Document ID: EPA-HQ-OAR-2013-0685-0226
Agency: epa
Document Type: Rule
Title: Source Determination for Certain Emission Units in the Oil and Natural Gas Sector
Posted Date: 2016-06-03T04:00Z

[Federal Register Volume 81, Number 107 (Friday, June 3, 2016)]
[Rules and Regulations]
[Pages 35622-35634]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2016-11968]

[[Page 35622]]

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ENVIRONMENTAL PROTECTION AGENCY

40 CFR Parts 51, 52, 70, and 71

[EPA-HQ-OAR-2013-0685; FRL-9946-55-OAR]
RIN 2060-AS06

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

AGENCY: Environmental Protection Agency (EPA).

ACTION: Final rule.

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SUMMARY: The U.S. Environmental Protection Agency (EPA) is finalizing a 
revision to regulations applicable to permitting of stationary sources 
of air pollution under the New Source Review (NSR) and title V programs 
in the Clean Air Act (CAA or Act). For sources in the oil and natural 
gas sector, this rule clarifies the meaning of the term ``adjacent'' 
that is used to determine the scope of a ``stationary source'' for 
purposes of the Prevention of Significant Deterioration (PSD) and 
Nonattainment NSR (NNSR) preconstruction permitting programs and the 
scope of a ``major source'' in the title V operating permit program in 
the onshore oil and natural gas sector. The revised definitions are 
based on the proximity of emitting activities and consideration of 
whether the activities share equipment. We believe that this 
clarification will provide greater certainty for the regulated 
community and for permitting authorities, and will result in more 
consistent determinations of the scope of a source in this sector. The 
EPA is adopting this revised definition in the regulations that apply 
to permits issued by the EPA and states to which the EPA has delegated 
federal authority to administer these programs. Other state and local 
permitting authorities with EPA-approved programs may also revise their 
permit programs to adopt this definition, but are not required to do 
so.

DATES:  This final rule is effective on August 2, 2016.

ADDRESSES: The EPA has established a docket for this action under 
Docket ID No. EPA-2060-2013-0685. All documents in the docket are 
listed on the http://www.regulations.gov Web site. Although listed in 
the index, some information is not publicly available, e.g., 
Confidential Business Information or other information whose disclosure 
is restricted by statute. Certain other material, such as copyrighted 
material, is not placed on the Internet and will be publicly available 
only in hard copy form. Publicly available docket materials are 
available electronically through http://www.regulations.gov.

FOR FURTHER INFORMATION CONTACT: For further general information on 
this rulemaking, contact Ms. Cheryl Vetter, Office of Air Quality 
Planning and Standards (C504-03), U.S. Environmental Protection Agency, 
by phone at (919) 541-4391, or by email at vetter.cheryl@epa.gov; or 
Mr. Greg Nizich, Office of Air Quality Planning and Standards (C504-
03), U.S. Environmental Protection Agency, by phone at (919) 54l-3078, 
or by email at nizich.greg@epa.gov.

SUPPLEMENTARY INFORMATION: 

I. General Information

A. Does this action apply to me?

    Entities potentially affected directly by this final action include 
owners or operators of sources of new and modified operations within 
the oil and natural gas production and processing segments of the oil 
and gas sector (herein after referred to as ``oil and natural gas 
operations''). Such entities are expected to be in the groups indicated 
in the following table. In addition, state, local and tribal 
governments may be affected by the rule if they update state rules to 
adopt the changes being made to federal permit program rules.

------------------------------------------------------------------------
             Industry group                       NAICS code \1\
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Oil and Gas Extraction.................  21111.
Crude Petroleum and Natural Gas          211111.
 Extraction.
Natural Gas Liquid Extraction..........  211112.
Drilling Oil and Gas Wells.............  213111.
Support Activities for Oil and Gas.....  213112.
Federal Government.....................  May Be Affected.
State/Local/Tribal Government..........  May Be Affected.
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B. 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 document will be posted at: http://www3.epa.gov/airquality/oilandgas/actions.html. Upon its publication in the Federal Register, 
only the published version may be considered the final official version 
of the notice, and will govern in the case of any discrepancies between 
the Federal Register published version and any other version.
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    \1\ North American Industry Classification System (NAICS). The 
table refers to the more commonly used NAICS code. However, the 
four-digit SIC codes 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 mains 
the list of SIC codes for references. We have retained the SIC codes 
in the regulation.
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C. How is this document organized?

    The information presented in this document is organized as follows:

I. General Information
    A. Does this action apply to me?
    B. Where can I get a copy of this document and other related 
information?
    C. How is this document organized?
II. Background for Final Rulemaking
III. Summary of the Final Rule Requirements
IV. Responses to Significant Comments on the Proposed Rule
    A. General Comments
    B. Comments on Option 1
    C. Comments on Option 2
    D. Implementation Issues
V. Environmental Justice Considerations
VI. 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 (PRA)
    C. Regulatory Flexibility Act (RFA)
    D. Unfunded Mandates Reform Act (UMRA)
    E. Executive Order 13132: Federalism
    F. Executive Order 13175: Consultation and Coordination With 
Indian Tribal Governments
    G. Executive Order 13045: Protection of Children From 
Environmental Health and Safety Risks
    H. Executive Order 13211: Actions Concerning Regulations That 
Significantly Affect Energy Supply, Distribution, or Use
    I. National Technology Transfer and Advancement Act
    J. Executive Order 12898: Federal Actions To Address 
Environmental Justice in Minority Populations and Low-Income 
Populations
    K. Congressional Review Act (CRA)
    L. Judicial Review
Statutory Authority

II. Background for Final Rulemaking

    This action affects the determination of what constitutes a 
``stationary source'' for the PSD and NNSR preconstruction permit 
programs under title I of the CAA, and the determination what 
constitutes a ``major source'' for the title V operating permit 
program. Under the PSD and NNSR programs, a ``stationary source'' is 
defined as a ``building, structure, facility, or installation'' that 
emits or may emit a ``regulated NSR pollutant.'' \2\ 40 CFR 
51.165(a)(1)(i), 51.166(b)(5). In turn, a

[[Page 35623]]

``building, structure, facility, or installation'' is defined as ``all 
of the pollutant-emitting activities'' that satisfy three prongs: they 
``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).'' 40 CFR 
51.165(a)(1)(ii); 51.166(b)(6). Under the title V program, ``stationary 
source'' is defined similarly, but with reference to a different set of 
pollutants; however, the term ``building, structure, facility, or 
installation'' is not defined. Instead, the same three-prong test is 
incorporated into the definition of ``major source.'' 40 CFR 70.2; 
71.2. We \3\ use the term ``source determination'' to describe a case-
specific examination of particular pollutant-emitting activities to see 
whether, under the definitions just discussed, they are collectively a 
``stationary source'' for purposes of the PSD or NNSR programs or are 
potentially (depending on their level of emissions) a ``major source'' 
for the purposes of the title V program.
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    \2\ The term ``regulated NSR pollutant'' is defined differently 
for the two programs, consistent with their separate purposes. 40 
CFR 51.165(a)(1); 51.166(b)(49).
    \3\ In this preamble, the term ``we'' and ``our'' refers to the 
EPA.
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    On September 18, 2015, the EPA proposed two options for clarifying 
the meaning of the term ``adjacent'' in the second prong discussed in 
the previous paragraph as applied to oil and gas sources, under both 
the preconstruction and operating permits programs. Source 
Determination for Certain Emission Units in the Oil and Natural Gas 
Sector. See 80 FR 56579, September 18. 2015. The preamble to the 
proposal provided a discussion of the history of making source 
determinations generally, and for these segments specifically, the 
previous guidance we have issued and the litigation that resulted. We 
explained our rationale for the two options we proposed for clarifying 
the term ``adjacent'' as it is used in determining the scope of a 
source for purposes of air permitting for these segments. The EPA's 
preferred option, referred to as Option 1, would have required 
permitting authorities to aggregate, for permitting purposes, all 
onshore oil and natural gas emitting equipment \4\ that are within the 
two-digit Standard Industrial Classification (SIC) code 13 \5\ 
(hereafter referred to as ``oil and natural gas operations''), are 
under common control of a single person (or persons under common 
control), and that are located within \1/4\ mile of each other. We 
believed that establishing a ``bright line'' based on the proximity of 
the equipment (in this case, \1/4\ mile), as several oil and gas-
producing states seemed to have done, would simplify permitting because 
it would avoid a more detailed case-by-case evaluation based on the 
relationship of the emitting equipment. We also proposed a second 
option, Option 2, which would have aggregated all emitting equipment 
within \1/4\ mile but would also have allowed permitting authorities to 
aggregate emitting equipment located beyond \1/4\ mile based on the 
relationship between the operations. The EPA described this 
relationship as ``exclusive functional interrelatedness,'' but 
requested comment on more specific ways to describe a relationship that 
meets the common sense notion of a plant. Finally, we requested comment 
on whether some combination of these two options might be preferable. 
This final rulemaking notice does not repeat all of the discussion, but 
refers interested readers to the preamble of the proposed rule for 
additional background.
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    \4\ Within this document the terms ``emitting equipment'' and 
``emitting activities'' are used interchangeably.
    \5\ The description for Major Group 13: Oil and Gas Extraction 
can be found at https://www.osha.gov/pls/imis/sic_manual.display?id=8&tab=group. This major group includes 
establishments primarily engaged in: (1) Producing crude petroleum 
and natural gas; (21 extracting oil from oil sands and oil shale; 
(3) producing natural gasoline and cycle condensate; and (4) 
producing gas and hydrocarbon liquids from coal at the mine site. 
Types of activities included are exploration, drilling, oil and gas 
well operation and maintenance, the operation of natural gasoline 
and cycle plants, and the gasification, liquefaction, and pyrolysis 
of coal at the mine site. This major group also includes such basic 
activities as emulsion breaking and desilting of crude petroleum in 
the preparation of oil and gas customarily done at the field site. 
Pipeline transportation of petroleum, gasoline, and other petroleum 
products (except crude petroleum field gathering lines) is 
classified in Transportation and Public Utilities, Major Group 46, 
and of natural gas in Major Group 49.
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III. Summary of the Final Rule Requirements

