Source Determination for Certain Emission Units in the Oil and Natural Gas Sector, 56579-56592 [2015-21026]

Agencies

• ENVIRONMENTAL PROTECTION AGENCY

[Federal Register Volume 80, Number 181 (Friday, September 18, 2015)]
[Proposed Rules]
[Pages 56579-56592]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2015-21026]



Federal Register / Vol. 80, No. 181 / Friday, September 18, 2015 / 
Proposed Rules

[[Page 56579]]


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ENVIRONMENTAL PROTECTION AGENCY

40 CFR Parts 49, 51, 52, et al.

[EPA-HQ-OAR-2013-0685; FRL-9931-97-OAR]
RIN 2060-AS06


Source Determination for Certain Emission Units in the Oil and 
Natural Gas Sector

AGENCY: Environmental Protection Agency (EPA).

ACTION: Proposed rule.

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SUMMARY: The U.S. Environmental Protection Agency (EPA) is proposing to 
clarify the term ``adjacent'' in the definitions of: ``building, 
structure, facility or installation'' used to determine the 
``stationary source'' for purposes of the Prevention of Significant 
Deterioration (PSD) and Nonattainment New Source Review (NNSR) programs 
and ``major source'' in the title V program as applied to the oil and 
natural gas sector. The EPA has previously issued guidance on how to 
assess ``adjacency'' for this industry, but the use of the guidance has 
been challenged, resulting in uncertainty for the regulated community 
and for permitting authorities. The EPA is proposing to clarify how 
properties in the oil and natural gas sector are determined to be 
adjacent in order to assist permitting authorities and permit 
applicants in making consistent source determinations for this sector. 
In this action, the EPA is proposing two options for determining 
whether two or more properties in the oil and natural gas sector are 
``adjacent'' for purposes of defining the ``stationary source'' in the 
PSD and NNSR programs, and ``major source'' for the title V program 
(referred to collectively as ``source''). The preferred option would 
define ``adjacent'' for the oil and natural gas sector in terms of 
proximity. The EPA is co-proposing and taking comment on an alternative 
option to define ``adjacent'' in terms of proximity or functional 
interrelatedness.

DATES: Comments. Comments must be received on or before November 17, 
2015.
    Public Hearing. The EPA will hold public hearings on the proposal. 
Details will be announced in a separate document.

ADDRESSES: Comments. Submit your comments, identified by Docket ID No. 
EPA-HQ-OAR-2013-0685, to the Federal eRulemaking Portal: https://www.regulations.gov. Follow the online instructions for submitting 
comments. Once submitted, comments cannot be edited or withdrawn. The 
EPA may publish any comment received to its public docket. Do not 
submit electronically any information you consider to be Confidential 
Business Information (CBI) or other information whose disclosure is 
restricted by statute. If you need to include CBI as part of your 
comment, please visit https://www.epa.gov/dockets/comments.html for 
instructions. Multimedia submissions (audio, video, etc.) must be 
accompanied by a written comment. The written comment is considered the 
official comment and should include discussion of all points you wish 
to make. For additional submission methods, the full EPA public comment 
policy, and general guidance on making effective comments, please visit 
https://www.epa.gov/dockets/comments.html. For additional instructions 
on submitting comments, go to the SUPPLEMENTARY INFORMATION section of 
this document.

FOR FURTHER INFORMATION CONTACT: For further general information on 
this rulemaking, contact Ms. Cheryl Vetter, Office of Air Quality 
Planning and Standards (C504-03), U.S. Environmental Protection Agency, 
by phone at (919) 541-4391, or by email at vetter.cheryl@epa.gov.

SUPPLEMENTARY INFORMATION:

I. General Information

A. Does this proposal apply to me?

    Entities potentially affected directly by this proposal include 
owners and operators of sources of new and modified oil and gas sector 
operations. Such entities are expected to be in the groups indicated 
below. In addition, state, local and tribal governments may be affected 
by the rule if they update state rules to adopt these changes.
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    \1\ North American Industry Classification System (NAICS).

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            Industry group                       NAICS Code\1\
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Oil and Gas Extraction...............  21111.
Crude Petroleum and Natural Gas        211111.
 Extraction.
Natural Gas Liquid Extraction........  211112.
Drilling Oil and Gas Wells...........  213111.
Support Activities for Oil and Gas...  213112.
Natural Gas Distribution.............  221210.
Pipeline Distribution of Crude Oil...  486110.
Pipeline Distribution of Natural Gas.  486210.
Federal Government...................  May Be Affected.
State/Local/Tribal Government........  May Be Affected.
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B. What should I consider as I prepare my comments for the EPA?

    When submitting comments, remember to:
     Identify the rulemaking by docket number and other 
identifying information (subject heading, Federal Register date and 
page number).
     Follow directions--The agency may ask you to respond to 
specific questions or organize comments by referencing a Code of 
Federal Regulations (CFR) part or section number.
     Explain why you agree or disagree; suggest alternatives 
and substitute language for your requested changes.
     Describe any assumptions and provide any technical 
information and/or data that you used.
     If you estimate potential costs or burdens, explain how 
you arrived at your estimate in sufficient detail to allow for it to be 
reproduced.
     Provide specific examples to illustrate your concerns, and 
suggest alternatives.
     Explain your views as clearly as possible, avoiding the 
use of profanity or personal threats.
     Make sure to submit your comments by the comment period 
deadline identified.

[[Page 56580]]

C. Where can I get a copy of this document and other related 
information?

    In addition to being available in the docket, an electronic copy of 
this action will be posted at https://www.epa.gov/airquality/oilandgas/actions.html.

D. How is this document organized?

    The information presented in this document is organized as follows:

I. General Information
    A. Does this proposal apply to me?
    B. What should I consider as I prepare my comments for the EPA?
    C. Where can I get a copy of this document and other related 
information?
    D. How is this document organized?
II. Statutory, Regulatory and Policy Background for Proposal
    A. Statutory and Regulatory Background
    B. How has the EPA applied the statutory and regulatory 
definitions?
    C. Oil and Natural Gas Sector
    D. What are the air emissions resulting from the oil and natural 
gas sector?
    E. How does the EPA regulate air emissions from the oil and 
natural gas sector?
    F. How has the EPA defined the source for the oil and natural 
gas sector previously?
    G. What approaches has the EPA taken recently regarding 
implementation of NSR and title V permitting for oil and natural gas 
sector sources?
    H. What is the purpose of this proposed action?
    I. Policy Discussion
    J. Why is the EPA proposing this action at this time?
    K. What is the effect of this proposed rulemaking on other 
industries?
    L. What is the effect of this proposed rulemaking on permitting 
authorities?
III. What are the options that the EPA is considering?
    A. Define Source Based on Proximity (Similar to the NESHAP)
    B. Define Source To Include Exclusively Functionally 
Interrelated Equipment
    C. Impacts of the Options on Air Permitting
    D. Proposal is Limited to Onshore Oil and Gas Operations
IV. Environmental Justice Considerations
V. Statutory and Executive Order Reviews
    A. Executive Order 12866: Regulatory Planning and Review and 
Executive Order 13563: Improving Regulation and Regulatory Review
    B. Paperwork Reduction Act
    C. Regulatory Flexibility Act
    D. Unfunded Mandates Reform Act
    E. Executive Order 13132: Federalism
    F. Executive Order 13175: Consultation and Coordination With 
Indian Tribal Governments
    G. Executive Order 13045: Protection of Children From 
Environmental Health and Safety Risks
    H. Executive Order 13211: Actions Concerning Regulations That 
Significantly Affect Energy Supply, Distribution, or Use
    I. National Technology Transfer and Advancement Act
    J. Executive Order 12898: Federal Actions To Address 
Environmental Justice in Minority Populations and Low-Income 
Populations
    K. Determination Under Section 307(d)
    Statutory Authority

 II. Statutory, Regulatory and Policy Background for Proposal

A. Statutory and Regulatory Background

    The major New Source Review (NSR) programs found in parts C and D 
of Title I of the Clean Air Act (CAA or Act) are preconstruction review 
and permitting programs that apply to new and modified major stationary 
sources of air pollutants subject to regulation under the Act. In areas 
where air quality does not meet the primary or secondary National 
Ambient Air Quality Standards (NAAQS) for a given pollutant and in the 
ozone transport region (OTR), which includes states in the Northeast 
and Mid-Atlantic regions, the program is implemented under part D of 
title I of the Act. This is called the ``nonattainment'' NSR (NNSR) 
program. In areas that meet the NAAQS, or ``attainment'' areas, or 
where we \2\ cannot determine whether those standards are met, or 
``unclassifiable'' areas, the requirements under part C of title I of 
the Act apply. This program is called the PSD program. The regulations 
for these two NSR programs are found in 40 CFR 51.165, 51.166, 52.21, 
52.24 and part 51, appendix S.
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    \2\ In this preamble, the term ``we'' and ``our'' refers to the 
EPA.
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    The NSR permitting programs are primarily implemented by state and 
local permitting authorities either through programs in their approved 
State Implementation Plans (SIPs) or through delegation of the federal 
program by the EPA. The EPA implements the federal PSD program and the 
NNSR program directly in reservation areas of Indian country and non-
reservation areas of Indian country over which a tribe or the EPA has 
demonstrated that a tribe has jurisdiction, unless a tribe has 
developed a Tribal Implementation Plan (TIP). The EPA may also 
implement the federal PSD program directly in areas where the state or 
local area has not developed a SIP-approved program or has not 
requested delegation of the program by the EPA. States are also 
required to have legally enforceable procedures that will allow them to 
prevent the construction or modification of a source that will 
interfere with attainment or maintenance of a NAAQS. In addition to the 
major source permitting programs, this is typically accomplished 
through a state or local ``minor'' new source permitting program. The 
EPA implements a minor source permitting program in all reservation 
areas of Indian country, unless a tribe has developed a TIP and in any 
non-reservation areas of Indian country for which a tribe, or the EPA 
acting in the tribe's place, has demonstrated that the tribe has 
jurisdiction.
    The NSR program applies to new and modified stationary sources of 
emissions. The CAA generally defines the term ``stationary source'' as 
``any source of an air pollutant'' except those emissions from certain 
mobile sources or engines under CAA section 216 [CAA section 302(z)]. 
The Act also defines some other terms that form the basis of specific 
NSR programs. So, for example, the PSD program requires a 
preconstruction permit for any ``major emitting facility'' constructed 
after a particular date [CAA section 164(a)], and defines a ``major 
emitting facility'' as a ``stationary source'' emitting or with the 
potential to emit more than a certain amount of air pollutants [CAA 
section 169(1)].
    Adhering to the statutory language in CAA section 111(a)(3), we 
have defined the term ``stationary source'' to mean ``any building, 
structure, facility, or installation which emits or may emit a 
regulated NSR pollutant'' [40 CFR 52.21(b)(5); 40 CFR 51.165(a)(1)(i); 
40 CFR 51.166(b)(5)]. We have then further defined the four statutory 
terms ``building, structure, facility, or installation'' collectively 
in our NSR regulations to mean ``all of the pollutant-emitting 
activities which belong to the same industrial grouping, are located on 
one or more contiguous or adjacent properties, and are under the 
control of the same person (or persons under common control),'' where 
the ``same industrial grouping'' refers to the two-digit Standard 
Industrial Classification code [40 CFR 52.21(b)(6); 40 CFR 
51.165(a)(1)(ii); 40 CFR 51.166(b)(6)].\3\ These three regulatory 
factors: (1) Same industrial grouping; (2) location on contiguous or 
adjacent properties; and (3) under the control of the same person or 
persons must be evaluated on a case-by-case basis for each permitting 
decision.
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    \3\ The four-digit SIC code was the only code system in use at 
the time our rules were developed. This classification system has 
since been replaced by the six-digit NAICS, which was developed with 
Canada and Mexico, and is used for classifying North American 
businesses. While the SIC codes are no longer updated, the United 
States Department of Labor's Occupational Safety and Health 
Administration still maintains the list of SIC codes for reference.
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    In addition to the pre-construction permitting requirements of the 
NSR

