A federal judge in Pennsylvania recently denied an environmental group’s attempt to subject a driller’s gas compressor stations to stricter regulatory permitting. This decision provides reliable guidance for drillers on the Marcellus Shale Formation in Pennsylvania.

On February 23, 2015, Judge Mariani of the U.S. District Court for the Middle District of Pennsylvania denied Citizens for Pennsylvania’s Future’s (PennFuture) claim that Ultra Resources, Inc. (Ultra), was operating its natural gas compressor stations on the Marcellus Shale without the necessary permit. Although Ultra’s eight separate compressor stations – facilities that compress and pump gas from the wells to processing facilities – each had general permits, PennFuture claimed that the compressor stations should be aggregated and therefore require a more stringent major source permit. While Ultra had obtained general permits from the Pennsylvania Department of Environmental Protection (DEP) that cover “aspects of natural gas compression and processing operation,” if the court determined that the eight stations should be aggregated then they would require a major source permit since they could potentially produce over 100 tons of nitrous oxide per year.

The court’s analysis of whether Ultra’s eight compression facilities should be aggregated hinged on an interpretation of whether the facilities were “adjacent” to one another. Under Pennsylvania air permitting regulations, sources of air contamination may be aggregated if they are on contiguous or adjacent properties under common control. This was a matter of first impression for the Third Circuit, and the court relied on the Sixth Circuit’s literal interpretation of adjacent in Summit Petroleum Corp. v. U.S. Environmental Protection Agency. Ultra’s compression stations were not adjacent under the plain meaning of the term since some parcels were separated by miles. After the Summit Petroleum decision, however, the DEP issued guidance that noted that while the spatial relationship is the preeminent factor in a determination of adjacency, “functional interdependence” could be considered as well. Here, the court denied PennFuture’s claim that Ultra’s compression facilities are functionally related, but the court notably left functional interdependence as a possible, secondary consideration in future determinations of whether facilities are adjacent to one another.

More coverage on this recent decision can be found here and here.