Pollution Control Financing Authority of Warren County v. New Jersey Dept. of Environmental Protection
| Decision Date | 05 December 1989 |
| Citation | 237 N.J.Super. 163,567 A.2d 243 |
| Parties | POLLUTION CONTROL FINANCING AUTHORITY OF WARREN COUNTY, New Jersey, Plaintiff-Appellant, and County of Hunterdon and Hunterdon County Utilities Authority, Intervenors-Appellants, v. The NEW JERSEY DEPARTMENT OF ENVIRONMENTAL PROTECTION, Dr. Richard T. Dewling, Commissioner, and Gerald Burke, Director, Office of Regulatory Services, Defendants-Respondents. |
| Court | New Jersey Superior Court — Appellate Division |
Robert A. Maren, for plaintiff-appellant (Broscious, Cooke & Glynn, attorneys; Robert A. Maren, Washington, N.J., on the brief).
John P. Gallina, Flemington, for intervenors-appellants (Gaetano M. DeSapio, Baptistown, attorney; John P. Gallina, Flemington, on the brief).
Paul H. Schneider, Deputy Atty. Gen., for defendants-respondents (Peter N. Perretti, Jr., Atty. Gen., attorney; James J. Ciancia, Asst. Atty. Gen., of counsel; Paul H. Schneider, on the brief).
Before Judges KING, SHEBELL and BAIME.
The opinion of the court was delivered by
BAIME, J.A.D.
This appeal presents a question of first impression. N.J.S.A. 13:1E-138 imposes three new taxes on the disposal of solid waste at sanitary landfills. Exempt from taxation are the "waste products resulting from the operation of a resource recovery facility." N.J.S.A. 13:1E-138 a, b and c. Although there are various types of resource recovery facilities, see N.J.S.A. 13:1E-137v, we are concerned here with an incinerator that reduces solid waste to ash residue by combustion, thereby producing energy. At issue is whether solid waste materials, other than those resulting from the combustion process, fall within the statutory exemption. We hold that only those materials which are subjected to and produced by the actual incineration process are exempt from the new taxes. Stated generally, solid wastes which bypass a resource recovery facility and are not treated do not constitute "waste products resulting from the operation of a resource recovery facility" and are thus not exempt.
The facts are not in dispute and are largely a matter of public record. The Pollution Control Financing Authority of Warren County (PCFA), a body corporate and politic created under the New Jersey Pollution Control Financing Law, N.J.S.A. 40:37C-1 to 40:37C-18, was instrumental in constructing New Jersey's first resource recovery facility. The facility will receive and incinerate acceptable, combustible, non-hazardous municipal waste for energy production. In addition, a sanitary landfill is presently under construction in Warren County. When completed, this landfill will receive the ash residue produced by the combustion of solid waste at the resource recovery facility. The landfill will also receive other materials which are not incinerated at the facility because they are bypassed or are unsuitable for burning. These facilities will serve Warren County and, pursuant to an inter-district agreement, will also accept some wastes from Hunterdon County.
By letter dated May 5, 1987, counsel for the PCFA asked the New Jersey Department of Environmental Protection (NJDEP) for a determination concerning the applicability of the new taxes to Warren County's sanitary landfill. In the letter, counsel noted that there are situations in which solid wastes will not be accepted for incineration at the resource recovery facility, but instead will be disposed of at the landfill. Several categories of waste fall within this classification. First, it is anticipated that waste will be generated in excess of the capacity of the resource recovery facility and these materials will not be subject to the combustion process. Similarly, there will be periods in which the incinerator is not operational due to repairs or maintenance and, in this event, wastes will be disposed of at the landfill. Further, certain "non-processible" wastes not suitable for burning will be bypassed and will be directed to the landfill. The PCFA asserted that such wastes, those not produced by incineration, as well as the ash residue resulting from the combustion process, should not be subject to taxation.
On July 15, 1987 the NJDEP responded by letter. The NJDEP determined that only wastes produced by the incineration process, ash residue, fall within the purview of the exemption provided by N.J.S.A. 13:1E-138 a, b and c. Those materials which bypass the incinerator, either (1) because they exceed the facility's capacity, (2) are received when the facility is not operational or (3) are of a kind which, by their nature, are not subject to the combustion process, were declared subject to taxation.
