5 Colo. Code Regs. § 1001-26-B-II

Current through Register Vol. 47, No. 16, August 25, 2024

Section 5 CCR 1001-26-B-II - [Effective until 9/15/2024] Greenhouse Gas Emissions and Energy Management for the Manufacturing Sector in Colorado

II.A. Purpose and Applicability

II.A.1. The purpose of this regulation is to evaluate greenhouse gas (GHG) emissions and energy efficiency from certain stationary sources within Colorado's industrial manufacturing sector and implement best practices for reducing GHG emissions and increasing energy efficiency.

II.A.2. This regulation applies to all energy-intensive, trade-exposed manufacturing stationary sources (EITE stationary sources) in Colorado, with reported direct GHG emissions equal to or greater than 50,000 metric tons of carbon dioxide equivalent per year.

II.A.3. The final audit shall be completed in year 2037, with reductions sustained thereafter.

II.B. Definitions

II.B.1. "Additional" means GHG emission reductions that exceed any GHG emission reductions otherwise required by law, regulation or legally binding mandate.

II.B.2. "Annual emissions" means the EITE stationary source's direct GHG emissions for a specific calendar year, reported under Regulation Number 22.

II.B.3. "Annual emissions limitation" means the number of metric tons CO2e an EITE stationary source may emit as calculated in Section II.E.

II.B.4. "Alternate account representative" means an individual designated pursuant to II.I.3 to take actions on an EITE stationary source' accounts.

II.B.5. "Audit plan" means the proposed audit scope, timelines and team submitted by the EITE stationary source to the Division for approval.

II.B.6. "Audit report" means the resulting document from the audit containing all the information and data required under Section II.C.3.

II.B.7. "Audit scope" means the GHG emission units and the energy consumption sources included in the energy and emissions control audit and identified in the approved audit plan.

II.B.8. "Audit team" means one or more persons performing the audit. The audit team must consist of at least one qualified third-party auditor. Additional capabilities and knowledge of the audit team must include, but are not limited to, technical expertise with specific operating and maintenance practices for the industry being audited; expertise in conducting GHG and energy management system audits; and expertise of the EITE stationary source's domestic and international market. The audit team must include individual(s) with documented audit expertise in the relevant industrial sector.

II.B.8.a. A bachelor's level college degree or equivalent in science, technology, business, statistics, math, environmental policy, economic, or financial auditing; or evidence demonstrating completion of significant and relevant work experience or other personal development activities that have provided the applicant with the communication, technical, and analytical skills to conduct audit; and

II.B.8.b. Sufficient workplace experience to act as an auditor, including a minimum two years of full-time experience in a professional role that involved emissions data management, emissions technology, emissions inventories, environmental auditing or other technical skills necessary to conduct the audit.

II.B.9. "Carbon dioxide equivalent" (CO2e) means a metric used to compare the emissions from various GHG classes based upon their global warming potential (GWP). The CO2e is determined by multiplying the mass amount of emissions (metric tons per year), for each GHG constituent by that gas's GWP, and summing the resultant values to determine CO2e (metric tons per year).

II.B.10. "Certification body" means a professional organization that has been accredited for a specific sector and can provide compliance certificates.

II.B.11. "Co-benefits" means the additional benefits associated with the reduction of harmful air pollutants to local communities, including localized air quality benefits.

II.B.12. "Compliance account" means an account created by the Division or its agent for an EITE stationary source to which the Division and/or the EITE stationary source transfers GHG credits to meet its compliance obligations.

II.B.13. "Direct GHG emissions" means GHG emissions from an EITE stationary source that are reported to the State of Colorado under Regulation Number 22, Part A and/or 40 CFR Part 98.

II.B.14. "Disproportionately impacted community" means those communities that meet the definition contained in § 24-4-109(2)(b)(II), C.R.S.

II.B.15. "Energy and GHG emission control audit" (the audit) means a rigorous examination of the GHG emissions and energy consumption of an EITE stationary source with the goal of analyzing and recommending GHG BAECT and energy BMPs, and identifying opportunities for reduction in GHG emissions and energy consumption for the facility, conducted consistent with the requirements set forth in this section.

II.B.16. "Energy best management practices" (energy BMPs) means the best energy efficiency practices available to the EITE stationary source, based on the maximum degree of energy efficiency that is achievable on a case-by-case basis, taking into account energy, environmental, and economic impacts, and is achievable for such facility through application of production process improvements and available equipment or process control methods, systems, and techniques, and includes incorporating all the key elements of SEM, such that the facility continually improves its energy performance, reduces energy costs, and reduces GHG emissions associated with energy use.

II.B.17. "Energy efficiency" means using less electricity or fuel to produce the same quantity of product or service.

II.B.18. "Energy-intensive, trade-exposed manufacturing stationary source" (EITE stationary source) means a source that principally engages in cement and concrete product manufacturing, NAICS code 3273; foundries, NAICS code 3315; iron and steel mills and ferroalloy manufacturing, NAICS code 3311; and/or pulp, paper, and paperboard mills, NAICS code 3221.

II.B.19. "Federal Energy Star Program" means the U.S. Environmental Protection Agency's voluntary program for industrial manufacturers through which specific energy performance indicators are measured and compared across industries and to which facilities are certified if they are achieving an Energy Star scoring of 75 or greater.

