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July/August 2021 Issue

Also in this issue: Supreme Court Signals that Government Agencies Should Be Very Wary of Denying Exceptions to Regulatory, Licensing and Contracting Requirements that Burden the Free Exercise of Religion     |     PSC Dismisses Complaint Challenging Extraterritorial Sewer Service “License Fee”

Wisconsin Supreme Court Holds DNR’s Broad Statutes Provide “Explicit” Authority to Take Challenged Actions; Dissent Decries “Calamitous Decision”

On July 8, 2021, the Wisconsin Supreme Court issued two decisions important to administrative agency authority. Both cases were decided by a 4-2 decision with Justices R.G. Bradley and Roggensack dissenting and Justice Hagedorn not participating.

The two cases addressed the authority of the Department of Natural Resources (DNR) to take certain actions on permit applications. The Kinnard Farms case (Clean Wisconsin v. DNR, 2021 WI 71) addressed the DNR’s authority to impose an animal unit maximum condition and an off-site groundwater monitoring condition upon a Wisconsin Pollutant Discharge Elimination System (WPDES) permit issued to Kinnard Farms. The Pleasant Lake Management District case (Clean Wisconsin v. DNR, 2021 WI 72) addressed the DNR’s authority to review a high capacity groundwater well application for environmental impacts before approving the application.

Both cases focused on how the Legislature’s passage of the REINS Act (2011 Wis. Act 21) and specifically Wis. Stat. § 227.10(2m) impacted the DNR’s authority. The Legislature adopted 2011 Wis. Act 21 to place limits on administrative agency authority. Section 227.10(2m) now provides that “[n]o agency may implement or enforce any standard, requirement, or threshold … unless that standard, requirement, or threshold is explicitly required or explicitly permitted by statute or by a rule that has been promulgated in accordance with this subchapter” (emphasis added).

At issue in both cases was the meaning of the phrase “explicitly required or explicitly permitted” in § 227.10(2m). In the Kinnard Farms case, the Court’s majority determined that the word “explicit” is not synonymous with the word “specific,” that an agency may rely upon a grant of authority that is explicit but broad when undertaking agency action, and that such an explicit but broad grant of authority complies with § 227.10(2m). This conclusion about the meaning of the word “explicit” was key to the result reached in both cases.

In the Kinnard Farms case, the Court found that Wis. Stat. § 283.31(3) and (4) provided the DNR with the necessary statutory authority to impose the challenged conditions in the WPDES permit issued to Kinnard. The Court focused on the authority granted to the DNR to prescribe conditions to assure compliance with effluent limitations and groundwater protection standards.  The Court found that (i) the Legislature gave the DNR broad authority to establish, monitor, and enforce health-based groundwater standards in Wis. Stat. ch. 160; (ii) this resulted in the promulgation of Wis. Admin. Code ch. NR 140; (iii) § NR 140.02(4) provides that the DNR “may take any action within the context of regulatory programs established in statutes or rules outside of this chapter, if those actions are necessary to protect public health and welfare or prevent a significant damaging effect on groundwater or surface water quality”; and (iv) NR 140 applies to all facilities regulated under Wis. Stat. ch. 283, including Kinnard Farms.

The Court concluded that the challenged conditions placed on the Kinnard WPDES permit were necessary to assure compliance with effluent limitations and groundwater protection standards. The Court noted that these conditions were imposed after examining the specific facts surrounding a particular permit application: “This case-by-case analysis allows the DNR to use its expertise to make fact-specific determinations and gives it the flexibility to prescribe conditions that are specifically tailored to a particular applicant.” With respect to the condition that required Kinnard to install offsite monitoring wells, the Court noted that “if the DNR did not have the ability to impose a groundwater monitoring requirement, then the groundwater protection standards would be essentially unenforceable.” 2021 WI  71 ¶39.

