Opinion ID: 3011231
Heading Depth: 2
Heading Rank: 1

Heading: Subpart J & Affected Facilities in Petroleum

Text: Refineries As detailed above, each New Source Perfor mance Standard promulgated under the Clean Air Act applies to specific affected facilities, and each New Source Performance Standard explicitly sets forth and defines the affected facility or affected facilities to which it applies. Consistent with this regulatory framework, Subpart J states in relevant part: The provisions of this subpart are applicable to the following affected facilities in petr oleum refineries: fluid catalytic cracking unit catalyst regenerators, fuel gas combustion devices, and all Claus sulfur recovery plants except Claus plants of 20 long tons per day (LTD) or less. The Claus sulfur recovery plant need not be physically located within the boundaries of a petroleum refinery to be an affected facility, provided it processes gases produced within a petr oleum refinery. See 40 C.F.R. S 60.100(a) (1999) (emphasis added). In determining that the stationary gas turbines located at Motiva's Repowering Project are fuel gas combustion devices subject to regulation under Subpart J, the EPA concluded that the turbines are affected facilities as defined by 40 C.F.R. S 60.100(a). However, as 40 C.F.R. S 60.100(a) expressly indicates, Subpart J does not apply to all fuel gas combustion devices, but rather applies only to fuel gas combustion devices located in petroleum refineries. Thus, the key question, upon which the outcome of this petition hinges, is: Are the stationary gas turbines here in a petroleum r efinery? Subpart J defines a petroleum refinery as any facility engaged in producing gasoline, kerosene, distillate fuel oils, residual fuel oils, lubricants, or other pr oducts through 14 distillation of petroleum or through r edistillation, cracking or reforming of unfinished petr oleum derivatives. 40 C.F.R. S 60.101(a) (1999). While the EPA r eadily concedes that the Repowering Project and the larger electrical power plant complex, in which the Repowering Project is located, are not a petroleum refinery,12 the EPA nonetheless contends that the Repowering Project's two stationary gas turbines are in a petroleum refinery and are subject to regulation under Subpart J. In originally determining that the stationary gas turbines are subject to regulation under Subpart J, the EPA stated: Star's [Repowering] Project is located adjacent to the remainder of the refinery and is under common ownership and control; therefore, it is considered part of the refinery. Further evidence that the[Repowering] Project is integrated into refinery operations is that the [Repowering] Project will supply most of the refinery's steam and all power requirements, has the ability to combust other fuel gas from the refinery, and . . . will help Star manage its solid waste from the r efinery. Because the [Repowering] Project is part of the refinery, fuel gas combustion devices associated with the [Repowering] Project are in a refinery and fuel gas generated at the [Repowering] Project is generated at a refinery. NSPS Subpart J Applicability Determination for the Star Enterprise Petroleum Refinery in Delawar e City, Delaware, Memorandum Dated July 21, 1998 (Star Applicability Determination). In short, the EPA concluded and now contends that because Motiva's Repowering Pr oject is located adjacent to a [petroleum] r efinery [that] is under common ownership and control, it should beconsidered part of the [adjacent] refinery, and thus that the stationary gas turbines at issue in this case, turbines that ar e an integral part of the Repowering Project, ar e in a petroleum refinery. _________________________________________________________________ 12. It is undisputed that Motiva's Repowering Pr oject is a cogeneration facility that will gasify petroleum coke and combust the resulting synthesis gas to generate only electricity and steam. 15 This reasoning alone cannot, however, pr ovide the basis for concluding that the Repowering Project's stationary gas turbines are subject to regulation under Subpart J. Indeed, were the EPA's reasoning sufficient to establish that the Repowering Project is part of Motiva's adjacent petroleum refinery, it would also be sufficient to establish that any independent, free-standing facility owned by Motiva and built on land adjacent to Motiva's petroleum r efinery is part of Motiva's petroleum refinery. For example, EPA's reasoning would also be sufficient to establish that a McDonald's restaurant, owned by Motiva and built on land adjacent to Motiva's petroleum refinery for the convenience of refinery workers, is part of Motiva's adjacent petroleum