By Joe Forward, Legal Writer, State Bar of Wisconsin

Aug. 27, 2010 – A Wisconsin appeals court ended a long-running dispute between the Village of East Troy (Village) and the Lake Beulah Management District (District) by ruling that the District did not have authority to enact an ordinance restricting the transfer of groundwater.

The saga began in 2003, when Village obtained a permit from the Wisconsin Department of Natural Resources (DNR) to construct a high-capacity well 1,400 feet from Lake Beulah, an 834-acre lake in Walworth County, to eliminate water deficiencies and a supplement future growth.

In October of 2003, the District and eventually, Lake Beulah Protective and Improvement Association (the conservancies), petitioned for a contested case before the DNR, alleging the DNR did not comply with its responsibility under the public trust doctrine to “protect navigable waters, groundwater and the environment as a whole” in issuing the permit.

The DNR eventually granted the conservancies a contested case hearing, but the administrative law judge granted the Village’s motion for summary disposition.

The administrative judge concluded the DNR lacked statutory authority to consider the environmental impacts of the proposed well because the Wisconsin statutes didn’t specifically mandate environmental review of a well with that specific capacity and location, and in any event, the District failed to present evidence that the well would cause adverse environmental impacts.

In July of 2004, the conservancies petitioned for judicial review of the 2003 permit. The circuit court affirmed the administrative law judge’s decision.

In August of 2005, the conservancies moved for reconsideration, and filed an geologist’s affidavit asserting the Village’s consultant reached erroneous findings about the water levels surrounding Lake Beulah, and concluding that the new well would have adverse impacts.

The circuit court denied the petition for reconsideration, and the conservancies appealed. Pending appeal in 2005, the DNR issued a new permit to the Village because the 2003 permit was set to expire, and the conservancies petitioned for review of the 2005 permit.

In Lake Beulah Management District v. Dept. of Natural Resources, 2008AP3170 (June 16, 2010), the appeals court held that the public trust doctrine grants the DNR authority to review the environmental impacts of all proposed wells without express authority to do so.

The appeals court also held that although it may assess the environmental impacts of a proposed well under the public trust doctrine, the DNR is not required to do so without an express mandate from the legislature.

Further, although the DNR must decide what evidence will trigger the DNR’s duty to investigate public trust concerns, the appeals court held that “scientific evidence” suggesting an adverse impact “should be enough to warrant further, independent investigation.”

The appeals court remanded the case to the circuit court for an order that the DNR reconsider issuance of the 2005 permit in light of the geologist’s findings and any other information the DNR had before issuing the 2005 permit. Upon review, the DNR approved the 2005 permit. Shortly thereafter, the Village began well construction, which was finished in 2008.

However, on Dec. 11, 2006, about six months after the appeals court ruling for a DNR environmental review, the Lake Beulah Management District – which operates with the powers of a municipal corporation – adopted an ordinance that prohibited the net transfer of ground and surface water from the area that included the location of the disputed well.

The ordinance, if ruled to be legal, would have ended operation of the well.

The Village claimed the District did not have authority to enact or enforce the ordinance. In turn, the District brought an action for a declaratory judgment that the ordinance was valid. The circuit court granted summary judgment to the Village, concluding the ordinance was void and unenforceable and invalid as applied to the Village. The District appealed.

In Lake Beulah Management District v. Village of East Troy, 2009AP2021 (Aug. 25, 2010), the appeals court ruled that the ordinance was preempted by state legislation. Specifically, the court ruled that the DNR has exclusive authority to regulate waters of the state.

The appeals court rejected the District’s argument that although the DNR has exclusive authority to regulate “how” groundwater may be extracted, the ordinance regulates “whether and how much” groundwater may be withdrawn.

“[T]he Ordinance logically conflicts with, defeats the purpose of, and violates the legislature’s delegation of authority to the DNR” in this sphere, the appeals court held.