, INC. 1100 Connecticut Ave., N.W., Suite 810, Washington, D.C. 20036 Washington: (202) 898-1108 / Baltimore: (410) 752-3376

Toll Free: (888) 445-3376 9
ton of aluminum produced times the ton of 1 aluminum produced during the year. And I’ve 2 given you the equation for that in the testimony 3 I handed to the EPA people. It’s essentially 4 carbon dioxide equals the net carbon times the 5 production. You guys are probably too young – at 6 least Jennifer and Jessica are – do you know who 7 Boris and Natasha are? Okay. Boris and Natasha, 8 the industrial spies, will use this information. 9Annual aluminum production and carbon consumption 10 are key indicators of economic performance for 11 aluminum smelters and thus knowledge of these 12performance indicators can be used to determine a 13 smelter’s operating costs, raw material 14 requirements and/or energy demands. Some 15 aluminum companies (though not necessarily Alcoa, 16NEDA’s member) would consider production data and 17 carbon consumption to be competitively sensitive 18 because this information can be used in product 19pricing and negating purchase prices for raw 20materials and energy contracts. 21 In the paper industry we’ll turn to, a 22OLENDER REPORTING, INC. 1100 Connecticut Ave., N.W., Suite 810, Washington, D.C. 20036 Washington: (202) 898-1108 / Baltimore: (410) 752-3376

Toll Free: (888) 445-3376 10
typical pulp and paper mill produces pulp by 1 blending wood chips with a caustic solution and 2 cooking them. The caustic solution dissolves 3 roughly half of the wood material during the 4 cooking process freeing up wood into pulp fibers. 5 The pulp fibers are washed, bleached if needed, 6 and sent to a paper machine to make the desired 7 consumer product. 8 The residual caustic solution is washed 9 from the pulp and is referred to as black liquor. 10 The black liquor is evaporated to remove most of 11 the water and then sent to a recovery boiler for 12 combustion. This concentrated black liquor which 13 contains half the wood’s organic material is 14 combusted to produce steam for more wood cooks. 15 The inorganic chemicals are collected at the 16 bottom of the boiler as smelt, recovered and 17 reused to make more of caustic solution. 18 Subpart AA, Equation AA-2 of EPA’s GHG 19 Mandatory Reporting Rule requires recovery 20boilers to report GHG emissions by using the 21 black liquor solids in the GHG calculation. The 22OLENDER REPORTING, INC. 1100 Connecticut Ave., N.W., Suite 810, Washington, D.C. 20036 Washington: (202) 898-1108 / Baltimore: (410) 752-3376

Toll Free: (888) 445-3376 11
BLS or black liquor solids is a measure of the 1 organic portion of the black liquor all of which 2 came from the wood, and the black liquor solids 3 also represent half of the total wood used during 4 the cooking process. Knowing the black liquor 5 solids value directly provides the wood usage, 6 and hence the annual production of the facility. 7 The actual percent of the organic materials in 8 the black liquor solids is easily determined by 9 the final product type, for instance the paper 10products versus cardboard versus tissue which 11 each have a unique BLS percentage content. 12 GHG MRR rule also requires reporting of 13 annual fuel use. Fuel costs by fuel type are 14 readily available. Therefore, a cost efficiency 15 value can be determined using the total cost of 16 the fuels and the production (for instance, the 17 dollar per ton of product). Information 18 containing cost per unit of production is highly 19 confidential. Also, fuel usage data provides 20 energy information for each type of fuel. 21 Therefore, energy efficiency values can also be 22OLENDER REPORTING, INC. 1100 Connecticut Ave., N.W., Suite 810, Washington, D.C. 20036 Washington: (202) 898-1108 / Baltimore: (410) 752-3376

Toll Free: (888) 445-3376 12

determined. 1 For this reason, pulping companies guard 2 both process information and energy efficiency 3 information from competitors. Industrial spies, 4 Boris and Natasha, can take information about 5 inputs to the digester and energy use, and use it 6 along with production rates to calculate mill 7 yields; this information in turn can be taken to 8 a competitor who can use it to optimize its pulp 9production processes, removing the competitive 10 advantage the reporting company currently enjoys. 11 Turn to the semiconductor industry – to 12 understand how the semiconductor industry regards 13 the sensitivity of raw material and production 14 information and how it guards it from the public. 15 In this process involving hundreds of 16photographic and chemical processing steps in 17 which electronic circuits are gradually created 18 on wafers made of pure silicon and other 19 semiconducting material. Each step has a 20 specifically defined chemical “recipe” that 21 defines the precise chemical use and other 22OLENDER REPORTING, INC. 1100 Connecticut Ave., N.W., Suite 810, Washington, D.C. 20036 Washington: (202) 898-1108 / Baltimore: (410) 752-3376

Toll Free: (888) 445-3376 13
process conditions that are required to produce 1 the nanometer scale features on a modern 2 semiconductor chip. 3 A most critical proprietary step, this 4process includes etching circuitry by exposing 5 the semiconductor wafer to a bombardment of ions 6 that are usually a plasma of reactive gases, 7 generally fluorocarbons to dislodge portions of 8 the material from the exposed surface. The 9 fluorocarbons used are inputs into calculating 10 GHGs released from a fab. Companies put 11 tremendous amounts of research and development 12 resources into developing these process steps and 13 consider them highly confidential. The 14 electronics sector reporting rule would require 15 semiconductor manufacturers to disclose 16 information about the type and quantity of raw 17 materials and usage in calculating GHG emissions. 18 The release of such information poses 19 significant risks to a semiconductor company’s 20 competitive position in a very fast moving 21 industry where piracy by other nationalized 22OLENDER REPORTING, INC. 1100 Connecticut Ave., N.W., Suite 810, Washington, D.C. 20036 Washington: (202) 898-1108 / Baltimore: (410) 752-3376

Toll Free: (888) 445-3376 14
industries in the world is well-recognized. 1 In closing, NEDA/CAP will be submitting 2 comments on the issues raised – this should be 3 the July 7t hand July 27t hnotices further 4discussing why information is so sensitive and 5 will harm manufacturing companies if it is 6published, and also addressing how EPA can verify 7 calculations without this information or third 8party verification. We also will be submitting 9 additional information to the record on why we 10 disagree with EPA on its definition of emissions 11 related information. My contact information is 12 there. Thank you very much. 13 MS. FRANKLIN: Thank you. 14 MS. RITTS: Do you have any questions? 15 MS. FRANKLIN: I don’t. 16 MS. RITTS: Thank you very much. 17 MS. FRANKLIN: For our next speaker I 18 invite Ms. Lorraine Gershman. 19 MS. GERSHMAN: Good afternoon. My name 20 is Lorraine Gershman and I’m speaking on behalf 21 of the members of the American Chemistry Council. 22OLENDER REPORTING, INC. 1100 Connecticut Ave., N.W., Suite 810, Washington, D.C. 20036 Washington: (202) 898-1108 / Baltimore: (410) 752-3376

Toll Free: (888) 445-3376 15
ACC represents the leading companies engaged in 1 the business of chemistry. 2 We appreciate and strongly support EPA’s 3 review of its proposal for the treatment of CBI 4 in the Mandatory Reporting Rule for greenhouse 5 gas emissions. 6 ACC has been very concerned about how EPA 7 will treat CBI and we continue to be concerned 8 due to none of the July 2010 proposals being 9 finalized at this point. Because EPA proposed 10 its rule only after finalizing the Mandatory 11 Reporting Rule, we were not able to fully 12 consider possible alternative reporting options 13 that might have protected more sensitive 14 information of CBI. We welcome EPA’s decision to 15 defer the reporting of inputs to emissions 16 equations and its call for information to afford 17 all stakeholders the necessary time to fully 18 evaluate how these inputs and other sensitive 19 data should be treated. 20 In its proposed CBI rule, EPA has 21 interpreted the term “emission data” far more 22OLENDER REPORTING, INC. 1100 Connecticut Ave., N.W., Suite 810, Washington, D.C. 20036 Washington: (202) 898-1108 / Baltimore: (410) 752-3376

