The town of Wiscasset looks set to go to court over a Maine Department of Environmental Protection decision to give tax breaks to a facility that stores spent nuclear fuel from the decommissioned Maine Yankee power plant.

The exemption, which has been in place for decades, is intended to incentivize companies to install “pollution-control equipment,” but threatens to cost Wiscasset $1.6 million in annual revenue, almost one-fifth of its budget.

“A lot of small towns have these big facilities, and they expect town services, but then use this as a way of getting out of paying town taxes,” said Dennis Simmons, the Wiscasset town manager.

The Wiscasset Board of Selectmen voted unanimously this month to appeal an October ruling by the Maine Board of Environmental Protection, an independent citizen group that oversees DEP decisions, affirming the DEP decision.

The state statute that outlines the exemption provides a straightforward incentive for industrial companies in Maine to abide by environmental regulations: Install equipment that reduces your facility’s air or water pollution, and you’ll pay less in taxes.

Companies approved for the exemption by the DEP can save millions over the years by not having to pay property taxes on pollution-reducing facilities, like a “baghouse” that collects harmful particulates from an asphalt plant, or, in this case, on an 11-acre parcel of land storing casks of spent nuclear fuel.

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The intent of the tax break was likely to ease the cost of installing pollution controls required by state and federal regulations, said Mark Margerum, a DEP staff member.

But for towns hosting industrial facilities, the benefits aren’t as clear, and could mean losing crucial revenue provided by a local company – even while providing public goods to that company, like roads or emergency services.

“What’s at stake today is whether or not Maine Yankee is going to be required to pay its fair share of the tax burden that all other taxpayers of the town have to pay,” said Sarah McDaniel, the attorney for Wiscasset, at a BEP hearing in October.

DIVISIONS ARISE

The town and Maine Yankee were previously bound to a 20-year-old settlement agreement that set the amount of property taxes Maine Yankee would pay each year, according to testimony from the two parties’ attorneys.

Since that settlement expired this past spring, the two have been unable to reach a new agreement, and the most recent 2023 valuation of Maine Yankee’s property in September more than doubled the amount of taxes owed from the prior valuation.

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Excluding the exemption, Maine Yankee’s taxes went from around $600,000 in 2022 to $1.5 million in 2023 after a new assessment from Wiscasset’s independent assessors. A lawyer for the company said Maine Yankee disagrees with that assessment.

Six months prior, in March, Maine Yankee was granted the exemption by the DEP for the first time. Wiscasset appealed to the Board of Environmental Protection but lost that appeal in October, causing town officials to file a lawsuit in early November.

At the heart of the case is the 11-acre facility that has been holding 542 metric tons of nuclear waste for two decades.

Maine Yankee claims that because the facility controls dangerous air particles emitted by the nuclear waste, known as radionuclides, and keeps them from entering the environment, the facility can be categorized as “air pollution control” equipment and qualifies for the exemption.

The statute defines pollution control loosely, causing its meaning to be debated by towns and industry players every couple of decades.

State court cases have narrowed the interpretation; the most recent case came in 2003 between the town of Jay and Androscoggin Energy, when Jay similarly challenged BEP for the determination that Androscoggin Energy’s equipment comprised an air pollution control facility. A Kennebec Superior Court judge affirmed DEP and the BEP’s findings.

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The Wiscasset facility, an “Independent Spent Fuel Storage Installation,” or ISFSI, was constructed as a temporary storage space for Maine Yankee’s nuclear waste until the federal government disposed of the waste off-site, which it was legally required to do by 1998.

But that removal hasn’t happened, and Maine Yankee doesn’t expect that to change anytime soon.

Because the federal government has surpassed its disposal obligation by more than 20 years, Maine Yankee has repeatedly and successfully sued the Department of Energy in federal court to recoup the millions spent maintaining its storage facility on Bailey Peninsula. The costs amount to $10 million per year, according to Maine Yankee, and the company expects maintenance needs to rise as the equipment ages.

At the Board of Environmental Protection meeting in October, it was this funding mechanism that Maine Yankee lawyers cited for seeking the exemption.

If Maine Yankee doesn’t limit operating costs to the best of its ability, it might not recoup those funds from the federal government down the line, argued the company attorney, Brian Rayback of the Portland-based firm Pierce Atwood LLP.

“Maine Yankee is forced to sue the Department of Energy every four to five years to recover the costs to operate,” Rayback said. “And one of the things that Maine Yankee has to prove in that litigation, is that all of the spending … is ‘just and reasonable.’ ”

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Not taking advantage of a state tax exemption, Rayback said, might fall outside the department’s definition of “just and reasonable,” leaving Maine Yankee and Maine ratepayers on the hook for the difference.

