On May 30, 2014, in an unanimous decision in National Environmental Development Association’s Clean Air Project v. U.S. Environmental Protection Agency, the United States Court of Appeals for the District of Columbia Circuit vacated EPA’s policy limiting the reach of the Sixth Circuit’s decision in Summit Petroleum Corp. v. EPA.

In Summit, the Sixth Circuit concluded that EPA’s interpretation of the term “adjacent” in the context of source aggregation under the Clean Air Act’s Title V and NSR permitting was unreasonable in its application to geographically dispersed oil and gas facilities. The EPA had argued that an operationally interdependent relationship (in the Summit case, spanning a 43-square mile area) was enough to find that pollutant-emitting activities were “adjacent.” For more on this decision, see our previous blog entry here.

Several months after the Summit decision was published, EPA issued a policy directive stating that it would continue to consider interrelatedness in determining adjacency when making source determinations in areas outside the jurisdiction of the Sixth Circuit. For more on the Summit directive, see our previous blog entry here.

An industry group brought suit in the D.C. Circuit against EPA, arguing that its Summitdirective resulted in a competitive disadvantage for industries located outside of the Sixth Circuit. EPA raised procedural arguments related to standing, ripeness, and finality of agency action. The agency also argued that it is not required to ensure national uniformity in response to judicial decisions.

At the outset, the Court dismissed the agency’s procedural arguments. On the merits, the Court pointed to EPA’s “Regional Consistency” regulations which require the agency to “[a]ssure fair and uniform application by all Regional Offices of the criteria, procedures, and policies employed in implementing and enforcing” the Clean Air Act. See 40 C.F.R. § 56.3 (a). Thus, the Court concluded that EPA’s own regulations require it to achieve national uniformity in how CAA permitting rules are applied, and that nothing in the regulations exempted inconsistencies created by a judicial decision. See National Environmental Development Association’s Clean Air Project v. U.S. Environmental Protection Agency, No. 13-1035, slip op. at 17 (D.C. Cir. May 30, 2014).

The Court disagreed with EPA’s contention that the doctrine of intercircuit nonaquiescence required a different result. The doctrine has been raised by agencies refusing to acquiesce to a decision of an individual circuit court that contravenes other circuits, in the hope that the individual court’s decision will ultimately be overturned by the Supreme Court or Congress. The Court stated that the doctrine “does not allow EPA to ignore the plain language of its own regulations.” Id. at 19. The Court noted that EPA may 1) revise its regulations to require aggregation when there is functional interdependence, or 2) revise its uniformity regulations. Finally, the Court noted that the agency chose not to appeal the Sixth Circuit decision to the U.S. Supreme Court. Id. at 18.

The Court’s decision is good news for the oil and gas industry. Now, on a nationwide basis, exploration and production facilities will only need to be aggregated for major source determinations if they are “adjacent” in an ordinary sense of the word—bearing in mind, of course, that there may still be some uncertainty about what “adjacent” means in the oil patch.

In addition, as a practical matter, the Court’s decision places an even greater emphasis on the choice of forum for litigation challenging CAA permitting regulations or policy. If EPA loses in one federal appeals court, the agency would be forced to eliminate any regional inconsistency, with its only other recourse being an appeal to the Supreme Court or formal agency rulemaking.