Toll Free: (888) 445-3376 16
broadly than is necessary to achieve the goals of 1 this reporting rule. “Emission data” should be 2 interpreted as the information needed to 3 determine emissions, not each and every piece of 4 information or data upon which emissions might be 5 calculated. We believe that past EPA practice 6 and case law support a narrow interpretation of 7 “emission data.” 8 EPA should follow the model established 9 in other reporting systems when determining what 10 information should be publicly available. Both 11 EPA’s TRI and California’s greenhouse gas 12 reporting system release basic facility 13 information along with total emissions data. 14Neither system requires the reporting or the 15 release of sensitive information such as inputs 16 into equations used to calculate emissions. TRI 17 has been an effective reporting system for almost 18 25 years in large part because it is periodically 19 revised to address concerns about the reporting 20burden while maintaining the quality and utility 21 of the data base. 22OLENDER REPORTING, INC. 1100 Connecticut Ave., N.W., Suite 810, Washington, D.C. 20036 Washington: (202) 898-1108 / Baltimore: (410) 752-3376

Toll Free: (888) 445-3376 17
The TRI data available to the public 1 includes detailed information on both the 2 facility and its emissions. Facilities can use 3 direct measurement, monitoring data, emissions 4 factors, engineering estimates, and/or mass 5 balance calculations in order to determine 6 emissions, which closely mirror the various 7 calculation methods in the mandatory reporting 8 rule. Facilities are required to report only the 9principal calculation method that was utilized, 10 and the measured/calculated emissions data for 11 each chemical. 12 EPA’s TRI recordkeeping requirements are 13 detailed and underlying data must be available 14 for inspection by EPA as requested. In the TRI 15 program, EPA struck a sound balance between the 16 limited data that must be submitted to EPA and 17 the bulk of the data that remains onsite and is 18 not made public. We find no reason for EPA to 19 depart from this approach in the implementation 20 of the mandatory reporting rule. EPA has 21 presented no compelling reason why inputs to the 22OLENDER REPORTING, INC. 1100 Connecticut Ave., N.W., Suite 810, Washington, D.C. 20036 Washington: (202) 898-1108 / Baltimore: (410) 752-3376

Toll Free: (888) 445-3376 18

emissions calculations are now considered to be 1 “emissions data” and therefore not subject to CBI 2protection, when those same inputs are not 3 publicly reported under TRI. Both TRI and the 4mandatory reporting rules allow the release of 5 emissions data to the public and have been or 6will be used to inform EPA policy. There is no 7 justification for EPA to require facilities to 8 now release sensitive information that would 9 compromise the business competitiveness of those 10 facilities. 11 Furthermore, both the TRI and the 12 Mandatory Reporting Rule require a senior company 13 official to sign off on the facility reports. 14 These senior officials are responsible for 15 insuring that the information submitted is 16 accurate and complete or face potential 17 penalties. Facilities have every incentive to 18 submit accurate data under both the TRI and the 19 Mandatory Reporting Rule. In both cases, EPA has 20 the ability to audit facility data to check for 21 accuracy and completeness. 22OLENDER REPORTING, INC. 1100 Connecticut Ave., N.W., Suite 810, Washington, D.C. 20036 Washington: (202) 898-1108 / Baltimore: (410) 752-3376

Toll Free: (888) 445-3376 19
EPA’s proposal to establish “inputs to 1 emissions equations” as a data field and to 2 classify these inputs as “emissions data” is a 3 dangerous expansion of what constitutes “emission 4data.” These “inputs” are data elements related 5 to process and operational information, such as 6 fuels, raw materials, unit throughput, production 7 rates, operating data, process data and so on, 8 and are not necessary to determine the identity, 9 amount, frequency or other characteristics of any 10 emission which has been emitted by the source. 11 Nor are these inputs necessary to identify the 12 source and distinguish it from other sources. 13 The inputs must be determined to be CBI protected 14because they reveal sensitive business 15 information that if publicly disclosed would 16 divulge methods or processes entitled to 17 protection as trade secrets. 18 In CBI proposal, EPA cited the need to 19 include the “inputs to emission equations” as 20 “emissions data” primarily to enable emissions 21 verification, as well as to support analysis of 22OLENDER REPORTING, INC. 1100 Connecticut Ave., N.W., Suite 810, Washington, D.C. 20036 Washington: (202) 898-1108 / Baltimore: (410) 752-3376

Toll Free: (888) 445-3376 20
greenhouse gas emissions for future policy and 1 program development. However, the Mandatory 2 Reporting Rule requires facility self3 certification with EPA emissions verification. 4Nowhere in the Mandatory Reporting Rule does it 5 state or suggest that EPA is now ceding its 6 emissions verification responsibility to the 7 public. To now imply that the public needs 8 access to the inputs in order to verify emissions 9 data is without merit. Only potential 10 competitors will be mining the inputs data and it 11 will not be to verify the reported emissions of 12 that facility, but rather to steal trade secrets. 13 EPA acknowledges that production and 14 throughput data that are not used as inputs to 15 emissions equations should be CBI. EPA proposes 16 to determine these data elements are entitled to 17 confidential treatment because disclosure of 18 these production and throughput data is likely to 19 cause substantial harm to the competitive 20position of businesses required to report these 21 data elements. EPA explains that by having such 22OLENDER REPORTING, INC. 1100 Connecticut Ave., N.W., Suite 810, Washington, D.C. 20036 Washington: (202) 898-1108 / Baltimore: (410) 752-3376

Toll Free: (888) 445-3376 21
production and throughput data, competitors would 1 be able to gain insight into a firm’s operational 2 strengths and weaknesses. EPA also reasons that 3 having information about production quantities of 4 each product and the product mix of a firm may 5 enable competitors to determine the type of 6production processes used, as well as to 7 reasonably infer the types and approximate 8 amounts of feedstocks consumed. 9 Indeed, ACC agrees with EPA’s assessment 10 that such information should be classified as 11 CBI. Yet EPA is requiring the same information 12 be publicly available under a number of subparts 13 when a facility must use this information as an 14 input into calculating emissions. 15 In other words, if a facility has a 16process that is amenable to a CEMS, its 17 production and throughput data will not be 18 considered by EPA to be emissions data and it 19will be protected as CBI. But a facility whose 20process is not amenable to a CEMS and uses 21 production and throughput data to calculate its 22OLENDER REPORTING, INC. 1100 Connecticut Ave., N.W., Suite 810, Washington, D.C. 20036 Washington: (202) 898-1108 / Baltimore: (410) 752-3376

Toll Free: (888) 445-3376 22

emissions, those facilities will suffer the 1 consequences of EPA releasing this sensitive 2 information to the public. There is no 3 justification for EPA’s determination that the 4 use of this data is emissions data. The FTC in 5 comments submitted to EPA on this proposal was 6 also concerned about the potential public release 7 of this sensitive information. President Obama’s 8 recent Executive Order “Improving Regulation and 9 Regulatory Review” states that “Our regulatory 10 system must protect public health, welfare, 11 safety and our environment while promoting 12 economic growth, innovation, competiveness, and 13 job creation.” Having EPA reveal to the public 14 sensitive data that are inputs to emissions 15 equations would stifle American competitiveness, 16 and is inconsistent with the spirit and letter of 17 this Executive Order. 18 Finally, facilities have always had the 19 opportunity to flag sensitive data as CBI in 20 submittals to EPA and have such data protected 21 from the public. However, under the CBI 22OLENDER REPORTING, INC. 1100 Connecticut Ave., N.W., Suite 810, Washington, D.C. 20036 Washington: (202) 898-1108 / Baltimore: (410) 752-3376

