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Natural Resources Defense Council v. Biorefining

Supreme Court of Indiana

September 2, 2014

NATURAL RESOURCES DEFENSE COUNCIL, Appellant (Respondent below),
v.
POET BIOREFINING -- NORTH MANCHESTER, LLC, POET BIOREFINING -- CLOVERDALE, LLC, CENTRAL INDIANA ETHANOL, INC., AND THE INDIANA DEPARTMENT OF ENVIRONMENTAL MANAGEMENT, Appellees (Petitioners below), GREEN PLAINS BLUFFTON, LLC, AND ANDERSONS CLYMERS ETHANOL, LLC, Intervenors below

Page 556

Appeal from the Marion Superior Court, No. 49F12-1102-MI-5363. The Honorable David J. Certo, Judge. The Honorable Valerie Horvath, Commissioner.

On Petition to Transfer from the Indiana Court of Appeals, No. 49A02-1205-MI-423.

ATTORNEY FOR APPELLANT: Kim E. Ferraro, Valparaiso, Indiana; Benjamin H. Longstreth, Washington, D.C.

ATTORNEY FOR APPELLEES: POET BIOREFINING -- NORTH MANCHESTER, LLC, AND POET BIOREFINING -- CLOVERDALE, LLC, Therese A. Czajka, Indianapolis, Indiana.

ATTORNEYS FOR APPELLEE: CENTRAL INDIANA ETHANOL, INC., Anthony C. Sullivan, E. Sean Griggs, Mark J. Crandley, Timothy A. Haley, Indianapolis, Indiana.

ATTORNEYS FOR APPELLEE: INDIANA DEPARTMENT OF ENVIRONMENTAL ENVIRONMENTAL MANAGEMENT, Gregory F. Zoeller, Attorney General of Indiana, Thomas M. Fisher, Solicitor General of Indiana, Carol S. Comer, Andrew R. Falk, Deputy Attorneys General.

ATTORNEYS FOR INTERVENOR: GREEN PLAINS BLUFFTON, LLC, Vicki J. Wright, Bryan S. Strawbridge, Indianapolis, Indiana.

ATTORNEYS FOR INTERVENOR: THE ANDERSONS CLYMERS ETHANOL, LLC, Joseph S. Simpson, Louis E. Tosi, Toledo, Ohio; John E. Haller, Columbus, Ohio.

ATTORNEYS FOR AMICUS: CURIAE, THE RENEWABLE FUELS ASSOCIATION, John S. Paniaguas, Chicago, Illinois; Charles H. Knauss, Shannon S. Broome, Robert T. Smith, Washington, D.C.

David, Justice. Rush, C.J., Dickson, Rucker, and Massa, JJ., concur.

OPINION

Page 557

David, Justice.

Agencies at both the state and federal level are tasked with promulgating, interpreting, and enforcing specific regulations pertaining to their particular area of expertise. Because of the agencies' degree of expertise, courts exercise significant deference in reviewing those interpretations. Here, Indiana's environmental agency revised its interpretation of a regulatory term and that interpretation was challenged and subjected to judicial review. But in light of the deference we show to such an agency assessment of its own regulations, we find the new interpretation reasonable--and because no more formal revision process was required, we affirm the trial court.

The Clean Air Act and Indiana's Implementation Plan

The U.S. Clean Air Act is a federal framework through which states can develop pollution prevention and control programs, and it seeks to encourage " reasonable Federal, State, and local government actions" consistent with the standards contained within that framework. 42 U.S.C. § 7401(c). To this end, the federal government--through Congress and the Environmental Protection Agency--establishes National Ambient Air Quality Standards, and the individual states must submit to the EPA their plans to implement or enforce the NAAQS within their borders. 42 U.S.C. § § 7409, 7410(a)(1). These State Implementation Plans do not have effect until they are approved by the EPA. See Envtl. Def. v. EPA, 467 F.3d 1329, 1331 (D.C. Cir. 2006). Any modification of a SIP must also be approved by the EPA before it has effect, see Sierra Club v. Ind.-Ky. Elec. Corp., 716 F.2d 1145, 1152 (7th Cir. 1983), thus an " existing SIP remains the 'applicable implementation plan' even after the State has submitted a proposed revision," General Motors Corp. v. U.S., 496 U.S. 530, 540, 110 S.Ct. 2528, 110 L.Ed.2d 480 (1990).

