WildEarth Guardians v. Extraction Oil & Gas, Inc., Civil Action No. 19-cv-01286-RBJ

Decision Date01 May 2020
Docket NumberCivil Action No. 19-cv-01286-RBJ
Parties WILDEARTH GUARDIANS, Plaintiff, v. EXTRACTION OIL & GAS, INC., Bonanza Creek Energy Operating Company, LLC, Crestone Peak Resources Operating, LLC, Great Western Operating Company, LLC, Mallard Exploration, LLC, Noble Energy, Inc., and PDC Energy, Inc., Defendants.
CourtU.S. Court of Appeals — Seventh Circuit

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EXTRACTION OIL & GAS, INC., Bonanza Creek Energy Operating Company, LLC, Crestone Peak Resources Operating, LLC, Great Western Operating Company, LLC, Mallard Exploration, LLC, Noble Energy, Inc., and PDC Energy, Inc., Defendants.

Civil Action No. 19-cv-01286-RBJ

United States District Court, D. Colorado.

Signed May 1, 2020

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Katherine Merlin, Katherine L. T. Merlin, Law Offices of, Randall M. Weiner, Randall M. Weiner, P.C., Law Offices of, Boulder, CO, Rebecca J. Fischer, WildEarth Guardians, Denver, CO, for Plaintiff.

Bennett L. Cohen, Colin Christopher Deihl, Ghislaine Torres Bruner, Polsinelli PC, Denver, CO, for Defendants Extraction Oil & Gas, Inc., Crestone Peak Resources Operating, LLC, Mallard Exploration, LLC.

James Robert Henderson, Radcliffe Dann, IV, Shalyn Kettering, Shannon Wells Stevenson, Davis Graham & Stubbs LLP, Denver, CO, for Defendants Bonanza Creek Energy Operating Company, LLC, Great Western Operating Company, LLC, PDC Energy, Inc.

Christopher Anthony Chrisman, Eric Paul Waeckerlin, Holland & Hart LLP, Denver, CO, for Defendant Noble Energy, Inc.


R. Brooke Jackson, United States District Judge

This matter is before the Court on defendants Extraction Oil and Gas, Inc. ("Extraction"); Bonanza Creek Energy Operating Company, LLC ("Bonanza");

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Crestone Peak Resources Operating, LLC ("Crestone"); Great Western Operating Company, LLC ("Great Western"), Mallard Exploration, LLC ("Mallard"); Noble Energy, Inc. ("Noble"); and PDC Energy, Inc. ("PDC")’s joint motion to dismiss, ECF No. 29, as well as Great Western's motion to dismiss, ECF No. 30. For the reasons stated herein, both motions are DENIED.


Plaintiff WildEarth Guardians seeks civil penalties against seven operators of oil and gas facilities for the emission of pollutants in violation of both the Clean Air Act ("CAA") and Colorado's state implementation plan ("SIP") pursuant to the CAA. ECF No. 1 at 50–53. WildEarth's allegations are premised on its novel interpretation of Colorado's SIP and, alternatively, on the lack of available data to confirm defendants’ facilities’ pollutant emission levels prior to their receipt of synthetic minor permits.

Regulatory Framework

The CAA establishes a cooperative-federalism framework to prevent and control air pollution. See 42 U.S.C. § 7407(a) (2018). The CAA directs the United States Environmental Protection Agency ("EPA") to set health-based standards for air emissions. See id. §§ 7407, 7409. States are responsible for achieving and maintaining compliance with these standards through a SIP. See id. § 7407(a)(1). The EPA reviews proposed SIPs after a notice and comment period to ensure compliance with applicable CAA requirements. See id. §§ 7410(a)(1)–(2), (k)(3); Union Elec. Co. v. EPA, 427 U.S. 246, 265, 96 S.Ct. 2518, 49 L.Ed.2d 474 (1976). If the EPA approves the SIP, the SIP becomes federal law and is enforceable in federal court. See General Motors v. United States , 496 U.S. 530, 533–34, 110 S.Ct. 2528, 110 L.Ed.2d 480 (1990).

The EPA has designated the Denver Metro-North Front Range as an "ozone nonattainment area," a region that violates federally established national ambient air quality standards for ground-level ozone.1 See 40 C.F.R. § 81.306 (2020). Within nonattainment areas, major stationary sources must comply with federal nonattainment air provisions. See 42 U.S.C. §§ 7501 – 7515 (2018). To this end, the CAA requires that a SIP include a nonattainment plan that includes a process for "permits for the construction and operation of new or modified major stationary sources anywhere in the nonattainment area." See id. § 7502.

