In re Town of Newington

• Decision Date: 21 April 2003
• Docket Number: 2002–448.,Nos. 2002–335,s. 2002–335
• Court: New Hampshire Supreme Court
• Parties: Appeal of TOWN OF NEWINGTON, (New Hampshire Department of Environmental Services).

149 N.H. 347

821 A.2d 1100

Appeal of TOWN OF NEWINGTON, (New Hampshire Department of Environmental Services).

Nos. 2002–335

2002–448.

Supreme Court of New Hampshire.

Argued Feb. 13, 2003.

Opinion Issued April 21, 2003.

Upton & Hatfield, LLP, of Concord (Robert Upton II on the brief and orally), for the petitioner.

Gallagher, Callahan & Gartrell, P.A., of Concord (Michael D. Ramsdell on the brief and orally), for the respondents.

DALIANIS, J.

The petitioner, the Town of Newington (town), appeals an order by the New Hampshire Department of Environmental Services (DES) granting the respondents, Newington Energy, LLC, and Hawkeye Funding, LP (collectively NEL), several property tax exemptions under RSA 72:12–a (Supp.2002). On appeal, the town specifically objects to DES granting: (1) a 100% exemption for a water injection system; (2) a 50% exemption for two stacks; (3) a 100% exemption for certain temporary construction devices; and (4) a 100% exemption for a storm water management system. NEL has cross-appealed, arguing that DES erred by: (1) reducing the exemption for the stacks to 50%; and (2) denying an exemption for heat recovery steam generators (HRSG) and an associated demineralization system. We affirm in part, vacate in part and remand.

NEL constructed and operates a combined cycle electric generation facility in Newington. On October 17, 2001, NEL applied to DES for several pollution control property tax exemptions. On March 29, 2002, DES issued its decision on the application, granting full exemptions for the water injection system, the stacks, the temporary construction devices, and the storm water management system, and denying an exemption for the HRSG and associated portion of the demineralization system.

After consideration of motions for rehearing filed by both parties, DES reduced the tax exemption for the stacks from 100% to 50%, but otherwise reaffirmed its March 29 ruling. Each party now appeals.

Originally, the town argued that the procedures followed by DES violated RSA chapter 541–A and the due process protections afforded by Part I, Article 15 of the New Hampshire Constitution. Because these issues were later withdrawn, however, we address only the tax exemption arguments.

RSA 72:12–a states, in pertinent part:

I. Any person, firm or corporation which builds, constructs, installs, or places in use in this state any treatment facility, device, appliance, or installation wholly or partly for the purpose of reducing, controlling, or eliminating any source of air or water pollution shall be entitled to have the value of said facility and any real estate necessary therefor, or a percentage thereof determined in accordance with this section, exempted from the taxes levied under this chapter for the period of years in which the facility, device, appliance, or installation is used in accordance with the provisions of this section.

....

III. The department shall investigate and determine whether the purpose of the facility is solely or only partially pollution control. If the department finds that the purpose of the facility is only partially pollution control it shall determine by an allocation of the applicant's investment in the facility what percentage of the facility is used to control pollution. In making its investigation, the department may inspect the facility and request such other information from the applicant as is reasonably necessary to assist it in making its determination.

The scope of our review of agency decisions under RSA 72:12–a is narrow. Appeal of City of Berlin , 131 N.H. 285, 289, 553 A.2d 758 (1988). Agency findings are deemed prima facie lawful and reasonable, and we will not sit as a trier of fact in reviewing them. Appeal of Town of Hampton Falls , 126 N.H. 805, 812–13, 498 A.2d 304 (1985). However, we will overturn agency decisions when the appealing party shows by a clear preponderance of the evidence that the agency's decision is unjust, unreasonable or unlawful. Id .

I. Water Injection System

The town argues that DES erred when it granted NEL a 100% exemption for the facility's water injection system, which injects water into the combustion turbine to reduce its operating temperature. DES ruled that the sole purpose of the temperature reduction was to reduce emissions of the air pollutant nitrogen oxide (NOx) when the facility is using backup oil fuel, rather than natural gas, to generate electricity. Accordingly, DES granted the system a 100% exemption. The town does not dispute that the system reduces NOx emissions, but argues that its actual purpose is to permit the facility to maximize power generation when using backup fuel without subjecting the turbines to damage from high temperatures. The town argues that the reduction of NOx emissions is merely incidental to the system's operational purpose. Thus, the town argues that the grant of a 100% exemption was error because at least part of the system's purpose did not relate to the reduction of air pollution.