[[Page 56581]]

program, title V of the CAA also requires a ``major source'' to obtain 
an operating permit, known as a title V permit [CAA section 501(2); CAA 
502]. The title V definition of major source refers to the definitions 
in other sections of the Act, including the definition of major source 
for hazardous air pollutants (CAA section 112), the general CAA 
definition of major stationary source (CAA section 302) and the 
definition of major stationary source under the NNSR program. Each of 
these programs set different numerical emissions thresholds at which 
permitting requirements apply, which then become the basis for the 
major source determination in the title V program.
    Our operating permit regulations define major source as ``any 
stationary source (or group of stationary sources that are located on 
one or more contiguous or adjacent properties, and are under common 
control of the same person (or persons under common control)) belonging 
to a single major industrial grouping . . .'' (40 CFR 70.2, 71.2). As 
in the NSR programs, we have defined industrial grouping to refer to 
the two-digit SIC code (40 CFR 70.2, 71.2). Many state and local 
permitting authorities have approved title V permitting programs that 
have adopted similar definitions.

B. How has the EPA applied the statutory and regulatory definitions?

    Source owner/operators and permitting authorities assess the three 
regulatory factors--same industrial grouping, location on contiguous or 
adjacent property, and under common control--on a case-by-case basis to 
determine which pollutant-emitting activities should be included as 
part of a single source when determining applicability of the NSR and 
title V permitting requirements. In the original promulgation and later 
application of these three factors, we have been mindful of the 
direction the D.C. Circuit Court of Appeals provided that the 
``source'' for permitting purposes should comport with the ``common 
sense notion of a plant'' (45 FR 52694, August 7, 1980 citing Alabama 
Power v. Costle). In the Alabama Power decision, the Court said that 
EPA cannot treat contiguous and commonly owned units as a single source 
unless they ``fit within the four statutory terms . . .'' (i.e., the 
terms building, structure, facility and installation). The Court said 
that we should ``. . . provide for the aggregation, where appropriate, 
of industrial activities according to considerations such as proximity 
and ownership.'' Alabama Power Co. v. Costle, 636 F. 2d 323, 397 (D.C. 
Cir. 1979). Examples of the case-by-case determinations made by the 
EPA, or by permitting authorities with the EPA's input, applying these 
principles over several decades of NSR permitting are available at 
https://www.epa.gov/region07/air/nsr/nsrindex.htm.
    The EPA later promulgated the title V major source definition found 
at 40 CFR 70.2 (57 FR 32250, July 21, 1992) and 71.2 (61 FR 34202, 
34210, July 1, 1996). Not only were these definitions consistent with 
each other, but EPA was also clear that the language and application of 
the title V definition was to be consistent with the language and 
application of the PSD definition contained in section 52.21 (61 FR 
34210, July 1, 1996). Examples of case-by-case source determinations 
made by the EPA, or by permitting authorities with the EPA's input, 
that apply the title V definitions are available at https://www.epa.gov/region7/air/title5/t5index.htm.
    Reviewing both the NSR and title V guidance regarding source 
determinations, it is clear that we have used the term ``contiguous or 
adjacent'' to mean that the land associated with the source (i.e., 
building, structure, facility or installation) is connected to (i.e., 
contiguous) or nearby (i.e., adjacent) another source. In response to 
the Alabama Power decision, the EPA promulgated the 1980 PSD rule, 
including the definitions used to determine the scope of the source for 
permitting purposes (45 FR 52676, August 7, 1980). We explained that 
the 3-part test (same industrial grouping, location on contiguous or 
adjacent property, and under common control) would comply with the 
court decision by reasonably comporting with the purposes of the PSD 
program, approximating the common sense notion of a plant, and avoiding 
aggregating pollutant-emitting activities that would not fit within the 
ordinary meaning of building, structure, facility or installation (45 
FR at 52694, August 7, 1980). In so doing, we considered but chose not 
to add a fourth factor or ``functional interrelationship'' test to the 
criteria for defining a source, as at that time, we believed that such 
a test would ``embroil[] the Agency in numerous fine-grained analyses'' 
(45 FR 52695, August 7, 1980). In the same rulemaking, we said that we 
did not intend ``source'' to include activities that are many miles 
apart along something like a pipeline or transmission line as a single 
source, but also noted that we were ``unable to say precisely at this 
point how far apart activities must be in order to be treated 
separately'' (45 FR 52695, August 7, 1980).
    Even though our regulations use the term ``adjacent,'' they do not 
define ``adjacent.'' Similarly, even though the EPA's historic 
interpretation is that ``adjacent'' means ``nearby,'' neither our 
regulations nor our historic interpretations set a specific distance 
that we would consider ``nearby.'' Over the years, the EPA has 
considered both the distance between two or more sources and whether 
they share an operational dependence or functional interrelatedness to 
determine whether they are ``adjacent.'' Even though our regulations do 
not explicitly define ``adjacent,'' we have provided policy 
interpretations of ``adjacency'' over time in the context of individual 
permitting actions many times because we were asked by permitting 
authorities to advise them on how to define a source within a specific 
permitting action. As is the case for most permitting-related 
decisions, these determinations were made on a case-by-case basis, 
considering the specific facts in each instance. In many of these cases 
and as explained in the examples below, we cited the principle of the 
``common sense notion of a plant'' in making a determination regarding 
the scope of the source.
    In one example, we determined that two aluminum smelting operations 
within the same SIC code (3334), located approximately 3.4 miles apart 
and commonly owned by Alcoa, should be considered a single source for 
purposes of NSR applicability. Alcoa requested confirmation of this 
single source determination after it purchased one of the plants from 
another company, allowing both operations to share common control and 
management as well as a single SIC code. The EPA determined that the 
two operations should be considered adjacent because of the shared 
materials and personnel and the company's assertion that the two plants 
would be operated as one facility.\4\
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    \4\ Riva, Steven C. ``Alcoa Messena Modernization Project and 
Request for a Single Source Determination.'' March 9, 2009. EPA 
Region 7 Air Program New Source Review Program Policy & Guidance 
Index available at https://www.epa.gov/region07/air/nsr/nsrmemos/alcoany.pdf and in the docket for this rulemaking.
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    In one case specific to the oil and natural gas sector, the EPA 
determined, in a letter issued by EPA Region 5 to Summit Petroleum 
Corporation, that an oil and gas sweetening plant and approximately 100 
oil and gas wells located within the boundaries of the Saginaw Chippewa 
Band's Isabella Reservation in Michigan were a single

[[Page 56582]]

major source for purposes of the title V operating permit program.\5\ 
The EPA based its decision on its evaluation that the sweetening plant 
and wells share the same two-digit SIC code and are under common 
control (Summit Corporation). In addition, the EPA concluded that the 
plant and the wells were adjacent and, thus, a single source given 
their proximity and exclusive interdependence as demonstrated by the 
following facts: All of the wells are located within an 8-mile radius 
of the sweetening plant; all are connected by a dedicated system of 
pipes; and all oil and gas from the wells must be processed through the 
sweetening plant before it can be marketed. That determination was 
later challenged and overturned, as will be discussed later in this 
notice.
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    \5\ Newton, Cheryl. ``Summit Petroleum Corporation Single Source 
Determination.'' October 18, 2010. EPA Region 7 Air Program New 
Source Review Program Policy & Guidance Index available at https://www.epa.gov/region07/air/nsr/nsrmemos/singler5.pdf and in the docket 
for this rulemaking.
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    Finally, in another example involving the oil and natural gas 
sector, the EPA determined that two natural gas compressor stations 
(Florida River and Wolf Point) and the numerous well sites owned or 
operated by BP and located within the Northern San Juan Basin should 
not be considered a single stationary source. In that situation, unlike 
the Summit Petroleum case discussed previously, there was no dedicated 
interrelationship between the wells and the compressor stations that 
would indicate that they should be treated as a single ``plant.'' Gas 
from the individual wells could flow to the two BP compressor stations, 
or other compressor stations. Gas production from BP's wells would not 
have to stop if one or both of the BP compressor stations were shut 
down. Additionally, the gathering pipeline between the wells and the 
stations co-mingled gas from operators other than BP and the compressor 
stations likewise accepted gas from other operators. The EPA's 
determination that this complex, dynamic system did not resemble a 
``common sense notion of a plant'' was also challenged, and was 
settled.\6\
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    \6\ Videtich, Callie. ``BP American Production Company's Florida 
River Compression Facility Single Source Determination.'' October 
18, 2010. EPA Region 7 Air Program New Source Review Program Policy 
& Guidance Index available at https://www.epa.gov/region07/air/nsr/nsrmemos/singler8.pdf and in the docket for this rulemaking. The 
Environmental Appeals Board (EAB) docket for CAA Appeal No. 10-04 is 
available at https://yosemite.epa.gov/oa/EAB_Web_Docket.nsf/77355bee1a56a5aa8525711400542d23/2c6cf712eac2d7b38525788b00545227!OpenDocument&Highlight=2,CAA,10-04. 
The petition for review by the EAB, EPA Region 8's response, and the 
reply by petitioner are available in the docket for this rulemaking.
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    In each of these examples, the EPA based its opinion on an analysis 
of the specific facts in the individual case. We have not established a 
``bright-line'' distance beyond which we would always consider 
operations to be separate sources. Neither have we established a 
distance within which we would always consider operations to be one 
source. We have also not established that certain operations must 
always (or never) be considered together for permitting purposes.