    This section provides a brief summary of the requirements of the 
final rule. Further discussion of the basis for these requirements and 
summaries of our responses to significant comments are provided in the 
next section.
    Based on the range and substance of the comments received, the EPA 
has made two revisions to the proposed definition of ``adjacent'' that 
are reflected in the final rule. As discussed in the proposal, we 
proposed that pollutant-emitting activities from onshore oil and 
natural gas operations that are located on the same ``surface site,'' 
as defined in 40 CFR 63.761,\6\ or on surface sites located within \1/
4\ mile of each other, would be considered ``adjacent'' for purposes of 
determining the source. We selected \1/4\ mile as a ``bright line'' 
distance for clarifying the meaning of ``adjacent'' based on proximity 
to be consistent with those states that also use a ``bright line'' 
approach as a way of delineating sources in this category. This also 
was, in our view, a reasonable distance within which sources in oil and 
natural gas operations are likely to be interconnected. However, we 
received comments from several entities that said that we misunderstood 
the states' approach. According to them, several states that use the 
\1/4\ mile boundary do not aggregate everything within it, as we 
proposed. Rather they use the \1/4\ mile boundary to define an area 
beyond which they would not consider pollutant emitting equipment to be 
adjacent and part of a single source. Within \1/4\ mile, these states 
determine on a case-by-case basis which equipment should be considered 
a single source because it meets the ``common sense notion of a 
plant.''
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    \6\ 40 CFR 63.761 defines surface sites 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.
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    For the reasons discussed more fully later in this notice, we have 
decided to modify the proposed definition in response to the 
recommendations made by commenters. As we proposed under both Option 1 
and Option 2, emitting equipment in the oil and natural gas production 
and processing segments located at a single onshore surface site will 
be considered ``adjacent'' under the final rule and, thus, part of a 
single stationary source, assuming the equipment is also under the 
control of one person (or persons under common control) and belongs to 
the two-digit SIC code 13. Also, as we proposed in Option 1, we are 
finalizing a definition that equipment on separate surface sites 
located more than \1/4\ mile apart is not ``adjacent'' and, therefore, 
is not part of the same stationary source. However, in this final rule, 
we are modifying Option 1 by incorporating an element from Option 2 and 
the state policies on which we modeled Option 1. Specifically, we would 
not require that all emitting equipment located on separate surface 
sites within \1/4\ mile of each other be considered ``adjacent.'' 
Instead, emitting equipment located on separate surface sites within 
\1/4\ mile of each other would only be aggregated as a single 
stationary source if the emitting equipment also have a relationship 
that meets the ``common sense notion of a plant.''
    This expression, the ``common sense notion of a plant,'' has been a 
criterion by which we have made source determinations for sources in 
all industries since our PSD rules were

[[Page 35624]]

revised in 1980 (45 FR 52676, August 7, 1980) in response to the D.C. 
Circuit Court of Appeals Alabama Power decision. Alabama Power Co. v. 
Costle, 636 F. 2d 323, 397 (D.C. Cir. 1979). In the onshore oil and 
natural gas production and processing segments, the ``plant'' is not as 
easy to discern as it is for other industrial operations, such as an 
electric utility generating plant or an oil refinery. Unlike these 
industrial operations, onshore oil and natural gas operations may not 
have an obvious boundary and may be located on property owned and 
controlled by others.
    As explained in our proposal, one way in which we historically have 
evaluated whether activities meet the common sense notion of a plant 
was through the use of ``functional interrelatedness'' or ``operational 
dependence.'' See 80 FR 56581, September 18. 2015. Our proposed Option 
2 would have looked for ``exclusive functional interrelatedness'' of 
emitting equipment outside the \1/4\ mile radius. See 80 FR 56587, 
September 18. 2015. We asked for comment on whether we should further 
define ``exclusive functional interrelatedness'' to give additional 
clarity to regulators and the regulated community.
    Rather than looking for ``functional interrelatedness'' in oil and 
natural gas operations and giving this term more specific definition, 
we have decided in this final rule that it is preferable to look for 
``shared equipment'' to determine when emitting activities in oil and 
natural gas operations have a relationship that meets the ``common 
sense notion of a plant.'' The EPA has applied the generalized notion 
of ``functional interrelatedness'' in other ways in other source 
categories, in some cases, at the request of the source. However, for 
oil and natural gas operations, we find it preferable to use a term 
that will give a more precise and clear criterion for defining when 
emitting activities within a \1/4\ mile proximity are sufficiently 
related to be considered adjacent, in line with the objectives of the 
proposal.
    For onshore oil and natural gas production, this final rule 
establishes that, where separate surface sites located within \1/4\ 
mile of each other include shared equipment necessary to process or 
store oil or natural gas, these surface sites will be aggregated. The 
EPA has concluded that equipment satisfying these criteria will meet 
the common sense notion of a plant. Under this final rule, separate 
surface sites that do not include shared emitting equipment, even if 
within \1/4\ mile, will not be aggregated.
    For example, an owner or operator proposing to construct a new well 
site should draw a \1/4\ mile circle from the center of the proposed 
new well site. If there is commonly-controlled emitting equipment 
located within that \1/4\ mile circle and within major SIC code 13, and 
that equipment is used to process or store the oil, natural gas or the 
byproducts of production that will come from the new well site, then 
the emissions from that equipment should be included in determining 
whether the new well site is a major source. Examples of shared 
equipment include, but are not limited to, produced fluids storage 
tanks, phase separators, natural gas dehydrators or emissions control 
devices. In this example, the shared equipment is necessary for the 
operation of the new well site, and should be considered part of the 
same source because together all of the equipment operates as a 
``plant.'' However, under the terms of this rule, we would not consider 
two well sites that feed to a common pipeline to be part of the same 
stationary source if they do not share any processing or storage 
equipment between them.
    We believe this change from the proposed rule is responsive to both 
the comments that we received from several states about the burden of 
aggregating individual surface sites, and from the industry about the 
independent nature of many, if not most, surface sites.
    We proposed to clarify the meaning of ``adjacent'' in all of the 
permitting rules, both the rules that apply to the EPA and delegated 
states as the permitting authority, as well as the rules that apply to 
state, local or tribal permitting authorities. However, we requested 
comment on whether we should require state, local and tribal permitting 
authorities to make this proposed change to their regulations. Several 
states, including both those with oil and natural gas operations and 
those without, expressed a desire to retain their existing approach to 
source determinations in permitting. These states, particularly those 
with oil and natural gas operations, expressed concern about the 
increased burden of the EPA's proposed Option 1. After reviewing the 
comments, the EPA has decided to adopt this change in its permitting 
rules, but to not require state, local and tribal permitting 
authorities to adopt this change. However, if they choose to do so, 
state, local and tribal permitting authorities may adopt the EPA's 
revised definition and submit their revised program to the EPA for 
approval.

