July 26, 2022 – A letter from the state Department of Natural Resources informing a company that the agency could not issue the company a permit for existing equipment was not subject to judicial review, the Wisconsin Supreme Court has ruled.

In Container Life Cycle Management, LLC v. DNR, 2022 WI 45 (June 23, 2022), the supreme court held (5-2) that the DNR’s letter did not adversely affect the company’s substantial interests because the letter was a not a complete review of the company’s permit application.

Justice Ann Walsh Bradley wrote the opinion for the majority, joined by Justice Patience Roggensack, Justice Rebecca Bradley, Justice Brian Hagedorn, and Justice Jill Karofsky. Justice Rebecca Grassl Bradley dissented, joined by Chief Justice Annette Ziegler.

Air Permit Violation

Container Life Cycle Management, LLC (CLCM) refurbishes used chemical containers at a facility at St. Francis in Milwaukee County. The facility is subject to air quality laws and regulations administered by the DNR.

In 2017, the DNR and the U.S. Environmental Protection Agency notified CLCM that it had violated an air emissions permit issued to it in 2014. To remedy the violation, in February 2018 CLCM applied for a permit to install an oxidizer on existing equipment to control the odors and emissions that caused the violation.

DNR replied that it required more information to process the application. CLCM submitted a revised permit application to DNR in June 2018.

In the revised application, in addition to the oxidizer, CLCM sought to install a new emissions source, remove equipment, and revise emissions limits specified in existing permits. CLCM also requested a waiver that would allow it to begin installing the oxidizer and the new emissions source while the permit application was pending.

First Letter from DNR

In a letter sent in June 2018, the agency denied CLCM’s request for the construction waiver, because the facility qualified as a major source subject to pollution limits in a PSD permit. The agency also said that the revised application was incomplete and requested more information from CLCM.

The letter contained a notice of appeal rights but stated that it was “not a complete review of the … construction permit application request or the operation permit application submitted at the same time.”

CLCM did not petition for judicial review of the letter and did not provide all of the information requested by DNR. Instead, the company submitted revised data in an effort to show that the St. Francis facility did not qualify as a major source and should instead qualify as a synthetic minor source, for which a PSD permit would not be required.

Second Letter from DNR

DNR responded with a letter sent on Dec. 14, 2018. In that letter, DNR responded to the company’s argument that the St. Francis facility should qualify as a synthetic minor source:

“The department has determined that such a permitting approach is not approvable in an after-the-fact PSD decision. In accordance with long-standing US EPA and department policy, DNR cannot issue a construction permit for existing equipment for which a facility failed to obtain a PSD permit without placing BACT or BACT-equivalent controls on the equipment in question.”

Like the June letter, the December letter stated that it was “not a complete review” of the applications for the construction permit or the operation permit; it also stated that CLCM may need to submit more information. The letter contained no notice of appeal rights.

After CLCM responded to the Dec. 14 letter, DNR sent a letter to CLCM on Dec. 26, 2018.

“The department has consistently indicated since June of 2018 that there was reason to believe the facility should have been permitted as a PSD major source since at least 2014,” DNR wrote in the letter. DNR also requested that CLCM submit the information requested in the previous two letters.

Company Files Lawsuit

In January 2019, CLCM filed a petition for judicial review of the Dec. 14 and Dec. 26 letters, under Wis. Stat. section 227.52. The company claimed the letters were determinations that the St. Francis facility was subject to PSD standards and permit requirements.

The circuit court dismissed the petition, ruling that neither December letter made a final determination with regard to a substantial right or interest of the company. CLCM appealed and the Wisconsin Court of Appeals affirmed the circuit court’s decision.

Permit Application Was Ongoing

In her opinion for the majority, Justice A.W. Bradley explained that CLCM’s substantial rights were not determined by the December 14 letter.

“The letter itself emphasized that ‘it is not a complete review’ of the permit applications at issue,” Bradley wrote.

That DNR requested additional information because it considered CLCM’s permit application to be incomplete, Justice A.W. Bradley explained, showed that DNR’s review of the company’s permit application was ongoing, rather than a decision supported by findings of fact and conclusions of law.

Furthermore, A.W. Bradley pointed out, the December 14 letter contained no statement of appeal rights.

December Letter Made No Determination

CLCM argued that the December 14 letter determined that the St. Francis facility was a major source to which PSD permit requirements applied.

But Justice A.W. Bradley explained that it was the June letter that made that determination; after all, she pointed out, that was the letter in which the agency wrote “The department has determined that … the facility is a PSD major source.”

Additionally, Justice A.W. Bradley noted, the December 14 letter did not determine that the St. Francis facility did not qualify as a synthetic minor source; it requested additional information about how the company proposed to comply with requirements that would allow the facility to qualify as a synthetic minor source.

Where to Draw the Line?

CLCM argued that the December 14 letter would force it spend money that it couldn’t recover if DNR ultimately decided that the St. Francis facility qualified as a minor source or a synthetic minor source instead of a major source.

But, Justice A.W. Bradley wrote, the December 14 letter indicated no more than that “CLCM … must comply with the process to get a permit, which may accrue some cost to CLCM [but] does not adversely affect CLCM’s substantial interests.”

A.W. Bradley wrote that allowing a party to challenge an agency action just because complying with the action would cost money “would create an unworkable system. For example, how much money expended would be enough to secure judicial review? Where would such a line be drawn?”

Dissent: Majority Imposes Finality Requirement

In her dissent, Justice R.G. Bradley argued that the majority had applied a finality requirement to deny CLCM the opportunity to obtain judicial review.

It was inaccurate to characterize the December 14 letter as a mere “step along the way,” as the majority had done, R.G. Bradley argued. Furthermore, even where federal courts have applied a finality requirement, they have decided that agency actions like the Dec. 14 letter are subject to judicial review.

By ruling out a particular permitting approach, Justice R.G. Bradley explained, the December 14 letter adversely affected CLCM’s substantial interests because it forced the company to go through a longer, costlier, and more burdensome permitting process.

“In other words, the Department concluded that CLCM needed to install … controls to conduct its refurbishing process,” R.G. Bradley wrote. “Under these facts, the majority’s decision to foreclose statutorily prescribed judicial review is in error.”

A ‘Rush to the Courts’

Justice R.G. Bradley also argued that rather than prevent an unworkable judicial system, the majority’s holding would cause a courthouse stampede.

“Those subject to adverse agency determinations will rush to the courts upon receipt of any communication that could conceivably be construed as a decision, lest the agency and court later deny review of a challenge deemed untimely,” R.G. Bradley wrote.

“The majority’s decision in this case will leave regulated entities and individuals uncertain of whether courts will dismiss early challenges as premature or reject later suits as tardy.”