refinery. Under this interpretation, the EPA would be able to regulate, under Subpart J, fuel gas combustion devices inside the McDonald's. Even though these fuel gas combustion devices would not be located in apetroleum refinery, such devices would be subject to regulation under Subpart J under the EPA's interpretation because they would be treated as affected facilities in [a] petroleum refinery[ ]. Were we to accept the EPA's r easoning (assuming common ownership and control), any fuel gas combustion device located in a facility adjacent to Motiva's petroleum refinery would be subject to regulation under Subpart J because such devices would be treated, inappr opriately, as affected facilities in [a] petr oleum refinery[ ]. This conclusion is untenable. As detailed above, it is undisputed that Motiva's Repowering Project is a cogeneration facility that will gasify petroleum coke and combust the resulting synthesis gas to generate electricity and steam. Moreover , even though Motiva's Repowering Project is adjacent to a petroleum refinery that Motiva owns, the Repowering Pr oject is located in a free-standing building, an electric power plant complex that is physically separate and distinct from Motiva's petroleum refinery. Neither the Repowering Project nor the electric power plant complex in which the Repowering Project is to be constructed and operated is apetroleum refinery. We therefor e fail to understand how the EPA concluded and now contends that the Repowering Pr oject's 16 stationery gas turbines are themselves in a petroleum refinery. Furthermore, if these turbines are not in a petroleum refinery, they ar e not affected facilities and thus are not subject to regulation under Subpart J. The EPA also argues that the Repowering Project will be an integral part of the refinery's operations and for that reason the stationary gas turbines at issue ar e in a petroleum refinery. The EP A asserts that: [The Repowering Project] will take low value material from the refinery, i.e., petr oleum coke, convert it into a different low value material, i.e. , a combustible gas, burn the gas in a combustion turbine, and use the steam and electricity produced by the turbine to provide energy for other refinery processes. The [Repowering] Project is thus a integral part of the refinery's operations both because it is part of the refinery's process of manufacturing usable products from crude oil and because it uses refinery products to provide a valuable input, i.e. ener gy [in the form of electricity and steam] to the refinery's operation. Star Applicability Determination. While much of the above is accurate, the Repowering Project is neither part of the adjacent petroleum refinery nor necessary to the refinery's operations. Indeed, as the EPA concedes, Motiva could as easily have chosen to power its refinery by purchasing electricity from the local electric company's commercial grid.13 If we were to follow the EPA's reasoning that the Repowering Project is part of Motiva's adjacent petroleum refinery, we would also be requir ed to conclude that any building that is located on land adjacent to Motiva's petroleum refinery and has a mutually beneficial relationship with the petroleum refinery -- be it to provide food to the workers or energy to the machinery-- is part of the petroleum refinery. Following this r easoning, the EPA would be able to regulate facilities within any such building as if they were located in the petr oleum refinery. _________________________________________________________________ 13. As we have already noted, Motiva's Repowering Project produces more than enough electricity to power the adjacent petroleum refinery and that surplus electricity will be sold to Delmarva and/or other customers on the commercial power grid. 17 The EPA acknowledges that the term petroleum refinery is clearly defined in Subpart J as any facility engaged in producing gasoline, kerosene, distillate fuel oils, residual fuel oils, lubricants, or other products thr ough distillation of petroleum or through redistillation, cracking or reforming of unfinished petroleum derivatives. 