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MAINE SUPREME JUDICIAL COURT                                                            Reporter of Decisions

Decision:       2003 ME 64

Docket:         Ken-02-508

Argued:         January 15, 2003

Decided:        May 1, 2003

Panel:           SAUFLEY, C.J., and CLIFFORD, RUDMAN, DANA, ALEXANDER, CALKINS, and LEVY, JJ.

TOWN OF JAY

v.

ANDROSCOGGIN ENERGY, LLC et al.

LEVY, J.

         [¶1]  The Town of Jay appeals from a judgment of the Superior Court (Kennebec County, Marden, J.) affirming a decision of the Board of Environmental Protection affirming the Department of Environmental Protection's grant of a property tax exemption to Androscoggin Energy, LLC, pursuant to 36 M.R.S.A. § 656(1)(E)(2) (1990), for Androscoggin Energy's dry low nitrogen oxide combustion systems (collectively, the DLN System).  The Town contends that the Board erred as a matter of law when it concluded that the DLN System (1) fits within the statutory definition of a "facility," (2) serves a pollution control function, and (3) was installed for the primary purpose of pollution control.  We affirm the court's judgment.

I.  CASE HISTORY

[¶2]  Androscoggin Energy owns and operates a gas-fired co-generation plant in the Town of Jay.  Located at the International Paper Mill (IP), the plant produces steam for sale to IP, and electricity for sale to IP and the regional electricity market.  Androscoggin Energy is partially owned by Wisvest, an affiliate of Wisconsin Electric Power Company, which contributed three combustion turbines in exchange for an equity interest in Androscoggin Energy.  The turbines were manufactured prior to 1994 for a paper mill project in Wisconsin that was later cancelled.

[¶3]  Town and state environmental regulations require that all new energy generation facilities be built in accordance with then-current Best Available Control Technology (BACT).  Jay, Me., Environmental Control and Improvement Ordinance § 13-303(3)(d) (Nov. 25, 1996); Me. Dep't Envtl. Prot. Reg. Ch. 115, § 4(A)(4)(d) (Nov. 1996).  To comply with BACT standards, Androscoggin Energy retrofitted the turbines with, among other things, the DLN System.  The DLN System is a "front-end" system, meaning that it reduces the amount of pollutants created in the production process.  In contrast, other retrofits to the turbines were "back-end" systems that control the emission of pollutants that are created in the combustion process.

[¶4]  Androscoggin Energy built the plant in 1998 and 1999.  The total cost of the plant was approximately $90 million, of which $3.9 million was for the retrofit of turbines.  The plant added approximately $84.6 million to the Town's tax base; Androscoggin Energy pays the Town approximately $1.3 million in taxes every year.

[¶5]  In January 2000, Androscoggin Energy applied to the Department of Environmental Protection (DEP) for a Tax Exemption Certification for the plant's air pollution control facilities, including the DLN System, pursuant to 36 M.R.S.A. §§ 656(1)(E)(2), 1760(30) (1990).  In March 2002, the Commissioner certified the DLN System as a tax-exempt air pollution control facility.  The Town appealed the certification to the Board of Environmental Protection and requested a public hearing, but did not request prehearing discovery beyond the exchange of prefiled expert witness testimony as agreed upon in a prehearing conference and memorialized by an order of the Board.

[¶6]  The Board affirmed the certification after conducting a hearing on "(1) the function of the [DLN System] which Androscoggin Energy seeks property tax exemption for; and (2) the motivation of Androscoggin Energy for the installation of the [DLN System]."  The Board concluded that the DLN System has multiple functions: "the primary functions are fuel delivery and combustion; the secondary function is industrial air pollutant reduction."  The primary motivation behind installing the DLN System, the Board concluded, was "reduction of an industrial air pollutant."  Finally, the Board concluded that the DLN System qualified as a tax-exempt air pollution control facility because its primary purpose was "reducing, controlling, eliminating or disposing of industrial air pollutants."

[¶7]  Pursuant to M.R. Civ. P. 80C, the Town appealed the Board's decision to the Superior Court.  The Town filed a motion for additional evidence and discovery, arguing that it was entitled to discovery and additional testimony on the business relationships and motivations involved in the purchase of the DLN System.  Additionally, the Town brought a declaratory judgment action and moved to consolidate the declaratory judgment and 80C actions.  Androscoggin Energy and the Attorney General, representing the DEP, objected to both motions.  After a hearing, the Superior Court denied the Town's motion for additional evidence and discovery.  The Town then withdrew its motion to consolidate.  On July 31, 2002, the Superior Court affirmed the Board's decision.  This appeal followed. 

II.  DISCUSSION

A.      Prehearing Discovery

[¶8] As a preliminary matter, the Town asserts that the Board abused its discretion when it restricted prehearing discovery to a requirement that the parties file their expert witnesses' testimony in writing prior to the hearing.  The Town has not, however, identified any specific prejudice to it resulting from this restriction. 

[¶9]  Due process at the agency level does not require full trial-like procedures.  Fichter v. Bd. of Envtl. Prot., 604 A.2d 433, 437-38 (Me. 1992).  Moreover, "relaxation or modification of procedural rules by an administrative agency does not constitute reversible error absent