In re Prevention of Significant Deterioration (PSD) Air Quality Permit Application of Hyperion Energy Center—Hyperion Ref., LLC

• Decision Date: 23 January 2013
• Docket Number: Nos. 26290,26293.,s. 26290
• Citation: 2013 S.D. 10,826 N.W.2d 649
• Parties: In the Matter of the PREVENTION OF SIGNIFICANT DETERIORATION (PSD) AIR QUALITY PERMIT APPLICATION OF HYPERION ENERGY CENTER—Hyperion Refining, LLC—Permit # 28.0701—PSD.
• Court: South Dakota Supreme Court

826 N.W.2d 649

2013 S.D. 10

In the Matter of the PREVENTION OF SIGNIFICANT DETERIORATION (PSD) AIR QUALITY PERMIT APPLICATION OF HYPERION ENERGY CENTER—Hyperion Refining, LLC—Permit # 28.0701—PSD.

Nos. 26290, 26293.

Supreme Court of South Dakota.

Argued Oct. 3, 2012.

Decided Jan. 23, 2013.

Marty Jackley, Attorney General, Roxanne Giedd, Deputy Attorney General, Pierre, South Dakota, Attorneys for appellee South Dakota Department of Environment & Natural Resources.

Marty Jackley, Attorney General, Charles D. McGuigan, Chief Deputy Attorney General, Pierre, South Dakota, Attorneys for appellee South Dakota Board of Minerals and Environment.

Frederick W. Addison, III, Amy L. Rickers of Munsch, Hardt, Kopf & Harr, PC, Dallas, Texas, and Todd Meierhenry of Meierhenry Sargent, LLP, Sioux Falls, South Dakota, Attorneys for appellee Hyperion Refining, LLC.

Robert L. Graham, Gabrielle Sigel of Jenner & Block, LLP, Chicago, Illinois, John H. Davidson, Jr., Vermillion, South Dakota, and Sam E. Khoroosi, Sioux Falls, South Dakota, Attorneys for intervenors and appellants Sierra Club, Save Union County, and Citizens Opposed to Oil Pollution. (#26293)

Marty Jackley, Attorney General, Roxanne Giedd, Deputy Attorney General, Pierre, South Dakota, Attorneys for appellee South Dakota Department of Environment & Natural Resources.

Marty Jackley, Attorney General, Charles D. McGuigan, Chief Deputy Attorney General, Pierre, South Dakota, Attorneys for appellee South Dakota Board of Minerals and Environment.

Frederick W. Addison, III, Amy L. Rickers of Munsch, Hardt, Kopf & Harr, PC, Dallas, Texas, and Todd Meierhenry of Meierhenry Sargent, LLP, Sioux Falls, South Dakota, Attorneys for appellant Hyperion Refining, LLC.

ZINTER, Justice.

[¶ 1.] The Board of Minerals and Environment (Board) authorized the Department of Environment and Natural Resources (DENR) to issue an air quality permit to Hyperion Refining, LLC (Hyperion). The permit was necessary for Hyperion to begin construction of a proposed petroleum refinery and power plant. Three citizens groups appealed to circuit court. Hyperion also appealed a permit condition limiting the amount of carbon monoxide that could be emitted from the proposed facility. The circuit court affirmed the Board's decision in all respects. The citizens groups now appeal the issuance of the permit, and Hyperion appeals the permit's carbon monoxide limit. We affirm.

Facts and Procedural History

[¶ 2.] This case involves the issuance of a “Prevention of Significant Deterioration Air Quality” permit (PSD permit) to Hyperion. Hyperion proposed to construct a large petroleum refinery and power plant in Union County. ¹ Federal and state regulations required Hyperion to obtain a PSD permit before constructing the facility. Among other things, a PSD permit regulates air quality by limiting the pollutants a facility may emit into the ambient air.

[¶ 3.] In December 2007, Hyperion submitted a PSD permit application containing 613 pages of materials to DENR. Three citizens groups—Save Union County, Citizens Opposed to Oil Pollution, and the Sierra Club (collectively, “Citizens”)—intervened and contested issuance of the permit.

[¶ 4.] Citizens also requested that a state environmental impact statement (EIS) be prepared before the permit was issued. DENR, the state agency in charge of preparing EISs and considering PSD permits, denied Citizens' request. On December 15, 2008, after extensive study and responses to public comments, DENR recommended approval of a PSD permit with ninety-six pages of conditions.

[¶ 5.] DENR's recommendation was challenged, and in the summer of 2009, the proposed permit was litigated in ten days of contested case hearings before the Board. Twice during the hearings, Citizens renewed their request for an EIS. The requests were denied.² On August 20, 2009, the Board authorized DENR to issue the permit.

[¶ 6.] One permit condition imposed a “commence construction” deadline of eighteen months, which was February 20, 2011. The permit provided that, if construction of the facility was not commenced by that date, the permit “[became] invalid.” The permit, however, allowed DENR's Secretary to grant an extension of time to commence construction if Hyperion applied for the extension within the eighteen-month time period and demonstrated that the extension was justified.

