Summit Petroleum Corp. v. United States Environmental Protection Agency

RECOMMENDED FOR FULL-TEXT PUBLICATION

Pursuant to Sixth Circuit Rule 206

File Name: 12a0248p.06

UNITED STATES COURT OF APPEALS

FOR THE SIXTH CIRCUIT

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X

Petitioner, -

SUMMIT PETROLEUM CORPORATION,

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Nos. 09-4348;10-4572

v.

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>

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UNITED STATES ENVIRONMENTAL

Respondents. N-

PROTECTION AGENCY; LISA JACKSON,

On Petition for Review of Final Action of the

United States Environmental Protection Agency Administration.

No. AR-18J.

Argued: April 17, 2012

Decided and Filed: August 7, 2012

Before: SUHRHEINRICH, MOORE, and CLAY, Circuit Judges.

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COUNSEL

ARGUED: S. Lee Johnson, HONIGMAN, MILLER, SCHWARTZ and COHN LLP,

Detroit, Michigan, for Petitioner. Kim Smaczniak, UNITED STATES DEPARTMENT

OF JUSTICE, Washington, D.C., for Respondents ON BRIEF: S. Lee Johnson,

HONIGMAN, MILLER, SCHWARTZ and COHN LLP, Detroit, Michigan, Gina A.

Bozzer, ZIMMERMAN, KUHN, DARLING, BOYD, QUANDT and PHELPS, PLC,

Traverse City, Michigan, for Petitioner. Kim Smaczniak, UNITED STATES

DEPARTMENT OF JUSTICE, Washington, D.C., for Respondents. Donald K. Shandy,

RYAN WHALEY COLDRON SHANDY PLLC, Oklahoma City, Oklahoma, James R.

Wedeking, SIDLEY AUSTIN LLP, Washington, D.C., for Amici Curiae.

SUHRHEINRICH, J., delivered the opinion of the court, in which CLAY, J.,

joined. MOORE, J. (pp. 27–36), delivered a separate dissenting opinion.

1

Nos. 09-4348;10-4572 Summit Petroleum Corp. v. United States EPA, et al. Page 2

_________________

OPINION

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SUHRHEINRICH, Circuit Judge. This case arises from a final action of the

Environmental Protection Agency (EPA) determining that a natural gas sweetening plant

and various sour gas production wells commonly owned by Petitioner Summit Petroleum

Corporation (Summit) and separately located within an area of approximately forty-three

square miles constitute a single stationary source under the EPA’s Clean Air Act Title

V permitting program. Specifically at issue is the EPA’s conclusion that Summit’s

facilities satisfy the regulatory requirement of being “located on . . . adjacent properties”

because, although physically independent, they are “truly interrelated.” Summit,

together with Amici American Petroleum Institute and American Exploration and

Production Counsel, argues that the EPA’s determination that the physical requirement

of adjacency can be established through mere functional relatedness is unreasonable and

contrary to the plain meaning of the term “adjacent.” We agree. For these and other

reasons fully set forth herein, we VACATE the EPA’s final determination and

REMAND this case to the EPA to determine whether Summit’s sweetening plant and

sour gas wells are sufficiently physically proximate to be considered “adjacent” within

the ordinary, i.e., physical and geographical, meaning of that requirement.

I. Background

A. Summit’s Natural Gas Production Facilities

Summit is a producer of natural gas that owns and operates a natural gas

sweetening plant in Rosebush, Michigan. Summit’s plant “sweetens” the “sour” gas

from approximately one hundred sour gas production wells by removing hydrogen

sulfide so that the gas can be used. Summit owns all of the production wells and the

subsurface pipelines that connect each of the wells to the sweetening plant. The wells

themselves are located over an area of approximately forty-three square miles at varying

distances from the plant—from five hundred feet to eight miles away—and Summit does

Nos. 09-4348;10-4572 Summit Petroleum Corp. v. United States EPA, et al. Page 3

not own the property between the individual well sites or the property between the wells

and the plant. None of the well sites share a common boundary with each other, nor do

any of the well sites share a common boundary with Summit’s production plant. Flares

work as part of the plant operations by burning off natural gas waste to relieve pressure

on the gas collection equipment. The closest flare is located approximately one

half-mile from the plant, while the remaining flares are each over one mile away.

The sweetening plant and the majority of Summit’s gas production wells and

flares are located within the territory of Michigan’s Saginaw Chippewa Indian Tribe’s

Isabella Reservation. The sweetening plant, gas production wells, and flares emit sulfur

dioxides and nitrous oxides, air pollutants subject to regulation under the Clean Air Act

(CAA). The plant alone emits, or has the potential to emit, just under one hundred tons

of these pollutants per year. Each flare and each well site emits, or has the potential to

emit, much lower amounts of pollutants. However, if the emissions of sulfur dioxide

from the plant and any one production well were to be combined, they would exceed one

hundred tons of pollutants per year.

B. The EPA’s Title V Permitting Program

In 1970, Congress passed the CAA, 42 U.S.C. §§ 7401-7671q, “to protect and

enhance the quality of the Nation’s air resources so as to promote the public health and

welfare and the productive capacity of its population . . . .” 42 U.S.C. § 7401(b)(1)

(2006). In 1990, Congress enacted Title V of the CAA (Title V), 42 U.S.C.

§§ 7661-7661f, establishing an operating permit program to regulate stationary sources

of air pollution. Rather than imposing new substantive air quality control requirements,

Title V supplements the CAA by requiring regulated sources of air pollution to obtain

operating permits that include emission limitations, standards, monitoring requirements,

compliance schedules, and other conditions necessary to assure compliance with the

CAA. See 42 U.S.C. §§ 7661a(a), 7661c(a); Ohio Pub. Interest Research Grp., Inc. v.

Whitman, 386 F.3d 792, 794 (6th Cir. 2004). Although “[s]tates and local governments

bear ‘primary responsibility’” in administering Title V regulations, Whitman, 386 F.3d

at 794 (citing 42 U.S.C. § 7401(a)(3)), certain circumstances permit or require the EPA

Nos. 09-4348;10-4572 Summit Petroleum Corp. v. United States EPA, et al. Page 4

itself to establish and promulgate Title V regulations in lieu of the EPA-approved state

plans. In the absence of an EPA-approved plan regulating Indian territory located within

a given state, for example, the EPA is authorized to implement a federal air quality

control plan within that jurisdiction. Id. § 7601(d)(4). In this case, the EPA has

asserted jurisdiction to regulate Indian territory within the State of Michigan, including

the Saginaw Chippewa Indian Tribe’s Isabella Reservation. See, e.g., Approval and

Promulgation of Air Quality Implementation Plans; Michigan; PSD Regulations (PSD

Regulations), 73 Fed. Reg. 53,366 (Sept. 16, 2008) (to be codified at 40 C.F.R. pt. 52)

(“Michigan is not authorized to carry out its Federally approved air program in ‘Indian

Country,’ as defined in 18 U.S.C. 1151.”).

Title V requires every “major source” of air pollution to obtain a Title V

operating permit. 42 U.S.C. § 7661a(a). The EPA’s Title V plan defines a major source

to include “any stationary facility or source of air pollutants which directly emits, or has

the potential to emit, one hundred tons per year of any pollutant,” including nitrous

oxides and sulfur dioxides (the pollutants emitted by Summit’s operations). See

42 U.S.C. § 7602(j); see also 40 C.F.R. § 71.2. The EPA defines a “stationary source”

as “any building, structure, facility, or installation which emits or may emit a regulated

[air] pollutant.” 40 C.F.R. § 52.21(b)(5). Multiple pollutant-emitting activities, such as

Summit’s sweetening plant and sour gas production wells, can be aggregated together

and considered a “building, structure, facility, or installation,” i.e., a single stationary

source, under Title V only if they: (1) are under common control; (2) “are located on one

or more contiguous or adjacent properties”; and (3) belong to the same major industrial

grouping. 40 C.F.R. § 71.2.1 If the pollutant-emitting activities fail to satisfy any one

of these three criteria, they are considered separate stationary sources and their emissions

cannot be aggregated to meet the major source threshold for which a Title V permit is

required.

1

A group of stationary sources belong to the same industrial grouping if they share a two-digit

Standard Industrial Classification (SIC) code, a code used to determine the type of activity

in which the facilities are engaged. 40 C.F.R. § 71.2. The SIC manual is available at

http://www.osha.gov/pls/imis/sic_manual.html.

Nos. 09-4348;10-4572 Summit Petroleum Corp. v. United States EPA, et al. Page 5

C. Major Source Determination Correspondence Between Summit and the

EPA

In January 2005, Summit, together with the Michigan Department of

Environmental Quality (MDEQ), submitted a request to the EPA to determine whether

Summit’s facilities met the definition of a Title V major source of air pollution.2

Summit’s request correctly noted that emissions from its sweetening plant were

insufficient to constitute it a major source, but “if potential emissions from the sour gas

production wells are included with the gas sweetening plant emissions, the aggregated

sources combined may be considered a single major source for criteria pollutants,

namely nitrogen oxides and sulfur dioxides.” Summit’s request suggested that

aggregation of its facilities would be improper for two principal reasons. First, Summit’s

wells were “located at great distances from its production facility on entirely different

tracts, leases and surface sites,” making them neither contiguous nor adjacent to one

another. Second, the EPA had not distinguished between the definition of a “facility”

found in its hazardous air pollutant (HAP) regulations from the definition of a “facility”

for criteria pollutant (Title V) purposes. The EPA’s HAP regulations specifically

considered aggregation of multiple facilities in the oil and gas industry and concluded

that aggregation was improper: “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, whether

or not these units are in a contiguous area under common control . . . .” See Article II,

Part 55, Air Pollution Control, of the Michigan Natural Resources and Environmental

Protection Act, 1994 PA 451, as amended (Act 451), and 1980 AACS R 336.1211 (Rule

211)) (emphasis added).

