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New USEPA Title V and NSR Guidance: “Adjacent” does actually mean “Adjacent”

Posted in Environment

On November 26, 2019, USEPA published a guidance memorandum “Interpreting ‘Adjacent’ for New Source Review and Title V Source Determinations in All Industries Other Than Oil and Gas” (the November 26 Guidance).  In the November 26 Guidance, USEPA updated its interpretation of the regulations governing the scope of a “stationary source” under the NSR and Title V Clean Air Act programs.[1]

Those regulations generally define a stationary source as “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)….”  See e.g. 40 CFR 52.21(b)(5)-(6) (emphasis added).

Previously, USEPA had interpreted “adjacent” to include not only physical proximity, but also the functional interrelatedness of different facilities, regardless of physical proximity.  In the November 26 Guidance, USEPA determined that it will no longer use the existence of some functional interrelationship to establish “adjacency”.

As USEPA summarized its decision:

[F]or purposes of making source determinations for NSR and title V, EPA interprets the term “adjacent” to entail physical proximity between properties. From this point forward, EPA will consider properties that do not share a common boundary or border, or are otherwise not physically touching each other, to be “adjacent” only if the properties are nevertheless nearby, side-by-side, or neighboring (with allowance being made for some limited separation by, for example, a right of way). This is inherently a case-specific inquiry where determining the appropriate distance at which two properties are proximate enough to reasonably be considered “adjacent” may vary depending on the nature of the industry involved.  Therefore, EPA is not here establishing or recommending a “bright line,” or specifying a fixed distance, within which two or more properties will be deemed (or presumed) by EPA to be in close enough physical proximity to be considered “adjacent.”  In each case, this determination should ultimately approximate the “common sense notion of a plant.”

November 26 Guidance at pg. 8 (emphasis added).

Despite the fact that USEPA did not establish a bright-line distance within which properties will be considered adjacent, adjacency may be narrowly determined, given the language USEPA uses in the November 26 Guidance (“allowance being made for some limited separation by, for example, a right of way”).  This means that the November 26 Guidance may result in fewer major stationary source determinations (because fewer facilities will be considered a single stationary source and have their emissions aggregated for major source determinations).

That said, the November 26 Guidance makes clear that it only applies prospectively, and that adjacency determinations will continue to be made on a case by case basis.  In addition, permitting authorities with USEPA-approved permitting programs (including Ohio EPA) are not required to apply the November 26 Guidance.

For example, Ohio EPA Engineering Guide #58 (still active from March 1995, supplementing Ohio EPA’s Title V regulations) still evaluates the functional interrelationship between facilities in determining adjacency (and uses five miles as a potential threshold for adjacency).  In light of the November 26 Guidance, Engineering Guide #58, which seemingly relies on USEPA determinations that existed at that time, may be out of date, but as of this writing is still Ohio EPA’s guidance on the adjacency question.

The November 26 Guidance should be considered going forward when locating a new facility in proximity to an existing facility to determine if emissions would be aggregated together for NSR and Title V purposes.  Even though many permitting authorities are not required to apply the November 26 Guidance, it will likely be persuasive authority that a permitting authority should consider in making a case-by-case adjacency determination.

[1] In a previous rulemaking, USEPA established a bright-line definition of adjacency for the oil and gas extraction industry only: “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 14 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.”  See e.g. 40 CFR 52.21(b)(6)(ii).  The November 26 Guidance does not apply to this definition.

Supreme Court of Ohio Holds 21-Year Statute of Limitations Applies to Stale Lease Expiration Claims

Posted in Energy

On November 26, 2019, the Supreme Court of Ohio clarified that a declaratory judgment claim that an oil and gas lease terminated for lack of production is subject to the 21-year statute of limitations for recovery of title to or possession of real property in R.C. 2305.04.  See Browne v. Artex Oil Co., Slip Op. No. 2019-Ohio-4809. In Browne, the lessee argued that an action like the case at bar was subject to the 15-year statute of limitations for actions upon written contracts in former R.C. 2305.06.  The Court disagreed. The Court noted that the lessors were not alleging a breach of the oil and gas lease, but were simply requesting a declaration that the oil and gas lease had terminated by its terms through operation of law.  This claim was was more akin to an action to quiet title than one upon a written contract, the Court found, as the lessee had no obligation to produce under the lease and the parties did not dispute the lease’s provisions.   Relying heavily on the notion that in Ohio an oil and gas lease vests a real property interest in the lessee, the Court held that R.C. 2305.04 was the controlling limitations statute.  The Court reasoned that because the oil and gas lease vested the lessee with a real property interest and the lessors were merely seeking recognition of their reversionary interest in that real property, R.C. 2305.04, which applies to actions to recover title to or possession of real property, was the operative statute.  The Court remanded the matter to the trial court for an evaluation of the parties’ claims in light of the correct statute of limitations.

