Summit Petroleum Corp. v. U.S. Envtl. Prot. Agency

• Citation: 690 F.3d 733,75 ERC 1129
• Decision Date: 07 August 2012
• Docket Number: Nos. 09–4348,10–4572.,s. 09–4348
• Parties: SUMMIT PETROLEUM CORPORATION, Petitioner, v. UNITED STATES ENVIRONMENTAL PROTECTION AGENCY; Lisa Jackson, Respondents.
• Court: United States Courts of Appeals. United States Court of Appeals (6th Circuit)

690 F.3d 733

75 ERC 1129

SUMMIT PETROLEUM CORPORATION, Petitioner,

v.UNITED STATES ENVIRONMENTAL PROTECTION AGENCY; Lisa Jackson, Respondents.

Nos. 09–4348, 10–4572.

United States Court of Appeals,Sixth Circuit.

Argued: April 17, 2012.

Decided and Filed: Aug. 7, 2012.

ARGUED:S. Lee Johnson, Honigman, Miller, Schwartz and Cohn LLP, Detroit, Michigan, for Petitioner. Kim Smaczniak, United States Department of Justice, Washington, D.C., for Respondents. ON BRIEF:S. Lee Johnson, Honigman, Miller, Schwartz and Cohn LLP, Detroit, Michigan, Gina A. Bozzer, Zimmerman, Kuhn, Darling, Boyd, Quandt and Phelps, PLC, Traverse City, Michigan, for Petitioner. Kim Smaczniak, United States Department of Justice, Washington, D.C., for Respondents. Donald K. Shandy, Ryan Whaley Coldron Shandy PLLC, Oklahoma City, Oklahoma, James R. Wedeking, Sidley Austin LLP, Washington, D.C., for Amici Curiae.

Before: SUHRHEINRICH, MOORE, and CLAY, Circuit Judges.

SUHRHEINRICH, J., delivered the opinion of the court, in which CLAY, J., joined. MOORE, J. (pp. 751–57), delivered a separate dissenting opinion.

OPINION

SUHRHEINRICH, Circuit Judge.

This case arises from a final action of the Environmental Protection Agency (EPA) determining that a natural gas sweetening plant and various sour gas production wells commonly owned by Petitioner Summit Petroleum Corporation (Summit) and separately located within an area of approximately forty-three square miles constitute a single stationary source under the EPA's Clean Air Act Title V permitting program. Specifically at issue is the EPA's conclusion that Summit's facilities satisfy the regulatory requirement of being “located on ... adjacent properties” because, although physically independent, they are “truly interrelated.” Summit, together with Amici American Petroleum Institute and American Exploration and Production Counsel, argues that the EPA's determination that the physical requirement of adjacency can be established through mere functional relatedness is unreasonable and contrary to the plain meaning of the term “adjacent.” We agree. For these and other reasons fully set forth herein, we VACATE the EPA's final determination and REMAND this case to the EPA 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.

I. Background

A. Summit's Natural Gas Production Facilities

Summit is a producer of natural gas that owns and operates a natural gas sweetening plant in Rosebush, Michigan. Summit's plant “sweetens” the “sour” gas from approximately one hundred sour gas production wells by removing hydrogen sulfide so that the gas can be used. Summit owns all of the production wells and the subsurface pipelines that connect each of the wells to the sweetening plant. The wells themselves are located over an area of approximately forty-three square miles at varying distances from the plant—from five hundred feet to eight miles away—and Summit does not own the property between the individual well sites or the property between the wells and the plant. None of the well sites share a common boundary with each other, nor do any of the well sites share a common boundary with Summit's production plant. Flares work as part of the plant operations by burning off natural gas waste to relieve pressure on the gas collection equipment. The closest flare is located approximately one half-mile from the plant, while the remaining flares are each over one mile away.

The sweetening plant and the majority of Summit's gas production wells and flares are located within the territory of Michigan's Saginaw Chippewa Indian Tribe's Isabella Reservation. The sweetening plant, gas production wells, and flares emit sulfur dioxides and nitrous oxides, air pollutants subject to regulation under the Clean Air Act (CAA). The plant alone emits, or has the potential to emit, just under one hundred tons of these pollutants per year. Each flare and each well site emits, or has the potential to emit, much lower amounts of pollutants. However, if the emissions of sulfur dioxide from the plant and any one production well were to be combined, they would exceed one hundred tons of pollutants per year.

