Yesterday, the U.S. Court of Appeals for the Sixth Circuit issued its decision in the Summit Petroleum case rejecting USEPA’s attempt to aggregate production and processing facilities as one “stationary source” for Title V permitting. This decision overturns USEPA’s long-standing requirement that permitting authorities must look at the “functional relationship” between two or more separate facilities to determine whether they are “adjacent” and subject to aggregation for Title V or PSD permitting.  (See Summit Petroleum Corp. v. U.S. EPA, Nos. 09-4348; 10-4572 (Aug. 7, 2012)).

The Summit case involved USEPA’s aggregation of Summit’s sweetening plant with nearly one hundred sour gas production wells that were located in the surrounding area and connected to the sweetening plant by pipelines. By aggregating these multiple sources, USEPA determined that Summit’s combined facilities were a “major source” for Title V permitting. It is the definition of a “major source” that gives rise to the issue that was presented to the court in Summit.

Under the Title V and PSD permitting programs, a “major source” is any “stationary source” that emits a certain amount of air pollutants. 40 C.F.R. §71.2 and 40 C.F.R. § 52.21(b)(1). A “stationary source” is “ any building, structure, facility, or installation that emits or may emit a regulated [air] pollutant.” 40 C.F.R. § 52.21(b)(5). A “building, structure, facility, or installation’ is defined as “all of the pollutant-emitting activities which belong to the same industrial grouping, are located on one or more contiguous or adjacent properties, and are under the control of the same person…” 40 C.F.R. § 52.21(b)(6) and 40 C.F.R. § 71.2. In order to aggregate stationary sources, all three criteria must be present. In the Summit case, the facilities were commonly owned and were part of the same SIC code. Because the production wells and the sweetening plant were not contiguous, the only question remaining was whether the wells and plant were “adjacent”.

Summit Petroleum argued that its facilities were not adjacent because they were spread out over 43 square miles, with some wells more than 8 miles from the sweetening plant. In arguing that the facilities were “adjacent”, USEPA relied upon a number of its previous letter determinations and memoranda to support its position that the “functional relationship” between the facilities was an important factor in determining whether they were adjacent regardless of how far apart they were located. The court specifically rejected USEPA’s argument, vacated USEPA’s aggregation determination and remanded the case to USEPA ordering USEPA “to determine whether Summit’s sweetening plant and sour gas wells are sufficiently physically proximate to be considered ‘adjacent’ within the ordinary, i.e., physical and geographical, meaning of that requirement”. Thus, the court has decided that “adjacent” means that facilities must have physical proximity in order to be aggregated as a single stationary source.