Avoid Air Permit Violations When Expanding an Ethanol Plant

By James L. Pray | September 01, 2006
With the favorable ethanol market, many ethanol plants have begun or are considering plant expansions. Although a plant may be in compliance with the terms of its current air emissions permits, a request for a new air permit due to a plant expansion may not fly due to the U.S. EPA's New Source Review (NSR) or Prevention of Significant Deterioration (PSD) regulations. This violation can result in existing air permits being voided, and the possibility of sanctions.

What are these NSR and PSD regulations? Because these regulations are too complicated to cover in this short article, I will only briefly cover PSD regulations as they pertain to plant expansions. The more rigorous NSR regulations are triggered if the plant is situated in a non-attainment area for National Ambient Air Quality Standards (NAAQS). PSD regulations can be triggered by a modification to an existing source that results in a "significant" increase in emissions (currently defined as more than 100 tons of pollutants per year). These regulations require extensive and time-consuming reviews of area air quality, and mandate the use of best-available control technology. Pending EPA rule changes may increase the tonnage increase limit to 250 tons per year for ethanol plants.

These regulations can pose a problem if an ethanol plant is built in stages. As an example, a plant designed to emit just less than 100 tons of air pollutants (and much lesser amounts of "hazardous" air pollutants) per year should be able to avoid having to obtain a Title V air permit. If that same plant is later modified and increases its air pollution emissions by up to 100 tons per year, it becomes a major source and will have to obtain a Title V air permit. Although the plant may have avoided triggering PSD review because the increase was less than 100 tons per year, splitting a project into stages to avoid PSD review is considered circumvention of the regulation, and the plant could be subject to an enforcement action and revocation of its permit.

The regulatory authority may ask a number of questions to determine if a plant is circumventing PSD review, including whether the expansions were proposed over a relatively short period of time and whether they are really a single project. Circumvention of PSD review is sometimes called "sham permitting." Permits obtained through circumvention are void if the regulator can show an original intent to operate the plant at major source levels.

For new plants still in the planning stage, avoid mentioning purely conjectural plant expansions in offering documents, Web sites and other documents. Otherwise, an agency may be able to argue that there was an intention from the outset to build a larger plant and that any permits granted for the first "stage" of construction circumvented PSD review. If a future plant expansion is central to the company's plans, then the permit engineer should consider complying with PSD requirements in the first permit application in order to avoid later penalties and sanctions. Considering a significant expansion? Examine the original offering documents. Was a future plant expansion mentioned? If so, carefully consider the new permit applications. Regardless, management should understand that PSD regulations pose additional regulatory risks associated with plant expansions.

James Pray chairs the environmental practice group at BrownWinick, a Des Moines, Iowa-based law firm serving the renewable fuels industry. Reach him at pray@brownwinick.com or (515) 242-2404.