On June 2, the Commonwealth Court weighed in on the long-simmering national debate surrounding questions of when two or more facilities must be regulated as a single source under the federal Clean Air Act (CAA) and state air pollution control statutes. The U.S. Environmental Protection Agency and state agencies have sought to aggregate facilities where certain factors support a finding that the facilities are operationally related, and especially where the level of emissions from the combined source would trigger heightened regulatory or permitting requirements. National Fuel Gas Midstream v. Pennsylvania Department of Environmental Protection, No. 116 CD 2016 (June 2, 2017), provides some clarity about the meaning of the term “common ­control,” one of the three factors for determining if facilities should be aggregated for air permitting purposes. The decision finds that regulated facilities should not be ­combined as a single source merely because they are each owned by a separate subsidiary of a shared corporate parent.

Significance of Source Aggregation

Under the CAA, “major” ­stationary sources of air pollution are required to obtain Title V permits, which impose ­monitoring, recordkeeping and reporting requirements to ensure compliance with ­applicable air ­pollution control ­requirements. Major sources may also be subject to more stringent requirements under the EPA's New Source Review program and would ­typically not be eligible to operate under general ­permits published by state air pollution control agencies.

Given the increased stringency that comes with being a major stationary source, ­facilities subject to air permitting ­requirements have an incentive to stay below major source thresholds when possible. In certain contexts, however, the EPA and the states that administer approved CAA programs have authority to treat separate facilities as a single source of air emissions. A decision to aggregate otherwise separate emissions sources can be highly significant because facilities that would not be ­considered “major” on their own might exceed the CAA's emission thresholds when combined, thereby subjecting the combined source to the more stringent major source requirements.

The CAA permits separate facilities to be treated as a single source of air pollution if the relevant facilities: (1) share the same industrial grouping (i.e., same SIC Code); (2) are located on one or more contiguous or adjacent properties; and (3) are under ­common control of the same person (or of persons under common control). If all three ­criteria are satisfied, the EPA or the approved state agency may aggregate the emissions of the multiple sources.

Meaning of 'Common Control'

Determining if facilities are under common control is often the most complicated and contested aspect of the source ­aggregation analysis, because ­neither the CAA nor its implementing regulations define the phrase “common control.” Through a 1980 ­interpretive rulemaking, the EPA rejected a blanket rule for deciding common control in favor of case-by-case determinations. In that same ­rulemaking, the EPA said that common-control inquiries should be guided by the general definition of “control” used by the Securities and Exchange Commission (SEC), which defines ­”control” to mean “the possession, direct or indirect, of the power to direct or cause the direction of the management and policies of a person (or organization or ­association) whether through the ownership of voting shares, contract, or otherwise.”