II.B.20. "Greenhouse gas best available emission control technology" (GHG BAECT) means a GHG emission control technology for a GHG emission unit based on the maximum degree of GHG reductions achievable on a case-by-case basis, taking into account energy, environmental, and economic impacts, employment of which is demonstrated by compliance with the GHG BAECT and energy BMP intensity rate determination.

II.B.21 "GHG BAECT and energy BMP intensity rate" means the total direct GHG emissions per unit of production from the emissions units within the audit scope after GHG BAECT and energy BMPs are operational as determined in Section II.D.1.b.(iv).

II.B.22. "GHG credit" means a tradable compliance instrument issued pursuant to Sections II.F.1.a.(ii) that represents a GHG emission reduction from an EITE stationary source of one metric ton of CO2e. The GHG credit must be real, additional, quantifiable, permanent, verifiable and enforceable. When issuing a GHG credit, the Division shall assign each credit an identifier that is unique.

II.B.23. "Harmful air pollutant" as used in this section means pollutants designated by EPA as criteria air pollutants (carbon monoxide, lead, nitrogen dioxide, ozone, particulate pollution (PM) (PM2.5 and PM10) and sulfur dioxide) or hazardous air pollutants.

II.B.24. "International Organization of Standardization" (ISO) means the independent, non-governmental international standard-setting body composed of representatives from various national standards organizations.

II.B.25. "ISO 50001: Energy Management Systems- Requirements with guidance for use" (ISO 50001) means the internationally accepted standard which specifies the requirements for an organization to demonstrate that it has a sustainable energy management system in place, has completed the energy planning process, and has a commitment to continual improvement of its energy performance.

II.B.26. "Lead auditor" means an individual who has met the requirements of and is certified as a lead auditor through a professional certification body.

II.B.27. "Management system" means the policies, processes, and procedures used by an organization to ensure that it can fulfill the tasks required to achieve its GHG emissions or energy management objectives.

II.B.28. "Net meter" means a renewable energy resource or renewable energy storage on the EITE stationary source's property which supply energy directly to the EITE stationary source's energy provider in exchange for a Power Purchase Agreement where the customer receives credit for the energy production.

II.B.29. "Non-GHG BAECT emissions" means the GHG mass emissions from an EITE stationary source that are not covered by the audit.

II.B.30. "North American industry classification system (NAICS) code(s)" means the six-digit code(s) that represents the product(s)/activity(s)/service(s) at a facility or supplier as listed in the Federal Register and defined in "North American Industrial Classification System Manual 2007," available from the U.S. Department of Commerce, National Technical Information Service, Alexandria, VA 22312 (as published August, 2021).

II.B.31. "Permanent" means the GHG emission reductions are not reversible, or, when the GHG emission reductions are reversible, that mechanisms are in place to replace any reversed emission reductions to ensure that all reductions that are awarded GHG credits endure.

II.B.32. "Plain-language" means writing that is clear, concise, well-organized, and follows other best practices appropriate to the subject or field and is easily understandable.

II.B.33. "Primary account representative" means an individual authorized by an EITE stationary source to make submissions to the Division or its agent in all matters pertaining to this Part that legally bind the authorizing source.

II.B.34. "Process" means a specific operation at an EITE stationary source comprising a series of actions or steps which are carried out in a specific order to complete a particular stage in the manufacturing process.

II.B.35. "Product" means the quantifiable material output of an individual manufacturing process or manufacturing facility.

II.B.36. "Proof of certification" means an official document issued by the formal registrar or certifying body stating the scope of certification, the expiration date and the standards to which the stationary source is certified.

II.B.37. "Qualified third-party auditor" means one or more individuals who hold a valid lead auditor certification in greenhouse gas and/or energy management systems and have demonstrated capabilities to evaluate GHG reduction opportunities for large, energy-intensive, industrial manufacturing processes and facilities. Qualified third-party auditors must have worked as an auditor for at least two years, or must have worked as a project manager or lead person for not less than four years (two of which may be graduate level work) in:

(1) the development of GHG or other air emission inventories, or

(2) as a lead environmental data or financial auditor.

The individual must not be affiliated with the EITE stationary source, its subsidiaries, or related entities; there can be no common ownership between the EITE stationary source and the third-party auditor. Capabilities and knowledge of the auditor include, but are not limited to, background, experience, and recognized abilities to perform the assessment activities, data analysis, and report preparation and experience lead auditing GHG or energy management systems for the industry subject to this section.

II.B.38. "RACT/BACT/LAER Clearinghouse" (RBLC) means EPA's central database of air pollution technology information, including past RACT, BACT, and LAER decisions contained in New Source Review (NSR) permits, to promote the sharing of information among permitting agencies and to aid in future case-by-case determinations.

II.B.39. "Real" means that GHG emission reductions result from a demonstrable action or set of actions and are quantified using appropriate, accurate, and conservative methodologies that account for all GHG emission sources within the boundary of the regulated source generating GHG credits and account for uncertainty and activity-shifting leakage and market-shifting leakage.

II.B.40. "Regulated source" means a source of greenhouse gas that is subject to a rule adopted by the Commission under Section 105(1)(e) of the Act that imposes specific and quantifiable greenhouse gas reduction obligations upon that source or group of sources.

II.B.41. "Retail distributed generation" means a renewable energy resource or renewable energy storage that directly supply building or process energy needs at a metered location, where surplus energy is supplied to the location's energy provider when energy production is greater than on-site demand and grid energy is supplied through a customer meter to the location during times when on-site production is less than demand.