[Disclosure: Vorys represented amici curiae Ohio Oil and Gas Association and Southeastern Ohio Oil and Gas Association in this case.]

The Supreme Court of Ohio To Address Due Diligence Under ODMA

Posted in Energy

In July, we wrote about Gerrity v. Chervenak (5th Dist., Guernsey County), involving the level of due diligence that the Ohio Dormant Mineral Act requires surface owners to use when notifying mineral holders of abandonment proceedings. On October 15, 2019, the Supreme Court of Ohio agreed to hear Gerrity.  The Court will consider the following propositions of law:

Appellant’s Proposition of Law No. I:  R.C. 5301.56 Requires Strict Compliance and a Surface Owner Seeking to Capture a Severed Mineral Interest Must First Attempt Service by Certified Mail before Resorting to Publication.

Appellant’s Proposition of Law No. II: In Order to Satisfy Due Process and the Publication Provision of R.C. 5301.56(E), a Surface Owner Must Employ Reasonable Search Methods Conforming to Due Diligence Designed to Locate All Holder(s) of a Severed Mineral Interest.

In the same order, the Court declined to hear Paczewski v. Antero (7th Dist., Monroe County), which we previously covered here.

Court Reaffirms Ohio’s Marketable Title Act and Dormant Mineral Act are not in Conflict

Posted in Energy

The Seventh District Court of Appeals reaffirmed that claimants can use both Ohio’s Marketable Title Act (“MTA”) and Dormant Mineral Act (“DMA”) to extinguish and abandon, respectively, mineral interests. In West v. Bode, 2019-Ohio-4092, the appellant-surface owners attempted to extinguish a severed oil and gas royalty interest under the MTA. The holders of the royalty interest argued, in part, that the MTA did not extinguish the royalty interest because, as between the MTA and DMA, the DMA is the more specific statute with regard to terminating mineral interests and the DMA did not abandon the royalty interest. The Court rejected the royalty holders’ argument, as it had done in similar, prior cases. However, in its decision, the Court offered its strongest defense of the MTA to date. The Court explained that, pursuant to R.C. 1.51, it must construe conflicting, but interrelated, statutory provisions together so it can give effect to both. Only in the event that there is a conflict between the two provisions and the conflict is irreconcilable does the special provision prevail as an exception to the general provision, unless the general provision is the later adoption and the General Assembly manifested an intent that the general provision prevail. In this case, the Court did not find any irreconcilable conflict between the MTA and DMA. In fact, it noted the different look-back periods, savings events, and termination procedures under the two acts and found that each applies to a particular situation independent of the other. Thus, the MTA could apply to extinguish the severed royalty interest.

You can read the full decision here.

USGS: Big Increase in Undiscovered Marcellus and Utica Gas

Posted in Energy

The Marcellus and Utica Shales contain around 214 tcf of undiscovered, technically recoverable natural gas, according to a new U.S. Geological Survey (USGS) assessment.  “This is a significant increase from the previous USGS assessments of both formations. In 2011, the USGS estimated a mean of 84 trillion cubic feet of natural gas in the Marcellus Shale, and in 2012 the USGS estimated about 38 trillion cubic feet of natural gas in the Utica Shale,” the agency reports.

You can read more about the USGS’s findings here.

Update for Ohio’s Oil and Gas Land Professionals

Posted in Energy

The Division of Real Estate & Professional Licensing issued new guidance for Ohio’s Oil and Gas Land Professionals (“Land Professionals”).  First, the Division updated its Land Professional Disclosure Form. Ohio law requires Land Professionals to provide this disclosure form to landowners prior to or at its first meeting with landowners.  Second, the Division is requesting that all Land Professionals complete the disclosure form in its entirety. Specifically, Land Professionals should include the address and tax parcel number of the subject property. The Division noted that landowners may own multiple properties; hence, the need to identify the subject property. Additionally, the Division recommends that Land Professionals remind landowners to return the disclosure form to the Land Professional and not the Division.

