Pennsylvania EHB Upholds DEP Aggregation Determination - May Affect Source Aggregation in the Future

January 25, 2016
Todd D. Kantorczyk, Esq.
MGKF Special Alert - Forecast 2016

At the close of 2015 the Pennsylvania Environmental Hearing Board (EHB) upheld the Pennsylvania Department of Environmental Protection’s decision to treat a natural gas well pad and nearby compressor station as a single emissions source for air permitting purposes (National Fuel Gas Midstream, et al. v. Commonwealth of Pennsylvania, EHB Docket No. 2013-206-B).  While source aggregation issues have been a hot button issue for natural gas operations for some time, the principles the EHB applied in this matter have the potential to affect other industries where source aggregation may be in play in the coming year and beyond.

Under federal and state regulations, two activities qualify as a single emission source if the pollutant-emitting activities: (1) belong to the same industrial grouping; (2) are under common control; and (3) are located on contiguous or adjacent properties.  In this instance, the EHB first held that the well pad and compressor station belonged to the same industrial grouping, with the compressor station falling under Oil and Gas Field Services because operation of the compressor engines constituted the primary polluting activities.

Next, the EHB found that the well pad and the compressor station were under common control because they shared a corporate parent that had approval over the operating and capital budgets of the two subsidiaries.  Notably, the EHB declined to apply the general definition of “control” used by the Securities and Exchange Commission and referenced by the United States Environmental Protection Agency in the applicable regulatory preamble.  At the same time, the EHB noted that it would have been very difficult to establish common control through a contractual or support/dependency standard that has been argued in other circumstances.

Finally, the EHB found that the two operations were “adjacent” because the boundaries of the two developed parcels were 0.24 miles apart.  While this distance fell within the Department’s quarter-mile “rule of thumb” set forth in official guidance, the EHB explicitly noted that it was not bound by Department guidance on this point.  Indeed, in his concurring opinion Judge Labuskes went so far as to say that the Environmental Rights Amendment in Article 1, Section 27 of the Pennsylvania Constitution (i.e., the Environmental Rights Amendment) provides sufficient authority for the Department to treat multiple sources as a single facility “[r]egardless of what the complex regulations governing air quality might otherwise require.”

At a minimum, going forward the EHB’s decision in this matter opens up new avenues of analysis for the Department and may require additional planning for entities evaluating issues related to single source aggregation for air permitting purposes.