EPA Scrutinizes Emission Aggregation Under New Source Review

December 8, 2009
Client Alert Newsletter December 2009

The U.S. Environmental Protection Agency ("EPA") appears to be moving toward a more stringent approach regarding New Source Review applicability, at least as it relates to the aggregation of emission increases from multiple activities. Under the Clean Air Act, the more stringent and time consuming New Source Review permitting program applies if a proposed modification to an existing major stationary source would result in a "significant net emission increase." In order to determine whether a proposed net emission increase will be significant, the facility operator must account for all creditable emission increases from the "project." Specifically, to the extent that the operator undertakes several changes at the same facility, and each results in an emission increase, the operator must aggregate the emission increases from all such changes if they constitute a single project.

On January 15, 2009, EPA issued a final regulation which clarified that emission increases from separate activities need not be aggregated in this context unless the activities are "substantially related" from an economic or technical standpoint. Further, the final rule provided that activities undertaken at least three years apart are presumed not to be substantially related. However, shortly following the inauguration of President Obama, the new EPA administration determined to reconsider this regulation in response to a petition for reconsideration from the Natural Resources Defense Council, and stayed the effectiveness of the final rule until May 18, 2010.

More recently, EPA revoked a 2007 policy governing aggregation of emissions at oil and natural gas facilities. The 2007 EPA policy directed state permitting authorities not to aggregate emission increases experienced at physically-separate oil and natural gas facilities under common ownership, unless the facilities are physically adjacent or contiguous. EPA has now determined that emission increases must be aggregated from different oil and natural gas facilities if they are interconnected by pipeline and share facilities, such as pumping stations. In essence, EPA has determined to focus on whether such facilities are under "common control," regardless of whether they are physically separated, even by hundreds of miles. To the extent that the facilities are under common control and physically interconnected, then EPA believes they should be evaluated under the Clean Air Act as if these locations constitute a single facility. This change in policy is likely to result in the determination that New Source Review applies to many more projects at oil and gas facilities, and may also result in the classification of more facilities as major stationary sources for purposes of hazardous air pollutant regulation and Title V air permitting.