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06.26.2018 Legal News

Time to Make a Change: Deconstructing Clean Air Act Stationary Source Aggregation

When facilities with air emissions are contiguous, the permitting authority may consider them part of the same stationary source for Clean Air Act permitting purposes (Title V and New Source Review).  This is commonly called source aggregation.  Source aggregation has significant impacts on the permitting path for a facility.  For example, a facility may trigger Prevention of Deterioration (“PSD”) thresholds for a pollutant if aggregated with the emissions from a nearby facility when the facility would not reach these thresholds alone.  A PSD permit can result in the installation of expensive Best Achievable Control Technology controls. 

EPA employs a three-factor test to determine if two facilities should be aggregated.  The three factors are whether the facilities: (1) have the same industrial grouping; (2) are located on one property or on contiguous or adjacent properties; and (3) are under common control of the same person(s).  The analysis is fact-specific. 

EPA recently re-examined the application of these factors in a letter (the “2018 Source Aggregation Letter”) concerning the Meadowbrook Energy LLC’s biogas processing facility (the “Meadowbrook Facility”).  The Meadowbrook Facility plans to convert landfill gas from the contiguous Keystone Sanitary Landfill (the “Keystone Landfill”) to natural gas transportation fuel, receiving it via a pipeline between the two facilities.  The facilities have no cross-ownership.  The facilities operate independently, maintaining full responsibility for emissions compliance.  Each has the ability to function without reliance on the other:  The Meadowbrook Facility can purchase landfill gas from another source, while the Keystone Landfill can flare 100% of its gas consistent with its permit.  EPA recommended that the Meadowbrook Facility and the Keystone Landfill should not be aggregated, which departs from previous EPA implementation of the three-factor test.

EPA expressed its intent to change the agency’s position broadly on the common control factor in the 2018 Source Aggregation Letter.  Previously, EPA has hinged its analysis of common control on a dependency relationship between two facilities based on beneficial economics – such as a contractual relationship in which one facility was obligated to purchase all of the product of another – even though the facilities had no common ownership.  In the 2018 Source Aggregation Letter, EPA stated that it is refining its viewpoint to emphasize that control should focus on “the power or authority of one entity to dictate decisions of the other that could affect the applicability of, or compliance with, relevant air pollution regulatory requirements.”  2018 Source Aggregation Letter at 6 (emphasis in original).  EPA clarifies that control should be interpreted more narrowly to mean more than the ability to influence another entity when there are no ownership ties.  EPA clarified that facilities that have a dependency relationship are no longer presumed to be aggregated.

The 2018 Source Aggregation Letter could change the permitting equation for facilities that have a dependency relationship.  For example, many utilities own landfill-gas-to-energy engines that generate electricity.  The engines are often located adjacent to a landfill, which provides the engines with fuel.  Previously, aggregation of the landfill with the facility operating the engines was likely.  EPA’s new interpretation may also enable manufacturing facilities to engage in business relationships with neighboring facilities that might have been avoided out of concern for aggregation of emissions.  The 2018 Source Aggregation Letter is good news for industry, although EPA cautions that the source aggregation evaluation must be performed by the permitting authority.  It is also a fact-specific determination. 

EPA Letter from William L. Wehrum, Office of Air and Radiation, EPA to the Honorable Patrick McDonnell, Secretary, Pennsylvania Department of Environmental Protection (April 30, 2018).