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October 30, 2017Client Alert

Next Steps: What Does the WDNR-DBA Settlement Mean for Wisconsin Dairy Farms?

The last couple of weeks have been very busy for Michael Best’s clients in the dairy industry. First, our attorneys assisted our client, the Dairy Business Association of Wisconsin (DBA) in settling a lawsuit we brought on DBA’s behalf, challenging Wisconsin Department of Natural Resources’ (WDNR) regulation of large dairy farms under its Wisconsin Pollutant Discharge Elimination System (WPDES) permit program. Second, Governor Walker announced last week as part of his rural agenda his intention to “work with the legislature and EPA to transfer regulatory authority over large farms from the DNR to DATCP to encourage the best use of technical expertise and create program efficiencies,” a move long-supported by industry insiders to allow for more efficient permitting. We will keep our dairy industry clients informed of the impacts of these developments as we move forward. But, as for the lawsuit settlement, many of our clients are asking “what’s next?”

To start, the settlement vindicates DBA’s claims that WDNR acted in excess of its legal authority in 2016 when it implemented a new approach to regulating runoff from feed storage areas (FSAs) and management of calf hutch lots without engaging in formal rulemaking procedures required by statute. The settlement provides immediate relief for Wisconsin’s dairy community and should help ensure WDNR follows the law before unilaterally implementing sweeping regulatory changes in the future. The settlement also has important implications for dairy farms regulated under WPDES permits.

Background

NRCS Standard 635 (2002 WI), incorporated in Wis. Admin. Code ch. NR 243 (Wisconsin’s CAFO Rule), permits the use of land-based Vegetated Treatment Areas (VTAs) to manage captured or contained feed storage runoff. Relying on this standard, numerous Wisconsin farms constructed VTAs as part of their runoff control systems. In almost all cases, the design and use of VTAs was approved by WDNR as part of a WPDES permit. In 2016, WDNR began a systematic approach of declining to review feed runoff control systems that included these designs, and began enforcing standards of 100% storage of all feed storage runoff that would require costly modifications and upgrades to existing runoff control systems.

Meanwhile, WDNR also changed its approach to regulating on-farm calf hutch lots. On March 9, 2016, WDNR announced that it would require review and approval of engineering plans and specifications for calf hutch lots on WPDES-permitted farms. WDNR’s calf hutch directive would have treated calf hutch lots as “reviewable facility or systems” under NR 243 and would have required compliance with standards not incorporated into law.

Frustrated after more than a year’s worth of attempts by DBA to convince WDNR to reverse these two illegal actions (actions which resulted in a number of enforcement actions being initiated by WDNR against DBA farmer members), DBA filed suit against WDNR earlier this summer in Brown County Circuit Court.

What does the settlement do?

The settlement provides immediate regulatory relief for Wisconsin dairy farmers and avoids the delay and expense of additional litigation. The settlement is public and can be viewed here.

Under the terms of the settlement agreement, WDNR agreed to recognize VTAs constructed and managed in accordance with NRCS Standard 635 (2002 WI) as valid and lawful runoff control systems. WDNR also agreed to withdraw its draft guidance on VTAs and notify affected permittees and interested stakeholders within 30 days.

With respect to calf hutch lots, WDNR agreed that calf hutch lots are not a “reviewable facility or system” requiring an engineering plan and specification review and approval, to rescind its earlier directive requiring such reviews, and to provide notice to affected permittees and stakeholders within 30 days.

Importantly, the settlement also requires WDNR to limit its enforcement of standards or rules relating to FSA leachate/runoff controls to those authorized by statute or administrative rule. WDNR also agreed that it would not consider calf hutch lots “reviewable facilities” in the future unless specifically required by a lawfully enacted statute or promulgated administrative rule.

Permittees should know that the settlement does not alter the discharge standard applicable to dairy CAFOs under NR 243 and farms’ WPDES permits nor the duty to apply for coverage under such permits; the settlement does, however, clarify that WDNR may no longer presume that a discharge is occurring or will occur from a farm. Under NR 243.13, a CAFO generally may not discharge manure or process wastewater to navigable waters from the production area, except where there is a precipitation caused discharge from the containment, the containment has been designed to capture the 25 year/24-hour rain event, and the production area is operated in accordance with inspection, maintenance and record keeping requirements, as defined in the rule. This standard is set by state and federal law. Beyond this requirement to prohibit the discharge of pollutants to navigable waters, WDNR may not further impose a standard requiring “zero discharge” whatsoever from the production area or VTA. DBA members have been frustrated with WDNR’s presumption of a discharge and implementation of a “zero discharge” standard without regard to important modifiers that allow such a discharge under certain circumstances.

What should farm owners do next?

As alleged in the lawsuit, WDNR has been enforcing regulatory standards and requirements that exceed its authority through a variety of means. These include (1) informing WPDES permit applicants that their application would not be approved unless their leachate and runoff control systems were redesigned to comply with new requirements; (2) issuing Notices of Noncompliance, Notices of Violation, and holding Enforcement Conferences with affected dairy farms; and (3) taking further enforcement actions against dairy farms alleged to be in noncompliance with WDNR’s new standards.

Any WPDES permittee who has been subject to any of these actions should be aware that the settlement may impact their legal rights and options for responding to WDNR. Timely review and action may be required to preserve these rights as farms proceed through permitting and enforcement actions.

For WPDES Permit Applicants: WPDES permittees seeking issuance of an initial WPDES permit or reissuance of an expiring WPDES permit should review the status of their permit application with knowledgeable legal counsel and engineering professionals familiar with the program and the settlement. Specifically, this review should consider whether WDNR is (1) requiring an engineering review of existing FSA runoff controls, which is no longer justified given the settlement of the DBA lawsuit; (2) requiring an engineering review of a calf hutch lot, which is not permitted under the terms of the settlement; or (3) making a finding of noncompliance or returning a submission as incomplete based on standards or requirements that are now unenforceable based on the settlement agreement.

Additionally, if the farm has received (or expects to receive) a draft permit in the future, this document should be carefully reviewed to ensure that the permit’s terms and conditions do not exceed WDNR’s legal authority.

For Farms Subject to Enforcement Action: Numerous WPDES permittees have been issued a Notice of Violation or Notice of Noncompliance related to the farms’ alleged failure to comply with WDNR’s 2016 guidance on FSA leachate and runoff control systems or calf hutch lots. Farms should have legal counsel evaluate the continuing basis for any enforcement action, particularly as they related to alleged discharges from FSAs or calf hutch lots, inadequate FSA or calf hutch runoff control and collection systems, or failure to maintain 180 days of manure and process wastewater storage.

Dairy farmers with questions about how the settlement may affect their farm’s regulatory obligations should contact a Michael Best attorney.

A Michael Best team led by Attorneys David Crass, Joseph Olson, and Andrew Cook represented DBA in its challenge WDNR’s actions.

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