March 29, 2024 – A decision by the state Department of Natural Resources (DNR) to regulate polyfluoroalkyl substances (PFAS) as hazardous substances is unenforceable because it wasn’t promulgated as a rule, the Wisconsin Court of Appeals (District II) has ruled (2-1) in Wisconsin Manufacturers and Commerce, Inc. v. Wisconsin Department of Natural Resources, 2022AP718 (March 6, 2024).
Judge Shelley Grogan wrote the majority opinion, joined by Judge Maria Lazar. Judge Lisa Neubauer dissented.
Dirty Soil?
In 2018, Leather Rich, Inc. (LRI), a dry cleaner, learned that its property may have been contaminated with volatile organic compounds (VOC).
LRI contacted the DNR, as required under the Wis. Stat. section 291.11(2)(a), a provision of the state’s “Spills Law.”
Jeff M. Brown , Willamette Univ. School of Law 1997, is a legal writer for the State Bar of Wisconsin, Madison. He can be reached by
email or by phone at (608) 250-6126.
A consultant found VOC in the groundwater on the LRI property and recommended that LRI remediate the VOC.
Voluntary Program
LRI applied for a spot in the DNR’s Voluntary Party Liability Exemption (VPLE) program in January 2019.
Property owners often apply to the VPLE program in the hopes of obtaining a certificate of compliance (COC), which provides certain exemptions from liability.
DNR approved LRI’s application for the VPLE program in February 2019.
Interim Decision
Close in time to that approval, DNR issued an interim decision that it considered “emerging contaminants” to be included in the definition of hazardous substances contained in the Spills Law.
DNR made the interim decision in a post on the agency’s website.
In the decision, the DNR cited concerns over (PFAS) and “other emerging contaminants” found in properties in the VPLE program.
The DNR also said that it would only issue COCs for individual hazardous substances investigated after the VPLE requirements were met, rather than COCs that would cover all potential hazardous substances.
The DNR sent LRI and other VPLE program participants a letter in August 2020 that reminded them to “assess emerging contaminants and their potential impacts as early in the cleanup process as possible.”
In March 2020, the DNR told LRI that it hadn’t approved LRI’s plan to remediate the VOCs because PFAS have been linked to dry cleaning operations and LRI was a potential source of PFAS contamination.
Test for PFAS
In October 2020, the DNR approved LRI’s site investigation, as long as LRI: 1) conducted soil tests for PFAS; and 2) identified individual and combined “exceedances” for PFAS.
The DNR didn’t identify to LRI the specific PFAS compounds that it should test and didn’t specify the level beyond which it would consider PFAS compounds to be hazardous substances subject to the Spills Law.
In 2021, LRI withdrew from the VPLE program. In February 2021, LRI sued the DNR in Waukesha County Circuit Court.
LRI claimed that the DNR decisions about emerging contaminants and limiting the types of COCs the agency would issue were rules adopted without complying with chapter 227.
The circuit court concluded that the DNR’s policy of regulating PFAS as hazardous substances under the Spills Law was unenforceable. The DNR appealed.
Circuit Court Had Jurisdiction
On appeal, the DNR argued that the circuit court didn’t have jurisdiction over LRI’s lawsuit because the basis for the lawsuit was the non-existence of an administrative rule rather than the existence of one.
But Judge Lazar concluded that to accept that argument would be to unreasonably construe section 227.40, the section that authorizes rule challenges.
If that section were interpreted to allow only challenges to existing rules, Lazar wrote, “an agency such as DNR 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.”
Lazar also concluded that an unpromulgated rule is a “rule or guidance document” which section 227.40(4)(a) obligates a court to declare as invalid if it was “promulgated or adopted without compliance with statutory rule-making or adoption procedures.”
DNR Decisions Were Rules
On appeal, LRI argued that the following three DNR policies were rules which section 227.40(4) required the agency to go through the formal notice-and-comment promulgation process:
including “emerging contaminants” in the Spills Law’s definition of “hazardous substances;”
deciding that VLPE program participants would be required to identify individual and combined “exceedances” of PFAS; and
deciding to limit the scope of COCs issued to VLPE program participants.
Judge Lazar applied the five-part test established by the Wisconsin Supreme Court in Citizens for Sensible Zoning, Inc., 90 Wis. 2d 804, 280 N.W.2d 702 (1979) and concluded that each of the challenged policies was a rule that chapter 227 required the DNR to promulgate. Lazar concluded that each of the policies was:
a regulation, standard, statement of policy, or general order;
of general application;
had the effect of law;
was issued by an agency; and
was issued to implement, interpret, or make specific legislation enforced or administered by such agency as to govern the interpretation or procedure of the agency.
“Because the DNR did not promulgate [the interim decision] in accordance with the required rulemaking procedures, the circuit court did not err in concluding that the interim policy is invalid and therefore unenforceable,” Judge Lazar wrote.
Dissent: Decisions Didn’t Have Force of Law
Judge Neubauer began her dissent by pointing out that nowhere in the Spills Law did the legislature require the DNR to identify substances that counted as “hazardous substances” under section 292.01(5).
“The absence of any statutory command … stands in stark contrast to numerous instances elsewhere in the Spills Law where the legislature specifically directed the DNR to address an issue or complete a task through rulemaking,” Neubauer wrote.
Neubauer also argued that the three DNR policies did not meet the third requirement under Citizens for Sensible Zoning, Inc. and as such were not rules subject to the promulgation requirements of ch. 227.
“The statements about the law do not have the force of law because they do not impose any new or unique legal obligations on responsible parties beyond what the Spills Law already requires,” Judge Neubauer wrote.