Toll Free: (888) 445-3376 23
proposal, by making sweeping determinations on 1 data in advance, EPA has taken away the ability 2 for facilities to identify sensitive information 3 and make the requisite showing to EPA that the 4 information should be protected. At the very 5 least, we request to this traditional and sound 6practice. 7 Thank you. And ACC will be submitting 8

comments. 9 MS. FRANKLIN: Thank you very much. 10Unfortunately, I need to depart. My colleague, 11 Ms. Jessica Gordon, will resume the duties of the 12presiding officer at this point. And we would 13 like to invite Karin Ritter as the next speaker. 14 MS. RITTER: Okay. Good afternoon. My 15 name is Karin Ritter. I’m a manager with the 16 regulatory and scientific affairs department of 17 the American Petroleum Institute. The American 18 Petroleum Institute is the premier trade 19 association in the oil and natural gas industry 20with 450 member companies engaged in all aspects 21 of the industry. 22OLENDER REPORTING, INC. 1100 Connecticut Ave., N.W., Suite 810, Washington, D.C. 20036 Washington: (202) 898-1108 / Baltimore: (410) 752-3376

Toll Free: (888) 445-3376 24
API submitted comments on September 7t h, 1 2010, addressing EPA’s original proposal of July 2 7, 2010 and followed up with additional comments 3 on October 14, 2010. API is pleased today to 4provide preliminary comments regarding the change 5 to the reporting date for “inputs to the emission 6 equations” data elements required under the 7 greenhouse gas reporting program and EPA’s call 8 for information to examine potential business 9 harm to reporters. In addition, API also has CBI 10 concerns that go beyond the inputs to emission 11 equations category as discussed in comments that 12were submitted yesterday February 2n d. API 13 expects to submit additional comments, as well as 14more specifically address EPA’s call for 15 information, by the end of the comment period of 16 March 7, 2011. 17 API and its member companies welcome the 18 EPA’s interim final rule to defer until August 19 31, 2011 the reporting deadline for calendar year 20 2010 data elements that are “inputs to emission 21 equations.” API also welcomes EPA’s proposed 22OLENDER REPORTING, INC. 1100 Connecticut Ave., N.W., Suite 810, Washington, D.C. 20036 Washington: (202) 898-1108 / Baltimore: (410) 752-3376

Toll Free: (888) 445-3376 25
rule that would further defer the reporting 1 deadline for designated data elements until March 2 31s t, 2014 allowing time to address important 3 issues related to the reporting of confidential 4business information. As API’s prior comments 5 demonstrate, the “inputs to emission equations” 6 contain highly sensitive operational information 7 that is CBI. For example, the quantity of fuel 8 combusted in each combustion unit or group of 9 combustion units is not information that is 10 routinely reported in other greenhouse as 11 reporting programs and it’s not currently 12 available to the public. Under the California, 13 for example, under the California mandatory 14 greenhouse reporting rule, fuel quantity for each 15 combustion device is recognized as CBI. 16 API has four concerns with respect to CBI 17 as follows: 18 First, API is concerned that EPA’s 19 compilation and proposed reporting deferral of 20 the data elements that are “inputs to emission 21 equations” is not as comprehensive as EPA may 22OLENDER REPORTING, INC. 1100 Connecticut Ave., N.W., Suite 810, Washington, D.C. 20036 Washington: (202) 898-1108 / Baltimore: (410) 752-3376

Toll Free: (888) 445-3376 26
have intended. Multiple data elements that were 1 originally categorized by EPA as “inputs to 2 emission equations” in its July 7, 2010 proposed 3 CBI rulemaking are not included in either the 4 interim final or the proposed deferral actions. 5 Again, API provided detailed information 6 regarding these omissions in comments we 7 submitted yesterday. And by these omissions, EPA 8might be contributing to an inadvertent 9 disclosure of confidential information when 10 reporters comply with the upcoming March 31s t, 11 2011 reporting deadline for calendar year 2010 12 data. API urges that consistent with the 13 Agency’s stated intent, all data elements in the 14 “inputs to emission equations” category be 15 included in EPA’s final rule on the deferral. 16 Second, EPA has not yet addressed the 17 confidentiality concerns of suppliers nor has it 18 categorized the data elements that pertain to the 19promulgated subparts RR and UU for Carbon Dioxide 20 Injection and/or Carbon Capture and 21 Sequestration. In its September 7, 2010 comments 22OLENDER REPORTING, INC. 1100 Connecticut Ave., N.W., Suite 810, Washington, D.C. 20036 Washington: (202) 898-1108 / Baltimore: (410) 752-3376

Toll Free: (888) 445-3376 27

API members expressed concern that some of the 1 suppliers reporting requirements could reveal 2process-specific information and production 3 volumes, thus providing competitors with data 4 about sensitive process capabilities and 5 operational limits and market capabilities and 6 engagements. For these reasons, API has 7 previously stated that petroleum fuel refiners, 8 importers and exporters should not have to report 9 to EPA on petroleum feed stock and product 10volumes or unit-specific greenhouse gas emissions 11 and process data unless assured of the 12 confidentiality of these data. However, these 13 data elements are not addressed either in the 14 interim deferral to August 31, 2011 nor in the 15 proposed deferral of certain data elements to 16 March 2014. So unless EPA promptly issues final 17 determinations that these data elements are 18 confidential, the Agency should take urgent 19 action to defer reporting of these data elements 20 to prevent commercial harm to companies resulting 21 from the revelation of competitive and 22OLENDER REPORTING, INC. 1100 Connecticut Ave., N.W., Suite 810, Washington, D.C. 20036 Washington: (202) 898-1108 / Baltimore: (410) 752-3376

Toll Free: (888) 445-3376 28

confidential data. 1 Third, API is deeply concerned that EPA 2 has not finalized its confidentiality 3 determination for other Direct Emitter data 4 elements that are also not included in the 5 deferral to August 31s tor the proposed deferral 6 to March 31s t, 2014. In its comments of September 7 7, 2010, again, API expressed primary concerns 8 about two data categories: (1) the “inputs to 9 emission equations,” and, (2) the “unit/process 10 operating characteristics that are not inputs to 11 emission equations.” So to illustrate the 12 importance of providing CBI protection to data 13 elements in both categories, let’s consider 14 reporting under Subpart C for Combustion Sources 15 using either a Tier 2 or a Tier 3 methodology. 16 Reporters are required to report the quantity of 17 each fuel combusted, along with the higher 18 heating value, carbon content and molecular 19weight of each fuel. If disclosed, this 20 information along with the identification of 21 maximum heat rate capacity of each combustion 22OLENDER REPORTING, INC. 1100 Connecticut Ave., N.W., Suite 810, Washington, D.C. 20036 Washington: (202) 898-1108 / Baltimore: (410) 752-3376

Toll Free: (888) 445-3376 29
unit would provide competitors valuable trade 1 information by divulging utilization rates of 2 combustion units. Knowing the combustion unit 3 capacity, competitors could then estimate the 4production output of individual combustion units 5 and entire facilities. Competitors could use 6 this information to evaluate whether a facility 7 could increase production and market share with 8 its current capacity or is already at its maximum 9production and would need to invest capital to 10 expand capacity in order to produce more. Having 11 such information could help competitors make 12 competitive decisions on expanding their own 13 production rates or altering their pricing 14 strategies to the detriment of the reporting 15 company. Yet, neither the interim final rule nor 16 the proposed rule, address CBI concerns beyond 17 the “inputs to emission equations” data elements 18 category. API and its members would like to 19 reiterate that it is critically important that 20 EPA strictly protect the confidentiality of 21 sensitive business information and consider, at a 22OLENDER REPORTING, INC. 1100 Connecticut Ave., N.W., Suite 810, Washington, D.C. 20036 Washington: (202) 898-1108 / Baltimore: (410) 752-3376