The EPA responded to Summit’s source determination request on April 26, 2007,

confirming that it was asserting jurisdiction to regulate Summit’s facilities within the

2

40 C.F.R. § 71.3 provides that an owner or operator of an emission source may submit a written

request to the EPA administrator for a determination of the applicability of Part 71 to a particular facility.

At the time of the parties’ determination request, Summit was operating its plant under a Permit to Install

(No. 632-82I) issued by MDEQ under Michigan’s Air Pollution Control Act, Part 55 of the Natural

Resources and Environmental Protection Act, M.C.L. § 324.5501 et seq. (Part 55), and Michigan’s CAA

State Implementation Plan, 1980 AACS R. 336.1201.

Nos. 09-4348;10-4572 Summit Petroleum Corp. v. United States EPA, et al. Page 6

Isabella Reservation but stating that it was “unable to conclude if the wells and plant

constituted a single source for Title V purposes.” The EPA distinguished its Title V and

HAP regulations, maintaining that pollutant-emitting facilities could be aggregated to

constitute a single stationary source under Title V if they operated under common

control, were located on contiguous or adjacent properties, and belonged to the same

industrial grouping. It then identified the proper procedure for determining a single

stationary source in the oil and gas industry, outlined in an EPA guidance memorandum

issued by Acting Assistant Administrator William Wehrum:

1) Identify the surface sites,

2) Evaluate whether each individual surface site qualifies as a separate

stationary source, or if the emissions activities should be grouped

together to form a stationary source (i.e., if their emission activities are

under common control, belong to the same major industrial grouping,

and are contiguous or adjacent), and

3) Aggregate two or more stationary sources if they are under common

control and are located in proximity of each other.3

Memorandum from William L. Wehrum, Acting Assistant Adm’r, to Reg’l

Adm’rs I-X (Jan. 12, 2007) available at

http://www.eenews.net/public/25/12769/features/documents/2009/10/13/document_p

m_02.pdf (last visited May 16, 2012) (Wehrum Memorandum).

The EPA found that based on the information provided by Summit’s request, its

wells and production plant were undisputedly commonly owned, part of the same

industrial grouping, and not located on contiguous surface sites. Accordingly, the

agency concluded that it “must evaluate the adjacency, (i.e., the nearness or closeness)

of the sour gas wells to the sweetening plant” to determine whether Summit’s facilities

constituted a single stationary source subject to regulation. Although it noted that

“because the production wells supply the gas to the gas sweetening plant, we believe that

3

Before this Court and, it appears, in practice, the EPA styles and regards its guidance

memorandums as non-binding, advisory documents. Both the Wehrum Memorandum and the McCarthy

Memorandum, discussed infra, express that notwithstanding the suggestions for conducting Title V

stationary source analyses contained therein, actual determinations are to be made on case-by-case,

situational, and particularized bases.

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the sites meet the common sense notion of a plant,” the EPA found that the Wehrum

Memorandum “makes clear that proximity is the most informative factor in making a

source determination involving oil and gas activities.” Finally, the EPA requested

additional information—a map of Summit’s facilities and a schematic of its processes

that showed the connection between Summit’s “exploration and production

activities”—to assist it in reaching a decision.

Summit provided the requested information in a letter dated April 24, 2008. In

the letter, Summit agreed that under the Wehrum Memorandum, proximity was the most

crucial factor in making source determinations for the oil and gas industry. Summit

reminded the EPA of the Wehrum Memorandum’s additional comments regarding the

proximity factor, e.g., the EPA’s position that it was unreasonable to aggregate wells and

production field activities that “occur over large geographic distances with the

downstream processing plant into a single stationary source.” See id. Summit submitted

that the concepts of contiguousness and adjacency should assess “whether the land

associated with the pollutant-emitting activity is connected to, or is nearby, land

associated with another pollutant-emitting activity.” In support, Summit pointed again

to the Wehrum Memorandum, which advised that “[a] reviewing authority can consider

two surface sites to be in close proximity if they are physically adjacent, or if they are

separated by no more than a short distance (e.g., across a highway, separated by a city

block or some similar distance).” Id. Summit noted that its wells and production plant

were separated by much larger distances than those contemplated by the Wehrum

Memorandum and reiterated its request that the EPA not consider them a single

stationary source under Title V.

In July 2009, the EPA responded that even with Summit’s supplemental

materials, it was again unable to conclusively determine whether Summit’s facilities

constituted a single stationary source. The EPA addressed Summit’s emphasis on the

Wehrum Memorandum and stressed that physical proximity was not the only factor in

adjacency determinations, stating that “generally, the EPA determines whether two

facilities are ‘adjacent’ based on a ‘common sense’ notion of a source and the functional

Nos. 09-4348;10-4572 Summit Petroleum Corp. v. United States EPA, et al. Page 8

interrelationship of the facilities, rather than simply on the physical distance between the

facilities.” The EPA concluded by requesting that Summit contact it as soon as possible

to further “discuss the requirements of the . . . Title V permit applications for sources

located on tribal lands.”

The parties engaged in a conference call in July 2009. According to Summit, the

EPA indicated that it might no longer be using the Wehrum Memorandum as guidance

in Summit’s source determination. The EPA said it would investigate the status of the

Wehrum Memorandum and gather information on permit conditions for other sources

before making a final source determination.

1. The EPA determines Summit’s facilities to be a single and major

source under Title V.

On September 8, 2009, EPA issued its determination that Summit’s sweetening

plant and sour gas wells constituted a single stationary source, and were therefore a

major source, under Title V. The EPA did not explain the basis for its decision, save for

citing to its prior April 26, 2007 and April 16, 2009 letters to Summit. Shortly after the

EPA issued its decision, it forwarded Summit a September 22, 2009 guidance

memorandum prepared by the EPA’s Office of Air and Radiation Assistant

Administrator Gina McCarthy entitled “Withdrawal for Source Determinations for Oil

and Gas Industries” (McCarthy Memorandum). See Memorandum from Gina McCarthy,

Assistant Adm’r, to Reg’l Admr’s Regions I-X (Sept. 22, 2009), available at

http://www.eenews.net/public/25/12769/features/documents/2009/10/13/document_p

m_01.pdf (last visited May 16, 2012). In pertinent part, the McCarthy Memorandum

reasoned that the simplified approach of the Wehrum Memorandum, with its emphasis

on physical proximity in the determination of what constituted a stationary source, was

no longer appropriate. The McCarthy Memorandum called permitting authorities to

instead “rely foremost on the three regulatory criteria for aggregating emissions from

multiple sources, . . . (1) whether the activities are under the control of the same person

(or person under common control); (2) whether the activities are located on one or more

contiguous or adjacent properties; and (3) whether the activities belong to the same

Nos. 09-4348;10-4572 Summit Petroleum Corp. v. United States EPA, et al. Page 9

industrial grouping.” Id. (citing 40 C.F.R. § 52.21(b)(6)). The guidance memorandum

nevertheless conceded that stationary source determinations should be made on a

case-by-case basis and that “in some cases, ‘proximity’ may serve as the overwhelming

factor in a permitting authority’s source determination decision.” Id.

In response to the EPA’s September 8, 2009 determination, Summit filed its

initial Petition for Review with this Court on November 4, 2009. On January 5, 2012,

Summit sent a letter to the EPA requesting an administrative stay of the deadline the

EPA had imposed on Summit to obtain a Title V operating permit so that Summit could

submit additional information for the EPA’s consideration. The EPA granted Summit’s

request and the parties submitted a joint motion for abeyance to this Court on

March 4, 2010. This Court granted the motion on March 18, 2010, holding the case in

abeyance and vacating the briefing schedule to allow the parties time to resolve their

pending administrative issues.

On October 18, 2010, the EPA sent Summit a final letter confirming that even

with Summit’s supplemental information, the EPA considered Summit’s facilities a

single stationary source, and thus a major source, under Title V. The EPA explained that

the McCarthy Memorandum directed it to consider all three regulatory factors. On the

issue of the facilities’ adjacency, the EPA indicated that it had never established a

specific distance between pollutant-emitting entities at which they were no longer

adjacent. Id. The EPA reiterated that, historically, factors such as the “nature of the

relationship between the facilities” and the “degree of interdependence between them”

had been important to the question of whether two facilities were adjacent. The agency

discussed its view that Summit’s plant, wells, and flares worked together as a single unit

that “together produced a single product” and found that Summit had failed to provide

any evidence to demonstrate that the emissions sources were not “truly interdependent.”

The EPA thus concluded that given this functional interrelationship, Summit’s facilities

“should not be considered separate emission sources.”

