[Federal Register Volume 81, Number 107 (Friday, June 3, 2016)]
[Rules and Regulations]
[Pages 35622-35634]
[FR Doc No: 2016-11968]

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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<PHONE_NUMBER>, or by email at<EMAIL_ADDRESS>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<EMAIL_ADDRESS>
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.

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             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

``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

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

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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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.

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

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

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

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.

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

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<PHONE_NUMBER>6-0,
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<PHONE_NUMBER>6-0,
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.
* * * * *

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<PHONE_NUMBER>6-0, 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<PHONE_NUMBER>6-0,
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.

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