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Court: Adjacent Natural Gas Plant, Wells Not Single Pollution Source

A federal appeals court in Cincinnati, OH, last week vacated a final U.S. Environmental Protection Agency (EPA) finding that a natural gas sweetening plant and sour gas production wells owned by Michigan-based Summit Petroleum Corp., which are located within 43 square miles, constitute a single and major source of pollution under Title V of the Clean Air Act (CAA).

Summit challenged the September 2009 EPA finding in the U.S. Court of Appeals for the Sixth Circuit, arguing that its wells in central Michigan are located at great distances from its production plant on entirely different tracts, leases and surface sites, making them neither contiguous nor adjacent. The American Petroleum Institute and American Exploration and Production Counsel intervened on Summit's behalf.

"We vacate the EPA's final determination and remand this case to the [agency] 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," the court decision said.

The judges rejected the EPA's claim that adjacency can be established through mere "functional relatedness."

Title V of the CAA requires every "major source" of air pollution to obtain a Title V operating permit. A major source is is defined as "any stationary facility or source of air pollutants which directly emits, or has the potential to emit, 100 tons per year of any pollutant." A stationary source is considered to be "any building, structure, facility or installation which emits or my emit a regulated air pollutant.

Multiple pollutant-emitting activities, such as Summit's sweetening plant and sour gas production wells, can be aggregated together and considered a "building, structure, facility or installation" -- single stationary source under Title V -- if they meet three requirements: are under common control; are located on one or more more contiguous or adjacent properties; and belong to the same major industrial grouping.

If the pollutant-emitting activities fail to satisfy any one of these criteria, they are considered separate stationary sources and their emissions cannot be aggregated to meet the major source threshold for which a Title V permit is required. Summit and intervenors contend that the company only meets two parts of the three-part test, with the exception being the "adjacent" factor.

"Summit argues that the term 'adjacent' is unambiguous, and the EPA's interpretation of it defies its plain and ordinary meaning. We agree," the court said. "We conclude that both the dictionary definition and etymological history of the term 'adjacent,' as well as applicable case law, support Summit's position."

The EPA said in the past it has considered "functional relationship" when determining whether activities occurred on adjacent properties, and it asked that the court show it some deference. But the court refused the request.

"We conclude that any 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. We thus reject the EPA's argument to the contrary and have little hesitation in taking this opportunity -- the first our court has been given in the EPA's own history of 'entrenched executive error" -- to vacate the agency's unreasonable interpretation of its Title V permitting plan."

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