NRDC loses challenge to Indiana ethanol air permits

By Susanne Retka Schill | September 19, 2014

The Indiana Supreme Court ruled in favor of the state’s ethanol industry in a case filed by the Natural Resources Defense Council challenging Indiana’s implementation of the Clean Air Act. The case begun in 2010 has undergone several reversals as it worked its way to the state’s highest court.

In its state implementation plan (SIP), Indiana’s air quality regulations largely parallel the Clean Air Act.  In 2007, the U.S. EPA clarified an ambiguity in the definition of major emitting facilities to expressly exclude fuel ethanol plants from the term: “chemical processing plant.”  The definition is used in determining the thresholds for compliance under the Prevention of Significant Deterioration program. Chemical processing plants must follow more stringent PSD regulations at annual emissions of 100 tons or higher, while other facilities go through PSD review at annual emission of 250 tons or higher. The Indiana Department of Environmental Management did not go through a formal rewriting of its SIP, but adopted the EPA’s 2007 ethanol ruling.

In 2010, the Indiana department issued two operating permits for new ethanol plants in the state, one to Putnam County Ethanol and the other to Poet Biorefining-North Manchester. NRDC sought an administrative review of both permits, claiming a violation of the Indiana’s SIP by permitting annual emissions in excess of 100 tons per year without PSD review. The Indiana Office of Environmental Adjudication agreed with NRDC and ordered the permits remanded, but later stayed the order so the facilities could operate while the matter was resolved.

Other plants’ permits were challenged as well and ultimately combined into one suit, adding Central Indiana Ethanol Inc., Green Plains Bluffton LLC and the Andersons Clymers Ethanol LLC to the litigation. Early in 2011, the Indiana state assembly weighed in, passing a law affirming that ethanol plants would not be classified as chemical process plants for air quality regulations.

The trial court reversed the Office of Environmental Adjudication’s ruling, which NRDC then appealed. The Court of Appeals reversed the trial court in favor of NRDC’s arguments.

In its ruling, the Indiana Supreme Court reviewed the case history, explaining the NRDC challenged boiled down to two main arguments: “was IDEM required to formally amend Indiana’s SIP to effect the change, and if not, is IDEM’s interpretations to the term ‘chemical process plant’ correct?”

The Supreme Court examined NRDC’s arguments in detail, finding that the Indiana Department of Environmental Management “was not required to formally amend Indiana’s SIP to effectuate its change in how in interprets the regulatory phrase ‘chemical process plant.’” The court also found that the interpretation itself is legally permissible.

The opinion cites an earlier court ruling that said, “The power of an administrative agency to administer a congressionally created ... program necessarily requires the formulation of policy and the making of rules to fill and gap left, implicitly or explicitly, by Congress.”  And went on to say that applies at the state level. “The purpose of the clean air Act is to create a framework within which states may regulate and operate. To do so successfully, states and their implementing agencies must be afforded the flexibility to responsively adapt to changing technologies, market fluctuations, environmental conditions, and shifts in public policy. Requiring the clean Air Act and SIPs to contain each and every rule, definition, interpretation, and administrative construction would turn a framework into a hide-bound behemoth of legal provisions addressing all manner of minutia that would require years to modify for even the most basic of reasons.”