II.B.42. "Social cost of greenhouse gases" means the monetized damages associated with an incremental increase in carbon emissions in a given year. The social cost of greenhouse gases must include use of a discount rate of not more than two and a half percent; except that the social cost of greenhouse gases that is used may not be lower than that established in 2016, using a two and one-half percent discount rate, by the Federal Interagency Working Group on the social cost of greenhouse gases or than the final social cost of greenhouse gases, using a two and one-half percent or lower effective discount rate, established by the Federal Interagency Working Group on the social cost of greenhouse gases pursuant to Federal Executive Order 13990, dated January 20, 2021, whichever is higher.

II.B.43. "Strategic energy management" (SEM) means a management system-based, continuous improvement approach to energy management that seeks to improve an organization's energy performance, reduce energy costs, and reduce GHG emissions associated with energy use; drives improvement in facility energy efficiency through equipment upgrades and through operations and maintenance improvements and behavioral changes.

II.B.44. "Tracking and accounting system" means a GHG credit tracking system designated by the Division where GHG credits are issued, traded and retired by the Division or its agent.

II.B.45. "Transfer" of a GHG credit means the removal of a GHG credit from one account and placement into another account.

II.B.46. "Transfer request" means the communication by an authorized account representative or an alternate authorized account representative to the Division or its agent to transfer allowances between accounts.

II.B.47. "Verifiable" means that a reported emission reduction resulting from a GHG credit at a regulated source is well documented and transparent such that it lends itself to an objective review by the Division to verify the emission reduction is real, using monitoring of emissions reductions relative to the baseline.

II.C. Energy-Intensive Trade-Exposed Stationary Source Audit Requirements

II.C.1. Energy and GHG Emission Control Audits

II.C.1.a. By December 31, 2022, and December 31 every five years thereafter, owners or operators of each EITE stationary source must conduct energy and GHG emission control audits to establish greenhouse gas best available emission control technology (GHG BAECT) and energy best management practices (energy BMPs) and determine whether the stationary source is employing GHG BAECT and energy BMPs at the EITE stationary source, and submit the audit report to the Division.

II.C.1.b. Each EITE stationary source must conduct an audit within twelve (12) months of reporting direct GHG emissions of 50,000 metrics tons CO2e per year under Regulation Number 22, Part A and/or 40 CFR Part 98 and every five years thereafter.

II.C.1.c. Audits must be conducted by a qualified third party auditor and meet or exceed nationally or internationally accepted energy and GHG accounting and management audit standards or protocols.

II.C.2. Audit Plan

II.C.2.a. Each EITE stationary source must submit an audit plan to the Division for approval at least 120 days prior to beginning the audit as required in Section II.C.1. The Division will review the audit plan and notify the EITE stationary source within 60 days of submission of any deficiencies. If notified of deficiencies, the EITE stationary source must submit a revised audit plan for final approval no later than 30 days prior to beginning the audit. The EITE stationary source must receive approval from the Division of the audit plan prior to beginning the audit. Such approval shall not be unreasonably withheld. The audit plan must include:

II.C.2.a.(i) A description of all the emission units at the EITE stationary source that directly release one or more GHGs, ordered from largest emitting to smallest emitting emission units averaged over the past 5 years, quantified in CO2e as well as broken out by GHG type. Using this list, the emission units that comprise at least the top 80% of the EITE stationary source's direct GHG emissions shall be identified, documented and included in the GHG emissions audit scope. Additionally, any individual emissions unit that comprises 2% or more of the EITE stationary source's direct GHG emissions shall be identified, documented and included in the GHG emissions audit scope.

II.C.2.a.(ii) Unless the EITE stationary source is utilizing Section

II.C.2.a.(iii) to show employment of energy BMPs, a description of all the emission units at the EITE stationary source that consume energy, averaged over the past five (5) years and ordered from largest consuming to smallest consuming. Using this list, the energy consumption sources that comprise the top 80% of the EITE stationary source's energy consumption shall be identified, documented and included in the energy audit scope.

II.C.2.a.(iii) If an EITE stationary source is certified to the Federal Energy Star Program or ISO 50001, the EITE stationary source will be determined to be employing energy BMPs and the energy audit will be limited in scope. Proof of certification of the EITE stationary source to one or more of these existing standards must be included in the audit plan to utilize this option.

II.C.2.a.(iii)(1) If an EITE stationary source is planning on becoming certified to one of these standards, the EITE stationary source must submit the certification or registration timeline or plan, including key milestones towards certification or registration with certification scheduled for no more than 12 months after the audit date.

II.C.2.a.(iv) Records of any previous third-party audit results that the EITE stationary source proposes to use to support the audit on a supplementary basis or to avoid duplication of data collection efforts that have been performed within three (3) years prior to the planned audit date. To be accepted, supplementary audit data must be verified and validated by a third party and result from an audit that meets or exceeds nationally or internationally accepted energy and GHG accounting audit standards or protocols.

II.C.2.a.(v) A description of the audit team members, including experience, qualifications, and role in the audit, and existing or previous business relationship, and the nature of such relationship with the owner or operator of the EITE stationary source. If there is an existing or previous business relationship, a list and description of work done for the owner or operator of the EITE stationary source.

II.C.2.a.(v)(A) The Division may reject a proposed qualified third-party auditor or audit team if it does not meet the qualifications in Sections II.B.8. and II.B.37., failed to conduct a previous audit to the satisfaction of the Division, or is deemed to have a previous or existing relationship with the source that is so pervasive that the auditor would be unable to conduct the audit in an unbiased and independent manner.

