Summary of Proposed Water Legislation

Recently Introduced in the Michigan Senate and House

Jim Olson

Olson, Bzdok & Howard, P.C.

For Michigan Citizens for Water Conservation

On October 26, 2005, several Democrat State Representatives introduced H.B.s 5366, 5367, 5368, 5369, 5370, 5371, 5372, 5373. The next day, October 27, 2005, Senator Patricia Birkholz and several other Republican Senators introduced S.B.s 850, 851, 852.

The Democrat’s package seeks to prohibit the private sale of water or the sale of water obtained from a municipal system outside of the Great Lakes Basin, unless expressly authorized by law, establish public comment and review of any diversion or export falling within the jurisdiction of the Governor on behalf of the State under the Federal Water Resources Development Act (“WRDA”), implement conservation measures related to water withdrawals, regulate water withdrawals and augmentation of inland lakes and streams, regulate water withdrawals of more than 2 million gallons per day, require analysis of adverse environmental impacts in issuing any drinking water permits, and exempt agriculture crops and produce from the prohibition of diversions under the Great Lakes Preservation Act (“GLPA”).

The Senate package seeks to regulate large quantity withdrawals greater than 2 million gallons a day from adverse impacts to trout streams, prohibit adverse impacts to trout streams from large withdrawals, require a balancing and protection of “multiple uses” of water, confer authority on the Groundwater Advisory Council with the help of a scientific and legal expert panel to establish a water withdrawal assessment tool for large quantity withdrawals, and require reporting and information on large quantity water withdrawals, with more limited requirements for farmers, municipal water suppliers, and residential users.

The Democrat package is fairly comprehensive, but unduly complicated and in some instances compromises riparian and public trust common law standards that may make more difficult to state to assert its sovereign interests over water against diversions, exports, or privatization. The H.B.s require self-reporting conservation practices.

The Republican package is narrow in its application and protects only trout streams from adverse resource impacts from only large quantity withdrawals; it totally ignores riparian standards, public trust standards, and diversions or sale of water – so called privatization, and requires limited registration and reporting for certain large quantity withdrawals, which are exempt from disclosure to the public as required by the Freedom of Information Act. The S.B.s only encourage voluntary conservation practices. The Republican bills undermine the State’s authority to assert sovereign control over its public water resources, and the right of riparians, farmers, and other businesses who rely on current common law water principles to protect them against diversions or exports from watersheds or the Great Lakes Basin.

1. The House Bills

a. H.B. 5366

i. H.B. 5366 would amend the Great Lakes Preservation Act, MCL 324.32701 et seq., by adding Sec. 32704A, declaring that “ the waters of the state are held in the public trust for the use and enjoyment of the public as authorized by law.” The public trust doctrine recognizes that the water is a public resource which cannot be disposed of without express legislative authority, and then only for a public purpose without impairment of the public waters, water resources, or the uses made of the trust waters by the public.

ii. Subsection 32704A(2) provides that “unless authorized by law, the sale of natural water withdrawn from the waters of the state ... is prohibited” where (A) the water is withdrawn from a privately owned waterworks system “established” under the Safe Drinking Water Act, MCL 325.1001 et seq., or (B) the water is withdrawn from a publicly owned waterworks system that certifies the water will be used solely within the Great Lakes Basin.

iii. Subsection 32704A(3) provides that if “authorized by law,” the legislature must consider whether the withdrawal and sale would serves a public purpose, does not harm the waters of the state, the public trust, or related purposes, and would result in an improvement of the waters or water resources of the state.

iv. The term “water withdrawal facility” is defined to mean a “facility designed to transfer water in its natural state outside of its watershed of origin.”

b. H.B. 5367

H.B. 5367 adds enforcement and civil fines of $25,000 to $ 3,000,000 for a violation of the Subsection 32704A to be added by H.B. 5366.

c. H.B. 5368

i. H.B. 5368 further amends the Great Lakes Preservation Act through a new Subsection 32704A to provide a procedure for public comment and review for the Governor in considering a diversion or export of water out of the Great Lakes Basin subject to the Federal Water Resources Development Act, 42 USC 1962D-20, known as “WRDA.” WRDA prohibits the diversion or export of water out of the Basin without the consent of all eight governors of the Great Lakes states. The WRDA does not provide a mechanism for the Governor to invoke the WRDA, a standard for reviewing such as diversion or export, or a means by which other citizens or entities can request the Governor to invoke the WRDA or provide public comment. H.B. 5368 cures this deficiency on request from a governor of another state, from another state, or from a petition signed by 25 or more residents, or on the Governor’s own exercise of authority.

ii. If it is decided that a diversion or export is subject to the WRDA, then any request for approval, public notice and information related to the project, its purpose, impact, conservation, and other standards is required. Public comment is also required for not less than 30 days.

