March/April 2024 Issue

Also in this issue: New Option for Obtaining Money for Private Lead Service Line Replacement Funding     |     Seventh Circuit Rules that the City of Madison's Physical Abilities Test did not Violate Title VII

Court of Appeals Holds that DNR’s Regulation of “Emerging Contaminants” Like PFAS Under the Spills Law are Invalid Unpromulgated Rules

Liz Leonard | 04.03.24

The Wisconsin Court of Appeals issued its decision in the Wisconsin Manufacturers and Commerce, Inc. and Leather Rich, Inc. v. Wisconsin Department of Natural Resources case on March 06, 2024 affirming the circuit court’s grant of summary judgment to Wisconsin Manufacturers and Commerce, Inc. (“WMC”) and Leather Rich, Inc. (“LRI”). The court of appeals held that the DNR issued three ​“rules” as defined in Wis. Stat. ch. 227, without following the proper procedures for promulgating a ​“rule” under that chapter. The Wisconsin Department of Natural Resources (“DNR”) has indicated that it will request review by the Wisconsin Supreme Court, so the court’s decision will remain stayed until the Wisconsin Supreme Court either denies the petition for review or issues their own decision in the case. As such, nothing is changing at this time regarding the Spills Law and DNR’s approach to ​“emerging contaminants” like PFAS.

“Emerging contaminant” is a term used to describe a previously unknown or presumed innocuous substance that is currently being researched and identified as potentially harmful. Per-and polyfluoroalkyl substances (“PFAS”) are some of the ​“emerging contaminants” recently receiving a lot of attention from lawmakers and the public. Municipalities should keep an eye on this case as it has the potential to greatly affect the DNR’s authority to regulate ​“emerging contaminants” such as PFAS, and could also affect some associated programs, like DNR’s administration of emergency bottled water to homes with private wells contaminated with PFAS.

This case concerns LRI, a small family-owned dry-cleaning business located in Waukesha County. In 2018, LRI became aware that its property was potentially contaminated with certain Volatile Organic Compounds (“VOCs”) that are commonly found at dry cleaning facility locations. LRI notified DNR of the VOCs as they are required to do by the ​“Spills Law” found in chapter 292 of the Wisconsin Statutes. In 2019, the DNR approved LRI’s application to enter the Voluntary Party Liability Exemption (“VPLE”) program — an environmental clean-up program monitored by the DNR where voluntary applicants can receive a Certificate of Compliance (“COC”) protecting them from some liability related to contamination upon completion of the program. See Wis. Stat. § 292.15(2)(a)3.

At about the time LRI entered into the VPLE program, the DNR announced that, in its view, ​“emerging contaminants” like PFAS fall within the definition of a ​“hazardous substance” under the Spills Law. See Wis. Stat. § 292.01(5). The DNR indicated that it would be evaluating the potential for PFAS and other emerging contaminants at properties already enrolled in
the VPLE program. The DNR also explained that its interim decision was to offer only partial COCs for the individual hazardous substances investigated as part of the VPLE program instead of offering general COCs which provide complete liability exemption for all hazardous substances, whether investigated as part of the VPLE or not.

In 2020, the DNR required LRI to test for and create a remediation plan that included PFAS because PFAS contamination has historically been linked to dry cleaning businesses. In 2021, LRI withdrew from the VPLE program after attempting to satisfy the requirements for some time and filed a Complaint alleging that the DNR’s policies regarding ​“emerging contaminants” were invalid unpromulgated rules that did not comply with Wis. Stat. ch. 227.

Applying the framework set out in Citizens for Sensible Zoning, Inc. v. DNR, 90 Wis. 2d 804, 280 N.W.2d 702 (1979), the court of appeals, like the circuit court before it, determined that there were three DNR policies that were in fact invalid unpromulgated rules. The first unpromulgated rule was the DNR’s determination that ​“emerging contaminants” like PFAS fall under the definition of ​“hazardous materials” under the Spills Law. The second unpromulgated rule was the DNR’s regulation/​enforcement of ​“any standard, requirement, or threshold related to emerging contaminants, including PFAS, in the … VPLE programs.” And the third unpromulgated rule was the DNR’s interim decision indicating it would only issue partial COCs for VPLE program participants.

There is no dispute that the DNR did not go through the rulemaking process when issuing these three policies. As such, the holding that these three policies qualify as ​“rules” disposes of the case in WMC and LRI’s favor.

The court of appeals decision was not unanimous. Judge Neubauer, dissenting, would have held that none of the three policies listed are rules, but rather constitute guidance documents merely informing the public of what the Spills Law already requires and allows.

With a request for review by the Wisconsin Supreme Court imminent, it seems likely that this issue will remain unsettled for a while longer. For now, under the stayed decisions, the DNR continues to regulate PFAS and other ​“emerging contaminants” as ​“hazardous substances” under the Spills Law. However, the DNR indicated by affidavit submitted in the case, that it has reversed course and plans to issue general COCs to sites currently in the VPLE program upon completion of remaining remediation requirements. Stay tuned for further updates.