### T E X A S C O U R T O F A P P E A L S , T H I R D D I S T R I C T , A T A U S T I N

NO. 03-11-00442- CV

Mont Belvieu Caver ns, LL C, Appellant

v. Texas Com m ission on En vironm ental Quali ty; and Zak Covar, Successor t o Mark R. Vic kery, Exec utive Dire ctor of the Texas Com m ission on En vironm ental Quali ty, Appellees

F ROM TH E DISTRI CT COURT O F TRAVIS CO UNTY, 200 TH JUDICI AL DISTRICT NO. D-1 -GN-0 9-0 0004 3, H ONO RAB LE TIM SULAK , JUDGE P RESIDING

O P I N I O N

Mont Be lvieu Caverns, L L C, appea ls a final summary judgme nt that it take nothing in a suit for judicial revie w of a Texas Commi ssi o n o n E n v i ro nmental Quality (TCEQ) order deter mining that a new brine-pond sy stem Mo n t Be l v i eu had installed at one of its fac iliti es did not qualify for the “pollution control proper ty ” tax exemption. See Tex. Tax Code Ann. § 11.31 (West Supp. 2 0 1 1 ). M ont Be lvieu bring s two issues, urg ing that (1) the district court err ed in 1 g ranting the summary judgme nt and in deny ing a cross-motion Mont Be lvieu had filed; and (2) the district court abused its discretion in deny ing Mont Be lvieu cer tain discovery

. We will overr ule these issues and a ffirm the district c ourt’s judg ment.

We cite the curr ent versions of statutes and rules wher e there h as b ee n n o m ater ial 1 intervening substantive chang e.BACK GR OUND

Regulatory c ontext

To best understand th e re l ev ance and leg al signific ance of the historical fac ts underly ing this appea l, it is helpful t o beg in with an ex planation of the re gu l at o ry reg ime throug h which the “ pollution control property ” exemption is admini stered a nd TCEQ’s role w ithin it

. 2

Statu tory fram ework I n November 1993, Texas voters ratified amendments to their state constitution authorizin g t h e L eg islature to enac t g ener al l aws ex empting from ad valore m taxation “all or part of rea l and persona l proper ty used, constructe d, acquir ed, or installed” afte r J anuar y 1, 1994, “wholly

or partly to meet or exceed rules or reg ulations adopted by any environmenta l protec tion ag ency of the U n i t ed S t at es, this state, or a poli tical s ubdivision of t his state for the prevention, monitoring, control, or reduc tion of air, water , or land pollution.” Tex. Const. art. VII I , § 1 -1 (a dopted at the Nov. 2, 1993 elec tion ( see Tex. H.J.R. Res. 86, § 2, 73d L eg ., R.S., 1993 Tex . Gen. L aws 5576)). 3 Conditi oned on ratifica

tion, the L eg islature enac ted a new section 11.31 of the tax code, which took eff ect on J anuar

y 1, 1994. See Act of May 10, 1993, 73d L eg . , R

. S

. , ch

. 285, §§ 1, 5 (codifie d as amende d at Tex. Tax Code Ann. § 11.31). Subsection (a) of section 11.31 states that “[a] person is entitled to an exemption from taxation of all or part of rea l and persona l proper ty that t h e person
Some of the ensuing discussion conce rns actions or events involving TCEQ’s prede cessor 2 ag ency , the Texas Natura l Resource Conservation Commi ssion. For clar ity , and beca use there is no distinction betwee n the two that is materia l to our analy sis, we use “TCEQ” to ref er to both TNRCC and TCEQ. The amendment there by cre ated an exception to artic l e VI I I ’s g ener al require ments that 3 “[t] axation shall be equal and uniform” and that “[a]ll rea l proper ty and tang ible persona l pr operty in this S tate . . . shall be ta x ed in proportion to its value.” See Tex. Cons t. art. VI I I , § 1(a) -(b)

. 2owns and that is used wholly or par tly as a f acility , device , or method for the control of a ir, wate r, or land pollution.” Tex. Tax Code Ann. § 11.31(a ). A “ fac ility , device , or method for the control of air, w ater , or land pollution,” is defined in subsec tion (b) of sec tion 11.31 as:

land that is acquir ed afte r J anuar y 1, 1994, or any structure , building, inst al l ation, excavation, machiner

y , equipment, or d evice , and any attachme nt or addition to o r reconstruction, repla ceme nt, or improvement of that proper ty , that is used, constructe d, acquir ed, or installed wholly or partly to meet or exceed rules or reg ulations adopted by any environmenta l protec tion ag ency of the Un it e d St a tes, this state, or a political subdivisi on of this state f or the pre vention, monitoring, c ontrol, or re duction of air, w ater , or land pollution.

Id. § 11.31(b). Howeve r, the L eg islature limit ed this definition somewhat by providing that proper ty used in “manuf

actur [i ng ] or produc[ing] a product or provid[ing] a service that preve nts, monitors, controls, or reduc es air, water , or land pollution,” such as a landfill, did not, for that rea son alone, qualify for the ex em p t i o n . S ee id. § 11.31(a)

. Property that meets t he st atutory definition 4 and qualifies for the exemption is termed, as s h orthand, “pollution control proper ty ” within section 11.31. See id. § 11.31(c) , (f) , (h), ( i).

I n addition to cre ating this tax e x emption f or pollution-control proper ty in tax code section 11.31, the L eg islature also established a two-stag e proce ss for administering the exemption. I n the first stag e, a person desiring to obtain the exemption for particula r proper ty must a pply for a deter mination from TCEQ’s exe cu t i v e direc tor (commonly termed a “use deter mination” ) that

5

The L eg islature also excluded from the exemption proper ty used for residential purposes, 4 or for rec re at ional, park, or scenic uses as define d in tax code section 23.81. See Tex. Tax Code Ann. § 11.31(a ) (West Supp. 2011). See 30 Tex. Admin. Code § 17.2(11) (2012) (Tex. Comm’n on Envtl. Quality , Def initions ) 5 (def ining “use deter

mination” as a “finding , either positive or neg ative, by the executive direc tor that 3the proper ty “is used wholly or partly as a fac ility , device , or method for the control of air, water , or land pollution”—i.e., the proper ty is pollution-control proper ty elig ible for the exemption. See id. § 11.31(c) , (d); cf. § 11.31(a) , (b) (statutory definition). The applicant must detail, i nter alia, “the proportion of the installation t h at i s p o llution control proper ty ” and, if the proper

ty is not wholly pollution-control proper

ty , “such financ ial or other data as the executive direc tor require s by rule for the deter

mination of the proportion of the installation that is pollution control proper ty .” Id. § 11.31(c)

. Upon such application, the executive direc tor must deter mine “whe t h er t h e facility , device , or method is use d wholly or partly to control pollution and, if applicable , the proportion of the prope rty

that is pollut ion control proper ty .” See id. § 11.31(d). The executive direc tor’s use deter mination may be “appe aled” to TCEQ commissioners. See id. § 11.31(e)

. The commissioners must consider the appea l at th eir next reg ularly schedule d meeting and either aff irm the use deter

mination or rema

nd it for redeter mination. See id

. Such an appea l “is not a contested case ” for purposes of the Administrative Procedur es Act. See id. TCEQ’s order in suc h a proce eding may be challeng ed throug h a suit for 6 judicial revie w under

the g ener al authorization in section 5.351 of t he water code, see Tex. Water Code Ann. §§ 5.351, .354 (West 2008), with the district co u rt ’s judgme nt being subject to the appellate proce ss as with “other civil case s in which the district court has orig inal jurisdiction.” Id. § 5.355 (West 2008).

the proper

ty is use d wholly or partially for pollution control purposes and listi ng the perc entag e of the prope rty

that is determined to be use d for pollution control”). The Administrativ e P ro ce d u re Act (APA) is codified at Tex. Gov’t Code Ann. 6 §§ 2001.001–.902 (West 2008). 4I f an applicant s ucce eds in obtaining a final use deter mination that the proper

ty is wholly or par tly pollution-control property (terme d a “positive” use determination ), the a pplicant 7

can then apply for the exemption with the local appra isal district wher e the proper ty is located. See Tex. Tax Code Ann. § 11.31(i); see also id. § 11.43 (setting forth application require ments). The district court must acc ept the TCEQ executive direc tor’s positive use deter mination as “conc lusive evidence” that the proper ty (or, if applicable , the proportion of the proper ty that the executive direc tor found to b e p o l l u t ion-control proper ty ) qualifies for the exemption. See id. § 11.31(i); see also id. § 11.31(d).

