Pennsylvania Environmental Hearing Board declines to follow the Sixth Circuit’s lead on air emissions aggregation

Last week, in an appeal filed by an environmental organization, the Pennsylvania Environmental Hearing Board (EHB) rejected an attempt by the operator of a gas processing plant and several compressor stations (connected to the plant via pipelines) to preclude evidence of the “functional relationship” between the plant and the compressor stations in determining whether the various sources should be considered a single stationary source whose emissions could be aggregated under federal and state air quality law.  In reaching that result, the EHB effectively declined to follow a major decision issued last year by the U.S. Court of Appeals for the Sixth Circuit that concluded that the “functional relationship” between pollutant emitting sources is not relevant to deciding whether those sources are “adjacent,” one of the factors used to determine whether such sources should be considered a single stationary source whose total aggregated emissions might exceed certain thresholds that subject operators to more onerous permitting processes and obligations.

In Clean Air Council v. DEP and MarkWest Liberty Midstream & Resources, LLC, EHB Docket No. 2011-072-R (Opinion and Order on Permittee’s Motion to Limit Issues for Hearing or, in the Alternative, for Partial Summary Judgment), an environmental organization appealed a plan approval that the Department issued to a natural gas company (MarkWest) to construct various equipment at its gas processing plant.  In issuing the plan approval, the Department had determined that the emissions from the plant should not be aggregated with those of the compressor stations for the purpose of determining whether the plant and the compressor stations should be considered a single stationary source.

Under a federal Clean Air Act regulation (40 C.F.R. § 71.2) whose requirements have been adopted by Pennsylvania in its delegated air permitting program, multiple pollutant emitting sources can be aggregated and considered a single stationary source if they (1) are under common control; (2) “are located on one or more contiguous or adjacent properties”;  and (3) belong to the same major industrial grouping.  If the aggregated emissions from a single stationary source exceed certain thresholds, its operator could be required to undergo a more burdensome application process and/or comply with more stringent operating requirements.

In support of its motion to preclude evidence of the functional relationship between the plant and the compressor stations, MarkWest cited Summit Petroleum Corp. v. EPA, 690 F.3d 733 (6th Cir. 2012), the first major ruling on a challenge to EPA’s interpretation of the term “adjacent” to include consideration of the functional relationship between pollutant emitting sources.  In Summit Petroleum, the owner and operator of a natural gas sweetening plant in Michigan and the approximately one hundred gas production wells that deliver sour gas via subsurface pipelines to the plant (where the sour gas is sweetened by removing hydrogen sulfide) had challenged an EPA determination that the plant and wells constituted a single stationary source whose aggregated emissions made it a major source under Title V.  In deciding that the plant and the wells were “adjacent” under the second factor of the single stationary source analysis set forth above, EPA considered the functional relationship between them, noting that they worked together as a single unit that produced a single product.

The Sixth Circuit vacated EPA’s determination and remanded the case to EPA to determine whether the plant and wells “are sufficiently physically proximate to be considered ‘adjacent’ within the ordinary, i.e., physical and geographical, meaning of that requirement.”  The court rejected the contention that the functional relationship between the plant and the wells was in any way relevant to this analysis, stating that “[w]hether the distance between two facilities enables a given relationship to exist between them is immaterial to the concept of adjacency.”

In Clean Air Council, MarkWest, citing Summit Petroleum, argued that “the only factor that may properly be considered in determining whether two or more facilities are located on ‘adjacent’ properties is geographic distance” and that “the functional relationship of the facilities is not relevant to the question of ‘adjacency.'” The EHB disagreed.  Stating that it was “not persuaded by the . . . argument that functional relationship should never be considered in determining whether two or more pollutant emitting activities are ‘adjacent’ for purposes of air quality regulation,” the EHB, following an en banc oral argument, denied MarkWest’s motion (which it treated as a motion for partial summary judgment).

The EHB found that various definitions of “adjacent” (such as “nearby” and “proximate”) provided in pertinent Department guidance and in other reference materials are relative terms.  “[B]ecause they are relative,” the Board reasoned, “other factors must be considered in determining whether something is ‘near’ or proximate’ in a given set of circumstances.”  On that basis, the Board determined that the functional relationship between the plant and compressor stations could be a factor in determining adjacency and decided to admit evidence of that relationship at the upcoming hearing in this matter “and determine at that time the weight that [such evidence] should be given.”

In a concurring opinion, Judge Steven C. Beckman stated that he would have added the words “if any” to the quoted passage above to allow for the possibility that the EHB might, after the presentation of testimony at the hearing, still reach the conclusion that functional relationship is not a proper factor for consideration.  Judge Beckman also posed the following question for the parties to address at the hearing, currently scheduled for September:  “[I]f consideration of functional relationship or some other similar concept is not permissible, what factors can be used by the Department and how should they be applied to determine that two properties are sufficiently close enough or sufficiently proximate to be considered adjacent[?]”  Contemplating how to respond to that question may prove to be a distraction on more than a few vacations this summer.