Summit filed a second Petition for Review in this Court on October 18, 2010.

The EPA opposed, and this Court denied, a motion to intervene filed by American

Nos. 09-4348;10-4572 Summit Petroleum Corp. v. United States EPA, et al. Page 10

Petroleum Institute (API). This Court granted the unopposed motions of API and

American Exploration and Production Council (AXPC) (collectively Amici) to submit

amicus briefs in the case.

II. Analysis

A. Standard of Review

Section 307(b) of the CAA, 42 U.S.C. § 7607(b), does not specify a standard for

judicial review of an EPA final action. Accordingly, this Court reviews the EPA’s

source determination under the judicial review provisions of the Administrative

Procedure Act (APA). 5 U.S.C. § 706(2)(A). See Alaska Dep’t of Envtl. Conservation

v. E.P.A., 540 U.S. 461, 496-97 (2004). The APA requires us to credit an agency action

unless it is “arbitrary, capricious, an abuse of discretion, or otherwise not in accordance

with law.” 5 U.S.C. § 706(2)(A). Where, as here, we review an agency’s interpretation

of its own regulation and not its application of a statute passed by Congress, we must

defer to the agency’s interpretation unless it is “plainly erroneous or inconsistent with

the regulation.” Auer v. Robbins, 519 U.S. 452, 461 (1997) (internal quotation marks

and citations omitted). We afford an agency’s interpretation no deference, however, if

the language of the regulation is unambiguous, for doing so would “permit the agency,

under the guise of interpreting a regulation, to create de facto a new regulation.”

Christensen v. Harris Cnty., 529 U.S. 576, 588 (2000). If the regulation is ambiguous

and deference is due, we have still noted that “deferential” review is not inconsequential,

Ky. Waterways Alliance v. Johnson, 540 F.3d 466, 474 (6th Cir. 2008), and we must be

satisfied that the agency’s action minimally involved a “rational connection between the

facts found and the choice made.” Motor Vehicle Mfrs. Ass’n of the U.S., Inc. v. State

Farm Mut. Auto. Ins. Co., 463 U.S. 29, 43 (1983).

The issue in the instant case is relatively straightforward. Summit, the EPA, and

Amici agree that the EPA has properly exercised jurisdiction to regulate the tribal lands

on which Summit’s facilities are located. They agree that Summit’s production plant

and sour gas wells are commonly owned and share a major industrial grouping,

Nos. 09-4348;10-4572 Summit Petroleum Corp. v. United States EPA, et al. Page 11

satisfying two parts of the three-part test for a stationary source under the EPA’s Title

V permitting program. All parties further agree that if Summit’s plant and wells are

aggregated into a single stationary source, the total emissions from this source would

exceed the threshold required for a stationary source to be considered a major source,

and Summit would be required to obtain a Title V permit to regulate its emissions of

criteria pollutants. Finally, the parties agree that Summit’s production plant and sour gas

wells are not located on “contiguous,” i.e., bordering, properties. Undisputedly, the sole

disputed issue before us is whether Summit’s facilities are “adjacent” to one another,

thus converting them into a stationary source, and a major source, under Title V.

Together with Amici, Summit argues that the EPA’s conclusion that Summit’s

activities are “adjacent” because they are “truly interrelated” is unreasonable, and urges

this Court to vacate the EPA’s determination that Summit’s plant and wells constitute

a single stationary source. Specifically, Summit argues that the term “adjacent” is

unambiguous, and that EPA’s interpretation of it defies its plain and ordinary meaning.

We agree.

B. As used in the EPA’s Title V plan, the term “adjacent” is unambiguous.

Summit argues that the term “adjacent,” both generally and as it appears in the

EPA’s regulatory requirement that aggregated activities be “located on contiguous or

adjacent properties,” is unambiguous. The EPA disagrees, submitting, inter alia, that

the term “adjacent” is unquestionably ambiguous because the EPA has never defined a

specific physical distance by which it is defined or with which it is simultaneous. See

Resp’t Br. at 30 (connecting the premise that “adjacent” is ambiguous because it lacks

a definite distance with the conclusion that “[a]s applied to plant operations that vary

enormously across the different industries regulated by the [CAA], [the term “adjacent”]

is at minimum ambiguous as to whether emissions units that are part of an integrated

industrial operation and located 500 feet to roughly eight miles apart may be considered

to be located on ‘adjacent’ properties. . . .”).

We conclude that both the dictionary definition and etymological history of the

term “adjacent,” as well as applicable case law, support Summit’s position.

Nos. 09-4348;10-4572 Summit Petroleum Corp. v. United States EPA, et al. Page 12

1. The dictionary definition of “adjacent” implies physical proximity.

This Court, and others as well, have often consulted dictionaries to ascertain the

meaning of words. See, e.g., Terrell v. United States, 564 F.3d 442, 451 (6th Cir. 2009)

(citing MCI Telecomms. Corp. v. AT&T Co., 512 U.S. 218, 225 (1994)). Our research

satisfies us that dictionaries agree that two entities are adjacent when they are “[c]lose

to; lying near . . . [n]ext to, adjoining.” American Heritage Dictionary of the English

Language, available at www.ahdictionary.com (search “adjacent”) (last visited

May 16, 2012). The EPA does not cite, nor could we locate, any authority suggesting

that the term “adjacent” invokes an assessment of the functional relationship between

two activities. See, e.g., Meriam-Webster Dictionary, available at www.meriam-

webster.com (search adjacent”) (last visited May 16, 2012) (“not distant: nearby <the

city and adjacent suburbs>; having a common endpoint or border <adjacent

lots> . . . ; immediately preceding or following); Oxford Dictionaries, available at

www.oxforddictionaries.com (search “adjacent”) (last visited May 16, 2012) (“next to

or adjoining something else; adjacent rooms; the area adjacent to the fire station”).

Even the etymology of the term belies the EPA’s position that the term’s

definition is even partially based on the contextual relationship, as opposed to the

geographic location, of two activities. Here, our study reveals that the word “adjacent”

originated in the early fifteenth century from the combination of syllables “ad” and “jet.”

Online Etymology Dictionary, available at www.etymonline.com (search “adjacent”)

(last visited May 16, 2012). “Ad” is a “prefix expressing direction toward or in addition

to, . . . with regard to, [or] in relation to . . . space or time . . . .” Id. (search “ad-“)

(last visited May 16, 2012) (emphasis added). As incorporated in “adjacent,” the verb

“jet” implies an action resulting in a certain physical resting place for an object: “to

throw, cast . . . with notion of ‘to cast (oneself) down.’” Id. (search: “adjacent” and

“jet”) (last visited May 16, 2012). Thus, quite literally, two things are adjacent if they

have been “throw[n], cast . . . down . . . in relation to [one another] . . . in space . . . .”

See generally Online Etymology Dictionary, supra.

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The EPA argues that though they are not incorrect, dictionaries provide an

incomplete definition of “adjacent,” and that the functional interrelationship of two

facilities must be considered because physical distance is meaningless without context.

See Resp’t Br. at 27 (“It is only by examining the relative context that a reasonable

determination can be made as to whether two objects are ‘close’ or ‘proximate’ to one

another.”). The notion that adjacency expands and contracts with context, true as it is,

must not be overextended. In the first instance, it is certainly correct that two states

could be adjacent to one another in the context of a country, just as two houses could be

adjacent in the context of a neighborhood. It is noted, however, that the contextual

element of the overall space within which one asks whether two things are adjacent does

not fundamentally change the physical and geographical nature of the question. The

EPA makes an impermissible and illogical stretch when it states that one must ask the

purpose for which two activities exist in order to consider whether they are adjacent to

one another. Resp’t Br. at 26-27 (“A distance of one mile between two properties may

be considered sufficiently small to be close to each other if one is driving between them;

not so if one is trying to throw a softball from one to the other.”). Whether the distance

between two facilities enables a given relationship to exist between them is immaterial

to the concept of adjacency—it merely answers the question of whether a certain activity

can or cannot occur between two locations that were, and will continue to be regardless

of whether they host the activity, physically distant or physically adjacent.

Case law supports this understanding.

2. Case law supports the idea that adjacency relates only to physical

proximity.

Several cases specifically address whether the term “adjacent” is ambiguous.

While some courts conclude that “adjacent” is ambiguous in the limited sense of lacking

an abstract definition, there is common recognition of the fact that adjacency is a purely

physical and geographical, even if case-by-case, determination. United States v. St.

Anthony R.R. Co. is an illustrative example. The EPA claims support in the case because

of its statement that: “[adjacency] must be defined with reference to the context, at least

Nos. 09-4348;10-4572 Summit Petroleum Corp. v. United States EPA, et al. Page 14

to some extent[].” United States v. St. Anthony R.R. Co.,192 U.S. 524, 530 (1904).

Ironically, the EPA disregards the context of the Supreme Court’s assertion, which

undisputedly cabined any purported ambiguity to purely physical dimensions: “[a]s the

word [adjacent] is frequently uncertain and relative as to its meaning,” the Court

reasoned, “it might . . . be regarded as more extended when used with reference to a

large object than with reference to a comparatively small one. In other words, it must

be defined with reference to the context, at least to some extent.” Id. See also, e.g.,

Padula v. Lally, No. 160313, 1994 WL 16193907, at *2 (Mass. Land Ct. Feb. 9, 1994)

(noting that all definitions of the word “adjacent” put before the court “suggest that . .

