In the Matter of a Request for a Contested Case Hearing on the Proposed Air Emission Permit for Heron Lake BioEnergy, LLC Fuel Ethanol Production Facility AND Minnesota Center for Environmental Advocacy, et al., Relators, vs. Heron Lake BioEnergy, LLC, Respondent, Minnesota Pollution Control Agency, Respondent.
Annotate this CaseThis opinion will be unpublished and
may not be cited except as provided by
Minn. Stat. § 480 A. 08, subd. 3 (2004).
STATE OF MINNESOTA
IN COURT OF APPEALS
A05-1162A05-2405
In the Matter of a Request
for a Contested Case Hearing
on the Proposed Air Emission
Permit for Heron Lake BioEnergy, LLC
Fuel Ethanol Production Facility.
AND
Minnesota Center for
Environmental Advocacy, et al.,
Relators,
vs.
Heron Lake BioEnergy, LLC,
Respondent,
Minnesota Pollution Control Agency,
Respondent.
Filed July 3, 2006
Affirmed Hudson, Judge
Minnesota Pollution Control Agency
Kevin Reuther, Elizabeth I. Goodpaster, Janette K. Brimmer, Minnesota Center for Environmental Advocacy, 26 East Exchange Street, Suite 206, St. Paul, Minnesota 55101-1667 (for relators)
Jonathan C. Miesen, Lindquist & Vennum PLLP, 4200 IDS Center, 80 South Eighth Street, Minneapolis, Minnesota 55402 (for Heron Lake BioEnergy, LLC)
Mike Hatch, Attorney General, Kathleen L. Winters, Assistant Attorney General, 900 Bremer Tower, 445 Minnesota Street, St. Paul, Minnesota 55101-2127 (for MPCA)
Considered and decided by Hudson, Presiding Judge; Worke, Judge; and Crippen, Judge.*
U N P U B L I S H E D O P I N I O N
HUDSON, Judge
In this consolidated appeal, relators challenge the Minnesota Pollution Control Agency's ("MPCA") issuance of an air-emission permit to Heron Lake BioEnergy, LLC ("HLBE" or "the facility"). In initially filed appeal A05-1162, relators argue that (a) they raised disputed issues of material fact regarding the proposed facility's potential to emit pollutants and therefore are entitled to a contested-case hearing, and (b) the record lacks sufficient evidence to support the MPCA's conclusions that HLBE is a "synthetic minor" source of certain air pollutants. While that appeal was pending, MPCA modified the permit, and relators filed a second appeal, arguing that (a) the modified permit increases the quantity of certain pollutants that the facility can emit; (b) MPCA did not recalculate the relevant emission figures based on the permit modifications; and (c) the issuance of the modified permit while the prior appeal was pending prejudiced relators. Because relators did not demonstrate that a contested-case hearing was necessary to resolve material issues of fact and to assist the agency in making its decision, and because there was substantial evidence to support the agency's issuance and later modification of the permit, we affirm.
FACTS
In September 2005, after relators filed an initial appeal of the permit, HLBE requested permit changes based on facility design and operation modifications. Relators objected to the request because it affected emission of air pollutants and raised concerns about the appropriateness of amending a permit when the decision granting the permit is on appeal. The MPCA issued an amended permit to HLBE. Relators filed a second appeal, which was consolidated with the first appeal.
D E C I S I O NWhen reviewing agency decisions we adhere to the fundamental concept that decisions of administrative agencies enjoy a presumption of correctness, and deference should be shown by courts to the agencies' expertise and their special knowledge in the field of their technical training, education, and experience. The agency decision-maker is presumed to have the expertise necessary to decide technical matters within the scope of the agency's authority, and judicial deference, rooted in the separation of powers doctrine, is extended to an agency decision-maker in the interpretation of statutes that the agency is charged with administering and enforcing.
In re Excess Surplus Status of Blue Cross & Blue Shield of Minn., 624 N.W.2d 264, 278 (Minn. 2001) (footnote omitted) (quotation and citations omitted).
I
Relators argue that the MPCA erred by not granting a contested-case hearing because material facts were in dispute regarding the facility's ability to comply with the synthetic-minor-source requirements, and additional information would have aided the agency in making its decision.
Our standard of review for an agency's decision regarding whether to hold a contested-case proceeding is governed by Minn. Stat. § 14.69 (2004) of the Minnesota Administrative Procedures Act. See Minn. Ctr. for Envtl. Advocacy v. Minn. Pollution Control Agency, 644 N.W.2d 457, 463 (Minn. 2002) (applying statute in context of decision whether to require environmental impact statement).