Toll Free: (888) 445-3376 30
minimum, immediate deferment of reporting for all 1 data elements included in industry’s previous 2 comments on the proposed CBI July 7t h, 2010, until 3 a final CBI rule is promulgated. All these data 4 elements should be immediately deferred until 5 August 31s t, 2011 and they should also be included 6 in the proposed rule providing reporting deferral 7 until March 31s t, 2014. 8 Fourth, EPA has not finalized its action 9 on the proposed CBI rulemaking originally 10 initiated in July 2010, and companies seeking to 11 have their confidential information protected, 12would have to resort to a case-by-case CBI 13 application in order to protect their data and 14 still be in compliance with the reporting 15 deadline. Categorical CBI designations were 16 developed to avoid the need for company-by17 company, element-by-element applications for CBI 18 designation which is tedious, burdensome and time 19 consuming, if it could be accomplished at all. 20At this time, a case-by-case request for CBI 21 protection may be virtually impossible given the 22OLENDER REPORTING, INC. 1100 Connecticut Ave., N.W., Suite 810, Washington, D.C. 20036 Washington: (202) 898-1108 / Baltimore: (410) 752-3376

Toll Free: (888) 445-3376 31
massive amounts of data that must be reported 1 under a very fast-approaching March 31s tdeadline. 2 In addition, such requests may also be difficult 3 or even impossible, because EPA has mandated that 4 all reporting be via an electronic reporting tool 5 (e-GGRT) with its associated web-forms, which 6 have yet to be released in final form. Since we 7 have not been able to test, or even view, the e8 GGRT forms it is not clear whether there is an 9 option for manually selecting a field indicating 10 that CBI protection is requested for a specific 11 data element, or whether the system recognizes 12 only pre-set categorical flags when introduced by 13 EPA. Practically speaking, if such a CBI field 14 exists, given the fact that a typical refinery 15 would possibly be submitting thousands of data 16points, reporters may not have a way to assert 17 CBI protection for such a large number of data 18points on an individual basis. 19 In summary, EPA ought to recognize that 20API’s members – if not all of industry – need 21 sufficient time to use the electronic reporting 22OLENDER REPORTING, INC. 1100 Connecticut Ave., N.W., Suite 810, Washington, D.C. 20036 Washington: (202) 898-1108 / Baltimore: (410) 752-3376

Toll Free: (888) 445-3376 32

tools after EPA’s release of the final version of 1 thse tools, and to review the not-yet-released 2 final CBI designations, before they can properly 3 report under the greenhouse gas reporting rule 4while at the same time protect the 5 confidentiality of these sensitive data. In view 6 of the imminent March 31, 2011 reporting 7 deadline, API urges EPA to immediately defer 8 until August 31, 2011, reporting for data 9 elements that were noted as potential CBI in the 10 September 27, 2010 API comments on the proposed 11 July 7, 2010 rule. API further requests that EPA 12 amend its December 27, 2010 proposed rule and 13 further defer said data elements to March 31, 14 2014, to enable adequate time to address all 15 pending CBI actions. 16 MS. GORDON: Thank you. 17 MS. RITTER: Are there any questions? 18 MS. GORDON: No. Thank you. Our next 19 three speakers in order will be Craig Segall, R. 20 Gillem Lucas and Mandy Warner. 21 MR. SEGALL: Thanks for spending this 22OLENDER REPORTING, INC. 1100 Connecticut Ave., N.W., Suite 810, Washington, D.C. 20036 Washington: (202) 898-1108 / Baltimore: (410) 752-3376

Toll Free: (888) 445-3376 33
afternoon with us. It’s a pleasure for 1 everybody. You can sense the sort of electricity 2 in the room. I’m Craig Segall. I’m a project 3 attorney with the Sierra Club and I’m very 4 grateful for you – both for the work you’re doing 5 and for holding the hearing. So I’ll try to 6 spare you just reading straight through this and 7 hand it to you later. So let me hit the 8 highlights. First of all, as you know, the 9 greenhouse gas reporting program is an 10 extraordinarily impressive effort. When 11 reporting kicks in from most sources a few weeks 12 from now, it will give us the clearest national 13 picture ever of the origins of the warming 14pollution, information central in our view – and 15 I think most people’s – making good policy. But 16 thanks to the proposed rule issued today, neither 17 EPA nor the public may see thousands of crucial 18 data points until 2014. The duration and scope 19 of this delay is practically unwarranted and 20 raises substantial legal questions. We believe 21 EPA can substantially reduce and perhaps 22OLENDER REPORTING, INC. 1100 Connecticut Ave., N.W., Suite 810, Washington, D.C. 20036 Washington: (202) 898-1108 / Baltimore: (410) 752-3376

Toll Free: (888) 445-3376 34
eliminate any such delay with their careful 1 review of the data in question. 2 So let me start with first principles. 3 Congress has twice directed the Agency to put 4 reporting in place for, quote, “all sectors of 5 the economy of the United States not later than 6 June 26, 2009.” Similarly in the Clean Air Act, 7 Congress made the clear choice that all emission 8 data that’s data necessary to calculate emissions 9 simply has to be reported to the public. The CBI 10 question does not enter into it. And where CBI 11 does enter into it, that is not emission data. 12 The presumptions is very, very strongly in favor 13 of disclosure. 14 All of which is to say I think there are 15 genuine questions whether or not this delay is 16 legal at all and whether or not you can be 17 thinking about these questions at all. Congress 18 has been very clear that the atmosphere as a 19public commons is a matter of vital public 20 concern. The public deserves to know who’s 21 polluting it. And that’s really what’s at stake 22OLENDER REPORTING, INC. 1100 Connecticut Ave., N.W., Suite 810, Washington, D.C. 20036 Washington: (202) 898-1108 / Baltimore: (410) 752-3376

Toll Free: (888) 445-3376 35
here. So in our view, delaying in reporting for 1 five years past Congress’s deadline for more than 2 thirty sectors including the industries which are 3 the largest carbon polluters is more or less 4 unsupportable. We’re aware of course that 5 companies will report their final emissions 6 figures. But given that those figures are 7 reached through a system of equations, reporting 8 only the final figures gives us basically a black 9 box rule. It’s unverifiable. It’s far less 10 useful. It’s not consistent with Congress’s 11 mandate. 12 What’s particularly troubling about all 13 of this of course is that the proposed delay 14 arises from industry comments raising what EPA 15 itself as only, quote, “potential problems,” 16 offered, quote, without, quote, “sufficient 17 specificity.” Some members of industry are 18 worried as we’ve seen today about reporting’s 19 impacts on competitiveness, but still, even in 20what I think referred today, cannot really say 21 how, certainly for the vast majority of data 22OLENDER REPORTING, INC. 1100 Connecticut Ave., N.W., Suite 810, Washington, D.C. 20036 Washington: (202) 898-1108 / Baltimore: (410) 752-3376

Toll Free: (888) 445-3376 36
points identified. These concerns should not 1 lead EPA, therefore, to a lengthy three-year 2 blanket hold on reporting of these thousands of 3 data points for at least four reasons. So I, 4 like everyone else, have a numbered list. 5 First, these late-raised concerns are not 6 news. Listening to the testimony today, I’m 7 reminded of the scene in Casablanca where the 8police are shocked, shocked, that gambling is 9 occurring in a casino. Industry has known since 10 the reporting rule was proposed almost two years 11 ago that they would be reporting using emissions 12 equations, and that inputs to these equations 13 would likely be deemed reportable emission data 14 as they are naturally necessary to calculating 15 emissions. EPA’s choice, moreover, to use 16 equations rather than broadly to require direct 17 measurement was welcomed by many industries as a 18 less expensive alternative to direct measurement. 19 It was pretty broadly hailed in fact. Having 20 taken this deal, industry cannot now demand that 21 they not only be allowed to escape directly 22OLENDER REPORTING, INC. 1100 Connecticut Ave., N.W., Suite 810, Washington, D.C. 20036 Washington: (202) 898-1108 / Baltimore: (410) 752-3376