. two objects must be in reasonable proximity”); Syufy Enters.v. Home Ins. Co. of Ind.,

No. 94-0756, 1995 WL 129229, at *2 (N.D. Cal. Mar. 21, 1995) (stating that the

“‘ordinary and popular’ reading of the term ‘adjacent’ denotes a sense of physical

proximity”).

The most persuasive authority comes from the Supreme Court’s decision in

Rapanos v. United States, 547 U.S. 715 (2006). Similar to this case, Rapanos concerned

a regulation enacted by an administrative agency, the Army Corps of Engineers (Corps),

interpreting Congress’ legislation in the Clean Water Act (CWA). Id. at 723-24.

Specifically at issue in Rapanos was a provision in the CWA prohibiting the discharge

of pollutants in “navigable waters,” which the CWA further defined as “the waters of the

United States, including the territorial seas.” Id. at 723 (citing 33 U.S.C. § 1362(7)). In

its regulations implementing the CWA, the Corps interpreted “the waters of the United

States” to include, in pertinent part, “[w]etlands adjacent to . . . waters [and tributaries]

(other than the waters that are themselves wetlands[]).” Id. at 724 (citing 33 CFR

§328.3(a)(7)). In the action that was the impetus for suit, the Corps interpreted their own

regulation to exercise jurisdiction over a private owner’s “sometimes saturated” parcel

of land located eleven to twenty miles from the nearest body of navigable water, a

proximity it deemed sufficiently “adjacent” to constitute it part of “the waters of the

United States.” Id. at 720-21.

Nos. 09-4348;10-4572 Summit Petroleum Corp. v. United States EPA, et al. Page 15

The Sixth Circuit deferred to the Corps’ interpretation of its regulation, but the

Supreme Court reversed, holding that deference was not due to “the Corps’ definition

of ‘adjacent,’ which . . . has been extended beyond reason . . . .” Id. at 746. In swift

refutation of the dissent’s view that adjacency should be interpreted expansively, the

majority held that the Court had previously used “‘adjacent’ and ‘adjoining’

interchangeably” and had only previously concluded that a wetland was adjacent to a

navigable body of water “‘[][b]ecause’ it ‘actually abut[ted] on a navigable waterway.’”

Id. at 747 (some emphasis added). Finally, the Court noted that “[h]owever ambiguous

the term may be in the abstract, ‘adjacent’ . . . is not ambiguous between ‘physically

abutting’ and merely ‘nearby.’” Id. at 748.

Together with the ordinary and dictionary definitions of the term “adjacent,” the

Rapanos decision, and similar case law, points clearly toward the conclusion that the

regulatory requirement that aggregated activities be “located on contiguous or adjacent

properties” is unambiguous in the context in which it is here considered. For the

foregoing reasons, we adopt this position.

C. The EPA’s interpretation of the term “adjacent,” to which no deference

is owed, runs contrary to its plain meaning.

Having determined that the word “adjacent” is unambiguous, we apply no

deference in our review of the EPA’s interpretation of it. Christensen, 529 U.S. at 588.

Instead, we must test the agency’s interpretation against the plain meaning of its

unambiguous regulation. Here, we conclude that the EPA’s interpretation of the

requirement that activities be “located on contiguous or adjacent properties,” i.e., that

activities can be adjacent so long as they are functionally related, irrespective of the

distance that separates them, undermines the plain meaning of the text, which demands,

by definition, that would-be aggregated facilities have physical proximity. The mere fact

that in a limited sense, the term “adjacent” is not susceptible to abstract definition does

not render it unclear, for “however ambiguous the term may be in the abstract, ‘adjacent’

. . . is not ambiguous between ‘[physically proximite]’ and merely ‘[functionally

related].’” See Rapanos, 547 U.S. at 748. In light of this conclusion, we hold that the

Nos. 09-4348;10-4572 Summit Petroleum Corp. v. United States EPA, et al. Page 16

EPA has interpreted its own regulatory term in a manner unreasonably inconsistent with

its plain meaning and vacate the EPA’s stationary source determination hereby directing

the EPA to reassess the aggregation of Summit’s facilities under the ordinary

understanding of its requirement that Summit’s plant and wells be located on adjacent,

i.e., physically proximate, properties.

1. The EPA’s unreasonable interpretation is not entitled to

heightened deference merely because it is longstanding.

The EPA opposes this conclusion, claiming that because it has an established

history of supplementing the traditional definition of adjacency with the concept of

activities’ functional relatedness, we must review its interpretation with heightened

deference. Resp’t Br. at 31-32 (citing Alaska Dep’t of Envtl. Conservation, 540 U.S. at

487 (stating that courts “normally accord particular deference to an agency interpretation

of ‘longstanding’ duration”) (quoting North Haven Bd. of Ed. v. Bell, 456 U.S. 512, 522

n.12 (1982))). The EPA’s appeal to the “longstanding duration” principle is

unsurprising, since even a cursory overview demonstrates that the agency has rarely, if

ever, considered physical proximity the sine qua non of two pollutant-emitting activities

being “adjacent” to one another. See, e.g., Letter From Edward E. Reich, EPA to Clyde

B. Eller, EPA Region IX (May 16, 1980), available at

www.epa.gov/region7/air/nsr/nsrmemos/shell.pdf (last visited May 16, 2012)

(two facilities 1.8 miles apart and connected by pipeline are a single source because

neither facility produces products independently); Letter from Edward E. Reich, EPA

to Steve Rothblatt, EPA Region V (June30,1981), available at

www.epa.gov/region7/air/title5/t5memos/defsrce2.pdf (last visited May 16, 2012)

(two plants one mile apart are a single source because they are connected by railroad and

operated together); Letter from Robert G. Kellam to Richard R. Long, EPA Region VIII

(Aug. 27, 1996), available at http://www.epa.gov/region07/air/nsr/nsrmemos/abnt.pdf

(last visited May 16, 2012) (landfarm and brewery six miles apart are single source

because the landfarm operation is integral to the brewery operation); Letter from Richard

R. Long, EPA Region VIII to Lynn R. Menlove, Utah Dept. of Envtl. Quality

(Aug. 8, 1997), available at www.epa.gov/region07/air/nsr/nsrmemos/util-at1.pdf (last

Nos. 09-4348;10-4572 Summit Petroleum Corp. v. United States EPA, et al. Page 17

visited May 16, 2012) (pump station and production operations 21.5 miles apart and on

opposite sides of a lake are a single source because connective channel transports raw

materials between them and facilities have a support relationship); Letter from Cheryl

L. Newton, EPA Region V, to Donald Sutton, Illinois EPA (Mar. 13, 1998), available

at www.epa.gov/region7/air/nsr/nsrmemos/acme.pdf (last visited May 16, 2012) (steel

mill facilities 3.7 miles apart and separated by Lake Calumet, landfills, the I-94

expressway, and the Little Camulet River are a single source because “USEPA considers

that the close proximity of the sites, along with the interdependency of the operations

and their historical operation as one source . . .”); Letter from Richard Long, EPA

Region VIII, to Dennis Myers, Colorado Air Pollution Control Div. (Apr. 20, 1999),

available at http://www.epa.gov/region07/air/nsr/nsrmemos/amersoda.pdf (last visited

May 16, 2012) (“distance alone” does not preclude a mine and plant thirty-five to forty

miles apart but connected by pipeline being considered a single source given “integral

connectedness of the[] facilities”); Forest Gil, et al. (2001) (EPA guidance that adjacency

analysis should include operational, not geographical, inquiries, e.g., whether the

facilities are situated to enable working integration, whether materials and people are

routinely transported between them, and whether the production process is split in any

way between the facilities); Letter from Pamela Blakley, EPA Region

V to Don Smith, Minn. Pollution Control Agency (Mar. 23, 2010), available at

http://www.epa.gov/region7/air/nsr/nsrmemos/single.pdf (last visited May 16, 2012)

(facilities separated by three miles without any physical connection are a single source

because materials are transported between them daily). See also Letter from Winston

A. Smith, Region VI, to Randy C. Poole, Mecklenburg Cnty. Dept. of Envtl.

Protection (May 19, 1999), available at

http://www.epa.gov/region07/air/nsr/nsrmemos/we1999.pdf (last visited May 16, 2012)

(two bulk gas terminals separated by .9 miles are separate sources because although

close in proximity, they are not functionally related).

Though the EPA has previously considered the functional relationship between

activities in assessing whether they lie on “contiguous or adjacent properties,” its request

of increased deference to this interpretation rests on the premise that some measure of

Nos. 09-4348;10-4572 Summit Petroleum Corp. v. United States EPA, et al. Page 18

deference is in fact owed to the EPA’s interpretation in the first instance—a premise we

reject in light of the unambiguousness of the regulation at issue. See Christensen,

529 U.S. at 588. Here again, we rely on authority from the Supreme Court in Rapanos:

In a curious appeal to entrenched executive error, the dissent contends

that ‘the appropriateness of the Corps’ 30-year implementation of the

Clean Water Act should be addressed to Congress or the Corps rather

than to the Judiciary.’ Surely this is a novel principle of administrative

law—a sort of 30-year adverse possession that insulates disregard of

statutory text from judicial review. It deservedly has no precedent in our

jurisprudence.

