*** E.O. 12866 Review – Draft – Do Not Cite, Quote, or Release During Review *** EO12866_S ource Determination _2060-AS06_ NPRM _PreambleRule_20150618

Page 1 of 57 6560-50-P ENVIRONMENTAL PROTECTION AGENCY 40 CFR Parts 51, 52, 70 and 71 [EPA
- HQ
- OAR -2013-0685 : FRL - ] RIN 2060- AS06 Source Determination for Certain Emission Units in the Oil and Natural Gas Sector AGENCY: Environmental Protection Agency (EPA). ACTION: Proposed rule. SUMMARY: The U.S. Environmental Protection Agency (EPA) is proposing to clarify the term “adjacent” in the definition s of: (1) “ 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 (2) “major source” in the title V
program a s appl ie d to the oil and gas natural sector . The EPA has previously issued guidance on how to assess “adjacency” for this industry, but the use of the guidance has been challenged, result ing in uncertainty for the regulated community and for permitting aut horities

. The EPA is proposing to clarify how emitting equipment 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 th is s ector . In this action, the EPA is proposing t wo 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. T he EPA*** E.O. 12866 Review – Draft – Do Not Cite, Quote, or Release During Review *** EO12866_S ource Determination _2060-AS06_ NPRM _PreambleRule_20150618

Page 2 of 57 is co -proposing and taking comment on an alternative option to consider pollutant- emi tting activities “adjacent” if they are proximate or are exclusively functionally interrelated. DATES: Comments

. Comments must be received on or before [INSERT DATE 60 DAYS FROM DATE OF PUBLICATION IN THE FEDERAL REGISTER]

. Public Hearings

. The EPA will hold one public hearing on this action in Denver, Colorado. Further details will be announced in a separate notice within this Federal Register

. Please refer
to SUPPLEMENTARY INFORMATION for additional information on the comment period and the public hear ing. ADDRESSES: Submit your comments, identified by Docket ID No. EPA

- HQ

- OAR -2013-0685, to the Federal eRulemaking Portal: http://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 http://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 http://www.epa.gov/dockets/comments.html

. For additional instructions on submitting comments, go to the SUPPLEMENTARY
INF ORMATION 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),*** E.O. 12866 Review – Draft – Do Not Cite, Quote, or Release During Review *** EO12866_S ource Determination _2060-AS06_ NPRM _PreambleRule_20150618

Page 3 of 57 U.S. Environmental Protection Agency, by phone at (919) 54l-4391 , or by email at vetter.cheryl@epa.gov

. For i nformation pertaining to the one public hearing on this action , see separate notice in this Federal Register or contact Ms. Pamela S. Long , Air Quality Policy Division, Office of Air Quality Planning and Standards (C504-01), U.S. Environmental Protection Agency, Research Triangle Park, North Carolina 27711; telephone number (919) 541- 0641; fax number (919) 541-5509; email address: long.pam@epa.gov

. SUPPLEMENTARY INFORMATION: I. General Information A. Does this propos al 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 additio n, state, local and tribal governments may be affected by the rule if they update state rules to adopt these changes. Industry Group NAICS Code 1
Oil and Gas Extraction 21111 Crude P etroleum and Natural Gas Extraction 211111 Natural Gas Liqu id 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

1 North American Industry Classification System (NAICS)*** E.O. 12866 Review – Draft – Do Not Cite, Quote, or Release During Review *** EO12866_S ource Determination _2060-AS06_ NPRM _PreambleRule_20150618

Page 4 of 57 Pipeline Distribution of Natural Gas 486210 Federal Govern ment May Be A ffected State/Local/Tribal Government May Be A ffected

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 F ederal 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. 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 http://www.epa.gov/nsr/index.htm

. D. What should I know about a possible public hearing?*** E.O. 12866 Review – Draft – Do Not Cite, Quote, or Release During Review *** EO12866_S ource Determination _2060-AS06_ NPRM _PreambleRule_20150618

Page 5 of 57 One public hearing will be held on this action in Denver, Colorado. Further details will be announced in a separate notice within this Federal Register