C. Oil and Natural Gas Sector

    The United States Census Bureau's North American Industry 
Classification System (NAICS) describes the Oil and Gas Extraction 
industry (NAICS Code 2111) as including activities such as 
``exploration for crude petroleum and natural gas; drilling, 
completing, and equipping wells; operation of separators, emulsion 
breakers, de-silting equipment, and field gathering lines for crude 
petroleum and natural gas; and all other activities in the preparation 
of oil and gas up to the point of shipment from the producing 
property.'' \7\ This definition includes activities such as natural gas 
processing and liquids extraction, and sulfur recovery from natural 
gas. Pipeline transmission and distribution of oil and natural gas, and 
storage of natural gas are included in NAICS subsector 486 Pipeline 
Transportation.
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    \7\ U.S. Department of Commerce, United States Census Bureau, 
North American Industry Classification System, 2012 NAICS 
Definition, Sector 21--Mining, Quarrying, and Oil and Gas 
Extraction, 21111 Oil and Gas Extraction https://www.census.gov/cgi-bin/sssd/naics/naicsrch?code=21111&search=2012 accessed 12/03/2013.
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    The EPA has previously described in the preamble to its proposed 
New Source Performance Standard (NSPS) for the oil and natural gas 
sector that this sector includes operations in the extraction and 
production of oil and natural gas, and the processing, transmission and 
distribution of natural gas. For oil, we described the sector as 
including ``all operations from the well to the point of custody 
transfer at a petroleum refinery.'' For natural gas, we described it as 
including all operations from the well to the customer (76 FR 52738, 
52744, August 20, 2011).
    For purposes of this proposed action, we are primarily interested 
in the first two of these: Oil and natural gas production, and natural 
gas processing, or what may be referred to in the industry as 
``upstream'' and ``midstream'' operations. For reasons that will be 
explained later in this notice, we do not intend to apply the proposed 
clarification to operations that take place offshore. Onshore 
production operations include ``the wells and all related processes 
used in the extraction, production, recovery, lifting, stabilization, 
separation, or treating of oil and/or natural gas (including 
condensate). Production components may include, but are not limited to, 
wells and related casing head, tubing head and ``Christmas tree'' 
piping, as well as pumps, compressors, heater treaters, separators, 
storage vessels, pneumatic devices and dehydrators. Production 
operations also include the well drilling, completion and workover 
processes, and include all the portable non-self-propelled apparatus 
associated with those operations. Production sites include not only the 
``pads'' where the wells are located, but also include standalone sites 
where oil, condensate, produced water and gas from several wells may be 
separated, stored and treated. The production sector also includes the 
low pressure, small diameter, gathering pipelines and related 
components that collect and transport the oil, gas and other materials 
and wastes from the wells to the refineries or natural gas processing 
plants (76 FR 52744, August 20, 2011).
    Natural gas processing operations are aimed at removing impurities 
and other by-products from the extracted gas. Natural gas consists 
primarily of methane. It may also contain water vapor, hydrogen sulfide 
(H2S), carbon dioxide (CO2), helium, nitrogen and 
other compounds. It commonly exists in mixtures with other 
hydrocarbons, referred to as natural gas liquids (NGL). Natural gas 
must be processed to remove these other compounds and gases before the 
gas is considered pipeline quality suitable for transmission and 
distribution. Natural gas processing removes and recovers the liquids, 
and non-methane gases, all or some of which may be sold.

 D. What are the air emissions resulting from the oil and natural gas 
sector?

    Emissions from the oil and natural gas sector include volatile 
organic compounds (VOC), greenhouse gases (including methane), 
H2S, sulfur dioxide (SO2), carbon monoxide (CO) 
and nitrogen oxides (NOX). VOCs, including some hazardous 
air pollutants (HAP), are generally emitted during well completions, 
from equipment leaks and from storage tanks. Emissions of the 
greenhouse gas methane may also come from these sources while emissions 
of the greenhouse gas CO2 come primarily from combustion 
sources, such as flares, engines and compressors. Emissions of

[[Page 56583]]

NOX and CO are also a result of these combustion operations. 
Emissions of sulfur compounds come from production and processing 
operations that treat ``sour gas,'' that is, natural gas with an 
H2S content of greater than 0.25 gr/100 scf.

E. How does the EPA regulate air emissions from the oil and natural gas 
sector?

    In addition to the source-specific permitting required by the NSR 
and title V programs, air emissions from the oil and natural gas sector 
are also regulated through other CAA-based rules. The EPA first listed 
crude oil and natural gas production for NSPS development in 1979 (44 
FR 49222, August 21, 1979). An NSPS, 40 CFR part 60, subpart KKK, was 
promulgated in 1985 that addressed VOC emissions from leaking 
components at onshore natural gas processing facilities (50 FR 26122, 
June 24, 1985). A second NSPS, regulating SO2 emissions from 
natural gas processing plants, 40 CFR part 60, subpart LLL, was 
promulgated in 1985 (50 FR 40158, October 1, 1985). In 2012, the EPA 
finalized revisions to these NSPS and established standards in 40 CFR 
part 60, subpart OOOO, limiting VOC emissions from gas wells, 
centrifugal compressors, reciprocating compressors, pneumatic 
controllers and storage vessels (77 FR 49490, August 16, 2012). In 2013 
and 2014, the EPA made certain amendments to the 2012 NSPS standards in 
order to improve implementation of the standards (78 FR 58416, 
September 23, 2013 and 79 FR 79018, December 31, 2014). Separately, the 
EPA is proposing to expand the NSPS (subpart OOOO) to regulate several 
additional categories of emitting equipment in this sector.
    The EPA has also regulated emissions of HAP from certain oil and 
natural gas sector processes through use of National Emissions 
Standards for Hazardous Air Pollutants (NESHAP), specifically the Oil 
and Natural Gas Production NESHAP (40 CFR part 63, subpart HH) and 
Natural Gas Transmission and Storage NESHAP (40 CFR part 63, subpart 
HHH). These regulations were first promulgated in 1999 (64 FR 32610, 
June 17, 1999) and were amended in 2012 (77 FR 49490, August 16, 2012).

F. How has the EPA defined the source for the oil and natural gas 
sector previously?

    As discussed in the previous section, selected equipment and 
emitting activities involved in oil and gas production are regulated 
under both the NSPS and NESHAP programs. The NSPS and NESHAP focus on 
technology-based standards for industrial source categories, and do not 
approach the regulation of stationary sources in the same way as 
required for NSR permitting.
    The definition of a major source in the NESHAP program is similar 
to, but distinguishable from, the definition of stationary source used 
in the NSR permitting programs. The NESHAP program defines a major 
source as a stationary source or a group of stationary sources ``within 
a contiguous area'' (40 CFR 63.2). This ``major source'' definition 
differs from the definition of stationary source used in the NSR 
permitting programs because it does not include ``adjacent properties'' 
[e.g., 40 CFR 52.21(b)(5)]. A major source under CAA section 112 is 
further defined as any stationary source or group of stationary sources 
``that emits or has the potential to emit considering controls, in the 
aggregate 10 tons per year (tpy) or more of any HAP or 25 tpy or more 
of any combination of HAP.'' [CAA section 112(a)(1)]. An area source of 
HAP is one that is not a major source of HAP.
    When Congress revised CAA section 112 in 1990, however, it included 
a specific provision discussing how oil and gas wells and pipeline 
facilities were to be treated with respect to regulating emissions of 
HAP [CAA section 112(n)(4)(A)]. This section provides that 
``notwithstanding'' the definitions of major source in section 112, the 
emissions from any oil or gas exploration or production well (with its 
associated equipment) and emissions from any pipeline compressor or 
pump station ``shall not be aggregated with emissions from other 
similar units'' to determine whether the units or stations are major 
sources. Congress specified this whether the units are in a contiguous 
area or under common control. In the case of any oil or gas exploration 
or production well (with its associated equipment), such emissions 
``shall not be aggregated for any purpose under this section.''
    In the NESHAP for Oil and Natural Gas Production Facilities, the 
EPA defines the affected source consistent with this requirement of the 
Act, including which associated equipment should be part of the 
facility, which associated equipment could potentially be aggregated, 
and which cannot be aggregated as per CAA section 112(n)(4)(A) [40 CFR 
63.760(b)]. The EPA defines this associated equipment to include 
``equipment associated with an oil or natural gas exploration or 
production well, and includes all equipment from the wellbore to the 
point of custody transfer'' (40 CFR 63.761). The EPA defines the 
facility for purposes of the NESHAP to mean ``the grouping of equipment 
where hydrocarbon liquids are processed, upgraded (i.e., remove 
impurities or other constituents to meet contract specifications), or 
stored prior to the point of custody transfer'' or where natural gas is 
``processed, upgraded, or stored'' prior to natural gas transmission 
and storage. For the purpose of the NESHAP major source determination, 
facility (including a building, structure, or installation) means oil 
and natural gas production and processing equipment that is located 
within the boundaries of an individual surface site as defined in the 
NESHAP (40 CFR 63.761).
    Furthermore, the EPA defines surface site as ``any combination of 
one or more graded pad sites, gravel pad sites, foundations, platforms, 
or the immediate physical location upon which equipment is physically 
affixed'' (40 CFR 63.761). The effect of these definitions is to define 
the affected facility based on the emissions from equipment and 
activities that are in close proximity to each other. The EPA stated 
that its intent in defining affected facility in this way was both to 
comply with the specific language in CAA section 112(n)(4), and to 
reduce the burden on owners and operators in making source 
determinations. The EPA stated at that time its belief that it was not 
reasonable to aggregate emissions from surface sites that are located 
on the same lease, but are at great distances from each other, even 
though they would be under common control (64 FR 32618, June 17, 1999).

G. What approaches has the EPA taken recently regarding implementation 
of NSR and title V permitting for oil and natural gas sector sources?