iii. After any public notice and comment, the Department of Environmental Quality must evaluate the proposed project, and establish guidelines for doing so that consider: reasonable alternative water supplies in the watershed to which the water would be diverted and used, the exhaustion of conservation measures, adverse impacts, and negative legal precedents, resource improvement, whether it is for a public water supply, or will maximize return flow of equal quality water, in or closest to the point of withdrawal.

d. H.B. 5369

H.B. 5369 implements conservation practices requirements for any authorized or otherwise lawful water withdrawal. Under subsection 32707A, the statutory scheme provides for self-certification consistent with “generally accepted conservation practices” as established by the Department of Environmental Quality. It would apply to any water withdrawal as defined under the current 32701 et seq. or as that may be amended.

e. H.B. 5370

i. H.B. 5370 would amend the Inland Lakes and Streams Act, MCL 324.30101 et seq., and the Wetlands Protection Act, Mcl 324.30301 et seq., through changes to text and a new subsection 30102A to require permits for augmentation of lakes or streams or the diminishment of the flow or level of lakes or streams by withdrawal of surface water, spring water, or groundwater. This would conform generally with the Circuit Court opinion and judgment in Michigan Citizens for Water Conservation v Nestles North American Waters Inc., as well as the current interpretation of the ILSA by the MDEQ as a result of the MCWC v Nestlé decision (waiting decision on appeal from Michigan Court of Appeals). However, an ILSA permit is not required if a permit is obtained under the Wetlands Protection Act, MCL 324.30301 et seq. or the Great Lakes Preservation Act, assuming the permit scheme for water withdrawals under H.B. 5371, below, is enacted. Withdrawals subject to H.B. 5371 are limited to greater than 2 million gallons a day.

ii. Permits are required only for a “new or increased withdrawal” that “has the potential to cause adverse environmental impacts on water or water-dependent natural resources. In considering impacts, the Department must consider the size, timing (i.e. season of the year etc.), proximity to surface water and groundwater flow, potential changes in flow, level (including base or summer base flow conditions), and impact on water resources, and potential to diminish stream flow. In conducting this evaluation, the Department must also provide an assessment tool model to be used by persons seeking a permit.

iii. However, the Department is authorized to grant general permit categories where minimal impacts would arise from similar kinds of water withdrawal or augmentation activities.

iv. The Department or members of the public can investigate or demand an investigation if a withdrawal or combined withdrawals are adversely impacting, or have the potential to adversely impact, water or water dependent natural resources. If the withdrawals involve agricultural uses, then the Department of Agriculture has jurisdiction. The Department in each case may refuse to accept an “unreasonable” petition if not based on reasonable facts or a “reasonable belief” of the facts. The Department may call for a voluntary meeting to resolve any problem within 30 days, and if that fails the Director of the Department may order corrective action.

v. A toll free line for the public must be established, but a person who files “two unverified petitions ... within 1 year” can be required to pay the costs of investigation of any third or subsequent petition. “Unverified” means there is “not reasonable evidence to suspect adverse natural resource impacts.”

vi. Subsection 30304A would amend the Wetland Protections Act to provide for similar definitions, permit requirements, and standards.

f. H.B. 5371

i. H.B. 5371 would amend the Great Lakes Preservation Act to regulate withdrawals through water permits in order to meet Michigan’s commitments to the Great Lakes Charter, the Annex process, and the Great Lakes Water Quality Agreement. In many respects, it is a proposed codification of Governor Granholm’s proposed Michigan Water Legacy Act.

ii. Subsection 32701(D) adds a definition of “diversion,” now lacking in the GLPA: “A transfer of water from the Great Lakes Basin into another watershed outside of the Great Lakes Basin. The reference to “watershed” infers that the Basin is a watershed which it is, being the largest common denominator for all watersheds in the Basin. Further thought is needed to determine whether it makes more sense, both scientifically and legally, to prohibit diversions from any watershed within the Basin except where authorized by and in compliance with any applicable statute or the common law. This would strengthen the State’s position in defending claims by those who want to divert or export water, such as the commerce clause challenge recently filed by Nestlé against Governor Granholm and the MDEQ or challenges under the NAFTA or other investment trade agreements.

iii. In subsection 32702(J) the state reaffirms its right and obligation to use, conserve, and protect the waters of the Basin as set forth in the Boundary Waters Treaty, the Water Quality Agreement, the Charter, and the Annex 2001. However, no mention is made of its sovereign ownership of the waters within the state as a public resource or the public trust in these water resources.