. E. How is this notice organized? The information presented in this notice 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. What should I know about a possible public hearing? E. How is this notice organized? II. Statutory, Regulatory and P olicy B ackground 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? I II

. What are the options that is the EPA is considering? A. Define Source Based on Proximity (in a Manner Similar to the NESHAP ) B. Define Source to Include Exclusively Functionally Interrelated Equipment C. Impacts of the Options on Air Permitting DC . 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*** E.O. 12866 Review – Draft – Do Not Cite, Quote, or Release During Review *** EO12866_S ource Determination _2060-AS06_ NPRM _PreambleRule_20150618

Page 6 of 57 H. Executive Order 13211: Actions Concerning Regulations That Significantly Affect Energy Supply, Distribution, or Use. I. National Technology Transfer and Advancement Act J. Executive Or der 12898: Federal Actions to Address Environmental Justice in Minority Populations and Low-Income Populations K. Determination Under Section 307(d) Statutory Authority L ist of Subjects
II. Statutory, Regulatory and Policy Background for Proposal
A. Statutory and Regulatory Background The major New Source Review (NSR) program s found in parts C and D of Title I of the Clean Air Act (CAA or Act) are preconstruction review and permitting program s 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 can not 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.
T he 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-

2 In this preamble, the term “we” and “our” refers to the EPA.*** E.O. 12866 Review – Draft – Do Not Cite, Quote, or Release During Review *** EO12866_S ource Determination _2060-AS06_ NPRM _PreambleRule_20150618

Page 7 of 57 reservation areas of Indian country over which a tribe or the EPA has demonstrated that a tribe has jurisdictio n, 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 maintena nce of a NAAQS. In addition to the major source permitting programs, t his is typically accomplished through a state or local “minor” new source permitting program

. for “minor” stationary sources. 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

. T he 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*** E.O. 12866 Review – Draft – Do Not Cite, Quote, or Release During Review *** EO12866_S ource Determination _2060-AS06_ NPRM _PreambleRule_20150618

Page 8 of 57 51.166(b)(5) ]. We have then further defined the four statutory term s “build ing, 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 c ontrol of the same person (or persons under common control),” where the “same industrial grouping” refer s 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 adjacentproperties; and (3) under the control of the same person or persons must be evaluated on a caseby

- case basis for each permitting decision. In addition to the pre-construction p ermitting requirements of the NSR 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 ]. Th e title V definition of major source refers to the definitions in other s ections 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 N NSR 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 stat ionary source (or group of stationary sources that are located on one or more contiguous or adjacent properties, and are

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 maint ains the list of SIC codes for reference.*** E.O. 12866 Review – Draft – Do Not Cite, Quote, or Release During Review *** EO12866_S ource Determination _2060-AS06_ NPRM _PreambleRule_20150618

Page 9 of 57 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 – o n 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 th e 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 deter minations 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 http://www.epa.gov/region07/air/nsr/nsrindex.htm

.*** E.O. 12866 Review – Draft – Do Not Cite, Quote, or Release During Review *** EO12866_S ource Determination _2060-AS06_ NPRM _PreambleRule_20150618

Page 10 of 57 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 http://www.epa.gov/region7/air/title5/t5index.htm

. Reviewing both the NSR and title V guidance regarding source determinations, it is clear that w e 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 te s t (same industrial grouping, location on contiguous or adjacent property, and under common control) wou ld 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 buil ding, 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 int errelationship” test to the criteria for defining a

source , as a t that time, w e believed that such a test would “embroil[] the Agency in numerous fine

- grained analys es ” (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*** E.O. 12866 Review – Draft – Do Not Cite, Quote, or Release During Review *** EO12866_S ource Determination _2060-AS06_ NPRM _PreambleRule_20150618

Page 11 of 57 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 no t 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 ac tion. 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 b y Alcoa , sh ould 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 an d management as well as a single SIC code. The EPA determined that the two operations sh ould be considered adjacent because of the shared*** E.O. 12866 Review – Draft – Do Not Cite, Quote, or Release During Review *** EO12866_S ource Determination _2060-AS06_ NPRM _PreambleRule_20150618

