Aggregation in Air Permitting - When Two Sources Become One

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Mark Wenclawiak of All4 Inc. presents "Aggregation in Air Permitting - When Two Sources Become One." This presentation describes the potential issues with source aggregation, the definition of a "stationary source," and considerations for future projects.

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  • Today we are going to talk about a facet of air permitting that has confused and frustrated air quality professionals since the dawn of the Clean Air Act. The situation is how are two (or more) sources of air pollution treated with respect to permitting – are they separate sources or are they determined to be a single source. In most situations, when sources are not deemed a single source, they can avoid major source status, is usually the preferred solution. However, as we will discuss, the these single source determinations are rooted in agency guidance and not regulation, so each situation is a case by case scenario. So for this presentation, we’ll review how agency guidance has historically addressed the situation through 3 specific criteria and some illustrative examples. We’ll then discuss a recent twist on this topic and how it may affect projects moving forward. We’ll end with a review of considerations for given projects, and have some questions and open discussions.
  • As we touched on in the introduction, how facilities are (or are not ) aggregated often makes the difference in major versus minor source status. In this era of outsourcing, subcontracting and other various business arrangements, we see more instances of multiple entities co-locating on the same property and often sharing infrastructure. In addition, with the advent of sustainability programs, we have seen various projects creating symbiotic relationships such as landfill gas to energy projects, CHP, and use a waste as a raw material creating situations that are natural candidates for consideration of aggregation. Before we go into the weeds of how aggregation can be a challenge, lets review some of the basics.
  • The term stationary source is a core premise of PSD and Title V permitting. Its defined as…..Building, structure, facility or installation is further defined through 3 criteria: 1, 2, 3All 3 of these criteria need to be to be considered a single source.Let’s take a closer look at the nuances of the 3 factors
  • The 3 criteria are not defined in the regulations; regulatory agencies have relied on EPA guidance when making single source determinations. Common control is presumed when one company locates on another’s property. In addition, for common control, the prevailing guidance looks at some of the following, which largely focus on the business relationship and sharing of resources like workforce, management and equipment.
  • The 2nd factor, contiguous or adjacent property, also is not specifically defined and is not based in literal terms of a set distance between two facilities. A key distinction is that facilities do not necessarily need to physically be next door neighbors. And the guidance tends to be all over the place. EPA has said 20 miles is too far to be considered contiguous. Some states will consider sources contiguous if they are within a ¼ mile; some use ½ mile, others like GA strictly rely on case by case evaluations. The McCarthy memo, issued in 2009, reinforced that proximity should not be the sole factor to evaluate contiguous or adjacent. It recognized that it should be a consideration but not the primary factor. This memo was based on position related to oil and gas industry, which as we will see, will be a key player in the future of the application of the 3 factor test. So, the name of the game for the contiguous or adjacent property factor includes functional interrelatedness – specifically where a physical connection (rail line, pipe line) or a shared operational relationship exists, it is a good possibility that two sources could be considered contiguous or adjacent, even at a distance of several miles.
  • The third criterion is typically the least complicated. It looks at the SIC Code of the co-located facilities, namely the primary 2-digit classification (e.g., 28 for chemical facilities, 49 for power facilities). When they are the same, case closed. However, even when they are not the same, facilities can be aggregated if they are judged to meet a primary activity or support facility testEach facility is evaluated based on its principal product produced, services rendered, or revenues. If the primary activity is deemed to be the same, then we have one sourceIf the primary activity test fails, can one of the facilities be considered a support activity? Where more than 50% of the output or services provided by one facility is dedicated to another facility that it supports, then a support facility relationship is presumed to exist. For example a crude pipeline facility and a bulk terminal, different SIC but would be considered a single source because the pipeline supports the bulk terminal. Let’s take a look at some illustrative examples.
  • The Summit decision specifically evaluated the adjacent criteria. The case involved an oil and gas sweetening plant and related wells in Michigan. EPA had decided that the plant and wells were a single source for the purposes of title V permitting even though they are several miles apart. EPA’s decision was based on interrelatedness, due to the physical connection between the sites (infrastructure-wise and operationally). Summit challenged the decision, focusing on proximity – and won. The court ruled that adjacent shall not consider interrelatedness. This decision applies only in MI, OH, TN, and Kentucky; outside of those states, the traditional 3 factor still applies. Or is this a sign of a new precedent to be established across the country.
  • As you move forward with your projects and bump up against the issue of aggregation, remember, the past decisions by EPA and other agencies are a case by case basis. Do not rely on these decisions for your situation. Ask yourself these questions to help you evaluate if aggregation is applicable for your situation?
  • Because of the lack of regulatory basis for aggregation, a pre-application meeting with EPD is strongly encourage. EPD may be able to provide you with its opinion but it may also need to go to EPA for further supports. As with any permitting project, timing is always an issue so additional opinions from EPA will further delay the process.When you are able to demonstrate that you do not have a single source, documenting the rationale to come to this conclusion – include emissions information, engineering design specs, and other business related documentation (contracts, leases, etc.).
  • Aggregation in Air Permitting - When Two Sources Become One