The 2002 rule am endm ents I n 2001 amendments to section 11.31, the L eg islature mandated t h at TCEQ promulg ate new rules clar i fy i n g and ref ining the standards the executive di rec tor employ ed when deciding use-de termination applications. See Act of May 22, 2001, 77th L eg ., R.S

. , ch. 881, § 1, 2001 Tex. Gen. L aws 1 7 7 4 , 1 7 75 (codifie d at Tex. Tax Code Ann. § 11.31(g )). These rules, the L eg islature specific ally require d, “must

. . . establish specific sta n d a r d s f o r c o n s id e r in g a

p p lications,” “ens u re that deter

minations are equal and uniform,” and—of particula r signific ance to this appea l—“allow for deter

minations that distinguish the proportion of proper ty that is used to control, monitor, preve nt, or reduc e pollution from the proportion of proper ty that is used to produce g oods

or service s.” See id. (codifie d at Tex. Tax Code Ann. § 11.31(g )). Wit h this, the L eg islature added

an express prohibition ba rring the executive direc tor from g ranting any positive use deter mination

See 30 Tex. Admin. C ode § 17.2(11)

. 7 5unless the proper ty complied with those “standa rds established under rules adopted under this section.” Id. (codifie d at Tex. Tax C ode Ann. § 11.31( h)).

I n rec og nizi ng

—and re quiring TCEQ to make—a distinction betwee n “prope rty that is used to control, monitor, preve nt, or reduc e pollution” (i.e., pollution-control prope rty ) and “prope rty that is used to produce g oods and service s,” the L eg islature drew a conce ptual line simil ar to one sug g ested by the Attorney Gene ral in an opinion he had issued a few wee ks ear lier construing
tax code section 11.31. See Tex. Atty Gen. Op. No. J C-0372 (2001). Opinion J C-0372 responde d
to a reque st from TCEQ’s chair man inquiring, in part, whether t h e p ollution-control proper ty exemption applied to equipment used to make a product that limit s pollution throug h its desig n (he cited the example of a boiler constructe d with technolog y that achie ves more complete combustion and, i n t u rn , lower emissions), as opposed to pollution-control equipment that is “adde d on” to production equipment (e.g ., controls at t he end of t he production proce ss, like scrubbe rs). See id.
at 3–4. Whil e sug g esting that “an add-on device ” would be “wholly ” pollution-control proper ty and thus qua lify for an exemption for the total va lue of that proper ty , the Attorney Gene ral, construing

s ection 11.31’s definition of pollution-control proper ty and its provisions rela ting to partial exemptions , rea soned that “prope rty that serve s both a production and a p o l l u t i o n-re duction purpose[] is not enti t l ed to a tax exemption on the total value of the proper ty ,” but only a partial exemption corr esponding to the “portion of proper ty that actua lly controls pollution.” See id. at 6–7. The Attorney Gene ral conclude d by sug g esting that “[t] he leg islature may want to provide [TC EQ] with additional g uidance reg arding the proper criter ia for assessing what portion of proper ty actua lly controls pollution,” further observing that the leg islation that later beca me the 2001 amendments to 11.31 was a lrea dy

under c onsideration. See id. at 7 n.4.
6I n response to the L eg isl at u re ’s mandate, TCEQ made swee ping chang es to

its rules conce rning use applications, which wer e (and still are ) codified in chapte r 17 of Texas Administrative Code title 30. See 26 Tex. Reg

. 7420 (2001), adopted by 27 Tex. Reg

. 185 (2002) (codifie d at 30 Tex. Admin. Code §§ 17.1–.25) (2002) (“ 2 0 0 2 Rules”). The 2002 rules prohibited the executive direc tor from deter mining that proper

ty is pollution-control proper ty unless (1) the proper

ty was “used, constructe d, acquir ed, or installed wholly or part l y to meet or exceed laws, rules, or reg ulations adopted by any environmenta l protec tion ag ency of the United States, Texas, or a poli tical s ubdivision of Tex as, for the prevention, monitoring, control, or reduction or air, water , or land pollution”—i.e., it met the statutory definition of polluti o n -control proper ty

— and 8 (2) “the require ments of § 17.15 and § 17.17 of this title (rela ting to ReviewStandards and Partial Deter mination) have be en met.” See 2002 Rules § 17.4(d). Section 17.15 of the 20 0 2 R u les, in turn, require d the executive direc tor to apply standards set forth in a “De cision Flow Chart” when deciding use applications. See id

. § 17.15 (flow char t located at 27 Tex. Reg

. at 303). The Dec ision Flow Chart presc ribed three sets of inquiries wi th respe ct to eac h piece of proper ty for which the exemption was claimed. First, the execut i v e direc tor was to consider whether the installation of the equipment or proce ss in question allowed the applicant to meet or ex cee d a spec ific, identifiable e nvironmental law or reg ulation. See id . (flow char t & n.3). I f he found i n t he aff irmative, the executive direc tor next considere d whether the equipment or proce ss provided an identifiable environmenta l benef it “at the site wh er e i t is installed.” See id

. (flow char t & n.4). I f this sec ond question was answe red in the aff irmative, the

See Tex. Tax Code Ann

. § 1 1 .31(a) , (b). The rule simil arly trac ked section 11.31’s 8 exclusions and lim itations. See 2002 Rules § 17.4(a); see also id. § 17.6. 7proper

ty was considere d “elig ible” fo r a positive use deter mination, and the issue then beca me the proportion of the proper ty that was to be c onsidered pollution-control pr operty

. See id. To asce rtain t he proportion of t he property that was poll ution-control property , the Dec ision Flow Chart and other rules presc ribed three alterna tive analy tical trac ks or “tiers.” Under “Tier I ,” the applicable proportion was to be deter mined by ref

err ing to a “pre deter

mined equipment list” (PDL ), a listing of

g ener ic prope rty

cate g ories and ty

pes for which the e x ecutive dir ector had previously deter

min ed an applicable perc entag e of pollution-control use. See id

. §§ 17.2(9), (11) (def ining “pre deter

mined eq u i p m ent list” and “Tier I ” respe ctively ), 17.15 (flow char

t). I f the p ro p er t y appea

red on the P DL or was nece ssary for the installation or operation of property listed there , the executive direc tor would g rant a positive use deter mination for th e p ro p er t y , with the appli ca ble percenta g e of use as the P DL presc ribed. See id. § 17.2(11), 17.15 (flow chart). I f t he proper ty did not appea

r on the PDL , the application was to be analy zed under either “Tier I I ,” which inquired wh et her or not the proper ty was wholly (100%) pollution-control proper ty , or “Tier I I I ,” which assumed that the proper ty was only partially pollution-co n t ro l proper ty and focuse d

on asce rtaining the appropr iate perc entag e of use. S ee i d

. § 17.2(7), (12), (13) (def ining “par

tial deter mination,” “Tier I I ,” and “Tier I I I ” re s p ectively ), 17.15 (flow char

t). Rule 17.17 g overne d Tier I I I deter

minations, also termed “pa rtial deter minations.” See id . § 17.2(7), 17.17. Rule 1 7

. 1 7 re quired the executive direc tor to deter mine the “cr editable partial perc entag e for a proper

ty or projec t which is not used wholly for pollution control” throug h a series of calc ulations derive d from cost acc ounting principles. See id

. § 17.17(b); see also id

. § 17.2(4) (def ining “cost analy sis proce dure” ). Simpl y descr ibed, the calc ulations soug ht to identify the p er ce n t age of the proper

ty ’s total capital costs that wer e attributable to the proper ty ’s pollution8control fea ture by (1) compar ing the total capital costs to the cost of compar able equipment without

the pollution-control fea ture, and (2) adjusting d o w nw a r d f or (a) any incre ases in productive capa city attributable to the new proper ty and (b) the value of any waste by products that could be reuse d or recy cled due to the new pollution-control fea ture. S ee i d

. § 17.17 (re fer ence d char ts located at 27 Tex. Reg

. at 305–06 ); see also id

. § 17.2(1), (2), (3), (10) (defining “by product,” “ca

pital cost new,” “ca pital cost old,” and “ production ca pacity fac tor” re spectively