iv. Subsection 32702A is added that ties water permits to water quality standards or laws, presumably Part 31, ILSA, WPA, Part 41, Part 17 (MEPA), and mandates that the “interests and rights of Native America tribes of the Great Lakes Region shall be considered by the Department.” This includes tribal interests within the framework of the water permit scheme, as well as the rest of the existing scheme regarding diversions, registrations, and conservation within the GLPA. To some extent, this cures the problem with WRDA and the resulting lack of cause of action for the tribes to maintain under WRDA. Presumably, they can now use the state law and standards and have an interest that falls within the scope of interests protected by the GLPA.

v. Subsections 32705 and 32706 are amended to require registration and reporting for water withdrawals of greater than 100,000 gallons per day, and for augmentation projects.

vi. Subsection 32711 is amended to implement the water permit scheme for new or increased withdrawals of more than 2 million gallons per day or 100 million gallons in a year. In 2010, the limit would drop to 1 million gallons per day or 1oo million gallons per year. Applications must identify location, quantity, affects on adjacent property, impacts on water resources, alternative sources, conservation practices, restoration, and other information. The Department has 6 months to decide, and any approved permit expires in 5 years, requiring reapplication. A public hearing may be held on a permit application.

vii. Under 32712C, no water permit can be issued unless the applicant demonstrates all of the following standards:

(1) No reasonable alternative water supply exists in the watershed of the proposed use.

(2) Will not impair or pollute natural resources or the public trust, and will not adversely affect public water rights in navigable waters.

(3) Current and proposed water use incorporates accepted conservation practices.

(4) No adverse impact on water or water resources.

(5) Consistent with health, safety, and welfare and not detrimental to the public interest.

(6) Potential impacts will be minimized by return flow.

(7) Plan for improvement to waters or water dependent resources of the Basin.

viii. The Department reserves power to modify, revoke, or impose conditions on any permit, or to issue orders.

ix. Under new subsection 32716, the water permit scheme does not preempt local governments from adopting their own regulations; does not alter any other remedy a person may have under common law or statutes, and does not relieve obligation to obtain permits under any other law. Finally, a water permit or the Part 327 is not to be construed to create, convey, or transfer any property interests in the water.

g. H.B. 5372

H.B. 5372 amends the Safe Drinking Water Act to add a new standard that allows the Department (Water Bureau) to reject an application for a waterworks system if it “will cause adverse impacts to natural resources under standards described in 32712C (see above).

h. H.B. 5373

H.B. 5372 would exempt “water contained in agricultural crops or produce” from the prohibition of diversions outside of the Basin in current Section 32703(1) of the GLPA. Note, this is probably surplusage, since crops and produce are most likely “consumptive uses” as defined by the GLPA and not a diversion.

2. The Senate Bills

a. S.B. 850

i. S.B. 850 would edit certain technical provisions of the Inland Lakes and Streams Act, MCL 324.30101 et seq., and amend the GLPA, 324.32701 et seq. to regulate certain “large quantity water withdrawals” by prohibiting any such large quantity withdrawal “that causes an adverse resource impact to a designated trout stream” listed under Director Order, FO-210.04, Oct. 10, 2003. Under subsection 32701(M) a “large quantity withdrawal” is one or more cumulative withdrawals of 100,000 gallons per day, using a 30-day average, that supply a common distribution system. Under 32701(A) “adverse resource impact” means (1) decreasing the base flow of a stream so it will no longer support characteristic fish populations, or (2) decreasing the level of a lake such that it will no longer support fish populations. Under 32701(D) the term “base flow” means “the 50% exceedance flow for the lowest flow month of the flow regime for a stream reach averaged over a 5 year period or extrapolated from flow estimates for Michigan. However, under 32722(2) and (3), the amendment would presume that existing large quantity withdrawals do not adversely impact water resources, and that even a new or increased withdrawal would not if it can be shown that (A) the location is more than 1,320 feet from the banks of a designated trout stream, and (B) the depth of the well is at least 150 feet; further under the to-be-developed water assessment tool, H.B. 851, below, it is presumed there will be no adverse impact if the tool results in a determination that it is “not likely to cause an adverse impact.” This would mean that the burden is on the Department or citizens to not only prove but rebut a presumption of no adverse impacts in these circumstances. It also would contradict the standard in Part 17, NREPA (the MEPA), 342.1701 et seq., that prohibits approval of conduct that is “likely to” have environmental effects if there exists feasible and prudent alternatives. Water users or marketers could use the statutory presumptions to defeat a violation of the MEPA, when such conduct could be shown to otherwise violate the MEPA.

ii. The term “waters of the State” means “groundwater, streams, lakes, including the Great Lakes within Michigan’s territorial limits. This confirms the definition in Part 31, water quality, for water quantity or withdrawals under the GLPA as it would be amended. It also confirms the understanding under GLPA, the Annex, the Charter, and other documents that address withdrawals or diversions for the Great Lakes.

