On October 6, 2012, the Pennsylvania Department of Environmental Protection (“PA DEP”) finalized guidance on air quality permitting decisions for oil and gas operations. For a full copy of the guidance, click here. The guidance emphasizes the issue of physical proximity in determining whether emissions from oil and gas operations come from a single source. In doing so, Pennsylvania is following in the footsteps of other states who have adopted guidance on air aggregation, including West Virginia, Texas, Oklahoma and Louisiana. Critically, the guidance also follows a ruling from the Sixth Circuit Court of Appeals, finding that, in determining whether air emissions come from a single source, the terms “adjacent” and “continuous” should be interpreted according to their plain meanings. A Jackson Kelly blog article discussing the Sixth Circuit’s ruling in Summit Petroleum Corporation v. EPA, Nos. 09-4348:10-4572 (6th Cir. Aug. 7, 2012), is presented here.
PA DEP regulates the air emissions from oil and gas industry through air quality plan approvals and permits, including PSD, Non-attainment NSR, and Title V Permits. When a company operates several stationary sources or sites in the same vicinity or location, a single-source determination is completed to determine if those two or more contamination sources should be aggregated as a single source for the purposes of air permitting. The PA DEP applies a three-part regulatory test and states that a stationary source is a “building”, “structure”, “facility” or “installation”, which “(1) belong to the same industrial grouping; and (2) are located on one or more contiguous or adjacent properties; and (3) are under the control of the same person”. If a facility meets this three-part test, multiple contamination sources may be aggregated.
EPA has considered that the facilities are “belong to the same industrial grouping” when they have the same first two-digits of the Standard Industrial Classification (“SIC”) code. The definition of the terms “adjacent” and “contiguous”, as established in the Summit Petroleum case, “mean and relate to spatial relationship or spatial distance or proximity”. PA DEP has adopted a quarter mile rule of thumb to determine when sites are “adjacent” or “contiguous”. However, PA DEP notes that properties beyond the quarter mile range may still be considered “adjacent” or “contiguous” but only on a case-by-case basis. PA DEP provides an example:
Because of the nature of the oil and gas extraction industry, wells are scattered across a large resource area creating duplicate facilities that perform identical functions. For instance, well production pads and compressor stations are dispersed across a wide area that could encompass many square miles so that the leased properties can be accessed and natural gas can be extracted, compressed, and conveyed via pipeline to a nearby processing facility. Such expansive operations would not generally comport with the “common sense notion of a plant.” Additionally, two aggregate stationary sources located on properties spread throughout a large geographical area would not be consistent with the plain meaning of the terms contiguous or adjacent properties. Consequently, only sources that are in close proximity should be considered contiguous or adjacent properties for single source determination purposes.
In providing this air permitting guidance, PA DEP has stated that its air permitting staff should make a single source determination based upon a five-step analysis.
- Air emission sources may be treated as a single source for air permitting purposes if they meet the two- to three-part regulatory test;
- Each of the elements must be met in order to treat separate emission units as a single stationary source;
- While federal guidance may be instructive, it is not dispositive;
- The aggregation test must be applied on a case-by-case basis to the specific facts of the matter before the agency; and
- The plain meaning of the terms “contiguous” and “adjacent”, particularly in the context of the “common sense notion of a plant,” and the terms “building,” “structure,” “facility,” or “installation,” are appropriate considerations in the application of the aggregation test.
This article was authored by Carolyn McLain, who can be contacted for further information at firstname.lastname@example.org.