Pollution Reduction Tax Exemption Decision Challenged

Appeal of the Town of Newington
Appeal of the Town of Newington
Nos. 2002-335, 2002-448
Monday, April 21, 2003
In this case, the Department of Environmental Services (DES) granted Newington Energy, LLC (NEL) several property tax exemptions under RSA 72:12-a. This statute says that any treatment facility, device, appliance or installation built for the purpose of reducing, controlling or eliminating air or water pollution is entitled to have the value of that facility exempted from property taxation.

The town objected to DES’s decision to grant a 100 percent exemption for a water injection system, a 50 percent exemption for two stacks, a 100 percent exemption for temporary construction devices and a 100 percent exemption for a storm water management system.

NEL, which operates a combined cycle electric generation facility, cross-appealed, claiming that DES improperly reduced its exemption for the stacks from 100 percent to 50 percent and incorrectly denied its request for exemption for heat recovery steam generators and demineralization system.

State agency decisions are deemed lawful and reasonable on their face and are overturned by the Court only when the appealing party shows by a clear preponderance of the evidence that the agency’s decision is unjust, unreasonable or unlawful.

Evidence was heard in the case about whether the purpose of the water injection system was to reduce air pollution (nitrogen oxide) or to maximize power generation and whether the purpose of the storm water management system was to reduce water pollution, as NEL argued, or prevent flooding, as the town argued. DES weighed evidence from both sides and determined that the purpose of both facilities was to reduce pollution, which met the criteria of the exemption statute. The Court said it was reluctant to substitute its judgment for the expertise of the agency and the evidence supported DES’s decision.

The town also argued that DES incorrectly granted property tax exemption for temporary construction devices because the statute only covered permanent devices. The Court disagreed, noting that the plain meaning of the statute covers “any treatment facility” constructed for the purpose of pollution control.

The Court agreed with NEL that DES improperly reduced its tax exemption from 100 percent to 50 percent on two stacks based on the town’s argument that the stacks not only disperse pollutants but also increase air flow to facilitate combustion. The Court said DES is required to determine a partial tax exemption based on the allocation of the applicant’s investment in the facility’s pollution control purpose, but that DES had made no findings as to NEL’s investment in the pollution control purpose of the stacks. The Court remanded NEL’s exemption request for the stacks to DES for such findings.

Finally, the Court said it could not determine what reasoning DES relied on to deny NEL’s request for tax exemption for the heat recovery steam generator and associated demineralization system and therefore remanded the request to DES to make findings of facts supporting its decision.