Yesterday, we reported on the Pennsylvania Department of Environmental Protection’s (DEP) announcement of a proposed technical guidance for single stationary source determinations for oil and gas operations (the Single Source Guidance). Here’s our analysis of the proposal, including some background information, a discussion of the guidance and our thoughts on its potential impact.

Background

First, you should know that aggregation is the process of determining whether emissions from multiple operations should be aggregated into a single source for air permitting purposes. A significant issue related to oil and gas operations is whether emissions from individual operations such as wells, processing plants and compressor stations should be combined so that they become major sources for permitting purposes, subject to Title V requirements and New Source Review. When aggregation is at issue, individually the operations are not considered “major” for any contaminant.

The aggregation concept derives from the U.S. Environmental Protection Agency’s (EPA’s) original definition of a “source” in its Prevention of Significant Deterioration (PSD) regulations, a subsequent court decision (Alabama Power v. Castle, 636 F.2d 323 (D.C. Cir. 1979) and EPA’s current definition of stationary source (found at 40 CFR 52.21(b)(5)). EPA’s definition of “stationary source” under the PSD regulations is “a building, structure, facility or installation which emits or may emit a regulated pollutant.” A building, structure, facility or installation must meet three criteria:

  • i. under common control of the same person (or persons under common control);
  • ii. belong to same industrial grouping (activities will be considered as part of the same industrial grouping if they use the same two-digit major or Standard Industrial Classification (SIC) code identification); and
  • iii. located on one or more contiguous or adjacent properties.

See 40 C.F.R. § 52.21(b)(6).

Pennsylvania DEP’s Proposed Single Source Guidance

The DEP announced yesterday an interim technical Guidance for Performing Single Stationary Source Determinations for Oil and Gas Industries, (the 'Single Source Guidance") effective October 12, 2011. The Single Source Guidance addresses all three prongs of the definition of stationary source mentioned above, as follows:

Sources under the Common Control of the Same Person

Under the Single Source Guidance, common control is established when both facilities are owned by the same parent company or a subsidiary of the parent company. Further, the Single Source Guidance clarifies that common control may also be established if an entity has decision-making authority over the operation of a second entity through a contractual agreement or voting interest.

Same Industrial Groupings

Under the PSD and Title V permitting programs, pollutant-emitting activities are considered to be part of the same industrial grouping if they have the same first two-digit SIC code. The Single Source Guidance clarifies that, in addition, a support facility is considered to be part of the same industrial grouping as that of the primary facility it supports even if the support facility has a different two digit SIC code, as defined in 40 CFR Part 52.21(b)(6). Support facilities under the Single Source Guidance are typically those that “convey, store or otherwise assist in the production of the principal product."

In addition to PSD permits, the Single Source Guidance would also apply to Non-Attainment New Source Review (NSR) permits. For Non-Attainment NSR permits, the SIC code requirement would not apply.

Contiguous or Adjacent Properties

The Single Source Guidance makes it clear that “contiguous” or “adjacent” means the distance or spatial relationship between locations. The DEP guidance states that spatial distance, not interdependence, is the overarching factor in determining whether sources shall be aggregated. This concept is true to EPA regulations and rejects certain EPA letters and informal opinions that have impermissibly transformed the concept of “contiguous” and “adjacent” to mean “interdependent.”

The Single Source Guidance takes the extra and necessary step by adding a “rule of thumb” to this “spatial” notion that properties located a quarter mile or less apart “are considered” contiguous or adjacent properties for PSD, nonattainment NSR and Title V applicability determinations. Single source determinations for properties located beyond this quarter-mile range will be considered on a case-by-case basis.

Potential Impact of DEP’s Proposed Single Source Guidance

Because the Single Source Guidance is a policy and not a regulation, even when finalized its effect will only be to assist DEP permit writers in conducting their case-by-case aggregation analysis, but it will not be a formal mandate. Existing appeals pending before the Environmental Hearing Board, including Group Against Smog and Pollution v. DEP and Laurel Mountain Midstream Operations LLC (EHB Docket No. 2011-065-R) and Clean Air Council v DEP and MarkWest Liberty Midstream and Resources (EHB Docket No. 2011-072-R) will likely have to include an evaluation of whether the challenged DEP determination would have been different if the proposed policy were used as guidance.

DEP will accept public comment on this guidance until November 21, 2011.