The EPA has approved the portions of Colorado's SIP relevant to WildEarth's claims. ECF No. 1 ¶ 4. The Colorado Department of Public Health and Environment administers Colorado's SIP through two sub-departments: the Air Quality Control Commission ("Commission") and the Air Pollution Control Division ("Division"). See Colo. Rev. Stat. § 25-7-105. The Commission develops rules and regulations regarding the construction, operation, and permitting of stationary sources of air pollutants, and the Division implements these rules and regulations. See id.

Regulation 3 of Colorado's SIP governs the permitting of stationary sources of air pollutants, including for oil and gas facilities. See 5 Colo. Code Regs. 1001-5 ("Regulation 3"). Under Regulation 3 a facility operator must provide Colorado notice of a new source of air pollutants by filing an Air Pollutant Emission Notice ("APEN"). See id. , Part A § II.B.3. APENs provide information to determine what type of permit is required. See id. Each APEN identifies

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the facility's emissions points and provides emissions data for each point. See id.

In conjunction with filing the APEN, an operator of a new facility must also apply for a construction permit. The applicable permitting requirements for a given facility depend on whether the facility is a "major source" or a "minor source" of air pollutants. Compare Regulation 3, Parts A–B with Regulation 3, Part D. Whether a facility is a major source depends on its emissions levels. Relevant in this case, a facility can be considered a major source based on emissions of either volatile organic compounds ("VOCs") or hazardous air pollutants ("HAPs").

A major source is "any stationary source of air pollutants that emits, or has the potential to emit, 100 tons per year or more of any regulated pollutant [e.g. VOCs]." Regulation 3, Part D § II.A.25.b; 42 U.S.C. § 7479(1) (defining a "major emitting facility" as including "petroleum refineries" "which emit, or have the potential to emit, one hundred tons per year or more of any air pollutant"). Under the CAA, a source is also considered major if it emits or has the potential to emit 10 tons per year or more of any individual listed HAP or 25 tons per year of an aggregation of HAPs. See 42 U.S.C. § 7412(a)(1)–(2) (2018). A minor source is "any stationary source that does not qualify as a major source." Regulation 3, § I.B.26.

Thus, the definition of major source considers both actual emissions and potential emissions. A facility's "potential to emit" ("PTE") is defined as "the maximum capacity of a stationary source to emit a pollutant under its physical and operational design." Id. , Part A § I.B.37; 40 C.F.R. §§ 51.166(b)(4) & 52.21(b)(4). A facility's PTE can be lowered by any physical or regulatory control that reduces its pollutants, so long as that control is "state enforceable and federally enforceable." Id. , Part A § I.B.37; 40 C.F.R. §§ 51.166(b)(4) & 52.21(b)(4). In the APEN, an operator must provide both "controlled" and "uncontrolled" PTE for each emission point. See Regulation 3, Part A § II.B.3. A facility's "controlled" PTE includes consideration of enforceable physical or regulatory controls. A facility's "uncontrolled" PTE is its raw PTE given no such controls.

Both the SIP and the CAA allow facilities to voluntarily lower emissions to avoid major-source requirements. See Regulation 3, Part B § II.A.7; Envtl Prot. Agency, Options for Limiting the Potential to Emit (PTE) of a Stationary Source Under Section 112 and Title V of the Clean Air Act (1995) ("Options for Limiting PTE"), https://www.epa.gov/sites/production/files/documents/limit-pte-rpt.pdf. Specifically, a facility with uncontrolled PTE over major-source thresholds can be considered a minor source if its controlled PTE is below major-source thresholds. Such a facility is called a "synthetic minor source" and is not subject to major-source requirements. See Regulation 3, Part B § II.A.7.

Major sources for VOCs must comply with the CAA's preconstruction permitting program. 42 U.S.C. §§ 7475(a) & 7479(1) – (3) (2018). Pursuant to this federal requirement Regulation 3 requires any proposed new or modified major source in a nonattainment area to obtain a nonattainment new source review permit ("NSR permit" or "major source permit") prior to construction. See Regulation 3, Part D. Among other things, an NSR permit requires operators of new or modified major sources to: (i) achieve "the lowest achievable emission rate," (ii) certify compliance at "all other existing major stationary sources owned, operated, or controlled by the applicant," (iii) achieve specific emission offset rates, (iv) include an analysis of alternative sites, sizes, processes, and environmental control techniques, and (v) demonstrate that emissions will not adversely

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impact visibility in CAA-designated areas. See id. , Part D, § V.A.7.

The CAA regulates requirements for HAPs. 42 U.S.C. § 7412 (2018). Major sources of HAPs must comply with the CAA's maximum achievable control technology ("MACT") requirements. See id. § 7412(g)(2)(B).

The SIP also provides a 90-day grace period for certain facilities applying for construction permits. Operators of certain oil and gas facilities need not file an application for a construction permit until "within thirty days after the report...

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