iii. In order to assert authority over the waters of the state, S.B. 850 adds a finding in 32702(I) that the waters of the state are subject to “multiple use” which uses “must be balanced.” This contradicts and could well violate the standards and preferred uses protected by riparian and public trust law. Moreover, it would lead to a water allocation system of water law that, in the end, would undermine Michigan’s own water law that presently protects its sovereign power and the rights of businesses and citizens to use water within our watersheds without threat from diversions or exports for use elsewhere.

iv. A new subsection 32702(I)(2) would reiterate the State’s authority to protect water resources for the health, safety, and welfare under Art 4, Sec. 51, and from pollution or impairment under Art 4, Sec. 52 of the Mich Constitution, but that such power is “subject to” constitutional protections from unreasonable government actions and the taking of private property for public purposes without compensation. The provisions re-state the obvious, already in the constitution, adds nothing, and is unnecessary. Because of possible confusion, it would be more prudent to simply delete it. Indeed, this is nothing but a quote from Attorney General Cox’s Opinion No. 7162 (Sept. 23, 2004, pp. 10-11).

v. Section 32723 would also impose a new permit requirement for large quantity withdrawals for new or increased withdrawals of more than 2 million gallons per day averaged over a 90-day period. An applicant application is administratively complete unless the Department says it is not within 14 days, and the Department must make the decision within 60 days of the administratively complete application. The permit “shall” be approved if (A) the withdrawal is from a confined aquifer or (B) will not cause adverse resource impact. Thus, if there is a categorical presumption of no impact under 32722(2) or (3) or it’s from a “confined aquifer,” the withdrawal, even if a large quantity would be basically exempt.

vi. A” party aggrieved by the determination” may file a contested case petition, and the decision must be made within 60 days, which grants water permit applicants a preference over other affected persons appealing Department decisions; if not satisfied with that decision, the aggrieved person may appeal to a circuit court under the Administrative Procedures Act (“APA”). This may mean only those denied a permit would be arguably “aggrieved.” Courts may allow others who are impacted by the decision, such as adjacent water users or landowners, but citizens who would have difficulty in intervening or seeking court review under this provision. Moreover, the standard of review under the APA is contrary law, arbitrary, or not supported by substantial evidence on the record. This would weaken the standard of review under the MEPA, at least to the extent that a review was taken under the APA involving a decision under the MEPA.

vii. Finally, water withdrawals in connection with hazardous wastes, solid waste, or environmental cleanups of hazardous substances do not require water permits under the new amendment; and 32725 provides that the amendment is not to be construed to affect, alter, or interfere with common law water rights. This latter provision cuts either way; it could be used as a “sword” by those exercising withdrawals under a claimed common law right, or as a “shield” against water withdrawals by those whose common law rights are impacted, such as riparians or other well owners. To be clearer, the provision should state that it does not create or diminish any water rights or property interests, or alter or impair any existing water rights or remedies under the common law or other statute.

b. S. B. 851

S.B. 851 would amend Ground Advisory Council Act, 324.32803, by enlarging the number of members, and appointing a technical advisory committee with legal and scientific expertise to assist the Council in establishing a “Water withdrawal assessment tool.” The tool is to be used by an applicant or person designing a new or increased “large quantity withdrawal,” [32701(M), 100,000 gallons per day; 32723, 2 million gallons per day], to help determine whether the withdrawal “may cause adverse impact” to the waters of the State or water dependent natural resources. The technical advisory committee would assist the Council in making a “factually based determination” on the parameters and variables of the assessment tool that “require a policy or other risk-based judgment.”

c. S.B. 852

i. S.B. 852 would amend Section 32705 of the GLPA and require “the owner of real property who develops a new or increased withdrawal on that property” of more than 100,000 gallons to register with the Department. The registration must be filed before any withdrawal, provided that this requirement does not interfere with withdrawals related to testing for such new or increased withdrawal. If the owner is a farmer, then the registration is to be filed with the Department of Agriculture. If an owner has a permit under S.B. 851, no registration is required.

ii. The annual report under subsection 32707(1) is not required from farmers who register under subsection (8), a public water supply that reports under the Safe Drinking Water Act, or the owner of a non-commercial or residential well. If the source is groundwater, the location must be provided within 25 feet.

iii. Information reported to the either department cannot be disclosed under the Freedom of Information Act (“FOIA”) unless it is causing an adverse resource impact. This flies in the face of long-standing case law principles under the FOIA, which restrict non-disclosure and even then require a showing that non-disclosure outweighs the public interest in disclosure. Without the information, it may be hard to show a withdrawal is causing an impact, and the fact that water is a public resource should require disclosure in the absence of a compelling justification that it should qualify as confidential or exempt under the FOIA.