Opinion ID: 1311164
Heading Depth: 1
Heading Rank: 7

Heading: Determination of the Primary Purpose Findings of Fact

Text: Determining whether a device is primarily for pollution control is not an easy matter. See Chemical Waste Management, Inc. v. State, 512 So.2d 115, 116-17 (Ala.Civ. App.1987). The County Board must weigh the evidence presented to it and determine if, as between several stated purposes for the equipment, the primary purpose is pollution control. In its 1994 decision, the County Board made the following findings of fact (transcript cites omitted): 7. The Assessor disallowed the pollution control exemption for the Sulfur Plant, Sulfur Plant Engineering SRU # 2, Amine Unit, Hydrogen Plant, Hydrotreater and Upgraded Flare Knockout System. 8. The refining process at Frontier produces primarily diesel fuel and gasoline from crude oil. About half of Frontier's market is an on-road diesel market. 9. Sulfur is a naturally occurring contaminant in the crude petroleum oils used to make diesel fuel. The removal of sulfur from the petroleum oils is necessary for the manufacture of diesel fuel. 10. Frontier desulfurizes diesel fuel by taking the unhydrotreated, or high sulfur diesel, and mixing it with hydrogen manufactured at Frontier's hydrogen plant in a diesel hydrotreater. The diesel hydrotreater is a catalytic system which removes the sulfur from high sulfur diesel and combines it with hydrogen, forming the hydrogen sulfide. The hydrogen sulfide gas is then routed to an amine unit which separates the hydrogen sulfide gas from other gaseous materials and sends the hydrogen sulfide gas in a pure form to the sulfur recovery unit, which converts the hydrogen sulfide gas into elemental sulfur and burns the remainder in the incinerator. See Exhibit 3 (F-5). 11. Frontier constructed the hydrogen plant to supply hydrogen for the process of removing sulfur from the diesel fuel. The hydrogen plant reacts methane (natural gas purchased from Cheyenne Light) with a catalyst under high temperatures and pressures generating hydrogen and carbon dioxide. The hydrogen and carbon dioxide are then separated from each other through a diethanolamine (DEA) system. The hydrogen is then routed to the diesel hydrotreater and the carbon dioxide is vented. See Exhibit 3(F-6). 12. The diesel hydrotreater is actually the process unit that accomplishes the desulfurization of the diesel fuel. It is a reactor with a catalyst that allows removal of the sulfur from the high sulfur diesel, producing a desulfurized diesel fuel meeting the federal environmental requirements and leaving gaseous hydrogen sulfide known as H2S. See Exhibit 3(F-7). 13. The H2S gas then goes to the DEA treater, known as Frontier's Amine Unit. The Amine Unit separates the hydrogen sulfide from carbon dioxide or other gases, including methane, ethane, and propane. This process creates a very high purity hydrogen sulfide stream that then goes to the sulfur plant. These gases, along with other gases, are burned in the refinery for heat recovery. See Exhibit 3(F-8). 14. From the Amine Unit, the H2S goes to the sulfur recovery units to undergo a process that converts hydrogen sulfide gas, gaseous hydrogen sulfide into elemental sulfur, and sends the remaining gas to a tail gas treatment unit, which recovers a little bit more of the hydrogen sulfide, and then to the incinerator for combustion. See Exhibit 3 (F-9). There are two sulfur recovery units: the 35 ton-per-day unit that is called the sulfur plant and was constructed in 1984 and the sulfur recovery unit # 2 which is the new 65 ton-per-day unit that went into service in 1992. Based on these findings of fact the County Board concluded: 4. The desulfurization equipment; to-wit: Sulfur Plant, Sulfur Plant Engineering SRU #2, Amine Unit, Hydrogen Plant, and Hydrotreater do not qualify for pollution control exemption under W.S. § 35-11-1103 and W.S. § 39-1-201(a)(xx), as the same were not designed, installed and utilized primarily for the elimination, control or prevention of air, water or land pollution. 5. The County Assessor, through Pickett, stated that the equipment which was denied the pollution control exemption because they're primary and essential parts of the plants . . . and this Board agrees with that analysis. This appears to be an interpretation of the State Board of Rules which provide: Other beneficial purposes means uses of property which are a value to the taxpayer such as . . . [p]roperty which functions as an essential item in the . . . industrial process or facility. Rules, Chapter XXX, Sec. 9(c)(i), State Board of Equalization. In its decisions the State Board declared the County Board's determinations that the equipment is used for the purposes of manufacturing a better product (1993) and that the equipment constitutes primary and essential parts of the plants (1994) are not supported by the record or its own findings of fact. The State Board then announced that [i]t is only because of environmental concerns and requirements the diesel fuel and gaseous hydrogen sulfide must be treated. We conclude, therefore, the equipment at issue constitutes pollution control devices for purposes of exemption allowed by W.S. § 35-11-1103. However, the State Board improperly broadened the scope of the exemption statute when it focused on the purpose of the final product, low-sulfur diesel fuel, rather than on the purpose of the equipment.