4 The record articles

U.S. EPA Proposes to Define “Adjacent” for the Oil and Gas Industry

Posted: September 14th, 2015

Author: All4 Staff 

Previous ALL4 blogs and at least one 4 The Record article have discussed the extremely complex issue of single source aggregation for air permitting.  This issue has been particularly difficult for the oil and gas industry resulting in some seemingly contradictory U.S. EPA decisions, some of which were successfully challenged in court.  Further complicating the issue is that some states have developed state-specific guidance regarding single source aggregation.  For example, Texas, Oklahoma, Pennsylvania, and Louisiana have issued guidance that presumes that operations with one quarter mile should be considered a single source. 

You may recall that U.S. EPA’s New Source Review (NSR) regulations use three (3) criteria to determine which pollutant-emitting activities make up a building, structure, facility or installation.  The three (3) criteria that are currently evaluated on a case-by-case basis are: 1) same industrial grouping, 2) under common control of the same person or persons, and 3) located on contiguous or adjacent properties.  For the oil and gas industry, the notion of “adjacent” has been particularly troublesome, especially given the fact that that the term is not defined by U.S. EPA. 

On August 18, 2015 U.S. EPA Administrator Gina McCarthy signed a prepublication version of a rulemaking that would define the term “adjacent” for the oil and gas industry.  U.S. EPA is proposing two (2) options for determining whether two (2) or more properties are “adjacent”.  U.S. EPA’s preferred option is to define “adjacent” based on proximity.  The initial proposal is to use one quarter mile, however U.S. EPA is accepting comments to suggest other distances such as one half mile.  U.S. EPA is also accepting comments regarding the issue of “daisy-chaining.” This is where a series of sites are within the specified distance of the next site in a chain, but the last site is separated from the first site by more than the specified distance. 

U.S. EPA’s second proposed option for defining “adjacent” is to consider a source under common control if it is proximate, or it is “exclusively functionally interrelated.”  The proposed rulemaking specifically cites equipment connected by a pipeline as an example of functional interrelatedness.  Under this proposed definition, operations would be considered a single source if the activities are separated by more than one quarter mile AND there is functional interrelatedness, or if the activities are separated by a distance of less than one quarter mile.  Obviously, the introduction of the notion of functional relatedness makes the definition of “adjacent” significantly more encompassing. 

This proposed rulemaking is critical to the oil and gas industry.  The path that U.S. EPA chooses for the definition of “adjacent” could cause many oil and gas operations to aggregate multiple sites as a single source, thereby potentially causing small operations that are currently minor sources to be considered an aggregated source that may meet the definition of a major source.  The result would likely contribute to a significant additional air permitting burden on the industry. 

This proposed rulemaking has not yet been published in the Federal Register.  Once published, comments will be accepted for 60 days after the publication date.  ALL4 strongly encourages potentially affected oil and gas organizations to submit comments to U.S. EPA on this very important rulemaking.  As always, ALL4 stands ready to assist the oil and gas industry with preparing and submitting comments. 


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