International Paper Co. v. Board of Environmental Protection

• Decision Date: 02 August 1993
• Citation: 629 A.2d 597
• Parties: INTERNATIONAL PAPER CO. v. BOARD OF ENVIRONMENTAL PROTECTION, et al.
• Court: Maine Supreme Court

Page 597

629 A.2d 597

INTERNATIONAL PAPER CO. v. BOARD OF ENVIRONMENTAL PROTECTION, et al.

Supreme Judicial Court of Maine.

Argued April 28, 1993.

Decided Aug. 2, 1993.

James G. Good (orally), Sarah H. Beard, Pierce, Atwood, Scribner, Allen, Smith & Lancaster, Portland, for plaintiff.

Leanne Robbin (orally), Asst. Atty. Gen., Augusta, for defendant.

Before WATHEN, C.J., and ROBERTS, GLASSMAN, CLIFFORD, COLLINS, RUDMAN and DANA, JJ.

COLLINS, Justice.

International Paper Company (IP) appeals from the Superior Court (Kennebec County, Alexander, J.) judgment affirming the Board of Environmental Protection's refusal to certify IP's sludge/bark dryer and related equipment as a "water pollution control facility" for tax exemption purposes pursuant to 36 M.R.S.A. §§ 655(1)(N), 656(1)(E)(1), & 1760(29) (1990). ¹ We vacate the judgment.

In its normal course of operations, IP generates water pollutants. To treat the wastewater leaving the plant, IP puts this water first into clarifiers in which some pollutants settle out of the water as sludge. ² The sludge leaving the clarifiers contains about 75% water and is transported to sludge presses where water is pressed out of the sludge leaving the sludge no longer free-flowing and with a water content of approximately 60%. IP formerly disposed of the sludge at this stage by transporting it to landfills. It now has chosen incineration as its method of disposal.

IP already had an incinerator in place with which it disposed of waste bark and produced steam-generated power for the plant. ³ The sludge leaving the sludge presses contained too much water to be burned in the waste-fuel incinerator. In order to dry the sludge enough to facilitate its incineration, IP purchased and installed a sludge dryer which reduces the water content of the sludge to about 40% enabling it to be burned in a mixture of about 65% bark and 35% sludge. IP mixes the sludge with bark prior to its entry into the sludge dryer to make handling the sludge more efficient.

Water pollution control facilities, certified as such by the Commissioner of Environmental Protection, are exempt from property, sales, and use taxes. 36 M.R.S.A. §§ 655(1)(N), 656(1)(E), & 1760(29) (1990). IP asked the Department of Environmental Protection to certify the sludge/bark dryer, conveyors, and ash-handling system as a tax-exempt water pollution control facility. Despite the Commissioner's finding that the "primary purpose of installing the sludge/bark dryer [was] to dispose of or eliminate wastewater treatment sludge," he denied IP's request based on his conclusion that sludge with a 60% water content is "not water pollution."

IP appealed the Commissioner's decision to the Board of Environmental Protection. The Board agreed with the Commissioner and held that, because the sludge entering the dryer had "insufficient liquid content to be free flowing" and was not "water borne industrial waste," it was no longer water pollution, and had become instead, solid waste. The Board stated that:

Sludge does not become "water pollution" merely because it originates at the water treatment plant. [The sludge entering the dryer] is a concentration of water pollutants to a point where those pollutants [have] become a solid waste, rather than bits of solids suspended in a liquid.

The Board continued, distinguishing the sludge dryer from the already-tax-exempt sludge presses, by saying, "[t]he fundamental distinction between the ... press [and] the dryer is that the material flowing to the ... press is a liquid waste and the material going to the dryer is a solid waste." The Board affirmed the Commissioner's decision concluding that the sludge/bark dryer "operates to enhance solid waste disposal, not [to] reduce[,] control or eliminate water pollution." IP appealed the Board's decision to the Superior Court pursuant to M.R.Civ.P. 80C. The Superior Court (Kennebec County, Alexander, J.) affirmed the Board's decision and, from that decision, IP appeals.

