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Ethanol plant emissions suit may be bound for Indiana Supreme Court

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Indiana’s ethanol industry faces an uncertain regulatory environment and likely more stringent emissions standards after a recent Indiana Court of Appeals ruling. A state agency will ask the Indiana Supreme Court to hear the case, as several corn-to-fuel plant operators also are expected to do.

The Court of Appeals this month denied a rehearing in Natural Resources Defense Council v. POET Biorefining-Cloverdale LLC et al., 49A02-1205-MI-423. The court ruled for NRDC, holding that Indiana could not permit ethanol plants to operate in a category allowing annual emissions of up to 250 tons of airborne pollutants. The plants instead should be in a category allowing up to 100 tons, the court held.

NRDC and the permitting agency, Indiana Department of Environmental Management, agree that the state was following guidance from the federal Environmental Protection Agency when it issued permits for a few plants at the 250-ton threshold. The EPA in 2007 determined that ethanol plants should not be considered “chemical process plants” that are subject to the lower emission standard.

The issue, though, is whether IDEM was allowed to grant permits to ethanol plants adopting that federal guidance without first getting formal EPA approval for a change in its state implementation plan as required under the Clean Air Act.

“Other states have not been doing the same thing that Indiana has,” said Ben Longstreth, a Washington attorney for NRDC, explaining why the national organization brought suit here. “Indiana is unique in that it started issuing permits at a different level without changing its state implementation plan.”

According to NRDC, the primary air pollutant from fuel-grade ethanol plants is particulate matter (soot), but other emissions may include volatile organic compounds and greenhouse gases such as nitric oxide, carbon monoxide and sulfur dioxide. Longstreth said NRDC has members in Indiana who’ve complained about emissions from ethanol plants.

The Office of Environmental Adjudication within IDEM determined that when the agency issued permits to some plants in 2010, it should have categorized them as chemical process plants. A Marion Superior judge reversed that finding, but the Court of Appeals reversed the trial court, holding that the state improperly permitted plants in Cloverdale, Marion and North Manchester when, following EPA guidance, it didn’t classify them as chemical process plants.

But Betsy Zlatos, program counsel for the Office of Air Quality at IDEM, said the agency is in a Catch-22. IDEM did file a proposed revision with the EPA that adopted the federal agency’s guidance saying fuel-grade ethanol plants don’t

have to be treated as chemical process plants. Zlatos said the EPA has been sitting on the state’s request for almost two years.

“We’re at the mercy of the approval system,” Zlatos said. She confirmed the department will ask the Supreme Court to grant transfer in the case, and other attorneys familiar with the suit say the ethanol plant operators also are likely to appeal.

“We’re hoping the Supreme Court will get a feel for what’s going on. We want to follow the law,” she said, noting that IDEM did everything it was required to do and shouldn’t be penalized because the EPA dragged its feet on a plan adopting its own language.

Nevertheless, Judge Melissa May wrote for the Court of Appeals panel that without approval from the EPA, the state could not issue permits as it did.

“The issue before us is whether the State could properly exclude fuel-grade ethanol production plants from the category of ‘chemical process plants’ without Environmental Protection Agency (EPA) approval of a modification to the Indiana State Implementation Plan (SIP). As it could not, the ethanol plants remain ‘chemical process plants,’ and we must reverse the trial court,” May wrote.

The opinion also noted the EPA’s 2007 guidance on ethanol facilities is the subject of federal litigation in the D.C. Circuit Court. That IDEM promulgated a new rule and submitted it to the feds “was not enough – EPA approval … was required,” May wrote for the Court of Appeals.

Longstreth said EPA is taking a fresh look at emissions standards for ethanol plants.

“In part, the issue is about pollution from these plants, but also the issue is to make sure the system of cooperative federalism between EPA and the states are acting together works,” Longstreth said.

ethanolAttorneys representing the plant operators in the case did not respond to requests for comment. But Frank Deveau, co-chair of Taft Stettinius & Hollister LLP’s environmental practice, said he believes the plant operators will appeal.

“It seems like the Court of Appeals may have been hypertechnical in its enforcement of procedures,” said Deveau, who isn’t involved in this case but has experience representing ethanol plant operators in the sighting process. “I don’t think this is going to be left at the 100-ton limit.”

Some other states aren’t required to go through the state implementation plan process as Indiana does and, therefore, can rely directly on EPA rules and guidance when approving ethanol plants. Deveau said that if the Court of Appeals opinion were to stand, it could have a negative effect on the industry in Indiana.

“Costs would increase such that the industry, if I was looking to locate a facility, I would go to a different state and just go by the EPA rule,” he said.

Zlatos agreed, saying the ruling “puts ethanol plants in our state at a distinct disadvantage.”

Longstreth argued those concerns are overstated. “In our experience, many ethanol plants have operated many years in Indiana under the (100-ton) threshold and should be able to operate under that threshold.

“If it’s a larger plant, they just have to make sure they’re employing the best pollution controls,” he said.•

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