COMPLYING WITH THE CAA IN INDIAN COUNTRY

• Jurisdiction: United States

Air Quality Issues Affecting Oil, Gas, and Mining Development and Operations (Feb 2018)
CHAPTER 14B
COMPLYING WITH THE CAA IN INDIAN COUNTRY
Clara Poffenberger
Attorney, Clara Poffenberger Environmental Law and Policy LLC
Washington, DC

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CLARA POFFENBERGER is an environmental attorney with over 26 years of experience with air pollution laws and regulations. She began her career at the U.S. Environmental Protection Agency, first in the Office of Air and Radiation in Washington D.C. and then in the Air Enforcement Division of the Office of Enforcement and Compliance Assurance ("OECA"). Having become nationally recognized for proficiency with various Clean Air Act programs, Clara joined private practice to work with companies on Clean Air Act compliance and enforcement matters as well as regulatory advocacy. Clara worked with companies with facilities all over the United States on air pollution regulation, permitting and enforcement matters. In addition, Clara created and developed Baker Botts' Latin America Environmental Law Practice that included managing a client group with interests in Latin America as well as a network of environmental lawyers in the Americas. From 2006 to 2012, as ExxonMobil's lead attorney on New Source Review matters, the New Source Review Consent Decree, fuel regulatory matters, and climate change regulatory matters, Clara worked with all segments of the oil and gas industry, working on pipeline issues as well as with XTO on air regulatory and permitting issues. Returning to private practice in 2012, Clara continues to represent the oil and gas industry and chemical manufacturers on air regulatory issues. Clara is licensed in Virginia and Washington D.C. but provides compliance guidance and strategy support at the national level and state level, including state air regulations that are based on federal rules. Clara graduated from the Washington College of Law at the American University in Washington D.C. with a Master in International Law and Affairs as well as a J.D. Clara graduated from Virginia Tech in Blacksburg, Virginia with a Bachelors of Art in International Studies and International Development.

Summary

From industry counsel perspective, there are currently three dynamic areas of discussion regarding compliance with the Clean Air Act ("CAA") for operations in Indian country

(1) the importance of jurisdiction - how it relates to permitting and other requirements, permit appeals, interpretation of regulations, and enforcement.

(2) the complexity of jurisdictional determinations; and

(3) the tangled relationship of NSPS, permits, and FIPs.

I. Jurisdiction Matters

A fundamental question for complying with air regulations is which government entity has jurisdiction: state, federal or tribal. State and tribal jurisdictions do not overlap; a source is either on state land or on tribal land, with rare exceptions. Jurisdiction is based on the physical location of the source on the land; it is not based on where the air emissions travel. Although the "air shed" of an area can include both state and tribal lands - the air emissions from a source impacts the air quality of state and of tribal lands - a source is usually only located on state or tribal land, not both. Federal lands - such as national parks - are subject to the air permitting jurisdiction of the state.¹ Federal air regulations do not apply by themselves on federal lands; state regulations apply on federal lands; the federal government is an owner of lands under state jurisdiction. On tribal lands, federal regulations apply in the absence of approved tribal regulations or are incorporated by tribal regulations - just like a state.

Which authorities have jurisdiction matters in several important ways for permitting and for enforcement of air regulations. For permitting, the differences relate to: (1) who issues the permit and the permit content preferences of the permit authority; (2) the appeals process for permit decisions; (3) what additional separate procedures or regulations apply; and (4) what guidance or interpretations of the applicable regulations might apply. For enforcement, the differences relate to: (1) who is the primary enforcer; (2) whether the applicable regulations can be enforced by citizens under the CAA; and (3) what other federal agencies might weigh in on issues. These differences, discussed further below, might be important when evaluating investment or operational options.