Toll Free: (888) 445-3376 37
measuring its pollution, that even be given a 1 pass in showing its work as it completes 2 equations-based reporting. Emissions reporting 3 just cannot be a black box system. Industry can 4 choose between direct reporting and emissions 5 equations, but it cannot choose [inaudible] 6 emissions equations without meaningful 7 verification of public disclosure. If large 8polluters wish otherwise, they had ample reason 9 and chance to raise these concerns long ago. 10 They are not now entitled to a panicked three 11 more years of delay in relation to rules and 12 results they’re familiar with at the latest in 13 2009. 14 Second, even supposing that we had some 15 delay, the length of the delay is unconscionable. 16 First of all, as a practical matter, the climate 17 crisis is getting worse every day. We’re already 18 well above safe levels of carbon in the 19 atmosphere and excellent data is needed to solve 20 it as Congress recognized. We can’t wait three 21 years or if these delays stray on as delays often 22OLENDER REPORTING, INC. 1100 Connecticut Ave., N.W., Suite 810, Washington, D.C. 20036 Washington: (202) 898-1108 / Baltimore: (410) 752-3376

Toll Free: (888) 445-3376 38
do once begun, for verifiable information on the 1 country’s biggest sources of carbon pollution. 2As I’ve said, the EPA was directed to develop the 3 entire reporting system in December of 2007.3837 4 It had a proposed rule done again for the entire 5 system in April of ’09, less than a year and a 6 half later, and a final rule by December of 2009. 7 If EPA can develop the entire system in two 8years, it does not need three years to make small 9 adjustments to it. 10 This is particularly so because for the 11 most part, EPA has already defined much of the 12 universe of reporting options for a given sector. 13 This would be the tier-based system we’re 14 familiar with in the rule. There are not 15 entirely new emissions equations out there that 16will entirely avoid sensitive information – even 17 if EPA looks for them for the next three years 18 although there may be a few small tweaks which we 19 think could be made more quickly. If a polluter 20 does not like reporting using equations, its 21 solution is obvious, and requires no delays or 22OLENDER REPORTING, INC. 1100 Connecticut Ave., N.W., Suite 810, Washington, D.C. 20036 Washington: (202) 898-1108 / Baltimore: (410) 752-3376

Toll Free: (888) 445-3376 39
changes to the rule. It should install direct 1 measurement technology instead and solve its 2problems itself. 3 Third, deferring reporting of emissions 4 equations raises substantial verification 5 concerns. Without underlying emissions equation 6 data, it will be very difficult to verify whether 7 emissions have been reported correctly, or also 8 importantly, how to fix problems even if they are 9 identified. EPA has recognized this problem in 10 its proposed rule, and suggested that it might 11 step-up site visits to compensate, but this 12 solution is not particularly comforting. 13 Initially to our knowledge, EPA 14 enforcement staff and funding had originally 15 intended to conduct only limited site visits, 16 essentially spot checks. If EPA now tends to 17 expand this program, it will need to show that it 18 has the resources to visit all, or a very 19 substantial fraction, of deferred reporters. 20 Initially, I’d note it’s not at all clear that 21 industry really wants that level of industry site 22OLENDER REPORTING, INC. 1100 Connecticut Ave., N.W., Suite 810, Washington, D.C. 20036 Washington: (202) 898-1108 / Baltimore: (410) 752-3376

Toll Free: (888) 445-3376 40

visits either which seems like the natural 1 alternative if they aren’t happy with the current 2 system. But even supposing EPA can essentially 3 visit all sites regularly and annually, it’s not 4 at all clear that EPA can meaningfully conduct 5 the verifications it would have to do without 6 creating public records of precisely the 7 information which it’s trying to avoid collecting 8 in the first place by deferring reporting of 9 recording data. Perhaps there is some way for 10 reporters not actually to have to write down what 11 they verify or to share it with EPA to determine 12 systems and problems in reporting. That could be 13 done, but it’s essentially a system of blinded 14 inspectors. It’s unlikely to produce meaningful 15 verification data or useful accuracy so there’s 16 not a lot of point in doing it although I 17 supposed it’s better than nothing if we have to 18 settle for it. 19 So, [inaudible] EPA is trying to avoid a 20 Congressional determination that it needs to 21 report all this data to the public. You can’t 22OLENDER REPORTING, INC. 1100 Connecticut Ave., N.W., Suite 810, Washington, D.C. 20036 Washington: (202) 898-1108 / Baltimore: (410) 752-3376

Toll Free: (888) 445-3376 41
very well avoid it by spending extra resources 1 and saying they have to look at the data 2 themselves. It will just be a hassle and runs 3 into the same legal problems EPA is wrestling 4with. 5 Now fourth, getting to the meat of this, 6 to the extent that industry has raised 7 substantive concerns, they’re far more minor than 8 EPA’s broad exclusions suggest. So we’re now 9 analyzing the exclusions in detail and I’m sure 10 some preliminary conclusions now which will be 11 followed by at this point blocks and blocks of 12 spread sheets come March. So generally speaking, 13 the deferrals are far broader than they need to 14be. As far as I can tell, the system used to 15 reach them was more or less deferring reporting 16 of all equations data or things that plausibly 17 could be emissions equations and inputs. That’s 18 a very different question than what’s not already 19publicly available and/or what is not at all 20 competitively relevant. 21 And for that matter, let me say 22OLENDER REPORTING, INC. 1100 Connecticut Ave., N.W., Suite 810, Washington, D.C. 20036 Washington: (202) 898-1108 / Baltimore: (410) 752-3376

Toll Free: (888) 445-3376 42
initially, because this is not how we treat CBI 1 claims in the typical case-by-case system. One 2 looks in great detail at them, the presumption is 3 strongly for disclosure and only then are they 4 considered to be blocked from reporting. What’s 5 not done generally is to respond to sort of 6 general industry concerns and shunt off a large 7 part of the data indefinitely. In other words, I 8 think the deferral functionally treats emission 9 data as CBI for the near term in ways – on the 10basis of far less evidence – for far more 11 information than would be required for case-by12 case reporting. 13 So having a look at this – broad classes 14 of data are already publicly available and we can 15 show that. In subpart C, for instance, EPA 16proposes deferring reports on the heat input and 17 even the quantity of the fuel used in essentially 18 all industrial boilers. This data in fact is 19 very often already available in Title V and state 20 operating permits. We have quite a sheaf of 21 them. It’s not confidential. Likewise, turning 22OLENDER REPORTING, INC. 1100 Connecticut Ave., N.W., Suite 810, Washington, D.C. 20036 Washington: (202) 898-1108 / Baltimore: (410) 752-3376

Toll Free: (888) 445-3376 43
to cement, another big emitter, EPA has proposed 1 deferring reporting on clinker and cement kiln 2 dust production, that our experts were able to 3 find in, I think, about a week almost all that 4data in public permits and databases. The same 5 story in iron and steel: EPA reacted to industry 6 by proposing to defer reporting of the mass of 7 fuels used in the process, but our engineers 8 could, again, find this data in public permits 9 and public permit applications. 10 I could go on, so I will. In the oil and 11 gas sector, EPA proposed deferring reporting of 12 the number and fuel use of pneumatic devices that 13 vent high-global-warming-potential methane to the 14 atmosphere. These component counts in fact, have 15 no competitive relevance and both component 16 counts and the fuel use rates of these systems 17 regularly appear in air permits and are provided 18 to federal, state and local agencies for royalty 19 and tax reporting purposes. I can report similar 20 conclusions on EPA’s proposed deferrals on, for 21 instance, in the oil and gas sector, acid gas 22OLENDER REPORTING, INC. 1100 Connecticut Ave., N.W., Suite 810, Washington, D.C. 20036 Washington: (202) 898-1108 / Baltimore: (410) 752-3376

Toll Free: (888) 445-3376 44
removal vents, tank emissions, well venting, 1 including for exploration well venting where if 2 there weren’t any putative concerns about any one 3 well, [inaudible] largely solves of doing basin 4 level reporting, so you’re reporting [inaudible] 5 basin it’s not a problem. 6 So these are just highlights. There are 7 a lot more and we will provide you a point-by8point analysis of them showing that a vast 9majority of this information is either already in 10public view albeit scattered in ways that are far 11 less useful than EPA’s collection will create, 12 and much of the remainder do not raise 13 competiveness concerns. 14 So upshot is that on analysis, many of 15 the, quote, “potential problems” polluters 16 identified don’t actually exist to the extent 17 they can even be legally considered or as a 18matter of equity should be considered two to 19 three years down the line from the development of 20 the system. And this isn’t surprising. Industry 21 has a long, long history of misusing confidential 22OLENDER REPORTING, INC. 1100 Connecticut Ave., N.W., Suite 810, Washington, D.C. 20036 Washington: (202) 898-1108 / Baltimore: (410) 752-3376