IV. Responses to Significant Comments on the Proposed Rule

    The EPA received more than 19,000 comments on the proposed rule. In 
this section we summarize the major comments and our responses. For 
details of all the significant comments and our responses, please refer 
to the Response to Comments document in the docket for this rulemaking.

A. General Comments

1. Need for Clear Guidance
a. Summary of Proposal
    In the proposed rule, the EPA described the history and the current 
status of making source determinations for onshore oil and natural gas 
operations. We described the guidance that had been issued, the source 
determinations that have been made and the lack of clarity that has 
often resulted. We proposed two options for clarifying the term 
``adjacent'' when making source determinations for onshore oil and 
natural gas operations.
b. Brief Summary of Comments
    Several commenters stated that providing clear and reasonable 
definitions in rulemaking would benefit the regulated community, 
regulators and other stakeholders by providing needed certainty. The 
current lack of clarity, according to commenters, has resulted in 
increased costs due to permitting delays and litigation following the 
issuance of a permit. Several commenters also supported our decision to 
provide this clarification through rulemaking, rather than by 
additional guidance.
    Other commenters did not believe that a rulemaking is necessary. 
These commenters stated that the rulemaking is not necessary because 
the term ``adjacent'' is unambiguous, that it is synonymous with 
``contiguous,'' i.e., that ``adjacent' means touching, sharing a 
border, or abutting. These commenters pointed to the dictionary 
definition of the word ``adjacent'' as being ``contiguous.'' Some of 
these commenters went on to say that the meaning of the term 
``adjacent'' has been clearly established in relevant case law, citing 
Summit Petroleum Corp. v. EPA, 690 F.3d 733, 742 (6th Cir. 2012). And 
some commenters questioned our authority to adopt the two meanings of 
the term that we proposed, claiming that the proposed definitions 
violated the D.C. Circuit Court of Appeals' holdings in Alabama Power 
or that the EPA simply lacked authority to define the term ``adjacent'' 
in a way that, according to commenters, conflicted with the dictionary 
definition and/or the

[[Page 35625]]

decision of the Sixth Circuit Court of Appeals in Summit Petroleum.
c. EPA Response
    We agree with the commenters who stated that a rulemaking is the 
best way to provide clarity in permitting. However, we recognize that 
most permits are issued by states, and that some states have 
substantial experience in making source determinations for oil and 
natural gas operations. Accordingly, in recognition of this state 
expertise, and in response to many comments, we are making the meaning 
of ``adjacent'' adopted in this rule mandatory only for the permit 
programs administered by the EPA or delegated states, while leaving to 
other states the decision of whether to make a similar change to their 
approved permitting.
    We disagree with commenters who claim that the EPA lacks authority 
to define adjacent by regulation or that state the rulemaking is 
unnecessary because of the dictionary meaning of ``adjacent'' and the 
Summit Petroleum decision. These commenters are mistaken that the EPA 
cannot define ``adjacent'' by rule to mean all emitting equipment 
within a specified radius.\7\ Commenters gave two reasons for this: 
first, that to do so would not comport with Alabama Power, and second, 
that the EPA's authority to give a meaning to ``adjacent'' that varies 
from its dictionary definition is foreclosed by the Summit Petroleum 
decision.
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    \7\ Although we are not finalizing an option (such as our 
proposed Option 2) that would potentially include emitting 
activities outside a \1/4\ mile radius, commenters are also mistaken 
(for similar reasons) in asserting that we could not have finalized 
such an option.
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    Regarding the first point, the CAA affords the EPA discretion in 
the permitting context to provide a more specific meaning to the term 
``stationary source'' that is used in the Act. See, Chevron USA, Inc. 
v. NRDC, 467 U.S. 837 (1984) (discussing the meaning of the term 
stationary source under the CAA). Through a rulemaking process, we are 
defining the statutory term ``stationary source'' for a particular 
context: the PSD, NNSR and title V programs as applied to oil and 
natural gas operations. The definition of the term ``stationary 
source'' in section 302(z) of the Act, the related definition in 
section 111(a)(3), the structure of the Act, and its legislative 
history do not supply a clear meaning of ``stationary source'' in this 
context. Thus, it is permissible for the agency, in a rulemaking 
process, to apply a reasonable interpretation of the statute that 
resolves an ambiguity.\8\ It is also permissible for the EPA to create 
a rule using a ``bright line,'' as we are doing here, for purposes of 
better administering the Act, see Emily's List v. Fed. Election Comm'n, 
581 F.3d 1, 22 n.20 (D.C. Cir. 2002).
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    \8\ In fact, the Supreme Court in Chevron reversed the D.C. 
Circuit Court of Appeals' judgment that the EPA had impermissibly 
interpreted ``stationary source,'' stating that the Circuit Court 
erred by ``read[ing] the statute inflexibly'' and not deferring to 
the EPA's reasonable interpretation.
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    As to the second point, while the Summit Petroleum decision is a 
motivating factor for this action, the decision, and the Court's 
reference to the dictionary meaning of ``adjacent'' in that decision, 
are not preclusive of our authority to take the action. The Summit 
Petroleum Court addressed the issue of whether, in the absence of a 
rule defining the term ``adjacent,'' the EPA had permissibly 
interpreted the term in a particular source determination. The Court 
looked to the dictionary definition of ``adjacent'' to determine 
whether the EPA's interpretation of this term would ``permit the 
agency, under the guise of interpreting a regulation, to create de 
facto a new regulation.'' Summit Petroleum, 690 F.3d at 740 (quoting 
Christensen v. Harris Cnty., 529 U.S. 576, 588 (2000)). In this 
rulemaking action, the EPA is not interpreting the term ``adjacent'' in 
the existing regulation; instead we are assigning a meaning to the term 
by going through a rulemaking process. When an agency is defining a 
word by rule, the agency is free to give specialized meaning to the 
word without being bound to hew precisely to a particular dictionary 
definition. See Stenberg v. Carhart, 530 U.S. 914, 942 (2000) (noting 
that an ``explicit definition'' can permissibly ``vary from the term's 
ordinary meaning''). And in fact, the PSD regulations in 40 CFR 51.166 
are replete with such specialized meanings, for example in the 
definitions of ``significant'' and ``process unit.'' \9\
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    \9\ For similar reasons, comments that cite case law about 
agency interpretations of statutes and that refer to the dictionary 
definition of ``adjacent'' are off target: the statutory term we are 
interpreting is ``stationary source'' (and the related definition in 
section 111(a)(3)), not ``adjacent.'' We are defining the term 
``adjacent'' in order to give meaning to our reasonable 
interpretation of the statutory term ``stationary source.''
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    Even if commenters were correct--and they are not--that the EPA is 
bound by a particular dictionary definition of ``adjacent'' when 
defining the term for specialized use, commenters are mistaken about 
the meaning of the term. While many dictionary definitions of 
``adjacent'' include ``contiguous'' as one definition, this is not the 
only definition of the word ``adjacent.'' For example, one online 
dictionary defines ``adjacent'' to mean ``lying near, close, or 
contiguous; adjoining; neighboring.'' \10\ Another dictionary provides 
the following ``Synonym Discussion of Adjacent'': ``Adjacent may or may 
not imply contact but always implies absence of anything of the same 
kind in between . . .'' \11\ This dictionary makes a further 
distinction in its ``Synonym Discussion'', stating that the word 
``adjoining'' definitely implies meeting and touching at some point or 
line.'' \12\ So, while we agree that ``adjacent'' can mean contiguous, 
we do not agree that it unambiguously must. We are finalizing this rule 
to provide a bright line distance beyond which pollutant-emitting 
operations in the onshore oil and natural gas production and processing 
segments are not considered ``adjacent.'' The decision to use both 
words ``contiguous'' and ``adjacent'' in our PSD rules was a deliberate 
choice, designed to include emitting equipment that is on property that 
is touching (contiguous) with equipment that may not be contiguous, but 
still meets the common sense notion of a plant. Had we intended 
``adjacent'' to mean exactly the same as ``contiguous,'' we would not 
have included the word ``adjacent.''
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    \10\ Dictionary.com http://dictionary.reference.com/browse/adjacent?s=t accessed February 22, 2016.
    \11\ Thus, two surface sites separated by \1/4\ mile may be 
``adjacent,'' if there is no surface site in between them.
    \12\ Merriam-Webster Dictionary, http://www.merriam-webster.com/dictionary/adjacent accessed February 22, 2016.
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    Finally, we disagree with commenters who argue the Summit Petroleum 
Court provided sufficient guidance on the meaning of ``adjacent'' to 
obviate the need for this rulemaking. The Court's decision is binding 
only in the Sixth Circuit, which leaves the issue unresolved 
elsewhere.\13\ The Court also did not provide guidance on how 
``nearby'' sources must be to consider them ``adjacent'' for purposes 
of permitting. This is the question that we have taken up in this 
rulemaking, specific to onshore oil and natural gas operations. We have 
clarified that ``adjacent'' for these segments means within \1/4\ mile 
and having shared equipment.
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    \13\ While the D.C. Circuit Court of Appeals has held that the 
EPA is bound by our regional consistency regulations, the Court also 
suggested that we could revise them in order ``to account for 
regional variances created by a judicial decision or circuit 
splits.'' Nat'l Envt'l Dev. Ass'n's Clean Air Proj. v. EPA, 752 F.3d 
999, 1010 (D.C. Cir. 2014). We have proposed to do so. 80 FR 63935 
(October 22, 2015).