In a judicial review . . . the court may affirm the decision of the agency or remand the case for further proceedings; or it may reverse or modify the decision if the substantial rights of the petitioners may have been prejudiced because the administrative finding, inferences, conclusion, or decisions are:
(a) In violation of constitutional provisions, or
(b) In excess of the statutory authority or jurisdiction of the agency; or
(c) Made upon unlawful procedure; or
(d) Affected by other error of law; or
(e) Unsupported by substantial evidence in view of the entire record as submitted; or
(f) Arbitrary or capricious.
Minn. Stat. § 14.69.
The MPCA's decision whether to order a contested-case hearing is governed by its permit rule, Minn. R. 7000.1900, subp. 1 (2005), which provides:
The board or commissioner must grant the petition to hold a contested case hearing or order upon its own motion that a contested case hearing be held if it finds that:
A. there is a material issue of fact in dispute concerning the matter pending before the board or commissioner;
B. the board or commissioner has the jurisdiction to make a determination on the disputed material issue of fact; and
C. there is a reasonable basis underlying the disputed material issue of fact or facts such that the holding of a contested case hearing would allow the introduction of information that would aid the board or commissioner in resolving the disputed facts in making a final decision on the matter.
(Emphasis added.)
The MPCA has wide discretion to determine whether the permit challenger has met its burden to show that a contested-case hearingis warranted. See, e.g., In re N. States Power Co. v. Wilmarth Indust. Solid Waste Incinerator Ash Storage Facility, 459 N.W.2d 922, 923 (Minn. 1990). The burden is on relators to demonstrate the existence of material facts that would aid the agency in making a decision before they are entitled to a contested-case hearing. In re Solid Waste Permit for the NSP Red Wing Ash Disposal Facility, 421 N.W.2d 398, 404 (Minn. App. 1988), review denied (Minn. May 18, 1988).
Here, relators challenged the methodology and technical assumptions used by the MPCA to support issuance of the HLBE permit. Specifically, in March 2005, relators requested a contested-case hearing on the following two issues:
(1) Whether the evidence before the [M]PCA supports the determination that the proposed HLBE ethanol-production plant is a facility that has the potential to emit less than 100 tons per year of all criteria pollutants, and
(2) Whether emission controls consistent with the HLBE facility's potential to emit criteria pollutants have been imposed in the air-emission permit.
In support of their request for a contested-case hearing, relators submitted an affidavit from Dr. Ranajit Sahu, an environmental-engineering consultant. Dr. Sahu's professional opinion was that the documentation for the Draft Air Emission Permit contained "numerous unsupported technical assumptions as well as some errors regarding the estimates of the HLBE facility's potential to emit VOC, SO2, NOx, and particulate matter."
In the MPCA's findings of fact, conclusions of law, and order, dated May 10, 2005, the MPCA commissioner addressed these questions. The record includes a detailed review by the MPCA of each of relators' numerous disputed issues. On each, the MPCA issued detailed findings examining relators' criticisms and either rejecting the basis for the criticism or explaining why it would not change the MPCA's final decision in the matter. We will not substitute our judgment for these findings, which are supported by substantial evidence. Vicker v. Starkey, 265 Minn. 464, 470, 122 N.W.2d 169, 173 (1963).
In general, relators rely on In re City of Owatonna's NPDES/SDS Proposed Permit Reissuance for Discharge of Treated Wastewater, 672 N.W.2d 921 (Minn. App. 2004), for the proposition that relators are entitled to a contested-case hearing simply by raising material issues of fact. But City of Owatonna is distinguishable because relator's experts there not only raised material issues of fact, but also determined that the wastewater-treatment facilities were having a detrimental effect on the lake waterthus producing evidence contrary to the action proposed by the agency. Id.at 929. Here, we conclude that relators have merely challenged MPCA's facts and methodologies without showing how a contested-case hearing would aid the agency in resolving the disputed facts. Our conclusion is based on the following analysis of relators' claims.