40 C.F.R. S 60.101(a). Moreover, the EPA concedes that Motiva's Repowering Project is a cogeneration facility that generates only electricity and steam and that the Repowering Pr oject resides in a separate, free-standing electric power plant complex. The EPA also concedes that none of the processes described in the definition of petroleum refinery set forth in S 60.101(a) takes place as a part of the Repowering Project or even within the building in which the Repowering Project resides. Nonetheless, the EP A contends that a broad definition of petroleum refinery to include operations essential to its purpose is consistent with the language of Subpart J. Using this broad definition, the EPA concluded: The Star [petroleum] refinery is engaged in the processes described in the NSPS Subpart J definition of petroleum refinery. The [Repowering] Project is an integral part of the refinery. It gasifies coke generated by refinery process units, producing synthesis gas, combusts the synthesis gas and is also capable of combusting other types of refinery fuel gas. The sulfur compounds (mainly H2S) stripped during the gasification process will be sent to the modified Claus sulfur recovery plant. The steam and most of the electricity produced by the project will be routed back to other refinery process units. Star Applicability Determination. The EPA's reasoning is flawed because the Repowering Project is not essential to the operation of Motiva's petroleum refinery. Were the Repowering Project essential to the operation of the refinery, the EPA might be able to convince us that the Repowering Project was part of Motiva's petr oleum refinery and that the stationary gas turbines located in the Repowering Project are in a petroleum refinery. However, as mentioned above, Motiva does not need electricity from the Repowering Project to power its refinery. Motiva could 18 just as easily purchase electricity from the local power company. Nor is the Repowering Project necessary for coke disposal. Rather than using the petroleum coke, produced in its refinery, to power the turbines at issue here, Motiva could ship the coke off-site for use at other industrial facilities or for disposal. Indeed, because Motiva's petroleum refinery operated for many years prior to the conception of the Repowering Project, it is har d to understand how the EPA concludes that the Repowering Project is essential to the operation of the adjacent petroleum refinery.14Moreover, the EPA's claim that[i]f the current power plant did not exist, Star would not be able to operate the refinery at its current capacity is also inaccurate for the reasons articulated above. Presumably, the only limitations on refinery capacity would be limitations on available power and available raw materials. The Repowering Project in no way affects the availability of raw materials, and although the Repowering Pr oject would supply power to Motiva's petroleum refinery, Motiva could just easily purchase that power (and any additional power needed) from a commercial supplier . Finally, in support of its initial determination, the EPA contends that: The coke gasification project is not a stand-alone facility. . . . In Star's case, the refinery in its current form could not operate without the curr ent power plant or without the planned Project, and it is not likely that the current power plant or planned Project would exist (they certainly would not exist in their current or planned form) without the r emainder of the refinery. _________________________________________________________________ 14. Were we to accept the EPA's logic, if Motiva purchased electricity from the local electric company, generated by a generator located in a free-standing building on land adjacent to its petroleum refinery, and then, at a later date, Motiva purchased outright the entire local electric company, any stationary gas turbines that wer e a part of the aforementioned generator facility would (quite suddenly) become subject to regulation under Subpart J, since these turbines would be literally transformed into affected facilitiesin [a] petroleum refinery[ ]. This sort of reasoning, and the outcome dictated by it, are untenable. 19 Star Applicability Determination. For the same reasons detailed above, this argument is unpersuasive. Put simply, the Repowering Project is a stand-alone facility and could operate absent the existence of Motiva's petr oleum refinery by obtaining petroleum coke from another commercial supplier (rather than Motiva's adjacent petr oleum refinery) and selling all of the steam and electricity pr oduced by the Repowering Project to commercial customers such as Delmarva. While it is undisputed that a mutually beneficial relationship exists between Motiva's Repowering Project and Motiva's petroleum refinery, the EP A's determination that the stationary gas turbines at Motiva's Repowering Project are subject to regulation under Subpart J is not only plainly erroneous but also inconsistent with the language of Subpart J itself. In short, the EPA's deter mination that the stationary gas turbines at Motiva's Repowering Pr oject are affected facilities subject to r egulation under Subpart J ignores the requirement that r egulated turbines be located in a