II.C.2.a.(vi) The specific GHG and/or energy audit standards, protocols or procedures to be used for conducting the audit, if applicable.

II.C.3. Audit Reports

II.C.3.a. Each EITE stationary source must complete the audit report in accordance with Sections II.C.3.a.(i). through II.C.3.a.(v) and submit the audit report to the Division by December 31 of the audit year that includes the following elements for all GHG emission units listed in accordance with Section II.C.2.a. and specified in the Division-approved audit plan, at a minimum.

II.C.3.a.(i) The GHG BAECT analysis. The audit team must analyze GHG BAECT as follows:

II.C.3.a.(i)(A) Identify all available control technologies and strategies with practical potential for application to reduce GHG emissions from the GHG emission units included in the audit scope. Identify the current GHG emissions rate of each audited emission unit at the time of the audit.

II.C.3.a.(i)(A)(1) Control technologies and strategies must include, but are not limited to, fuel use, raw material use, energy efficiency improvements, preheating/heat reuse and strategic energy management options), and carbon capture and underground storage or utilization.

II.C.3.a.(i)(B) Eliminate technically infeasible control technologies and strategies.

II.C.3.a.(i)(B)(1) Notwithstanding Section II.C.3.a.(i)(B), the audit team must perform a feasibility assessment of carbon capture and underground storage or utilization technology for any single emissions unit evaluated with direct emissions of 100,000 tons per year or greater CO2e in any of the previous five years as reported under Regulation Number 22, Part A and/or 40 CFR Part 98 . The audit team shall include this analysis in the audit report.

II.C.3.a.(i)(C) Rank remaining emission unit control technologies and strategies in descending order based on the reduction in direct GHG emissions per ton of product or output.

II.C.3.a.(i)(D) Perform a cost-effectiveness analysis on all control technologies and strategies for the emissions unit considering the full lifetime of the equipment. The cost-effectiveness analysis must include an estimate of the net levelized cost per ton of GHG emission reductions ($/ton CO2e) over the life of each proposed control method. The audit team must document in the audit report the discount rate, which is of no more than 8%, used for the cost-effectiveness analysis. The net levelized cost analysis should include, but is not necessarily limited to, the following costs and benefits:

II.C.3.a.(i)(D)(1) Engineering and design costs;

II.C.3.a.(i)(D)(2) Equipment costs, including installation;

II.C.3.a.(i)(D)(3) Available tax credits and/or incentive programs; and

II.C.3.a.(i)(D)(4) Changes in the annual costs resulting from the control technology/method including energy costs, operations and maintenance costs, and changes to productivity and/or product quality.

II.C.3.a.(i)(E) Eliminate cost-prohibitive GHG reduction measures considered. GHG reduction measures with a cost-effectiveness of equal to or less than the social cost of GHGs cannot be eliminated as cost-prohibitive, except for a demonstrated, unreasonable burden on competitiveness as analyzed in Section II.C.3.a.(i)(F).

II.C.3.a.(i)(F) Consider the economic, energy, and environmental impacts arising from each option under consideration. In this case, economic reasonableness includes an analysis of the economic impact of the emission unit control option on the EITE stationary source's competitiveness within the marketplace. The audit team must document these determinations and associated analyses in the audit report.

II.C.3.a.(i)(G) Additional required documentation for all control technologies and strategies must include, but are not limited to, overall implementation cost, control efficiency, remaining useful life of the equipment, impacts to land use approvals, and a quantification of any co-benefits. The level of analysis conducted and documented shall consider the nature of the GHG BAECT measure and potential impacts of these additional criteria.

II.C.3.a.(i)(H) The GHG BAECT analysis may reference recently permitted GHG best available control technologies (BACT), operational or process limits in the EITE stationary source's air pollution permits or in the RACT/BACT/LAER Clearinghouse for similar operations as applicable.

II.C.3.a.(ii) The energy BMP analysis.

II.C.3.a.(ii)(A) Unless the EITE stationary source successfully demonstrates that it currently employs energy BMPs pursuant to Section II.C.3.a.(ii)(B) or (C) and provides the requisite supporting information pursuant to Sections II.C.3.a.(ii)(B)(1) and (2) or II.C.3.a.(ii)(C)(1) to II.C.3.a.(ii)(C)(3), the audit team must analyze energy BMPs as follows:

II.C.3.a.(ii)(A)(1) Identify all available energy efficiency measures for the specific energy consumption sources included in the audit scope. Any energy efficiency measure considered to be a GHG BAECT option but not recommended as GHG BAECT must be included in the energy BMP analysis for that GHG emission unit, as applicable. This analysis can exclude any control technologies that redefine the stationary source.

II.C.3.a.(ii)(A)(2) Eliminate technically infeasible energy efficiency measures.

II.C.3.a.(ii)(A)(3) Rank remaining energy efficiency measures based on the reduction in energy use per ton of final product manufactured at the facility.

