United States: The All-Out Litigation "Air War" Over PA DEP’s Oil And Gas Midstream "Air Aggregation" Decisions Rages On

Last Updated: July 8 2013
Article by Michael L. Krancer and Margaret A. Hill

The Environmental Hearing Board ("EHB" or the "Board") issued a major and long-awaited decision on June 20, 2013 on the issue of "air aggregation"—or did it? It was certainly longawaited, but we question whether it is, in fact, a major decision.

The case is Clean Air Council v. Commonwealth, EHB Docket No. 2011-072-R. The Board denied MarkWest's motion to preclude the Clean Air Council ("CAC") or the Department of Environmental Protection ("DEP") from introducing any evidence on the issue of "functional interrelationship" among MarkWest's eleven different facilities over a 40-square mile area. The CAC had appealed the DEP's decision to not aggregate all of these facilities as a "single source" for air permitting purposes.

Plaintiff NGOs and others have been waging a comprehensive attack on Pennsylvania's administrative procedures for evaluating "air aggregation" (aka "single source determinations"). Upstream and midstream operators need to be vigilant in monitoring projects and legal developments involving air aggregation issues as well as in planning their projects and litigating in support of such, when their projects are challenged.

The "air aggregation" issues started when the DEP, in February 2011, rescinded a very vague and lengthy so-called "Interim Guidance" that had been issued in the very last days of the Rendell administration. The DEP ultimately issued a revised technical guidance document that was clearer and more faithful to the statutory and regulatory scheme of the Clean Air Act and case law.

There is near universal agreement that the test for whether sources are to be aggregated, or treated as a single source, for air permitting purposes boils down to answering three questions:

  1. Are the facilities under common control or ownership?
  2. Are they contiguous or adjacent?
  3. Are they within the same SIC code?

If the answer to all three questions is "yes," then the sources should be aggregated. The only real issue is the second question—the meaning of the terms "contiguous or adjacent," particularly the term "adjacent." Sometimes the "adjacency" evaluation can be addressed by asking the following question: Do the various facilities fit within the common sense notion of a single plant? If so, then the sources are aggregated and considered a single source.

The DEP's revised Guidance on the subject, which was promulgated in October 2012 after public comment, is premised on the not so startling notion that the terms "contiguous or adjacent," by their plain meaning, refer to spatial distance, which is the preeminent factor in making air aggregation decisions. (See "Guidance for Performing Stationary Source Determinations for Oil and Gas Industries" issued on October 6, 2012). The Environmental Protection Agency ("EPA") gave that rather common sense notion its "walking papers" in September 2009 in the now famous (or infamous to some) "McCarthy Memorandum" in which the EPA turned its preeminent focus on whether the different facilities, even though many miles apart, are, in any sense, functionally interdependent. The McCarthy Memorandum did not provide any rationale or legal analysis for this EPA about-face, nor did the agency provide any meaningful substantive guidance

on how to analyze the basic question of when facilities should be treated as a "single source." As DEP Secretary Krancer said when the DEP issued its updated Guidance, "The EPA's approach 'is not supported by the [governing] court decision, the EPA's or state's regulations.'"

The CAC complained bitterly to the EPA about the DEP's Guidance. Even before the DEP's Guidance was final, the

CAC filed a petition with the EPA in February 2012 requesting a determination that Pennsylvania is not implementing its State Implementation Plan ("SIP") nor enforcing its Clean Air Act Title V permitting program. Then, the CAC filed a "Notice of Intent" to sue the EPA on May 30, 2013. The CAC's contention is that the DEP is not providing a "legally adequate and complete single source determination for the oil and gas industries." According to the CAC's view of the world, if any number of facilities, even if miles apart, are in any way functionally interdependent or have any connection to each other, they must be aggregated or considered as a single source for air permitting purposes. The CAC's litigation against MarkWest and the DEP in this permitting case is yet another of its flotilla of litigations on this topic.

On an ironic note, the CAC, more litigious than consistent, sued the EHB over the joint decision of the DEP, EPA, and Philadelphia Air Management Services' decision to aggregate, in the Sunoco refinery case, the Philadelphia refinery and the Marcus Hook refinery, located eighteen miles apart but operated in many ways as one plant, as a single source. This aggregation determination was the joint decision by federal, state, and city environmental regulators, which will end up reducing overall air emissions in the area, and saved America's East Coast oil refining capabilities, 1,200 union refinery jobs, and tens of thousands of indirect jobs in Southeastern Pennsylvania. (See "Temple Center on Regional Politics, Taking Care of Our Own, How Democrats, Republicans, Business, and Labor Saved Thousands of Jobs and Our Refineries," January 2013 (http://www.cla.temple.edu/corp/files/2012/12/Refinery-story-011113.pdf.) Not surprisingly, the CAC quietly exited that litigation via settlement.