Following its receipt of the NJDEP's opinion letter, the PCFA filed a complaint in the Superior Court, Law Division, seeking a declaratory judgment. Thereafter, Hunterdon County and the Hunterdon County Utilities Authority (Hunterdon) were permitted to intervene. The case was then transferred to the Appellate Division. R. 1:13-4.
The PCFA seeks a reversal of the NJDEP's determination on the basis that (1) only the Director of the Division of Taxation had jurisdiction to resolve questions relating to the applicability of the statutory exemption, (2) the NJDEP's action constituted de facto rule-making in violation of the Administrative Procedure Act ( N.J.S.A. 52:14B-1 to 52:14B-15), and (3) under the statute, all materials and wastes received by a sanitary landfill from a resource recovery facility are excepted from the three taxes. Hunterdon joins in the PCFA's substantive argument that the exemption applies to wastes bypassed from the incineration process as well as ash residue.
Before considering the arguments advanced, a brief description of the operative statutory scheme is necessary for a full understanding of the issues presented. The legislation creating the new taxes supplements the Solid Waste Management Act ( N.J.S.A. 13:1E-1 to 13:1E-198). In its findings, the Legislature acknowledged that "New Jersey must move away from its current reliance on landfilling as the principal method of solid waste disposal" and adopt new and efficient "waste reduction, recycling and energy recovery technologies." N.J.S.A. 13:1E-136. "Decreasing the waste flow to landfills, whether by means of predisposal methods such as source separation and recycling or through high technology conversion" was thus said to be "in the energy, environmental, and economic interests" of the State. Ibid.
In furtherance of this objective, and in keeping with similar efforts in other states, the Legislature developed a "two-pronged" strategy for managing solid waste disposal designed to encourage a transition from a traditional and virtually exclusive reliance on landfilling to the increased use of advanced resource recovery incinerators and facilities. Statement of the Senate Energy and Environmental Committee, Assembly No. 1778-L. 1985, c. 38. "The first component of ... the strategy consists of the imposition of taxes on solid wastes disposed of at landfills, designed to provide counties with funds with which to make the transition toward resource recovery," and to establish "incentives" for that purpose. Ibid. The second component "establishes a procurement procedure" for the provision of resource recovery services.
Pursuant to N.J.S.A. 13:1E-138 a, b and c, "[t]here is levied upon the owner or operator of every sanitary landfill facility" three taxes, a solid waste services tax, a resource recovery investment tax and a solid waste importation tax. Together, these are commonly known as the McEnroe taxes. As we mentioned at the outset of our opinion, a common exemption excepts from all three taxes the "acceptance for disposal of the waste products resulting from the operation of a resource recovery facility." Ibid.
The statutes "establish several funds as depositories of the revenues generated from the three new landfill taxes." Ibid.; see also N.J.S.A. 13:1E-147; N.J.S.A. 13:1E-149. The "Solid Waste Services Tax Fund" is thus established in the NJDEP. N.J.S.A. 13:1E-147. The counties "can use ... moneys [from this fund] for district solid waste management plan implementation, public participation programs, and the implementation of the goals of the State Recycling Plan." Statement of the Senate Energy and Environmental Committee, supra. The "Resource Recovery Investment Tax Fund" is created in the Department of the Treasury, N.J.S.A. 13:1E-149, and is designed to "subsidize the cost differential between current landfill disposal costs and anticipated resource recovery tipping fees," to "finance the design, construction, operation, and maintenance of new or expanded sanitary landfill facilities to be used for the disposal of ash residue ... and to finance the closure costs associated with terminated landfills...." Statement of the Senate Energy and Environmental Committee, supra.
To recapitulate, "the days of the dominance of landfills are numbered." Ibid. In creating the McEnroe taxes, the Legislature intended to encourage the transition from landfills to resource recovery facilities and to promote corresponding efforts toward recycling and waste reduction.
We now turn to the arguments advanced by the PCFA and Hunterdon. We consider these contentions in the order raised.
We first address the PCFA's argument that the NJDEP lacked jurisdiction to determine whether the statutory exemption was applicable to bypassed wastes not produced by the combustion process. We find no merit whatsoever in this contention.
At the outset, we observe that it was the PCFA that requested the NJDEP to render a written determination concerning the applicability of the taxes to the wastes which will bypass its resource recovery facility. In furtherance of its application, the PCFA emphasized the "importan[ce]" of having an immediate and authoritative resolution of the issue by the NJDEP. Having beseeched the NJDEP to decide the question, and now unhappy with the outcome, the...
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