II.C.3.a.(ii)(A)(4) Perform a cost-effectiveness analysis on all energy efficiency measures considering the full lifetime of the measure. The cost-effectiveness analysis must include an estimate of the net levelized cost per energy consumption reduction over the life of the equipment. The audit team must document in the audit report the discount rate, which is of no more than 8%, used for the cost-effectiveness analysis. The net levelized cost analysis should include, but is not necessarily limited to, the following costs and benefits:

II.C.3.a.(ii)(A)(4)(a) Engineering and design costs;

II.C.3.a.(ii)(A)(4)(b) Equipment costs including installation;

II.C.3.a.(ii)(A)(4)(c) Available tax credits and/or incentive programs; and

II.C.3.a.(ii)(A)(4)(d) Changes in the following annual costs resulting from the control technology/method including energy costs, operations and maintenance costs, and changes to productivity and/or product quality.

II.C.3.a.(ii)(A)(5) Eliminate cost-prohibitive energy efficiency measures considered. Energy efficiency measures with a cost-effectiveness equal to or under the social cost of GHGs cannot be eliminated as cost-prohibitive, except for a demonstrated, unreasonable burden on competitiveness shown in Section II.C.3.a.(ii)(A)(6).

II.C.3.a.(ii)(A)(6) Consider the economic, energy, and environmental impacts arising from each measure remaining under consideration. In this case, economic reasonableness includes an analysis of the economic impact of the measure on the EITE stationary source's competitiveness within the marketplace. The audit team must document these determinations and associated analyses in the audit report.

II.C.3.a.(ii)(A)(7) Additional required documentation for all analyzed measures include, but are not limited to, cost-effectiveness, remaining useful life of the equipment, impacts to land use approvals and any co-benefits. The level of analysis conducted and documented shall consider the nature of the energy efficiency measure and potential impacts of these additional criteria.

II.C.3.a.(ii)(B) In lieu of performing the energy BMP analysis, certification within 12 months of the audit date under the annual Federal Energy Star Program will be determined as employment of energy BMPs for the EITE stationary source. Annual Energy Star certification documentation for all years subsequent to the previous audit as well as the current certification must be included in the audit report and contain:

II.C.3.a.(ii)(B)(1) Specific BMP energy efficiency measures the EITE stationary source used to achieve the Federal Energy Star Program certification; and

II.C.3.a.(ii)(B)(2) The annual Energy Performance Indicator (EPI) benchmarking spreadsheet demonstrating a score of 75 or higher submitted with the Energy Star application.

II.C.3.a.(ii)(C) In lieu of performing the energy BMP analysis, registration to ISO 50001 within 12 months of the audit date will be determined as employment of energy BMPs for the EITE stationary source. Management system documentation must be included in the audit report and contain:

II.C.3.a.(ii)(C)(1) Specific BMP energy efficiency measures the EITE stationary source used to achieve the ISO 50001 Program certification;

II.C.3.a.(ii)(C)(2) Information on the energy management system including the Manual, Objectives and Goals, Energy Policy and results of the most recent energy management system audit; and

II.C.3.a.(ii)(C)(3) The valid registration certificate.

II.C.3.a.(ii)(D). If an EITE stationary source fails to achieve the annual certification by the EPA Energy Star Program or registration to ISO 50001, the source must submit a compliance action plan to the Division within 90 days of the certification or registration expiration. The plan must include the EITE stationary source's plan and timeline to implement energy BMPs to either reacquire certification in the EPA Energy Star Program, reacquire ISO 50001 registration, or comply with the requirements in Section II.C.3.a.(ii)(A). The energy BMPs must be achieved within twelve months after the compliance action plan is approved by the Division.

II.C.3.a.(iii) The GHG BAECT and energy BMP recommendation.

II.C.3.a.(iii)(A) The GHG BAECT recommendation will include:

II.C.3.a.(iii)(A)(1) Recommendations on the most effective direct GHG emissions control technology and strategy, or suite of technologies and strategies, for the GHG emissions unit analyzed as GHG BAECT;

II.C.3.a.(iii)(A)(2) A list of emissions control measures with a levelized cost less than or equal to $0; and

II.C.3.a.(iii)(A)(3) Recommendations on GHG BAECT options that provide greater co-benefits to the surrounding communities where the top emission unit control technologies or strategies are comparable in terms of cost-effectiveness.

II.C.3.a.(iii)(A)(4) A calculation of the Non-GHG BAECT emissions. Non-GHG BAECT emissions are calculated by subtracting the reported emissions from units evaluated for GHG BAECT from the facility annual emissions at the time of the first audit. This shall be calculated as follows:

Non-GHG BAECT Emissions = Total direct emissions from the most recent year reported- (reported emissions from the units evaluated for GHG BAECT)

II.C.3.a.(iii)(B) The energy BMP recommendation will include:

II.C.3.a.(iii)(B)(1) Recommendations on the most effective energy efficiency measures for the energy consumption sources analyzed to be set as Energy BMPs.

II.C.3.a.(iii)(B)(2) A list of energy efficiency measures with a levelized cost less than or equal to $0;

II.C.3.a.(iii)(B)(3) Recommendations on Energy BMP options that provide greater co-benefits to the surrounding communities where the top emissions unit control technologies or strategies are comparable in terms of cost effectiveness.

II.C.3.a.(iv) A plain-language summary of the audit findings, determinations, and recommendations in the top two languages spoken by the community surrounding the EITE stationary source. This summary shall include the list of GHG BAECT options for the emission units analyzed, how they were ranked and why they are being recommended.

II.C.3.a.(v) Confidential business information must be clearly identified and be submitted in a separate, supplementary document to the audit report.