    As was the case with other industry categories, the EPA initially 
approached permitting decisions in the oil and natural gas sector on a 
case-by-case basis without any specific guidance until 2007. At that 
time, because of an increase in oil and gas development, and an 
increase in permit activity, the EPA issued the first guidance document 
specific to this industry. The EPA built on the idea of using the 
surface site, as defined in 40 CFR 63.761, and the proximity of surface 
sites to each other in permitting guidance, when it issued a guidance 
document titled ``Source Determinations for Oil and Gas Industries'' in 
2007.\8\ This 2007 memo is

[[Page 56584]]

relevant to our proposed action because it acknowledged that source 
determinations within the oil and gas industry may not be as 
straightforward as those within other regulated industries. We note 
that even in cases that clearly meet the tests of same SIC code and 
common control, the nature of oil and gas exploration and production 
operations may require a detailed evaluation to determine whether 
sources are on contiguous or adjacent properties. Production fields, 
even if under the control of a single operator, may cover large areas. 
Unlike many other industries, however, the expanse of land on which 
these commonly-controlled operations are located is frequently not 
owned or controlled by the owner/operator of the oil and gas activity. 
Instead, the producers may control only the surface area that holds the 
well and associated production equipment.
---------------------------------------------------------------------------

    \8\ Wehrum, William. ``Source Determinations for Oil and Gas 
Industries.'' January 12, 2007. EPA Region 7 Air Program New Source 
Review Program Policy & Guidance Index available at https://www.epa.gov/region07/air/nsr/nsrmemos/oilgas.pdf and in the docket 
for this rulemaking.
---------------------------------------------------------------------------

    As discussed earlier in this notice, EPA has previously said that 
it would not consider all facilities along a pipeline to be one source. 
The 2007 memo built upon that idea to conclude that, for the oil and 
gas production industry, ``we do not believe determining whether two 
activities are operationally dependent drives the determination as to 
whether two properties are contiguous or adjacent, because it would 
embroil the Agency in precisely the fine-grained analysis we intended 
to avoid and would potentially lead to results which do not adhere to 
the common sense notion of a plant.'' Thus, the 2007 memo acknowledged 
that permitting authorities may consider proximity, and not operational 
dependence, as the most informative factor in determining the scope of 
a source, and recommended the approach used in CAA section 112 and the 
NESHAP for Oil and Natural Gas Production Facilities (the ``surface 
site'') as the starting point for determining the boundaries of the 
source for NSR and title V. Beyond the surface site, the memo 
recommends that permitting authorities consider aggregating multiple 
surface sites if they are in close proximity, i.e., physically adjacent 
or separated by no more than a short distance. However, consistent with 
the EPA's overall permitting practice, the 2007 memo concluded that the 
decision of whether a permitting authority should aggregate two or more 
pollutant-emitting activities into a single source for permitting 
remains a case-by-case decision taking into consideration the factors 
relevant to the specific case.
    In 2009, the EPA withdrew the 2007 memo.\9\ In doing so, we 
reinstated the use of the fundamental criteria for making source 
determinations for the oil and natural gas sector based on the use of 
the three factors contained in our regulations; same SIC code, common 
control, and location on contiguous or adjacent property. This fact-
specific examination is consistent with the EPA's historical practice 
in other industries, and is in contrast to the simplified approach of 
relying principally on proximity that was the focus of the 2007 
memorandum. From 2009 forward, the EPA recommended that permitting 
authorities conduct each source determination based on a case-by-case 
evaluation of the emissions activities at each building, structure, 
facility or installation. The 2009 memo acknowledged that proximity 
might well serve as the overwhelming factor in a permitting authority's 
source determination decision, but the conclusion could only be 
justified after examining all relevant factors, consistent with 
regulatory requirements and historical practice.
---------------------------------------------------------------------------

    \9\ McCarthy, Gina. ``Withdrawal of William Wehrum's January 12 
2007 Issued Guidance Memo `Source Determinations for Oil and Gas 
Industries'.'' September 22, 2009. EPA Region 7 Air Program New 
Source Review Program Policy & Guidance Index available at https://www.epa.gov/region07/air/nsr/nsrmemos/oilgaswithdrawal.pdf and in 
the docket for this rulemaking.
---------------------------------------------------------------------------

    The EPA has had direct experience as the permitting authority in 
making source determinations for onshore oil and gas operations in 
Indian country. The 2010 permit for compressor stations located on the 
Southern Ute Indian Reservation (Florida River and Wolf Point) and the 
Summit Petroleum permits are two examples discussed in detail 
previously. In these cases, the EPA conducted a fact-specific 
examination of the three factors in determining which emitting 
activities should be included in title V permits. In both of these 
cases, the source determinations were challenged.
    The EPA was challenged on its source determinations for the Florida 
River permit by WildEarth Guardians. They challenged the EPA's decision 
not to aggregate certain wells into a single source in the title V 
permit renewal. EPA entered into a settlement agreement with the 
petitioner and agreed to undertake a ``pilot'' program to gather 
additional information ``for the purpose of studying, improving and 
streamlining oil and gas source determinations in new or renewal Title 
V permits.'' \10\ The EPA has collected data from several permit 
applicants, but has not yet issued permits based on that data, due to 
uncertainties created by court decisions discussed later in this 
proposal.
---------------------------------------------------------------------------

    \10\ U.S. Environmental Protection Agency. February 20, 2012. 
Motion for Dismissal. In re: BP America Production Company, Florida 
River Compression Facility, Permit No. V-SU-0022-05.00. Available at 
https://yosemite.epa.gov/oa/EAB_Web_Docket.nsf/(Filings)/
E340610E897366E1852579AB005443C4/$File/
Motion%20for%20Dismissal...41.pdf and in the docket for this 
rulemaking.
---------------------------------------------------------------------------

    In the case of Summit Petroleum's operations in Rosemont, Michigan, 
also discussed previously, the EPA determined in 2010 that the 
company's gas sweetening facility and associated wells were under 
common control and in the same major industrial grouping. In addition, 
the EPA determined that they were adjacent because of the functional 
interrelatedness of the operations. The EPA determined that the source 
must get a title V operating permit.
    Summit appealed that determination to the United States Court of 
Appeals for the Sixth Circuit, which issued a decision that overturned 
the EPA's title V applicability determination. Summit Petroleum Corp. 
v. U.S. Environmental Protection Agency, 690 F.3d 733 (6th Cir. 2012). 
In the decision, the Court said that the EPA's use of interrelatedness 
in determining whether sources were ``adjacent'' is unreasonable and 
contrary to the plain meaning of the term as currently used in EPA's 
regulations. The two judges in the majority found that the term 
``adjacent'' was unambiguous and its plain meaning related only to 
physical proximity, and thus could not include consideration of 
functional interrelatedness. The EPA sought rehearing of the Court's 
decision, but that request was denied.
    In a memorandum, EPA Headquarters then instructed its Regional Air 
Directors that the agency intended to apply the outcome of the Sixth 
Circuit decision only in the states under the jurisdiction of the Sixth 
Circuit and that we would continue to make stationary source 
determinations for title V and PSD permitting consistent with the 
agency's long-standing interpretations of its regulations in the rest 
of the country.\11\
---------------------------------------------------------------------------

    \11\ Page, Stephen. ``Applicability of the Summit Decision to 
EPA Title V and NSR Source Determinations.'' December 21, 2012. EPA 
Region 7 Air Program New Source Review Program Policy & Guidance 
Index available at https://www.epa.gov/region07/air/nsr/nsrmemos/inter2012.pdf and in the docket for this rulemaking.
---------------------------------------------------------------------------

    The EPA's guidance memo to its regional offices was challenged by 
the National Environmental Development Association's Clean Air Project 
(NEDA/CAP) in the D.C. Circuit Court of

[[Page 56585]]

Appeals. National Environmental Development Association's Clean Air 
Project v. Environmental Protection Agency, 752 F.3d 999 (D.C. Cir. 
2014). NEDA/CAP alleged that the memorandum violated the EPA's Regional 
Consistency regulations by establishing inconsistent permit criteria in 
different parts of the country. The D.C. Circuit agreed and held that 
the memo conflicted with EPA regulations that promote uniform national 
regulatory policies. 752 F.3d at 1009 (discussing 40 CFR part 56). In 
essence, the Court found that EPA bound itself to consistency with the 
Summit decision through its own regulations. In issuing the decision, 
the D.C. Circuit indicated that the EPA could have avoided a conflict 
between its December 2012 memo and the Regional Consistency regulations 
by revising the source determination regulations to explicitly require 
consideration of functional interrelatedness.

H. What is the purpose of this proposed action?

    The purpose of this action is to request comment on the best 
approach to define ``adjacent'' for the onshore oil and natural gas 
sector.\12\ We believe it is important to address this industry 
separately because permitting decisions are difficult and time-
consuming. Providing this guidance will promote a consistent regulatory 
treatment for this industry. In addition, this industry continues to 
grow at a rapid pace, and the sheer number of determinations that need 
to be made heightens the need for guidance in the near term.
---------------------------------------------------------------------------

    \12\ We note that the EPA Administrator signed a separate 
proposal on August 5, 2015 to amend the Regional Consistency 
Regulations to address consistency issues resulting from judicial 
decisions. See Environmental Protection Agency, RIN 2060-AS53 
available at https://www.epa.gov/nsr/actions.html.
---------------------------------------------------------------------------

    We also believe it is important to address this issue through a 
rulemaking. The oil and gas source determination guidance provided by 
the EPA on two separate occasions, in 2007 and 2009, was issued in the 
form of a memo, with no opportunity for public notice and comment. 
Then, as discussed above, the subsequent onshore oil and gas permitting 
decisions made by EPA were challenged, and both guidance memos were 
referenced or relied upon by the parties in those challenges. The EPA 
is interested in addressing any uncertainty by providing additional 
clarity through rulemaking and seeking comment on the best approach for 
defining the term ``adjacent'' specific to the onshore oil and natural 
gas sector.

I. Policy Discussion

    An important consideration in deciding how to define the stationary 
source for oil and gas operations is the environmental protection that 
is achieved by aggregating multiple pollutant-emitting activities into 
a single source. Under the PSD and NNSR programs, new major sources or 
major modifications at major sources for a given pollutant are subject 
to either Best Available Control Technology (BACT) or Lowest Achievable 
Emissions Reduction (LAER) controls, depending on the air quality 
designation status for that pollutant of the area in which the source 
is located. These controls may be more stringent than controls required 
at minor sources. Because major source BACT or LAER controls may be 
continually improving, permitting authorities must assess and sources 
must install the best technology at the time a permit is issued, 
instead of what was the best the last time an NSPS or NESHAP was 
updated. Therefore, these case-by-case controls required for major 
sources or major modifications at major sources are often more 
stringent than controls required under NSPS or NESHAP, if those 
standards have not been recently updated, because control technology 
tends to improve over time.
    In addition, if the source is or will be located in an area that is 
designated nonattainment, emissions reductions, known as offsets, may 
be required in higher ratios to compensate for the proposed emissions 
increase. Therefore, aggregating activities into major sources may 
result in more oil and gas sources being subject to greater control 
under LAER, in addition to having to obtain offsets, resulting in 
greater environmental protection.
    Aggregating facilities is also more likely to result in sources 
being subject to operating permitting requirements under title V of the 
Act. While this does not result in any additional control requirements, 
it may result in additional monitoring and reporting requirements that 
provide more information on the operation of the source to the 
regulators and interested citizens. The title V permitting process 
includes opportunities for public participation, EPA oversight, and 
citizens' rights to petition the EPA to object to permits. These 
opportunities exist at both the initial permit issuance, and at permit 
renewal, which occurs every 5 years. The title V process provides more 
opportunities for public participation than minor source permitting, 
which generally includes public participation only at the time of 
initial construction or modification, and under processes that vary 
according to the permitting authority.
    Aggregating activities may also provide facility owners/operators 
with greater flexibility to modify operations without triggering 
additional permitting requirements. A source consisting of multiple 
emitting activities may be able to ``net out'' of further PSD or NNSR 
permit review by reducing emissions in one part of a source in order 
that emissions at another part of the source may increase. This allows 
sources to avoid additional permitting requirements for modifications 
to an existing facility under PSD and NNSR by taking credit for 
reductions that have already occurred within the facility. A smaller 
source offers less opportunity to ``net out'' because there are fewer 
emitting activities that can be reduced if a modification results in an 
increase. Finally, netting is usually not available under minor NSR 
programs, so smaller minor sources would likely not be able to take 
advantage of netting to avoid minor NSR permitting requirements.
    Another approach to achieving environmental protection is to 
require controls by direct federal regulation through the NSPS or 
NESHAP programs. The NSPS program results in significant control and is 
applicable to new, modified and reconstructed sources. The NSPS also 
includes monitoring and recordkeeping requirements. The NESHAP program 
also results in significant control of HAP, many of which are also 
VOCs, and is applied to both new and existing sources. Each of the 
emissions standards established pursuant to these programs must be 
reviewed and revised, if necessary, at least every eight years to take 
into account developments in practices, processes and control 
technologies. These standards apply to affected facilities independent 
of the need for an NSR permit. Separately, the EPA is proposing 
revisions to 40 CFR part 60, subpart OOOO, the NSPS for the oil and 
natural gas sector.
    Additional controls may be required for sources located in 
nonattainment areas, including minor sources, through a SIP, or through 
a Federal Implementation Plan (FIP) in areas where EPA is the 
regulatory authority, such as in certain areas of Indian country. The 
CAA requires implementation of reasonable available control technology 
(RACT) for major sources in moderate and above ozone nonattainment 
areas and in the Ozone Transport Region (OTR). The EPA develops Control 
Techniques Guidelines (CTGs) to inform a state's RACT determinations. 
Separately, the

