A recent decision by a Pennsylvania federal court has left open the door outside the Sixth Circuit for Clean Air Act citizen suits and permit challenges claiming that facilities must obtain strict major source air permits by aggregating emissions from similar emissions units. In the case, styled Citizens for Pennsylvania’s Future v. Ultra Resources, Inc., Case No. 4:11-cv-1360 (M.D. Pa. Feb. 23, 2015), the court ultimately ruled that Pennsylvania air permitting authorities properly declined to “aggregate” emissions from a series of natural gas wells and compressor stations for permitting purposes. However, the court’s analysis left open an argument that agencies should engage in a case-by-case analysis of whether such facilities are functionally interrelated, not just adjacent to one another, in determining whether they should be considered a single source for air permitting purposes.
The issue of “aggregating” emissions to trigger major source thresholds has been a contentious one, particularly in the oil and gas industry. Whether emissions from multiple emission units can be aggregated has a major effect on permitting. In 2009, EPA issued a guidance memorandum instructing the agency to consider not only whether emission units were physically contiguous or adjacent but also whether they were “functionally interrelated” in determining whether their emissions should be aggregated for purposes of determining whether major source permits were required. In a 2012 case, Summit Petroleum Corp. v. EPA, 690 F.3d 733, the U.S. Court of Appeals for the Sixth Circuit held that considering physical or functional interrelatedness was contrary to the plain meaning of the word “adjacent” as used in the definition of “facility.” As such, the court ruled that EPA could not rely on the interrelatedness of facilities to aggregate their emissions for permitting purposes where the facilities are not adjacent. Although, EPA has announced that it intends to publish new, national, guidelines on aggregation, such guidelines have not yet been published.
In the meantime, environmental interest groups pledged to file lawsuits challenging minor source permits issued to the oil and gas industry that did not aggregate emissions from interrelated facilities, such as wells and compressor or processing stations. The Ultra Resources case was the first of these cases to be decided by a federal court outside of the Sixth Circuit. In Ultra Resources, the Pennsylvania Department of Environmental Protection (PADEP) issued separate general permits to each of eight compressor stations as individual NOX emitting units. The court noted that according to Pennsylvania law a “major emitting facility” is one that emits or had the potential to emit 100 tpy to any air pollutant, that Pennsylvania is designated non-attainment and thus a facility that emits or has the potential to emit 100 tpy of NOX must undergo non-attainment new source review (NNSR) permitting. Aggregation of the Ultra units’ NOX emissions would have exceeded 100 tpy of NOX thus subjecting Ultra to NNSR. Plaintiffs argued that the compressor and production systems were functionally interrelated and therefore their emissions should be aggregated and a major source permit should be required. The Pennsylvania court refused to apply the rule from the Sixth Circuit that only geographic adjacency should be considered in determining whether aggregation was appropriate, and left open the possibility that functional interrelatedness could be considered. However, after examining the facts of the case, the court ruled that the various emissions units could operate independently of one another and were therefore not functionally interrelated such that aggregation would not be required even under a functional interrelatedness analysis.
As a result of the Ultra Resources decision, project opponents, at least in states outside the Sixth Circuit, will retain the ability to argue that emissions from functionally interrelated facilities should be aggregated for permitting purposes. The oil and gas industry, and other industries where aggregation has been an issue, will therefore continue to face uncertainty in the permitting process until EPA releases additional guidance or amends its regulations. Moreover, because the Ultra Resources case arose in a citizen suit challenge to a series of issued permits, even those facilities holding final minor source permits remain at risk of litigation until the aggregation issue is resolved.