A. VOC emission limit of the scrubber
Emissions from the fermentation process are controlled with a "wet scrubber," variously known as a gas scrubber, a carbon-dioxide ("CO2") scrubber, or a fermentation scrubber. Relators argue that the VOC emission limit of 9.48 pounds per hour (lbs/hr) (first calculated by the MPCA using theoretical estimates), as compared to the 4.0 lbs/hr estimate ultimately used by the MPCA (based on scaled data from a South Dakota ethanol facility) is a material issue of fact in dispute. The MPCA conceded that the VOC limit for the CO2 scrubber was a material fact because using the higher number would result in the facility exceeding the VOC limit for a "synthetic minor" permit. But the MPCA found that it was reasonable to base their calculations on actual emissions testing from the Glacial Lake ethanol facilitya similar, operating, ethanol-production plant in South Dakota. The Glacial Lake facility is a 40-million-gallons-per-year facility, and the HLBE will be a 55-million-gallons-per-year facility. MPCA scaled the test results to account for the difference in production amounts. MPCA staff testified that real-life test data is "about as good a comparison as you're going to get [for permit calculations]." MPCA staff also testified that they routinely use scaled comparisons rather than theoretical predictions because they are more accurate. Further, the record shows that the Glacial Lake ethanol facility was designed by the same company that designed the HLBE facility. On this record, the MPCA's decision to deny a contested-case hearing was reasonable because a contested-case hearing would not have aided the agency in making a decision as to which of its own calculations it should use.
B. VOC control efficiency of the loadout flares
Relators argue that the destruction efficiency of 90% for the loadout flares was unreasonably high. ("Destruction efficiency" relates to the flare's ability to destroy the VOCs in the flare.) Relators also contend that destruction efficiency is dependent on the design of the flare, but the record contains no design details regarding HLBE's proposed flare. The MPCA agreed that the destruction efficiency of a loadout flare is a material fact because if that efficiency goal could not be met, the project might exceed its 100 tpy VOC limit. However, the MPCA denied a contested-case hearing because it found no reasonable basis to conclude that the loadout flare could not meet 90% destruction efficiency. Under the Air Pollution Control Equipment Rule, Minn. R. 7011.0060.0080 (2005), the MPCA has established control efficiencies for common control devices such as flares. The rule establishes an efficiency of 98% for VOC flares. Minn. R. 7011.0070, subp. 1 (2005) (indicating a 98% efficiency requirement for a total enclosure VOC flare). Moreover, as the MPCA notes, the HLBE permit includes federal requirements for operation and maintenance conditions to insure proper operation of the flare. With operation and maintenance conditions in the permit, there is no need for design details to be included in the permit.
On this record, we conclude that the MPCA's decision to deny a contested-case hearing on this issue was appropriate because the MPCA used an efficiency that was less than the efficiency required of a VOC flare by the Minnesota rules. A contested-case hearing would not have resulted in the agency using a lower efficiency rate.
C. VOC emissions from cooling cyclones
Relators challenge the use of a permit limit of 3 lbs/hr of VOCs from the cooling cyclones when the technical documents supporting the permit application indicated 3.31 lbs/hr. The MPCA determined that this is not a material fact because using the higher number would not cause the project to become a major source for VOC. Further, the MPCA determined there was no reasonable basis underlying relators' challenge because the 3.0 lbs/hr rate was based on actual test results from the Glacial Lake ethanol facility and were scaled for the HLBE facility. Again, because of the agency's reasonable preference to use real data over theoretical estimates, and relators' failure to show that this permit limit could not be achieved by the facility, the MPCA's decision to deny a contested-case hearing on this issue was appropriate.
D. Sulfur content of coal
SO2 emissions from the facility will be primarily a result of coal combustion. The permit includes a total SO2 tpy emission limit of 94.8 tpy. In its permit application, HLBE calculated its ability to meet the SO2 emissions limit using an average coal sulfur content of 0.22%. Relators argue that the "potential to emit" SO2 from the burning of coal should be based on the maximum sulfur content of coal in order to accurately assess the facility's full potential to emit SO2. The MPCA found that HLBE could remain under the permit limit by burning low-sulfur coal and that an ample supply of low-sulfur coal was available to HLBE. Because the permit limitations and conditions required continuous monitoring of SO2 emissions, thus insuring that the facility operates within the permit limit, and because establishing an exact sulfur content of coal to be burned was neither material nor a reasonable basis for a contested-case hearing on a pre-construction permit, the MPCA's denial of a contested-case hearing was appropriate.
E. Control efficiency of SO2 by the limestone fluidized bed
Relators contest the ability of the facility to meet the 90% SO2-control-efficiency requirement of the permit given that MPCA staff originally calculated an 84% efficiency. The MPCA responded that Federal New Source Performance Standards require a new source to capture 90% of their potential SO2 emissions. Because the facility must capture SO2 emissions at 90% control efficiency to comply with federal standards, the MPCA determined that neither a material issue of fact was raised nor a reasonable basis to support a contested-case hearing was established. The MPCA's determination was appropriate.