[[Page 56586]]

EPA is proposing a CTG for the oil and natural gas sector.
    All of these programs (NSPS, NESHAP, RACT and state SIP/EPA FIP 
requirements) typically apply to emitting equipment, irrespective of 
the total emissions of the source at which the equipment is located, 
although there may be thresholds for individual types of equipment. An 
advantage of applying environmental control through these programs is 
that the administrative burden of applying for, obtaining, and 
maintaining major source permits can be reduced for sources because 
these limitations establish enforceable limits on the sources' 
potential to emit, and can keep a source from being considered major. 
The burden of reviewing and issuing major source permits is likewise 
reduced for permitting authorities.
    The biggest advantage to sources, particularly in this industry, is 
that controlling emissions through NSPS, NESHAP or emission control 
standards imposed by states through their SIPs does not require case-
by-case pre-approval as do the controls determined through major source 
permitting. This provides greater certainty to the source owners and 
operators without the delays associated with such permitting. 
Communities can also be certain of the controls sources are required to 
install and operate because the sources do not have the opportunity to 
``net out'' of controls through a permitting process. Compliance and 
enforcement are also enhanced because the control, monitoring and 
recordkeeping requirements are consistent for each type of equipment 
and do not differ from site to site, or in the case of federal 
controls, state to state.
    For the oil and gas industry, where source owners/operators must 
obtain the right to drill in a particular location and only hold those 
rights for a limited period of time, the ability to proceed quickly is 
important. For communities and air regulators, the ability to protect 
air quality and public health is important. A major source permit 
typically takes a year or more to process. If there is uncertainty 
about what should be included as part of that permitted source, the 
time to issue a permit can take longer. We believe that the most 
important result of a major or minor permit for all stakeholders, 
including the regulated industry, the community in which the source is 
located, and the permitting authority, is the requirement to install 
control technology to minimize air emissions and protect public health 
and the environment. We think that providing clarity about the scope of 
the source through this rule, and the emissions control requirements 
associated with other rules being proposed by the EPA serves the 
interests of all stakeholders.

J. Why is the EPA proposing this action at this time?

    One reason for taking this action is to resolve the uncertainty 
that the litigation over the Summit Petroleum source determination and 
resulting guidance has created for both permitting authorities and for 
owners/operators of regulated sources. Another reason is to develop a 
coordinated approach to regulating emissions from oil and gas sources 
under the variety of regulatory mechanisms available to state and 
federal regulatory agencies. There has been an increase in oil and gas 
production resulting from the rise in use of unconventional methods of 
extraction (e.g., the use of hydraulic fracturing), and this production 
is taking place in more areas and at a faster pace than in the recent 
past. We believe this justifies a new look at the best way to regulate 
and permit these operations. In separate notices, the EPA is proposing 
to require additional controls for the emissions from the oil and 
natural gas sector. Those requirements include additional requirements 
for new sources under the NSPS, requirements for minor sources at oil 
and gas operations in Indian country, and a CTG that will inform RACT 
determinations for existing major VOC sources located in moderate or 
above ozone nonattainment areas and in the OTR.
    We believe that the additional emissions controls required for new 
sources under the revised NSPS makes it less likely that major source 
permitting would result in substantial additional pollution control. In 
commenting on this proposal, commenters are encouraged to consider how 
emission controls being proposed in separate EPA notices may impact the 
preferred option in this proposal.

K. What is the effect of this proposed rulemaking on other industries?

    At this time, the EPA is proposing to clarify the definition of 
``adjacent'' used to determine the source to be permitted within the 
PSD, NNSR and title V programs as it applies to the oil and natural gas 
sector for the reasons discussed earlier in this proposal. The EPA 
believes that the unique characteristics of this industry--such as the 
underground mineral rights versus surface land ownership, widespread 
operations and interconnectedness via pipeline, etc.--warrant an 
industry-specific definition that will streamline the assessment of 
which operations should be considered to be on contiguous or adjacent 
properties. For other industries, we continue to believe that a case-
by-case assessment of the three factors remains the appropriate method 
of making source determinations. For these industries, as discussed 
previously, we believe it is generally less difficult to determine the 
scope of the source, because the operations already take place at 
facilities that more clearly match the common sense notion of a plant.

L. What is the effect of this proposed rulemaking on permitting 
authorities?

    We are proposing to make changes to both the PSD and NNSR programs 
in this rulemaking. We believe that it may be possible for some states 
to interpret their existing state rules consistent with this rulemaking 
(when final) and may not need to revise SIPs to incorporate these 
changes. However, we intend to encourage states to revise their SIPs to 
adopt these changes, when final. Similarly, states would be expected to 
make conforming changes to their operating permit programs. While we 
are proposing changes to both the federal programs and the requirements 
for state programs, we invite comment on whether states should be 
required to adopt these changes.

III. What are the options that the EPA is considering?

    In this proposal, the EPA is proposing and requesting comment on 
two options for clarifying the definition used to determine the source 
to be permitted within the NSR and title V programs as it applies to 
the oil and natural gas sector. As we stated before, any determination 
of the scope of a source requires a fact-specific inquiry into each of 
the three regulatory factors, i.e., whether emitting activities share 
the same SIC code, are under common control, and are contiguous or 
adjacent. We are not proposing to change or take comment on this 
inquiry or the three factors. However, in this notice, the EPA is 
taking comment on how the term ``adjacent'' in the third factor should 
be applied specifically to emission units in the oil and natural gas 
sector.

A. Define Source Based on Proximity (Similar to the NESHAP)

    Under the first, and currently preferred, option for which the EPA 
is taking comment, the EPA proposes to define ``adjacent'' such that 
the source is similar to that in the NESHAP for this industry, Subpart 
HH, National Emissions Standards for Hazardous Air Pollutants From Oil 
and Natural Gas Production Facilities (40 CFR 63.760). Under this 
option, the ``source'' for oil

[[Page 56587]]

and natural gas sector activities is presumed to be limited to the 
emitting activities at the surface site, and other emitting activities 
will be considered ``adjacent'' if they are proximate. Thus, under this 
first option, two or more surface sites must be considered as a single 
source if they share the same SIC code, are under common control, and 
are contiguous or are located within a short distance of one another.
    We prefer this option because we believe that a definition that 
centers on a surface site is familiar to the industry and the 
regulators because of the current NESHAP requirements, so it will 
streamline permitting. We also believe that a definition focused on a 
surface site most closely represents the common sense notion of a plant 
for this industry category. Surface sites that are not in close 
proximity to one another may be on a separate lease which may not align 
with the common sense notion of a single plant. In addition, we believe 
that this definition is consistent with Congress' intent, at least as 
they expressed it with regard to HAPs, as discussed previously.
    Under this option, as we are proposing it, the source owner/
operator would not be required, and would not be allowed, to include 
additional emitting activities in a permit beyond those in the source 
as defined. This could mean that an owner/operator must obtain more 
individual construction permits and possibly more operating permits. 
However, these would be more likely to be minor source permits. If 
finalized, owner/operators could lose the benefits of being able to net 
emissions over a larger source, which could be a disadvantage, 
particularly for sources in nonattainment areas. We request comment on 
this more limited concept of source for this industry, specifically 
whether limiting the scope of the source in this way provides 
sufficient guidance for sources and permitting authorities to permit 
these sources in a consistent and efficient manner.
    In addition, we request comment on whether it is appropriate to 
establish a specific distance within which to consider multiple surface 
sites as a single source, and if so, what that distance should be. Some 
states, such as Texas, Oklahoma, Louisiana and Pennsylvania, have 
issued guidance that presumes that operations within \1/4\ mile should 
be considered a single source. We believe that it will be helpful to 
prescribe a distance in this rule, given that this question has 
generated significant confusion and uncertainty in the past. The EPA is 
proposing to adopt a distance of \1/4\ mile but is asking for comment 
on whether another distance, such as \1/2\ mile, is an appropriate 
distance to consider for defining a single source even if on separate 
surface sites (i.e., operations beyond that distance would not be 
considered for aggregation).
    Louisiana's guidance further specifies that facilities should not 
be ``daisy-chained'' together to establish a single contiguous 
source.\13\ A series of emission units are ``daisy-chained'' when each 
individual unit is located within the specified ``contiguous or 
adjacent'' distance from the next unit, but where the last unit is 
separated from the first unit by a much larger distance. We request 
comment on whether the EPA should make a similar distinction if we 
adopt this proximity-focused source definition. Louisiana's guidance 
goes on to specify that the geographic center of the site's emissions 
defines the center for purposes of establishing the \1/4\ mile distance 
used to determine the boundary of the single source. We request comment 
on whether the center or some other feature, such as the boundary of 
the surface site, is more appropriate to use as the starting point of 
the measurement radius when determining the source.
---------------------------------------------------------------------------

    \13\ Louisiana Department of Environmental Quality. 
Interpretation of Contiguous for Oil & Gas Production Facilities. 
https://www.deq.louisiana.gov/portal/DIVISIONS/AirPermitsEngineeringandPlanning/AirPermitsProceduresandGuidance/ContiguityandOilandGasProduction.aspx. March 2015.
---------------------------------------------------------------------------

    We also request comment on whether there are instances where 
setting such a bright-line distance could increase or limit permitting 
authority oversight of these sources because they would be more likely 
to be subject to minor source permitting. We also request comment on 
whether the potentially smaller scope of each source could result in an 
unacceptable permitting burden (by creating a larger number of smaller 
sources) on the regulated community or on permitting authorities.
    While the EPA does not expect there would be adverse air quality 
impacts as a result of this approach, we are interested in whether 
there might be any environmental effect, including effects on NAAQS 
compliance from this approach, with either benefit or harm resulting. 
Finally, we request comment on whether there are circumstances in which 
an owner/operator would prefer to combine surface sites or other 
operations that are beyond the presumptive distance, e.g., \1/4\ mile, 
and seek a PSD or NNSR permit, and whether the EPA should preserve this 
option. If so, should the option to seek a major source permit be 
limited to the owner or operator's discretion, or should a permitting 
authority be able to make this determination, and under what 
circumstances?