A. Permitting

The permitting background of Summit Petroleum's facilities in Michigan (leading up to the 6^th Circuit decision in Summit Petroleum v. EPA² ) began with the state of Michigan requesting guidance from EPA about how to permit the sources - whether to aggregate the oil and gas wells. Aggregation of the emissions from all the wells under ownership or control of

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Summit Petroleum in that area would make the facility a major source. Grouping only some of the emission sources together would mean the facilities would be minor. More than two years after Michigan first requested EPA guidance for the Summit Petroleum permit(s), EPA issued a letter asserting jurisdiction because the sources were on Indian land. After another two years, EPA issued its source aggregation determination. Summit Petroleum then appealed the aggregation determination directly to the federal Court of Appeals and obtained a decision two year later.

This is an interesting example that highlights a few differences between permitting under state jurisdiction and permitting under federal jurisdiction. Federal permits often take more time than state permitting.³ One reason is the permit appeals process through the U.S. Environmental Appeals Board. But another reason for delay and a difference in permitting is that federal permits must follow national policy and can often involve controversial issues where the permit authority considers the precedent that must be followed or might be set by permit decisions. Another difference between the permitting jurisdictions is that the appeals process for final agency actions by EPA under the CAA is to the federal Court of Appeals; although appeals of final permits under PSD or title V must first go to the U.S. Environmental Appeals Board.

Other differences between permitting authorities relate to permit content preferences but this varies among EPA regions and states. A federal permit could contain as much or as little content as a state permit, it depends on which EPA region and which state are compared.

i. Permit Appeals

Permits issued by EPA or by the state or the tribe under a delegation of authority are subject to the federal permit appeals process in 40 CFR § 124.19 and if appealed, are appealed to the U.S. EPA Environmental Appeals Board ("EAB"). Appeals to the EAB involve briefing and an opportunity for a hearing; it is like litigation. Appeals to EAB for air permits involve significant delay. In addition, the permit can be appealed by anyone who commented on the permit and on the basis of such comments. Once appealed the permit is stayed and no action can proceed in reliance on the permit. By contrast, each state with an approved permit program has its own permit appeals process; each vary by timing and who can appeal but almost all state appeals processes take far less time than the EAB appeals process. Some states allow a permit appeal to proceed without staying the permit and some states allow some limited construction to proceed while the permit appeal process proceeds. Where states stay the permit pending appeal, usually the permit appeal process is not lengthy.⁴

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From a different perspective, petitions for review to challenge regulatory applicability determinations, including jurisdiction issues or aggregation issues, may be filed directly with the federal Court of Appeals where the facility resides. Although this entails more delay to obtain a resolution, in the case of Summit Petroleum, the court addressed the dispute faster than EPA had taken to issue a determination.⁵ By contrast, applicability determinations by states, sometimes with guidance and pressure from EPA, are not directly appealable to the federal courts of appeals. The appeals process of the state is the first place to challenge a determination. A permit applicant cannot challenge the determination until the state or the agency has taken final agency action and usually that final agency action is not until the permit is issued or denied. States rarely put in writing a final determination separate from the permitting process and EPA input on the permit process is through comments and permit objections; neither can be appealed directly to courts. In sum, the oil and gas industry would not likely have its own "source determination" rule, issued in 2016, if a question of source aggregation had not arisen on Indian lands, where the determination could be appealed directly to federal court.

Source Aggregation and the Source Determination

EPA's final determination for Summit Petroleum was that emissions from all the wells must be aggregated because they were functionally related or dependent. The 6th Circuit rejected EPA's rationale for aggregating the emission sources. EPA issued a directive that the court decision would only apply within the jurisdiction of the 6th Circuit; industry successfully challenged that directive. In response to the challenge, EPA issued a rule allowing EPA to limit the effect of circuit court decisions - the Regional Consistency rule. EPA issued a source determination rule changing the permit rules related to what oil and gas emission sources must be included together for determining major source status - the Oil and Gas Source Determination Rule. This rule change applies only to oil and gas sources. At the same time, industry continues efforts to have the effect of the 6th Circuit court decision apply nationwide. This is the

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