II.D. GHG BAECT and Energy BMP Determination

II.D.1. Within 60 days of receipt of the audit report, the Division will determine GHG BAECT and energy BMPs for the EITE stationary sources as follows:

II.D.1.a. The GHG BAECT determination may be based on the top-ranked control technology for the emission units in the audit report, or a suite of control technologies, at the Division's discretion, so long as:

II.D.1.a.(i) The cost of the suite of control measures, combined, would not be unduly burdensome to the facility; and

II.D.1.a.(ii) The total annual CO2 emissions reductions generated by the suite of measures is equal to or greater than the annual CO2 emissions reductions generated by the top-ranked control technology according to the audit report.

II.D.1.b. A GHG BAECT determination will be issued for each GHG emissions unit in the audit scope and include:

II.D.1.b.(i) The Division's determination of specific control technologies and/or measures for that emission unit, including the current GHG emissions rate of each audited emission unit at the time of the audit;

II.D.1.b.(ii) All control technologies found under Section II.C.3.a.(i) to have a net levelized cost less than or equal to $0, where cost neutrality can be achieved no more than 5 years from operational date of the technology, except where the auditor has established that doing so would pose an unreasonable burden to the facility; and

II.D.1.b.(iii) The GHG emission rate per unit of final product at the EITE stationary source for the individual emissions units after implementation of the prescribed measures.

II.D.1.b.(iv) The final GHG BAECT and energy BMP intensity rate determination shall be issued for the EITE stationary source as a rate of total GHG emission (CO2e) for the emissions units included in the audit scope per final product of the facility. This calculation shall be based on the determination(s) in Sections II.D.1.a. and II.D.1.c. (as applicable) and shall be calculated as follows:

GHG BAECT & Energy BMP Intensity Rate Determination = [SIGMA] (CO2e per tons of facility product for each emission unit in audit scope).

II.D.1.b.(iv)(1) The Division may adjust the final GHG BAECT and energy BMP intensity determination based on a change to the GHG emission rate for any GHG BAECT measure after the GHG reduction measure is fully operational and tuned.

II.D.1.c. The energy BMP determination will be issued for each energy consumption source in the audit scope and include:

II.D.1.c.(i) The Division's determination of energy BMPs for the specific energy consuming equipment; and

II.D.1.c.(ii) Any energy efficiency measures found under Section II.C.3.a.(ii) to have a net levelized cost less than or equal to $0 that are not included in the BAECT determination, unless the auditor has established that doing so would pose an unreasonable burden to the facility.

II.D.2. The Division will hold one or more public meetings on the results of the final GHG BAECT and energy BMP determinations.

II.D.3. Within 45 days of making its final GHG BAECT and energy BMP determinations, the division will present the determinations at a regular meeting of the Commission. The Commission may approve the determinations or return them to the Division for further analysis. The Division will return to the Commission for final approval at its next regular meeting or as soon as practical.

II.E. Emission Reduction Requirements

II.E.1. All EITE stationary sources subject to this rule must reduce facility-wide GHG emissions by 5 percent.

II.E.1.a. EITE stationary sources annual emissions limitation shall be calculated as described in this Section II.E.1.a. Multiply the EITE stationary source's prescribed final GHG BAECT and energy BMP intensity rate determination, as determined by the Division under Section II.D. by the number of units produced in the calendar year, to result in a GHG BAECT mass emission number. If an EITE stationary source produces more than one product and, as a result, has more than one final GHG BAECT determination, the GHG BAECT mass emissions is calculated by multiplying the intensity rate for each product by the amount of product produced in the previous year, to calculate the GHG BAECT mass emissions for each product, and then adding the mass emissions for each product to calculate the GHG BAECT mass emissions. Add the Non-GHG BAECT emissions calculated under Section II.C.3.a.(iii)(A)(5) to the GHG BAECT emissions number, resulting in a mass-based emissions representing the facility-wide total GHG emissions (CO2e), which serves as the baseline for the 5 percent mass-based reduction. Subtract the five (5) percent mass emissions reduction as required under Section II.E. This shall be calculated as follows:

Annual Emission Limit for Compliance Year in tons CO2e = (((GHG BAECT & Energy BMP Intensity Rate Determination) * (Compliance Year Facility Product)) + Non-GHG BAECT determination) * 0.95

II.E.1.b. Beginning no later than the third year after each audit year, EITE stationary sources must demonstrate the additional mass-based five (5) percent GHG emission reduction and continued compliance with the reduction described in this section, by comparing the total mass GHG emissions limitation to the direct reported GHG emissions for the previous year. This is demonstrated through the annual compliance certification in Section II.G.1.a.

II.E.1.c. Where an EITE stationary source's approved compliance action plan requires that the plan be completed and operational after the third year after each audit year, the EITE stationary source must meet an interim annual mass emission limit achieving the required mass-based five (5) percent GHG emission reduction.