B. Define Source To Include Exclusively Functionally Interrelated 
Equipment

    Under the second option, the EPA proposes to define the ``source'' 
for the oil and natural gas sector to include all of the interrelated 
equipment that is under common control, is in the two-digit SIC (Code 
13 Oil and Gas Extraction), and is on contiguous or adjacent property, 
where the EPA would presume that equipment in an oil and gas field is 
``adjacent'' if it is proximate, or if it is exclusively functionally 
interrelated. Exclusive functional interrelatedness might be shown by 
connection via a pipeline or other means, because of the physical 
connection between the equipment. Other examples of factors that could 
be assessed to determine interrelatedness include exclusive delivery of 
product from one group of equipment to the other via truck or train and 
facts such as whether one group of equipment would be able to operate 
if the other group of equipment was not operating. The EPA and states 
would make a determination of adjacency based on a consideration of the 
interrelatedness of emitting activities in addition to the distance 
between them. So, for the oil and natural gas sector, pollutant-
emitting activities will be considered adjacent if one of the following 
circumstances apply: (1) The pollutant-emitting activities are 
separated by a distance of \1/4\ mile or more and there is an exclusive 
functional interrelatedness; or (2) the pollutant-emitting activities 
are separated by a distance of less than \1/4\ mile.
    The consideration of interrelatedness is consistent with the EPA's 
current and historical practice for other industries and its 
longstanding practice for oil and natural gas sector activities. The 
EPA is requesting comment on this approach to better understand the 
perspective of various stakeholders. What are the advantages and 
disadvantages to this approach? Are there characteristics related to 
the oil and natural gas sector that would make this approach more or 
less difficult to implement than the preferred alternative, such as 
need to examine various interrelatedness criteria or the 
interconnectedness of the operations through pipelines? Should the EPA 
further define exclusive functional interrelatedness for this sector to 
provide additional clarity to regulators and the regulated community? 
For example, should the

[[Page 56588]]

EPA limit exclusive functional interrelatedness for this sector to 
emitting equipment that is configured in a ``hub and spoke'' model, 
where oil or gas produced from one or more wells has a dedicated flow 
(via a pipeline or other delivery method) to only one possible 
downstream point for further compression, processing or storage? Are 
there other configurations specific to this industry that the EPA 
should consider to be exclusively functionally interrelated?
    In addition, is there any environmental benefit or harm that might 
result from this approach? For example, could this approach create a 
disincentive to building pipelines, and what would be the environmental 
effect of those decisions? Finally, the EPA requests comment on whether 
there is a specific distance beyond which sources in the oil and gas 
industry should not be considered interrelated, even if interconnected 
by pipeline.

C. Impacts of the Options on Air Permitting

    The EPA expects that the combined effect of all the rules being 
proposed, including the proposed changes to the NSPS, the proposed rule 
for oil and gas sources in Indian country, and the CTG, will be to 
reduce the number of major oil and gas sources, even if we finalize 
Option 2. The proposed rules add requirements for enforceable controls, 
thereby decreasing potential emissions and making it less likely that 
major source permitting will be required. This is because a source's 
potential emissions are determined after taking into account controls 
that are enforceable as a practical matter, such as those required in 
the NSPS and a SIP adopting the CTG.
    The two options presented in this rule differ primarily in the 
permitting burden placed on sources and permitting authorities. In the 
EPA's experience, it takes significantly longer to apply for and review 
a PSD application than it does to apply for and review a minor NSR 
permit. Option 1 can be expected to result in fewer major sources than 
Option 2, but more minor sources. Option 2 can be expected to result in 
more major sources, as some otherwise minor sources could be combined 
into a smaller number of major sources.
    Because the EPA would benefit from public comment on all of these 
issues, the EPA is co-proposing these two approaches and, following 
review of public comments on the issues raised by each approach, 
anticipates adopting one of the approaches in the final rule. We 
welcome comments on these two discrete options, or some combination of 
these, and other options for determining the source for permitting oil 
and natural gas sector operations.

D. Proposal is Limited to Onshore Oil and Gas Operations

    The EPA is proposing to limit this rulemaking to onshore oil and 
gas operations for a number of reasons. First, the CAA already contains 
a specific definition of ``outer continental shelf source'' which 
includes any ``equipment activity, or facility which emits or has the 
potential to emit any air pollutant'' specifically including ``platform 
and drill ship exploration, construction, development, production, 
processing, and transportation.'' In addition, ``emissions from any 
vessel servicing or associated with an outer continental shelf (OCS) 
source, including emissions while at the OCS source or en route to or 
from the OCS source within 25 miles of the OCS source'' must be 
included when determining the OCS source [CAA section 328(a)(4)(C)]. In 
our permitting experience, these OCS sources are more likely than 
onshore operations to be stand-alone major PSD sources. The EPA has 
issued permits for exploration rigs to operate as portable PSD sources, 
allowing them to operate in a number of locations under one permit. We 
believe that this current approach provides sufficient streamlining for 
both sources and permitting authorities and propose to continue the 
existing case-by-case approach for offshore sources.

IV. Environmental Justice Considerations

    This proposal is intended to clarify the definition of adjacent 
used to determine the source to be permitted within the existing PSD, 
NNSR and title V programs as it applies to the oil and natural gas 
sector. This clarification will assist permitting authorities and 
permit applicants in making source determinations for the oil and gas 
industry and is not intended to result in less environmental protection 
for human health and the environment. It is being proposed as a part of 
a comprehensive strategy to reduce emissions from the oil and natural 
gas production sector which includes new (or lower) emission standards 
or requirements for a number of types of emitting equipment. It, 
therefore, is not expected to have a disproportionately high and 
adverse human health or environmental effects on minority populations 
or low-income populations. However, the permitting process, 
particularly under the major source programs, NSR and title V, may 
provide opportunities for public participation at individual sources 
that may be of interest to minority or low-income populations.

V. Statutory and Executive Order Reviews

A. Executive Order 12866: Regulatory Planning and Review and Executive 
Order 13563: Improving Regulation and Regulatory Review

    This proposed action is a significant regulatory action that was 
submitted to the Office of Management and Budget (OMB) for review 
because it raises novel legal and policy issues arising out of the 
President's priorities. Any changes made in response to OMB 
recommendations have been documented in the docket.

B. Paperwork Reduction Act

    This proposed action would not impose any new information 
collection burden. However, the OMB has previously approved the 
information collection requirements contained in the existing 
regulations for PSD (40 CFR 52.21) and title V (40 CFR parts 70 and 71) 
under the provisions of the Paperwork Reduction Act, 44 U.S.C. 3501 et 
seq and has assigned OMB control numbers 2060-0003, 2060-0336 and 2060-
0243. The OMB control numbers for the EPA's regulations in 40 CFR are 
listed in 40 CFR part 9. Instead of new information collection burdens, 
this proposed action proposes proffers options that clarify the 
existing permitting requirements applicable to new and modified oil and 
natural gas sector sources. This proposed action is not likely to 
increase the burden associated with permitting, and may reduce it.

C. Regulatory Flexibility Act

    The Regulatory Flexibility Act (RFA) generally requires an agency 
to prepare a regulatory flexibility analysis of any regulation subject 
to notice and comment rulemaking requirements under the Administrative 
Procedures Act or any other statute unless the agency certifies the 
rule will not have a significant economic impact on a substantial 
number of small entities. Small entities include small businesses, 
small organizations and small governmental jurisdictions.
    For purposes of assessing the impacts of this proposed rule on 
small entities, small entity is defined as: (1) A small business as 
defined in the Small Business Administration's (SBA) regulations at 13 
CFR 121.201; (2) a small governmental jurisdiction that is a government 
of a city, county, town,

[[Page 56589]]

school district or special district with a population of less than 
50,000; and (3) a small organization that is any not-for-profit 
enterprise which is independently owned and operated and is not 
dominant in its field.
    After considering the economic impacts of this proposed rule on 
small entities, I certify that this proposed action will not have a 
significant economic impact on a substantial number of small entities. 
In making this determination, the impact of concern is any significant 
adverse economic impact on small entities. An agency may certify that a 
rule will not have a significant economic impact on a substantial 
number of small entities if the rule relieves regulatory burden, has no 
net burden or otherwise has a positive economic effect on the small 
entities subject to the rule. Entities potentially affected directly by 
this proposal include sources in the oil and natural gas sector. We 
intend with this proposal to clarify the existing requirements for 
permitting new and existing sources in the oil and natural gas sector. 
We believe that any option finalized after notice and comment 
rulemaking will not increase, and may decrease, the administrative 
burden for permitting these sources, including those that may be small 
entities. We have, therefore, concluded that this proposed action will 
have no net regulatory burden for all directly regulated small 
entities.
    We continue to be interested in the potential impacts of the 
proposed rule on small entities and welcome comments on issues related 
to such impacts.

D. Unfunded Mandates Reform Act

    This proposed action does not contain an unfunded mandate of $100 
million or more as described in the Unfunded Mandates Reform Act of 
1995 (UMRA), 2 U.S.C. 1531-1538, and does not significantly or uniquely 
affect small governments. This action imposes no enforceable duty on 
any state, local or tribal governments or the private sector. The CAA 
imposes the obligation for private sector sources to obtain permits 
prior to construction. Many states and some local governments choose to 
implement those requirements. In other areas, the EPA implements those 
requirements. In this proposal, the EPA is taking comment on the most 
appropriate way to implement those requirements for an industry 
category. Therefore, this proposed action is not subject to the 
requirements of sections 202, 203 and 205 of the UMRA.

E. Executive Order 13132: Federalism

    This proposed action does not have federalism implications. It will 
not have substantial direct effects on the states, on the relationship 
between the national government and the states, or on the distribution 
of power and responsibilities among the various levels of government, 
as specified in Executive Order 13132. The requirement to obtain 
permits for new major sources is imposed by the CAA. This proposed 
rule, if made final, would interpret those requirements as they apply 
to the oil and natural gas sector. Thus, Executive Order 13132 does not 
apply to these proposed regulation revisions.
    In the spirit of Executive Order 13132 and consistent with the EPA 
policy to promote communications between the EPA and state and local 
governments, the EPA specifically solicits comments on this proposed 
action from state and local officials.

