Wisconsin Court Voids State’s ‘Hazardous Substance’ Listing For PFAS

March 8, 2024

A Wisconsin state appeals court in a split decision has struck down state regulators’ ability to require investigation and cleanup of PFAS and other emerging contaminants as “hazardous substances” under state law unless they issue a formal rule, but the dissenting judge charges the ruling upends legal interpretations of the law that have stood for more than 45 years.

The Wisconsin Court of Appeals ruled March 6 against the Wisconsin Department of Natural Resources (DNR) in Wisconsin Manufacturers and Commerce, Inc. (WMC) and Leather Rich, Inc. v. DNR, et al., in a 2-1 decision, invalidating DNR’s policies on designating per- and polyfluoroalkyl substances (PFAS) as “hazardous substances,” and enforcing thresholds or requirements for the substances and its related liability waiver policy known as Certificates of Compliance (COCs).

While the ruling sided with industry, an appeal to Wisconsin’s Supreme Court, sought by the state’s attorney general, could be viewed differently by a high court that just last year flipped for the first time in 15 years from conservatives in the majority to liberals.

Despite the state contending the policies are not rulemakings and any finding that they are rulemakings would upend the 46-year-old Spills Law, the appeals court agreed with a lower court that all three policies are in fact rulemakings and that the state failed to follow procedural requirements for rulemakings.

“In summary, the three policies . . . -- emerging contaminants as hazardous substances, emerging contaminants at certain concentrations, and COC approval under the [Voluntary Party Liability Exemption (VPLE)] program -- fall within the definition of a rule as set forth in” Citizens for Sensible Zoning, Inc. v. DNR, Judge Shelley Grogan writes for the majority, referring to a state supreme court decision. Judge Maria Lazar joined Grogan in the majority ruling.

Grogan goes on to say, “Because the DNR did not promulgate these rules in accordance with [state law] procedural requirements, they are invalid and unenforceable.”

The majority has granted a stay of its order, given the DNR’s request for a stay pending appeal.

But, in a dissenting opinion, Judge Lisa Neubauer disagrees that the state’s policies on PFAS as hazardous substances are rulemakings, saying such a stance is a reversal of the Spills Law’s long-standing interpretation. The Spills’ Law sets out obligations for responsible parties that discharge hazardous substances into the environment, she writes. “Since the law’s enactment in 1978, the [DNR] has overseen more than 40,000 hazardous substance cleanups.

“Today, for the first time since the statute was enacted, the court holds that the DNR must promulgate rules identifying certain substances as hazardous before the Spills Law applies to discharges of those substances,” she says.

Wisconsin Attorney General Josh Kaul (D) has told local news outlets the state plans to ask the Wisconsin Supreme Court to review the ruling. Asked about the court decision, a DNR spokeswoman said, “We’re reviewing the ruling and are unable to comment at this time.”

Ruling’s Consequences

Environmentalists are roundly criticizing the ruling, contending it could have wide-reaching implications for the state’s ability to provide environmental protections from toxic pollution to its citizens, with five environmental groups in a March 6 press release saying they hope the state’s high court will reverse the decision. The groups, which are amicus parties in the litigation, are Midwest Environmental Advocates, Citizens for a Clean Wausau, Clean Water Action Council of Northeast Wisconsin, River Alliance of Wisconsin and Wisconsin Environmental Health Network.

“This case could have implications for virtually every community in the state, not just those facing PFAS contamination,” Tom Kilian, with Citizens for a Clean Wausau, said in the press release, which contends the suit sought to limit DNR’s ability to investigate PFAS contamination and require cleanup by responsible parties.

Attorneys also are warning of the consequences of the ruling, including for parties wanting to conduct environmental assessments as part of due diligence.

The ruling “upends Wisconsin DNR authority to regulate PFAS at remedial action cleanup sites without first completing rulemaking. This decision creates uncertainty for entities seeking to evaluate PFAS in the environment and conduct environmental due diligence for real estate transactions at properties where PFAs was utilized or likely utilized,” Godfrey & Kahn attorneys Ned Witte and Bill Nelson write in a March 6 client alert.