In an affidavit in support of NEL's application, Ronald Bozgo, a Vice President of Consolidated Edison Development, a principal owner of NEL, described the chemical reaction that results in the formation of NOx and explained that NOx formation increases in relation to increases in the combustion turbine's flame temperature. He stated that in order to reduce NOx formation, the water injection system is used to reduce flame temperature. Thus, he concluded that the sole purpose of the system is to reduce the formation of NOx when backup fuel is in use and that there was no operational reason to install such a system other than to reduce NOx formation. In fact, he stated that "there are significant undesirable operational side effects associated with a water injection system...."

The town presented an affidavit from George E. Sansoucy, a professional engineer, in support of its claim that the pollution control benefits of the system were merely incidental to its power augmentation purpose. Sansoucy conceded that the water injection system reduced flame temperature, but asserted that the reduction was intended to increase power output, not to control pollution.

DES agreed with NEL that the sole purpose of the system was to control pollution. It found that Sansoucy's affidavit lacked specific information supporting his conclusions. DES noted, however, that it agreed with the town that the sole purpose of the steam injection portion of the system was to increase power production, and consequently it had denied an exemption for that portion.

DES, not the court, sits as the trier of fact and evaluates the competing evidence. City of Berlin , 131 N.H. at 289, 553 A.2d 758. We are reluctant to substitute our judgment for the expertise of administrative agencies. Town of Hampton Falls , 126 N.H. at 814, 498 A.2d 304. The finding at issue is supported by the record, and we are not persuaded by a clear preponderance of the evidence that DES' decision was unreasonable, unjust or unlawful. See id .

II. Storm Water Management System

The town argues that DES erred in granting NEL's storm water management system a 100% exemption. The storm water management system consists of catch basins, a subsurface collection system, grassed drainage swales, two onsite detention basins, rip-rap for energy dissipation and roof drain systems. NEL claimed in its application that the sole purpose of the system is pollution control. DES granted a 100% exemption for the system, except for the roof drains which it determined were installed only for the purpose of removing water from the roof. On appeal, the town argues that the pollution control benefits of the system are merely fortuitous, and that the actual purpose of the system is to prevent flooding. Thus, according to the town, only additional investment related to pollution control, if any, should be exempted.

In support of its application, NEL again submitted an affidavit from Ronald Bozgo, in which he described the various functions of the storm water management system and related each to pollution control. He stated that the system included equipment designed to "minimize erosion, stabilize embankments and control runoff" as well as measures to "trap sediments preventing silt-laden runoff water from transgressing into sensitive environmental areas." The town, on the other hand, provided no evidentiary support for its claim that all or part of the system's purpose is flood prevention.

DES determined that each part of the storm water management system, other than the roof drains, contributed to minimizing and collecting pollutants which would otherwise be discharged directly to surface water or wetlands. DES found that the system was carefully engineered to minimize water pollution and complied with recommendations prepared for DES. Moreover, contrary to the town's position, DES found that flooding could be prevented simply by grading in such a way as to properly direct runoff. Accordingly, we conclude that the DES ruling is supported by the record and is not unreasonable, unjust or unlawful. See City of Berlin , 131 N.H. at 289, 553 A.2d 758.

III. Temporary Construction Devices

The town argues that DES erred in granting NEL a 100% exemption for temporary construction devices that prevent erosion and intercept, collect and treat sediment-laden construction runoff. DES noted that because the devices were temporary, the exemptions would be limited to the period of time that the devices were in use. The town does not dispute that the devices control pollution during construction. Rather, the town argues that RSA 72:12–a only permits tax exemptions for permanent pollution control facilities. We disagree.

In construing a statute, we look first to its plain meaning. See Goode v. N.H. Legislative Budget Assistant, 148 N.H. 551, 553–54, 813 A.2d 381 (2002). Further, when examining statutory language, we construe all parts of a statute together to effectuate its overall purpose...