F. Executive Order 13175: Consultation and Coordination With Indian 
Tribal Governments

    This action does not have tribal implications as specified in 
Executive Order 13175. It would not have a substantial direct effect on 
one or more Indian tribes, since no tribe has developed a TIP that 
allows it to issue NSR permits. Furthermore, these proposed regulation 
revisions do not affect the relationship or distribution of power and 
responsibilities between the federal government and Indian tribes. The 
CAA and the Tribal Air Rule establish the relationship of the federal 
government and tribes in developing plans to implement NSR permitting, 
and this proposal does nothing to modify that relationship. Thus, 
Executive Order 13175 does not apply to this action.
    The EPA has concluded that this action will not have tribal 
implications because it doesn't impose a significant cost to tribal 
governments. However, there are significant tribal interests because of 
the growth of the oil and gas production industry in Indian country. 
Although Executive Order 13175 does not apply to this action, the EPA 
has offered consultation to tribal officials in developing this action. 
Meeting summaries will be included in the docket for this rulemaking.
    The EPA specifically solicits additional comment on this proposed 
action from tribal officials.

G. Executive Order 13045: Protection of Children From Environmental 
Health and Safety Risks

    The EPA interprets EO 13045 as applying only to those regulatory 
actions that concern environmental health or safety risks that the EPA 
has reason to believe may disproportionately affect children. This 
action is not subject to EO 13045 because it is not intended to 
establish an environmental standard intended to mitigate health or 
safety risks. The proposal requests comments on the appropriate 
definition of a source as it applies to one source category for 
purposes of permitting under the requirements of the CAA.

H. Executive Order 13211: Actions Concerning Regulations That 
Significantly Affect Energy Supply, Distribution, or Use

    This proposed action is not a ``significant energy action'' because 
it is not likely to have a significant adverse effect on the supply, 
distribution or use of energy. We believe this action is not likely to 
have any adverse energy effects because it will not increase, and may 
decrease, the permitting burden on owners and operators of sources in 
the oil and natural gas sector.

I. National Technology Transfer and Advancement Act

    Section 12(d) of the National Technology Transfer and Advancement 
Act of 1995 (NTTAA), Public Law 104-113, section 12(d) (15 U.S.C. 272 
note) directs the EPA to use voluntary consensus standards in its 
regulatory activities unless to do so would be inconsistent with 
applicable law or otherwise impractical. Voluntary consensus standards 
are technical standards (e.g., materials specifications, test methods, 
sampling procedures and business practices) that are developed or 
adopted by voluntary consensus standards bodies. NTTAA directs the EPA 
to provide Congress, through OMB, explanations when the agency decides 
not to use available and applicable voluntary consensus standards.
    This proposed rulemaking does not involve technical standards. 
Therefore, the EPA is not considering the use of any voluntary 
consensus standards.

J. Executive Order 12898: Federal Actions To Address Environmental 
Justice in Minority Populations and Low-Income Populations

    The EPA believes the human health or environmental risk addressed 
by this proposed action will not have disproportionately high and 
adverse human health or environmental effects on minority, low-income 
populations or indigenous populations. The proposal requests comment on 
the appropriate definition of the source as it applies to one industry 
category for purposes of

[[Page 56590]]

permitting under the CAA. As such, it does not adversely affect the 
health or safety of minority or low-income populations. The results of 
this evaluation are contained in Section IV of this preamble.

K. Determination Under Section 307(d)

    Pursuant to sections 307(d)(1)(J) and 307(d)(1)(V) of the CAA, the 
Administrator determines that this action is subject to the provisions 
of section 307(d). Under section 307(d)(1)(J), the provisions of 
section 307(d) apply to revisions to regulations relating to PSD. Under 
section 307(d)(1)(V), the provisions of section 307(d) apply to ``such 
other actions as the Administrator may determine.''

Statutory Authority

    The statutory authority for this action is provided by sections 
101; 111; 114; 116, 160-165, 169, 173, 301, 302, 501 and 502 of the 
CAA, as amended (42 U.S.C. 7401; 42 U.S.C. 7411; 42 U.S.C. 7414; 42 
U.S.C. 7416; 7470-7475, 7479, 7503, 7601, 7602, 7661, and 7662.

List of Subjects

40 CFR Part 51

    Environmental protection, Air pollution control, Construction 
permit, Intergovernmental relations, Major source, Oil and gas.

40 CFR Part 52

    Environmental protection, Air pollution control, Construction 
permit, Incorporation by reference, Intergovernmental relations, Major 
source, Oil and gas.

40 CFR Part 70

    Environmental protection, Air pollution control, Intergovernmental 
relations, Major source, Oil and gas, Operating permit.

40 CFR Part 71

    Environmental protection, Administrative practice and procedure, 
Air pollution control, Intergovernmental relations, Major source, 
Operating permit.

    Dated: August 18, 2015.
Gina McCarthy,
Administrator.
    For the reasons stated in the preamble, Title 40, Chapter I of the 
Code of Federal Regulations is proposed to be amended as follows:

PART 51--REQUIREMENTS FOR PREPARATION, ADOPTION, AND SUBMITTAL OF 
IMPLEMENTATION PLANS

0
1. The authority citation for part 51 continues to read as follows:

    Authority: 23 U.S.C. 101; 42 U.S.C. 7401-7671q.

0
2. In Sec.  51.165, revise paragraph (a)(1)(ii) to read as follows:


Sec.  51.165  Permit requirements.

    (a) * * *
    (1) * * *

 [PROPOSED REGULATORY TEXT FOR OPTION 1]

    (ii) (A) Building, structure, facility, or installation means all 
of the pollutant-emitting activities which belong to the same 
industrial grouping, are located on one or more contiguous or adjacent 
properties, and are under the control of the same person (or persons 
under common control). Pollutant emitting activities shall be 
considered as part of the same industrial grouping if they belong to 
the same Major Group (i.e., which have the same two-digit code) as 
described in the Standard Industrial Classification Manual, 1972, as 
amended by the 1977 Supplement (U.S. Government Printing Office stock 
numbers 4101-0065 and 003-005-00176-0, respectively).
    (B) Notwithstanding the provisions of paragraph (a)(1)(ii)(A) of 
this section, building, structure, facility, or installation means, for 
onshore activities under SIC Major Group 13: Oil and Gas Extraction, 
all of the pollutant-emitting activities included in Major Group 13 
that are located on one or more contiguous or adjacent properties, and 
are under the control of the same person (or persons under common 
control). Pollutant emitting activities shall be considered adjacent if 
they are located on the same surface site, or on surface sites that are 
located within \1/4\ mile of one another, where a surface site has the 
same meaning as in 40 CFR 63.761.

[PROPOSED REGULATORY TEXT FOR OPTION 2]

    (ii) (A) Building, structure, facility, or installation means all 
of the pollutant-emitting activities which belong to the same 
industrial grouping, are located on one or more contiguous or adjacent 
properties, and are under the control of the same person (or persons 
under common control). Pollutant emitting activities shall be 
considered as part of the same industrial grouping if they belong to 
the same Major Group (i.e., which have the same two-digit code) as 
described in the Standard Industrial Classification Manual, 1972, as 
amended by the 1977 Supplement (U.S. Government Printing Office stock 
numbers 4101-0065 and 003-005-00176-0, respectively).
    (B) Notwithstanding the provisions of paragraph (a)(1)(ii)(A) of 
this section, building, structure, facility, or installation means, for 
onshore activities in SIC Major Group 13: Oil and Gas Extraction, all 
of the pollutant-emitting activities included in Major Group 13, are 
located on one or more contiguous or adjacent properties, and are under 
the control of the same person (or persons under common control). 
Pollutant-emitting activities shall be considered adjacent if one of 
the following circumstances apply:
    (1) The pollutant-emitting activities are separated by a distance 
of \1/4\ mile or more and there is an exclusive functional 
interrelatedness; or
    (2) The pollutant-emitting activities are separated by a distance 
of less than \1/4\ mile.
* * * * *
0
3. In Sec.  51.166, revise paragraph (b)(6) to read as follows:


Sec.  51.166  Prevention of significant deterioration of air quality.

* * * * *
    (b) * * *

 [PROPOSED REGULATORY TEXT FOR OPTION 1]

    (6)(i) Building, structure, facility, or installation means all of 
the pollutant-emitting activities which belong to the same industrial 
grouping, are located on one or more contiguous or adjacent properties, 
and are under the control of the same person (or persons under common 
control) except the activities of any vessel. Pollutant-emitting 
activities shall be considered as part of the same industrial grouping 
if they belong to the same Major Group (i.e., which have the same two-
digit code) as described in the Standard Industrial Classification 
Manual, 1972, as amended by the 1977 Supplement (U.S. Government 
Printing Office stock numbers 4101-0066 and 003-005-00176-0, 
respectively).
    (ii) Notwithstanding the provisions of paragraph (b)(6)(i) of this 
section, building, structure, facility, or installation means, for 
onshore activities under SIC Major Group 13: Oil and Gas Extraction, 
all of the pollutant-emitting activities included in Major Group 13 
that are located on one or more contiguous or adjacent properties, and 
are under the control of the same person (or persons under common 
control). Pollutant emitting activities shall be considered adjacent if 
they are

[[Page 56591]]

located on the same surface site, or on surface sites that are located 
within \1/4\ mile of one another, where a surface site has the same 
meaning as in 40 CFR 63.761.

[PROPOSED REGULATORY TEXT FOR OPTION 2]

    (6)(i) Building, structure, facility, or installation means all of 
the pollutant-emitting activities which belong to the same industrial 
grouping, are located on one or more contiguous or adjacent properties, 
and are under the control of the same person (or persons under common 
control) except the activities of any vessel. Pollutant-emitting 
activities shall be considered as part of the same industrial grouping 
if they belong to the same Major Group (i.e., which have the same two-
digit code) as described in the Standard Industrial Classification 
Manual, 1972, as amended by the 1977 Supplement (U.S. Government 
Printing Office stock numbers 4101-0066 and 003-005-00176-0, 
respectively).
    (ii) Notwithstanding the provisions of paragraph (b)(6)(i) of this 
section, building, structure, facility, or installation means, for 
onshore activities in SIC Major Group 13: Oil and Gas Extraction, all 
of the pollutant-emitting activities included in Major Group 13, are 
located on one or more contiguous or adjacent properties, and are under 
the control of the same person (or persons under common control). 
Pollutant-emitting activities shall be considered adjacent if one of 
the following circumstances apply:
    (A) The pollutant-emitting activities are separated by a distance 
of \1/4\ mile or more and there is an exclusive functional 
interrelatedness; or
    (B) The pollutant-emitting activities are separated by a distance 
of less than \1/4\ mile.
* * * * *
0
4. In appendix S to part 51, revise section A.2. to read as follows:

APPENDIX S TO PART 51--EMISSION OFFSET INTERPRETATIVE RULING

* * * * *

II. Initial Screening Analyses and Determination of Applicable 
Requirements

    A. * * *

[PROPOSED REGULATORY TEXT FOR OPTION 1]

    2. (i) Building, structure, facility or installation means all 
of the pollutant-emitting activities which belong to the same 
industrial grouping, are located on one or more contiguous or 
adjacent properties, and are under the control of the same person 
(or persons under common control) except the activities of any 
vessel. Pollutant-emitting activities shall be considered as part of 
the same industrial grouping if they belong to the same ``Major 
Group'' (i.e., which have the same two digit code) as described in 
the Standard Industrial Classification Manual, 1972, as amended by 
the 1977 Supplement (U.S. Government Printing Office stock numbers 
4101-0066 and 003-005-00176-0, respectively).
    (ii) Notwithstanding the provisions of paragraph II.2.(i) of 
this appendix, building, structure, facility or installation means, 
for onshore activities under SIC Major Group 13: Oil and Gas 
Extraction, all of the pollutant-emitting activities included in 
Major Group 13 that are located on one or more contiguous or 
adjacent properties, and are under the control of the same person 
(or persons under common control). Pollutant emitting activities 
shall be considered adjacent if they are located on the same surface 
site, or on surface sites that are located within \1/4\ mile of one 
another, where a surface site has the same meaning as in 40 CFR 
63.761.