In the MarkWest case, the CAC contended that the DEP erred by not aggregating into one source for permitting analysis a processing facility and ten separate compressor stations spread over a 40-square mile area of southwestern Pennsylvania. Since, according to the CAC, those facilities have some functional relationship to each other (i.e., they are connected to each other via pipeline), they must, without more, be considered as a single source. This CAC conclusion is apparently irrespective of whether the eleven facilities ever actually have any product flowing between them.

The en banc oral argument of MarkWest's motion for summary judgment was held in early April before the EHB. This fact itself is noteworthy because the EHB very rarely holds arguments on motions and almost never hears en banc oral arguments. The judges had numerous questions for all counsel during the argument. MarkWest argued that the Board should preclude any evidence of functional interdependence. The Board treated this as a motion for partial summary judgment. In essence, MarkWest contended that facilities located so far apart could not, as a matter of law, be considered either contiguous or adjacent. It argued that the functional interdependency of the various facilities is irrelevant and that this issue cannot factor into the decision of whether to aggregate at all. The DEP is defending its permitting decision, but opposed granting MarkWest's motion since, under the DEP's Guidance, the functional relationship is a factor that warrants consideration. In other words, the DEP's assessment is that MarkWest's motion "goes a bridge too far." The CAC, of course, opposed MarkWest's motion and contends that the DEP erred and should have aggregated the eleven facilities.

MarkWest's view had strong support in the federal courts. In April 2012, the Sixth Circuit Court of Appeals decided the case of Summit Petroleum Corp. v. EPA, 2012 WL 3181429 (6th Cir. Aug. 7, 2012). In a strongly worded opinion, the Sixth Circuit took the EPA to the woodshed for, in essence, torturing the definition of "contiguous and adjacent" to mean functional interdependence. The Sixth Circuit said point-blank that it was "illogical" for the EPA to "state[ ] that one must ask the purpose for which two activities exist in order to consider whether they are adjacent to one another." (emphasis in the original.) It is our understanding that the EPA has taken the curious and somewhat questionable position that it will ignore the Summit Petroleum decision, with the exception of Ohio, Kentucky, Michigan, and Tennessee.

In any event, the EHB, in a broadly worded decision written by Chief Judge Renwand, denied MarkWest's motion. The Board acknowledged the Summit Petroleum case, but noted that the decision was not binding on it. Interestingly, Chief Judge Renwand had written in a previous opinion in a different case that the Summit Petroleum case was "persuasive." GASP v. DEP and Laurel Mountain Midstream Operating, LLC, 2012 EHB 329, 340. Then, the Board virtually embraces the dissent in Summit as a guidepost. The Board also commented, in dicta, that "there is no explanation of the cutoff at the one-quarter mile." This statement is surprising as the body of the Guidance itself describes where this geographic linchpin comes from with footnote references to the authority from other states.

Judge Beckman wrote a very interesting concurring opinion that confesses his discomfort with the majority opinion. He senses that the broad wording of the majority opinion could be read to mean that the Board has concluded that the functional relationship will be taken into account at trial. He specifically says that he has "some concerns" with the majority opinion, as well he must in order to have written a concurrence. His main point is that he would modify the majority opinion to say that the Board will determine at trial the weight that the functional interdependence should be given, if any. He leaves open the possibility that the MarkWest motion did not "go a bridge too far." How the taking of evidence on the topic will allow Judge Beckman to decide whether it was legally permissible for the DEP to have considered functional relationship is hard to explain. But he also says that if it turns out that the functional relationship was not an appropriate factor to consider, he will then remand the case to the DEP for a new determination, which would exclude the consideration of that factor. That seems hard to square since it would seem that, in such case, the DEP's consideration of the functional relationship would have been a harmless error since the DEP decided not to aggregate anyway.

Several other "air aggregation" cases are pending. In another very recently filed litigation, the Group Against Smog and Pollution ("GASP") appealed on May 28, 2013 two permits to the EHB that the DEP issued to XTO Energy, Inc. for two compressor stations in which it did not aggregate. GASP asserts that the two stations should be considered major air-emitting sources for hazardous air pollutants, and that neither XTO nor the DEP has shown the lack of "Best Available Technology" that would support emission rates less stringent than those set forth in the DEP's General Permit 5 for natural gas facilities. GASP argues that the facilities must comply with additional air permitting requirements applicable to major sources.