Rapanos, 547 U.S. at 752 (internal citations omitted). Like Rapanos, we conclude that

an agency may not insulate itself from correction merely because it has not been

corrected soon enough, for a longstanding error is still an error. We thus reject the

EPA’s argument to the contrary and have little hesitation in taking this opportunity—the

first our Court has been given in the EPA’s own history of “entrenched executive

error”—to vacate the agency’s unreasonable interpretation of its Title V permitting plan.

Id.

D. Assuming arguendo the term “adjacent” is ambiguous, the EPA’s

interpretation is inconsistent with the regulatory history of the EPA’s

Title V plan and the EPA-issued guidance memorandums.

Although we consider the unambiguousness of the regulatory term “adjacent” to

be quite clear, we conclude that our holding would be the same even if we were to accept

the EPA’s argument that its regulation is ambiguous.

Where an agency interprets its own ambiguous regulation, we credit that

interpretation with great deference. Auer, 519 U.S. at 461. Indeed, only if the agency’s

interpretation is plainly erroneous or inconsistent will we reject it. Id. Because even

deferential review is not inconsequential, however, see Ky. Waterways Alliance,

540 F.3d at 474, we will not grant administrative agencies unbridled discretion to

interpret the terms of their own regulations in any conceivable manner. See generally

Auer, 519 U.S. at 461; Motor Vehicle Mfrs. Ass’n, 463 U.S. at 42-43. Here, even if we

were to find that the word “adjacent” was ambiguous, we would still find that the EPA’s

Nos. 09-4348;10-4572 Summit Petroleum Corp. v. United States EPA, et al. Page 19

interpretation of its regulatory requirement that Title V single stationary sources are

located on “contiguous or adjacent properties” was entirely inconsistent with: (1) the

regulatory history of its Title V permitting plan; and (2) its own guidance memorandums

regarding the application of its Title V regulations to the oil and gas industry. We would

thus conclude that EPA’s interpretation was unreasonable under Auer, and our decision

in this case would be the same.

1. The EPA’s interpretation is inconsistent with the regulatory

history of its Title V plan.

On the issue of the EPA’s regulatory history interpreting Title V, we first note

the incongruity between the EPA’s refusal to include a functional relationship test in its

single stationary source analysis and its current position that its analysis cannot be

completed without it.

In order for multiple activities to be together considered a single “building,”

“structure,” “facility,” or “installation” within the meaning of the EPA’s Title V plan,

the activities must: (1) be under common control; (2) be located on contiguous or

adjacent properties; and (3) belong to the same industrial grouping. 40 C.F.R. § 71.2.

The EPA first established this stationary source test for use in its Prevention of

Significant Deterioration (PSD) program. See 40 C.F.R. § 52.21(b)(6) (“Building,

structure, facility, or installation means all of the pollutant-emitting activities which

belong to the same industrial grouping, are located on one more contiguous or adjacent

properties, and are under the control of the same person (or persons under common

control) . . . .”). It developed the test in the wake of the Alabama Power Co. v. Costle

decision, a 1979 challenge to the EPA’s former PSD regulations, adjudicated by the

United States Court of Appeals for the D.C. Circuit. See Alabama Power Co. v. Costle,

636 F.2d 323 (D.C. Cir. 1979). Assessing the EPA’s then-existing stationary source test,

the Alabama Power Court advised that “[t]o allow an entire plant or other appropriate

grouping of industrial activity to be subject as a single unit . . . EPA should devise

regulatory definitions of the terms ‘structure,’ ‘building,’ ‘facility,’ and ‘installation’ to

provide for the aggregation, where appropriate, of industrial activities according to

Nos. 09-4348;10-4572 Summit Petroleum Corp. v. United States EPA, et al. Page 20

considerations such as proximity and ownership.” Id. at 397. The court also required

that the EPA make its aggregation test sufficiently predictable to give plausibly regulated

entities “explicit notice as to whether (and on what statutory authority) the EPA

construes the term [stationary] source . . . .” Id.

In the preamble to the 1980 amendments to the final PSD rules, the EPA

recognized that Alabama Power required a new definition of a single stationary source

to, inter alia, “approximate a common sense notion of a ‘plant[]’ [and] . . . avoid

aggregating pollutant-emitting activities that as a group would not fit within the ordinary

meaning of ‘building,’ ‘structure,’ ‘facility,’ or ‘installation.’” Requirements for

Preparation, Adoption, and Submittal of Implementation Plans; April 4, 2012 Approval

and Promulgation of Implementation Plans, 45 Fed. Reg. 52,676 (Aug. 7, 1980) (to be

codified at 40 C.F.R. pts. 51, 52, and 124). Consistent with this understanding, the EPA

declined to adopt the court’s proposed dual-prong proximity/ownership test, finding that

this “definition [of a single source] would fail to approximate a common sense notion

of a ‘plant,’ since in a significant number of cases it would group activities that

ordinarily would be regarded as separate.” 45 Fed. Reg. at 52,695. The EPA therefore

set out to add a third criteria which would narrow the field of aggregated sources to those

more in line with the “common sense notion of a plant.” Id.

The functional relationship test, which EPA admittedly now uses to determine

whether activities are adjacent to one another, was one of the additional criteria the EPA

considered and rejected during its post-Alabama Power rule-making process. First, the

EPA “asked for comment on whether factors other than proximity and control, such as

the functional relationship of one activity to another, should be used [in stationary source

determinations].” 45 Fed. Reg. at 52,694. Then, after due consideration, the EPA

rejected the option of adding a third requirement (in addition to ownership and

proximity) that the activities comprising a single stationary source be functionally

related to one another. 45 Fed. Reg. at 52,695. The EPA specifically found that

assessing whether activities were sufficiently functionally related to constitute a single

source “would be highly subjective” and would make “administration of the definition

Nos. 09-4348;10-4572 Summit Petroleum Corp. v. United States EPA, et al. Page 21

substantially more difficult, since any attempt to assess those interrelationships would

have embroiled the Agency in numerous, fine-grained analyses.” Id. In lieu of the

rejected functional interrelationship test, the EPA elected to incorporate the “industrial

grouping” criterion, a factor which asks whether the multiple activities are engaged in

the same type of business, i.e., operate under the same SIC code. See supra n.2;

40 C.F.R. § 71.2.

a. The EPA’s mis-characterization of its own regulatory

history is unconvincing.

The EPA argues that its prior rejection of the proposal that “functional

relatedness” be a third prong of its stationary source test is immaterial because its

decision not to use this as a stand-alone factor is not inconsistent with its use of the

concept as a supplement to its adjacency analysis. In at least two ways, neither Title V’s

regulatory history nor common sense supports the EPA’s position.

First, the fact that the EPA considered adding to the tests of ownership and

proximity with a test of functional relatedness belies its current contention that the

factors of proximity and functional relatedness are one in the same. The EPA admits

that it retained Alabama Power’s suggested ownership and proximity test, seeking only

a third test to reduce the number of single stationary sources to those representative of

a common plant. If the adopted proximity requirement—articulated by the EPA as the

requirement that activities be “located on contiguous or adjacent properties”—suggested

a measure of the activities’ functional relatedness, there would have been no need to

consider adopting this already-included test as a third prong in the EPA’s single source

analysis. Clearly, at least at the time the EPA adopted its stationary source regulation,

the EPA understood adjacency in geographical, rather than operational, terms.

Second, the EPA’s decision not to employ a functional relatedness test was

categorical and unqualified. Far from advocating the use of a functional relatedness

assessment as part but not all of the stationary source analysis, the EPA expressed the

sweeping conclusion that any reference to the operational relationship between activities

“would be highly subjective,” would “make administration of the definition substantially

Nos. 09-4348;10-4572 Summit Petroleum Corp. v. United States EPA, et al. Page 22

more difficult,” and would burden “the Agency in numerous, fine-grained analyses.”

45 Fed. Reg. 52,695. This broad condemnation cuts heavily against the EPA’s argument

that the use of any assessment of functional relatedness is reasonable (even in its own

view). Ultimately, the EPA has failed to convince us why the criterion it considered, and

then strongly rejected, is now indispensable to its ability to make adequate stationary

source determinations. The foregone conclusion, given the absence of notice and

comment procedures amending the EPA’s Title V plan to include an assessment of

activities’ functional relatedness, is that the EPA’s current test is in practice completely

inconsistent with the wording of its own regulation.

2. The EPA’s interpretation is inconsistent with its own guidance

memorandums.

We next note that just as the EPA’s present interpretation of adjacency is

inconsistent with the regulatory history of its Title V permitting plan, so too is it

inconsistent with the very EPA-issued guidance memorandums on which the EPA relies

in the instant case. As discussed supra, the EPA’s first two letters to Summit cited the

Wehrum Memorandum as primary authority in its decision-making process. The

Wehrum Memorandum had particular relevance to the EPA’s single source

determination for Summit—it was issued to guide permitting authorities specifically on

the application of Title V to the aggregation of pollutant-emitting activities in the oil and

gas industry. The Wehrum Memorandum rejected the notion that geographically distant

oil and natural gas activities could be considered “contiguous” or “adjacent:”

[F]or this 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

it would potentially lead to results which do not adhere to the common

sense notion of a plant. . . . Given the diverse nature of the oil and gas

activities, we believe that proximity is the most informative factor in

making source determinations for these industries.