[PROPOSED REGULATORY TEXT FOR OPTION 2]

    2. (i) Building, structure, facility or installation means all 
of the pollutant-emitting activities which belong to the same 
industrial grouping, are located on one or more contiguous or 
adjacent properties, and are under the control of the same person 
(or persons under common control) except the activities of any 
vessel. Pollutant-emitting activities shall be considered as part of 
the same industrial grouping if they belong to the same ``Major 
Group'' (i.e., which have the same two digit code) as described in 
the Standard Industrial Classification Manual, 1972, as amended by 
the 1977 Supplement (U.S. Government Printing Office stock numbers 
4101-0066 and 003-005-00176-0, respectively).
    (ii) Notwithstanding the provisions of paragraph II.2.(i) of 
this appendix, building, structure, facility or installation means, 
for onshore activities in SIC Major Group 13: Oil and Gas 
Extraction, all of the pollutant-emitting activities included in 
Major Group 13, are located on one or more contiguous or adjacent 
properties, and are under the control of the same person (or persons 
under common control). Pollutant-emitting activities shall be 
considered adjacent if one of the following circumstances apply:
    (A) The pollutant-emitting activities are separated by a 
distance of \1/4\ mile or more and there is an exclusive functional 
interrelatedness; or
    (B) The pollutant-emitting activities are separated by a 
distance of less than \1/4\ mile.
* * * * *

PART 52--APPROVAL AND PROMULGATION OF IMPLEMENTATION PLANS

0
5. The authority citation for part 52 continues to read as follows:

    Authority: 42 U.S.C. 7401 et seq.

0
6. In Sec.  52.21, revise paragraph (b)(6) to read as follows:


Sec.  52.21  Prevention of significant deterioration of air quality.

* * * * *
    (b)* * *

[PROPOSED REGULATORY TEXT FOR OPTION 1]

    (6)(i) Building, structure, facility, or installation means all of 
the pollutant-emitting activities which belong to the same industrial 
grouping, are located on one or more contiguous or adjacent properties, 
and are under the control of the same person (or persons under common 
control) except the activities of any vessel. Pollutant-emitting 
activities shall be considered as part of the same industrial grouping 
if they belong to the same ``Major Group'' (i.e., which have the same 
first two digit code) as described in the Standard Industrial 
Classification Manual, 1972, as amended by the 1977 Supplement (U.S. 
Government Printing Office stock numbers 4101-0066 and 003-005-00716-0, 
respectively.
    (ii) Notwithstanding the provisions of paragraph (b)(6)(i) of this 
section, building, structure, facility, or installation means, for 
onshore activities under SIC Major Group 13: Oil and Gas Extraction, 
all of the pollutant-emitting activities included in Major Group 13 
that are located on one or more contiguous or adjacent properties, and 
are under the control of the same person (or persons under common 
control). Pollutant emitting activities shall be considered adjacent if 
they are located on the same surface site, or on surface sites that are 
located within \1/4\ mile of one another, where a surface site has the 
same meaning as in 40 CFR 63.761.

[PROPOSED REGULATORY TEXT FOR OPTION 2]

    (6)(i) Building, structure, facility, or installation means all of 
the pollutant-emitting activities which belong to the same industrial 
grouping, are located on one or more contiguous or adjacent properties, 
and are under the control of the same person (or persons under common 
control) except the activities of any vessel. Pollutant-emitting 
activities shall be considered as part of the same industrial grouping 
if they belong to the same ``Major Group'' (i.e., which have the same 
first two digit code) as described in the Standard Industrial 
Classification Manual, 1972, as amended by the 1977 Supplement (U.S. 
Government Printing Office stock numbers 4101-0066 and 003-005-00716-0, 
respectively.
    (ii) Notwithstanding the provisions of paragraph (b)(6)(i) of this 
section, building, structure, facility, or installation means, for 
onshore activities in SIC Major Group 13: Oil and Gas Extraction, all 
of the pollutant-

[[Page 56592]]

emitting activities included in Major Group 13, are located on one or 
more contiguous or adjacent properties, and are under the control of 
the same person (or persons under common control). Pollutant-emitting 
activities shall be considered adjacent if one of the following 
circumstances apply:
    (A) The pollutant-emitting activities are separated by a distance 
of \1/4\ mile or more and there is an exclusive functional 
interrelatedness; or
    (B) The pollutant-emitting activities are separated by a distance 
of less than \1/4\ mile.
* * * * *

PART 70--STATE OPERATING PERMIT PROGRAMS

0
7. The authority citation for part 70 continues to read as follows:

    Authority: 42 U.S.C. 7401, et seq.

0
8. In Sec.  70.2, revise the undesignated text of the definition for 
``Major source'' to read as follows:


Sec.  70.2  Definitions.

 [PROPOSED REGULATORY TEXT FOR OPTION 1]

* * * * *
    Major source means any stationary source (or any group of 
stationary sources that are located on one or more continuous or 
adjacent properties, and are under common control of the same person 
(or persons under common control)) belonging to a single major 
industrial grouping and that are described in paragraph (1), (2), or 
(3) of this definition. For the purposes of defining ``major source,'' 
a stationary source or group of stationary sources shall be considered 
part of a single industrial grouping if all of the pollutant emitting 
activities at such source or group of sources on contiguous or adjacent 
properties belong to the same Major Group (i.e., all have the same two-
digit code) as described in the Standard Industrial Classification 
Manual, 1987. For onshore activities belonging to SIC Major Group 13: 
Oil and Gas Extraction, pollutant emitting activities shall be 
considered adjacent if they are located on the same surface site, or 
are on surface sites that are located within \1/4\ mile of one another, 
where a surface site has the same meaning as in 40 CFR 63.761.
* * * * *
0
9. In Sec.  70.2, revise the undesignated text, and paragraphs 1 and 2 
of the definition for ``Major source'' to read as follows:


Sec.  70.2  Definitions.

[PROPOSED REGULATORY TEXT FOR OPTION 2]

* * * * *
    Major source means any stationary source (or any group of 
stationary sources that are located on one or more continuous or 
adjacent properties, and are under common control of the same person 
(or persons under common control)) belonging to a single major 
industrial grouping and that are described in paragraph (1), (2), or 
(3) of this definition. For the purposes of defining ``major source,'' 
a stationary source or group of stationary sources shall be considered 
part of a single industrial grouping if all of the pollutant emitting 
activities at such source or group of sources on contiguous or adjacent 
properties belong to the same Major Group (i.e., all have the same two-
digit code) as described in the Standard Industrial Classification 
Manual, 1987. For onshore activities belonging to SIC Major Group 13: 
Oil and Gas Extraction, pollutant emitting activities shall be 
considered adjacent if one of the following circumstances apply:
    (1) The pollutant-emitting activities are separated by a distance 
of \1/4\ mile or more and there is an exclusive functional 
interrelatedness; or
    (2) The pollutant-emitting activities are separated by a distance 
of less than \1/4\ mile.
* * * * *

PART 71--FEDERAL OPERATING PERMIT PROGRAMS

0
10. The authority citation for part 71 continues to read as follows:

    Authority: 42 U.S.C. 7401, et seq.

Subpart A--Operating Permits

0
11. In Sec.  71.2, revise the undesignated text of the definition for 
``Major sources'' to read as follows:


Sec.  71.2  Definitions.

[PROPOSED REGULATORY TEXT FOR OPTION 1]

* * * * *
    Major source means any stationary source (or any group of 
stationary sources that are located on one or more contiguous or 
adjacent properties, and are under common control of the same person 
(or persons under common control)), belonging to a single major 
industrial grouping and that are described in paragraph (1), (2), or 
(3) of this definition. For the purposes of defining ``major source,'' 
a stationary source or group of stationary sources shall be considered 
part of a single industrial grouping if all of the pollutant emitting 
activities at such source or group of sources on contiguous or adjacent 
properties belong to the same Major Group (i.e., all have the same two-
digit code) as described in the Standard Industrial Classification 
Manual, 1987. For onshore activities belonging to SIC Major Group 13: 
Oil and Gas Extraction, pollutant emitting activities shall be 
considered adjacent if they are located on the same surface site, or 
are on surface sites that are located within \1/4\ mile of one another, 
where a surface site has the same meaning as in 40 CFR 63.761.
* * * * *
0
12. In Sec.  71.2, revise the undesignated text, and paragraphs 1 and 2 
of the definition for ``Major sources'' to read as follows:


Sec.  71.2  Definitions.

[PROPOSED REGULATORY TEXT FOR OPTION 2]

* * * * *
    Major source means any stationary source (or any group of 
stationary sources that are located on one or more contiguous or 
adjacent properties, and are under common control of the same person 
(or persons under common control)), belonging to a single major 
industrial grouping and that are described in paragraph (1), (2), or 
(3) of this definition. For the purposes of defining ``major source,'' 
a stationary source or group of stationary sources shall be considered 
part of a single industrial grouping if all of the pollutant emitting 
activities at such source or group of sources on contiguous or adjacent 
properties belong to the same Major Group (i.e., all have the same two-
digit code) as described in the Standard Industrial Classification 
Manual, 1987. For onshore activities belonging to SIC Major Group 13: 
Oil and Gas Extraction, pollutant emitting activities shall be 
considered adjacent if one of the following circumstances apply:
    (1) The pollutant-emitting activities are separated by a distance 
of \1/4\ mile or more and there is an exclusive functional 
interrelatedness; or
    (2) The pollutant-emitting activities are separated by a distance 
of less than \1/4\ mile.
* * * * *
[FR Doc. 2015-21026 Filed 9-17-15; 8:45 am]
BILLING CODE 6560-50-P