On February 23, 2015, the US District Court for the Middle District of Pennsylvania granted Ultra Resources, Inc.’s motion for summary judgment, holding as a matter of law that eight compressor stations owned and operated by Ultra Resources, Inc. (“Ultra”) were not a “single source” for air quality permitting purposes. See Citizens for Pennsylvania’s Future v. Ultra Res., Inc., No. 4:11CV01360, 2015 US Dist. LEXIS 21357 (M.D. Pa. Feb. 23, 2015). This post provides a brief summary of the Ultra Resources decision. Check back to this web site soon for our more in-depth analysis of the Ultra Resources decision.

If the compressor stations were aggregated as a single source, their emissions would have exceeded major source thresholds, and Ultra would have been required to obtain a single, more stringent, major-source air permit for the compressor stations. Under Pennsylvania regulations, as under EPA regulations, compressor stations are considered a single source for air permitting purposes only if they are under common control and are contiguous or adjacent. 40 C.F.R. § 70.2 (defining “major source”); 25 Pa. Code § 121.1 (defining “facility,” “major facility,” and “Title V facility”). The sole issue in dispute in Ultra Petroleum was whether the compressor stations were “adjacent” to one another. The parties stipulated to the distance between the compressor stations (ranging from 0.78 to 4.43 miles).

In granting summary judgment to Ultra, the court found that a determination of adjacency should focus on the plain meaning of the term, requiring physical proximity. Based on the plain meaning of the word “adjacent,” the court held that Ultra’s compressor stations were not adjacent to one another as a matter of law. The court rejected PennFuture’s argument that the compressor stations were “adjacent” by virtue of being “functionally interrelated” solely because the eight compressor stations deposit gas into a common pipeline.

In reaching its determination in Ultra Petroleum, the court cited PADEP’s “Guidance for Performing Single Stationary Source Determination for Oil and Gas Industries” (DEP ID: 270-0810-006), 42 Pa. B. 6344 (Oct. 6, 2012); Sixth Circuit case law in Summit Petroleum Corp. v. EPA, 690 F.3d 733, 735 (6th Cir. 2012), in which the Sixth Circuit interpreted “adjacency” to require physical proximity and could not be shown by functional relationships among facilities; and Nat’l Envtl. Dev. Ass’n’s Clean Air Project v. EPA, 752 F.3d 999 (D.C. Cir. 2014), in which the D.C. Circuit extended the Summit Petroleum decision nationwide. Norton Rose Fulbright’s past discussions of Summit Petroleum and NEDACAP are available on our web site.

The Ultra Resources court agreed with the majority in Summit Petroleum that the plain meaning of “contiguous” and “adjacent” should normally operate to allow a determination as to whether stationary sources should be aggregated. Departing from Summit Petroleum and NEDACAP, however, the court left open the possibility that, under PADEP guidance, a court in Pennsylvania might still consider “functional interrelatedness,” but only in unique factual situations beyond the normal oil and gas configurations and arrangements contemplated by PADEP.