Wehrum Memorandum, supra. We need not strain to conclude that the EPA’s source

determination for Summit, in which the EPA admittedly found that aggregation of

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Summit’s sweetening plant and sour gas wells was appropriate despite their physical

separation, is patently inconsistent with this guidance.

While the EPA withdrew the Wehrum Memorandum and issued the McCarthy

Memorandum shortly before the final iteration of its single source determination for

Summit, the McCarthy Memorandum does not support the EPA’s analysis, either. To be

sure, the McCarthy Memorandum criticized the Wehrum Memorandum’s emphasis on

physical proximity, noting that such was not “a sufficient endpoint in the

decision-making process.” McCarthy Memorandum, supra. Apart from revoking this

prior guidance, however, the McCarthy Memorandum promotes a neutral and plain

meaning application of the EPA’s Title V plan, directing permitting authorities to “rely

foremost on the three regulatory criteria” for aggregating emissions from multiple

sources, i.e., “(1) whether the activities are under the control of the same person (or

person under common control); (2) whether the activities are located on one or more

contiguous or adjacent properties; and (3) whether the activities belong to the same

industrial grouping.” Id. (citing 40 C.F.R. § 52.21(b)(6)). As discussed supra, the

McCarthy Memorandum concedes that at the end of any case-by-case analysis,

proximity may well be the overwhelming and determinative factor. If the McCarthy

Memorandum says anything about including supplemental and unexpected factors in the

Title V stationary source analysis, it cautions against it.

There is some dispute between the parties as to which of the EPA’s letters

declaring Summit’s plant and wells a single stationary source was the EPA’s “final

agency determination.” Summit argues that the EPA’s October 2010 correspondence

was a mere reiteration of its final determination in September 2009; thus, Summit

contends, the Wehrum Memorandum applied to the EPA’s decision and its emphasis on

physical proximity in the adjacency analysis should have caused Summit’s facilities to

be considered separate emissions sources. Ultimately, whether the Wehrum

Memorandum had been superceded by the McCarthy Memorandum at the time of the

EPA’s final determination would not impact our decision. Although the Wehrum

Memorandum made clear the near-singular importance of the physical proximity of two

Nos. 09-4348;10-4572 Summit Petroleum Corp. v. United States EPA, et al. Page 24

facilities in the EPA’s stationary source analysis, the McCarthy Memorandum supports

Summit’s position with its focus on applying the regulatory text in Title V decisions.

In either case, then, the EPA-issued guidance memorandums support the error in the

EPA’s interpretation of its own regulatory term.4

E. Arguments by Amicus API support our conclusion.

Our decision finds support in many of the arguments raised in the brief of

Amicus API.5 First, as a member of the oil and gas industry itself, API urges us to

consider the fact that the EPA’s interpretation of adjacency to include a measure of

functional relationship is subjective and unpredictable, undermining the Alabama Power

Court’s mandate that the EPA’s test give “explicit notice as to whether (and on what

statutory authority) the EPA construes the term [stationary] source . . . . ” See Alabama

Power, 636 F.2d at 397. Relatedly, API criticizes the EPA for supporting its source

determination with the concept of a “common sense notion of a plant,” reasoning that

this general principle is clearly meant to constrain, rather than enlarge, the EPA’s

definition of a single stationary source.

API also argues that the EPA’s interpretation has led in this case, and will

continue to lead, to absurd source determinations within the industry. In a context where

4

Summit additionally argues, as it has since its initial correspondence with EPA, that the

definition of a “facility” in EPA’s HAP regulations cuts against aggregation of even adjacent facilities in

the oil and gas industry. Summit specifically cites the Preamble to Subpart HH, Section V of the

Significant Comments and Changes to the Proposed Standards of HAP Regulations, within which EPA

states that “EPA believes it would not be reasonable to aggregate emissions from surface sites that are

located on the same lease, but are great distances apart.” Summit notes that the Preamble “makes no

mention of distinguishing HAP emissions from criteria pollutant emissions [under Title V],” arguing that

the same non-aggregation standard should apply to pollutant-emitting sources regulated under Title V.

Pet’r Br. at 35. The Wehrum Memorandum would seem to support Summit’s position as its three-step

procedure for determining a stationary source cites to EPA’s HAP regulations. Still, this is not Summit’s

strongest argument. As even Summit concedes, “HAPs are not at issue in this case.” Pet’r Br. at 36.

Furthermore, the Senate committee discussing the new definition of a “source” within EPA’s HAP

regulations specifically cautioned that any definition would refer only to HAPs. See S. Rep. No. 101-228

at 150-51 (1989), reprinted in 5 Legislative History at 8490-91 (cautioning that the definition would “apply

only in the context of this section and should not be confused with other meanings of the term ‘major

source’ in parts C (prevention of significant deterioration) or D (non-attainment) of the Act.”). Because

Michigan’s Title V regulations are also not at issue in this case, Summit’s similar appeal to the incongruity

between EPA’s Title V plan and Michigan’s plan (which precludes aggregation of oil and gas facilities

despite contiguousness or adjacency) also fails.

5

While we credit Amicus AXPC with raising several persuasive arguments, as well, they have

substantial overlap with the positions taken by Summit and have thus already been addressed.

Nos. 09-4348;10-4572 Summit Petroleum Corp. v. United States EPA, et al. Page 25

oil and gas producers often have little say over where emission points are located and

nearly every facility is connected to one another by pipeline (and thus, in a sense,

functionally related), API argues, the aggregation of activities without regard to their

physical proximity is inherently unreasonable. Indeed, with the concept of a “common

sense notion of a plant” construed as facilitating the aggregation of operationally related

but physically distant activities, there is little foreseeable limit to the aggregation of

emission points spread out literally across the country. Moreover, API cautions that

source determinations dependent on activities’ functional relatedness will be quickly

outdated as oil and gas producers add and remove emission points from their production

systems, potentially requiring nearly constant renewed source determination requests and

decisions.

We are particularly struck by API’s final observation—that the EPA’s source

determination in this case is an ironic showcase of the very fears that caused the agency

not to adopt a functional relatedness test for source determinations in the first instance.

From Summit and MDEQ’s joint source determination request in January 2005 to the

final iteration of the EPA’s decision, nearly five years passed. The parties engaged in

at least twenty-five conference calls and exchanged “a small mountain of paper” within

this period. Certainly, the cost for Summit to produce the data and schematics requested

by the EPA, and the cost for the EPA to distill and understand the same, were high in

terms of both monetary and capital resources. As API points out, this process produced

exactly the “fine-grained” and administratively burdensome result the EPA sought to

avoid in its drafting of its Title V stationary source test, see 45 Fed. Reg. at 52,695, and

is strong evidence that the EPA’s interpretation of its own regulation was unreasonable.

III. Conclusion

For the reasons stated, we VACATE the final agency determination of the EPA

aggregating Summit’s sour gas wells and sweetening plant into a single and major source

under its Title V permitting plan. We REMAND this case to the EPA for a

reassessment of Summit’s Title V source determination request in light of the proper,

Nos. 09-4348;10-4572 Summit Petroleum Corp. v. United States EPA, et al. Page 26

plain-meaning application of the requirement that Summit’s activities be aggregated only

if they are located on physically contiguous or adjacent properties.

Nos. 09-4348;10-4572 Summit Petroleum Corp. v. United States EPA, et al. Page 27

_____________

DISSENT

_____________

KAREN NELSON MOORE, Circuit Judge, dissenting. Congress passed the

Clean Air Act (“CAA”) “to protect and enhance the quality of the Nation’s air resources

so as to promote the public health and welfare and the productive capacity of its

population.” 42 U.S.C. § 7401(b)(1). Because the majority hamstrings the

Environmental Protection Agency’s (“EPA”) ability to pursue this mission by refusing

to defer to the agency’s reasonable interpretation of its own regulation, I respectfully

dissent.

I. REVIEW OF AGENCY ACTION

As the majority acknowledges, we defer to an agency’s interpretation of its own

ambiguous regulation as “controlling” unless that interpretation is “‘plainly erroneous

or inconsistent with the regulation.’” Auer v. Robbins, 519 U.S. 452, 461 (1997)

(quoting Robertson v. Methow Valley Citizens Council, 490 U.S. 332, 359 (1989));

Bowles v. Seminole Rock & Sand Co., 325 U.S. 410, 413–14 (1945); Claiborne-Hughes

Health Ctr. v. Sebelius, 609 F.3d 839, 844 (6th Cir. 2010). As in the context of agency

interpretation of statutes, judicial deference to an agency’s interpretation of regulations

is premised on the relative institutional expertise and political accountability of an

agency as compared to a court; moreover, an agency’s authority to interpret its own

regulations implementing a statute is incident to the authority to interpret that statute.

See Matthew C. Stephenson & Miri Pogoriler, Seminole Rock’s Domain, 79 Geo. Wash.

L. Rev. 1449, 1456–57 (2011).

In addition to the deference we give to administrative interpretations of

regulatory language, we will not overturn agency action unless it is “arbitrary,

capricious, an abuse of discretion, or otherwise not in accordance with law.” 5 U.S.C.

