For several decades, EPA has wrestled with how to define air emissions sources that are near to each other.  EPA has tried to determine whether nearby sites should be “aggregated” for purposes of determining whether to consider the combined emissions for air permitting thresholds or whether each site stands on its own for purposes of deciding whether regulatory thresholds have been crossed.   These battles were especially critical in the oil and gas industries.

On October 6, 2012, Pennsylvania DEP addressed aggregation by issuing its Guidance for Performing Single Stationary Source Determinations for Oil and Gas Industries.  The Guidance was largely driven by the fact that the numerous new Marcellus Shale production wells are not often on any single piece of property or in a single facility.   Accordingly, there was some confusion as to when DEP would require combining of all emissions from all locations, adding them together for purposes of determining if thresholds for permitting were reached.

DEP began by stating that the determination of whether two or more pieces of property should be combined would be on a case-by-case basis.  However, the agency then announced several rules to use in making that case-by-case determination. 

First, multiple locations may be combined if they either have the same industrial SIC code grouping or they work together to support the production of a principal product.   If an operation is a “supporting operation,” then DEP will review whether the sources are “contiguous” or “adjacent” and whether the operations are under “common control.”  If so, then the facility will need to comply with preconstruction permitting and operating permit requirements if total emissions are above the regulatory thresholds.

Next, DEP defined what it considers to be “adjacent” for purposes of determining whether facilities meet that requirement.  DEP adopted a “quarter mile” rule stating that DEP generally considers operations within a quarter mile of each other as “adjacent.”  Although this would be a general rule, DEP announced that the quarter mile area may be expanded on a case by case basis.  Furthermore, facilities will not be “daisy-chained” together.  In other words, the quarter mile is measured from the primary operation.  DEP will not consider the quarter mile as being from each pad, a common shale gas operational practice in which there is a principal pad with supporting pads a quarter mile from each other. 

Finally, DEP defined what it would consider to be “common control.”  Under the guidance, common ownership or decision making authority would be considered.  Also, DEP would consider whether two operations that do not share common ownership, but have a “support/dependency” relationship.  Factors to be reviewed for the “support/dependency” test include financial arrangements, common employees, common benefits and voting or control rights. 

DEP acknowledged that EPA regulations can be persuasive, but will not control DEP’s definitions. 

Obviously, DEP’s attempt to allow flexibility also allows arguments to be made on what test to examine on a case-by-case basis.  However, DEP has now given industry a framework for air determinations that had been missing in the past.