F. Control efficiency of NOx emissions
Relators conclude that the control efficiency of over 82% for HLBE's Selective Non-Catalytic Reduction ("SNCR") equipment is unsupported and that using a realistic control efficiency of 60% results in violating the permit threshold. The MPCA found the efficiency of the SNCR to be a material fact. The MPCA agreed that some data concerning SNCRs suggest that a control efficiency of 60% is typical, but the MPCA found that more recent data concerning SNCRs, including the technology proposed to be installed in the HLBE facility, suggest that SNCRs can meet the emission limit in the permit. Because the permit sets an NOx emission limit and requires continuous monitoring of NOx emissions, a contested-case hearing over the issue of the efficiency rates of specific equipment would not have aided the MPCA board in making a determination of the facility's source status.
Because we conclude that relators did not provide evidence of material disputed facts that would aid the agency in its decision-making process, and because the MPCA painstakingly applied the contested-case-hearing criteria to each of relators' challenges and exercised its reasoned judgment to determine that a contested-case hearing was not required, we will not disturb the MPCA's denial of a contested-case hearing.
II
Relators also argue that the record lacks substantial evidence to support the MPCA's issuance of a "synthetic minor" air permit to HLBE. Specifically, relators contend that the record does not support the MPCA's conclusion that HLBE should be classified as a "synthetic minor" source of air pollutants. In support of this argument, relators argue that the terms and conditions of the permit are not technically accurate, are not design-based limitations, and do not, as a practical matter, limit HLBE's potential emissions of VOC, SO2, and NOx to less than 100 tpy.
When an agency "hears the view of opposing sides presented in the form of written and oral testimony, examines the record and makes findings of fact," it is acting in a quasi-judicial manner. In re Signal Delivery Serv., Inc., 288 N.W.2d 707, 710 (Minn. 1980). When an agency acts in a quasi-judicial capacity, an appellate court applies the substantial-evidence test on review. In re N. States Power Co., 416 N.W.2d 719, 723 (Minn. 1987). Substantial evidence is defined as: "(1) such relevant evidence as a reasonable mind might accept as adequate to support a conclusion; (2) more than a scintilla of evidence; (3) more than some evidence; (4) more than any evidence; or (5) the evidence considered in its entirety." Minn. Ctr. for Envtl. Advocacy v. Minn. Pollution Control Agency, 644 N.W.2d at 466. Where the record contains substantial evidence supporting a finding of fact by the agency, we must affirm the agency decision, and we may not substitute our own judgment for that of the administrative body. City of Moorhead v. Minn. Pub. Utils. Comm'n, 343 N.W.2d 843, 846 (Minn. 1984). But in considering "questions of law, reviewing courts are not bound by the decision of the agency and need not defer to agency expertise." St. Otto's Home v. Minn. Dep't of Human Servs., 437 N.W.2d 35, 3940 (Minn. 1989) (citations omitted); see also N. States Power Co. v. Minn. Pub. Utils. Comm'n, 344 N.W.2d 374, 377 (Minn. 1984) (citation omitted) (stating that an appellate court may reverse an agency decision if the decision was affected by an error of law).
A. VOC emissions
Relators argue that, without knowing the design details of the VOC-reduction equipment, the record lacks support for a determination that the facility will remain under the limit for VOC emissions. The record shows that the emission limits of the gas scrubber were based on actual emissions testing from the Glacial Lake facility and that the results were scaled to account for the difference in production amounts. MPCA staff testified that they routinely use scaled comparisons rather than theoretical predictions because scaled comparisons are more accurate. The MPCA also noted that full design details of the equipment are not required at the permitting stage; for permits, an applicant is only required to identify the types of control equipment it intends to install and the estimated operating efficiencies of that equipment. See Minn. R. 7007.0500, subp. 2(C)(8) (2005). Further, Glacial Lake and HLBE were designed by the same company; it is reasonable to expect that the HLBE scrubber will be designed to meet the emissions limitations. We conclude that the MPCA's determination that the project's VOC emissions could reasonably be limited to under 100 tpy was based on substantial evidence.
B. SO2 emissions
Relators argue that the MPCA should have used the maximum emission capacity of coal when determining the project's maximum "potential to emit" SO2.
The EPA defines "potential to emit" as:
the maximum capacity of a stationary source to emit a pollutant under its physical and operational design. Any physical or operational limitation on the capacity of the source to emit a pollutant, including air pollution control equipment and restrictions on the . . . type or amount of material combusted, stored, or processed, shall be treated as part of its design if the limitation or the effect it would have on emissions is federally enforceable.