§ 706(2)(A); see also Motor Vehicle Mfrs. Ass’n, Inc. v. State Farm Mut. Auto. Ins. Co.

(State Farm), 463 U.S. 29, 42–43 (1983).

Nos. 09-4348;10-4572 Summit Petroleum Corp. v. United States EPA, et al. Page 28

II. MAJOR-SOURCE AGGREGATION

The EPA will aggregate the emissions of multiple stationary sources to determine

if the sources together constitute a major source if those sources (1) “are under common

control of the same person,” (2) “are located on one or more contiguous or adjacent

properties,” and (3) “belong[] to a single major industrial grouping.” 40 C.F.R. § 71.2.

In this case, the EPA determined that Summit’s sour-gas wells, flares, and gas-

sweetening plant, which are connected by a dedicated underground pipeline and are used

exclusively as part of a single, interconnected operation, together constituted a major

source. As part of its determination that Summit’s various stationary sources were

located on adjacent properties, the EPA considered the fact that those sources were

functionally interrelated.

The majority bases its conclusion that the EPA’s interpretation of its own

regulation was impermissible on three factors: the plain meaning of the word

“adjacent,” the regulatory history of CAA major-source aggregation determinations, and

policy considerations. In my view, none of these factors prevent us from deferring to the

EPA and upholding its decision in this case.

A. The Meaning of “Adjacent”

The majority peruses several dictionaries and concludes that “adjacent” refers to

the physical or geographical relationship between two or more objects. The objects must

be “not distant,” “next to,” “close to,” or “immediately preceding or following.” The

EPA’s interpretation of its Title V regulations to allow for consideration of functional

interrelatedness in adjacency determinations does not contradict this plain meaning of

the word “adjacent.” The ultimate question remains whether two properties are

physically close enough to be considered adjacent for the purposes of aggregation under

Title V. The EPA’s position is simply that other factors in addition to absolute physical

distance can be relevant in determining whether two objects that are a given distance

apart are close enough to be considered adjacent in this context. The EPA does not

contend that multiple stationary sources are adjacent simply because they are

Nos. 09-4348;10-4572 Summit Petroleum Corp. v. United States EPA, et al. Page 29

functionally interrelated, and the majority either misunderstands or mischaracterizes the

agency’s position in so describing it.

In this more limited sense, “adjacent” is ambiguous. The fact that “adjacent”

refers to the distance between two objects does not explain what factors go into a

determination of whether two objects that are a given distance apart are “next to” each

other, “close,” or “immediately preceding or following.” The cited definitions do not

unambiguously foreclose the consideration of factors other than absolute physical

distance.1 One object in a sequence “immediately preced[es] or follow[s]” the next item

in the sequence, for example. Two objects that are physically connected fall “next to”

each other along that connection. Two or more stationary sources that are functionally

interrelated can similarly be described as “next to” each other; one follows the other in

a common process.

Moreover, functional interrelatedness can inform the determination of whether

two objects that are a given distance apart are adjacent. If two properties are close

enough to each other to house stationary sources that contribute to the same interrelated

operation, and only to that operation, those properties are more likely to be close enough

reasonably to be considered adjacent. Likewise, the EPA could reasonably conclude that

two or more sources that exist only as part of the same larger process or sequence will

likely be close enough to each other to be considered adjacent. As the EPA recognizes,

circumstances may exist in which the distance between two stationary sources is too

great for those sources to be considered adjacent, even if they are functionally

interrelated. This fact does not mean that interrelatedness can never be a factor, but that

it will not support a finding of adjacency in that instance.

The consistency of the EPA’s approach with the regulation is apparent from the

record in this case. The EPA did not ignore the physical dimension of adjacency; the

EPA’s decision to aggregate Summit’s wells, flares, and plant was not, as the majority

1

The majority acknowledges that “adjacent” does not refer to any specific distance and that

context matters as to whether two objects that are a given distance apart are adjacent, but then

contradictorily concludes that the EPA cannot consider any factor other than distance in deciding whether

two stationary sources are located on adjacent properties.

Nos. 09-4348;10-4572 Summit Petroleum Corp. v. United States EPA, et al. Page 30

alleges, made “irrespective of the distance that separates them.” Distance was a factor

in concluding that the various sources were located on adjacent properties. In its April

26, 2007 letter to Summit, for example, the EPA requested a map showing the location

of each emission unit, as well as the potential to emit of each unit located within one

mile of the gas-sweetening plant. Pet’r App. at 31. The EPA discussed the distance

between Summit’s gas-sweetening plant, gas wells, and flares in its October 18, 2010

letter explaining its decision to aggregate each source in Summit’s operations as a major

source, noting, for example, that “it appears that there are a dozen or more sour gas wells

within a one mile-radius of the sweetening plant.” Resp. App. at 90–91 & n.21. If the

EPA had truly considered only functional interrelatedness, it would have declared

Summit’s operation to be a major source in its initial April 2007 letter after noting that

each source was interrelated and would not have sought additional information regarding

the distance between the emission units and the plant. See Pet’r App. at 31.

Moreover, in Summit’s case, functional interrelatedness has a physical

dimension; each stationary source is connected via a dedicated pipeline. The operation

is thus not only functionally interrelated but physically interconnected. Each source

(gas well, flare, and sweetening plant) is a stop along a single physically connected

process; each well is “next to” and “immediately preced[es]” the following well, for

example. Nothing outside of this process either physically or functionally interrupts the

traverse of gas from an underground field through the gas wells and past the flares to the

sweetening plant. The properties on which each well or flare are located are likewise

connected to each other, and to the property on which the plant is located.2

The EPA’s position thus comports with the plain meaning of the word “adjacent”

as a description of the geographical relationship between two objects. The EPA uses

interrelatedness only to determine whether two properties are close enough to each other

to be considered adjacent. Functional interrelatedness thus operates only in that realm

2

Although the EPA does not rely on this fact, the underground fields from which the gas is drawn

extend beyond the individual parcels of land on which each gas well or flare is located. The different

locations within the field from which each well draws gas are thus not only physically proximate, but are

actually contiguous.

Nos. 09-4348;10-4572 Summit Petroleum Corp. v. United States EPA, et al. Page 31

of adjacency that is ambiguous; it does not replace proximity, but serves as a means of

determining proximity. Accordingly, deference is warranted.

The majority’s cited caselaw does not dictate a contrary result. Indeed, the

majority’s “most persuasive authority” on the meaning of “adjacent” within the CAA

regulations is a Supreme Court decision that involved a different statute and did not

purport to provide a general definition of the word “adjacent.”3 In Rapanos v. United

States, 547 U.S. 715, 740–42 (2006), which dealt with the Clean Water Act (“CWA”),

a plurality of the Court concluded that, for a wetland to fall within the meaning of

“waters of the United States” and thus be subject to regulation under the CWA, the

wetland must actually abut a navigable waterway. In its earlier opinion in United States

v. Riverside Bayview Homes, Inc., 474 U.S. 121 (1985), the Court had held that the

Army Corps of Engineers’s interpretation of the CWA to cover certain wetlands was

reasonable because the precise boundary between water and land is not always clear and

an expert agency is best positioned to decide how far the CWA’s regulatory scope

should extend in such situations; in Riverside Bayview, the Court had described the

wetlands that could be regulated under the CWA as those that were “adjacent” to

navigable waters. Rapanos, 547 U.S. at 740–41. Because only wetlands that actually

abut waters implicate the issue of how to determine a land/water boundary, the Court in

Rapanos clarified that its use of the word “adjacent” in Riverside Bayview meant only

physically abutting and, accordingly, that only those wetlands that physically abut

navigable waters could be considered adjacent to such waters for CWA purposes. Id.

at 742. Indeed, the plurality expressly stated that “[i]n expounding the term ‘adjacent’

as used in Riverside Bayview, we are explaining our own prior use of that word to

interpret the definitional phrase ‘the waters of the United States’” and that “[h]owever

ambiguous the term may be in the abstract, . . . ‘adjacent’ as used in Riverside Bayview

is not ambiguous between ‘physically abutting’ and merely ‘nearby.’” Id. at 747–48.

Given the specific, limited nature of this discussion, it really has no applicability to any

inquiry into the meaning of “adjacent” more generally or in any other context. In

3

The majority’s other proffered caselaw is notably sparse. We do not typically find much

persuasive authority in unpublished decisions of the Massachusetts Land Court, for example.

Nos. 09-4348;10-4572 Summit Petroleum Corp. v. United States EPA, et al. Page 32

determining otherwise, the majority mistakes the sea for the air, leaving the fish and the

fowl confused.

If anything, Rapanos actually undermines Summit’s position by demonstrating

that the meaning of “adjacent” is contextual and that the determination of whether two

objects are adjacent can depend upon the purpose for which the adjacency decision is

being made. In Rapanos, the question was how close a wetland must be to navigable

waters to qualify as “waters of the United States,” and the Court held that “adjacent” in

that context meant physically abutting because only abutting wetlands could reasonably

constitute “waters” at all. See id. at 741 n.10. Different factors are relevant when the

question is how close multiple stationary sources must be to each other to qualify as an

aggregated major source.

