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Tuesday, September 02, 2014

Ind. Decisions - Supreme Court decides one today

In Natural Resources Defense Council v. Poet Biorefining- North Manchester, LLC, Poet Biorefining- Cloverdale, LLC, Central Indiana Ethanol, Inc., et al., 17-page, 5-0 opinion (with a David v. Goliath-type lineup of attorneys on p. 1), Justice David writes:

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. * * *

In 2011, the Indiana General Assembly passed a law providing that for purposes of Indiana’s SIP, “chemical process plants” did not include fuel ethanol plants. Act of May 10, 2011, Public Law 159-2011, § 21(e), 2011 Ind. Acts 1614–15; Ind. Code § 13-17-3-4(e) (Supp. 2011).2 IDEM then published a nonrule policy document, citing the EPA’s Ethanol Rule and affirming its intention to interpret the phrase “chemical process plants” in Indiana’s SIP in accordance with the Ethanol Rule—in other words, to exclude ethanol plants from being classified as chemical process plants. 20110525 Ind. Reg. 318110311NRA (May 25, 2011). This change was then incorporated into the Indiana Administrative Code, see 326 Ind. Admin. Code 2-2-1(ff)(1)(U), but again, Indiana’s SIP has not yet been amended through the EPA approval process to codify this new interpretation. * * *

NRDC challenges IDEM’s policy change in a number of ways, but they boil down to two main arguments: was IDEM required to formally amend Indiana’s SIP to effect the change, and if not, is IDEM’s interpretation of the term “chemical process plant” correct? * * *

[I. SIP Revision not Required] We agree with IDEM that this provision “incorporates the SIC Manual strictly for the purpose of determining whether pollutant-emitting activities at a facility belong to the same industrial grouping.” (IDEM’s Br. at 11.) Whether the SIC Manual defines chemical process plants to include fuel ethanol plants or not, that definition is not incorporated into the PSD SIP’s definition of major stationary source or chemical process plant. As such, it does not compel IDEM to formally amend the SIP in this case. * * *

[II. IDEM’s Interpretation of Indiana’s SIP is Reasonable.] “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 any gap left, implicitly or explicitly, by Congress.” Chevron, U.S.A., Inc. v. NRDC, Inc., 467 U.S. 837, 843 (1984) (quoting Morton v. Ruiz, 415 U.S. 199, 231 (1974)). The same principle is true here at the state level. And here, 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. “[W]ere the shoe on the other foot,” (NRDC’s Br. at 32), and were IDEM promulgating an interpretation tightening pollution restrictions, we doubt that NRDC would be making this claim with such force. * * *

The only question here, then, is whether IDEM’s new interpretation is reasonable and supports the issuance of the permits in this case. More specifically, the question is whether the regulatory phrase “chemical process plant” can reasonably be interpreted to permit exclusion of fuel ethanol plants. * * *

NRDC argues that the plain meaning of “chemical process plant” must include fuel ethanol plants, because the phrase “refers on its face to a category of industrial facilities that utilize chemical processes to produce chemical products,” and “[f]uel ethanol plants fall squarely within that definition” because “converting raw plant matter to fuel ethanol is a chemical process.” (NRDC’s Br. at 39–40.) But we do not see interpretation of the phrase as needing to be that strict. * * *

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.

Conclusion. Neither the Clean Air Act nor Indiana’s State Implementation Plan mandate that IDEM pursue the formal SIP revision process before excluding fuel ethanol plants from the chemical process plant major source category. Moreover, there is nothing unreasonable in IDEM’s decision to define “chemical process plant” to incorporate such an exclusion as a matter of regulatory interpretation. We therefore affirm the trial court.

ILB: Interesting opinion, with some language that may cut both ways in future years.

Posted by Marcia Oddi on September 2, 2014 01:52 PM
Posted to Environment | Ind. Sup.Ct. Decisions | Indiana Government