Recent EPA Policy Guidance for Air Quality Permitting

The United States Environmental Protection Agency (EPA) recently released an applicability letter and draft policy memo that have a notable effect on how stationary source determinations are made for air quality permitting. EPA defines “stationary source” in the federal construction permitting regulations (40 CFR Parts 51 and 52) and the Title V operating permit regulations (40 CFR Parts 70 and 71) as all pollutant-emitting activities that meet three criteria:

• Belong to the same industrial grouping (same two-digit SIC code);
• Are located on contiguous or adjacent properties; and
• Are under control of the same person (or persons under common control).

Aggregation of Facilities Using the Common Control Factor

On April 30, 2018, EPA issued a letter to the Pennsylvania Department of Environmental Protection in response to a request for EPA to review whether Meadowbrook Energy LLC and Keystone Sanitary Landfill, Inc. should be aggregated for air permitting purposes. This memo establishes EPA’s revised interpretation for assessing “common control” when evaluating whether two facilities should be considered as one stationary source for air quality permitting.

Meadowbrook Energy LLC (Meadowbrook) had determined that their facility was not under common control with Keystone Sanitary Landfill (Keystone) and should not be considered a single stationary source for title V and NSR permitting purposes. Meadowbrook represented in their assessment that the two entities have no cross-ownership or direct control over operations at the other facility. Keystone is required to construct and maintain sufficient flare capacity to destroy 100% of Keystone’s landfill gas should Meadowbrook be unable to accept landfill gas, concluding that the air pollutant control compliance of Keystone lies solely with Keystone. Meadowbrook emphasized that each entity has separate compliance responsibilities and neither entity is able to operate the other’s facility to ensure that the other facility complies with environmental requirements. EPA ultimately agreed and provided a revised interpretation of the term “common control.”

EPA’s re-evaluation of common control states that the assessment of “control” should focus on the power or authority of one entity to dictate decisions of the other that could affect the applicability of, or compliance with, air pollution regulatory requirements. EPA states that determinations of common control need to continue to be made on a case-by-case basis, but the approach should better reflect a “common sense notion of a plant” and minimize the potential for entities to be held responsible for decisions of other entities where they have no authority and to realize that dependency relationships should not be presumed to result in common control.

Draft Guidance for Interpreting “Adjacent”

On September 4, 2018, EPA released a draft memo for public review and comment that interprets how the term adjacent will be interpreted for all industries other than oil and gas. As noted above, there are three criteria used to determine the scope of a stationary source. EPA has already interpreted “adjacent” for the oil and gas industry (see here), so this interpretation extends to all other industries.

EPA’s draft guidance interprets the term “adjacent” to mean physical proximity. Previous interpretations of adjacent have utilized functional interrelatedness in the evaluation of adjacency and EPA now believes that is not an appropriate interpretation. Operations that do not share a common boundary or border, or are otherwise not physically touching each other, will not be deemed adjacent even if the operations are nearby. EPA further explains that the existence of a functional interrelationship, e.g. a pipeline, railway, or conveyance, shall not be invoked to establish adjacency.

For prior single source determinations, EPA states that those operations should continue to be considered one source as long as the common control and same industrial grouping code criteria continue to be met. The new guidance will apply to source determinations from this point forward. EPA continues to assert cooperative federalism and allows states with approved permitting programs to remain responsible for source determinations. Therefore, states with approved permitting programs are not required to follow the interpretation in the memorandum.

EPA is accepting comments on the draft guidance through October 5, 2018.