September 22nd, 2009 

The following issued guidance memorandum, “Source Determinations for Oil and Gas 

Industries” has since been withdrawn. Please refer to Gina McCarthy’s memorandum, 

“Withdrawal of Source Determinations for Oil and Gas Industries” provided via the link 

below. 

http://www.epa.gov/region7/air/nsr/nsrmemos/oilgaswithdrawal.pdf
J~~~ED STqT~S 

2'^ A 'Z UNITED STATES ENVIRONMENTAL PROTECTION AGENCY 

WASHINGTON, D.C. 20460 

z ~f` ` 

rq Z PROZ to \ 

JAN 1 2 2007 

OFFICE OF 

AIR AND RADIATION 

MEMORANDUM 

SUBJECT: 

FROM: 

Source Determinations for Oil and Ga 

Acting Assistant Adminis 

William L. Wehrum 

at~r 6101 

TO: Regional Administrators I-X 

The purpose of this memorandum is to provide guidance to assist permitting authorities 

in making major stationary source determinations for the oil and gas industry. This guidance 

extends to oil and gas operations on land, in state waters, and on the federal Outer Continental 

Shelf (OCS).t 

Currently, significant oil and gas development is occurring in the Western United States . 

With this development, we expect issues to arise related to whether exploration, extraction or 

production activities need to be aggregated together to determine whether the activities qualify as 

a "major stationary source" for purposes of the major New Source Review (NSR) and the Title V 

permitting programs.z As explained in detail below, we suggest that permitting authorities begin 

the analysis by evaluating whether each individual surface site qualifies as a separate stationary 

source, and then aggregating two or more surface sites only if the surface sites are under 

common control and are located in close proximity to each other. The term "surface site" 

generally refers to a single area of development and includes 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. See e.g . 40 CFR 63 .761 . 

t On the OCS, "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 source within 25 miles of the OCS source, shall be considered direct 

emissions from the OCS source." See CAA §328(a)(4)(C). This memorandum does not supercede our existing 

interpretation of this regulatory language. 

2 Oil and gas development activities include such things as geological and geophysical exploration for petroleum 

deposits, drilling oil and gas wells, and separating natural gas liquids from crude oil. The activities generally fall 

into the major Standard Industrial Code (SIC) 13 including SIC 1311, 1321, 1381, 1382, and 1389. 

Internet Address (URL) * http .//www .epa .gov 

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The Federal NSR regulations define a "major stationary source" as any "stationary 

source" that emits or has the potential to emit above certain specified emissions thresholds 

(ranging from 10-250 tons per year) depending on the attainment status of the area. The Federal 

NSR regulations define "stationary source" to mean "any building, structure, facility, or 

installation which emits or may emit any air pollutant subject to regulation under the Act. 

,3 The 

regulations establish three criteria for identifying emissions activities that belong to the same 

"building," "structure," "facility," or "installation": (1) whether the activities are under common 

control, (2) whether the activities are located on one or more contiguous or adjacent properties; 

and (3) whether the activities belong to the same major industrial grouping. 4 The Title V 

program also considers whether activities are under common control and located on contiguous 

or adjacent property .5 

In implementing the stationary source definition for the major NSR and Title V permit 

programs, the foremost principle that guides our decision-making is that we should apply a 

"common sense notion" of a plant. In Alabama Power v. Costle, the court cautioned that 

". . .EPA cannot treat contiguous and commonly owned units as a single source unless they fit 

within the four permissible statutory terms," and that "EPA should . . .provide for the 

aggregation, where appropriate, of industrial activities according to considerations such as 

proximity and ownership."6 In 1980, we expressed the view that Alabama Power set boundaries 

on our discretion to interpret the component terms of "stationary source ." Specifically, we 

indicated that we must (1) reasonably carry out the purposes of Prevention of Significant 

Deterioration (PSD); (2) approximate a common sense notion of a "plant"; and (3) avoid 

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

meaning of "building," "structure," "facility" or "installation."7 Accordingly, we follow these 

overarching principles in interpreting the three regulatory criteria in context of a given source 

determination. 

Source determinations within the oil and gas industries are not always straightforward. 

Even when two or more pollutant-emitting activities are clearly under common control and 

belong to the same 2-digit SIC code, the unique geographical attributes of the oil and gas 

industry necessitate a detailed evaluation of whether the activities are contiguous and adjacent . 

For example, well sites can be located hundreds of miles from the natural gas processing plant, 

and some oil and gas operations (e.g., a production field) can cover many square miles. 