). 9 The 2002 Rules likewi s e i mposed proce dural demands upon applicants that corresponded to the analy tical tier under which the use deter mination was being soug ht. An applicant could file a “Tier I ” application for a deter mination based o n t h e PDL , or a “Tier I I ” application seeking to demonstrate that the proper ty was wholly (100%) pollution-control proper ty , and otherwise would be require d to file a “Tier I I I ” application seeking a partial deter mination. See id

. § 17.2(11)–( 13), 17.17(a)

. Tier I I I applications wer e the most complex, with appl icants req u i re d t o s upply “a workshee t showing the calc ulation of the Cost Analy sis Procedur e, § 17.17

The 2002 Ru l es presc ribed the following formula to deter mine the cre ditable partial 9 perc entag e for

a prope rty

or projec t that is not used wholly for pollution control:

See 2002 Rules § 17.17(b). “B y product” in the above f

ormula is deter

mined as follows:

See id. § 17.17(c)

.
9of this chapte r (re lating to Partial Deter min at i o n ), and explaining eac h of the varia bles.” See id

. § 17.10(d)( 5). The rules likewise imposed filing fee s corr espondi n g t o t h e relative complexit y and resour ce- intensiveness of the work the application demande d of TCEQ’s sta ff , wi th Tier I applications requiri n g t h e l owest application fee , Tier I I I applications the highe st, and Tier I I applications in betwe en. See id . § 17.20(a)

.
The 2008 rule am endm ents Although T CEQ’s 2002 Rules require d the ex ecutive director to e stablish the PDL and made it an integ ral part of the perc entag e-of -use analy sis, see id

. §§ 17.2(9), (11), 17.4(c) , 17.15, the age ncy

did not include the PDL itself within those rules. I nstead, TCEQ sty led t he P DL as an “appe ndix ” to a “Te chnica l Guidelines Manual” that the ag ency published to g ive g uidance to usedeter mination a

pplicants. See 19 Tex. Reg

. 7793, 7794–96 (F eb. 4, 1994) (desc ribing manual and explaining that the PDL

would be kept se para

te as a n appendix because of the ne ed to continually revise the PDL “indepe ndent of the ma nual”) . The a g ency

justified this approa ch as war rante d by the need for flexibi lity in making revisions to the PDL as staff fou n d ap p ro p ri ate “without the formality of rulema

king.” See id. at 7796. This chang ed, howeve r, afte r the L eg islature amende d tax code section 11.31 in 2007
to require TCEQ to promulg ate rules establishing “a non ex cl u s i v e list of fac iliti es, device s, or methods for the control of air, water , or land pollution” and update it at least once ever y three y ear s. See Act of May 28, 2007, 80th L eg ., R.S., ch. 1277, § 4, 2007 Tex. Gen. L aws 4261, 4264 (codifie d
at T ex . Tax Code Ann. § 11.31(k), ( l )). TCEQ responde d to this and other mandate s i n t h e leg islation by promulg ating rule amendments that took eff ect on Fe bruar

y 7, 2008. See 32 Tex. Reg

.

106985 (2007), adopted by 33 Tex. Reg. 932 ( 2008) (c odified at 30 Te x . Admin. Code §§ 17.1–.20) (2008) (“2008 Rules”). The am en d m en t s ’ chief impact rele vant to this case was to repla ce the 1 0 former PDL with “ Part A” of a new and slightly differ ent “Equipment and Categ ories L ist” (ECL ) that was incorpora

ted into the rules themselves. See 2008 Rules § 17.2(7) (def ining “Equipment and Categ ories L ist”), 17.14 (de scribing “Equipment Categ ories L ist). 1 1

Mont Belvieu seeks a use deter m ination

Appellant Mont Be lvieu is in the business of storing n at u ral g as liquids in underg round salt dome ca verns. To r emove g ases f rom the storag e ca

verns, Mont B elvieu pumps in brine—hea

vily salted wa ter—to displace the gase s. Conversely , when Mont Belvieu desire s to pump g ases into the cave rns, brine must be remove d. I n rec ent deca des, Mont Be lvieu and aff iliated entities have constructe d larg e surfa ce impoundments or “ponds” at th ei r storag e fac iliti es to reta in displaced brine for future reuse . Such ponds fall within the definition of “brine pits” that are reg ulated by Texas Railroad Commi ssion to ensu re t h at , among other conce rns, brine does
not discharg e into and pollute surfa ce or subsurfac e water s. See genera lly 16 Tex. Admin. Code § 3.8(d)( 8) (2012) (Tex. Railroad Comm’n, Water Protection) (“Rule 8 ”); see also id. § 3.8(a) (2) (def ining “ brine pit”).

TCEQ made further amendments to its use-de t er mination rule in 2010, but these are 1 0 not materia l to our analy sis. See 35 Tex. Reg

. 6255 (2010), adopted 35 Tex. Re g. 1 0 9 6 4 (2 0 1 0 ) (codifie d at 30 Tex. Admin. Code §§ 17.1–.25). The other portion of the ECL , “Part B,” consisted of cer tain cate g ories of pollution-control 1 1 equipment that the L eg islature’s 2007 amendments require d TCE Q t o include in the ECL

. See Tex. Tax Code Ann. § 11.31(k) ; 2008 Rules § 17.14(a). 11Mont Be lvieu maintains that its brine p o n ds and rela ted piping, pumps, and

equipment quali fy as 100% pollution-control proper ty , rea soning that these fac iliti es repr esent an environmenta lly pref

era ble alterna tive to their other pri n ci p al option for handling displaced brine—disposing of it throug h injection wells, see 16 Tex. Admin. Code § 3.9 (2012) (Tex. Railroad Comm’n, Disposal Wells), a method that would also nece ssitate that the company consume large quantities of fresh water t o cre ate ne w brine w hen nee ded. As if e choing this view, the PDL (i.e., the list of prede termined pollution-control pr operty cate g ories under the 2002 Rules) listed “ Br ine Storag e Ponds”—including not only the excavation, but liners, pumps, and other “anc illary equipment”—a s 100% pollution-control proper ty :

No. Media Equ ipme nt Desc ription P erc ent S-20 L and/Water Surfac e I mpoundments and

A n c i l l a r y E q u i p m e n t (I ncluding Br ine Storag e Ponds) Ex cava tion ponds, clay and sy nthetic liners, leak d e t e c t i o n s y s t e m s , leac hate collection and t r e a t m e n t e q u i p m e n t , monitor well, pumps, etc. 100%

2002 Rules § 17.14(a) (t ab l e at S-20). And Mont Be lvieu or its aff iliates succe ssfully obtained
at lea s t fi v e 100% positive use deter minations for brine-pond sy stems betwee n 1997 and 2007, including a 2007 Tier I deter mination for two ponds at its “Ea st Storag e” fac ility in Chambers County

.

On Fe bruar

y 12, 2008—five da

y s afte r the 2008 Rules took effe ct and r eplac ed the PDL with the ECL

—Mont Be lvieu submi t t ed a T i er I application seeking a 100% positive use

12deter

mination for a $23 milli on b rine storag e pond sy stem at its “Nor th Storag e” fac ility in Chambers County

. The application descr ibed the projec t and its anticipated environmenta l benef its as follows:

This Project [wil l] consist of o ne 4.0 milli on barr el HDPE [hi g h-density poly et h y lene] double lined brine pond, instrumentation, pond piping, elec trical substation and associate d equipment. The brine pon d w il l a c c o mp li sh two signific ant purp oses, waste minimi zation and preve ntion of salt water intrusion into inland water s. Also, by rec y cling brine, rathe r than using fre sh water which would become brine in daily opera tion of the cave rn sy stem, the total quantity of waste g ener ated will be si g nificantly

reduc ed by

constructing this brine pond. The c urre nt scope of this project includes the c onstruction of one 35f t X 70ft conc rete pump pit, and the installation of one 600 HP tra[n] sfer pump. Also included is 3,500[' ] of 30" HDPE piping f rom the newpond to North St[ ora]g e . . . .