petroleum refinery. B. Physical Location as the Touchstone of S 60.100(a) Despite the EPA's arguments to the contrary, in determining what facilities are af fected facilities that can be regulated under Subpart J, and, specifically, in determining what facilities are in petroleum refineries, the touchstone of such a determination is the physical location of the facilities in question. As noted above, 40 C.F.R. S 60.100(a) states: The provisions of this subpart are applicable to the following affected facilities in petroleum refineries: fluid catalytic cracking unit catalyst regenerators, fuel gas combustion devices, and all Claus sulfur recovery plants except Claus plants of 20 long tons per day (LTD) or less. The Claus sulfur recovery plant need not be physically located within the boundaries of a petroleum refinery to be an af fected facility, provided it processes gases produced within a petr oleum refinery. 40 C.F.R. S 60.100(a) (1999) (emphasis added). For the last sentence of S 60.100(a) to make any sense, the ultimate question to be answered when determining whether certain 20 facilities are in petroleum refineries must be: Where are the facilities physically located? Although the EPA argues strenuously that the term petroleum refinery must be interpreted broadly to include not only Motiva's petroleum refinery but also an adjacent, free-standing, independent electric power plant complex that produces steam and electricity for use by the refinery (as well as other commercial customers including the local power company), the stationary gas turbines in this freestanding, independent facility are simply notin a petroleum refinery because neither the Repowering Project nor the electric power plant complex in which the Repowering Project is located engages in the pr oduction of gasoline, kerosene, distillate fuel oils, r esidual fuel oils, lubricants, or other products through distillation of petroleum or through redistillation, cracking or reforming of unfinished petroleum derivatives. 40 C.F .R. S 60.101(a) (1999). Moreover, the explicit inclusion in S 60.100(a) of Claus recovery plants not . . . physically located within the boundaries of a petroleum refinery, and the corresponding absence of a similar inclusion with respect tofuel gas combustion devices not . . . physically located within the boundaries of a petroleum refinery, further undermines the EPA's determination. C. Chemical Composition of Synthesis Gas Bur ned in the Stationary Gas Turbines Although our determination that Subpart J does not apply here frees us from having to determine whether the synthesis gas to be burned by the stationary gas turbines is a fuel gas regulated under Subpart J, we do note that the chemical composition of the synthesis gas is markedly different from the chemical composition of other fuel gases, the burning of which is subject to regulation under Subpart J. As the petitioners highlight in their brief, and as the regulatory history of Subpart J suggests, the exclusive focus and purpose of Subpart J is the reduction of sulfur emissions (specifically sulfur dioxide (SO2) emissions) by limiting the amount of hydrogen sulfide (H 2S) in combustible fuel gases combusted in petroleum r efineries. According to Motiva, a not insignificant amount of the sulfur/SO2, emitted when the synthesis gas at issue is 21 combusted in these turbines, comes not from H 2S in the synthesis gas but from COS in the synthesis gas. Regardless of the exact source of the sulfur/SO2 emissions, it appears from the recor d that at least some of the sulfur/SO2 emitted when the synthesis gas at issue is combusted comes not from H2S in the gas but rather from COS in the gas. As mentioned above, compliance with Subpart J can be established either by measuring and monitoring the H2S level in the fuel gas prior to combustion or by measuring and monitoring the SO2 level in the emissions after combustion. See supra, note 4. If subject to regulation under Subpart J, Motiva is without a legally acceptable method for measuring the combined concentration of COS and H2S in the pre-combustion synthesis burned at the Repowering Project. Therefore, Motiva will be forced either to monitor and r educe the emission of SO2, or to monitor and control the level of H2S in the pre-combustion synthesis gas being combusted at the Repowering Project (rather than the level of H2S and COS in the pre-combustion synthesis gas), even though by itself, the level of H2S in the synthesis gas being combusted is an arguably poor and clearly inferior measure of Motiva's compliance with Subpart J. As the EPA points out, the unique chemical composition of the synthesis gas, in and of itself, does not and would not exempt the stationary gas turbines at issue here from regulation under Subpart J. This composition may suggest, however, that another regulation, for example, Subpart GG,15 regulating stationary gas turbines, rather than Subpart J, may be the _________________________________________________________________ 15. 