The Sixth Circuit Court of Appeals has rejected EPA’s determination that a collection of natural gas production facilities constitutes a “single source” and the agency’s position that “interrelated” facilities on non-adjacent properties can be viewed as a single source.
In a decision directly impacting air permitting of oil and gas facilities in Ohio, Kentucky, Michigan, and Tennessee, a panel of the Sixth Circuit Court of Appeals rejected EPA’s determination that a collection of Summit Petroleum Corporation natural gas production facilities constitutes a “single source.” Summit Petroleum Corp. v. U.S. EPA, No. 09-4348;10-4572, (6th Cir., Aug. 7, 2012). In doing so, the court rejected EPA’s position that “interrelated” facilities on non-adjacent properties can be viewed as a single source. The opinion should increase pressure on EPA to take a more limited view of adjacency in air permit applicability determinations across the country, not only for oil and gas facilities, but generally where companies have multiple facilities in relatively close proximity to each other.
Summit owns a natural gas sweetening plant in Michigan, along with production wells and subsurface pipelines that connect the wells to the sweetening plant. The production wells are located from 500 feet to eight miles away from the plant, and Summit does not own the property between the wells or between the wells and the plant. If viewed as independent facilities, the plant and wells would be subject to regulation as minor sources of air emissions. If viewed in combination as a single source, however, they would constitute a “major source” of air emissions subject to more significant requirements. EPA determined that the facilities are a single, major source subject to Title V operating permit requirements.
EPA's regulations require that multiple activities be aggregated into a single source if they are under common control, belong to the same major industrial grouping, and are on "one or more contiguous or adjacent properties." EPA's policy, reflected in its determination that Summit's facilities were a single source, indicates that facilities that are "truly interrelated" or interdependent, but not actually on contiguous properties, could still be "adjacent."
The court found that EPA’s position regarding the interrelationship of facilities does not provide a sufficient basis for their aggregation into a single source. The court’s decision describes a view of aggregation that might be even narrower than has been articulated by permitting agencies, such as the Pennsylvania Department of Environmental Protection (DEP), that have themselves sought to take a narrower view than the EPA position.
The Commonwealth of Pennsylvania has taken a position that is contrary to EPA and more in line with the Sixth Circuit's decision. On October 12, 2011, the DEP issued interim guidance for single stationary source determinations for oil and gas facilities. DEP Secretary Michael Krancer described the approach as a "common-sense" method for determining whether sources are "contiguous" or "adjacent." The rule of thumb adopted by DEP is to treat sources located a quarter mile apart or less as contiguous or adjacent and to consider sources outside a quarter mile on a case-by-case basis. Secretary Krancer noted that West Virginia and Texas have similar quarter mile policies.