Mont Be lvieu claimed that the projec t’s installation allowed it to mee t o r exceed 16 Tex. Admin. Code § 3.8—i.e., Rule 8, the Railroad Commi ssion rule reg ulating “brine pits.” I t cited
cate g ory S-20 as the basis for a Tier I deter mination, as had the 2007 Tier I application for the East Storag e brine ponds. Howeve r, ca teg ory S-20 had bee n chang ed in the new ECL :

No. Media Equ ipme nt Desc ription P erc ent S-20 L and/Water Surfac e I mpoundments

and Anc illary

Equipment (I ncluding Br ine Disposal Ponds) Ex cavation ponds, clay and sy nthetic liners, leak detec tion sy stems, leachate collec tion and tre atment equipment, monitor well, pumps, etc. 100%

2008 Rules § 17.14(a) ( table at S-20) ( emphasis adde d).

This time, in what Mont Be lvieu ch ar ac t eriz es as a stunning about-fa ce, TCEQ’s executive direc tor issued a neg ative use deter mination for the brine-pond sy stem, ex p l aini ng that “[t] he equipment is considere d to be production equipment and not p o l l u t ion control proper ty .” 13Mont Be l v i eu appea led the neg ative use deter mination to TCEQ commissioners. Mont Be lvieu, the executive direc tor, and the Offic e of Public I ntere st Counsel eac h submitt ed briefing , and 1 2 Mont Be lvieu additionally submitt ed evidenc e attempting to demonstrate that the executive direc tor had previously issued 100% positive use deter minations for sever al simil ar or identical brine-pond projec ts. I n his briefing , the executive direc tor urg ed the commissioners to aff irm his neg ative use deter mination because (1) br ine storag e ponds we re no longe r included in c ateg ory S-20 and we re thus no longe r eligi b l e o n t h at basis for a Tier I deter mination; (2) the North Storag e brine-pond sy s t em was used to manag e the level of g ases in the storag e cave rns and was thus considere d production equipment; and (3) the projec t and equipment i d en t i fied in Mont Be lvieu’s application—the concr ete pump pit, transfe r pump, and piping to and from the b r in e p o n d —simil arly failed the require ment that it provide an environmenta l benef it at the site of installation beca use they mere ly moved brine into and out of the cave rns. On t he other hand, the executive direc tor acknow ledg ed that cer

tain components of the brine-pond sy stem “installed to preve nt contamination of surfa ce or subsurfac e water in the state, such as s y n t h etic liner, leak- detec tion sy stems, and monitoring equipment may qualify for [t he] exempt i o n . ” No netheless, he insisted that any such relief was unavailable in the proce dural context of Mont Be l v ieu’s pending application, which soug ht a Tier I

deter mination for the entire brine-pond sy stem. The commissioners considere d Mont Be lvieu’s appea l during one of their reg u l ar public meeting s and aff

orded counsel for Mont Be lvieu and the executive direc tor five minutes

eac h to prese nt oral arg ument. During this portion of the meeting , two exchang es occur red betwee n

The loca l appra isal district did not file any briefing

. 1 2 14Mont Be lvieu and the commissioners t h at h av e signific ance to this appea l. First, Mont Be lvieu

acknow ledg ed that, as the executive direc tor had arg ued, it used the North Storag e b r in e - pond sy stem in producing its g as-stora g e services

— i

. e., the sy stem was, at least in part, “produc tion proper ty ” and not exclusively pollution-control proper ty

. Second, the commissioners, echoing the executive direc tor’s sug g estions that cer tain compone n

ts o f th e s y s te m w o u ld li k e ly q ualify as pollution-control proper ty , inquired whether Mont Be lvieu desired a rema nd so t h at i t could submit an application limit ed to or otherwise distinguishing the sy stem’s pollution-control co m p o n en ts or fea tures. Mont Be lvieu declined this invitation, steadfa stly insisti ng that it was entitled to a 100% positive use deter mination for the entire brine-pond sy stem. I mmediately following the latter exchang e, TCEQ commissioners voted unanimously to aff irm the executive direc tor, “having co ncluded that the Ex ecutive D irec tor’s De termination was in ac corda nce w ith the applicable sta tutes and rules.”

P roce edings i n di strict

court Mont Be lvieu sued TCEQ and its executive direc t o r (collec tively “TCEQ” with ref ere nce to this litigation) s ee k i ng to challeng e the ag ency ’s final order

. As authorized by water code section 5.351, Mont Be lvieu soug ht judicial revie w of the order , asser ting that its North Storag e brine-pond sy stem qualified for a 100% positive use deter minati o n an d t h at TCEQ’s contra ry decision was arbitra

ry and capr icious. Mont Be lvieu also asser ted claims for decla

ratory relief under section 2001.038 of the APA and the Uniform Dec lara tory J udg ments Act (UDJA) challeng ing 1 3 1 4 the validity and T CEQ’s construction of tax code section 11.31 and acc ompany ing reg ulations.

See Tex. Gov’t Code Ann. § 2001.038. 1 3 See Tex. Ci v. Prac. & Rem. Code Ann. §§ 37.001–.011 (West 2008). 1 4 15Specifica lly , Mont Be lvieu soug ht decla rations that: (1) TCEQ’ s construction of tax code se ction 11.31 and acc ompany ing reg ulations in rela tion to the North Storag e brine-pond sy stem “ig nore the plain terms of the statute and eng raf t a dditional r equire ments,” causing the ag ency to rende r “ultra vires decisions bey ond the scope of the ag ency ’s authority ”; (2) T C EQ’s “dec ision to trea t Mont Be lvieu differ ently from virtually identica l, p r io r a p p li c a n ts ” v io la te d th e c o mp any ’s due-pr ocess and equal- protec tion rig hts under the fede ral and state constitutions; (3) TCEQ’s denial of the pollutioncontrol exemption throug h administrative means and any judicial revie w limit ed to the substantialevidenc e standard violated constitutional due-pr ocess, equal- protec tion, open-c ourts, and jury -trial protec tions; (4) tax code section 11.31 was an unconstitutional deleg ation of leg islative authority to TCEQ; and (5) TCEQ’s application of its administrative rules had cause d Mont Be lvieu’s proper ty taxes to be “excessive and unla wful.” Mont Be lvieu propounded discovery requests on TCEQ. These reque sts consisted of content i o n i n t errog atories, reque sts for production, and reque sts for admission inquiring into TCEQ’s leg al and f

actua l bases for deter

mining that the North Storag e brine-pond sy stem was not 100% p o l lution-control proper ty and how that deter

mination compar ed to the ag ency ’s prior use deter minations involving other brine ponds. Mont Be lvieu also reque sted admissions to the eff ect that its North Storag e brine-pond sy stem had environmenta lly benef icial eff ects. TCEQ sough t a protec tive order , arg uing p rincipally that the reque sts wer e not rea sonably calc ulated to lead to the discovery of admissible evidenc e beca use judicial revie w was confine d to the ag ency re cord. Mont Belvieu move d to compel.

Whil e thes e d i s cover

y -re lated motions rema ined pending , Mont Be lvieu filed a motion for partial summary judgme nt on its judicial-re view claim. Mont Be lvieu soug ht to establish
16that TCEQ had acte d arbitra rily and capr iciously based on evidence p u rp o rt ing to demonstrate conclusively that the ag ency had previously g rante d 100% positive use dete rminations on projects simil ar or identical to its North Storag e brine-pond sy stem. Relatedly , Mont Be lvieu asser ted sever al summary -judg ment g rounds attempting to demonstrate that TCEQ’s intervening chang e fr o m the PDL to the ECL did not provide leg al support or justification for tre ating the North Storag e brine

pond sy stem differ ently

. Specifica lly , Mont Be lvieu urg ed that, as a matter of law, the applicability of the pollution-control proper ty exemption was g overne d by the rules i n eff ect on J anuar

y 1, 2008—i.e., the PD L

— an d that TCEQ’s application of the ECL instead was unconstitutionally

re t ro active. I n the event the EC L did apply , Mont Be lvieu further asser ted t hat t he North Storag e brine-pond sy stem still came within cate g ory S-20, and thus qualified for a Tier I 100% positive use d eter mination, beca

use there was no substantive distinction betwee n “brine storag e po n d s ” an d “brine disposal ponds.” And even if there wer e such a differ ence , Mont Be lvieu urg ed further in the alterna tive, S-20’s ref

ere nce to “brine disposal ponds” was mere ly illust rative and non-exclusive, and the sy stem was still a “surfa ce impoundment” tha t fit within t he categ orica l description.

