Large Industrial End Users

All of the parties agree with staff's conclusion that the largest industrial end users should be regulated by ARB as industrial point sources, with the emissions not attributed to the natural gas sector. Parties disagree, however, regarding the size demarcation above which industrial end users should be regulated as point sources. Several parties, including PG&E, Wild Goose, El Paso/Mojave, SCE, and SDG&E/SoCalGas, support regulating industrial end users as point sources if they meet or exceed ARB's reporting threshold of 25,000 metric tons of CO2e (expressed by PG&E as 4.5 million therms) per year, which they argue would cost-effectively capture the bulk of the emissions. PG&E and Wild Goose assert that treating smaller industrial end users as point sources would not significantly increase the proportion of emissions regulated on that basis. Wild Goose points out that, as determined by ARB, lowering the threshold to include industrial end users with CO2e emissions that meet or exceed 10,000 tons per year would only include an additional 2% of GHG emissions in ARB's point source regulatory approach.

NRDC/UCS support lowering the threshold for regulating industrial end users as point sources to 10,000 metric tons of CO2e per year, which they assert would cover more end users that are capable of making reductions and would not place an undue burden on these users or on regulators. These parties point out that California's three largest local distribution companies have only 127 customers that consume more than 2 million therms (which is roughly equivalent to 10,000 tons of CO2e) per year. They suggest that this level may be a better fit with the "expandability" criterion, since a United States Senate Committee has approved the Lieberman-Warner Climate Security Act (S.2191), including a reporting threshold of 10,000 tons of CO2e per year for stationary sources. SMUD supports a threshold equivalent to 1 MW, in order to be consistent with the electricity sector and to avoid creating incentives for fuel switching.

Small End Users

As described in greater detail below, parties differ on the appropriate regulatory approach for reducing GHG emissions from combustion of natural gas by end users that are too small for ARB to regulate as a point source. However, none of the parties dispute staff's assertion that combustion-related GHG emissions from small end users account for a significant proportion of all GHG emissions associated with natural gas usage.