State can exclude fuel ethanol plants from ‘chemical process plant’ classification

The Indiana Supreme Court on Tuesday affirmed the decision by state environmental agencies to no longer consider fuel ethanol plants to be a “chemical process plant” under the Clean Air Act. By removing fuel ethanol plants from this classification, those plants may not be subject to stricter regulations.

Under the U.S. Clean Air Act, all states must submit their implementation plans to enforce National Ambient Air Quality Standards to the U.S. Environmental Protection Agency for approval. Even if a state changes its state implementation plan, it must be approved by the EPA before it has effect.

Prior to 2007, the Indiana Department of Environmental Management consistently classified fuel ethanol plants as chemical process plants, which are considered a “major emitting facility.” It did so because the EPA did so. As such, it requires stricter review of emissions to make sure they will not go over a specific threshold in a year.

The EPA in 2007 passed a rule modifying the definition of major emitting facilities to exclude fuel ethanol plants from the term “chemical process plant.”  In 2011, the Indiana General Assembly passed a law that excluded these ethanol plants from the term “chemical process plants.”

But the SIP currently in effect in Indiana was approved in 2003 and still considers fuel ethanol plants as chemical process plants. The state has not submitted a new SIP for EPA approval to codify this new interpretation.

The Natural Resources Defense Council objected when several fuel ethanol plants were issued permits by IDEM that considered the plants to be a “minor source.” The Office of Environmental Adjudication agreed with NRDC that the permits violate the state’s SIP. But the trial court reversed, finding the phrase “chemical process plant” as used in the 2003 SIP is ambiguous. The trial court found clear intent by the agencies and legislators that fuel ethanol plants should no longer be considered chemical process plants.

The Court of Appeals reversed the trial court, but the justices agreed with the trial court and affirmed in Natural Resources Defense Council v. Poet Biorefining- North Manchester, LLC, Poet Biorefining- Cloverdale, LLC, Central Indiana Ethanol, Inc., et al., 49S02-1405-MI-313.  

“When the EPA changed course and issued the Ethanol Rule, IDEM followed suit — with the Indiana General Assembly’s approval. When the federal agency charged with implementing the Clean Air Act, the Indiana General Assembly, and the state agency charged with drafting and applying Indiana’s SIP all concur as to what a regulatory phrase includes — or does not include — and nothing in that interpretation conflicts with the rest of the regulatory scheme, we think that interpretation must stand,” Justice Steven David wrote. “Whether the interpretation is sound public or environmental policy is not something we review, nor do we seek to propose a long-term judicial definition of ‘chemical process plant’ that will bind IDEM to our view of how that phrase should apply in every circumstance. The question we face is only whether IDEM’s exclusion of fuel ethanol plants from that phrase is reasonable, and we find that it is.”


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