Page 12 of 57 materials and personnel and the company’s assertion that the two plants would be operated as one facility

. 4 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 maj or 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 interdependen ce 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 de termination was later challenged and overturned, as will be discussed later in this notice. Finally , in another example involving the oil and natural gas sector , the EPA determined that two natural gas compress or 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

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 http:// www.epa.gov/region07/air/nsr/nsrmemos/alcoany.pdf and in the docket for this rulemaking. 5 Newton, Cheryl. “Summit Petroleum Corporation Single Source Determination.” October 18, 2010. EPA Region 7 Air Program New Source Review Program Policy & Guidance I ndex available at http://www.epa.gov/region07/air/nsr/nsrmemos/singler5.pdf and in the docket for this rulemaking.*** E.O. 12866 Review – Draft – Do Not Cite, Quote, or Release During Review *** EO12866_S ource Determination _2060-AS06_ NPRM _PreambleRule_20150618

Page 13 of 57 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 treat ed 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 compr essor stations were shut down. Additionall y, 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. Th e EPA’s determination that this complex, dynamic system did not resemble a “c ommon sense notion of a plant” was also challenged , and was settled. 6 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. W e have also not established that certain operations must always (or never) be considered together for permitting purposes. C. Oil and Natural Gas Sector

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 http://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 a vailable at http://yosemite.epa.gov/oa/EAB_Web_Docket.nsf/77355bee1a56a5aa8525711400542d23/2c6cf7 12eac2d7b38525788b00545227!OpenDocument&Highlight=2,CAA,10- 04 . The petition for review by the EAB, EPA Region 8’s response, and the reply by petitioner are ava ilable in the docket for this rulemaking.*** E.O. 12866 Review – Draft – Do Not Cite, Quote, or Release During Review *** EO12866_S ource Determination _2060-AS06_ NPRM _PreambleRule_20150618

Page 14 of 57 The United States Census Bureau’s North American Industry Classification System (NAICS) describes the Oil and Gas Extr action 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 c rude 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. The EPA has previously described in the preamble to its proposed New Source Perf ormance Standard ( NSPS ) for the oil and natural gas sector that this sector includ es 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 late r in this notice, we do not intend to apply the proposed clarification to operations that take place

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 http://www.census.gov/cgibin/sssd/naics/naicsrch?code=21111&search=2012 accessed 12/03/2013.*** E.O. 12866 Review – Draft – Do Not Cite, Quote, or Release During Review *** EO12866_S ource Determination _2060-AS06_ NPRM _PreambleRule_20150618

Page 15 of 57 offshore. Onshore production operations include “ the wells and all related processes used in the extraction, production, recove ry, lifting, stabilization, sep a ration , 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, sep arators, 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 sit es include not only the “pads” wh ere 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 (H 2 S), carbon dioxide (CO 2 ), helium, nitrogen and other compounds. It commonly exis ts in mixtures with other hydrocarbons, referred to as natural gas liquids (NGL). N atural gas must be processed to remove these other compounds and gase s 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 an d natural gas sector include volatile organic compounds (VOC), greenhouse gases (including methane), H 2 S, sulfur dioxide (SO 2 ), carbon monoxide (CO) and*** E.O. 12866 Review – Draft – Do Not Cite, Quote, or Release During Review *** EO12866_S ource Determination _2060-AS06_ NPRM _PreambleRule_20150618

Page 16 of 57 nitrogen oxides (NOx). VOC s, 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 CO 2 come primarily from combustion sources, such as flares, engines and compressors. Emissions of 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 a n H 2 S 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 SO 2 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). S eparate ly, the EPA is proposing to expand the
NSPS (subpart OOOO) to regulate several additional categories of em itting equipment in this
sector

.*** E.O. 12866 Review – Draft – Do Not Cite, Quote, or Release During Review *** EO12866_S ource Determination _2060-AS06_ NPRM _PreambleRule_20150618

Page 17 of 57 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 Product ion NESHAP (40 CFR part 63, subpart HH) and Natural Gas Transmission and Storag e 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, s elected 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 s imilar 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 t he N SR permitting program s 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 stati onary 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 H AP 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*** E.O. 12866 Review – Draft – Do Not Cite, Quote, or Release During Review *** EO12866_S ource Determination _2060-AS06_ NPRM _PreambleRule_20150618