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[[Page 35626]]

B. Comments on Option 1

1. Support for Option 1
a. Summary of Proposal
    In Option 1, the EPA proposed that the meaning of ``adjacent,'' for 
purposes of determining the scope of a source in the oil and natural 
gas production and processing segments, should be based solely on the 
distance between pollutant emitting activities. Under this option, 
emitting equipment at a single surface site would be considered to be 
adjacent, and emitting equipment at two or more surface sites would be 
considered ``adjacent'' if they are located within \1/4\ mile of each 
other. We stated in the proposal that we believed this option to be the 
most consistent with the ``common sense notion of a plant.'' We chose 
the distance, \1/4\ mile, because it is the distance we found in 
permitting guidance issued by a number of oil and natural gas producing 
states. The EPA also considered this distance reasonable to use for the 
types of equipment used in this industry.
b. Brief Summary of Comments
    Several commenters supported Option 1 as written. These commenters 
preferred Option 1 over Option 2 because they believed it is the least 
ambiguous and reflects the plain meaning of the word ``adjacent.'' One 
commenter stated that this approach would streamline the determination 
of the scope of a ``stationary source'' and would reduce the time it 
takes to get a permit.
    Other commenters, while supporting Option 1 over Option 2, 
recommended revisions to Option 1. Many of these commenters offered 
different distances within which emitting equipment or operations 
should be considered one source. The suggested distances ranged from a 
requirement that operations be physically touching or abutting to be 
considered ``adjacent'' to distances of up to one mile.
    Finally, many state and industry commenters recommended a 
particular revision to Option 1. These commenters recommended that the 
EPA consider emitting activities located on separate surface sites 
within \1/4\ mile to be adjacent only if they also meet the ``common 
sense notion of a plant'' that the EPA has used since 1980 when 
determining the scope of a source for permitting purposes. Two state 
commenters told us that while their state has guidance that includes 
\1/4\ mile as the distance for determining the source, they do not use 
the distance as a bright line. Rather, they use it as an outer 
boundary, within which they assess whether emitting equipment should be 
considered a single source for purposes of permitting, but beyond which 
they do not consider emitting equipment to be adjacent.
c. EPA Response
    We are adopting the approach recommended by several commenters: to 
require that pollutant-emitting equipment on separate surface sites be 
considered one source only if the sites are within \1/4\ mile of each 
other and the equipment is considered by the permitting authority to 
meet the common sense notion of a plant. More specifically, the 
language in the final rule treats certain oil and gas-related 
pollutant-emitting activities as a plant based on ``shared equipment.'' 
Operations located on the same surface site would continue to be 
considered part of the same source provided that they are also within 
the same two-digit SIC code and are under common control of the same 
person (or persons under common control). While we do not agree with 
comments that argue that a particular dictionary definition of 
``adjacent'' and/or the Summit Petroleum and Alabama Power decisions 
compel this outcome, we agree with the comments that this approach 
better achieves the purpose of the rule: to reduce permitting burdens, 
as explained later in this notice.
2. Do Not Support Option 1
a. Brief Summary of Comments
    Some commenters did not support Option 1. One concern raised was 
that, while the Option 1 approach would streamline permitting, it would 
not provide sufficient flexibility to consider and address local air 
quality concerns. Other commenters were concerned that the Option 1 
approach would result in the aggregation of sources that should not be 
treated as one source. Another commenter was concerned that the Option 
1 approach would allow the oil and gas industry to avoid major source 
regulation under the CAA. This commenter went on to say that Option 1 
would not approximate a ``common sense notion of a plant'' or fit 
within the ordinary meaning of facility or installation as used in the 
definition of source.
b. EPA Response
    In response to concerns raised by commenters about the need for 
permitting authorities to be able to address local air quality 
concerns, we are not requiring that EPA-approved state and local 
programs adopt the approach that the EPA is finalizing for permits 
issued by the EPA and delegated states. This will allow state and local 
permitting authorities with EPA-approved programs to continue to use 
their discretion to make source determinations for this industry in the 
manner that they believe best addresses their local air quality 
concerns. For example, those local programs in California that have a 
long history of permitting oil and natural gas operations on contiguous 
leases as single sources under their approved programs will be able to 
continue to do so, without having to submit an equivalency 
demonstration showing that their programs are at least as stringent as 
the program adopted by the EPA. Because the EPA is not requiring states 
with approved programs to apply our meaning of the term ``adjacent,'' 
and our rule changes make clear that for approved programs this change 
is optional, these approved programs already comply with our PSD, NNSR 
and title V rules, without these changes. States also remain free to 
adopt more stringent requirements in order to address local air quality 
concerns.
    Those states that administer PSD permitting programs under a 
delegation of federal authority by the EPA will have to follow the 
approach that we are finalizing, or develop their own permitting 
programs and have them approved by the EPA as a revision to a state 
implementation plan (SIP). We did not receive adverse comments 
regarding delegated PSD programs having to use this approach. Those 
state and local programs that are approved, not delegated, that 
incorporate the EPA's program by reference, may incorporate the 
definition of ``adjacent'' for onshore oil and natural gas operations 
in 40 CFR 52.21(b)(6)(ii), and/or 40 CFR appendix S to part 51; or they 
may specifically exclude this paragraph from their incorporation when 
they next update it.
    There may be state and local governments with approved programs 
that wish to clarify the meaning of adjacent for oil and natural gas 
operations, as the EPA has done in its own permitting rules. Those 
state and local governments would be able to do so, but would not be 
required to do so on any particular schedule. We believe, after careful 
review of the comments received, that this approach offers the best 
resolution for the lack of clarity that has existed for this industry, 
particularly when we have been the permitting authority, but does not 
increase the burden on approved states by requiring them to revise 
their permitting programs (or to develop an equivalency demonstration) 
and submit the changes to us as SIP revisions.

[[Page 35627]]