40 CFR § 52.21(b)(4) (2005) (emphasis added).
The permit issued by the MPCA specifically contains a provision that limits the facility's emissions of SO2. All conditions of an MPCA permit issued under chapter 7007 are federally enforceable unless specifically designated as not enforceable. Minn. R. 7007.1750 (2005). The permit issued here expressly indicated that the permit "does not reflect a variance from any federally enforceable applicable requirement, or the requirements of Minn. R. ch. 7007." The permit requirement limiting SO2 emissions could be accomplished by HLBE through an operational plan to burn low-sulfur-content coal. Research conducted by the MPCA indicated that an ample supply of coal with low sulfur content existed for the project to meet the proposed SO2 tpy limit. HLBE's maximum potential to emit SO2, taking into account an operational limitation of purchasing coal with a sulfur content of 0.4% or less, reasonably results in emissions below the permit limit of 100 tpy. The MPCA's determination that the permit limitations and continuous monitoring requirements would reasonably limit the facility's SO2 emissions to under 100 tpy was based on substantial evidence.
C. NOx emissions
Fuel combustion produces nitrogen oxides. Relators argue that the record lacks substantial evidence to support the MPCA's conclusion that HLBE's potential to emit NOx is less than 100 tons per year. This argument is based on relators' assertion that the removal-efficiency rate used by the MPCA was set too high. The permit sets a limit on NOx emissions at 20.1 lbs/hr, which equals 0.09 pounds per million British Thermal Units (BTU). The MPCA Board based its conclusion on three factors: (1) the manufacturer of the emissions-reduction equipment guaranteed the NOx emissions would not exceed that limit; (2) publications from the United States Environmental Protection Agency (USEPA) demonstrating that NOx emissions from coal-fired, fluidized-bed boilers with SNCR systems, comparable to the planned HLBE boiler system, range from .03 to 0.1 pounds per million BTU; and (3) research by MPCA staff indicating that emissions data from two newer plants with coal-fired, fluidized-bed boilers similar to the ones proposed for HLBE were well under the limits of this permit. The data gathered by the MPCA are substantial evidence that support its conclusion that the HLBE limit on NOx was achievable.
The record includes abundant reports, data, and testimony supporting the MPCA's factual findings and conclusions of law. Because substantial evidence supports the MPCA's determination that the facility meets the requirements for a "synthetic minor" source, we affirm the agency's decision to issue the permit.
III
Finally, relators argue that the MPCA's issuance of a modified permit after relators appealed the original permit prejudiced relators because it created a new final agency decision without affording relators an effective opportunity to supplement the record.
After the issuance and appeal of its original air-emission permit, HLBE submitted to the MPCA a notice regarding needed design changes to the proposed facility. The MPCA found that the proposed changes met the requirements of an "insignificant modification" under Minn. R. 7007.1250, subp. 1.B(2) (2005). An "insignificant modification" is a modification that will result in little or no increase in emissions. Id. Because the design changes met these requirements, the MPCA was not required to issue a permit amendment. Id. Nevertheless, the MPCA determined that, because of the underlying appeal, it would respond to the proposed changes more formally by issuing a minor permit amendment under Minn. R. 7007.1450, subp. 2 (2005). Therefore, relators were allowed to comment on the proposed changes and did so by submitting correspondence to the MPCA objecting to the proposed design changes. The MPCA's process also afforded relators the ability to file a second appeal. We fail to see how relators were prejudiced by this process.
Furthermore, an appeal of an agency decision to issue a permit should not stop all progress on the project or prohibit the agency from making further decisions relative to the approved permit. An appeal of an agency decision does not function as a substitute injunction, delaying progress on a project that has received agency approval. Here, the HLBE had a permit. Relators did not request either an administrative or a judicial stay of the HLBE permit pending the outcome of this appeal. With permit in hand, HLBE continued its facility planning. As with many projects, plans change, and with those changes revisions need to be made. HLBE was required by agency rules to notify the MPCA of any changes affecting the permit and to seek agency approval of modifications as required by rule in chapter 7007. HLBE and the MPCA proceeded cautiously, exceeding the requirements of the rules, in addressing the modifications. While an amended permit may have complicated matters on appeal, it did not prejudice relators.
Affirmed.
* Retired judge of the Minnesota Court of Appeals, serving by appointment pursuant to Minn. Const. art. VI, § 10.
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