Moreover, unlike many industries, land ownership and control are not easily distinguished in this 

industry, because subsurface and surface property rights are often owned and leased by different 

entities, and drilling and exploration activities are contracted to third parties. While it is not 

uncommon for a single company to gain the use of a large area of contiguous property through 

3 See e.g. 40 CFR 52.21(b)(5) 

4 Under this definition, activities are within the same industrial grouping if they share the same two-digit Standard 

Industrial Classification (SIC). Exploration, extraction or production activities in the oil and natural gas 

development industry share the same two-digit SIC code - "13". 

5 40 CFR 70.2 also includes a SIC reference which is not contained in the statute. We have proposed to delete this 

reference from the title V regulations. 

6 Alabama Power Co. v. Costle 636 F.2d 323, 397 (D .C . Cir. 1979) 

7 45 FR 52676, 52695 (August 7,1980) 
these lease and mineral rights agreements, owners or operators of production field facilities 

typically control only the surface area necessary to operate the physical structures used in oil and 

gas production, and not the land between well drill sites. 8 

The concept of "contiguous and adjacent" considers whether the land associated with the 

pollutant-emitting activity is connected to, or is nearby, land associated with another pollutantemitting activity . Historically, we also have used such factors as operational dependence and 

proximity to inform our analysis of whether two properties are contiguous or adjacent .9 The 

concept of "operational dependence" considers the extent to which each activity relies on the 

other for its operations . In the oil and gas industries, materials are transferred between 

pollutant-emitting points and many activities are physically connected via pipelines, but the 

extent of the operational reliance may vary widely from point to point. 

Notably, in 1980, we declined to add a specific "functionality" criteria to the definition of 

source because we believed that "assessments of functional interrelationships would be highly 

subjective" and "embroil[] the Agency in fine-grained analysis."t° We also made clear that we 

do not intend "source" to encompass activities that would be many miles apart along a long-line. 

For instance, EPA would not treat all of the pumping stations along a pipeline as one source . ~ 1 

Accordingly, for this industry, we do not believe determining whether two activities are 

operationally dependent drives the determination as to whether two properties are contiguous or 

adjacent, because it would embroil the Agency in precisely the fine-grained analysis we intended 

to avoid, and it would potentially lead to results which do not adhere to the common sense notion 

of a plant. 

The concept of proximity considers the physical distance between two activities . EPA 

has not specifically defined an exact separation of distance that would cause two activities to be 

considered contiguous or adjacent . Nonetheless, we have stated that proximity can be the most 

informative factor in determining whether two activities are contiguous or adjacent . For 

example, we stated that when two facilities are close together, a permitting authority can 

consider the two facilities as a single source irrespective of an absence of physical connection 

and operational dependence . 

12 We also think that the opposite is equally true. A permitting 

authority can find that two pollutant-emitting activities are separate sources when they are 

located far apart, irrespective of the presence of physical connections and operational 

dependence between the sites. 

Given the diverse nature of the oil and gas activities, we believe that proximity is the 

most informative factor in making source determinations for these industries . We do not believe 

that it is reasonable to aggregate well site activities, and other production field activities that 

g We recognized the unique challenges this industry presents in our discussion of the facility definition in the 

section 112 rulemaking. 64 FR 32620, 32617 (June 17, 1999). 

9 See e.g. Memo. from Winston Smith, Director Air, Pesticides and Toxics Management Division to Randy C. 

Poole, Air Hygienist 11, Applicability of Title V Permitting Requirements to Gasoline Bulk Terminals Owned by 

Williams Energy Ventures, Inc. (May 19, 1999) 

~° 45 FR 52676, 52694 (August 7, 1980). 11 Id at 52695 

12 Memo. from Winston Smith at 6. 
occur over large geographic distances, with the downstream processing plant into a single major 

stationary source . Aggregation of such geographically-dispersed activities defies the concept of 

contiguous and adjacent . While the land mass may be "contiguous or adjacent" when viewed as 

a whole, the limited portion of the properties physically associated with the pollutant-emitting 

activity are not necessarily nearby, connected, or in any way proximate to each other. 

Congress also recognized the unique geographic attributes of the oil and gas industries 

when it provided specific direction on how emission sources in the oil and gas exploration and 

production industry should be grouped together for purposes of defining a major source under 

the Section 112 Air Toxics Program .' 3 Specifically, Section 112(n)(4) of the Act states : 

[E]missions from any pipeline compressor or pump station shall not be aggregated with 

emissions from other similar units, whether or not such units are in a contiguous area or 

under common control, to determine whether such units or stations are major sources, 

and in the case of any oil or gas exploration or production well (with its associated 

equipment), such emissions shall not be aggregated for any purpose under this section . 