Page 18 of 57 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 or not the units are in a contiguous area or under common control. In the c ase of any oil or gas exploration or production well (with its associated equipment), such emissions “shall not be aggregated for an y purpose under this section.” In the NESHAP for Oil and Natural Gas Production Facilities , the EPA de fine s th e affected so urce consistent with t his 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 define s 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).*** E.O. 12866 Review – Draft – Do Not Cite, Quote, or Release During Review *** EO12866_S ource Determination _2060-AS06_ NPRM _PreambleRule_20150618

Page 19 of 57 Furthermore, t he EPA defines s urface 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 o f these definitions is to define the affected facility based on the emissions from equipment and activities that are in close
p roximity 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 E PA 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 develo pment, 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 permittin g guidance , when it issued a guidance document title d “Source Determinations for Oil and Gas Industries” in 2007. 8 This 2007 memo is relevant to our proposed action because it acknowledge d that source determinations within the oil and gas

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 http://www.epa.gov/region07/air/nsr/nsrmemos/oilgas and in the docket for this rulemaking.*** E.O. 12866 Review – Draft – Do Not Cite, Quote, or Release During Review *** EO12866_S ource Determination _2060-AS06_ NPRM _PreambleRule_20150618

Page 20 of 57 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. 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 th e 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 dependen ce, 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 dist ance. 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*** E.O. 12866 Review – Draft – Do Not Cite, Quote, or Release During Review *** EO12866_S ource Determination _2060-AS06_ NPRM _PreambleRule_20150618

Page 21 of 57 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. In doing so, we re instat ed 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 adjacen t property . This fact

- specific examination is consistent with the
EPA’s historical practice in other industri es, 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 ev aluation of the emissions activities at each building, structure, facility or installation . The 2009 memorandum acknowledged that proximity might well serve as the overwhelming factor in a permitting authority’s source determination decision, but the concl usion could only be justified after examining all relevant factors, consistent with regulatory requirements and historical practice

. 9
The EPA has had direct experience as the permitting authority in making source determinations for onshore oil and gas ope rations in Indian country. T he 2010 permit for compressor stations located on the Southern Ute Indian Reservation (Florida River) and the Summit Petroleum permits are two examples discussed in detail previously. In these cases, the
EPA conducted a fact

- spe cific examination of the three factors in determining which emitting

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 http://www.epa.gov/region07/air/nsr/nsrmemos/oilgaswithdrawal.pdf and in the docket for this rulemaking.*** E.O. 12866 Review – Draft – Do Not Cite, Quote, or Release During Review *** EO12866_S ource Determination _2060-AS06_ NPRM _PreambleRule_20150618

Page 22 of 57 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 s ettlement a greement 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. 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 contiguous and adjacent because of the functional interrelatedness of the operations. The EPA deter mined 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 Petrol eum Corp . v. U. S. Environmental Protection Agency , 690 F.3d 733 (6 th Cir.

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 http://yosemite.epa.gov/oa/EAB_Web_Docket.nsf/(Filings)/E340610E897366E1852579AB00544 3C4/$File/Motion%20for%20Dismissal...41.pdf and in the docket for this rulemaking.*** E.O. 12866 Review – Draft – Do Not Cite, Quote, or Release During Review *** EO12866_S ource Determination _2060-AS06_ NPRM _PreambleRule_20150618

Page 23 of 57 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 th e term as currently used in EPA’s regulations. T he 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 o f 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 a gency’s long -standing interpretations of its regulations in the rest of the country. 11
The EPA’s guidance memo to its regional offices was challenged by the National Environmental Development Association Clean Air Project (NEDACAP) in the D.C. Circuit Court of Appeals. National Environmental Development Association’s Clean Air Project v. Environmental Protection Agency, 752 F.3d 999 (D.C. Cir. 2014). NEDACAP alleged that the

memo randum 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

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 I ndex available at http://www.epa.gov/region07/air/nsr/nsrmemos/inter2012 and in the docket for this rulemaking.*** E.O. 12866 Review – Draft – Do Not Cite, Quote, or Release During Review *** EO12866_S ource Determination _2060-AS06_ NPRM _PreambleRule_20150618