I n addition to responding to Mont Be lvieu’s summary -judg ment motion, TCEQ filed

a cross-motion for partial summary judgme nt that Mont Be lvieu take nothing on its judicial-re view cl aim

. Among its g rounds, TCEQ asser ted that, contra

ry to Mont Be lvieu’s contentions, any alleg edly “unequa l” trea tment of the North Storag e brine-pond s y s t em was justified by the new ECL and that its application of the new list was not retroa ctive, much less unconstitutionally so. As additional gro u n d s, TCEQ relied on the now-undisputed fac t that the sy stem was, at least in part, production proper

ty , urg ing that this fac t neg ated the possibili ty o f t h e 100% positive use deter mination Mont Be lvieu had soug ht and that, simil arly , various sy stem components mere ly
17serve d production purposes and did n ot provide an environmenta l benef it at the site. Although reiter ating its prior acknow ledg ments that cer tain sy stem comp onents might qualify for the exemption, TCEQ likewise urge d ag ain t h at any such relief was unavailable under the proce dural posture of Mont B elvieu’s Tie r I application. Hea ring s wer e held on both the summary -judg ment m o t i ons and the pending discovery motions. Follo w in g b o th h e a r ings, the district court g rante d TCEQ’s motion for protec tive order and denied Mont Be lvieu’s motion t o co m p el

. A few day s later, the district court 1 5 g rante d TCEQ’s cross-motion for partial summary judgme nt and denied Mont Be lvieu’s m otion. The dist rict court’s order did no t s t at e t h e s p ecif ic grounds on which it relied. Subsequently , and expressly without conce ding the merits of t h e d i strict court’s prior ruling s, Mont Be lvieu filed a notice of partial non-suit as to its remaining claims in order to make the district court’s summary

judgme nt order final. Mont Be lvieu identified the “Unde cided Claims” as its “due proce ss and equal protec tion claims, ultra vires claim, claim that TCEQ denied Mont Be lvieu’s acc ess to open courts

or trial by j u ry , cl ai m that Tax Code section 11.31 is an unconstitutional deleg ation of leg islative authority , and claim that the subject taxes are excessive and unlawful.” The district court then signe d a fina l judgment incor

poratingits prior rulings a nd the nonsuit. This appeal followe d.

ANALYSIS Mont Be lvieu bring s two issues on appea l. I n the first , M o n t Be lvieu urg es that the district court err ed in g ranting TCEQ’s summary -judg ment motion and deny ing its own. I n the

Although the Honora

ble Tim Sulak ulti mately

signe d the final judg ment, as ref lected in 1 5 our caption, the Honora

ble L ora L ivingston hear d and ruled on the discovery motion s and the Honora ble Stephen Ye lenosky

ruled on the pa

rtial summary

judgme nt motions

. 18second, Mont Be lvieu arg ues that the district court abused its discretion in deny ing Mont Be lvieu’s motion to compel discovery and g ranting TCEQ a prote ctive orde r. Be fore turning to t h ese issues, we emphasize some signific ant aspec ts of the proce dural posture in which they are prese nted to us. Most p ro m i n en t ly , when asser ting its exemption claim befor e TCEQ, Mont Be lvieu opted to stand or fall based on a claimed entitlement
to a 100% positive use deter mination for its North Storag e brine-pond sy stem—an all-or-n o t h i n g claim that the sy stem is wholly pollution-control proper ty —and in particula

r a Tier I deter

mination based on cate g ory S-20 of the rele vant listi ng of prede termined pollution-control proper ty

. Consequently , the merits of Mont Be lvieu’s underly ing judicial-re view c la im turn on whether TCEQ
acte d arbitra

rily or capr iciously in deter mining that the brine-pond sy stem was not in cate g ory S-20 of that listi ng and there by failed to qua lify for a Tier I deter mination. “An administrative ag ency

1 6 is said to act arbitra

rily or capr iciously wher e, among other things, it fails to co n sider a fac tor the L eg islature has d i re cted it to consider, considers an irrele vant fac tor, or considere d rele vant fac tors but still rea ches a completely unrea sonable result.” City of W aco v. Texas Comm’n on Envtl. Quality , 346 S.W .3d 781, 819 (Tex

. Ap p . — Aus tin 2011, pet. denied) (citing City of El Paso v. Public Util. Comm’n , 883 S.W .2d 179, 184 (Tex. 1994)).

Additionally , while Mont Be lvieu initially asser ted claims for decla

ratory relief more broadly challeng ing the administrative and statutory fra m ew o rk within which TCEQ made this deter mination, it ultimately non-suited all of these claims except to the extent they wer e implicated

Although TCEQ advoca

ted a substantial-evidenc e standard below, at t h i s j uncture the 1 6 parties a g ree that the arbitrary -and- capr icious standard gove rns review of TCEQ’s order in a noncontested- case proce eding

. See City of W aco v. Texas Comm’n on Envtl. Quality , 346 S.W .3d 781, 815–19 (Tex. App.—Austin 2011, pet. denied). 19in the district c ourt’s summary -judg ment ruling s. The sole decla ratory claim that would appea r to be implicated by the summary -judg ment ruling s is Mont Be lvieu’s claim that TCEQ’s deter mination and its rules, including the ECL , are inconsistent with tax code se ction 11.31.

Summ ary judgm ent

On appea l, Mont Be lvieu challeng es TCEQ’s entitlement to summar y judgme nt on

eac h of the g rounds prese nted in TCEQ’s motion and urg es that it was entitled to summary judgme nt

on eac h of the g rounds prese nted in its own motion. I n essenc e, these competing g rounds join issue

as to whether the No rt h S torag e brine-pond sy stem qualifies as wholly (100%) pollution-control proper ty u n d er TCEQ’s rules or, if not, nonetheless qualifies under the statutory definitions such that the rules are inconsistent with the statute and invalid. I f the sy stem did n o t q u alify as 100% pollution-control proper ty under either TCEQ’s rules or the underly ing statutory definitions, TCEQ would not, as a matter of law, have acte d arbitra rily or capr iciously in d en y ing Mont Be lvieu’s applicatio n

— ra ther, it would have acte d arbitra rily and capr iciously if it had g rante d it. See Rodriguez v. Servic e Lloyds Ins. Co. , 997 S.W .2d 248, 254–55 (Tex. 1999) (“I f the Commi ssion does not follow the clea r, unambig uous lang uag e of its own reg ulation, we reve rse its action as a

rbitrar y and ca pricious.”)

.
Stan dard of rev iew We revie w a trial court’s summa r y - ju d g me n t r

u li n g s d e novo. Valence Operating Co.

v. Dorsett , 164 S.W .3d 656, 661 (Tex. 2005); Provident Life & Acc ident Ins. Co. v. Knott , 128 S.W .3d 211, 215 (Tex. 2003). Summary judgme nt is proper when there are no disputed issues of materia l fac t and the movant is entitled to judgme nt as a matter of law. Tex. R. Civ. P. 166a(c ).
20When revie wing a summary judgme nt, we take as true all evidenc e favor able to the non-movant, and

we indulge ever

y rea sonable infere nce and resolve any doubts in the non-movant’s favor

. Valence Operating Co. , 164 S.W .3d at 661; Knott , 128 S.W .3d at 215. When parties file cross-motions for summary judgme nt on overla pping issues and the trial court g rants one motion and denies the other,

we revie w the summary -j udg ment evidenc e supporting both motions and deter mine all questions prese nted and prese rved. See FM Props. Operating Co. v. City of Austin , 22 S

. W

. 3 d 8 6 8 , 8 7 2 (Tex. 2000). We “should rende r the judgme nt that the trial court should have rende red.” Id

. Where, as her e, the trial court does not specify any particula r ground on which it relied w hen g ranting the motion, we will aff

irm the judgme nt on any g round prese nted in the motion that is meritorious and prese rved for our revie w. State Farm Fi re & Cas. Co. v. S

. S

. , 8 5 8 S.W .2d 374, 380 (Tex. 1993); Picke tt v. Texas Mut. Ins. Co. , 239 S.W .3d 826, 840 (Tex. App.—Austin 2007, no pet.).

