VEOLIA ENERGY BOSTON, INC.
BOARD OF ASSESSORS OF BOSTON.
Heard: May 6, 2019.
from a decision of the Appellate Tax Board.
Supreme Judicial Court granted an application for direct
Anthony M. Ambriano for board of assessors of Boston.
Kathleen S. Gregor (Erin R. Macgowan also present) for the
Present: Gants, C.J., Lenk, Gaziano, Lowy, Budd, Cypher,
& Kafker, JJ.
an appeal by the board of assessors of Boston (assessors)
from a decision of the Appellate Tax Board (board) abating
taxes on certain personal property in Boston owned by and
assessed to Veolia Energy Boston, Inc. (Veolia), for fiscal
year (FY) 2014. The question presented is whether the taxed
personal property, "consisting principally of
pipes" that Veolia used to produce, store, and
distribute steam, is exempt from local taxation in accordance
with G. L. c. 59, § 5, Sixteenth (3) (clause 16 ),
which provides in pertinent part that all property owned by a
manufacturing corporation, "other than real estate,
poles and underground conduits, wires and
pipes," is exempt from local taxation (emphasis
produces and distributes steam through networks of pipes and
appurtenant equipment. The board found that these networks,
including the pipes at issue here, operate in concert as a
single, integrated machine, and, as a result, concluded that
the pipes constituted machinery exempt from local taxation in
accordance with clause 16 (3). On appeal, the assessors argue
that the board erroneously relied on the so-called
"great integral machine" doctrine, stated for the
first time by this court in Commonwealth v. Lowell Gas
Light Co., 12 Allen 75, 78 (1866), in concluding that
the pipes constituted exempt machinery because such a
conclusion is belied by the plain language of clause 16 (3),
which explicitly excepts "pipes" from the
reasons that follow, we conclude that pipes that constitute
machinery are exempt from local taxation in accordance with
clause 16 (3). We further conclude that the great integral
machine doctrine, which has endured without legislative
interference for well over one hundred years, remains an
appropriate means by which to determine whether certain
property constitutes machinery. Accordingly, we affirm the
decision of the board.
dispute between the parties began when Veolia was assessed a
personal property tax of approximately $2 million on certain
pipes it used to produce, store, and distribute steam for FY
2014. Veolia paid the tax due and timely filed
an application for abatement with the assessors, arguing that
the pipes at issue were in fact machinery, and therefore
exempt from local taxation in accordance with clause 16 (3)
The assessors denied the application for abatement, and
Veolia appealed to the board, which reversed.
board held an evidentiary hearing over two days and
considered testimony from four witnesses: the director of
system operations for Veolia North America, an affiliate of
Veolia, who testified about Veolia's operations; a
managing director of the energy practice at Navigant
Consulting, who gave expert testimony regarding Veolia's
operating systems; the vice-president and head of finance for
Veolia North America, who discussed Veolia's financial
reporting; and a director of personal property for the
assessing department of the city of Boston, who testified
about the contested assessment. The board also considered
exhibits entered into evidence and a statement of agreed
facts with attachments. We summarize the board's
owns and operates a "district energy network" in
Boston and assists in the operation of a similar network in
Cambridge. The Boston network converts chemical energy from
natural gas and fuel oil into high-pressure steam and then
distributes the high-pressure steam to approximately 250
commercial, healthcare, government, institutional, and
hospitality customers. Veolia's customers use the steam
at customized pressures for various purposes, including power
generation, sterilization, heating, and cooling.
steam manufacturing process begins at one of three generation
facilities: the Kneeland Facility, located on Kneeland Street
in Boston; the Scotia Facility, located on Scotia Street in
Boston; and the Kendall Station Facility, located in
Cambridge. These generation facilities perform a number of
functions, including water treatment, fuel treatment and
storage, and high-pressure steam generation. The equipment
varies from facility to facility, with two using boilers and
one using boilers as well as a heat recovery steam generator
as means to generate steam.
one of the facilities generates steam, it enters a
pressure-regulated network of distribution mains and
appurtenant equipment. The networks operate together to
balance customer load and steam generation across the
generation facilities to ensure equivalent rates of
production and consumption. The steam is stored and
transported through pipes within the networks. By design,
these pipes expand, contract, and move to withstand pressure
and heat fluctuations. Also, they are equipped with valves to
control pressure, to shed condensate (steam that has returned
to liquid state), and to direct the flow of steam.
pressure of the steam is highest at the point of generation.
Once steam reaches a customer's site, a pressure
reduction valve reduces that pressure to assure safety, to
comply with regulatory requirements, and to conform to
customer equipment compatibility and use requirements. After
a customer uses the steam, the networks condense it into
condensate, some of which the networks return to the
generation facilities through condensate-return lines for
further steam production.
networks employ a centralized supervisory control and data
acquisition (SCADA) system to monitor their activity. The
SCADA system is accessible via the Internet and at several
places in the networks. Each of the generation facilities
also has an internal control system that feeds data to the
master SCADA system. A system shift supervisor directs
operations of the entire SCADA system, monitoring the
networks, the status of the ...