[¶ 7.] Another permit condition required that carbon monoxide emissions from the proposed facility's twenty large “process heaters” could not exceed certain “Best Available Control Technology” (BACT) limits. BACT limits are designed to require the maximum degree of reduction of pollutant emissions that is achievable. The permit imposed a carbon monoxide BACT limit of 0.007 lb/mmBtu (pounds per million British thermal units) for the process heaters.

[¶ 8.] Citizens appealed the issuance of the permit to circuit court. Hyperion filed a separate appeal challenging the carbon monoxide BACT limit. Hyperion argued that 0.010 lb/mmBtu was the achievable limit.

[¶ 9.] On June 23, 2010, while the appeals were pending, the circuit court granted a Hyperion motion to remand the matter to allow the Board to consider additional evidence on several issues, including a request to extend the commence construction deadline. On the same date, Hyperion filed an application with DENR to extend the commence construction deadline to August 20, 2012.

[¶ 10.] DENR then began the process of investigating, soliciting public comments, and considering new evidence on the new issues and the request to extend the commence construction deadline. Over the next eight months, DENR made numerous requests of Hyperion for additional information to address the new issues and the request for an extension.³ DENR ultimately proposed a draft amended permit, which included an extension of the commence construction deadline. The draft amended permit was made available for public comment on February 14, 2011, six days before the original commence construction deadline was to expire. The public comment period ran from February 14, 2011, to April 1, 2011.

[¶ 11.] On March 21, 2011, the Board entered a scheduling order. The order set a July 2011 contested case hearing to consider the proposed amended permit. On March 31, 2011, Hyperion filed its comments on the draft amended permit. In its comments, Hyperion requested that the commence construction deadline be extended to eighteen months after the Board approved the amended permit. ⁴

[¶ 12.] After public comments and DENR's response to public comments, a four-day contested case hearing on the amended permit was held in July 2011. Extensive expert testimony and nearly 4,000 pages of exhibits were presented to the Board. Hyperion indicated that it had not commenced construction because of the national economic downturn; the need to address new federal regulations regarding sulfur dioxide and nitrogen dioxide emissions; the identification of a new emission source that required correction of the initial permit; and the uncertainty of the permit's status as a result of the ongoing litigation.

[¶ 13.] On September 16, 2011, the Board entered findings and conclusions approving DENR's issuance of the amended permit. The amended permit incorporated Hyperion's request to extend the commence construction deadline to eighteen months after the effective date of the amended permit. The amended permit retained the carbon monoxide 0.007 lb/mmBtu BACT limit.

[¶ 14.] Citizens then appealed the Board's September 2011 decision. The circuit court consolidated the 2011 appeal with Hyperion's and Citizens' 2009 appeals. In a detailed memorandum decision, the court ultimately affirmed the decisions not to order an EIS, affirmed the determination that Hyperion presented satisfactory justification for the extension of the commence construction deadline, affirmed the issuance of the amended permit, and affirmed the carbon monoxide 0.007 lb/mmBtu BACT limit.

[¶ 15.] We consider the following issues raised by Citizens:

1. Whether an EIS should have been ordered before the issuance of the PSD permit.

2. Whether the initial permit “became invalid” when the Board neither ruled on Hyperion's request to extend the commence construction deadline within the original eighteen-month period nor adopted the ultimate deadline that was requested within that period.

3. Whether Hyperion presented satisfactory justification for its request to extend the commence construction deadline.

We consider the following issue raised by Hyperion:

4. Whether the Board clearly erred in determining the carbon monoxide BACT limit.

Decision

[¶ 16.] “We review agency decisions the same as the circuit court....” St. Pierre v. State ex rel. S.D. Real Estate Comm'n, 2012 S.D. 25, ¶ 14, 813 N.W.2d 151, 156. We “give great weight to the findings made and inferences drawn by an agency on questions of fact.” SDCL 1–26–36. “[Q]uestions of law are reviewed de novo.” Brown v. Douglas Sch. Dist., 2002 S.D. 92, ¶ 9, 650 N.W.2d 264, 267. We may reverse agency decisions when “substantial rights of the appellant have been prejudiced because the administrative findings, inferences, conclusions, or decisions” are, among other things, in violation of statutes, affected by an error of law, are clearly erroneous, or constitute an abuse of discretion. SDCL 1–26–36.

1. Environmental Impact Statement

[¶ 17.] SDCL chapter 34A–9 is South Dakota's Environmental Policy Act. SDCL 34A–9–4 provides in relevant part: “All agencies may prepare, or have prepared by contract, an environmental impact statement on any major action they propose or approve which may have a significant effect on the environment.” ⁵However, the Act is separate from, and involves environmental concerns in addition to those that are relevant in PSD air quality permitting. Compare South Dakota Environmental Policy Act's broad application to any action that may have a significant impact on the environment withARSD 74:36:09:02's...