Toll Free: (888) 445-3376 45

business information claims because it would 1 rather not tell its public what it’s doing to its 2 air. I recently, for instance, ran across air 3 permit applications for large refineries in Texas 4 that they put in confidentiality claims for -- 5 marked, you know, bright red confidential stamps 6 – textbook values for hydrocarbon heat contents, 7 the emissions rates of the facilities which, I 8 think, are hard to see as non-emission data, and 9most memorably, the EPA’s own public AP-42 10 emissions factors which industry felt very 11 strongly were competitively sensitive. There are 12 a lot of things industry would rather not share, 13 but which are plainly public. 14 So in view of all this, our 15 recommendations are straightforward: 16 First, placing the burden of proof 17 squarely on industry, as it has to its credit in 18 the call for information, EPA should conduct a 19 thorough review of which data elements have been 20 compellingly shown to raise competitiveness 21 concerns before it finalizes the deferral rule. 22OLENDER REPORTING, INC. 1100 Connecticut Ave., N.W., Suite 810, Washington, D.C. 20036 Washington: (202) 898-1108 / Baltimore: (410) 752-3376

Toll Free: (888) 445-3376 46
Doing so will almost certainly allow EPA to 1 significantly limit the scope of the role, if it 2 is finalized at all. 3 Second, if reporters are granted any 4deferral, EPA should very strongly consider 5 requiring them to use third-party verification 6 services for the duration of the delay. I’m 7 aware that’s a significant change in EPA’s 8 system, but to the extent that no one’s seen that 9 verification data, and EPA’s only doing spot10 checks, someone needs to be doing thorough 11 reviews. And there enough third-party verifiers 12 around from other reporting systems, we think, to 13 make that a manageable change especially in your 14 two or three-year delay if it stretches on that 15 long. 16 Third, though, any delay should be 17 minimal. These companies really do have it in 18 hand to solve their own problem. We would say 19 that EPA should seriously consider simply 20 requiring companies which don’t wish to report 21 their emissions equation inputs to switch to 22OLENDER REPORTING, INC. 1100 Connecticut Ave., N.W., Suite 810, Washington, D.C. 20036 Washington: (202) 898-1108 / Baltimore: (410) 752-3376

Toll Free: (888) 445-3376 47
direct measurement as soon as possible. That 1 should take at most about a year assuming that 2you start in the next reporting cycle. So, 3 again, not we think, a major problem – certainly 4not worth a delay twice as long as it took to 5 write the rule. 6 In conclusion, EPA and the public are on 7 the verge of benefiting from the Agency’s 8 genuinely hard work. And I don’t want to 9 shortchange [inaudible] criticism of this 10proposal. I think it’s misguided, but I think 11 the rule as a whole is quite remarkable. And it 12would really be a pity at this point a few months 13 away from seeing its fruits to pull back and put 14 the rule into what will initially be a three-year 15 delay, what will likely strike longer and create 16 a continuing target for industry to come up with 17 putative competitiveness concerns that delay the 18 vital interest that public has in knowing what’s 19 happening to its atmosphere. Thanks. 20 MS. GORDON: Thank you. Next. R. Gillem 21 Lucas, please. 22OLENDER REPORTING, INC. 1100 Connecticut Ave., N.W., Suite 810, Washington, D.C. 20036 Washington: (202) 898-1108 / Baltimore: (410) 752-3376

Toll Free: (888) 445-3376 48

MR. LUCAS: I don’t think I can talk that 1 fast. How long do I have? 2 MS. GORDON: I’m sorry? 3 MR. LUCAS: How long do I have? 4 MS. GORDON: A reasonable period of time. 5 MR. LUCAS: Oh, okay. So be reasonable. 6
MS. GORDON: Yes. 7 MR. LUCAS: We will be submitting the 8 written comments before the deadline. But the 9 reason I’m here today is to highlight something 10which is very simple. I’m a registered 11 professional engineer in California and Maryland, 12 and at one point in my life from 1990 to 1994 I 13 managed the air emissions testing group for the 14 largest air environmental company in the United 15 States, Research-Cottrell, and I’m very familiar 16with the challenges of measuring much of 17 anything, either indoors or outdoors. 18 But that’s not why I’m here today. I’m 19 the CEO of a company called Recover, IR. And we 20 are, we believe, the premier company in the 21 United States for aerial infrared measurements of 22OLENDER REPORTING, INC. 1100 Connecticut Ave., N.W., Suite 810, Washington, D.C. 20036 Washington: (202) 898-1108 / Baltimore: (410) 752-3376

Toll Free: (888) 445-3376 49
energy theft in the United States. And I’m only 1 going to address my comments relative to subpart 2NN and the punch line here – and then I’ll tell 3 you a little bit more about the punch line – is 4 that if there is not a validation or sampling of 5 the major cities in the United States, that 6probably the total greenhouse gas impact will be 7 in error by 1 to 3 percent. That’s relative to 8 all of the measurements. 9 A couple of benchmarks that are important 10 and relevant – the Department of Energy’s EIA 11 changed their corrective measurements for 12 balancing the measurements that they receive and 13 for some reason, late in 2008, 2009, they started 14 getting very large errors. And as reported on 15 the EIA site, they have errors now in the range 16 of 35 billion cubic feet per month natural gas 17 error. That’s the equivalent – the heating 18 equivalent of six days of oil from Saudi Arabia. 19 But they’ve changed the calculation method. So 20 if you can’t get the right answer, you change the 21 equation. That’s not my number, that’s the EIA 22OLENDER REPORTING, INC. 1100 Connecticut Ave., N.W., Suite 810, Washington, D.C. 20036 Washington: (202) 898-1108 / Baltimore: (410) 752-3376

Toll Free: (888) 445-3376 50
number and certainly if the EPA and the EIA are 1 collecting information, the numbers should be 2 consistent. Neither the EIA, nor the EPA in the 3 current ruling, requires reporting of theft rates 4 including bypass theft. Now, you might say, what 5 is bypass theft? Bypass theft is a situation 6where an industrial, commercial or residential 7 facility actually puts a pipe around their meter 8 and the meter reader comes out and reads a value 9 but it has correlation with how much gas they’re 10 using. There have been people that have been 11 taken to court. There are apartment buildings, 12 there are industrial buildings where this has 13 been in evidence and found out but it’s very hard 14 for utilities to detect especially when the 15 movement in the United States is to go both for 16 gas and electric meters that are remote sensors, 17 read through the internet and no one will ever go 18 there, no one will ever see these bypass thefts. 19 And so if you just take the EIA number of 20what they’re already reporting as an error in the 21 number of standard cubic feet per month of 22OLENDER REPORTING, INC. 1100 Connecticut Ave., N.W., Suite 810, Washington, D.C. 20036 Washington: (202) 898-1108 / Baltimore: (410) 752-3376

Toll Free: (888) 445-3376 51
natural gas, it’s very easy to hide what we are 1 conservatively predicting as the theft rate in 2 the United States of 14 billion cubic feet per 3 month. That’s about the equivalent of somewhere 4between on an annual basis, 30 to 45 days of oil 5 from Saudi Arabia which is a significant 6 contributor to the natural gas. 7 Now, if we say okay, well, why would I 8 say such an outrageous thing that the theft rates 9 are so high? My company – we conducted an aerial 10 infrared survey of the city of Detroit – 84,000 11 acres. And the reason this is important is that 12 from my personal experience, you cannot go out 13 and measure every meter accurately especially 14when most of the residential meters and many of 15 the meters on commercial and industrial buildings 16 are neither pressure compensated nor temperature 17 compensated. That means they read in error by 18 design especially when it’s the cold months when 19 the gas usage rates are the highest. What we’ve 20 found, actual findings, in Detroit – we found 21 that nearly 20 percent of the residents in the 22OLENDER REPORTING, INC. 1100 Connecticut Ave., N.W., Suite 810, Washington, D.C. 20036 Washington: (202) 898-1108 / Baltimore: (410) 752-3376

