By Jeryl L. Olson and Eric E. Boyd

On August 7th, in Summit Petroleum Corp. v. EPA, a panel of the United States Court of Appeals for the Sixth Circuit vacated a decision by the U.S. Environmental Protection Agency (EPA) that Summit Petroleum’s natural gas operations plant and wells located in a 43-square mile area near the plant were “adjacent” for air permitting purposes.  The decision is important because neither the gas plant nor the wells alone would have sufficient potential emissions to be considered a major source subject to stringent air requirements, but the plant and wells together would have sufficient potential emissions so as to be considered a major stationary source.

The case focused on how far apart the gas plant and the wells were.  Some of the wells were as far as eight miles away from the natural gas plant.  Two of the three judges on the panel found that the EPA’s reliance on the functional interrelation between the facilities goes against the plain meaning of the term “adjacent”, and remanded the case to the EPA.  The third judge, who filed a dissent, thought the EPA’s determination deserved more deference than did her two colleagues.  Although the EPA is free to reissue its original determination in the Summit matter, the case may signal a trend towards looking at physical proximity instead of inter-facility support as the predominant factor in whether two facilities under common control in the same industry code are to be considered a “single source” for purposes of applicability of certain air programs.

Until this week’s Sixth Circuit decision, the relevant guidance from the EPA on the subject was a 1995 interpretation of the definition of “single source” of air emissions under various air permitting programs.  The guidance provided that for facilities to be a single source of regulated pollutants (other than hazardous air pollutants) under the Prevention of Significant Deterioration (PSD), nonattainment New Source Review (NSR), and title V programs of the Clean Air Act, the following criteria must be satisfied:

  • the facilities are located on one or more contiguous or adjacent properties;
  • the facilities are under the control of the same person (or persons under common control); and
  • the facilities share the same two-digit (major group) Standard Industrial Classification (SIC) code (or one facility is considered a support facility to the other).*

* The first two prongs (adjacency and common control, including the use of SIC codes) are established under the PSD and  NSR, the third prong (“support facility test” is used under the National Emissions Standards for Hazardous Air Pollutants (NESHAPs) programs). See 40 C.F.R. §§ 70.2, 71.2, 51.165(a)(l)(i) and (ii), and 51.166(b)(5) and (6), and  52.2l(b)(5) and (6).

Thus, where facilities belong  in the same industrial grouping and are operated  under common control, the critical issue as to whether emissions must be considered together as a “single source” comes down to whether the facilities are “contiguous” or “adjacent” or are considered to “support” one another.

The EPA has not established a specific distance to be used to determine how far apart facilities must be to be considered by the Agency as contiguous or adjacent; it has instead consistently held that determinations are made on a “case-by-case” basis and depend on the “common sense notion of a source” and the “functional interrelationship” of the facilities. That is, rather than proximity between plants, the EPA often considers the relationship between the facilities and whether one facility supports or is dependent upon the other facility to determine whether they are a single air emissions “source.”  In various applicability determinations and other decisions, the EPA has considered the following factors in determining whether the facilities function in such a manner as to trigger a sufficient nexus to be considered a single air emissions source:

Does one plant produce materials or “intermediate” products that are finished at the other plant?

Does one plant provide storage for materials processed at the other plant?

Do managers, laborers or maintenance personnel move back and forth between the two locations?

Are there pipelines or rail lines that connect the facilities to transfer materials between plants?

Historically, if these conditions existed, then it was likely that the EPA would determine that the plants would be considered sufficiently related to be considered a single source even if not “adjacent or contiguous” and even where separated by several miles.  In 2007, the EPA published a Notice of Proposed Rulemaking that would have limited the “functional interrelationship” criteria, but the Agency never acted on the rulemaking.