The Clean Air Act also requires states to designate areas within their boundaries as either meeting the applicable NAAQS (" attainment" areas) or not meeting the applicable NAAQS (" nonattainment" areas). 42 U.S.C. § 7407(d). State SIPS are required to contain pollutant emission limitations and other regulatory measures in order " to prevent significant deterioration of air quality" within those designated attainment areas. 42 U.S.C. § 7471. And under the auspices of the Act's Prevention

Page 558

of Significant Deterioration program, no " major emitting facility" may be constructed or undergo major modifications without receiving a permit. 42 U.S.C. § § 7475, 7479(2)(C).

The Clean Air Act defines " major emitting facility" as a stationary facility capable of emitting airborne pollutants, subject to one of two broad categorizations. It is either one of twenty-eight types of facilities specifically listed in the Clean Air Act " which emit, or have the potential to emit, one hundred tons per year or more of any air pollutant," or it is " any other source with the potential to emit two hundred and fifty tons per year or more of any air pollutant." 42 U.S.C. § 7479(1).

PSD review for a major emitting facility's permit requires a demonstration that " emissions from construction or operation of such facility will not cause, or contribute to, air pollution" in excess of set standards and that " the proposed facility is subject to the best available control technology for each pollutant." 42 U.S.C. § 7475(a)(3), (4). Those major emitting facilities contained within the list of twenty-eight industrial source categories are also subject to stricter monitoring of their emission levels: their emission levels include not only the actual emissions directly produced by the facility (such as smoke from a smoke stack), but also " fugitive emissions" (such as pollutants that might leak from pipes or particles that might blow off the facility). 42 U.S.C. § 7602(j); 40 C.F.R. § § 51.166(b)(1)(iii), 52.21(b)(1)(iii).

One of the twenty-eight specifically identified categories of industrial facility constituting a major emitting facility if it exceeds the 100 tons of pollutants per year threshold is " chemical process plants." 42 U.S.C. § 7479.[1] The term " chemical process plant" is not defined by the Clean Air Act, but up until 2007 the EPA consistently interpreted the term to include fuel ethanol plants. Thus, if a fuel ethanol plant was capable of exceeding the one hundred ton per year threshold it was classified as a major source facility; and if it was located in an attainment area then it was subject to PSD review and permitting.

On May 1, 2007, the EPA issued a final rule modifying the definition of major emitting facilities (the " Ethanol Rule" ). 72 Fed. Reg. 24060. The rule, effective July 2, 2007, amended the portions of the Clean Air Act and its supporting regulations to expressly exclude fuel ethanol plants from the term " chemical process plant." 72 Fed. Reg. at 24061; see 40 C.F.R. § § 51.166(b)(1)(iii)(t), 52.21(b)(1)(iii)(t) (" term chemical processing plant shall not include ethanol production facilities that produce ethanol by natural fermentation included in NAICS codes 325193 or 312140" ).

Page 559

Indiana first submitted its SIP in 1972. See 40 C.F.R. § 52.770(a) (1998). In 2003, Indiana submitted an amendment to its SIP for EPA approval on February 1, 2002, incorporating PSD regulations; the EPA approved the amendments effective April 2, 2003. 68 Fed. Reg. 9892; see generally 326 Ind. Admin. Code 2-2. Since that time, Indiana has not formally modified or amended its SIP through the complete EPA approval process in any way relevant to this case.

The PSD provisions of Indiana's SIP largely parallel the Clean Air Act, in that the construction or modification of a " major stationary source" triggers PSD review and requirements. 326 Ind. Admin. Code 2-2-2(a). And a " major stationary source" in Indiana's SIP, like the " major emitting facility" from the Clean Air Act, includes sources that are either listed as one of the same twenty-eight industrial facility categories and capable of emitting more than 100 tons per year of a regulated pollutant, 326 Ind. Admin. Code 2-2-1(ff)(1), or are a stationary source capable of emitting 250 tons per year of a regulated pollutant, 326 Ind. Admin. Code 2-2-1(ff)(2). Like the Clean Air Act, chemical process plants are listed as one of the twenty-eight specific industrial categories, 326 Ind. Admin. Code 2-2-1(ff)(1)(U), and like the Clean Air Act the phrase " chemical process plant" is undefined in Indiana's SIP.

Up until the EPA issued its Ethanol Rule in 2007, Indiana consistently tracked the EPA's prior stance and interpreted " chemical process plant" to include fuel ethanol plants for the purposes of the Indiana PSD SIP. But after the Ethanol Rule was ...


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