Toll Free: (888) 445-3376 52
city of Detroit were stealing natural gas and 94 1 percent of them were stealing electricity. So if 2you don’t collect the information about the 3 thieves, you can’t add it up from the meters and 4you can hide it in the calculations, then the 5 error begins to appear. So that just in the city 6 of Detroit, that was about $75 million. You say, 7 well, why aren’t the gas companies interested in 8 collecting this problem? The reasons are that 9 since the deregulations of the utilities, the 10 electric companies and the gas companies, most of 11 them have become bill takers and caretakers of 12 the distribution systems in the cities. So they 13 don’t have a financial interest to go out and 14 find the thieves because it’s expensive, they 15 don’t have any budget, they don’t have any people 16 to run around and also in a lot of places where 17 the gas is being stolen, it’s dangerous – drug 18 addicts, dogs. But it’s not just in the low 19 income homes. There are people who have 20 installed bypasses in very expensive homes maybe 21 to heat their swimming pool so it’s not detected 22OLENDER REPORTING, INC. 1100 Connecticut Ave., N.W., Suite 810, Washington, D.C. 20036 Washington: (202) 898-1108 / Baltimore: (410) 752-3376

Toll Free: (888) 445-3376 53
because it’s expensive to heat a swimming pool. 1 So we looked at a conservative estimate 2 of looking at about the top 15 states only – not 3 the whole United States – and we looked at just 4 saying maybe they had 5 percent, but we believe 5 that the numbers are actually much higher than 6 that. And why would I think they’re much higher 7 than that? Yesterday in the Wall Street Journal 8 and today on television they quoted the same 9 information that as of today, as of the most 10 recent measurements, 14 percent of the people in 11 the United States are on food stamps. And say, 12well, what does that have to do with anything? 13 Last year, the amount of money that the United 14 States government paid for low income heating 15 assistance program was $5.1 billion. In many 16places, that only covered 25 percent of the 17 applicants. This year the projected number for 18 the low income heating assistance program will go 19 down – $3.3 billion. And that means more people 20 that won’t have a heating assistance program, so 21 what will they do? They’ll probably steal more 22OLENDER REPORTING, INC. 1100 Connecticut Ave., N.W., Suite 810, Washington, D.C. 20036 Washington: (202) 898-1108 / Baltimore: (410) 752-3376

Toll Free: (888) 445-3376 54

natural gas. 1 So when you look at the total emissions, 2 the equivalent emissions from the different fuel 3 sources, what you find is about 21 to 22 percent 4 of the weighted number comes from natural gas. 5 However, it’s interesting to look at the numbers 6published by the EIA and the EPA and the numbers, 7 the percentages, have not substantially changed 8 in eight years. Maybe they didn’t, but in the 9 last years as you’re probably well aware, the 10 cost per cubic foot of natural gas has dropped 11 significantly which means that more people are 12 going to natural gas for heating and for use and 13 for cars and lots of different things like that. 14 So what we should be seeing, especially with the 15 increase in fracking which is another source of 16 emissions – we see that the use of natural gas is 17 going up, so what we should expect is that we may 18 go from 21 to 23 or 24 percent over the next few 19years and that means that an error of about 5 20percent to 15 percent error in the natural gas 21 emissions rate will equate to about 1 to 3 22OLENDER REPORTING, INC. 1100 Connecticut Ave., N.W., Suite 810, Washington, D.C. 20036 Washington: (202) 898-1108 / Baltimore: (410) 752-3376

Toll Free: (888) 445-3376 55
percent when we look overall. This is not 1 insignificant. 2 And then if you look at the numbers in 3 the new rule, NN, it talks about calculating the 4value associated with the complete, 100 percent 5 combustion of natural gas. But most heating 6 systems, they’re not efficient and the energy 7 thieves – they don’t really care about how well 8 it’s hooked up. We’ve seen garden hoses used on 9 some homes. We’ve seen pipes that are not the 10 right kind of pipes, holes in the pipes and 11 consequently, we’re leaking natural gas unburned 12 to the atmosphere and the impact on the 13 atmosphere is 30 times greater for methane than 14 it is for CO2. 15 And also then separate issues associated 16with this new rule is a difficulty for the 17 natural gas local distribution companies to 18 report because there is a requirement in there to 19 report the BTU content of the gas that’s burned, 20but the truth of the matter is that that number 21 can vary by over 10 percent variance in the BTU 22OLENDER REPORTING, INC. 1100 Connecticut Ave., N.W., Suite 810, Washington, D.C. 20036 Washington: (202) 898-1108 / Baltimore: (410) 752-3376

Toll Free: (888) 445-3376 56

content, but they really don’t have an accurate 1 way to measure that. And then also a thing 2 that’s perhaps as significant is that when you 3 look at gas going in the ground into storage, 4 coming back out of storage, variances in the 5 static pressure in the line that might vary by 6 hundreds of pounds per square inch difference and 7 temperature variances that are moving around a 8 lot, then the accuracy of any report is going to 9 be a challenge. So in conclusion, we think that 10 there should be a change in the rule which at a 11 minimum requires the major metropolitan areas and 12 surrounding high density areas to measure natural 13 gas theft because our experience is in Detroit 14 specifically, that when they thought they had 15 about 5 percent theft, they actually had 20 16percent. So in most cities because they don’t 17 look, they don’t have any budget and they don’t 18 have any people to go look, they don’t have a 19 clue what the real number is and neither does 20 anyone else. And also they don’t have an 21 accurate way to find out who might be stealing 22OLENDER REPORTING, INC. 1100 Connecticut Ave., N.W., Suite 810, Washington, D.C. 20036 Washington: (202) 898-1108 / Baltimore: (410) 752-3376

Toll Free: (888) 445-3376 57

gas through a bypass. 1 In conclusion if you look at the – say, 2well, how can you measure bypass theft – well, if 3 the billing records show that a home or a 4 residence is using very little natural gas, but 5 the building is very hot, there’s something that 6 doesn’t correlate. So we can actually measure 7 the temperature of the buildings, correlate that 8 with the building records and figure out what’s 9 reasonable or unreasonable. So we hope that the 10 EPA will seriously consider at a minimum 11 validation and verification of energy theft 12

rates. 13 MS. GORDON: Sir, thank you. Before you 14 step down, actually I do have a question if you 15 don’t mind. 16
MR. LUCAS: Sure. 17 MS. GORDON: Thank you. Thank you for 18your comments and we’ll have the appropriate 19person take a look at them. I wonder if you 20 assert a connection between your comments and the 21 deferral of inputs to emission equations for 22OLENDER REPORTING, INC. 1100 Connecticut Ave., N.W., Suite 810, Washington, D.C. 20036 Washington: (202) 898-1108 / Baltimore: (410) 752-3376

Toll Free: (888) 445-3376 58

direct emitters? 1 MR. LUCAS: Yes. There’s a correlation. 2 And the correlation is – there are two things 3 that I mentioned – one was the inability to 4 correlate actual meter measurements which are in 5 the rule with inaccuracy in those meter 6measurements. As a registered professional 7 engineer in mechanical engineering, I have a 8 great understanding of how most meters work. And 9 the truth of the matter is that most meters 10probably are never calibrated before they’re 11 installed and there’s no protocol or practice to 12 go out and check the calibration. Some of these 13 meters have things inside that can break and fall 14 off. Some of them have things that can change by 15 erosion. So when you look at the equations that 16you’re going to use, then there has to be 17 something in the equations that says how big is 18my error for what I’m collecting, and will it 19 impact my whole number? Now, if the errors – if 20you use the theory of central tendency which 21 means if I pick a lot of things and I average 22OLENDER REPORTING, INC. 1100 Connecticut Ave., N.W., Suite 810, Washington, D.C. 20036 Washington: (202) 898-1108 / Baltimore: (410) 752-3376