3. Response to the EPA's Question on the Appropriate Distance
a. Summary of Proposal
    We requested comments on whether some distance other than the 
proposed \1/4\ mile would be a more appropriate distance within which 
emitting equipment should be considered ``adjacent.'' See 80 FR 56579, 
September 18, 2015.
b. Brief Summary of Comments
    Commenters provided a range of responses to this question, ranging 
from 44 feet, which the commenter said was consistent with guidance 
from the Bureau of Land Management, to one mile, which the commenter 
suggested is consistent with the largest manufacturing plant that is 
considered one source. Other commenters recommended that a ``city 
block'' be used as the basis for determining the sources. However, 
these commenters did not agree on the dimensions of a city block. Other 
suggestions included distances based on the size of the lease, or some 
combination of leases, and a distance based on the well spacing in a 
particular field or state.
c. EPA Response
    The EPA is retaining the proposed \1/4\ mile distance in the final 
rule. This distance was originally selected to be consistent with those 
states that also use a specific distance. In addition, as commenters 
mention, it is a commonly-used distance in oil and gas development for 
well spacing. Well spacing is typically set by a state agency such as 
an oil and gas conservation commission, and is intended to develop the 
oil and gas resource fairly and efficiently. One-quarter of a mile 
corresponds to a 40-acre lease. We think that a variable distance, such 
as one based on an individual lease or combination of leases held by an 
entity would complicate permitting, contrary to the purpose of this 
rule. And, while a city block might have some meaning in an urban area, 
we were not persuaded that it has any more meaning than \1/4\ mile in 
the areas where the majority of oil and natural gas development is 
taking place.
4. Response to the EPA's Question on ``Daisy Chaining''
a. Summary of Proposal
    We requested comments on whether sources within \1/4\ mile of each 
other should be ``daisy chained.'' We described a series of emissions 
units as being ``daisy chained'' when each individual emitting unit is 
located within \1/4\ mile of the next unit, but where the last unit is 
separated from the first unit by a much larger distance. See 80 FR 
56587, September 18, 2015.
b. Brief Summary of Comments
    Most commenters expressed opposition to ``daisy chaining.'' 
Commenters were concerned that by ``daisy chaining'' emitting 
equipment, sources could extend for dozens of miles, or could even 
bring in equipment connected by a pipeline which would be inconsistent 
with the EPA's previous statements on source in the 1980 PSD rule 
preamble. In that rule, we stated that we did not intend ``stationary 
source'' to encompass activities that would be many miles apart along a 
long line operation (45 FR 52676, August 7, 1980).
c. EPA Response
    After reviewing the comments we received, the EPA has determined 
that ``daisy chaining'' of emitting equipment would not provide the 
additional clarity that we seek through this rulemaking. We agree with 
commenters who said it could extend sources over many miles, perhaps 
even into the jurisdiction of multiple permitting authorities and in 
some instances beyond any common sense notion of a plant. This would 
increase the permitting burden for federal, state, local and tribal 
permitting authorities but we do not believe that it would provide 
additional air quality benefits beyond those that will occur as a 
result of the emission controls provided under the various New Source 
Performance Standards (NSPS), National Emission Standards for Hazardous 
Air Pollutants (NESHAP), and state and federal minor source programs, 
as explained later in this notice. We are, therefore, not adopting a 
requirement to include ``daisy chained'' equipment as part of a single 
source.
    To illustrate how we intend this process to work in order to avoid 
``daisy chaining'', we provide the following example. On surface site 
``A'', there is an existing collection of equipment consisting of 
several tanks, a pump jack, a heater-treater and a flare. The owner/
operator of site A decides to drill a new well within \1/4\ mile of 
site A, called site ``B.'' Site B feeds its produced water to the tanks 
on site A. Site B must consider the emissions from site A in 
determining whether site B is a major source because sites A and B are 
part of the same stationary source. At a later date, the same owner/
operator decides to drill a third well, ``C,'' within \1/4\ mile of 
site B but more than \1/4\ mile from site A. Sites C and B do not share 
any equipment. Therefore, site C is a single stationary source. Site C 
is not included with sites A and B (just because of proximity to B), 
and, therefore, there is no daisy chain created. If site C feeds 
material to the storage tanks at site A, then it would still not be 
considered part of the stationary source that includes site A, because 
it is located more than \1/4\ mile away from site A.
    Now, assume that the same owner/operator drills a fourth well, 
``D,'' within \1/4\ mile of site A, but more than \1/4\ mile from sites 
B and C. Site D will also feed its produced water to site A. Site D 
must be treated as a modification to the source that is made up of 
sites A and B. In this case, site A may be viewed as a ``hub'' and 
sites B and D are the spokes. The new source consists of sites A, B and 
D because sites B and D are within \1/4\ mile of the site at which the 
shared equipment exists. However, site C is not part of this source 
because site C is more than \1/4\ from the surface site with which it 
shares equipment. New sites would not be included within the source 
that includes sites A, B and D if they were beyond \1/4\ mile, so there 
would be no daisy chain.
    We believe that the permitting authority can make these source 
determinations, on a case-by-case basis, based on the clarifications 
that the EPA has provided. We do not believe that it is possible to 
eliminate all case-by-case source determinations. However, we believe 
we have provided sufficient guidance to ensure that such determinations 
are made consistently, and with more certainty for both permitting 
authorities and sources.
5. Response to the EPA's Question on What To Use as the Starting Point 
for Measuring the Radius of the Source
a. Summary of Proposal
    We requested comment on whether to use the edge or some other 
feature of the oil or natural gas operation as the starting point of 
the \1/4\ mile measurement radius when determining the source.
b. Brief Summary of Comments
    Commenters generally supported defining the point from which the 
distance between pollutant-emitting equipment is measured. However, 
there was disagreement on whether the center of the emitting equipment 
or the property boundary should be used. Several state commenters 
recommended that the property boundary be the starting point for 
determining the distance between operations because this distance is 
most relevant for purposes of air quality. However several commenters 
in the oil and gas industry

[[Page 35628]]

recommended that the geographic center of the site for purposes of 
establishing the \1/4\ mile distance, because property boundaries may 
be difficult to determine. Unlike sites in other industries, oil and 
natural gas operations frequently do not have fences, so the property 
boundaries are not always easily distinguished. Emitting equipment, 
such as may be found at a well site, can be and often is easily 
identified by Global Positioning System coordinates.
c. EPA Response
    The EPA has decided to establish the \1/4\ mile boundary from the 
center of the equipment at the new or modified source for construction 
permits. At an oil or natural gas well, that may be the wellhead; on a 
surface site, it should be established from the center of the emitting 
activities. We believe the center of the emitting activities is the 
easiest to establish for purposes of permitting, and the easiest to 
observe for purposes of enforcement. This best achieves our goal of 
providing greater clarity for permitting authorities and permittees, 
improving permitting, compliance and enforcement. For title V permits, 
the center of the equipment on each surface site(s) being permitted 
should be used.
6. Permitting Burden Under Option 1
a. Summary of Proposal
    We requested 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.
b. Brief Summary of Comments
    Several state commenters expressed concern that Option 1, as 
proposed, would increase the administrative burden of issuing permits. 
This is primarily because they believe that the proposed requirement to 
aggregate emitting equipment within \1/4\ mile would require them to 
reassess prior source determinations. This is particularly a concern 
when wells change ownership. The commenters stated that each 
transaction would require permitting authorities to reanalyze one or 
more previously-permitted sources to determine which equipment should 
be included in the source after the purchase or sale. Another commenter 
stated that while they expect an increase in minor source permitting 
under the EPA's proposed Option 1, they already have in place a number 
of streamlining options, such as general permits, which expedite 
regulatory timelines.
c. EPA Response
    As discussed in Section IV.D.3 in this document, this rule will 
apply prospectively and will not require a reassessment of permits that 
have been completed. Furthermore, the EPA has revised the approach to 
source determination in the final rule to address concerns about burden 
raised by commenters. Instead of requiring that all activities within a 
\1/4\ mile radius be aggregated, the EPA would instead only aggregate 
those activities within a \1/4\ mile radius that share equipment. In 
many cases, this would result in the wells being permitted separately, 
reducing the administrative burden of transferring or modifying permits 
when wells change ownership. In addition, the EPA is not requiring that 
state, local, and tribal permitting authorities adopt the approach 
being finalized by us, so those permitting authorities that are 
concerned there would be an increased burden from our approach (which 
we do not expect) would not have to follow it.
    We believe that the overall effect of this rule will be to reduce 
the permitting burden for permits issued by the EPA. The permitting 
burden for state, local and tribal permitting will differ depending on 
whether those permitting authorities choose to adopt these changes, and 
will depend on how any revised procedures differ from their current 
permitting practices. In some jurisdictions, the burden may be 
unchanged, either because the permitting authority chooses not to adopt 
the changes, or because the changes the EPA is finalizing do not 
substantially differ from the permitting authority's current practices.
7. Environmental Impact of Option 1
a. Summary of Proposal
    We requested comment on whether there would be adverse air quality 
impacts, including effects on National Ambient Air Quality Standard 
(NAAQS) compliance, as a result of Option 1.
b. Brief Summary of Comments
    One commenter expressed concern that the EPA's proposal would 
adversely affect the environment because it would encourage development 
of oil and gas resources over a larger area in order to avoid being 
within \1/4\ mile. This would increase the footprint of operations, and 
have an adverse impact on landowners and communities. Other commenters 
stated that the aggregation of oil and gas operations would not result 
in environmental benefits because the emissions are already controlled 
by multiple NSPS and NESHAP standards as well as state minor source 
permitting programs. Finally, one commenter stated that oil and gas 
development is the largest industrial source of volatile organic 
compounds and a significant source of sulfur dioxide and nitrogen oxide 
pollution in many areas, and that failure to subject these sources to 
PSD and NNSR would frustrate attempts to ensure NAAQS compliance.
c. EPA Response
    The EPA is finalizing several rules applicable to oil and natural 
gas operations, including an NSPS that will require pollution controls 
for oil well completions, equipment leaks and pneumatic controllers, 
among others, and a control techniques guideline (CTG) that will 
similarly define presumptive controls for the CAA's reasonably 
available control technology (RACT) requirements for certain areas. The 
additional emissions control requirements of the NSPS (and the CTG when 
adopted in RACT SIPs) make it less likely that these sources will be 
major sources, with or without the meaning of ``adjacent'' that we are 
adopting in this rule. This is because the threshold for permitting is 
based on the potential-to-emit of the source and the potential-to-emit 
may be reduced by enforceable limitations, such as those imposed by the 
NSPS. These restrictions, along with enforceable restrictions imposed 
by the states, reduce both the actual and potential emissions of the 
sources, reducing the likelihood that they will trigger major NSR or 
title V permitting. These control requirements will also ensure that 
new and modified operations emit substantially less air pollution which 
would contribute to local air quality. To the extent that NSPS 
requirements for these sources are insufficient to protect the NAAQS in 
attainment or unclassifiable areas--which we do not expect--the federal 
or state minor NSR program is intended to address that issue. For 
nonattainment areas, if the CTG presumptive controls are not sufficient 
to attain the NAAQS, then other emission reductions will be required in 
order to attain the standards.
    We do not believe that this final rule is likely to result in 
decisions by companies to locate farther apart to avoid major source 
permitting. We believe that the location of the underground mineral 
assets, advances in drilling technology that allow multiple wells to be 
drilled from one surface site, restrictions on well spacing imposed by 
a state agency such as an oil and gas conservation commission, and the 
restrictions imposed by the owner of the surface land are more likely 
to affect siting decisions than a desire to avoid