To the extent our resolution of these issues turns on construction of the tax code, we revie w these questions de novo. State v. Shumake , 199 S.W .3d 279, 284 (Tex. 2006). Our primary objective in statutory construction is to g ive eff ect to the L eg islature’s intent. See id. We seek that i n t en t “first and fore most” in the statutory text

. Lexington Ins. Co. v. Strayhorn , 209 S.W .3d 8 3 , 85 (Tex. 2006). “Where text is clea r, text is deter

minative of that intent.” Entergy Gulf States, Inc.

v. Summers , 282 S.W .3d 433, 437 (Tex. 2009) (op. on reh’ g ) (citing Shumake , 199 S.W .3d at 284; Alex Sheshunoff

Mgmt. Servs. v. Johnson , 209 S.W .3d 644, 651–52 (Tex. 2006)). We consider the words in context, not in isolation. State v. Gonzalez , 82 S.W .3d 322, 327 (Tex. 2002). We rely on the pl ain m eaning of t he tex t, unless a differe nt meaning is supplied b y l egis lative definiti on or i s appar ent from context, or unless such a construction leads to absurd results. See Entergy Gulf States, Inc ., 282 S.W .3d at 437; City of Rock wall v. Hughes , 246 S.W .3d 621, 625–26 (Tex. 2008); see also

21Tex. Gov’t Code Ann. § 311.011 (West 2005) (“Words and phrase s shall be rea d in co n t ex t and

construed acc ording to the rules of g rammar and common usag e,” but “[w]ords and phrase s that have acquir ed a te chnica l or particula r mea ning, whether

by leg islative definition or otherwise , shall be construed a ccor dingly .”). We a lso presume that the L eg islature wa s awa re of the bac kg round law and acte d with ref

ere nce to it. See Ack

er v. Texas W

ater Comm’n , 790 S.W .2d 299, 301 (Tex. 1990). We further presume that the L eg islature selec ted statutory words, phrase s, and expressions delibera tely and purposef ully

. See Texas Lot t er

y C o mm ’n v. First State Bank of DeQue en , 325 S.W .3d 628, 635 (Tex. 2010); Shook v. W alden , 304 S.W .3d 910, 917 (Tex. App.—Austin 2010,

no pet.). Our analy sis of the statutory text may also be informed by the presumptions that “the entire
statute is intended to be effec tiv e” an d t hat “a just and reasonable result i s intended,” Tex. Gov’t Code Ann. § 311.021(2), (3) (West 2005) , and conside ration of such matters as “the object soug ht
to be attained,” “cir cumstance s under which the statute was enac ted,” leg islative history , “common law or former statutory provisions, including laws on the same or simil ar subjects,” “conse quence s of a particula

r construction,” and the enac tment’s “title. ” Id

. § 311.023(1)- (5), (7) (West 2005). However, only when the statutory text is ambig uous “do we ‘re sort to rules of construction or ext ri n s i c ai d s . ’” Entergy Gulf States, Inc ., 282 S.W .3d at 437 (quoting In re Estate of Nash , 220 S.W .3d 914, 917 (Tex. 2007)).

I n addi tion to these g ener al principles that g uide our construction of tax code section 11.31, “[s] tatutory exemptions from taxation,” like the pol l u t i o n -control exemption, “ar e subject t o strict construction because they undermine equality and uniformity by placing a g rea ter burden on some taxpay ing businesses and individuals rathe r than placing the burden on all taxpay ers equally .” North Alamo W ater Supply Corp. v. W

illacy Cnty. Appraisal Dist. , 804 S.W .2d 894, 899
22(Tex. 1991) (citing Bullock v. National Bancshares Corp. , 584 S.W .2d 268, 271–72 (Tex. 1979)).

All doubts are resolved ag ainst the g ranting of an exemption. See id. ; Davies v. Mey er , 541 S.W .2d 827, 830 (Tex. 1976).

Mont Be lvieu’s first issue also potentially implicates principles that would require us to defe r to TCEQ’s construction of statutes it administers

. See Railroad Comm’n v. Texas Citi zens for a Safe Future & Clean W ater , 336 S.W .3d 619, 624–25 (Tex. 2011). But these principles apply only wher e the statute in question is ambig uous and only to the extent that the ag ency ’s interpre tation is one of those rea sonable interpre tations. See id. “Consequently , to deter mine whether this rule of d ef er en ce applies, a revie wing court must first make a threshold deter mination that the statute is ambig u o u s a n d th e a g e n c y ’ s c o n s tr

u c ti o n is r e a sonable—que stions that turn on statutory construction and are reviewe d de novo.” City of W aco , 346 S

. W .3d at 800 (citing Texas C itizens , 336 S.W .3d at 625). Additionally , this Court has recog nized that these principles of defere nce may be subj ect to further qualifica tions wher e the subject matter is not within any specia liz ed expertise of the ag ency , see id. (citing Texas Citi zens , 336 S.W .3d at 630), and wher e “a nontechnica l question of law” is involved, see Roger s v. T ex a s Bd. of Architectural Exam’ rs , —S.W .3d—, No. 03–10–00182–CV, 2011 Tex. App. L EXI S 6110, at *15 (T ex . Ap p.—Austin Aug

. 3, 2011,

no pet. h.) (citing Rylander v. Fisher Controls Int’l, Inc ., 45 S.W .3d 291, 302 (Tex. A pp.—Austin 2001, no pet.)).

To the extent our analy sis turns on TCEQ’s construction of the rules themselves, we defe r to the ag ency ’s interpre tation of its own rules unless that interpre tation is plainly err oneous or inconsistent w ith the text of the rule or underly ing statute. See Public Util. Comm’n v. Gulf States Utils. Co. , 809 S.W .2d 201, 207 (Tex. 1991) ; Tennessee Gas Pipeline Co. v. Rylander , 80 S.W .3d
23200, 203 (Tex. App.—Austin 2002, pet. denied)

. We construe admin i s t rative rules in the same

manner as statutes beca

use they have the forc e and eff ect of statutes. Rodriguez , 997 S.W .2d at 254.

Pollut ion-control vs. produ ction property Mont Be lvieu’s core asser tion on appea l is that its North Storag e brine-pond sy stem qualifies as 100% pollution-control proper ty under the definition in tax code section 11.31 and that it matters not under that definition whether the fac ility might also be considere d production proper ty

. To the e xte n t TCEQ’s rules would require a contra ry conclusion, Mont Be lvieu further sug g ests, they
contra dict the statutory

definition and ar e invalid. Mont Be lv ie u e mp h a s izes the text of subsections (a) and (b) of tax code section 11.31. Subsection (a) , as previously noted, states that “[a] person is entitled to an exemption from taxation of all or part of rea l and persona l proper ty that the person owns and that is use d wholly or partly as

a fac ility , dev i ce , o r method for the control of air, water , or land pollution,” while subsection (b) define s “fa cility , device , or m ethod for the con t ro l o f ai r, water , or l and poll ution.” See Tex. Tax Code Ann. § 11.31(a) , (b). Wit h ref ere nce to subsection (b), Mont Be lvieu arg ues that its brine-pond sy s t em i s (1 ) an “improveme nt” to rea l proper ty , as well as a “structur e,” “installation,” “excava tion,” and “devic e;” (2) that is “used, constructe d, acquir ed, or installed wholly or partly to

m ee t or exceed [environmental] rules or reg ulations”—the Railroad Commi ssion’s Rule 8

— an d (3) Rule 8 was adopted by the Railroad Commi ssion at least in part “for the preve ntion, monitoring, control, or reduc tion of air, water , or land po l l u t i o n . ” See id. § 11.31(b). And, Mont Be lvieu

rea sons, beca

use i ts brine-pond sy stem was thus unquestionably “par t of rea l

. . . proper

ty that [i t]

24owns and that is used wh o l l y or partly ” as such a “fa cility , device , or method,” subsection (a)

“entitle[s] [i t] to an exemption from tax ation.” See id. § 11.31(a)

.

Mont Be lvieu acknow ledg es that its brine-pond sy stem is part of the p r o c e s s b y w h ich i t p roduce s its g as-stora g e service s for customers and that other subsections within section 11

. 3 1 contemplate—inde ed require —that if proper ty is not “wholly ” u s e d f

o r pollution control, TCEQ will limit any positive use deter

mination to the pr oportion of the proper ty that is. See id. § 11.31(c) (3) (use- deter mination applicants must detail “the proportion of the installation that is pollution control proper ty ” and, “ [i ]f the installation i ncludes prope rty that is not used wholl y for the control of air,
water , or land pollution, the [applicant] shall also prese nt such fin an ci al o r o ther data as the executive direc tor require s by rule for the deter mination of the proportion of the installation that is pollution control proper

ty ”), (d) (executive d i re ctor shall make “dete rmination of whether the fac ility , device , or method is used wholly or partly to control p o l l u t i o n and, if applicable , the proportion of the proper ty that is pollution con t ro l proper ty ”), (g )(3) (rules must “allow for deter minations that distinguish the proportion of proper ty that is used to c ontrol, monitor, pr event, or reduce polluti on from the proportion of pro p er t y t h at i s used t o produce g oods and services” ). But, Mont B elvieu insists, it s brine-pond sy stem is “wholly ” pollution-control property as def ined in subsections (a) and (b) beca use the sy stem and all of its components collectiv el y enable it to

rec y cl e b ri n e ra t her than disposing of it, an alterna tive that also conser ves fre sh water that otherwise would be consumed in producing brine anew . I n its view, nothing in section 11.31 prec ludes property from being considere d “wholly ” pollution-control proper ty while also

concur rently having a role in producing g oods and service s. “At its logic al extreme,” Mont Be lvieu

s u gges t s, “all property has a business purpose,” including property like disposal wells that TCE Q
25considers to be 100% pollution-control proper ty , and that “[i] f the L eg islature had intended to define pollution control proper

ty as any method ‘used solely and exclusively for pollution control and not

a concur rent business purpose,’ ” it would have said so in the statute, y et did not. I n imposing such a limitation here, Mont B elvieu urg es, TCEQ has misconstrued and improperly added elements to the def inition of poll ution-control prope rty that the L eg islature has a ctually chosen. Mont Be lvieu’s rea soning overlooks t h e signific ance of subsection (g )(3) of section 11