36 M.R.S.A. § 1760 provides that "[n]o tax on sales, storage or use shall be collected upon or in connection with:"

29. Water pollution control facilities. Sales of any water pollution control facility, certified as such by the Commissioner of Environmental Protection, and any part or accessories thereof, or any materials for the construction, repair or maintenance of a facility.

As used in this subsection, unless the context otherwise indicates, the following terms have the following meanings.

A. "Disposal system" means any system used primarily for disposing of or isolating industrial or other waste and includes thickeners, incinerators, pipelines or conduits, pumping stations, force mains and all other constructions, devices, appurtenances and facilities used for collecting or conducting water borne industrial or other waste to a point of disposal, treatment or isolation, except that which is necessary to the manufacture of products.

B. "Facility" means any disposal system or any treatment works, appliance, equipment, machinery, installation or structures installed, acquired or placed in operation primarily for the purpose of reducing, controlling or eliminating water pollution caused by industrial or other waste, ....

C. "Industrial waste" means any liquid, gaseous or solid waste substance capable of polluting the waters of the State and resulting from any process, or the development of any process, of industry or manufacture.

D. "Treatment works" means any plant, pumping station, reservoir or other works used primarily for the purpose of treating, stabilizing, isolating or holding industrial or other waste.

36 M.R.S.A. § 1760(29) (1990). Sections 655 and 656 allow real estate and property tax exemptions for water pollution control facilities. See 36 M.R.S.A. §§ 655(1)(N) & 656(1)(E)(1) (1990). These sections define water pollution control facilities in essentially the same way as section 1760(29) except for the additional requirement that the facility "hav[e] a capacity to handle at least 4,000 gallons of waste per day." 36 M.R.S.A. § 656(1)(E)(1) (1990).

The parties agree that the "primary purpose of installing the sludge/bark dryer [was] to dispose of or eliminate wastewater treatment sludge." The parties disagree whether the sludge entering the dryer, with its 60% water content, is "water pollution" according to the tax exemption statutes. IP asserts that the Board's requirement that waste entering the device be "water borne," is inconsistent with the statute's express inclusion of "incinerators" in the definition of "disposal system" because no incinerator can burn "free-flowing" wastewater.

On an appeal from an intermediate appellate review of an administrative decision, we review the agency decision directly for an abuse of discretion, errors of law, or findings not supported by the evidence. Abbott v. Commissioner of Inland Fisheries and Wildlife, 623 A.2d 1273, 1275 (Me.1993). When interpreting statutes, we "seek to discern from the plain language the real purpose of the legislation, avoiding results that are absurd, inconsistent unreasonable, or illogical." Mahaney v. State, 610 A.2d 738, 741 (Me.1992). When the dispute involves an agency's interpretation of a statute administered by it, as is the case here, the agency's interpretation, although not conclusive on the court, is entitled to great deference and will be upheld unless the statute plainly compels a contrary result. Abbott v. Commissioner of Inland Fisheries and Wildlife, 623 A.2d at 1275. An exemption from taxation, although entitled to reasonable interpretation in accordance with the purpose of the exemption, is not to be extended by application to situations not clearly coming within the scope of the exemption provisions. Robbins v. State Tax Assessor, 536 A.2d 1127, 1128 (Me.1988).

The statutes at hand do not define water pollution. We have noted that one authority has defined water pollution as "any man-made alteration of the quality of the water that appreciably impairs its usefulness for a particular purpose." Ethyl Corp. v. Adams, 375 A.2d 1065, 1077 (Me.1977) (quoting 3 Waters and Water Rights 5 (B. Grindler ed. 1967)). Neither the statute nor the definition cited in Ethyl Corp. directly answers the question before us, whether water pollution must be water-borne. As IP correctly points out, the statute does expressly include the term "incinerators" in the definition of disposal systems. At the hearing before the Board, the staff witness conceded that its interpretation of the term water pollution as "water borne" is in conflict with the inclusion of the term incinerator in the definition of "disposal system." ⁴

The definition of "disposal system" also, however, contains the words "water borne:"

"Disposal system" means any system used primarily for disposing of or isolating industrial or other waste and includes thickeners, incinerators, pipelines or conduits, pumping stations, force mains and all other constructions, devices, appurtenances and...