Page 24 of 57 D.C. Circuit indicated that the EPA could have avoided a conflict between the Summit memo and the R egional Consistency regulations by revising the source determination regulations to explicitly require considerat ion 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. We also believe it is important to address this issue through a rulemaking. Th e oil and gas source determination guidance provided by the EPA on two sep arate occas ions, 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 cl ar ity through rulemaking and seeking comment on the best app roach for defining the term “adjacent” specific to the onshore oil and natural gas sector

. I. Policy D iscussion

12 We note that the EPA has also announced its plans to conduct a separate action to revise the Regional Consistency Regulations to address consistency issues resulting from allow an exception for judicial decisions. See August 2014 Action Initiation List, available at http://www2.epa.gov/sites/production/files/2014-09/documents/ail-epa-august_2014- 09242014.pdf

.*** E.O. 12866 Review – Draft – Do Not Cite, Quote, or Release During Review *** EO12866_S ource Determination _2060-AS06_ NPRM _PreambleRule_20150618

Page 25 of 57 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 , and t hese controls may be more stringent than controls required at minor sources. Major source BACT or LAER controls are intended to 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 a 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 locat ing in 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 acti vities 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 s ources 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*** E.O. 12866 Review – Draft – Do Not Cite, Quote, or Release During Review *** EO12866_S ource Determination _2060-AS06_ NPRM _PreambleRule_20150618

Page 26 of 57 citizen’s right s to petition the EPA to object to permits. These opportunities exist at both the initial permit issuance, and at permit renewal, which occurs every five 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 permittin g 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 ou t” 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 result s 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 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*** E.O. 12866 Review – Draft – Do Not Cite, Quote, or Release During Review *** EO12866_S ource Determination _2060-AS06_ NPRM _PreambleRule_20150618

Page 27 of 57 per mit. 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 throug h a Federal Implementation Plan ( FIP ) in areas where EPA is the regulatory authority, such as in certain areas of Indian country. The CAA require s implementation of reasonable available control technology (RACT) for major sources in moderate and above ozone nonattainment areas . The EPA develops Control Techniques Guidelines (CTGs) to inform a state’s RACT determinations . Separately, the EPA is proposing a CTG for the oil and natural gas sector. All of these programs (NSPS, NESHAP, R ACT 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 co ntrol 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 kee p 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, N ESHAP or emission control standards imposed by states through their SIPs do es not require case - by

- case pre-approval as do the controls determined through major source permit tings . 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 s ources do not have the*** E.O. 12866 Review – Draft – Do Not Cite, Quote, or Release During Review *** EO12866_S ource Determination _2060-AS06_ NPRM _PreambleRule_20150618

Page 28 of 57 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 c ase 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 importa nt. For communities and air regulators, the ability to protect air quality and public health is equally 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 permit ted 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 wi th 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 s ource 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*** E.O. 12866 Review – Draft – Do Not Cite, Quote, or Release During Review *** EO12866_S ource Determination _2060-AS06_ NPRM _PreambleRule_20150618

Page 29 of 57 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 c ountry, and a C TG that will inform RACT determinations for

e xisting major VOC sources located in moderate or above ozone nonattainment areas

. 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, N NSR 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

- ca s e assessment of the three factors remain s 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 clear ly m atch the common sense notion of a plant.*** E.O. 12866 Review – Draft – Do Not Cite, Quote, or Release During Review *** EO12866_S ource Determination _2060-AS06_ NPRM _PreambleRule_20150618

Page 30 of 57 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
oper ating 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 are 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 the process generally

. 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 S ource in Based on Proximity (a Manner S imilar 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 and*** E.O. 12866 Review – Draft – Do Not Cite, Quote, or Release During Review *** EO12866_S ource Determination _2060-AS06_ NPRM _PreambleRule_20150618