When Maine Yankee recoups costs through federal litigation, it does so with the intention to return those funds to its ratepayers, according to a 2017 report from the Maine Department of Health and Human Services.

Simmons, the Wiscasset town manager, acknowledged the argument that Maine Yankee posed about its ratepayers, but said applying for the exemption only shifts that burden elsewhere.

“I’m glad they’re looking out for the ratepayers, but they’re doing it on the backs of the taxpayers in Wiscasset, and we just want it to be a little more fair than it is right now,” Simmons said.

WHAT COUNTS AS POLLUTION CONTROL?

Any consideration of why Maine Yankee filed for the exemption, how it would affect the town’s coffers, the efficacy of the statute, or the intent of the legislators who passed it was barred from the Board of Environmental Protection’s ruling.

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The sole responsibility of the seven-member board was to determine whether the primary function of the Maine Yankee facility is to reduce industrial air pollution and, if there are multiple functions, whether the primary motivation behind installing the equipment was to reduce pollution.

Maine Yankee argued the primary function of the waste facility is pollution control, while McDaniel, the Wiscasset town attorney, argued that the facility’s core function was to store the nuclear waste. All other uses, such as controlling pollutants, were secondary, she said.

“The purpose of the ISFSI is stated in its name, storage,” McDaniel wrote in a filing accompanying its appeal. McDaniel also pointed to the name of the specific equipment that contains the nuclear waste: transportable storage canisters.

“One needn’t be a nuclear physicist to grasp the primary purpose of this equipment,” said McDaniel.

She also claimed the intention behind creating the facility was not for pollution control but the safe storage of a dangerous material. She reminded board members that it is Maine Yankee’s burden to prove it qualifies for an exemption, and said it hadn’t thoroughly done so.

The attorneys also squabbled over classifying radionuclides as an “industrial air pollutant,” which the statute specifically says a facility must control or reduce.

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“We’re here in the context of a property tax exemption, and under the law in Maine, the presumption is that everybody pays property tax on all of their property,” McDaniel said. “And there’s a reason for that, so that the burden of the government funding the government is shared equally across all the taxpayers.”

Board members focused on the technical aspects of Maine Yankee and Wiscasset’s arguments, sorting through definitions of the equipment that comprises the facility, like its concrete pads and towering canisters, and trying to better understand the pollutants it emits.

Susan Lessard, the board chair who is also the Bucksport town manager, expressed regret for the situation that pitted Maine Yankee and Wiscasset against one another and frustration with the statute itself.

She blamed the federal government’s inability to dispose of Maine Yankee’s nuclear waste for the parties reaching this point, and said a tax reduction for the town was an “unfair result.”

“I know what the rules are, I can read,” Lessard said, referring to the narrow definitions of the statute. “But the (tax reduction) is an unfair result of something that is neither your fault, Maine Yankee, or the town of Wiscasset.”

Lessard also took aim at the statute’s non-specific definitions and its inability to factor in the use of nuclear power plants, which she said should be given more weight than the less-risky facilities it was designed to assess.

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“A lot of what feels wrong about this is that we’re treating this like the pollution control facility of a wastewater treatment plant or a landfill,” Lessard said. “Not something that has a risk factor to the community … that this particular installation has.”

She reiterated that her concerns are outside the scope of the board and bluntly described the case at hand.

“It is unfortunate that Maine Yankee and the town couldn’t reach an agreement,” Lessard said.

In a unanimous decision, the board voted to reaffirm DEP Commissioner Melanie Loyzim’s decision and approve the exemption. The tax certifications issued by DEP do not expire, but DEP has authority to revoke, suspend, modify or take corrective action if terms of the license that grants them are violated — like if a company violates any law administered by DEP.

Simmons wrote in an email after the hearing that he was disappointed with the decision and took issue with Rayback’s description of Maine Yankee’s relationship with Wiscasset.

“In testimony, Maine Yankee stated that they are willing to pay a ‘fair’ share of taxes to the town,” Simmons wrote. ”Obtaining a property tax exemption for over 90% of the taxable value of the property hardly fits the definition of fair.”

Maine Yankee did not reply to a request for comment.

This story was originally published by The Maine Monitor, a nonprofit and nonpartisan news organization. To get regular coverage from the Monitor, sign up for a free Monitor newsletter here.

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