40 C.F.R. S 60.330, entitledApplicability and Designation of Affected Facility, is the first section of Title 40, Subpart GG, and states in relevant part: (a) The provisions of this subpart ar e applicable to the following affected facilities: All stationary gas turbines with a heat input at peak load equal to or greater than 10.7 gigajoules per hour, based on the lower heating value of the fuel fir ed. (b) Any facility under paragraph (a) of this section which commences construction, modification, or r econstruction after October 3, 1977, is subject to the requir ements of this part . . . . 40 C.F.R. S 60.330 (1999). It is undisputed by the parties that Subpart GG applies to the stationary gas turbines at issue in this case. The parties dispute only the applicability of Subpart J, which imposes much more stringent requirements than does Subpart GG on emissions from these stationary gas turbines. 22 appropriate regulation under which to r egulate emissions from these gas turbines. The discontinuity between the chemical composition of synthesis gas to be combusted at the Repowering Project and the chemical composition of other fuel gases, the combustion of which is subject to regulation under Subpart J, also suggests that the EPA's determination is inconsistent with the r egulation at issue and should be set aside.16 D. EPA's Prior Determination Under Subpart OOO In arguing that its determination in this case is neither plainly erroneous nor inconsistent with Subpart J, the EPA relies in part on what it characterizes as a prior, analogous determination under Subpart OOO--Standar ds of Performance for Nonmetallic Mineral Pr ocessing Plants.17 The EPA's reliance on this determination is misplaced for two reasons. First, while the factual background of the EP A's earlier determination under Subpart OOO is not entir ely clear (the record is incomplete), it is clear that the facts of this earlier determination are distinguishable, in at least one key respect, from the facts in this case. Unlike the stationary gas turbines at issue here, the Cement T reated Base plants located at nonmetallic mineral processing plants were portable. This fact alone distinguishes the EP A's prior determination under Subpart OOO because, as discussed above, physical location is the touchstone for deter mining which facilities are affected facilities as the term is defined in Subpart J. Because the Cement Treated Base plants at issue in this prior determination were portable, had the EPA concluded that these Cement Tr eated Base plants were subject to regulation under Subpart OOO based on their physical location, the regulatory framework established by _________________________________________________________________ 16. We further note that Motiva's inability to monitor and control the level of H2S and COS (prior to combustion) in the gas being combusted at the Repowering Project would take on heightened significance if it could be shown that monitoring the post-combustion SO2 emissions was more costly than monitoring the pre-combustion level of H2S in the synthesis gas at issue. 17. See Standards of Perfor mance for Nonmetallic Mineral Processing Plants, 40 C.F.R. SS 60.670-60.676 (1999). 23 Subpart OOO could have been easily circumvented simply by moving the Cement Treated Base plants. Phrased differently, when portable facilities ar e at issue, physical location cannot possibly be the touchstone for deter mining if, and/or when, regulation is appropriate. This obvious consequence of portability is, of course, irr elevant in the present case because the gas turbines her e are stationary. Second, and more importantly, even assuming, arguendo, that the facts surrounding the prior deter mination under Subpart OOO and the present determination under Subpart J are sufficiently analogous, this in no way implies that the EPA's prior determination under Subpart OOO was either correct or consistent with Subpart OOO. Neither this Court nor any other court of which we are awar e has addressed the propriety and/or legality of this prior determination upon which the EPA r elies in part. As such, even assuming that the facts surrounding this prior determination under Subpart OOO and the pr esent determination under Subpart J are sufficiently analogous, we can only conclude from this that the EP A has addressed the issues consistently, not correctly.18