B. The EPA's Title V Permitting Program

In 1970, Congress passed the CAA, 42 U.S.C. §§ 7401–7671q, “to protect and enhance the quality of the Nation's air resources so as to promote the public health and welfare and the productive capacity of its population....” 42 U.S.C. § 7401(b)(1) (2006). In 1990, Congress enacted Title V of the CAA (Title V), 42 U.S.C. §§ 7661–7661f, establishing an operating permit program to regulate stationary sources of air pollution. Rather than imposing new substantive air quality control requirements, Title V supplements the CAA by requiring regulated sources of air pollution to obtain operating permits that include emission limitations, standards, monitoring requirements, compliance schedules, and other conditions necessary to assure compliance with the CAA. See42 U.S.C. §§ 7661a(a), 7661c(a); Ohio Pub. Interest Research Grp., Inc. v. Whitman, 386 F.3d 792, 794 (6th Cir.2004). Although “[s]tates and local governments bear ‘primary responsibility’ ” in administering Title V regulations, Whitman, 386 F.3d at 794 (citing 42 U.S.C. § 7401(a)(3)), certain circumstances permit or require the EPA itself to establish and promulgate Title V regulations in lieu of the EPA-approved state plans. In the absence of an EPA-approved plan regulating Indian territory located within a given state, for example, the EPA is authorized to implement a federal air quality control plan within that jurisdiction. Id. § 7601(d)(4). In this case, the EPA has asserted jurisdiction to regulate Indian territory within the State of Michigan, including the Saginaw Chippewa Indian Tribe's Isabella Reservation. See, e.g.,Approval and Promulgation of Air Quality Implementation Plans; Michigan; PSD Regulations (PSD Regulations), 73 Fed. Reg. 53,366 (Sept. 16, 2008) (to be codified at 40 C.F.R. pt. 52) (“Michigan is not authorized to carry out its Federally approved air program in ‘Indian Country,’ as defined in 18 U.S.C. 1151.”).

Title V requires every “major source” of air pollution to obtain a Title V operating permit. 42 U.S.C. § 7661a(a). The EPA's Title V plan defines a major source to include “any stationary facility or source of air pollutants which directly emits, or has the potential to emit, one hundred tons per year of any pollutant,” including nitrous oxides and sulfur dioxides (the pollutants emitted by Summit's operations). See42 U.S.C. § 7602(j); see also40 C.F.R. § 71.2. The EPA defines a “stationary source” as “any building, structure, facility, or installation which emits or may emit a regulated [air] pollutant.” 40 C.F.R. § 52.21(b)(5). 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,” i.e., a single stationary source, under Title V only 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. 40 C.F.R. § 71.2.¹ If the pollutant-emitting activities fail to satisfy any one of these three 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.

C. Major Source Determination Correspondence Between Summit and the EPA

In January 2005, Summit, together with the Michigan Department of Environmental Quality (MDEQ), submitted a request to the EPA to determine whether Summit's facilities met the definition of a Title V major source of air pollution.² Summit's request correctly noted that emissions from its sweetening plant were insufficient to constitute it a major source, but “if potential emissions from the sour gas production wells are included with the gas sweetening plant emissions, the aggregated sources combined may be considered a single major source for criteria pollutants, namely nitrogen oxides and sulfur dioxides.” Summit's request suggested that aggregation of its facilities would be improper for two principal reasons. First, Summit's wells were “located at great distances from its production facility on entirely different tracts, leases and surface sites,” making them neither contiguous nor adjacent to one another. Second, the EPA had not distinguished between the definition of a “facility” found in its hazardous air pollutant (HAP) regulations from the definition of a “facility” for criteria pollutant (Title V) purposes. The EPA's HAP regulations specifically considered aggregation of multiple facilities in the oil and gas industry and concluded that aggregation was improper: “Emissions from any oil or gas exploration or production well, with its associated equipment, and emissions from any pipeline compressor or pump station shall not be aggregated with emissions from other similar units, whether or not these units are in a contiguous area under common control....” See Article II, Part 55, Air Pollution Control, of the Michigan Natural Resources and Environmental Protection Act, 1994 PA 451, as amended (Act 451), and 1980 AACS R 336.1211 (Rule 211) (emphasis added).

The EPA responded to Summit's source determination request on April 26, 2007, confirming that it was asserting jurisdiction to regulate Summit's facilities within the Isabella Reservation but stating that it was “unable to conclude if the wells and plant constituted a single source for Title V purposes.” The EPA distinguished its Title V and HAP regulations, maintaining that pollutant-emitting facilities could be aggregated to constitute a single stationary source under Title V if they operated under common control, were located on...