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Carbon Capture Facility May Not Be an NSR "Support Facility"



In a recent action involving the Red Cedar Gathering Company ("Red Cedar"), EPA Region 8 determined that a carbon dioxide capture facility that collects carbon dioxide from two co-owned and natural gas treating plants is not necessarily a "support facility" that would take the SIC code of the natural gas treating plants and hence could be considered a separate source under the Tribal NSR Rule.


ANALYSIS


Red Cedar owns and operates two natural gas treating facilities, the Arkansas Loop and Simpson Treating Plants (Treating Plants), an existing permitted major oil and natural gas source, on Indian country land within the Southern Ute Indian Reservation. Red Cedar sought to install a carbon dioxide capture facility (CO2 Plant) to take CO2 currently vented by the amine plants at the Treating Plants, resulting in a potential reduction of 200-400,000 metric tons of CO2/year. Red Cedar sought a separate source determination from EPA.


Red Cedar conceded that the CO2 Plant and the Treating Plants were adjacent and under common control, satisfying two of the three parts of the definition of a source. Red Cedar contended, however, that the CO2 Plant should have an SIC code of 281301 - Industrial Gases CO2 but that the existing Treating Plants have an SIC code of 1311 - Crude Petroleum and Natural Gas. Red Cedar further argued that the CO2 Plant should not be considered a "support facility" for the Treating Plants because as they do not rely on the CO2 Plant in any way and could discharge their CO2 into the atmosphere.


EPA acknowledged that the CO2 Plant and Treating Plants were adjacent and under common control and that Red Cedar had proposed different SIC codes. Rather than accept this SIC code at face value, EPA noted that under the 1980 PSD preamble, "if one facility constitutes a support facility of another facility, then the two operations may be considered on 'stationary source' within the meaning of part 52." Red Cedar letter at 2. EPA first looked at whether the CO2 Plant was a support facility for the Treating Plants. It ultimately answered this question "no" because the Treating Plants were preexisting and primarily sold natural gas to a product pipeline; their operation was well-established; and the Treating Plants were permitted to release the CO2 to the atmosphere. So, while EPA said that there may be an environmental benefit, the CO Plant did not "convey, store, or otherwise assist in the production of the principal product" of the Treating Plants.


EPA then flipped its analysis, reasoning that the Treating Plants could be viewed as support for the CO2 Plant because only they supplied it with CO2 and the CO2 Plant was selling the CO2. EPA found, however, that its existing policy "does not reasonably support consideration of an existing source long established with a primary activity that supplies a waste gas ... to be considered a support facility of a proposed new source." Red Cedar letter at 3.


In summary, EPA found that while the CO2 Plant and Treating Plants met two of the three criteria for a single source, the facts did not support a "support facility" relationship and EPA had no cause to dispute the two digit industrial codes supplied by Red Cedar. EPA also heavily relied upon the fact that the Treating Plants were not reliant on the CO2 Plant to continue to operate and demonstrate compliance with their primary permitted activity. Accordingly, EPA stated it would consider the CO2 Plant and Treating Plants as separate facilities.


COMMENTARY


The Region 8 Red Cedar decision indicates the continued vitality of the "support facility" concept in making source decisions. It also demonstrates that context is important and that EPA will consider historical factors in reaching its decision. The Red Cedar source determination is an example of a well thought out presentation to the agency for concurrence and of agency care in testing the case presented.

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