Page 31 of 57 natural gas sector activities is presumed to be limited to the emitting activities at the surface site , and other emitting activities will be considered “adja cent” 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, t he source owner/operator would not be required, and would not be a llowed to include additional emitting activities in a permi t 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 the se sources in a consistent and efficient manner

.*** E.O. 12866 Review – Draft – Do Not Cite, Quote, or Release During Review *** EO12866_S ource Determination _2060-AS06_ NPRM _PreambleRule_20150618

Page 32 of 57 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 propos ing 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 mak e a similar distinctio n 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 t he 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. http://www.deq.louisiana.gov/portal/DIVISIONS/AirPermitsEngineeringandPlanning/AirPermits ProceduresandGuidance/ContiguityandOilandGasProductio n.aspx . March 2015.*** E.O. 12866 Review – Draft – Do Not Cite, Quote, or Release During Review *** EO12866_S ource Determination _2060-AS06_ NPRM _PreambleRule_20150618

Page 33 of 57 We also request comment on whether there are instances where setting such a bright

- line distance could increase or limit permitting authority oversight o f these sources b ecause 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 result ing. Finally, we request comment on whether there are circumstances in which an owner s/ 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 F unctionally I nterrelated 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 Oi l and G as E xtraction ), 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 connect ion via a pipeline or other means, because of the physical connection between the equipment. Other examples of factors that could be assessed to determine*** E.O. 12866 Review – Draft – Do Not Cite, Quote, or Release During Review *** EO12866_S ource Determination _2060-AS06_ NPRM _PreambleRule_20150618

Page 34 of 57 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 th e other group of equipment was not operating. The EPA and states would make a determination of adjacency based on a consideration of the interrelat edness of emitting activities in addition to the distance between them. So, for the oil and natural gas secto r, 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 po llutant

- emitting activities are separated by a distance of less than 1⁄4 mile.
Th e 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 sect or 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 ? A re 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 a s need to examine various interrelatedness criteria or the interconnectedness of the operations through pipelines? Should the EPA further defin e exclusive functional interrelatedness for this sector to provide additional clarity to regulators and the regulated community? For example, should the 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 configuration s specific to this industry that the EPA should consider to be exclusively functionally interrelated?*** E.O. 12866 Review – Draft – Do Not Cite, Quote, or Release During Review *** EO12866_S ource Determination _2060-AS06_ NPRM _PreambleRule_20150618

Page 36 of 57 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 emi ts 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 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)]. I n our permitting experience, these OCS sources ar e 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 b oth sources a nd permitting authorities and propose to continue the existing case- by

- case approach for offshore sources

. Proposal is Limited to Onshore Oil and Gas Operations Because the EPA would benefit from public comment on 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. IV. Environmental Justice Considerations*** E.O. 12866 Review – Draft – Do Not Cite, Quote, or Release During Review *** EO12866_S ource Determination _2060-AS06_ NPRM _PreambleRule_20150618

Page 37 of 57 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. 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
p ermitting 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 Pr esident’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 OM B*** E.O. 12866 Review – Draft – Do Not Cite, Quote, or Release During Review *** EO12866_S ource Determination _2060-AS06_ NPRM _PreambleRule_20150618

Page 38 of 57 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 Flexibil ity 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 rul e 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, 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 propose d rule on small entities, I certif y 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 i s 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,*** E.O. 12866 Review – Draft – Do Not Cite, Quote, or Release During Review *** EO12866_S ource Determination _2060-AS06_ NPRM _PreambleRule_20150618

Page 39 of 57 has no net burden or otherwise has a positive economic effect on the small entities subje ct 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. Unfunde d 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 imp lement those requirements. In other areas, the EPA implements those requirement s. 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 nat ional government and the states, or*** E.O. 12866 Review – Draft – Do Not Cite, Quote, or Release During Review *** EO12866_S ource Determination _2060-AS06_ NPRM _PreambleRule_20150618

Page 40 of 57 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 solicit s comments on this propos ed 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 develop ed 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 govern ment and tribes in developing plans to implement NSR permitting , and th is proposal do es 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 implicatio ns 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.*** E.O. 12866 Review – Draft – Do Not Cite, Quote, or Release During Review *** EO12866_S ource Determination _2060-AS06_ NPRM _PreambleRule_20150618

