Court Opinion

ID: 4394110
Source: CourtListenerOpinion
Date Created: 2019-05-06 08:44:43.475544+00
Date Added: 2024-06-11T14:52:02.158947
License: Public Domain

IN THE SUPREME COURT OF TEXAS
                                       ══════════
                                         No. 18-0128
                                       ══════════

 TEXAS COMMISSION ON ENVIRONMENTAL QUALITY AND RICHARD A. HYDE, P.E.,
 EXECUTIVE DIRECTOR OF THE TEXAS COMMISSION ON ENVIRONMENTAL QUALITY,
                              PETITIONERS,
                                               v.

  BRAZOS VALLEY ENERGY, LLC; HAYS ENERGY, LLC; ENNIS POWER CO., LLC;
         MIDLOTHIAN ENERGY, LLC; WISE COUNTY POWER CO., LLC;
  FREEPORT ENERGY CENTER, LLC; FREESTONE POWER GENERATION, LLC; AND
             TENASKA GATEWAY PARTNERS, LTD, RESPONDENTS
            ══════════════════════════════════════════
                        ON PETITION FOR REVIEW FROM THE
                 COURT OF APPEALS FOR THE THIRD DISTRICT OF TEXAS
            ══════════════════════════════════════════

                                  Argued January 24, 2019

       JUSTICE LEHRMANN delivered the opinion of the Court.

       JUSTICE GUZMAN did not participate in the decision.

       At issue in this case is whether Texas Tax Code Section 11.31 gives the Texas

Commission on Environmental Quality and its Executive Director discretion to deny an ad

valorem tax exemption for heat recovery steam generators (HRSGs), devices the Legislature has

deemed “pollution control property.” This question is squarely resolved by our opinion in Cause

No. 17-1003, Brazos Electric Power Cooperative v. Texas Commission on Environmental

Quality, also issued today. ___ S.W.3d ___ (Tex. 2019). There we hold in pertinent part that the
Legislature has deemed certain types of property listed in Section 11.31(k) (also referred to as

“the k-list”), including HRSGs, to qualify at least in part as pollution control property entitled to

an exemption. Id. at ___. We further hold in Brazos Electric that the Commission abused its

discretion by issuing negative use determinations for two exemption applications involving

HRSGs—i.e., determining that the HRSGs were not entitled even to partial tax exemptions—

when the applications complied with all relevant statutory requirements. Id. at ___.

         Here, Brazos Valley Energy, LLC; Hays Energy, LLC; Ennis Power Co., LLC;

Midlothian Energy, LLC; Wise County Power Co., LLC; Freeport Energy Center, LLC;

Freestone Power Generation, LLC; and Tenaska Gateway Partners, LTD also submitted

compliant applications for tax exemptions for HRSGs. The Commission issued negative use

determinations for each of the applications, and the parties sought judicial review in district

court, which affirmed the determinations.              The court of appeals reversed, holding that the

Commission may not issue negative use determinations for devices on the k-list, such as HRSGs.

564 S.W.3d 1, 15 (Tex. App.—Austin 2017).

         In light of our holding in Brazos Electric, the court of appeals was correct to reverse the

trial court’s judgment and remand to the Commission.1 Accordingly, we affirm the court of

appeals’ judgment.

         1
           The Commission argues that the court of appeals ignored the existence of a valid alternative basis to
affirm the negative use determinations. Specifically, the Commission asserts that the applicants were allowed to
propose a methodology for determining the proportion of the HRSGs that are pollution-control related and that the
Commission reasonably determined none of the applicants’ proposed methodologies were reasonable. See 30 TEX.
ADMIN. CODE § 17.17(d) (2008). But even assuming the Commission correctly rejected the applicants’ proposed
methodologies, we fail to see how this provides an independent basis to affirm. As we explain in Brazos Electric,
for property on the k-list, the Commission’s sole responsibility is to determine “what proportion of the property is
purely productive and what proportion is for pollution control,” and it “may not determine that the pollution control
proportion is zero or negative.” ___ S.W.3d at ___; see also TEX. TAX CODE § 11.31(d), (k), (m). By determining
that the pollution-control proportion of the HRSGs at issue is less than zero, the Commission necessarily abused its

                                                         2
                                                                 ________________________________
                                                                 Debra H. Lehrmann
                                                                 Justice

OPINION DELIVERED: May 3, 2019

discretion regardless of the chosen formula or the manner in which it was applied. Brazos Electric, ___ S.W.3d at
___.

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