July 9, 2021Client Alert

Wisconsin Supreme Court Affirms WDNR’s Broad Powers in WPDES and High Capacity Well Permit Programs

In a pair of companion decisions issued July 8, 2021 that went against the position of prominent Wisconsin trade associations and the Wisconsin Legislature, a divided Wisconsin Supreme Court affirmed the Wisconsin Department of Natural Resources’ (WDNR) authority to exercise broad powers granted to the agency pursuant to the Wisconsin Pollutant Discharge Elimination System (WPDES) program and Wisconsin’s high capacity well program. Clean Wisconsin et. al v. Wisconsin Dep’t of Natural Resources, 2021 WI 71; Clean Wisconsin Inc. and Pleasant Lake Mgmt. Dist. v. Wisconsin Dep’t of Natural Resources, 2021 WI 72.

Both decisions analyzed the application of Wis. Stat. § 227.10(2m)—part of what is commonly referred to as “Act 21”—a state law that requires administrative agency actions to spring from explicit authority in rule or statute—to WDNR authority to condition or approve proposed projects. In both decisions, the Court held that the language of Wis. Stat. § 227.10(2m) requires an agency action to be supported by explicit, not specific, statutory or regulatory authority, and that “explicit authority can be broad in scope.” 2021 WI 71, 26; 2021 WI 70, 21. The impact of these decisions to the cases at hand will require WDNR to re-review eight high capacity well applications with consideration of the environmental impacts of those wells, and to determine whether a dairy farm’s WDPES permit should contain unprecedented conditions of an animal unit cap and off-site groundwater monitoring requirement. 

But looking ahead, the impact of the Court’s decisions is likely to extend far beyond the issues presented in the cases at hand. Given the Court’s reading of the “explicit” requirement in Wis. Stat. § 227.10(2m), administrative agencies may support their actions on broad legislative grants of statutory and regulatory authority. The intervening trade associations in the companion-cases argued that relying on such broad authority could create regulations without standards, or “leave applications without clear guidance” regarding what is needed for a permit approval. 2021 WI 72, 5. It is likely that the companion-cases will embolden administrative agencies to impose novel requirements on industry and commerce on the basis of broad grants of authority from the Legislature. For those with an interest in the specifics of the individual cases behind the companion-decisions, a discussion of each case and the Court’s analysis is below.

In the first case involving the DNR’s authority to impose novel conditions on Concentrated Animal Feeding Operations (CAFOs), the Court examined whether Wis. Stat. 227.10(2m) precluded WDNR from imposing an animal unit maximum and a requirement to install off-site groundwater monitoring in a CAFO’s WPDES permit. Clean Wisconsin et. al v. Wis. Dep’t of Natural Resources, 2021 WI 71. The case started when WDNR issued Kinnard Farms Inc., a concentrated animal feeding operation (CAFO), a WPDES permit, and the permit was challenged by neighbors and Clean Wisconsin for failing to contain an animal unit cap as well as off-site groundwater monitoring, among other things. Kinnard Farms argued that WDNR did not have the authority to impose an animal unit cap or require an off-site (that is, not at the CAFO production area) groundwater monitoring program. A contested case hearing was held, and the Administrative Law Judge found WDNR had the authority to impose the conditions in the permit. The case was appealed by Kinnard Farms to the WDNR Secretary, who initially declined to overturn the ALJ’s decision. However, the WDNR Secretary later exercised her right to amend the ALJ ruling and, citing the limits to WDNR authority in Wis. Stat. 227.10(2m), struck the portions of the ALJ decision that required the animal unit cap and off-site groundwater monitoring. Clean Wisconsin then petitioned to review the Secretary’s decision in circuit court, and the circuit court reversed the Secretary’s decision and ordered that the ALJ’s decision imposing the challenged requirements be reinstated. The circuit court ruling was appealed and, together with the companion case discussed herein, was certified for review by the Supreme Court of Wisconsin.

The Supreme Court held that broad grants of authority in Wis. Stat. § 283.31(3) and (5) provided sufficient “explicit” authority for DNR to impose the animal unit maximum and off-site groundwater monitoring requirements. Specifically, the Court held that the DNR had the authority to impose the disputed conditions under its authority to impose conditions to ensure that permit holders meet effluent limitations (Wis. Stat. § 283.31(3)) and to condition permits to ensure that permit holders meet groundwater quality standards (Wis. Stat. § 281.31(5). While these provisions do not explicitly mention animal unit caps or off-site groundwater monitoring, the Court held such conditions were indeed authorized by the broad, but explicit authority granted to WDNR to implement the WPDES program in the above-referenced provisions. In concluding that the DNR’s authority to impose the disputed conditions was sufficiently “explicit” under these statutes, the Court held that requiring the conditions to be listed verbatim in the statutes would require a higher standard of “specific” rather than “explicit”, and that the “specific” standard was not required by the Legislature as part of Wis. Stat. 227.10(2m). 