The question has to be asked: Did the Board's MarkWest decision really decide anything? In a limited sense, the answer is "yes" in that the evidence of "functional interdependence" will be considered at the trial of this case. The decision may or may not hold on eventual appeal if an appeal is filed. This part of the decision, however, is exactly what the DEP Guidance says. Unfortunately, it is still very unclear exactly what "functional interdependence" will mean to the Board, how this factor will be considered, and what weight it will carry relative to spatial adjacency. The DEP Guidance describes how functional interdependence fits relative to spatial distance, but the Board's June 20th opinion does not. Not only are the litigants in this case left in the dark on this issue, but all other permit applicants and the DEP are, as well. Not much was really decided by the Board, nor did it provide guidance on the ultimate merits of the DEP's permitting decision here.

Accordingly, we do not believe that this particular decision is as "major" as some may think. To peek around the corner though, the Board has correctly said many times that the DEP's reasonable interpretation of regulation is entitled to deference. This is a classic case where the DEP's Guidance and its application of that Guidance on the ground level, with this permitting decision, was more than just reasonable—both were compellingly correct under the facts and the law.

In the meantime, permitting uncertainty will remain. Clients would be well advised to seek good counsel on this issue at the planning stages of projects and, of course, at the litigation stage.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

To print this article, all you need is to be registered on Mondaq.com.

Click to Login as an existing user or Register so you can print this article.

Michael L. Krancer
Margaret A. Hill
In association with
Related Topics
Related Articles
Related Video
Up-coming Events Search
Font Size:
Mondaq on Twitter
Mondaq Sign Up
Gain free access to lawyers expertise from more than 250 countries.
Email Address
Company Name
Confirm Password
Mondaq Newsalert
Select Topics
Select Regions
Registration (please scroll down to set your data preferences)

Mondaq Ltd requires you to register and provide information that personally identifies you, including your content preferences, for three primary purposes (full details of Mondaq’s use of your personal data can be found in our Privacy and Cookies Notice):

  • To allow you to personalize the Mondaq websites you are visiting to show content ("Content") relevant to your interests.
  • To enable features such as password reminder, news alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our content providers ("Contributors") who contribute Content for free for your use.

Mondaq hopes that our registered users will support us in maintaining our free to view business model by consenting to our use of your personal data as described below.

Mondaq has a "free to view" business model. Our services are paid for by Contributors in exchange for Mondaq providing them with access to information about who accesses their content. Once personal data is transferred to our Contributors they become a data controller of this personal data. They use it to measure the response that their articles are receiving, as a form of market research. They may also use it to provide Mondaq users with information about their products and services.

Details of each Contributor to which your personal data will be transferred is clearly stated within the Content that you access. For full details of how this Contributor will use your personal data, you should review the Contributor’s own Privacy Notice.

Please indicate your preference below:

Yes, I am happy to support Mondaq in maintaining its free to view business model by agreeing to allow Mondaq to share my personal data with Contributors whose Content I access
No, I do not want Mondaq to share my personal data with Contributors

Also please let us know whether you are happy to receive communications promoting products and services offered by Mondaq:

Yes, I am happy to received promotional communications from Mondaq
No, please do not send me promotional communications from Mondaq
Terms & Conditions

Mondaq.com (the Website) is owned and managed by Mondaq Ltd (Mondaq). Mondaq grants you a non-exclusive, revocable licence to access the Website and associated services, such as the Mondaq News Alerts (Services), subject to and in consideration of your compliance with the following terms and conditions of use (Terms). Your use of the Website and/or Services constitutes your agreement to the Terms. Mondaq may terminate your use of the Website and Services if you are in breach of these Terms or if Mondaq decides to terminate the licence granted hereunder for any reason whatsoever.

Use of www.mondaq.com

To Use Mondaq.com you must be: eighteen (18) years old or over; legally capable of entering into binding contracts; and not in any way prohibited by the applicable law to enter into these Terms in the jurisdiction which you are currently located.

You may use the Website as an unregistered user, however, you are required to register as a user if you wish to read the full text of the Content or to receive the Services.

You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these Terms or with the prior written consent of Mondaq. You may not use electronic or other means to extract details or information from the Content. Nor shall you extract information about users or Contributors in order to offer them any services or products.

