S.D. SC OKs issuance of air quality permit to refinery

By Nathan Bass | Feb 1, 2013

PIERRE, S.D. (Legal Newsline) - The South Dakota Supreme Court affirmed the circuit court's ruling allowing the issuance of an air quality permit to Hyperion Refining LLC, enabling the company to begin construction on a petroleum refinery and power plant in Union County.

The Court, however, denied Hyperion's appeal of a permit condition limiting the amount of carbon monoxide that could be emitted from the proposed facility.

Justice Steven L. Zinter delivered the opinion of the unanimous five-member Court. The matter was argued Oct. 3, 2012, with the opinion filed on Jan. 23.

"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," the opinion states.

PSD is the acronym for Prevention of Significant Air Quality.

Citizens requested that a state environmental impact statement, an EIS, be prepared before granting Hyperion the permit but the Department of Environment and Natural Resources denied the request. On Dec. 15, 2008, DENR recommended the approval of a PSD permit with ninety-six pages of conditions.

The recommendation was challenged and hearings were held in the summer of 2009. Citizens renewed its requests for an EIS twice during the hearings and the requests were again denied. On Aug. 20, 2009, the Board authorized the DENR to issue Hyperion the permit.

There was a condition which imposed a "commence construction" deadline of eighteen months, which was Feb. 20, 2011, and another condition requiring carbon monoxide emissions not exceed "Best Available Control Technology" limits. The permit imposed a carbon monoxide BACT limit of 0.007 lb/mmBtu for the process heaters from the proposed facility.

Citizens appealed the permit issuance on several grounds and Hyperion appealed the carbon monoxide limit, arguing that the achievable limit was 0.010 lb/mmBtu.

In June 2010, while the appeals were pending, the circuit court granted Hyperion's motion to remand the matter back to the Board to consider additional evidence on several issues including a request to extend the commence construction date.

"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. DENR ultimately proposed a draft amended permit, which included an extension of the commence construction deadline," the opinion states.

"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.

"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.

Citizens appealed the decision back to the circuit court and the circuit court combined the appeal with the 2009 appeal. The court affirmed the decisions not to order an EIS, affirmed the determination that Hyperion presented satisfactory justification to extend the commence construction deadline, affirmed the issuance of the amended permit, and affirmed the carbon monoxide limit of 0.007.

Citizens and Hyperion each filed appeals to the state Supreme Court - Citizens on the three rulings adverse to it and Hyperion on the 0.007 BACT carbon monoxide limit.

On the decisions not to order an EIS, Zinter wrote, "[T]he Board's and DENR's decisions to deny the requests for an EIS were supported by DENR's technical review of Hyperion's application and other agency and public comments; DENR's response to those agency and public comments; and the testimony and environmental evidence considered in the administrative process.

"We conclude that the Board and DENR did not abuse their discretion in denying the requests for an EIS."

Next the Court looked at the validity of the permit. Citizens argued that although Hyperion filed for an extension of the commence construction deadline within the 18 month period allowed, the Board did not grant it until after the deadline and so the permit expired.

"We conclude that DENR and the Board were not required to render a final decision on the initial timely extension request within the initial eighteen-month period.

"Further," Zinter wrote, "the subsequent amendment to the request was made during the extension proceedings, and that amendment was not so different as to constitute a new application. Therefore, Hyperion's permit did not become invalid."

Thirdly, the Court looked at Citizens' argument that Hyperion did not sufficiently justify its request for an extension of the deadline.

A Hyperion vice-president had testified as to several reasons why Hyperion needed more time to commence construction and Citizens had the opportunity to cross-examine the company official, according to the opinion.

The Board then determined that the reasons given were valid and they approved the extension.

"Although Citizens cross-examined Hyperion's vice-president regarding the reasons for the extension," Zinter wrote, "the Board was best suited to determine the credibility of the vice-president and the weight to be given to his testimony.

"Further, Citizens provided no contradicting testimony. Therefore, after reviewing the entire record, we are not definitely and firmly convinced that the Board made a mistake. The Board did not clearly err in finding satisfactory justification for extension of the commence construction deadline."

Finally, the Court looked at Hyperion's argument that the Board erred in relying on the DENR evidence regarding the achievable BACT limit.

"We acknowledge that Hyperion presented testimony supporting its proposed limit. We also acknowledge that some of DENR's comparative evidence was subject to different interpretations. But ultimately, the comparability of other facilities involved conflicting evidence.

"The Board did not clearly err in deciding that the 0.007 lb/mmBtu BACT limit was achievable for Hyperion's project."

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