II.E.1.c.(i) This interim annual five (5) percent mass reduction shall be calculated by multiplying the EITE stationary source's GHG BAECT and energy BMP intensity rate, as determined by the Division under Section II.D. by the number of units produced in the third calendar year, to result in a GHG BAECT mass emission number. Add the Non-GHG BAECT emissions to this number. Five (5) percent of this mass emissions total represents the mass GHG emissions reduction required in tons of CO2e. The calculation is as follows:

((((GHG BAECT & Energy BMP Intensity Rate Determination) * (Compliance Year Facility Product)) + Non-GHG BAECT determination) * 5%)

II.E.1.c.(ii) The interim annual emissions limitation is calculated by multiplying the current GHG emissions intensity rate as documented in the most recent audit by the compliance year facility product to result in a mass GHG emissions total. Add the Non-GHG BAECT emissions to this total, and then subtract the 5% reduction calculated in Section II.E.1.c.(i). The calculation is as follows:

((Current GHG Emissions Intensity Rate as documented in the audit report * Compliance Year Facility Product) + Non-GHG BAECT determination)- ((((GHG BAECT & Energy BMP Intensity Rate Determination) * (Compliance Year Facility Product)) + Non-GHG BAECT Determination) * 5%)

II.E.2. If, at any point after the 2022 audit cycle and before 2030 an EITE stationary source achieves mass based GHG emission reductions equal to or greater than 20% below the source's 2015 GHG emissions baseline, the 5% emission reduction required under Section II.E.1. is considered satisfied through the year 2030, provided the 20% mass-based reductions are sustained as demonstrated through annual compliance certifications under Section II.G.1.a. An EITE stationary source meeting this requirement must continue to conduct the annual audits and otherwise comply with the requirements of this rule.

II.F. Emission Reduction Requirement Compliance

II.F.1. The EITE stationary source must submit a compliance action plan within 120 days of the Commission's approval of the GHG BAECT, energy BMPs, and GHG BAECT and energy BMP intensity rate determination that includes the EITE stationary source's plan and timeline to comply with the annual mass emission limit, and interim mass emission limit in Section II.D.1.b.(iv) as applicable and the energy BMPs determination.

II.F.1.a. The EITE stationary source may use the following emission reduction mechanisms to comply with the annual and interim emission limits:

II.F.1.a.(i) Actual, direct emissions reductions onsite at the EITE stationary source; or

II.F.1.a.(ii) Actual direct GHG emission reductions submitted in the form of GHG credits awarded by the Division. In order to produce GHG credits, the emissions reductions must be real, additional, verifiable, permanent and enforceable. GHG credits will only be issued in the tracking system after emission reduction have been demonstrated; or

II.F.1.a.(iii) Installation and utilization at the facility of a retail distributed generation or net meter renewable energy project that reduces the GHG emissions from the EITE stationary source's electrical energy use, and for which the EITE stationary source has retired Renewable Energy Credits in Colorado generated that year, which demonstrate emissions reductions to comply with Section II.F.1. Utilization of Renewable Energy Credits for compliance cannot exceed the annual generation of the distributed generation system and it can only be used to satisfy the five (5) percent GHG emission reduction associated with Section II.E.1. and shall not be used for any other component of the annual emission limitation.

II.F.1.b. If the measure(s) determined to be GHG BAECT and/or energy BMPs for an emission unit also are anticipated to result in significant co-benefits, then the EITE stationary source must demonstrate in its compliance action plan that the co-benefits will be achieved through comparable reductions of the relevant harmful air pollutant(s) at the EITE stationary source. If an EITE stationary source demonstrates there are no material co-benefits from the implementation of the measure(s) determined to be GHG BAECT and/or energy BMPs, these requirements do not apply.

II.F.2. Beginning no later than the third year after each audit year, EITE stationary sources must demonstrate the additional mass-based five (5) percent GHG emission reduction described in this section II.E. through the annual compliance certification in Section II.G.1.a.

II.F.3. When considering compliance options with similar or the same cost-effectiveness, the EITE entity must give increased priority to GHG reduction initiatives that would produce co-benefits to the neighboring communities surrounding the EITE stationary source.

II.F.4. The Division will review the compliance action plan for approval.

II.F.5. EITE stationary sources must comply with the compliance action plan once approved by the Division.

II.F.6. If in any calendar year an EITE stationary source achieves reported emissions lower than the annual emissions limitation, the Division will award the EITE stationary source GHG credits equal to the difference between the annual emissions limitation and reported emissions. GHG credits will only be issued after emission reductions have been demonstrated.

II.F.7. If in any calendar year an EITE stationary source fails to achieve the annual emissions limitation, the owners and operators may remedy this noncompliance by surrendering in the EITE entity's compliance account sufficient GHG credits so as to reduce the actual emissions to the EITE annual emissions limitation.

II.G. Reporting

II.G.1. Owners or operators of EITE stationary sources must submit an annual report to the Division by May 1 of each year (beginning May 1, 2026) that includes:

II.G.1.a. Annual Compliance Certification Requirements. The account representative of each EITE stationary source must submit a compliance certification to the Division or its agent that certifies:

II.G.1.a.(i) The EITE stationary source's annual GHG emissions, in metric tons, for the previous calendar year;

II.G.1.a.(ii) The total production at the EITE stationary source, in units that are consistent with the GHG BAECT and energy BMP intensity rate determination, for the previous year;

II.G.1.a.(iii) The EITE stationary source's GHG emissions rate per product for the previous calendar year and the GHG BAECT and energy BMP intensity rate determination.

II.G.1.a.(iv) The EITE stationary source's annual emissions limitation for the previous year;

II.G.1.a.(v) The difference, if any, between the EITE stationary source's actual total direct GHG emissions for the previous year and the EITE stationary source's annual emissions limitation for the previous year.

II.G.1.a.(vi) For EITE stationary sources that are complying through GHG credits pursuant to Section II.F.1.a.(ii):

II.G.1.a.(vi)(A) In the event that the EITE stationary source has actual total emissions that exceed its annual emissions limitation, the compliance certification shall specify the GHG credits that are to be surrendered from the EITE stationary source's compliance account sufficient to meet the EITE stationary source's annual emissions limitation.