In your use of the Website and/or Services you shall: comply with all applicable laws, regulations, directives and legislations which apply to your Use of the Website and/or Services in whatever country you are physically located including without limitation any and all consumer law, export control laws and regulations; provide to us true, correct and accurate information and promptly inform us in the event that any information that you have provided to us changes or becomes inaccurate; notify Mondaq immediately of any circumstances where you have reason to believe that any Intellectual Property Rights or any other rights of any third party may have been infringed; co-operate with reasonable security or other checks or requests for information made by Mondaq from time to time; and at all times be fully liable for the breach of any of these Terms by a third party using your login details to access the Website and/or Services

however, you shall not: do anything likely to impair, interfere with or damage or cause harm or distress to any persons, or the network; do anything that will infringe any Intellectual Property Rights or other rights of Mondaq or any third party; or use the Website, Services and/or Content otherwise than in accordance with these Terms; use any trade marks or service marks of Mondaq or the Contributors, or do anything which may be seen to take unfair advantage of the reputation and goodwill of Mondaq or the Contributors, or the Website, Services and/or Content.

Mondaq reserves the right, in its sole discretion, to take any action that it deems necessary and appropriate in the event it considers that there is a breach or threatened breach of the Terms.

Mondaq’s Rights and Obligations

Unless otherwise expressly set out to the contrary, nothing in these Terms shall serve to transfer from Mondaq to you, any Intellectual Property Rights owned by and/or licensed to Mondaq and all rights, title and interest in and to such Intellectual Property Rights will remain exclusively with Mondaq and/or its licensors.

Mondaq shall use its reasonable endeavours to make the Website and Services available to you at all times, but we cannot guarantee an uninterrupted and fault free service.

Mondaq reserves the right to make changes to the services and/or the Website or part thereof, from time to time, and we may add, remove, modify and/or vary any elements of features and functionalities of the Website or the services.

Mondaq also reserves the right from time to time to monitor your Use of the Website and/or services.


The Content is general information only. It is not intended to constitute legal advice or seek to be the complete and comprehensive statement of the law, nor is it intended to address your specific requirements or provide advice on which reliance should be placed. Mondaq and/or its Contributors and other suppliers make no representations about the suitability of the information contained in the Content for any purpose. All Content provided "as is" without warranty of any kind. Mondaq and/or its Contributors and other suppliers hereby exclude and disclaim all representations, warranties or guarantees with regard to the Content, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. To the maximum extent permitted by law, Mondaq expressly excludes all representations, warranties, obligations, and liabilities arising out of or in connection with all Content. In no event shall Mondaq and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use of the Content or performance of Mondaq’s Services.


Mondaq may alter or amend these Terms by amending them on the Website. By continuing to Use the Services and/or the Website after such amendment, you will be deemed to have accepted any amendment to these Terms.

These Terms shall be governed by and construed in accordance with the laws of England and Wales and you irrevocably submit to the exclusive jurisdiction of the courts of England and Wales to settle any dispute which may arise out of or in connection with these Terms. If you live outside the United Kingdom, English law shall apply only to the extent that English law shall not deprive you of any legal protection accorded in accordance with the law of the place where you are habitually resident ("Local Law"). In the event English law deprives you of any legal protection which is accorded to you under Local Law, then these terms shall be governed by Local Law and any dispute or claim arising out of or in connection with these Terms shall be subject to the non-exclusive jurisdiction of the courts where you are habitually resident.

You may print and keep a copy of these Terms, which form the entire agreement between you and Mondaq and supersede any other communications or advertising in respect of the Service and/or the Website.

No delay in exercising or non-exercise by you and/or Mondaq of any of its rights under or in connection with these Terms shall operate as a waiver or release of each of your or Mondaq’s right. Rather, any such waiver or release must be specifically granted in writing signed by the party granting it.

If any part of these Terms is held unenforceable, that part shall be enforced to the maximum extent permissible so as to give effect to the intent of the parties, and the Terms shall continue in full force and effect.

Mondaq shall not incur any liability to you on account of any loss or damage resulting from any delay or failure to perform all or any part of these Terms if such delay or failure is caused, in whole or in part, by events, occurrences, or causes beyond the control of Mondaq. Such events, occurrences or causes will include, without limitation, acts of God, strikes, lockouts, server and network failure, riots, acts of war, earthquakes, fire and explosions.

By clicking Register you state you have read and agree to our Terms and Conditions