United States: Great Lakes Water Diversions – Continued Controversy

Two recent petitions challenging water diversions, one in Wisconsin and another in Michigan, reflect the continued controversy over water rights and usage that have implications, environmental and otherwise, for energy producers and transporters.

On May 25, 2018, Midwest Environmental Advocates ("MEA") filed a petition challenging the Wisconsin Department of Natural Resources' ("Wisconsin DNR") April 25, 2018 approval of the City of Racine's request to divert seven million gallons per day ("MGD") of Great Lakes water ("2018 Racine").

The Wisconsin DNR approved the transfer of 7 MGD from Lake Michigan to an area outside the Great Lakes Basin.  Wisconsin DNR approval is required because of the Great Lakes–St. Lawrence River Basin Water Resources Compact ("Compact").  The Compact was entered into by the eight Great Lakes states, two Canadian provinces, and enacted into federal law.  A key aspect of the Compact is the ban on diversions of Great Lakes water outside the Great Lakes basin unless the diversion meets narrow exceptions, and the Compact requires any diversion to be primarily for residential households.  For example, in 2016, Waukesha, Wisconsin obtained a diversion of water from Lake Michigan because its water supply was contaminated with radium, a naturally occurring carcinogen.  One important condition was that all the water diverted to Waukesha must be returned, resulting in no net loss of water from the Great Lakes.

The main purpose of the 2018 Racine diversion is to supply a single private industrial customer, the Chinese owned Foxconn, and facilities surrounding the Foxconn plant.  Foxconn, a flat screen manufacturer located in Racine, Wisconsin after receiving a reported $4 billion incentive package from Wisconsin.  The diversion of an average of 7 MGD, has 5.8 MGD being used directly by Foxconn and 1.2 MGD being used by commercial facilities surrounding the Foxconn plant.  It also results in 2.7 MGD not being returned to the Great Lakes basin, largely because of evaporation. The diversion does not require unanimous approval under the Compact because less than 5 million gallons per day will be lost. None of the diverted water will be used for residential purposes.

The MEA petition asserts that the Wisconsin DNR's approval disregards and unreasonably interprets a core Compact requirement that all water transferred out of the Great Lakes Basin must be used for public water supply purposes, defined as "serving a group of largely residential customers."  The MEA petition asks for an administrative law judge to review and ultimately withdraw Wisconsin DNR's approval.  The MEA argues that the Wisconsin DNR ruling could become precedent, if allowed to stand, that would undo "a core provision of the compact, essentially unraveling the international agreement and will do undetermined damage to the sustainability of the Great Lakes."

Similarly, there is controversy over the Michigan DEQ permit granting Nestle Waters North America's request to withdraw 400 gallons per minute of water pursuant to the Michigan Safe Drinking Water Act, 1976 PA 399, as amended.  A permit is required if the water is from a new or increased large-quantity withdrawal of more than 200,000 gallons of water per day.  The MDEQ's approval allows Nestle to withdraw 576,000 gallons of water per day.

On May 31, 2018, the Michigan Citizens for Water Conservation ("MCWC") filed a petition to contest the Michigan DEQ's permit in state administrative court.  The MCWC petition claims the DEQ did not obtain "required" data on existing conditions in the field; instead, relying on Nestle-supplied data and computer models. Before Nestle can boost the pumping rate, the DEQ must approve a plan to monitor local wetlands and the health of two trout streams fed by the aquifer Nestle taps for water it bottles under the Ice Mountain spring brand in Stanwood. The DEQ called its review "the most extensive analysis of any water withdrawal permit in Michigan history."

The permit decision and preceding deliberations caused an uproar among Michigan citizens, particularly those living in Flint and Detroit — two Michigan cities where residents have separately struggled with water safety and affordability.  Michigan law allows Nestle to withdraw groundwater for free provided the extraction doesn't harm the environment or dry up neighboring wells.  There are also zoning challenges pending at the state court of appeals.

These extraction cases have generated significant national and global attention, and re-ignited a debate about Great Lakes water diversion and groundwater water policy.  The increased focus on water issues can pose regulatory and compliance issues for energy producers who may also seek to use water as part of the energy production process, as well as transporters who cross bodies of waters.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

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