Sixth Circuit Rules Against EPA Natural Gas Aggregation Interpretation

Natural gas wells will be less likely to be subject to permitting under the Clean Air Act following a recent decision by the United States Court of Appeals for the Sixth Circuit, Summit Petroleum Corporation v. U.S. EPA, Nos. 09-4348; 10-4572.  EPA had decided that a natural gas sweetening plant and numerous gas wells connected to it were part of a single facility, and as such their emissions had to be aggregated in order to determine whether together they constituted a major stationary source. (Major sources are subject to more extensive permit and emissions control requirements under the Clean Air Act.) Sites are considered a single facility, and their emissions are added together, if they are commonly owned, part of the  same SIC Code grouping, and are located on contiguous or adjacent property. Summit conceded the first two parts of that test were met, but contended the third was not.  

EPA disagreed, concluding that Summit’s facilities were located on “adjacent properties” because, although the wells and sweetening plant were not located on contiguous properties, they were “functionally interrelated” because they were connected by a pipeline, and the wells relied on the sweetening plant to produce pipeline quality gas.  EPA believed that relationship satisfied the requirement of adjacency.  The Sixth Circuit parsed the word “adjacent” and found that it required the wells and sweetening plant to be closely located in a physical or geographical sense, not functionally dependent on one another.  The case was remanded for EPA to determine whether there was sufficient physical proximity for the emissions from all the sources to be aggregated for purposes of regulation.

The Sixth Circuit decision is similar to that reached by the West Virginia Air Quality Board in May, 2011, finding that natural gas wells and compressor stations need not be aggregated.  Hughes v. Benedict and Appalachia Midstream Services LLC