Land Professionals can find the updated disclosure form here.


Ohio’s 5th Appellate District Addresses the Due Diligence Standard Under the Dormant Mineral Act

Posted in Energy

The Fifth Appellate District recently addressed whether an internet search to identify / locate the holders of severed mineral interests is always required under Ohio’s Dormant Mineral Act (“ODMA”). See, Gerrity v. Chervenak, 2019-Ohio-2687. In 1965, Jane Richards obtained title to certain severed mineral interests located in Guernsey County, Ohio (“Gerrity Minerals”). In 1997, Ms. Richards passed away in Florida and devised all of her real estate to Timothy Gerrity. Although Mr. Gerrity became the owner of the severed mineral interests, no ancillary estate was opened in Guernsey County. A certificate of transfer memorializing the devise was also not recorded.

The owner of the surface subject to the Gerrity Minerals subsequently abandoned the Gerrity Minerals under the ODMA. However, Mr. Gerrity claimed that the abandonment was invalid. Mr. Gerrity argued that the surface owner failed to exercise reasonable diligence to identify, locate, and serve him with a notice of abandonment. Under the ODMA, a surface owner must serve the holder of the mineral interest with a notice of abandonment by certified mail, return receipt requested. However, if service cannot be completed by certified mail, return receipt requested, the surface owner may serve the notice by publication.

In Gerrity, the surface owner attempted to serve Ms. Richards, the record title owner, with a notice of abandonment at her last known address in Cuyahoga County. However, certified mail service failed. Thus, the surface owner searched the county recorder’s office and probate court’s office in both Guernsey County and Cuyahoga County to identify an alternate address for Ms. Richards. However, the search did not reveal any other addresses for Ms. Richards or any information concerning her probate estate and devisees. As a consequence, the surface owner served its notice of abandonment by publication. 

The trial court found the surface owner to be the lawful owner of the Gerrity Minerals. Mr. Gerrity appealed and argued that reasonable diligence required the surface owner to search the internet for the address of Ms. Richards and for the identity of her devisees and their whereabouts. The court of appeals rejected this argument. The court cited the plain language of the ODMA, which only requires certified mail service at the holder’s last known address. In this particular case, the surface owner attempted certified mail service at Ms. Richards’ last known address. Further, when certified mail service failed, the surface owner conducted a search of two counties’ property and probate records. That search too failed to produce Ms. Richards’ probate estate or the identity of her devisees. The court found this searching to be reasonable under the circumstances because the ODMA does not contemplate a worldwide exhaustive search for a holder. 

USEPA Proposes to Redesignate Columbus Area in Attainment of 2015 Ozone NAAQS

Posted in Environment

On July 3, 2019, USEPA issued a proposed rule finding the Columbus, Ohio area is attaining the 2015 ozone National Ambient Air Quality Standard (NAAQS). The Columbus area is currently designated as nonattainment for the 2015 ozone NAAQS. However, in response to Ohio EPA’s request for redesignation to attainment supported by monitoring data for 2016-2018, USEPA determined that the Columbus area has met the requirements for redesignation under the Clean Air Act and is proposing to designate the area in attainment of the 2015 ozone NAAQS. The 2015 ozone NAAQS is attained in an area when the 3-year average of the annual fourth highest daily maximum 8-hour average concentration is equal to or less than 0.070 ppm at all of the ozone monitoring sites in the area.

In connection with the proposed attainment designation, USEPA is proposing to approve Ohio’s maintenance plan to keep the Columbus area in attainment of the 2015 ozone NAAQS through 2030. USEPA is also proposing to approve Ohio’s 2023 and 2030 VOC and NOx Motor Vehicle Emission Budgets for the Columbus area.

Comments on the proposed rule must be submitted by August 2, 2019.

Ohio EPA Issues Draft Vapor Intrusion Guidance

Posted in Energy, Environment

On June 24, 2019, Ohio EPA issued a draft Vapor Intrusion Sampling and Evaluation Guidance (Guidance). The draft Guidance, which is intended to update the 2010 version of Ohio EPA’s Vapor Intrusion Guidance, is applicable to sites subject to CERCLA, RCRA, and Ohio Voluntary Action (VAP) oversight.

Comments on the draft Guidance must be submitted to Ohio EPA by July 15, 2019.