. 3 1

. T hat provision, as previously explained, was part of the L eg islature’s 2001 amendments mandating that TCEQ promulg ate, and co mply with, rules imposing g rea ter cl arity and consistency in use determinations. See Act of May 22, 2001, 77th L eg ., R.S., ch. 881, § 1, 2001 Tex. Gen. L aws 1774, 1775 (c o d i fi ed at T ex. Tax Code Ann. § 11.31(g ), (h))

. And in subsection (g )(3) , the L eg islature in particula r mandated that the new rules “allow for deter minations that dist i n g uish the proportion of proper ty that is used to control, monitor, preve nt, or reduc e pollution [i .e., pollution-control proper ty ] from the proportion of proper ty t h at is used to produce g oods or service s.” Id

. § 11.31(g ). By requiring that TCEQ “ distingui sh the proportion of proper ty that is used to c ontrol, monitor, pr event, or re duce pollution [i .e., pollution-control prope rty ] from the proportion of proper

ty that is used to produce g oods or service s,” the L eg islature manifested its understanding and intent that pollution-control proper ty —proper ty qualify ing for the tax exemption—i s, by definition, distinct from “property that is used to produce g oods and services.” S ee id. Fur

ther, in the context of a statute addre ssing an exemption from ad valore m tax at i o n , subsection (g )(3) means that TCEQ must distinguish the proportion of t he property ’s value that is attributable to a pollution-control fea ture from that attributable to its capa city to produce g oods and service s, there by ref

lecting leg islative intent to limit the pollution-control proper ty exemption solely
26to c apital investment made to comply with state or fede ral environmenta l reg ulations that does not

y ield productive benef

its and would thus otherwise be irrational economica lly

. See id. § 11.31(g )(3)

. I n fac t, TCEQ ref

ers us to anec dotal leg islative history that, while not controlling , tends to confirm that this was the purpose of the pollution-control proper ty exemption from its inception. 1 7 These limit at i o ns and qualifica tions ref lected in subsection (g )(3) in turn inform

our construction of subsections (a) and (b)’ s definition of pollution-control p ro p er t y . See State

v. Gonzalez , 82 S.W .3d 322, 327 (Tex. 2002) (noting that courts must consider the words of a statute in c ontext , not in isol ation). And it f ollows f rom these limit ations and qualifica tions that proper ty cannot qualify as 100% pollution- co n t ro l p roper ty if any portion of its value is attributable to its capa city to produce g oods and service s. By acknow ledg ing that its North Storag e brine-pond sy stem

was part of its produc tion pr ocess, Mont B elvieu in e ssence conce ded that at least some portion of the proper

ty ’s value was attributable to its productive capa city , and it was not arbitra ry or capr icious for T C EQ to deter

mine as much. Consequently , Mont Be lvieu’s brine-pond sy stem cannot, by definition, be wholly (100%) pollution-control proper ty

. Thus, TCEQ’s reje ction of Mont Be lvieu’s

See Hea ring s on H.B. 1920 a

nd H.J .R. 86 Bef

ore the House Comm. on Way s & Means, 1 7 73d L eg ., R.S., (Mar

. 24, 1993) (tes t imony of Har ry Whit worth) (testify ing that “the equipment that we’ re talking about here today does not produce a penny o f reve nue. I t’s in there simply for the welfa

re[,] as we see it, [of] the g ener al population.”); see id. (statemen t o f R ep re s entative Steve Wolens) (explaining that if companie s “a re go i n g to be forc ed to buy stuff beca use the g overnme nt is insisti ng that they do it, don’t hit them another time by pay ing the ad valore ms on something they don’t rea lly [ ] wa n t any way ”); see Hea

ring s on Tex. H.B

. 1920 and H.J .R. 86 B e fore the Senate Comm. on I nterg overnme ntal Relations, 73d L eg ., R.S. (Apr. 28, 1993) (te s ti mo ny of Bill Allaway

) (explaining to Senator J ohn Whit mire, in response to conce rn that a landfill opera tor woul d be wholly exempt from property taxation, that proper ty elig ible for ex emption “is proper ty that preve nts the busines s . . . from polluting, not the proper ty that they use to conduct their business”). 27Tier I application for a 100% positive use deter mination was consistent with tax code section 11.31,

as we re a ny rules that re quired that de cision.

Rul es Wit hout text ual support for its exemption claim in tax code section 11.31 itself, Mont Be lvieu must retre at to urg ing that the applicable TCEQ rules nonetheless classified its brinepond sy stem as 100% pollution-control proper ty

. Br inging forwa

rd g rounds raised in its summary judgme nt motion an d response , Mont Be lvieu first seeks to establish that TCEQ could not validly apply the ECL to its exemption claim but was instead require d to use the PDL

. Mont Be lvieu sug g ests that TCEQ acte d arbitra rily and capr iciously in chang i n g ca t egory S-20’s ref ere nce to “brine storag e ponds” in the P DL to the EC L ’s refer ence to “brine disposal ponds.” As discussed previously , howeve r, the tax code ref lects the L eg islature’s intent that TCEQ distinguish pollutioncontrol proper

ty —proper ty qualify ing for the tax exemption—from “prope rty that is used to produce g oods and service s.” See Tex. Tax Code Ann. § 11.31(g ). Given that statutory direc tive, a TCEQ rule that would a llow storag e-only brine ponds, which Mont B elvieu acknow ledg es are part of the production proce ss, to qualify as 100% pollution-control proper ty would exceed the statutory scope of the exemption. As such, it was not arbitra ry or capr i ci o u s for TCEQ to chang e its rules to be consistent with the statute and its leg islative intent.

Mont B elvieu also contends that, as a matter of law, its e ligibility for the pollutioncontrol exemption is g overne d by the fac ts and law that exis ted on J anuar y 1, 2008, such that TCEQ

was bound to apply the PDL rathe r than the ECL , which did not take eff ect until Fe bruar

y 7, 2008. Section 11.42 provides that, as a g ener al rule, “elig ibilit y for and amount of an exemption authorized

28by this chapte r for any tax y ear are d et er m i n ed by a claimant’s qualifica tions on J anuar y 1.” Tex. Tax Code Ann. § 11.42(a) (West Supp. 2011). Howeve r, while the eff ect of this re quirement is to “fr eeze” the materia l fac ts as t h ey exis ted on J anuar y 1, 2008, it does not addre ss what rules may apply to construing those materi al fac ts—i.e., to g rant or not g rant the exemption—or, in fac t, what law may

exis t to levy

such a ta x . See Cade na v. State , 185 S.W . 367, 368 (Tex. Civ. App.—San Antonio 1916, writ ref ’d) (holding that taxes on proper ty owned in J anuar

y may be levied at any time during the ca lendar

y ear without violating the prohibition ag ainst retroa ctive laws)