II.G.1.b. Current project status to implement GHG BAECT or energy BMPs contained in a compliance action plan under Section II.F.1.;

II.G.1.b.(i) The current status of measures to achieve comparable co-benefits required under Section II.F.1.b.

II.G.1.c. If the EITE stationary source is determined to be employing energy BMPs through certification to the Federal Energy Star Program or the ISO 50001 standard, the EITE stationary source must submit the information in accordance with Section II.C.3.a.(ii);

II.G.1.d. Instances of noncompliance with the Division's approved GHG BAECT and energy BMPs determination, compliance action plan, reason(s) for noncompliance, and actions taken or planned to return to compliance; and

II.G.1.e. All information necessary for the Division to confirm the EITE stationary source's emission rate in the prior year.

II.G.2. In addition to the annual report, owners and operators of EITE stationary sources must submit a final audit update to the Division within 60 days of the operation of GHG BAECT and/or energy BMPs, which includes verification that all GHG BAECT and energy BMP measures established in section II.D. are operational.

II.H. Recordkeeping

II.H.1. EITE stationary sources must maintain records for a period of ten (10) years and make records available to the Division upon request, including:

II.H.1.a. Division approved audit plan.

II.H.1.b. Final audit reports.

II.H.1.c. Commission approved GHG BAECT and energy BMP determinations.

II.H.1.d. Annual Compliance Certificate

II.H.1.e. Approved compliance action plans and records reasonably necessary to demonstrate compliance with the approved plan.

II.H.1.f. Current certification or registration documentation to applicable standards to show continued compliance with Section II.C.3.a.(ii)(B) or (C).

II.H.1.g. If the final GHG BAECT is determined to have an operation date that is beyond the next 5-year audit, the EITE stationary source must maintain records of project management documentation related to the implementation of the GHG BAECT measure including project status, timeline, expected operational date as proposed and approved in the compliance action plan.

II.I. Accounting and Tracking System and Account Establishment and Registration Requirements

II.I.1. Establishment of accounting and tracking system and accounts.

II.I.1.a. The Division or its agent will establish an accounting and tracking system for EITE GHG credits.

II.I.1.a.(i) EITE GHG credits can only be used by EITE sources.

II.I.1.b. Upon receipt of the application required under Section II.I.2, the Division or its agent will establish one compliance account for each EITE stationary source in the accounting system.

II.I.1.c. If Division determines that a regulated source adversely affects a disproportionately impacted community through emissions of locally harmful air pollutants, the Division shall assign an identifier.

11.1.2. All EITE stationary sources must complete an application to register with the Division or its agent for a compliance account in the accounting system within 30 days after the Commission approves its GHG BAECT and Energy BMP determination, or within 30 days after the EITE stationary source first reports annual GHG emissions exceeding the 50,000-metric-ton threshold, whichever occurs later. Applicants must provide such information as the Division deems necessary in connection with the application, including but not limited to the following information:

II.I.2.a. Name, physical and mailing addresses, contact information, date and place of incorporation, and any ID number assigned by the incorporating agency;

II.I.2.b. Names and addresses of the entity's directors and officers with authority to make legally binding decisions on behalf of the entity, and partners with over 10 percent control over the partnership, including any individual or entity doing business as the limited partner or the general partner;

II.I.2.c. Names and contact information for person controlling over 10 percent of the voting rights attached to all the outstanding voting securities of the entity;

II.I.2.d. A business number, if one has been assigned to the entity by a Colorado state agency; and

II.I.2.e. A government-issued taxpayer or Employer Identification Number or for entities located in the United States, a U.S. Federal Tax Employer Identification Number, if assigned.

11.1.3. An EITE stationary source must designate a primary account representative and at least one, and up to four, alternate account representative. Any individual who requires access to the accounting system must register as a user in the accounting system.

11.1.4. Each authorized representative shall represent, and by his or her representations, actions, inactions, or submissions, legally bind the EITE stationary source in all matters relating to this part. Any representation, action, inaction, or submission by any authorized account representative shall be deemed to be a representation, action, inaction, or submission by the source.

II.J. Division Action on Compliance Certifications and Submittals

II.J.1. The Division may review and conduct independent audits of any compliance certification or other submission to the Division under this regulation.

II.J.2. If any submission contains false or fraudulent information, that is considered a violation of this regulation, subject to enforcement under § 25-7-115, C.R.S.

II.K. Noncompliance

II.K.1. In the event that an EITE stationary source fails to meet its annual emissions limitation, the EITE stationary source shall be deemed in noncompliance and must surrender three GHG credits for every ton emitted by the EITE stationary source in excess of the annual emissions limitation or be subject to a civil penalty or other enforcement action by the Division.

II.K.2. Nothing in Section II.K.1 shall limit the enforcement powers of the Division to remedy noncompliance with this Part, including but not limited to the Division's ability to seek additional penalties or fines, and compel actual reductions at any EITE stationary source in noncompliance.

5 CCR 1001-26-B-II

45 CR 01, January 10, 2022, effective 1/30/2022

45 CR 16, August 25, 2022, effective 9/14/2022

45 CR 24, December 25, 2022, effective 1/14/2023

46 CR 10, May 25, 2023, effective 6/14/2023