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EPA Issues Common Control Revised Interpretation Analysis

On April 30, 2018, EPA issued a letter to Pennsylvania Department of Environmental Protection (PADEP) responding to a request to review a document submitted on behalf of Meadowbrook Energy LLC (Meadowbrook) concerning whether emissions from a biogas processing facility under development by Meadowbrook should be aggregated with the co-located landfill owned by Keystone Sanitary Landfill, Inc. (KSL) for Clean Air Act purposes. The New Source Review (NSR) and Title V regulations in the Clean Air Act require aggregation of the emissions from co-located facilities that share a similar industrial classification where there is a “common control” relationship between them.  In EPA’s response, they indicated that previous interpretations of the term “common control” were made in a manner that may have supported viewing this case (Meadowbrook and KSL) and other cases as a single source due to the support or dependency relationships between the two entities that might be viewed as providing each with some degree of influence or control over the operations of the other. EPA is now re-evaluating and revising its interpretation of the term “common control” in the Title V and NSR regulations to focus on the power or authority of one entity to dictate decisions of the other that could affect the applicability of, or compliance with, relevant air pollution regulatory requirements. While EPA’s longstanding practice and view that determinations of common control are fact-specific and should continue to be made by permitting authorities on a case-by-case bases, EPA believes it should realign its approach to common control determinations to minimize the potential for entities to be held responsible for decisions of other entities over which they have no power or authority.

EPA’s Refined Interpretation Analysis Highlights:

A. Control means the power or authority to dictate decisions.

  • Establishes narrower interpretation of the meaning of “control”
  • “Control” encompasses the power or authority to restrict another entity’s choices and dictate the outcome of another entity’s decisions, i.e. remove autonomy of the controlled entity to decide whether or how to pursue a particular course of action
  • Does not include the mere ability to influence
  • Focus on whether control is established, not how
  • The fact that an entity is influenced, affected, or constrained by contractual relationships that it negotiated at arm’s length, or by external market forces, does not necessarily mean one entity is controlled or governed by these influences in making a given decision

B. Focus should be on control over decisions that affect the applicability of, or  compliance with, relevant air pollution regulatory requirements.

  • Focus on control (power or authority) over air pollution operations that could affect the applicability of, or compliance with, permitting requirements (e.g. the power to direct the construction or modification of equipment that will result in emissions of air pollution; the manner in which such emission units operate; the installation or operation of pollution control equipment; and monitoring, testing, recordkeeping, and reporting obligations)
  • If the authority one entity has over another cannot actually affect the applicability of, or compliance with, relevant permitting requirements, then the entities cannot control what permit requirements are applicable to each other, or whether another entity complies with its respective requirements – this means that each entity has autonomy with respect to its own permitting obligations, thus it is more logical for such entities to be treated as separate sources, rather than being artificially grouped together for permitting purposes
  • If one entity has power or authority over some aspect of another entity’s operations that would have no impact on pollutant emitting activities of the stationary source subject to permitting requirements, EPA does not consider that fact to be relevant to determining whether the two entities should be considered a single source for air quality permitting purposes

C. Dependency relationships should not be presumed to result in common control.

  • Existence of a dependency relationship between entities should not be confused with the altogether separate issue of whether one entity is a “support facility” for another entity – “Support facility” is addressed in the industrial grouping (2-digit SIC-code) aspect of site determinations
  • Furthermore, a dependency relationship should not be presumed to result in common control
  • Entities can be economically or operationally interconnected or mutually dependent through contracts or other business arrangements without having the power or authority to direct the relevant activities of each other
  • Determine whether one entity has the power or authority to dictate the decisions of another entity (and not simply to determine whether a dependency relationship exists)
  • The fact that economic conditions are such that one entity depends on another facility or that one facility would not profitably exist but for the existence of another entity does not necessarily mean that it has the power or authority to dictate the outcome of decisions regarding relevant air-pollution related aspects of each other’s operations

As outlined in the analysis, applying the reinterpretation of “common control” to the Meadowbrook/KSL case, EPA would not view the two facilities to be under common control.

Who May Benefit from this Reinterpretation?

If your facility and another entity are considered one site for Title V and NSR purposes based on the previous interpretation of “common control”, you may be able to request re-evaluation of the determination based on EPA’s narrowed reinterpretation as outlined in the analysis.

This could provide relief from the impractical and potentially inequitable result of holding you responsible for another business entity’s action without the power or authority to dictate such actions.

Analysis: https://www.epa.gov/sites/production/files/2018-05/documents/meadowbrook_2018.pdf

 

Contact your EPS consultant or call (404) 315-9113 with questions regarding this analysis.

 

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