The Kinnard Farms dissent took issue with the Court’s decision claiming its interpretation of § 227.10(2m) was inconsistent with the Court’s interpretation of that provision in Wisconsin Legislature v. Palm, 2020 WI 42. In Palm, the Court struck down Emergency Order 28 (the “Stay at Home” Order) based in part upon its conclusion that the Secretary of the Wisconsin Department of Health Services did not have explicit authority to issue such an Order. According to the Palm majority, the “explicit authority requirement is, in effect, a legislatively-imposed canon of construction that requires us to narrowly construe imprecise delegations of power to administrative agencies.” The Kinnard Farms dissent argued that an administrative agency must have “explicit textual authority before it may act.” 2021 WI 71 ¶70 (citing Palm).  It accused the majority opinion of ignoring the clear directive of the Legislature in Act 21.

In the Pleasant Lake case, the question before the Court was whether the DNR had explicit authority to consider the environmental impacts of eight proposed high capacity wells when deciding whether to permit those wells. In 2011, the Court unanimously decided in Lake Beulah Management District v. DNR, 2011 WI 54, that the DNR did have the authority and discretion to consider the environmental impacts of a proposed high capacity well. However once § 227.10(2m) was adopted (which was after Lake Beulah was argued), former Attorney General Schimel opined that the DNR no longer had that authority.

The Court majority in Pleasant Lake concluded that Wis. Stat. § 227.10(2m) did not alter the Court’s prior Lake Beulah decision and that the DNR still had the authority, primarily from Wis. Stat. § 281.12, to consider the environmental impacts of a high capacity well. According to the majority, “[t]he DNR’s authority to consider the environmental effects of proposed high capacity wells, while broad, is nevertheless explicitly permitted by statute.” 2021 WI 72 ¶21. The passage of § 227.10(2m) did not change the conclusion it previously reached in Lake Beulah: “Section 227.10(2m) does not … strip an agency of the legislatively granted explicit authority it already has. Nor does it negate a more targeted ‘directive from the legislature’ to ‘liberally construe’ the specific statutes that expressly confer an agency’s authority.” 2021 WI 72 ¶24.

The Pleasant Lake dissent strongly condemned the majority’s decision. The dissent warned that “[t]he majority’s move has injurious impact far beyond a handful of wells… . Although the legislature created our current administrative system, the majority transforms it into Frankenstein’s monster, a behemoth beyond legislative control unless the legislature kills it.” 2021 WI 72 ¶57. The dissent claims that “the majority affords administrative agencies carte blanche to regulate the people and entities they govern, based solely on broad grants of authority, denying the legislature the ability to check the actions of the bureaucracy it created.” Id.

The Pleasant Lake dissent argues that a faithful reading of Wis. Stat. § 227.10(2m) would have inevitably led to the abrogation of Lake Beulah and a curtailment of the broad grants of authority previously delegated to agencies. The dissent accuses the majority of having “nullified” the Legislature’s chosen mechanism for taking back some control from administrative agencies [i.e. the REINS Act] and leaving the legislature with no alternative but to repeal the statutes by which it has delegated its authority to make law.

A few thoughts about these decisions and the REINS Acts. First, if the Legislature wants to limit administrative agency authority or abrogate Lake Beulah, it may need to adopt direct and specific legislation, instead of relying on broad legislation like the REINS Act. As the Pleasant Lake majority states, the REINS Act does not strip an agency of the legislatively granted authority it already has. The Court will look to existing statutes and rules to determine the extent of an administrative agency’s authority. If the Legislature granted an administrative agency broad authority, the Court will not limit that authority based on the REINS Act. Second, these cases both involved an administrative agency’s permitting decision under a legislatively established permitting program. In these permitting decisions, the consideration of individual facts was important. These cases did not involve the establishment of new rules or policy decisions with more general application. New rules or policy decisions would likely be subject to more scrutiny. Third, these decisions reaffirm the DNR’s broad authority over water issues and may encourage the DNR as it seeks to deal with other challenging water issues such as nitrates, lead, and PFAS.

This newsletter is published and distributed for informational pur- poses only. It does not offer legal advice with respect to particular situations, and does not purport to be a complete treatment of the legal issues surrounding any topic. Because your situation may differ from those described in this Newsletter, you should not rely solely on this information in making legal decisions.

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