If you were hoping that the U.S. Environmental Protection Agency’s (EPA’s) defeat last summer on aggregating small emissions sources under Title V of the Clean Air Act (CAA) meant a less-aggressive stance going forward, the agency has some bad news for you.

Last August, critics of the EPA were heartened when the Sixth Circuit Court of Appeals rejected the agency’s determination that a natural gas sweetening plant in Michigan and its associated wells and flares constituted a single pollution source under Title V of the CAA (see “EPA’s Title V Source Policy Takes a Hit” in the November 2012 issue of POWER). Aggregating the total emissions allowed the agency to define the plant as a major source under Title V, thus requiring an emissions permit.

Splitting Hairs

The Sixth Circuit ruling in Summit Petroleum Corp. v. EPA turned on the definition of “adjacent” in the EPA regulations enforcing Title V. The regulations allow multiple pollution-emitting activities to be treated as a single source if they are under common control, part of the same industrial activity, and “are located on one or more contiguous or adjacent properties.” Summit’s activities did not take place on contiguous properties but were spread over an area of 43 square miles, with the various wells and flares being located anywhere from 500 feet to 8 miles away from the sweetening plant. Thus, the question was whether these rather widely spread operations were “adjacent” to one another for the purposes of Title V.

It’s important to keep in mind here that the court was construing regulations written by the EPA itself. As might be expected, federal courts give fairly large deference to an agency’s interpretation of its own rules. However, the boundaries of that deference can be unpredictable. The federal Administrative Procedure Act bars a court from interfering unless the interpretation is plainly erroneous or inconsistent with the regulation.

But—and this is a very large but—no deference is in order if the language of the regulation is plain and unambiguous. The rationale behind this rule is that allowing an agency to interpret a regulation beyond its plain meaning is tantamount to allowing it to create a new de facto regulation outside the official rulemaking process.

Naturally, Summit argued that “adjacent” was unambiguous, while the EPA argued that it was not. The agency based its argument on the fact that it had never defined a specific distance for this section of the regulations. It wanted to consider both physical proximity and “functional interrelatedness” in determining whether two sources were adjacent, something it insisted it has been doing for decades. The court, looking simply to the dictionary, agreed with Summit. Thus, it held that Summit’s facility, spread over 40-plus square miles, was not “adjacent” within the plain meaning of the word.

The EPA sought a rehearing en banc, but this was denied.

Not So Fast

Federal circuit court rulings are binding precedent only within that circuit, and merely persuasive authority outside it. Still, it’s not unusual for a decision like this to prompt an agency to change its approach in the interest of maintaining consistency nationwide.

Those hoping for such a response from the EPA, however, got an early lump of coal in their Christmas stockings when the agency announced on Dec. 21 that it was limiting its compliance with the Summit ruling to the boundaries of the Sixth Circuit (Kentucky, Tennessee, Michigan, and Ohio). Elsewhere, said the memo from Stephen Page, director of the Office of Air Quality Planning and Standards, “the EPA does not intend to change its longstanding practice of considering interrelatedness in the EPA permitting actions.” Further, the EPA “is still assessing how to implement this decision in its permitting actions in the 6th Circuit.”

The memo is a clear shot across the bow of anyone hoping the EPA would drop the “functional interrelatedness” standard. Until another court says otherwise, it intends to stick to the same approach that was rejected in Summit in permitting actions outside the Sixth Circuit.

As worrisome as that may sound, there may be a more significant response on the way.

Remember that Summit was based on regulations written by the EPA. Folks I’ve talked to with an ear on the ground in Washington believe the EPA is in the process of rewriting those regulations to include the functional interrelatedness standard, in effect reversing the decision on its own. And there’s little anyone outside the administration can do to stop it. Once the new rule is in place (a process that can take several years), the Summit decision becomes obsolete. While agency rulemaking can be—and frequently is—challenged in court, opponents will be starting from scratch and under a different standard of review. Congress could revise the CAA to include the Summit rule, of course, but the likelihood of that happening is probably nil.

What all this means is that Summit will likely serve as more of a speed bump than a change in course for the EPA. Those hoping the decision would herald a less-aggressive stance against small emission sources would probably be best served by continuing to follow the existing rules until more is known. And those in the Sixth Circuit would be advised not to make any major changes as a result of the Summit decision, lest it be drafted out of existence.

Final resolution of this dispute, it appears, is still a long way away.

Thomas W. Overton, JD is POWER’s gas technology editor.