Toll Free: (888) 445-3376 59
them together, even though I have errors, I will 1 be accurate. But if on average, the average 2 error is the same direction, then they will all 3 be in error. So that means that when I look at 4 this whole spectrum of things – and we created a 5 flow chart of all the reporting requirements and 6 the two things that are missing that are very 7 significant even if you don’t consider energy 8 theft is lost gas. And the computation of lost 9 gas with all these different things where you 10measure them – especially when you think about 11 independent gas suppliers sometimes supplying gas 12 through the local distribution companies, some 13 are providing it directly to very large 14 industrial companies and utilities – and you look 15 at it as a giant math equation, if you don’t 16 understand the magnitude of the errors in what’s 17 being reported, then you’re just kind of kidding 18yourself. And so there needs to be a validation 19 of how much could it be off if certain things 20 stacked up in a certain way? 21 Then the second thing is if I looked 22OLENDER REPORTING, INC. 1100 Connecticut Ave., N.W., Suite 810, Washington, D.C. 20036 Washington: (202) 898-1108 / Baltimore: (410) 752-3376

Toll Free: (888) 445-3376 60
individually at the accuracy of what’s being 1 reported, then that’s another error. Then if I 2 take who’s reporting it and what’s in it for 3 them, I would humbly submit based on my personal 4 experience in lying and cheating by people who 5 are reporting to the Clean Air Act, that there 6 needs to be some sort of validation that says is 7 this even in the range of reason or did somebody 8 sit in their office, not even look at much, add 9 up the numbers and send them in? So if there’s 10 no real incentive for the companies that are 11 supplying, distributing and using the gas and 12 they don’t understand where their errors are, 13 then you have a lovely rule which seems like it’s 14 going to do something special, but it’s just a 15 bunch of hooey. 16 MS. GORDON: Thank you. And our next and 17 final speaker will be Mandy Warner. 18 MS. WARNER: Good afternoon. My name is 19 Mandy Warner. I’m a policy analyst with 20 Environmental Defense Fund. On behalf of 21 Environmental Defense Fund and our more than 22OLENDER REPORTING, INC. 1100 Connecticut Ave., N.W., Suite 810, Washington, D.C. 20036 Washington: (202) 898-1108 / Baltimore: (410) 752-3376

Toll Free: (888) 445-3376 61
700,000 members nationwide, I sincerely thank you 1 for the opportunity to testify today. 2 Emissions data is the cornerstone of 3 effective air quality management. EPA’s Final 4Mandatory Greenhouse Gas Reporting Rule found 5 that emissions data is essential to sound policy 6 explaining that, quote, “accurate and timely 7 information on greenhouse gas emissions is 8 essential for informing many future climate 9 change policy decisions.” An effective emissions 10 reporting program promotes transparency, raising 11 awareness of emissions among reporting facilities 12 and other stakeholders and contributing to 13 efforts to identify and carry out reductions. 14 Indeed, in section 114 of the Clean Air Act, 15 Congress recognized the critical importance of 16publicly-available emissions data, mandating that 17 emissions data “shall be available to the public” 18 and providing that such data will not be entitled 19 to confidential treatment. Consistent with this 20 emphasis on disclosure, EPA has frequently 21 reiterated that the Reporting Rule must promote 22OLENDER REPORTING, INC. 1100 Connecticut Ave., N.W., Suite 810, Washington, D.C. 20036 Washington: (202) 898-1108 / Baltimore: (410) 752-3376

Toll Free: (888) 445-3376 62
accurate, transparent, and publicly available 1 data in order to, quote, “promote public 2 confidence in the data and enable the public, 3 industry, NGOs, and other stakeholders to better 4 understand the sources of greenhouse gas 5 emissions and the factors that affect the 6 quantities of greenhouse gases emitted.” 7 In this Call for Information, EPA is 8 soliciting additional information on data 9 facilities provide as, quote, “inputs to 10 emissions equations.” Under the Clean Air Act 11 and EPA’s implementing regulations, this data 12 falls squarely within the definition of 13 “emissions data” and therefore must be disclosed. 14 In its Confidential Business Information proposed 15 rule, the Agency recognized as much and proposed 16 to treat, quote, “inputs to emissions equations” 17 as “emissions data.” 18 The Agency nonetheless seeks information 19 on whether public disclosure of such data might 20 result in competitive harm to businesses, noting 21 that, although it received significant public 22OLENDER REPORTING, INC. 1100 Connecticut Ave., N.W., Suite 810, Washington, D.C. 20036 Washington: (202) 898-1108 / Baltimore: (410) 752-3376

Toll Free: (888) 445-3376 63

comments to this effect, most commenters’ claims 1 on competitive harm were broad and over 2 generalized. In gathering this information, we 3 encourage the Agency to rely only on specific, 4particularized evidence of competitive harm, and 5 we note that covered businesses are best situated 6 to provide this evidence and should be required 7 to do so to sustain any claims of competitive 8 harm. Even if the Agency obtains evidence of 9 competitive harm, however, this evidence cannot 10 overcome EPA’s statutory and regulatory mandate 11 to disclose all emissions data. Indeed, EPA must 12 disclose this data regardless of information it 13 obtains through this call for information. 14 If the Agency determines that the 15 mandatory disclosure of any such data elements 16 does result in competitive harm, EPA may provide 17 facilities with alternative means to calculate 18 emissions and to demonstrate compliance. Any 19 such alternative compliance pathways must result 20 in data that are at least as comprehensive and 21 accurate as the data obtained under the 22OLENDER REPORTING, INC. 1100 Connecticut Ave., N.W., Suite 810, Washington, D.C. 20036 Washington: (202) 898-1108 / Baltimore: (410) 752-3376

Toll Free: (888) 445-3376 64
procedures EPA has already finalized. One 1 potential solution would be to allow facilities 2 to rely instead on continuous emission monitors 3 (CEMS) to measure emissions. The Agency has 4 indicated that many commenters support this 5 course of action, and if EPA is concerned that 6 competitive harm may result from the mandatory 7 disclosure of “inputs to emissions equations,” 8 EDF encourages the Agency to rely on CEMS as an 9 alternative to ensure that emissions data is 10 fully disclosed. 11 Finally, EDF notes that in another 12 action, the Agency has proposed to defer 13 reporting of “inputs to emission equations” for 14 three years. We respectfully request that EPA 15 decline to take this action so that policymakers 16 and the public at large have access to high17 quality, transparent greenhouse gas emissions 18 data for “all sectors of the economy,” as 19 required under the Clean Air Act and as Congress 20 twice commanded. 21 I would like to again thank you for the 22OLENDER REPORTING, INC. 1100 Connecticut Ave., N.W., Suite 810, Washington, D.C. 20036 Washington: (202) 898-1108 / Baltimore: (410) 752-3376

Toll Free: (888) 445-3376 65
opportunity to testify concerning this important 1 proposal, and EDF looks forward to providing the 2Agency with more detailed information on the 3 public availability of certain inputs to 4 emissions equations in our written comments. 5 Thank you. 6 MS. GORDON: Thank you. Because we 7 announced in the notice on this hearing that the 8 hearing would remain open until five o’clock, – 9 MR. SEGALL: Can we go through it again? 10 MS. GORDON: -- people who continue to 11 arrive, if there are any, will still have the 12 opportunity to comment and if there’s anyone else 13 in the room who has not yet commented and would 14 like the opportunity, may have one. Barring 15 that, we will adjourn. Those who wish to remain 16 on the chance that someone else comes in and 17 wishes to comment, may do so. We will hear those 18 comments if that happens. Thank you very much. 19 [Whereupon, at 2:49 p.m., the Public Meeting 20 concluded.] 21 22