«xt'> RECOMMENDED FOR FULL-TEXT PUBLICATION Pursuant to Sixth Circuit Rule 206 File Name: 12a0248p.06 UNITED STATES COURT OF APPEALS FOR THE SIXTH ...»
RECOMMENDED FOR FULL-TEXT PUBLICATION
Pursuant to Sixth Circuit Rule 206
File Name: 12a0248p.06
UNITED STATES COURT OF APPEALS
FOR THE SIXTH CIRCUIT
Petitioner, SUMMIT PETROLEUM CORPORATION,
UNITED STATES ENVIRONMENTALRespondents. NPROTECTION AGENCY; LISA JACKSON, On Petition for Review of Final Action of the United States Environmental Protection Agency Administration.
Argued: April 17, 2012 Decided and Filed: August 7, 2012 Before: SUHRHEINRICH, MOORE, and CLAY, Circuit Judges.
COUNSELARGUED: 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.
SUHRHEINRICH, J., delivered the opinion of the court, in which CLAY, J., joined. MOORE, J. (pp. 27–36), delivered a separate dissenting opinion.
Nos. 09-4348;10-4572 Summit Petroleum Corp. v. United States EPA, et al. Page 2 _________________
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.
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 Nos. 09-4348;10-4572 Summit Petroleum Corp. v. United States EPA, et al. Page 3 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. See 42 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 Nos. 09-4348;10-4572 Summit Petroleum Corp. v. United States EPA, et al. Page 4 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). See 42 U.S.C. § 7602(j); see also 40 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.
A group of stationary sources belong to the same industrial grouping if they share a two-digit Standard Industrial Classification (SIC) code, a code used to determine the type of activity in which the facilities are engaged. 40 C.F.R. § 71.2. The SIC manual is available at http://www.osha.gov/pls/imis/sic_manual.html.
Nos. 09-4348;10-4572 Summit Petroleum Corp. v. United States EPA, et al. Page 5 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 40 C.F.R. § 71.3 provides that an owner or operator of an emission source may submit a written request to the EPA administrator for a determination of the applicability of Part 71 to a particular facility.
At the time of the parties’ determination request, Summit was operating its plant under a Permit to Install (No. 632-82I) issued by MDEQ under Michigan’s Air Pollution Control Act, Part 55 of the Natural Resources and Environmental Protection Act, M.C.L. § 324.5501 et seq. (Part 55), and Michigan’s CAA State Implementation Plan, 1980 AACS R. 336.1201.
Nos. 09-4348;10-4572 Summit Petroleum Corp. v. United States EPA, et al. Page 6 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 contiguous or adjacent properties, and belonged to the same industrial grouping. It then identified the proper procedure for determining a single stationary source in the oil and gas industry, outlined in an EPA guidance memorandum
issued by Acting Assistant Administrator William Wehrum:
1) Identify the surface sites,
2) Evaluate whether each individual surface site qualifies as a separate stationary source, or if the emissions activities should be grouped together to form a stationary source (i.e., if their emission activities are under common control, belong to the same major industrial grouping, and are contiguous or adjacent), and
3) Aggregate two or more stationary sources if they are under common control and are located in proximity of each other.3 Memorandum from William L. Wehrum, Acting Assistant Adm’r, to Reg’l Adm’rs I-X (Jan. 12, 2007) available at http://www.eenews.net/public/25/12769/features/documents/2009/10/13/document_p m_02.pdf (last visited May 16, 2012) (Wehrum Memorandum).
The EPA found that based on the information provided by Summit’s request, its wells and production plant were undisputedly commonly owned, part of the same industrial grouping, and not located on contiguous surface sites. Accordingly, the agency concluded that it “must evaluate the adjacency, (i.e., the nearness or closeness) of the sour gas wells to the sweetening plant” to determine whether Summit’s facilities constituted a single stationary source subject to regulation. Although it noted that “because the production wells supply the gas to the gas sweetening plant, we believe that Before this Court and, it appears, in practice, the EPA styles and regards its guidance memorandums as non-binding, advisory documents. Both the Wehrum Memorandum and the McCarthy Memorandum, discussed infra, express that notwithstanding the suggestions for conducting Title V stationary source analyses contained therein, actual determinations are to be made on case-by-case, situational, and particularized bases.
Nos. 09-4348;10-4572 Summit Petroleum Corp. v. United States EPA, et al. Page 7 the sites meet the common sense notion of a plant,” the EPA found that the Wehrum Memorandum “makes clear that proximity is the most informative factor in making a source determination involving oil and gas activities.” Finally, the EPA requested additional information—a map of Summit’s facilities and a schematic of its processes that showed the connection between Summit’s “exploration and production activities”—to assist it in reaching a decision.