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 UNITED STATES ENVIRONMENTAL PROTECTION AGENCY  
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REGION 8
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1595 Wynkoop Street
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Denver, CO   80202-1129
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Phone 800-227-8917
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www.epa.gov/region8


Ref: 8ARD-PM

Ethan W. Hinkley
Air Quality Compliance Manager
Red Cedar Gathering Company
125 Mercado Street, Suite 201
Durango, Colorado  81301
Ehinkley@redcedargathering.com 

Dear Ethan Hinkley:

On April 21, 2023, you transmitted a letter on behalf of Red Cedar Gathering Company (Red Cedar) to the U.S. Environmental Protection Agency, Region 8, requesting a formal source determination for the proposed construction of a Carbon Dioxide (CO2) Capture Facility (CO2 Plant) located adjacent to the Arkansas Loop and Simpson Treating Plants, an existing regulated and permitted major oil and natural gas source under the Clean Air Act (CAA). On March 29, 2023, the EPA received an application from Red Cedar for a permit to authorize construction of the proposed CO2 Plant as a minor modification of an existing major source per the minor New Source Review (MNSR) Permit Program in Indian country at 40 CFR Part 49. We understand from Red Cedar that the CO2 Plant would take CO2 currently vented to the atmosphere from the amine plants at the existing Arkansas Loop and Simpson Treating Plants and treat and compress the CO2 for transport off-site via pipeline. Red Cedar estimates an annual reduction of approximately 200,000  -  400,000 metric tons of CO2 emissions to the atmosphere from their operations as a result of the proposed CO2 Plant. Due to the unique nature of this facility, Red Cedar believes that the proposed CO2 Plant should be determined as a separate facility from the Arkansas Loop and Simpson Treating Plants. This source determination request concerns whether these two facilities should be considered part of the same "major source" for the Prevention of Significant Deterioration (PSD) Permit Program at 40 CFR part 52 and the title V operating permit program at 40 CFR part 70 (Part 70) via an EPA-approved Part 70 Permit Program implemented by the Southern Ute Indian Tribe. The EPA commonly refers to these types of questions as "source determinations." This letter documents the EPA's source determination regarding Red Cedar's proposed CO2 Plant.

BACKGROUND

The proposed CO2 Plant would be located on Indian country lands within the Southern Ute Indian Reservation. The facility would share a fence line with the Simpson Treating Plant. Red Cedar is planning to build the facility as the owner initially but plans to sell the facility to a third party in the future and to contract to operate the facility for the third party. Red Cedar is classifying the facility under standard industrial code (SIC) code 281301  -  Industrial Gases CO2 (North American Industry Classification System (NAICS) code 325210  -  Industrial Gas Manufacturing (CO2)), as the best fits for this type of facility, and given that a similar facility was not identified by Red Cedar for comparison. Understanding that a single source determination requires two or more operations to meet each of three criteria  -  (1) physical proximity (i.e., located on contiguous or adjacent properties), (2) common control (same owner/operator), and (3) belong to the same industrial grouping (that is, they belong to the same "Major Group," and thus have the same first two digit code, as described in the Standard Industrial Classification Manual, 1972, as amended by the 1977 Supplement), Red Cedar concedes that the CO2 Plant and the Arkansas Loop and Simpson Treating Plants, as proposed, meet the criteria of physical proximity and common control. However, Red Cedar has classified the proposed CO2 Plant with a different two-digit SIC code than the Arkansas Loop and Simpson Treating Plants, which are classified as SIC code 1311  -  Crude Petroleum and Natural Gas (NAICS code 211111  -  Crude Petroleum and Natural Gas). Red Cedar does not consider the CO2 Plant as a support facility for the Arkansas Loop and Simpson Treating Plants as Red Cedar states that the facility would not in any way rely on the proposed CO2 Plant for continued operation. Red Cedar believes the two operations should be considered separate facilities and be permitted separately. In anticipation that the EPA may not agree with Red Cedar's preliminary determination, a minor NSR application was submitted to the EPA for the CO2 Plant as a modification to the existing Arkansas Loop and Simpson Treating Plants. Should the EPA determine that the two facilities should be considered separate, Red Cedar would submit a revised NSR application for the CO2 Plant as a new minor source.