Applying our interpretation of the Section 112(a)(1) and (n)(4) statutory language, and our 

understanding of hazardous air pollutant (HAP) emission sources, we defined the major source 

under Section 112, for purposes of these industries, in reference to individual surface sites . 

14 

For purposes of making source determinations for NSR and Title V, we recommend that 

permitting authorities first look to the Section 112 approach of segregating each individual 

surface site . 

15 While we do not believe that permitting authorities should strictly apply the 

Section 112 definition of major stationary source for purposes of the NSR and Title V permit 

programs, we do believe that the "surface site" is a reasonable place to begin the source 

determination analysis . This is because we have already determined that a surface site fits within 

a reasonable interpretation of the term stationary source in context of one regulatory program, 

and administratively, we think it reasonable for a permitting authority to at least consider 

whether the same boundaries are appropriate in administrating other regulatory programs . 

After identifying the individual surface site, the permitting authority should consider 

aggregating pollutant-emitting activities at multiple surface sites, when the surface sites are 

under common control and located in close proximity to each other. A reviewing authority can 

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

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

13 Although Congress provided direction in Section 112(n)(4) absent a specific finding related to whether the 

activities are within a "contiguous area," notably, the Congressional Record shows that Congress explained its basis 

for creating special treatment for these industries under Section 112 partially based on a finding that emissions, "are 

typically located in widely dispersed geographic areas, rather than concentrated in a single area ." 136 Cong.Rec 

H12848-01 . 

14 See 64 FR 32618 and 40 C.F .R . Part 63, Subpart HH. 

15 It is common practice, when making NSR source determinations, to first look at a small group of pollutantemitting activities, and then determine whether it is appropriate to aggregate these activities with other activities to 

define the major stationary source . In the oil and gas industries, we think that a surface site contains an appropriate 

collection of pollutant-emitting activities to begin this analysis . 
some similar distance). 

16 Once the stationary source is identified, the permitting authority 

should consider the emissions from all equipment located either temporarily or permanently on 

the surface site(s) collectively to determine whether the surface site(s) qualifies as a major 

stationary source for NSR and Title V. 17,18 

In a great majority of cases, we expect that permitting authorities will find that a single 

surface site is the most-suitable industrial grouping because it correlates best with the definition 

of a stationary source . Accordingly, permitting authorities could treat each surface site as a 

separate stationary source and generally would not need to aggregate activities located on 

different oil and gas properties (oil and gas lease, mineral fee tract, subsurface unit area, surface 

fee trace or surface lease tract) or located on the same lease, when the sites are not located in 

close proximity to each other. 

Whether or not a permitting authority should aggregate two or more pollutant-emitting 

activities into a single major stationary source for purposes of NSR and Title V remains a caseby-case decision considering the factors relevant to the specific circumstances . Nonetheless, 

today's guidance provides permitting authorities a reasonable analytical approach that simplifies 

the determination process and assures greater uniformity in permitting decisions. Unless unique 

factors (such as proximity or 

interdependence) indicate otherwise, permitting authorities can consider oil and gas exploration 

and production activity located on a single surface site to be an individual stationary source . 

16 In making major stationary source determinations for this industry, some southern States apply a rule that 

generally results in separating pollutant-emitting activities located outside a '/a mile radius . 

17 This approach differs from the Section 112 approach for these industries . The Section 112 approach exempts 

activities at the well and its associated equipment from the regulations. 64 FR 32610. Congress' based its direction 

to disaggregate these emission points for purposes of section 112 on a finding that these emissions points generally 

have low HAP emissions. 

17 136 Cong.Rec H12848-01 . This is not necessarily the case for criteria pollutants . 

Drilling sites can contribute high levels of CO, NO,, and SOZ emissions from internal combustion engines. 

Accordingly, a potential to impact ambient air quality exists if these pollutant-emitting activities are closely located, 

and we believe it appropriate to consider these emissions points in defining the major stationary source for the NSR 

and Title V permitting programs . 

18 Temporary emissions include emissions from a portable stationary source that would be less than two years in 

duration, unless the Administrator determines that a longer period would be appropriate. 45 FR 52728. Temporary 

emissions, however, do not include emissions from non-road engines.