Introduction -

On December 21, 2012, the U.S. Environmental Protection Agency (“EPA”) issued a new guidance memorandum (the “Page Memorandum”) on single source determinations for the oil and gas industry under the Clean Air Act (“CAA”), indicating that it will not adhere to the Sixth Circuit’s August 2012 decision in Summit Petroleum Corp. v. EPA outside the Sixth Circuit’s jurisdiction. In a prior alert, the authors described the Summit decision and its significance in light of EPA’s ever-evolving interpretation of what constitutes a single “source” of emissions under the CAA. Summit rejected EPA’s current position that “functional interdependence” should be a consideration in determining whether to combine the air emissions of two or more physically distant facilities. In rejecting EPA’s “functional interdependence” test, the Sixth Circuit directed EPA to limit its evaluation of “adjacency” to whether activities are located on physically proximate properties in accordance with the “ordinary, i.e., physical and geographical, meaning of that requirement.”

Despite the Sixth Circuit’s decision in Summit, the Page Memorandum indicates that, outside the Sixth Circuit, EPA will continue to interpret “adjacent” to include the “functional interrelatedness” of two emission units when making single source determinations under the Title V, prevention of significant deterioration (“PSD”) and new source review (“NSR”) permit programs. The position articulated by EPA in the Page Memorandum undoubtedly will lead to additional disputes with industry regarding source determination decisions outside the Sixth Circuit.

Background -

Generally, the CAA subjects only “major sources” of air emissions to the stringent requirements of the PSD, NSR, and Title V programs. Whether a source qualifies as “major” is based upon the quantity of pollutants that a source emits or has the potential to emit (the specific threshold can differ depending on the pollutant, the regulatory program, attainment status of the area, and type of facility at issue). Most individual facilities related to oil and gas development emit pollutants in quantities well below the major source thresholds, but if the emissions from multiple distant, related facilities are combined, the overall “source” would often trigger the onerous major source requirements.