    1. 1. Aggregation in Air Permitting – When Two Sources Become One Presented to 2013 GAWP Industrial Conference & Expo by All4 Inc. Mark Wenclawiak, CCM | mwenclawiak@all4inc.com | 770-213-3468 March 26, 2013 www.all4inc.com Kimberton, PA | 610.933.5246 Columbus, GA | 706.221.7688
    2. 2. Outline  Why is this topic an issue? • Avoiding major source status • Case-by-case scenarios  What is a “stationary source?” • Three longstanding criteria • Illustrative examples  A new twist • Summit Petroleum Corp v EPA, et. al.   2 Considerations for your projects Questions and open discussions Your environmental compliance is clearly our business.
    3. 3. Why Is This Topic An Issue? Permitting Implications Diverse Operating Scenarios
    4. 4. Why Is This Topic An Issue?  Two sources are better than one • Avoid major source status!  Companies co-locating on property • Same parent company; subsidiary; joint ventures; infrastructure sharing  4 Projects related to sustainability creating symbiotic relationships • Landfill gas-to-energy projects • Combined heat and power • One company’s waste is another company’s raw material Your environmental compliance is clearly our business.
    5. 5. What Is a Stationary Source? 3 Factor Test Single Source Determination
    6. 6. What Is A Stationary Source?  Core premise of PSD and Title V permitting • Stationary source: “Any building, structure, facility, or installation which emits or may emit any air pollutant subject to regulation under the CAA.” • Three decades of applying the “3 factor test” 1. under common control; and, 2. located on 1 or more contiguous or adjacent properties; and, 3. in the same two-digit SIC code or 1 of the facilities is considered a support facility to the other  6 Single source determination Your environmental compliance is clearly our business.
    7. 7. Common Control  “Common control” – presumed with co-location • Dependency (whether 1 operation can function without the other) • Landlord-tenant (contract for services) • Common workforce (executives, managers, maintenance, operators) • Support services (shared administrative services) • Shared equipment (production, maintenance or support equipment) • Shared pollution controls • Legal responsibility (1 operation responsible for all) 7 Your environmental compliance is clearly our business.
    8. 8. Contiguous or Adjacent  “Contiguous or adjacent property” • Not defined in literal terms or through an empirical formula • McCarthy memo (September 2009) • Distance between operations (“proximity”) AND • Functional interrelatedness   Physical connections (dedicated rail lines, pipe lines, roadways, conveyors, taxiways) Shared operational relationships (common parking or service areas, workforce, security) • Oil and gas industry 8 Your environmental compliance is clearly our business.
    9. 9. Same SIC Code  “Same SIC Code” • Simple when co-located facilities have the same code • Still can be aggregated with different codes if they meet a primary activity or support facility test • Primary activity based on principal product produced, services rendered, or revenues • Support activity: “those which convey, store, or otherwise assist in the production of the principal product;” 50% of output or services  9 Crude pipeline facility (SIC 4612) for a bulk terminal (SIC 5171) = one source Your environmental compliance is clearly our business.
    10. 10. Example – Common Control  10 ABC Power Company (ABC) is located next to XYZ Manufacturing Company (XYZ). XYZ purchases power from ABC to support its manufacturing operations. ABC, however, produces power for thousands of customers within the State. In this example, we have two separate facilities. ABC, though supporting XYZ, also provides power to thousands of other customers. Therefore, ABC clearly is an independent power company, whose primary activity goes beyond supporting XYZ's operations. Your environmental compliance is clearly our business.
    11. 11. Example – Common Control  11 A wood furniture manufacturing plant owns and operates a wood-fired electric generating boiler. The electricity that is generated from this boiler is sold to a power company for use and distribution to its customers throughout the State. The boiler does not directly supply any power to the wood manufacturing plant. However, this boiler does primarily support the wood furniture manufacturing business because its main purpose is to provide an innovative means of disposing of the wood waste from the manufacturing plant. Therefore, in this case, the wood-fired electric generating boiler would be classified as part of the wood furniture manufacturing operations and would be considered to be part of the same facility. Your environmental compliance is clearly our business.
    12. 12. Example – Contiguous/Adjacent    12 Two sources separated by three miles were determined to be adjacent because a significant amount of material is transported between them on a daily basis. Two sections of a refinery approximately two miles apart were determined to be adjacent because neither section produces products independently due to a connection via pipeline between them. A landfarm and a brewery are located approximately 6 miles apart. The landfarm disposes of the brewery’s wastewater and is connected to the brewery via pipeline. The brewery and landfarm were determined to be adjacent because the operation of the landfarm is integral to the operation of the brewery. Your environmental compliance is clearly our business.
    13. 13. A New Twist Summit Petroleum Corp v EPA, et. al.
    14. 14. A New Twist        14 Summit decision evaluated “adjacent” Oil and gas sweetening plant and related wells Reversed consideration of interrelatedness Adjacent related only to physical proximity Applies only in Michigan, Ohio, Tennessee, Kentucky Otherwise, continue to apply 3 factor test Or is it the sign of things to come? Your environmental compliance is clearly our business.
    15. 15. Considerations for Your Project Be Prepared to Support Your Claims
    16. 16. Considerations   Remember – case-by-case basis Ask yourself questions about your project • Do facilities share common workforces, intermediates, products, byproducts? • Is there a contractual arrangement for goods and services? Financial arrangements between entities? • If 2 facilities were sited farther apart, would that affect the degree to which they are dependent on each other? • If one shuts down, what are the limitations on the other to pursue outside business interest? 16 Your environmental compliance is clearly our business.
    17. 17. Considerations  Pre-application meeting • EPD buy-in or does it need to get elevated to EPA? • Schedule impacts if a decision is needed from agency  Maintain documentation to support determination that not a single source • Emissions information • Engineering design specifications • Business documentation 17 Your environmental compliance is clearly our business.
    18. 18. Questions and Open Discussions Mark Wenclawiak, CCM| mwenclawiak@all4inc.com | 770-213-3468 www.all4inc.com Kimberton, PA | 610.933.5246 Columbus, GA | 706.221.7688

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