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August 31, 2012
Court limits EPA in O&G permitting

               Summit Petroleum Company and the oil and gas (O&G) industry in general notched a judicial victory over the EPA in a case revolving around the Agency’s authority to designate separate facilities owned by the same parent company as a single source for the purpose of Clean Air Act Title V permitting.
               In a 2-to-1 decision, the U.S. Court of Appeals for the 6th Circuit found that the EPA misinterpreted its own regulations when it decided that a single Title V permit appropriately covered Summit’s sweetening plant and sour gas wells, which are located inside a 43-square-mile area of the Saginaw Chippewa Indian Tribe’s Isabella Reservation near Mount Pleasant, Michigan.  Air pollutants emitted or potentially emitted by the sweetening plant did not reach the 100-ton-per-year (tpy) threshold that triggers Title V permitting.  However, when emissions from the gas wells were added, the aggregate did top 100 tpy.  The EPA looked at the combined emissions and ordered Summit to obtain a Title V permit.
Not adjacent
               In its petition to the 6th Circuit, Summit argued that the combination of the processing plant and wells could not be considered a single facility under the Title V regulations because the majority of the wells are located at least 1 mile from the sweetening plant.  The company pointed out that according to EPA’s own definition, multiple facilities could be considered a single stationary source only if they are located on one or more contiguous or adjacent properties.  Much of the case focused on the meaning of adjacency within the regulatory context.  Summit contended that, according to the dictionary definition and case law, adjacency must be unambiguously defined as physically abutting. 
The EPA countered that the separating distances here were not the guiding principle in understanding adjacency, which is indeed an ambiguous term in the Title V regulations.  Facilities separated by considerable distances could be considered part of the same stationary source if they are functionally related, in this case by pipelines, said the Agency. 
Court refers to Rapanos
The 6th Circuit majority sided with Summit.  The court found the “most persuasive” authority for its decision in the U.S. Supreme Court’s ruling in Rapanos v. the United States.  In that case, the Supreme Court found that a wetlands was adjacent to a water of the United States when the two abutted.  The 6th Circuit also found that EPA’s view of adjacency as an ambiguous term in the context of permitting went astray of the Agency’s own guidance documents.  Also, the majority was not persuaded by the Agency’s contention that its functionality interpretation of adjacency warranted deference because it was long-standing. 
               “Like Rapanos, we conclude that an agency may not insulate itself from correction merely because it has not been corrected soon enough, for a long-standing error is still an error,” stated the majority.
Absurd results
The majority also noted that its decision found support in many of the arguments raised in an amicus brief submitted by the American Petroleum Institute (API).  Among those arguments, the API stated that EPA’s interpretation could lead to absurd determination in the O&G sector since nearly all facilities in the industry are connected to each other by pipelines.
               The court directed the EPA to reassess Summit’s Title V source determination request in light of the “proper, plain-meaning application of the requirement that Summit’s activities be aggregated only if they are located on physically contiguous or adjacent properties.”
Immunity from aggregation              
In a dissenting opinion, Judge Karen Nelson Moore agreed with EPA’s view that adjacency is an ambiguous term that allowed grouping the Summit facilities into a single source.  Moore was also concerned that the majority ruling frees the O&G industry to gerrymander its way out of Title V regulation.  “Title V does not grant the oil and gas industry immunity from aggregation; this court should not effectively create such a provision when Congress has not done so,” stated Moore.
               The 6th Circuit’s opinion in Summit Petroleum Company v. EPA is at http://www.ca6.uscourts.gov/opinions.pdf/12a0248p-06.pdf.

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