. Finally , Mont Be lvieu arg ues that TCEQ’s application of the ECL in lieu of the PDL

was unconstitutionally retroa ctive. See Tex. Const. art. I , § 16 (“N o bill of attainder , ex post fac to law, retroa ctive law, or any law impairing the obliga tion of contra cts, shall be made.” ). We disag ree . Under article I , section 16, retroa ctive application of a law is unconstitutional only when it destroy s

or impairs vested rig hts. See Subaru of Am., Inc. v. David McD avid Nissan, Inc ., 84 S.W .3d 212, 219 (Tex. 2002); Corpus Christ i People’ s Baptist Church, Inc. v. Nuece s Cnty. Appraisal Dist. , 904 S.W .2d 621, 626 (Tex. 1 9 9 5 ); Ge n eral Dynamics Corp. v. Sharp , 919 S.W .2d 861, 866–67 (Tex. App.—Austin 1 9 9 6 , writ denied) ; see also Groce rs Supply Co. v. Sharp , 978 S.W .2d 638, 643 (Tex. App.—Austin 1998, pet. denied) (apply ing same principle to a dminist rative rules). But taxpay ers do not have a vested interest or rig ht in the method or proce dure used to deter mine the applicability of a tax exemption. See Ex parte Abell , 613 S.W .2d 255, 261 (Tex. 1981) (noting that anticipated continuance of prese nt law is not a vested rig ht); City of Dallas v. Trammel , 101 S.W .2d 1009, 1 0 1 2 (T ex . 1 937) (holding that there is no vested rig ht to that which constitutes a mere

ex p ecta ncy based upon anticipated continuance of exis ting law); Gene ral Dynamics , 919 S.W .2d
at 867 (ho l d i n g t h at “no Texas taxpay er has a vested rig ht in the continuation of a particula r 29measure ment method for the fra nchise tax ”); see al

s o E x p a r t e Abell , 613 S.W .2d at 262 (“When the authority g ranting the rig ht has the power and discretion to take that rig ht awa y , it cannot be said
to be a vested right.”)

. At best, M o n t Belvieu had an expectation that its claim for the ex emption might succe ed in light of prior TCEQ rules and decisions. Fur ther, it is not clea

r that TCEQ’s rule is retroa ctive. “A statute is retroa ctive o n l y i f i t opera tes befor e its eff ective date.” “I t is not retroa ctive mere ly beca

use it draw s u pon antec edent fac ts for its opera tion.” Gene ral Dynamics , 919 S.W .2d at 866.

I n the eve nt it could not avail itself of t he P DL , Mont Belvieu ha s broug ht forwa rd
t wo argume nts to the eff

ect that it was entitled to the pollution-control exemption even under the ECL

. The first is that the one-w ord chang e—i.e., from “brine storage ponds” to “brine disposal p o nds”—in the descr iption of items included in the phrase “surf ace impoundments” is “ s u b s ta n ti v e ly irrele vant” beca

use those terms are indisti ng uishable as they are used in the industry

. Specifica lly , Mont Be lvieu observe s that TCEQ’s use-de termination rules require that undefine d terms in th e rules be interpre ted using “the meaning s commonly ascr ibed to them in the fields of pollution control

or proper ty taxation,” see 30 Tex. Admin. Code § 17.2 (201 2 ) (T ex . Comm’n on Envtl. Quality , Def initions ), and urg es that, in those fields, “storag e” and “disposal” are used intercha ng eably when ref err ing to s u rf

ace impoundments. They point principally to the Railroad Commi ssion’s rules g overning brine rec y cling ponds, arg uing that those rules show that there is no distinction betwee n “storag e” and “disposal.” See 16 Tex. Admin. C ode § 3.8(a) (2) (2012) (Railroad Comm’n, Water Protection) (de fining “brine pit” as a “ [p] it use d for storag e of brine” ), (a) (3) (def ining “ collecting pit” as a “[p] it used for storag e of saltwater prior to disposal”); but see id. § 3.8(a) (13) (def ining “saltwa ter dispos al pi t” as “[p] it used for disposal of produce d saltwater ”). The y also point to the
30Texas Natura l Resource Code’s definition of “saltwa ter disposal pit” as “a collecting pit on the

surfa ce of the g round used to store or evapor ate oil field brines

. . . .” See Tex. Nat. Res. Code Ann. § 91.451 (West 2011) (empha sis added)

. Howeve r, espec ially in the context of t h e u n d er ly ing
tax code provisions that we have previously construed, we cannot conclude that TCEQ’s construction of its own rule to conclude that a brine storag e po n d u s ed to rec y cle brine in a production proce ss is not a 100% tax-ex empt “brine disposal pond” is plainly err oneous or inconsistent with the text of the rule or the underly ing statute. See Gulf

States Utils. Co. , 809 S.W .2d
at 207; Tennessee Gas Pipeline Co. , 80 S.W .3d at 203. As such, we defe r to TCEQ’s interpre tation. See G ulf States Util

s. Co. , 809 S.W .2d at 207. Mont Be lvieu’s second arg um ent is that the phrase “surf ace impoundment” under ECL cate g ory S-20 is broad en o u gh to encompa ss Mont Be lvieu’s brine ponds. But even if we

assume this is true, Mont Be lvieu’s arg ument nece ssarily presumes that its brine storag e ponds are the k i n d o f surfa ce improvements that would be considere d wholly (100%) pollution-control proper t y b ec au s e o f its proce dural stance that it is entitled to a 100% positive use deter mination rathe r than a partial deter

mination—i.e., an all-or- nothing claim that the sy stem is wholly pollutioncont ro l p ro p er ty

. Stated another way , even if Mont Be lvieu’s brine-pond sy stem qualifies as a surfa ce impoundment under the ECL , M o n t Be l vieu can only preva il here if that surfa ce impoundment is wholly pollution-control proper ty that is not used for other purposes. See 33 Tex. Reg

. at 933 (“Simply beca use a piece of equipment is on the [EC L ]

. . . does not mean it will rec eive

a positive use deter

mination.”); 32 Tex. Reg

. at 6979 (same)

. But Mont Be lvieu acknow ledg ed that its brine-pond sy stem was production proper ty and was not exclusively pollution-control proper ty

. Thus, for the rea sons stated, we cannot say that TCEQ’s interpre tation of its own rules—i.e., that
31a brine-pond sy stem that is not used wholly (100%) fo r p ollution control is not entitled to a

100% posi tive use determination— i s p l ai nly err oneous or inconsistent with the t ext of t he rule or the underly ing statute, and we must defe r to its interpre tation. See Gulf States Utils. Co. , 809 S.W .2d at 207; Tennessee Gas Pipeline Co. , 80 S.W .3d at 203.

Our resolution of t h e fo re going summary -judg ment g rounds establishes that, as a matter of law, Mont Be lvieu’s North Storag e brine-pond sy stem did not qualify as 100% pollutioncontrol p ro p er t y u n der the applicable TCEQ rules. Although Mont Be lvieu also bring s forwa rd complaints relating to TCEQ’s rule requiring applicants to prove environmenta l benef it at the site of installation, we need not addre ss this alterna tive rule-ba sed justification for the ag ency ’s decision. See Tex. R. App. P

. 47.1. The dist ri ct co u rt proper ly g rante d summary judgme nt for TCEQ. We

overr ule Mont Be lvieu’s first issue.

Discover y I n its second issue, Mont Be lvieu contends that the district court abused its discretion in deny ing it discovery conce rning the l eg al and factua l bases for TCEQ’s nega tive use deter mination. See In re CSX Corp. , 124 S.W .3d 149, 152 (Tex. 2003) (“G en erally , the scope of discovery is within the trial court’s discretion.”)

. This complaint is without merit. As noted above, Mont Be lvieu’s claims rema ining afte r its nonsu it wer e its claim for judicial revie w and its claim for decla ratory judgme nt that TCEQ’s deter mination and its rules are inconsistent with tax code section 11.31. The centr al issues in both these claims, as set forth in our analy sis of Mont Be lvieu’s first issue, turned on questions of law—spec ifically construction of statutes and rules. There wer e

no disputed materia l fac ts bear ing on those inquiries. Thus, discovery would not have aided in the

32resolution of these c laims and, acc ording ly , we c annot say that the trial cour

t abused its discretion in deny ing discovery reg arding these claims. See id. at 151–53 (noting that discovery reque sts must show a rea sonable expectation of obtaining information that will aid in resolution of the dispute). As to Mont Be lvieu’s nonsuited claims, even if we wer e to assume that the trial court er re d i n deny ing discovery reg arding these claims, any such err or was rende red harmless by Mont Be lvieu’s subsequent nonsuit of those cla ims. According ly , we ove rrule Mont B elvieu’s se cond issue.

CONCLUSION Having overr

uled bot h o f Mont Be lvieu’s issues on appea l, we aff irm the district court’s judg ment.

__________________________________________ Bob Pembe rton, J ustice Be fore Chief J ustice Jones, J ustices Pemberton a nd Rose Affir med Filed: Aug ust 3, 2012

33