State offers red carpet to ethanol plants despite environmental concerns

The Indiana Department of Environmental Management proposes a change in regulations that could reduce the time it takes to approve air permits for ethanol plants.

The change would establish industry-specific control standards for emissions. The measure, if approved by the Indiana Air Pollution Control Board as early as Dec. 6, would do away with an intensive, plant-by-plant analysis of "best available control technology" that producers complain has delayed their plans to get some of the 17 ethanol plants proposed for Indiana up and running.

"These analyses are 50 to 60 pages long," said Rob Davis, a director of Cardinal Ethanol LLC, a startup company planning to open a 100-million-gallon ethanol plant in Randolph County in mid-2008. "The environmental [consultants] don't work for nothing."

IDEM said in its proposal that the goal of the case-by-case determinations is to reach the maximum emission reductions that are technically feasible, balanced by environmental and economic impact.

"Such analyses are time-intensive, cause delays in permit issuance, and do not always provide predictability to the permit applicant," the proposal said.

Indiana's rolling out of the regulatory red carpet to the ethanol industry–a cornerstone of Gov. Mitch Daniels' economic plan and a boon to farmers who supply prime ingredient corn–is counter to a federal crackdown of the industry in recent years, although a new proposal might loosen the federal rules.

The U.S. Environmental Protection Agency in 2002 began hammering the ethanol industry for not complying with Clean Air Act rules, particularly emissions of volatile organic compounds.

VOCs have been associated with a higher risk of cancer, particularly in industrialized areas. They also contribute to ground-level ozone, or smog. Indianapolis has been on the cusp of nonattainment of federal air pollution standards, while areas in northwestern Indiana already are above limits.

With a settlement reached last December with ethanol maker MGP Ingredients of Illinois, the EPA had 83 percent of the nation's ethanol production capacity under consent decrees that require installation of new pollution controls.

Indiana's simplified permitting process wouldn't relax emissions standards, said IDEM spokesman Rob Elstro. Rather, according to the proposal, it would establish three control options for limiting VOCs in the form of thermal oxidizers, wet scrubbers or enclosed flares.

Cardinal's Davis said his firm was at loggerheads with IDEM under the current permitting process, a dispute that required the firm to bring in an equipment manufacturer to argue the company's case before the agency.

"It probably cost us a month" of time, he said.

So far, IDEM has approved permits for eight ethanol plants, including Cardinal. Those plants are each allowed to release up to 100 tons of air pollutants a year.

The 100-ton limit distinguishes minor polluters from major ones. Davis figures that anything above that would require the firm to go through a more extensive permitting process that could take nine months or more.

But ethanol plants could soon ramp up production and exceed the 100-ton limit without going through the hassle. The EPA–at a time President Bush is touting ethanol as a key part of the nation's energy strategy–has proposed allowing minor polluters to emit up to 249 tons per year.

Not doing so "could potentially stymie the growth of the ethanol production industry, which in turn could lead to reduced energy diversification and independence in this country," the EPA said in its proposal.

The rule change has alarmed some environmental groups, who note the irony of the ethanol industry's being touted as environmentally friendly. The industry counters that underlying pollution control standards would remain in place.

"It doesn't necessarily mean you're going to see a dramatic increase in pollution, because they'll still use the best available control technology," said Matt Hartwig, spokesman for the Washington, D.C.-based Renewable Fuels Association.

U.S. Sen. John Thune, R-South Dakota, is behind the proposed change in EPA rules. He argued that current rules needlessly delay new construction and expansion of existing plants.

About 40 ethanol plants are slated for construction nationwide over the next year.

Environmental groups in Indiana haven't had much experience with ethanol plants. New Energy Corp., in South Bend, operates the only ethanol refinery here.

"We haven't taken one on, per se," said Tim Maloney, executive director of the Hoosier Environmental Council.

Maloney said the plants seeking permits in Indiana propose to use thermal oxidizers and other modern devices to control emissions. The emerging industry here bears watching, he said.

IDEM inspectors have been watching New Energy Corp.'s South Bend facility and haven't always liked what they've seen. IDEM handed out violations dating to the late 1990s, charging that New Energy hasn't conducted an analysis of best available control technology and failed to install some required pollution control devices for VOCs.

Under a 2004 settlement with IDEM, the company agreed to install additional equipment and to a civil penalty of $220,000, according to state records.

But last April, the agency cited New Energy again for failing to submit nitrogen oxide emission data for 2004 and 2005. It also cited inadequate monitoring equipment. The case is pending.