A dissenting opinion was authored by Justice Patience Roggensack. She argued that there is no explicit textual authority in statute or rule that permits or authorizes WDNR to establish an animal unit cap or require off-site groundwater monitoring. She notes that the majority opinion, by viewing WDNR to have such authority based on broad statutory language, eviscerates Wis. Stat. § 227.10(2m) and restores the Court’s deference to administrative agencies that the Legislature explicitly limited in Wis. Stat. § 227.10(2m). Additionally, the Court itself recently eliminated deference to administrative agencies in Tetra Tech EC Inc. v. Wisconsin Dep’t of Revenue, 2018 WI 75, 373 Wis.2d 2387, 890 N.W.2d. 598. By allowing agencies to act pursuant to broad authority, this decision effectively restores the Court’s deference to administrative agency decisions when it concerns an agency’s authority, Justice Roggensack wrote.

In the second decision, the Court examined whether Wis. Stat. § 227.10(2m) impacted WDNR’s authority to consider the environmental impact of high capacity wells that are not required to undergo the formal environmental review process at Wis. Stat. § 281.34(4)(a). 2021 WI 72, 8. When the eight high capacity well applications at issue were initially submitted to WDNR, WDNR had adopted a policy in line with the Wisconsin Supreme Court decision in Lake Beulah Mgmt. Dist. v. Wisconsin Dep’t of Natural Resources, 2011 WI 54, 335 Wis. 2d 47, 799 N.W.2d 73, that it would review all high capacity well applications for environmental impacts, regardless of whether the wells met the criteria for an environmental review under Wis. Stat. 281.34(4). WDNR concluded that most of the wells at issue would have negative environmental impacts and therefore it declined to approve the applications and placed them “on hold.”

After the Wisconsin Department of Justice issued a memo that examined the impact of Wis. Stat. § 227.10(2m) on the Lake Beulah decision (section 227.10(2m) was passed by the Legislature after oral arguments in Lake Beulah), WDNR concluded it had no authority to consider the environmental effects of the high capacity wells as they did not fall into the specific categories of wells that required environmental review under Wis. Stat. § 281.34(4). WDNR then approved all of the well applications with no conditions to mitigate the environmental impacts the agency had already identified. Clean Wisconsin challenged the issuance of each of the eight permits and argued that WDNR had explicit statutory authority to review and condition the permits based on environmental impacts to public trust waters.

The Supreme Court agreed with Clean Wisconsin and found WDNR has broad authority to consider environmental impacts to public trust waters when making high capacity well permitting decisions. The Court’s decision not only affirmed WDNR’s broad public trust authority, but reaffirmed the Court’s Lake Beulah decision in light of Wis. Stat. § 227.10(2m). The Court relied on WDNR’s broad public trust authority in Wis. Stat. §§ 281.11 and 281.12 to find that WDNR has explicit authority to consider the environmental impact of all high capacity well applications. 

The Legislature granted WDNR broad statutory authority to “protect, maintain, and improve” the state’s public trust waters, and the Court’s recent companion cases open the door for WDNR to take unprecedented regulatory actions grounded in its public trust authority. Wis. Stat. § 281.11. The companion decisions may usher in a period of governance by WDNR and other state agencies that can be described as “regulate now, find authority later.” Furthermore, given the Court’s adoption of the broad authority granted to WDNR in statute as explicit authority for purposes of Wis. Stat. § 227.10(2m), the companion decisions will make it even more difficult for the regulated community to successfully challenge unprecedented and unsavory agency actions.

The dissenting opinion in 2021 WI 72 challenges the majority opinion on the plain meaning interpretation of Wis. Stat. § 227.10(2m), as well as the separation-of-powers issues associated with the majority’s opinion. Specifically, the dissent stresses that the Legislature’s intent to curtail administrative agency power was clear with its passage of Act 21. The statutory language clearly permits environmental reviews of high capacity wells in certain instances, but none of those was present for the eight wells at issue. The dissent stresses that the Court’s environmental policy concerns infiltrated its reasoning to help it reach a “favored” result. Furthermore, the dissent notes the explicit authority relied upon by the majority at Wis. Stat. §§ 281.11 and 281.12 consists of nothing more than policy and purpose statements or general statements of WDNR powers, and the majority’s reliance on such “nebulous grants of authority” empties all meaning and power from Act 21.  

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