[[Page 35629]]

major source permitting. As discussed earlier in this document, we 
believe the combined effect of the emission control standards already 
in place and the additional controls now being finalized is that fewer 
oil and natural gas operations will be major.

C. Comments on Option 2

1. Support for Option 2
a. Summary of Proposal
    In Option 2, the EPA proposed that all equipment within \1/4\ mile 
would be considered a single source and would allow equipment beyond 
\1/4\ mile to be included in the source if it was ``exclusively 
functionally interrelated.'' See 80 FR 56579, September 18, 2015.
b. Brief Summary of Comments
    Several commenters representing permitting authorities supported 
Option 2 because they believed that it is the option most similar to 
the way they make source determinations for this industry and others 
under their existing, SIP-approved programs.
c. EPA Response
    The EPA is not adopting the ``functional interrelatedness'' 
criterion in the final rule, but we are incorporating one aspect of 
Option 2 into the final rule. In addition, the EPA is including its 
final approach only in the regulations that apply to the EPA and 
delegated states. This means that the states that prefer to use an 
approach like Option 2 will be able to continue to do so.
2. Do Not Support Option 2
a. Brief Summary of Comments
    Oil and gas industry commenters were uniformly opposed to Option 2. 
These commenters stated that the use of ``functionality'' has no 
support in the CAA, is inconsistent with the plain meaning of the term 
``adjacent,'' and results in sources that do not resemble in any way a 
``plant.'' In addition, they stated that the use of such a test 
resulted in significant uncertainty because of the subjective nature of 
the analysis involved in determining which emissions units are part of 
the source. Several state permitting authority commenters echoed these 
sentiments and added that the interrelatedness test adds layers of 
analysis that is not productive. Several commenters expressed concern 
about the permitting burden of adopting Option 2. Commenters noted that 
in two cases where the EPA attempted to assess ``functional 
interrelatedness,'' the source determinations took several years, were 
litigated, and ultimately ended in decisions not to aggregate the 
various surface sites.
b. EPA Response
    Because of the difficulty of applying a ``functional 
interrelatedness'' criterion to oil and natural gas operations, the EPA 
is not adopting this criterion as part of the final rule. We do not 
agree with all of the comments opposed to Option 2, in particular those 
that stated Option 2 was beyond the EPA's authority, for similar 
reasons that we disagree with comments that Option 1 was beyond our 
authority. We do agree with those that stated applying a ``functional 
interrelatedness'' criterion by itself would not reduce permitting 
burdens for oil and natural gas operations to the same degree as a 
proximity test alone under Option 1. However, because of concerns 
discussed above with applying a proximity criterion alone, we are 
combining the proximity criterion in Option 1 with the element of 
Option 2 that involves considering whether equipment is related in a 
manner that meets the common sense notion of a plant. Our selected 
approach combines these elements by limiting aggregation to pollutant 
emitting equipment within \1/4\ mile of each other, but requires that 
these sources also have shared equipment. We believe that this 
approach, unlike applying ``functional interrelatedness'' outside of a 
specific perimeter, will limit the amount of analysis required for 
permitting in the oil and natural gas production and processing 
segments. By providing a clear limit on the distance within which we 
would require analysis of the relationship of the equipment, we believe 
permitting will proceed more quickly, and with more certainty for 
permitting authorities and the regulated community.
3. Environmental Impact Under Option 2
a. Summary of Proposal
    We specifically requested comments on whether there might be any 
environmental harm or benefit resulting from adopting Option 2.
b. Brief Summary of Comments
    One state commenter expressed concern that a strict application of 
the plain meaning of the term ``adjacent'' could allow oil and gas 
companies to manipulate their operations to avoid being considered a 
major source. Another commenter stated that without aggregation, oil 
and gas operations are subject to widely varying and less stringent 
standards under state minor source programs. This commenter believes 
that subjecting these operations to major source permitting would 
provide substantial public health and environmental benefits. This 
commenter believes that the emission control provided by the NSPS is 
not sufficient because it only addresses new or modified equipment and 
does not cover all equipment or activities encompassed by the industry 
and does not address local or regional air quality issues.
    Other commenters stated that the proposal would have little to no 
impact on air emissions because the control technology required if 
equipment is aggregated into major sources will likely be identical to 
what is required of minor sources. One commenter listed the numerous 
federal and state standards that already apply to oil and gas sources, 
regardless of whether the sources are determined to be major or minor, 
as evidence that the industry is already subject to stringent emissions 
control requirements.
c. EPA Response
    It is important to understand that even if equipment beyond a \1/4\ 
mile distance is aggregated under something like Option 2, only new or 
modified equipment would be subject to the control requirements of Best 
Available Control Technology under PSD or Lowest Achievable Emission 
Rate under the NNSR permitting program. Most new equipment would also 
be subject to limitations under the NSPS, whether the source is 
considered major or minor. Emission control requirements under state 
and federal minor source programs apply in addition to any requirements 
of the NSPS. These requirements may be more stringent than the NSPS, 
and in some states apply to new as well as to existing sources. Title V 
permitting generally does not result in new control requirements, it 
only compiles the requirements that exist in the underlying standards, 
such as the NSPS or NESHAP into one permit.
    For these reasons, we believe that aggregating equipment into major 
sources for title V, PSD or NNSR permitting under Option 2 would result 
in little environmental benefit over the approach adopted today. In our 
judgement, Option 2 would be more likely to result in delays in 
permitting and greater uncertainty for the permitting authorities and 
regulated community alike.

D. Implementation Issues

1. Requirements for States To Adopt
a. Summary of Proposal
    We proposed changes to the permitting rules that would have

[[Page 35630]]