In remarks to Inside PFAS Policy, Witte and Nelson add that with this precedential ruling, “any responsible party could challenge the DNR authority citing to this case and the lack of a list of hazardous substances in rule.” They add that the ruling represents an expansion of the limits set during former Gov. Scott Walker’s (R) administration on executive branch authority “and signals the inevitable focus on PFAS, environmental policy and environmental law on the Wisconsin Supreme Court stage.” Under Walker’s administration, the legislature approved a block on the DNR from creating rules exceeding $10 million over two years, unless the legislature gives approval of such rules, they note.

At issue in the case is DNR’s investigative and cleanup approach for hazardous substances, particularly PFAS. In the case, Leather Rich, Inc., a dry cleaning business, and WMC sued the DNR.

They argued that the agency’s policies deeming PFAS and other emerging contaminants as hazardous substances, and enforcement of their corresponding concentrations -- as well as an interim decision limiting the scope of COC liability protection -- “constituted unlawfully adopted rules that were invalid and unenforceable because the DNR did not comply with [Wisconsin Statutes chapter] 227’s rule-promulgation procedures,” the court says.

A lower state circuit court agreed with the industry parties, but DNR appealed, arguing the lower court erred because “(1) Respondents’ ‘unpromulgated rule’ claims fail to state cognizable claims and were beyond the circuit court’s jurisdiction; (2) the Spills Law does not require the DNR to promulgate a list of qualifying emerging contaminants or their respective concentrations before the statutes apply to those substances; (3) the DNR’s ‘interim decision’ that it would not issue broad Certificates of Compliance (‘COCs’) under the Voluntary Party Liability Exemption (‘VPLE’) program did not require rulemaking and is moot;” and the Wisconsin Natural Resources Board should have been dismissed from the litigation.

But the appeals court affirmed the lower court’s ruling on all four matters.

‘Unpromulgated’ Rules

The appeals court first took on the lack of jurisdiction charge, rejecting the state’s arguments that the respondents are challenging “the nonexistence of rules” and instead embraced the respondents’ assertion that the actions by DNR in fact do constitute rules, “albeit unpromulgated ones.”

It points out that otherwise, an agency “could evade review of its policies by simply refusing to refer to anything as a rule or by simply enacting a policy without following the rule-promulgation procedures. Such a construction would be unreasonable, and we do not construe statutes in an unreasonable manner,” it says.

Second, the court applied the Wisconsin Supreme Court’s five-part framework in Citizens for Sensible Zoning, Inc., for analyzing if an agency’s policy falls within the Wisconsin Statutes chapter 227 definition of a “rule.”

“Having determined that the circuit court did not lack jurisdiction to address these claims, we turn now to the question of whether the DNR’s policies related to the regulation of emerging contaminants as hazardous substances and the concentrations of those contaminants, along with the circumstances under which it would issue certain types of COCs to VPLE participants, fall within the statutory definition of a rule,” the court says.

On all three policies, the court found they meet the five-part definition for a rule, and that the lower court did not err in finding that these rules are invalid and unenforceable.

But Neubauer disagrees, saying “none of the statements about the law” that the respondents “challenge satisfies the five-part test for a ‘rule’. . .. Additionally, I disagree with Respondents’ argument that [Wisconsin Statutes Chapter 227] requires the DNR to promulgate a rule identifying PFAS and other emerging contaminants as hazardous before the Spills Law applies.”

She contends that the Spills Law “defines hazardous substance in broad, fact-specific terms and leaves it to responsible parties, in the first instance, to identify and notify the DNR of discharges of such substances. No provision in the Spills Law requires the DNR to promulgate a rule identifying a substance as a hazardous substance before the law’s investigation and remediation obligations apply to it. The majority errs in imposing such a requirement today.” -- Suzanne Yohannan (syohannan@iwpnews.com)

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