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September 5, 2014Client Alert

Administrative Decision Signals Potential Shift in Wisconsin Water Law

A recent decision by an Administrative Law Judge (ALJ) creates regulatory uncertainty for any business or municipality that must seek approval for a high capacity well in Wisconsin. On September 4, 2014, the ALJ issued two decisions in companion contested cases concerning permits and approvals issued by the Wisconsin Department of Natural Resources (WDNR) for the construction and operation of the proposed Richfield Dairy in Adams County, Wisconsin. In one case, the ALJ considered whether the WDNR is required to consider “cumulative impacts” when issuing approvals for wells with a capacity to pump greater than 70 gallons per minute, known as high capacity wells; and whether the high capacity wells proposed for the Richfield Dairy would have a significant adverse impact on local water resources. In this context, cumulative impacts means the impacts not only from the proposed wells, but of all wells past, present and future that have affected or could affect the water resources. In the other case, the ALJ considered arguments by opponents that the WDNR had not required enough monitoring in a Wisconsin Pollutant Discharge Elimination System (WPDES) permit and facility design features to protect the environment. The most significant aspects of the ALJ’s decisions are as follows: 

  • WDNR is required to consider cumulative impacts when deciding whether to approve, condition or deny high capacity well approvals;
  • Richfield Dairy’s installation of two new high capacity wells with a combined annual pumping limit of 52.5 million gallons per year will not cause substantial harm to nearby water resources;
  • With a single exception, the WPDES permit issued to Richfield Dairy is reasonable; and
  • The engineered facility designs meet and exceed all applicable standards and will be protective of groundwater.

These decisions are excellent news for the Richfield Dairy, as the project may proceed to construction and operation. Michael Best represented Richfield Dairy throughout these proceedings. The impacts of the high capacity well decision, if unaltered following any appeals, could however, create significant regulatory uncertainty for Wisconsin’s industries, municipalities and recreational facilities that must install capacity wells. The high capacity well decision is discussed in greater detail below. 

The high capacity well case arose shortly after the Wisconsin Supreme Court issued its opinion in the Lake Beulah case (Lake Beulah Management District v. DNR, 2011 WI 54, 335 Wis.2d 47, 799 N.W.2d 73.). The Court in Lake Beulah held that, even if there is no statutory or regulatory requirement that WDNR undertake a formal environmental review before issuing a high capacity well approval, if the agency is presented with “concrete scientific evidence” that a proposed well may cause potential harm to waters of the State, the agency must consider that evidence. With this directive from the Supreme Court, WDNR developed new internal processes for determining what constitutes “concrete scientific evidence” and when its new obligation to consider this evidence would be triggered. 

The WDNR determined that its Lake Beulah obligation would be triggered when WDNR received scientific information demonstrating that potential harm to a specific resource could result from the operation of the specific proposed well. In other words, WDNR reasonably determined that its Lake Beulah obligation would not be triggered by general information concerning regional impacts from long-existing high capacity wells. The agency further determined that it does not have statutory authority to condition or deny approval of a proposed well based on potential “cumulative impacts” from prior approved high capacity wells or future wells, and that a proposed well must be considered on potential impacts it alone may cause to nearby resources.

The Richfield Dairy high capacity well approval was one of the first to be issued with WDNR’s post-Lake Beulah process in place. During the Richfield Dairy high capacity well approval process, petitioners in this case submitted information to WDNR suggesting the entire Central Sands region of Wisconsin was already being impacted by existing high capacity wells, and claimed that Richfield Dairy’s well applications should be denied because of these existing “cumulative” regional impacts. WDNR, based on the long-standing Wisconsin Supreme Court holding that a landowner has the right to use the groundwater so long as its use does not cause harm, determined that WDNR did not have legal authority to condition or deny Richfield Dairy’s well application based on potential impacts from other sources, and issued the well approval to Richfield Dairy.  

A nine-day evidentiary hearing was held on the well approvals and expert testimony by WDNR and Richfield Dairy witnesses demonstrated that potential impacts from Richfield Dairy’s wells would be very small and would not adversely impact nearby surface waters. Petitioners witnesses presented evidence to suggest that existing high capacity wells had already caused significant impacts to surface waters, and they asserted WDNR must consider these existing “cumulative impacts” when deciding whether to approve a well application.  

Despite the lack of any authority authorizing WDNR to consider these cumulative impacts during the high capacity well approval process, the ALJ determined that there is “implied” statutory authority and that the Lake Beulah decision must be read broadly to require WDNR to consider cumulative impacts. The ALJ went on to evaluate the evidence presented at hearing and determined Richfield Dairy may install high capacity wells with an annual pumping limit of 52.5 million gallons per year without causing substantial harm to nearby resources. The ALJ’s determination that Richfield Dairy may install its wells is a significant victory for the dairy and for Wisconsin’s dairy and cheese making industries.

Administrative decisions are generally not considered binding or precedential legal authority.  So from a technical perspective, the ALJ’s decision in this case should only be applied to the facts of the Richfield Dairy well approval. However, it is very likely that WDNR will consider this decision as a mandate to develop new internal processes in an effort to begin considering cumulative impacts prior to issuing the high capacity well approvals in myriad settings, including for industrial uses, municipal water supply services and golf course/water park development, among others. 

Such actions by WDNR would constitute a significant change in how groundwater withdrawals have historically been regulated; however these actions are likely to be taken without any formal rulemaking process, public input or guidance from the legislature. For these reasons, the Richfield Dairy high capacity well permit decision creates significant uncertainty for businesses in Wisconsin that rely on high capacity wells to operate, and has a potential to create significant adverse economic impacts across the state. We will continue to monitor the impact of this decision on WDNR’s high capacity well approval program.

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