DISCUSSION

Under the federal rules governing the PSD Permit Program, "stationary source" is defined as "any building, structure, facility, or installation which emits or may emit any air pollutant subject to regulation under the Act" and further defines "building, structure, facility or installation" 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)." (40 CFR 52.21(b)(5) and (6)). The proposed CO2 Plant would be contiguous or adjacent to the Arkansas Loop and Simpson Treating Plants, and both facilities would be owned and operated by Red Cedar and, therefore, under common control. But the two facilities, as classified by Red Cedar, would not belong to the same industrial grouping. However, in the EPA's preamble to the Final Rule for 40 CFR part 52 published in the Federal Register on August 7, 1980 (45 FR 52676), the EPA clarified that if one facility constitutes a support facility of another facility, then the two operations may be considered one "stationary source" within the meaning of part 52. The preamble discusses the following: 
      
      "Each source is to be classified according to its primary activity, which is determined by its principal product or group of products produced or distributed, or services rendered. Thus, one source classification encompasses both primary and support facilities, even when the latter includes units with a different two-digit SIC code. Support facilities are typically those which convey, store, or otherwise assist in the production of the principal product." 45 FR 52676, 52695.


It could be argued that the CO2 Plant might be considered a support facility to the Arkansas Loop and Simpson Treating Plants, because the waste CO2 gas from the treating plants that would otherwise be vented to the atmosphere would be processed by the CO2 Plant. In its letter requesting a formal source determination, Red Cedar indicated simply that the Arkansas Loop and Simpson Treating Plants do not in any way rely on the proposed CO2 Plant to continue operating. The Arkansas Loop and Simpson Treating Plants have been constructed and operating for years with the primary purpose of treating and compressing natural gas for pipeline sales established as its primary activity. The current effective permits for the Arkansas Loop and Simpson Treating Plants do not prohibit venting of the waste CO2 gas. In that sense, while an environmental benefit, in taking the waste CO2 gas from the treating plants to make a secondary product, the CO2 Plant would not convey, store, or otherwise assist in the production of the principal product for the treating plants. 

When considered inversely, it may be argued that the Arkansas Loop and Simpson Treating Plants will serve as a support facility to the CO2 Plant, because the plant would primarily, or even possibly solely, process CO2 from the treating plants. In its application for a modification to the existing major source, Red Cedar explained that the waste CO2 gas captured from the Arkansas Loop and Simpson Treating Plants would be treated, compressed, and delivered to a CO2 pipeline for sale. In that sense, it might be argued that the CO2 Plant would rely on the Arkansas Loop and Simpson Treating Plants to operate. However, existing EPA policy discussed earlier, does not reasonably support consideration of an existing source long established with a primary activity that supplies a waste gas from that activity to be considered a support facility of a proposed new source. 

As the permitting authority, the EPA must ultimately determine whether the proposed CO2 Plant and the Arkansas Loop and Simpson Treating Plants constitute one stationary source for purposes of the EPA's implementation of the PSD and MNSR Permit Programs and the Southern Ute Indian Tribe's implementation of the Part 70 Program. After reviewing the information provided by Red Cedar in its application to permit the CO2 Plant and in its request for a formal source determination, we have concluded that the facts do not establish a support relationship of the proposed new CO2 Plant to the Arkansas Loop and Simpson Treating Plants, even with present plans that meet the common control and physical proximity criteria for single source determinations. Regarding the third criteria for a single source determination, the EPA has no cause to dispute the case-specific details that Red Cedar provided that the two-digit industrial codes attributed to each operation are different and that the Arkansas Loop and Simpson Treating Plants would not rely on the primary activity of the CO2 Plant to continue to operate and demonstrate compliance with their primary permitted activity. Therefore, the EPA has 

determined that the proposed CO2 Plant should be considered a separate source from the Arkansas Loop and Simpson Treating Plants. If you have any questions concerning this determination, please contact Claudia Smith at (303) 312-6520 or at smith.claudia@epa.gov.   



                                          Sincerely, 
                                           
                                    Adrienne Sandoval 
                                    Director  
                                    Air and Radiation Division 
                                     
cc:	Danny Powers, Manager, Air Quality Program, Southern Ute Indian Tribe 