applied both to the EPA, as the permitting authority, to delegated 
states, and to state, local and tribal permitting authorities. We 
invited comment on whether states should be required to adopt the 
proposed changes.
b. Brief Summary of Comments
    We received comments from several state and local permitting 
authorities, including those with and without oil and gas operations, 
requesting that their programs be allowed to continue to make 
determinations of ``adjacent'' on a case-by-case basis without being 
required to adopt the approach finalized by the EPA. This was 
particularly true for local programs in California, which have a long 
history of regulating oil and gas operations. A commenter representing 
the oil and gas industry operating in California echoed the comment 
that the existing program should not be disrupted.
c. EPA Response
    We agree with commenters who expressed the view that state and 
local permitting authorities should have the ability to make source 
determinations under their existing permitting programs. Once their 
programs are approved by the EPA, state and local governments are given 
the responsibility to make permitting decisions, and we do not intend 
any changes in this balance of responsibilities. We, therefore, are 
adopting these changes in our rules, but not requiring that state and 
local permitting authorities with approved programs also adopt the new 
definitions. These permitting authorities may, but are not required to, 
adopt these definitions, as discussed earlier in this document. This 
approach has a number of advantages. First, it is responsive to states' 
concerns that they have much experience making source determinations 
and they do not see the need to make changes to their existing 
approach. Second, it would not trigger an obligation for approved 
states, particularly those states without oil and gas development, to 
revise their state rules and submit a SIP revision, or to provide a 
demonstration that their existing rules are of equivalent stringency.
    With regard to title V permitting, we are also only adopting these 
changes in the rules that apply to the EPA and delegated programs. 
States and local agencies with approved programs may adopt a similar 
provision in their title V rules at their discretion.
2. Applicability to Other Industries
a. Summary of Proposal
    In the proposed rule, we stated that we intended to define 
``adjacent'' only for onshore oil and natural gas operations covered by 
two-digit SIC Major Group 13, for reasons that are discussed more fully 
in the preamble to the proposed rule. See 80 FR 56586, September 18, 
2015.
b. Brief Summary of Comments
    We received comments both asking us to and asking us not to apply 
the definition developed for oil and natural gas operations to all 
industries. One state commenter stated that permitting authorities and 
regulated sources in all categories should be subject to the same 
definition developed for the oil and natural gas industry. A commenter 
from an industry outside the oil and natural gas industry asked that 
the EPA confirm that proximity is the only basis on which the EPA will 
make determinations of adjacency. We also received comments from the 
transmission and distribution segments of the oil and natural gas 
sector requesting that the EPA clarify how this rule applies to these 
segments of the industry.
c. EPA Response
    The EPA did not propose this approach for other industries, and, 
therefore, we are not finalizing this approach for any industry other 
than onshore oil and natural gas extraction and production within two-
digit SIC Major Group 13. It does not apply to the transmission or 
distribution of oil or natural gas, which is covered under two-digit 
SIC Major Group 49. We continue to believe, as we stated in our 
proposal, that the nature of this industry poses unique challenges for 
making these source determinations, so this approach is warranted for 
this industry category. Source determinations for other industries will 
continue to be made on a case-by-case basis.
3. Applicability to Previously Issued Permits
a. Summary of Proposal
    The EPA did not discuss the application of the proposed options to 
previously issued permits in the preamble to the proposed rule.
b. Brief Summary of Comments
    Several commenters stated that any new rule that the EPA adopts 
should not be applied retroactively. One commenter urged the EPA to 
both make it clear that new federal language will be implemented only 
on a prospective basis, but at the same time asked that any previous 
decisions made to aggregate sources should be subject to new source 
determinations under the language finally adopted. Another commenter 
said that with a new definition of an existing term, some previous 
determinations will be consistent with the new definition, but others 
will not. This commenter specifically requested that the EPA include 
anti-backsliding language in the final rule to minimize the impact on 
previous determinations. In particular, under this rule surface sites 
that do not share equipment with other surface sites will not be 
aggregated, which will simplify permit actions when an independent 
surface site changes ownership.
c. EPA Response
    Historically, the EPA's rules are generally adopted on a 
prospective basis. That is, a new rule applies only after that rule is 
effective, and is not be applied retroactively to previous actions. 
This rule is no different. The EPA intends that this rule will be 
applied from August 2, 2016 forward. Previous source determinations and 
issued permits, whether sources were aggregated or not, should not be 
affected by this new definition of ``adjacent''.

V. Environmental Justice Considerations

    This document 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 oil and natural gas 
operations. This clarification will assist permitting authorities and 
permit applicants in making source determinations for the oil and 
natural gas industry, and is not intended to result in less 
environmental protection for human health and the environment. It is 
being finalized as a part of a comprehensive strategy to addresses 
emissions from the oil and natural gas sector which includes new (or 
lower) emission standards or requirements for a number of types of 
emitting equipment. As explained earlier in this document and in detail 
in our response to comments, the EPA does not anticipate that this rule 
will create a significant issue for attainment and maintenance of the 
NAAQS. Therefore, the EPA believes this action will not have a 
disproportionately high and adverse human health or environmental 
effects on minority populations or low-income populations.

[[Page 35631]]

VI. Statutory and Executive Order Reviews

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

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

B. Paperwork Reduction Act (PRA)

    This action does not impose any new information collection burden. 
The OMB has previously approved the information collection requirements 
contained in the existing regulations for PSD (40 CFR 52.21) and title 
V (40 CFR parts 70 and 71) under the provisions of the Paperwork 
Reduction Act, 44 U.S.C. 3501 et seq. and has assigned OMB control 
numbers 2060-0003, 2060-0336 and 2060-0243. The OMB control numbers for 
the EPA's regulations in 40 CFR are listed in 40 CFR part 9. Instead of 
new information collection burdens, this action finalizes a definition 
that clarifies the permitting requirements applicable to new and 
modified oil and natural gas sources. This final action is not likely 
to increase the burden associated with permitting. It is likely to 
decrease the burden of permitting for the EPA, when it is the 
permitting authority. The extent to which it will change the permitting 
burden for other permitting authorities will depend on whether state or 
local permitting authorities adopt the changes, and the extent to which 
these changes are different from the current practice.

C. Regulatory Flexibility Act (RFA)

    I certify that this action will not have a significant economic 
impact on a substantial number of small entities under the RFA. In 
making this determination, the impact of concern is any significant 
adverse economic impact on small entities. An agency may certify that a 
rule will not have a significant economic impact on a substantial 
number of small entities if a rule relieves regulatory burden, has no 
net burden or otherwise has a positive economic effect on the small 
entities subject to the rule. This final rule will not impose any 
additional requirements on small entities. This action clarifies 
existing requirements, and, by limiting the area in which an oil and 
gas source's operations must be analyzed for consideration as a single 
source, limits the burden on the sources and permitting authorities. 
Entities potentially affected directly by this final rule include 
state, local and tribal governments and none of these governments are 
small entities.

D. Unfunded Mandates Reform Act (UMRA)

    This 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.

E. Executive Order 13132: Federalism

    This action does not have federalism implications. It will not have 
substantial direct effects on the states, on the relationship between 
the national government and the states, or on the distribution of power 
and responsibilities among the various levels of government. The 
requirement to obtain permits for new major sources is imposed by the 
CAA. This rule would interpret those requirements as they apply to oil 
and natural gas operations. Thus, Executive Order 13132 does not apply 
to these regulation revisions. Finally, the EPA is not requiring that 
states adopt these changes.

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

    This action does not have tribal implications, as specified in 
Executive Order 13175. It would not have a substantial direct effect on 
one or more Indian tribes, since no tribe has developed a Tribal 
Implementation Plan that allows it to issue NSR permits and, in any 
case, we are not requiring any permitting authority other than the EPA 
and delegated states to adopt these changes. Furthermore, this 
regulation does not affect the relationship or distribution of power 
and responsibilities between the federal government and Indian tribes. 
The CAA and the Tribal Air Rule establish the relationship of the 
federal government and tribes in characterizing air quality and 
developing plans to attain the NAAQS, and this regulation does nothing 
to modify that relationship. Thus, Executive Order 13175 does not apply 
to this action.
    Consistent with the EPA Policy on Consultation and Coordination 
with Indian tribes, the EPA held several meetings with tribal 
environmental professionals to discuss issues associated with this 
rule, including a presentation on a National Tribal Air Association 
policy call on September 10, 2015, and an outreach call to state, local 
and tribal permitting authorities on September 15, 2015. These meetings 
discussed several related oil and gas rules, including this Source 
Determination rule. Summaries of these meetings are included in the 
docket for this rule.
    The EPA also offered consultation during the rulemaking process, 
but received no requests. The EPA provided an opportunity for tribes 
and stakeholders to provide written comments on the proposed rule. One 
tribe did submit comments and these comments are included in the docket 
for this rule.

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

    The EPA interprets Executive Order 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, per the definition of ``covered regulatory action'' in 
section 2-202 of the Executive Order. This action is not subject to 
Executive Order 13045 because it does not directly involve an 
environmental health risk or safety risk.

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

    This action is not a ``significant energy action'' because it is 
not likely to have a significant adverse effect on the supply, 
distribution or use of energy. The EPA is finalizing this clarification 
to its permitting rules and 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 oil and 
natural gas sources.

I. National Technology Transfer and Advancement Act

    This action does not involve technical standards.

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

    The EPA believes the human health or environmental risk addressed 
by this action will not have potential disproportionately high and 
adverse human health or environmental effects on any population, 
including any minority, low-income or indigenous populations, because 
it does not affect the level of protection provided to human health or 
the environment. The results of the evaluation of

[[Page 35632]]

environmental justice considerations is contained in Section V of this 
preamble titled, ``Environmental Justice Considerations.''

K. Congressional Review Act (CRA)

    This action is subject to the CRA, and the EPA will submit a rule 
report to each House of the Congress and to the Comptroller General of 
the United States. This action is not a ``major rule'' as defined by 5 
U.S.C. 804(2).

