• Federal Court Rejects EPA’s Aggregation of Emissions Sources in Air Permit for Natural Gas Producer
  • September 26, 2012 | Author: Boyd A. Bryan
  • Law Firm: Jones Walker LLP - Baton Rouge Office
  • "Major sources" of air emissions are subject to the stringent permitting requirements of Title V of the Clean Air Act and its state law counterparts. Title V defines a "major source" generally as any stationary facility or source that emits, or has the potential to emit, 100 tons per year of certain pollutants. Under the Environmental Protection Agency ("EPA") (and corresponding state) regulations, multiple emission sources can be aggregated together and considered a single “stationary source” only if they: (1) are under common control; (2) "are located on one or more contiguous or adjacent properties"; and (3) belong to the same major industrial grouping (i.e., share a two-digit Standard Industrial Classification ("SIC") code).

    The EPA has frequently interpreted the word "adjacent" to require emissions from sources that are separated in a geographic sense to be aggregated (i.e., added together) for "major source" purposes if the sources are "functionally interrelated." In a recent case involving an oil and gas producer, a federal appeals court rejected this interpretation by the EPA. Summit Petroleum Corp. v. United States Environmental Protection Agency, &under; F.3d &under;, 2012 WL 3181429, 2012 U.S. App. LEXIS 16345 (6th Cir. Aug. 7, 2012). The decision could relieve many oil and gas and other businesses with widely-dispersed emission sources from the onerous air permitting requirements applicable to "major sources."

    Summit Petroleum involved a natural gas producer ("Summit") that owns and operates a natural gas sweetening plant in Rosebush, Michigan. The plant "sweetens" the "sour" natural gas from approximately 100 sour gas production wells by removing hydrogen sulfide so that the gas can be used. Summit owns all of the production wells and the subsurface pipelines that connect each of the wells to the sweetening plant. The wells themselves are located within an area of approximately 43 square miles at varying distances-from 500 feet to 8 miles-from the plant. Summit does not own the property between the individual wells sites or the property between the well sites and the plant. None of the wells sites share a common boundary, nor do any of the well sites share a common boundary with the plant. Flares work as part of the plant operations by burning off natural gas waste to relieve pressure on the natural gas equipment. The closest flare is approximately one half-mile from the plant, and the remaining flares are each more than one mile away.

    The sweetening plant, gas production wells, and flares emit sulfur dioxides and nitrous oxides, which are air pollutants under Title V of the Clean Air Act. The plant alone emits, or has the potential to emit, just under 100 tons per year of these pollutants each year. Thus, the plant alone is not a "major source" under Title V. However, if the emissions from the plant and any one production well were to be combined, they would exceed the "major source" threshold of 100 tons per year.

    The parties in Summit Petroleum agreed that the plant and production wells are commonly owned by Summit and share a major industrial grouping, satisfying two parts of the three-part test for a "stationary source" under the EPA's regulations. The only issue was whether the plant and wells were "adjacent" under the third part of the test. The EPA argued that, notwithstanding the fact that the plant and wells were geographically dispersed, they were "adjacent" within the meaning of the EPA regulations because they were “functionally interrelated” and “truly interdependent.” The court disagreed. It concluded that the EPA’s interpretation that sources can be “adjacent” if they are functionally interrelated, irrespective of the physical distance that separates them, undermines the plain meaning of the text of the regulation which demands, by definition, that would-be aggregated sources have physical proximity. It remanded the case back to the EPA for a reassessment of whether the plant and wells are located on adjacent (i.e., physically proximate, properties).

    The Summit Petroleum decision may have a significant effect on "major source" determinations under Title V and corresponding state air permitting programs, particularly with respect to oil and gas and other activities with widely-dispersed emission sources. Although the question remains as to how far apart emission sources can be and still be considered "adjacent" for purposes of aggregation, it is clear that the EPA may no longer rely on the "functional relationship" test alone, without regard to the physical proximity, when making "major source" determinations.