Page 41 of 57 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. T h is proposal only clarifies the scope of a source 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 ac tion ” 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 No. 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 spec ifications, 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 a nd applicable voluntary consensus standards.*** E.O. 12866 Review – Draft – Do Not Cite, Quote, or Release During Review *** EO12866_S ource Determination _2060-AS06_ NPRM _PreambleRule_20150618

Page 42 of 57 Th is 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 Environmen tal 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 propos al requests comment on the appropriate definition of the source as it applies to one industry category. 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 proposes to determine 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 ; 1 14 ; 1 16, 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*** E.O. 12866 Review – Draft – Do Not Cite, Quote, or Release During Review *** EO12866_S ource Determination _2060-AS06_ NPRM _PreambleRule_20150618

Page 43 of 57 Environmental protection, Air pollution control, Intergovernmental relations, Major source, Oil and gas, Construction permit.
40 CFR Part 52 Environmental protection, Air pollution control, Intergovernmental relations, Major source, Oil and gas, Construction permit.
40 CFR Part 70 Environmental protection, Air pollution control, Intergovernmental relations, Oil and gas, Major sS ource, Operat ing permit

.*** E.O. 12866 Review – Draft – Do Not Cite, Quote, or Release During Review *** EO12866_S ource Determination _2060-AS06_ NPRM _PreambleRule_20150618

Page 44 of 57 Page 43 of 45 - Source Determination for Certain Emission Units in the Oil and Natural Gas Sector

40 CFR Part 71 Environmental protection, Administrative practice and procedure, Air pollution control, Intergovernmental relations, Major sS ource, Operating permit s.,

__________________________________ Dated :

__________________________________ G ina McCarthy , Administrator

.*** E.O. 12866 Review – Draft – Do Not Cite, Quote, or Release During Review *** EO12866_S ource Determination _2060-AS06_ NPRM _PreambleRule_20150618

Page 47 of 57 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 pollu tant

- emitting activities are separated by a distance of less than 1⁄4 mile.
* * * * **** E.O. 12866 Review – Draft – Do Not Cite, Quote, or Release During Review *** EO12866_S ource Determination _2060-AS06_ NPRM _PreambleRule_20150618

Page 51 of 57 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] Option 2:
A PPENDIX S TO PART 51 – EMMISSIONS OFFSET INTERPRET AT IVE RULING
II.
A.
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 subsection (i) of this section, b uilding, 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- emittin g activities are separated by a distance of*** E.O. 12866 Review – Draft – Do Not Cite, Quote, or Release During Review *** EO12866_S ource Determination _2060-AS06_ NPRM _PreambleRule_20150618

Page 53 of 57 (ii) Notwithstanding the provisions of subsection (i) of this section, b uilding, structure, facility, or installation mea ns, 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] Option 2: § 52.21 Prevention of significant deterioration of air quality. (b) (6) (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 subsection (i) of this section, b uilding, 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*** E.O. 12866 Review – Draft – Do Not Cite, Quote, or Release During Review *** EO12866_S ource Determination _2060-AS06_ NPRM _PreambleRule_20150618

Page 55 of 57 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 ha s the same meaning as in 40 CFR §63.761.
[PROPOSED REGULATORY TEXT FOR OPTION 2] Option 2: § 70.2 Definitions. 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 oncontiguous or adjacent properties belong to the same Major Group (i.e., all have the same twodigit 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 activitiesshall be considered adjacent if one of the following circumstances apply: 1) the pollutantemitting 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.*** E.O. 12866 Review – Draft – Do Not Cite, Quote, or Release During Review *** EO12866_S ource Determination _2060-AS06_ NPRM _PreambleRule_20150618

Page 57 of 57 [PROPOSED REGULATORY TEXT FOR OPTION 2] Option 2: § 71.2 Definitions. 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 oncontiguous or adjacent properties belong to the same Major Group (i.e., all have the same twodigit 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 adjacen t if one of the following circumstances apply: 1) the pollutantemitting 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.
* * * * *