L. Judicial Review

    Under section 307(b)(1) of the CAA, petitions for judicial review 
of any nationally applicable regulation, or any action the 
Administrator ``finds and publishes'' as based on a determination of 
nationwide scope or effect must be filed in the United States Court of 
Appeals for the District of Columbia Circuit within 60 days of the date 
the promulgation, approval, or action appears in the Federal Register. 
This action is nationally applicable, as it revises the rules governing 
all PSD, NNSR and title V programs, in 40 CFR 51.166, 40 CFR 51.165, 40 
CFR 52.21, 40 CFR part 70 and 40 CFR part 71. The Administrator also 
finds that this action is based on a determination of nationwide scope 
and effect, as it revises the EPA's direct implementation of the PSD 
and title V programs, which is in effect in multiple Circuits. As a 
result, petitions for review of this regulation must be filed in the 
United States Court of Appeals for the District of Columbia Circuit 
within August 2, 2016. Filing a petition for reconsideration by the 
Administrator of this final action does not affect the finality of this 
action for the purposes of judicial review nor does it extend the time 
within which a petition for judicial review must be filed, and shall 
not postpone the effectiveness of this action.

Statutory Authority

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

List of Subjects

40 CFR Part 51

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

40 CFR Part 52

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

40 CFR Part 70

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

40 CFR Part 71

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

    Dated: May 12, 2016.
Gina McCarthy,
Administrator.

    For the reasons stated in the preamble, title 40, chapter I of the 
Code of Federal Regulations is amended as follows:

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

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

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

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

Sec.  51.165  Permit requirements.

    (a) * * *
    (1) * * *
    (ii)(A) Building, structure, facility, or installation means all of 
the pollutant-emitting activities which belong to the same industrial 
grouping, are located on one or more contiguous or adjacent properties, 
and are under the control of the same person (or persons under common 
control) 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 4101-0065 and 003-005-00176-0, 
respectively).
    (B) The plan may include the following provision: Notwithstanding 
the provisions of paragraph (a)(1)(ii)(A) of this section, building, 
structure, facility, or installation means, for onshore activities 
under Standard Industrial Classification (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 if 
they are located on surface sites that are located within \1/4\ mile of 
one another (measured from the center of the equipment on the surface 
site) and they share equipment. Shared equipment includes, but is not 
limited to, produced fluids storage tanks, phase separators, natural 
gas dehydrators or emissions control devices. Surface site, as used in 
this paragraph (a)(1)(ii)(B), has the same meaning as in 40 CFR 63.761.
* * * * *

0
3. In Sec.  51.166, revise paragraph (b)(6) to read as follows:

Sec.  51.166  Prevention of significant deterioration of air quality.

* * * * *
    (b) * * *
    (6)(i) Building, structure, facility, or installation means all of 
the pollutant-emitting activities which belong to the same industrial 
grouping, are located on one or more contiguous or adjacent properties, 
and are under the control of the same person (or persons under common 
control) except the activities of any vessel. Pollutant-emitting 
activities shall be considered as part of the same industrial grouping 
if they belong to the same Major Group (i.e., which have the same two-
digit code) as described in the Standard Industrial Classification 
Manual, 1972, as amended by the 1977 Supplement (U.S. Government 
Printing Office stock numbers 4101-0066 and 003-005-00176-0, 
respectively).
    (ii) The plan may include the following provision: Notwithstanding 
the provisions of paragraph (b)(6)(i) of this section, building, 
structure, facility, or installation means, for onshore activities 
under SIC Major Group 13: Oil and Gas Extraction, all of the pollutant-
emitting activities included in Major Group 13 that are located on one 
or more contiguous or adjacent properties, and are under the control of 
the same person (or persons under common control). Pollutant emitting 
activities shall be considered adjacent if they are located on the same 
surface site; or if they are located on surface sites that are located 
within \1/4\ mile of one another (measured from the center of the 
equipment on the surface site) and they share equipment. Shared 
equipment includes, but is not limited to, produced fluids storage 
tanks, phase separators, natural gas dehydrators or emissions control 
devices. Surface site, as used in this paragraph (b)(6)(ii), has the 
same meaning as in 40 CFR 63.761.
* * * * *

[[Page 35633]]

0
4. In appendix S to part 51, revise section II.A.2. to read as follows:

Appendix S to Part 51--Emission Offset Interpretative Ruling

* * * * *

II. Initial Screening Analyses and Determination of Applicable 
Requirements

    A. * * *
    2. (i) Building, structure, facility or installation means all 
of the pollutant-emitting activities which belong to the same 
industrial grouping, are located on one or more contiguous or 
adjacent properties, and are under the control of the same person 
(or persons under common control) except the activities of any 
vessel. Pollutant-emitting activities shall be considered as part of 
the same industrial grouping if they belong to the same ``Major 
Group'' (i.e., which have the same two digit code) as described in 
the Standard Industrial Classification Manual, 1972, as amended by 
the 1977 Supplement (U.S. Government Printing Office stock numbers 
4101-0066 and 003-005-00176-0, respectively).
    (ii) Notwithstanding the provisions of paragraph II.A.2(i) of 
this section, building, structure, facility or installation means, 
for onshore activities under SIC Major Group 13: Oil and Gas 
Extraction, all of the pollutant-emitting activities included in 
Major Group 13 that are located on one or more contiguous or 
adjacent properties, and are under the control of the same person 
(or persons under common control). Pollutant emitting activities 
shall be considered adjacent if they are located on the same surface 
site; or if they are located on surface sites that are located 
within \1/4\ mile of one another (measured from the center of the 
equipment on the surface site) and they share equipment. Shared 
equipment includes, but is not limited to, produced fluids storage 
tanks, phase separators, natural gas dehydrators or emissions 
control devices. Surface site, as used in this paragraph II.A.2(ii), 
has the same meaning as in 40 CFR 63.761.
* * * * *

PART 52--APPROVAL AND PROMULGATION OF IMPLEMENTATION PLANS

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

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

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

Sec.  52.21  Prevention of significant deterioration of air quality.

* * * * *
    (b) * * *
    (6)(i) Building, structure, facility, or installation means all of 
the pollutant-emitting activities which belong to the same industrial 
grouping, are located on one or more contiguous or adjacent properties, 
and are under the control of the same person (or persons under common 
control) except the activities of any vessel. Pollutant-emitting 
activities shall be considered as part of the same industrial grouping 
if they belong to the same ``Major Group'' (i.e., which have the same 
first two digit code) as described in the Standard Industrial 
Classification Manual, 1972, as amended by the 1977 Supplement (U.S. 
Government Printing Office stock numbers 4101-0066 and 003-005-00716-0, 
respectively).
    (ii) Notwithstanding the provisions of paragraph (b)(6)(i) of this 
section, building, structure, facility, or installation means, for 
onshore activities under Standard Industrial Classification (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 if they are located on surface sites that are located 
within \1/4\ mile of one another (measured from the center of the 
equipment on the surface site) and they share equipment. Shared 
equipment includes, but is not limited to, produced fluids storage 
tanks, phase separators, natural gas dehydrators or emissions control 
devices. Surface site, as used in this paragraph (b)(6)(ii), has the 
same meaning as in 40 CFR 63.761.
* * * * *

PART 70--STATE OPERATING PERMIT PROGRAMS

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

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

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

Sec.  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 on contiguous or adjacent 
properties belong to the same Major Group (i.e., all have the same two-
digit code) as described in the Standard Industrial Classification 
Manual, 1987. State programs may adopt the following provision: For 
onshore activities belonging to Standard Industrial Classification 
(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 if they are located on surface sites that are located 
within \1/4\ mile of one another (measured from the center of the 
equipment on the surface site) and they share equipment. Shared 
equipment includes, but is not limited to, produced fluids storage 
tanks, phase separators, natural gas dehydrators or emissions control 
devices. Surface site, as used in the introductory text of this 
definition, has the same meaning as in 40 CFR 63.761.
* * * * *

PART 71--FEDERAL OPERATING PERMIT PROGRAMS

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

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

Subpart A--Operating Permits

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

Sec.  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 on contiguous or adjacent 
properties belong to the same Major Group (i.e., all have the same two-
digit code) as described in the Standard Industrial Classification 
Manual, 1987. For onshore activities belonging to Standard Industrial 
Classification (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 if they are located on surface sites that are 
located within \1/4\ mile of one another (measured from the center of 
the equipment on the surface site) and they share equipment.

[[Page 35634]]

Shared equipment includes, but is not limited to, produced fluids 
storage tanks, phase separators, natural gas dehydrators or emissions 
control devices. Surface site, as used in the introductory text of this 
definition, has the same meaning as in 40 CFR 63.761.
* * * * *
[FR Doc. 2016-11968 Filed 6-2-16; 8:45 am]
 BILLING CODE 6560-50-P