Because “adjacent” is ambiguous as to how to determine whether two objects

that are a given distance apart should be considered adjacent, we should defer to the

EPA’s decision to consider functional interrelatedness as a means of making that

determination. Moreover, the values which deference promotes would be served by

doing so. Whether two or more stationary sources are located on adjacent properties

goes to whether the EPA should aggregate those individual sources; ultimately, the

regulatory term that the EPA is interpreting when considering whether properties are

adjacent is “major source.” See 40 C.F.R. § 71.2.4 The consequence of aggregating the

various stationary sources within an operation is that the operation will be subject to the

CAA’s Title V permitting requirements, and whether an industrial operation should be

subject to CAA regulations is a decision best left to the expert agency tasked with

enforcing that law. The EPA’s aggregation decisions reflect its institutional expertise

regarding how various industrial operations affect air quality. In all its talk of adjacency,

the majority forgets the purpose of the adjacency determination. To mix environmental

metaphors, the majority’s analysis of the EPA’s clean-air regulations misses the forest

for the trees.

4

It is worth noting that Chevron U.S.A., Inc. v. Natural Resources Defense Council, Inc., 467 U.S.

837, 840 (1984), the grandparent of agency-deference cases, involved the EPA’s interpretation of

“stationary source” in a different section of the CAA.

Nos. 09-4348;10-4572 Summit Petroleum Corp. v. United States EPA, et al. Page 33

B. Regulatory History

In concluding that it would not defer to the EPA’s interpretation of “adjacent”

even if it found that term to be ambiguous, the majority relies heavily on the Preamble

to the EPA’s 1980 regulations defining “stationary source” under the CAA’s Prevention

of Significant Deterioration program, in which the EPA explained its decision not to

adopt functional interrelatedness as an independent factor that applied to all aggregation

determinations across all industries. See 45 Fed. Reg. 52,676, 52,693–95 (Aug. 7, 1980).

The majority first reasons that the EPA would not have considered adding a separate

interrelatedness requirement if adjacency and interrelatedness are the same. This

argument is logical, but misconstrues the EPA’s position. The EPA does not equate

adjacency with interrelatedness; the latter is a factor that in some cases can help

determine whether the requirement of the former is met. Because adjacency does not

depend upon interrelatedness, the latter would have had independent force as a separate

requirement.

Next, the majority characterizes the Preamble as a categorical rejection of any

consideration of functional interrelatedness. Although the Preamble rejects

interrelatedness as “another abstract factor” to be analyzed in all aggregation

determinations, 45 Fed. Reg. at 52,695, nothing in the Preamble forecloses the

possibility that interrelatedness could be relevant in a specific aggregation determination

or otherwise rejects interrelatedness as a criterion that could be considered within the

adjacency analysis. As discussed below, functional interrelatedness in the gas-drilling

industry is both particularly pertinent and less likely to involve the kind of “subjective”

assessments or “fine-grained analyses” that the EPA cited as reasons not to adopt

interrelatedness as an across-the-board requirement, see id. Moreover, the historical

record belies the majority’s characterization of the Preamble as a categorical rejection

of interrelatedness. The EPA considered interrelatedness in its aggregation

determinations within ten months of the 1980 Preamble—evidence that the consideration

of interrelatedness is not a recent phenomenon that somehow deviates from the agency’s

original regulatory intent. See Letter from Edward Reich, EPA to Steve Rothblatt, EPA

Nos. 09-4348;10-4572 Summit Petroleum Corp. v. United States EPA, et al. Page 34

Region V (June 30, 1981) (concluding that “two facilities [that] are approximately one

mile apart, have a dedicated railroad line between them and are programmed together

to produce one line of automobiles . . . can be considered adjacent”).

The Preamble also makes clear that aggregation as a major source is warranted

if an operation reflects the “common sense notion of [a] plant,” and that the three

requirements for aggregation—common ownership, adjacency, and a shared industrial

grouping—are intended to answer that question. See 45 Fed. Reg. at 52,694–95.

Different industries are structured differently. In the oil and gas industry, activities that

in other contexts might be housed within a single building may instead be spread out

across different parcels of land. Viewing the distance between two facilities in a drilling

operation in light of their functional interrelatedness thus serves the purpose of

identifying operations that reflect the “common sense notion of [a] plant.”

Finally, the fact that the EPA’s aggregation determination in this case is

somewhat inconsistent with the policy preferences expressed in the withdrawn Wehrum

Memo does not render that determination impermissible. The Wehrum Memo relies on

policy reasons for focusing on distance rather than interrelatedness, not an argument

based on the meaning of “adjacent.” Similarly, the Wehrum Memo would not need to

identify physical proximity as “the most informative factor” in an adjacency

determination if it was the only possible factor. See Pet’r App. at 35.

C. Policy Considerations

Our role is not to judge the wisdom of agency action, but its permissibility. To

the extent that Summit’s policy-based challenges to the EPA’s interpretation of its own

Title V regulations are even relevant, they do not hold up to scrutiny.

Summit and the majority stress the value of predictability in a regulatory regime

and emphasize that the EPA itself recognized the danger of having to conduct

“numerous, fine-grained analyses” in aggregation determinations. See 45 Fed. Reg. at

52,695. What Summit and the majority fail to recognize, however, is that such concerns

are not implicated in this case. Summit’s operations are clearly interrelated. Each well

Nos. 09-4348;10-4572 Summit Petroleum Corp. v. United States EPA, et al. Page 35

supplies sour gas only to Summit’s gas-sweetening plant. The plant does not receive

sour gas from any other source. Each unit is physically connected by dedicated pipeline.

Summit does not contend otherwise. No “highly subjective” or “fine-grained analys[i]s”

was required.5

Moreover, the EPA has long considered interrelatedness as a factor in major-

source aggregation determinations, including in the oil and gas industry, so Summit

cannot credibly claim surprise that the agency did so in this case. The concern that

deference to an agency’s interpretation of its own regulations would “require regulated

parties to divine the agency’s interpretations in advance or else be held liable when the

agency announces its interpretations for the first time in an enforcement proceeding and

demands deference” is not implicated. Christopher v. SmithKline Beecham Corp., —

U.S. —, 132 S. Ct. 2156, 2168 (2012). The majority is correct that a longstanding

agency interpretation is not worthy of deference if that interpretation conflicts with the

regulation; absent such conflict, however, the longstanding duration of an agency’s

interpretation certainly weighs towards deference. See Barnhart v. Walton,

535 U.S. 212, 219–20 (2002).

Further, as the majority recognizes, “adjacent” does not have a set meaning as

to any specific distance. Absent a bright-line rule as to how far is too far for numerous

sources to be considered adjacent, any aggregation determination that considers distance

alone could involve the very “subjective” assessments and “fine-grained analyses” that

Summit fears. Stripped of the ability to consider the interrelatedness of Summit’s wells

and plant, the EPA would have had to consider the distance between each individual

well, along with the distance between each well and the plant, and decide whether each

distance was too far to be considered adjacent. In Summit’s case, this process could

require over one hundred separate adjacency determinations. Other drilling operations

that are similarly structured but cover different distances or traverse different landscapes

5

The length of time and volume of paperwork in this case, bemoaned by the American Petroleum

Institute, are likely nothing more than the familiar symptoms of a large bureaucracy. Unfortunate as they

may be, they are not the result of the EPA’s use of interrelatedness as a factor. Indeed, the EPA concluded

that Summit’s operations were interrelated fairly early in the process, informing Summit of this conclusion

in its initial response to Summit’s source-determination request in April 2007. See Pet’r App. at 31.

Nos. 09-4348;10-4572 Summit Petroleum Corp. v. United States EPA, et al. Page 36

might not be able to rely on the determination in Summit’s case in predicting whether

they would be subject to aggregation.

The majority’s adoption of Summit’s position raises its own policy concerns.

Primarily, today’s ruling frees the oil and gas industry to gerrymander its way out of

Title V regulation. So long as sufficient distance exists between each well (so that they

are not “adjacent” as the majority defines that term), or someone other than the drilling

company owns parcels of land in between each well (so that they are not “contiguous”),

the drilling operation cannot be classified as a major source through aggregation. Unlike

the CAA provisions governing hazardous air pollutant emissions, see 42 U.S.C.

§ 7412(n)(4), Title V does not grant the oil and gas industry immunity from aggregation;

this court should not effectively create such a provision when Congress has not done so.

III. CONCLUSION

Because I believe that the EPA’s consideration of functional interrelatedness as

a factor along with physical distance in its adjacency determination was both reasonable

(and thus worthy of deference) and correct, I would affirm its decision to aggregate the

various stationary sources in Summit’s drilling operation as a major source.

Recognizing that the majority concludes otherwise, I note in closing that, aside from

essentially holding that functional interrelatedness is an impermissible factor to consider,

the majority does not find that any other aspect of the EPA’s aggregation determination

was flawed under the Administrative Procedure Act and the standards for agency

decisionmaking articulated in State Farm, 463 U.S. at 42–43. On remand, then, the EPA

is free to reach the same conclusion that Summit’s operations should be aggregated as

a major source for Title V permitting purposes, so long as it bases that conclusion on the

considerations that the majority today deems appropriate. See Sec. & Exch. Comm’n v.

Chenery Corp., 332 U.S. 194, 196, 200–01 (1947).