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No National Change to EPA’s Air Emission Source Aggregation Policy, Despite Sixth Circuit Ruling in Summit Petroleum

As clarified in a December 21, 2012, memorandum issued to the EPA Regional Air Division Directors, EPA will continue to apply a “functional interrelatedness” test in determining whether multiple air emission sources are “adjacent” for purposes of source aggregation for air permitting under Title V and new source review (NSR) programs for all states other than those under the jurisdiction of the U.S. Court of Appeals for the Sixth Circuit (Kentucky, Michigan, Ohio, and Tennessee). “Outside the 6th Circuit, at this time, EPA does not intend to change its longstanding practice of considering interrelatedness in the EPA permitting actions in other jurisdictions.”

In Summit Petroleum, the Sixth Circuit determined that the term “adjacent” pertained exclusively to physical and geographical proximity for purposes of establishing whether multiple air emission sources constitute a single source (i.e., “adjacent” means adjacent), and not whether the multiple air emission sources were functionally interrelated as argued by EPA.

Notwithstanding EPA’s reluctance to apply the Sixth Circuit decision in jurisdictions elsewhere, the recent guidance memorandum touches upon two important points left open by the Summit Petroleum decision.

First, while the decision focused on Title V permitting implications, EPA’s memorandum appears to indicate that the court’s interpretation applies with equal force to NSR permitting. This is important because the PSD/NSR definition is virtually identical to the Title V definition. As noted in the memorandum, “EPA may no longer consider interrelatedness in determining adjacency when making source determination decisions in its title V or NSR permitting decisions in areas under the jurisdiction of the 6th Circuit, i.e., Michigan, Ohio, Tennessee and Kentucky.” (Emphasis added).

Second, EPA could have attempted to factually distinguish the Summit Petroleum opinion as applicable only to the oil and gas industry gathering lines and pipeline systems or related factual scenarios. The clarifying memorandum, however, provides no such limitation.

Nevertheless, companies seeking to leverage the recent federal appellate ruling should do so with careful planning and caution as EPA also clarified that it “will continue to make source determinations on a case-by-case basis.” Indeed, even those businesses with operations in Ohio, Michigan, Kentucky, and Tennessee may take only limited comfort at present given EPA’s admonishment that it “is still assessing how to implement this decision in its permitting actions in the 6th Circuit.”