Today, the Wisconsin Supreme Court reversed the Wisconsin Court of Appeals decision in Wisconsin Manufacturers and Commerce, Inc. (WMC) and Leather Rich, Inc. v. Wisconsin Department of Natural Resources (DNR) regarding the DNR’s ability to regulate per- and polyfluoroalkyl substances (PFAS) as hazardous substances and administer the Voluntary Party Liability Exemption (VPLE) program under Wis. Stat. ch. 292 (the Spills Law).
The decision illustrates many common issues concerning how Wisconsin agencies communicate to stakeholders and helps to provide clarity on Wisconsin administrative rule requirements and limitations, and the utility of agency guidance documents. For Wisconsin remedial action sites, the decision has wide-ranging impact and applies to any contaminant that meets the narrative definition of hazardous substance in Wis. Stat. § 292.01(5).
The Wisconsin Supreme Court held that the DNR is not and was not required to promulgate administrative rules under Wis. Stat. ch. 227 before taking certain actions on PFAS including (1) identifying which PFAS or other contaminants are hazardous substances; (2) modifying VPLE implementation policies; (3) requiring specific numeric standards or thresholds for reporting discharges of PFAS; and (4) stating certain PFAS and contaminants are hazardous substances before requiring responsible parties to address them. The decision also holds that the DNR is not limited by Wis. Stat. § 227.10(2m) before applying the Spills Law to PFAS, or other contaminants in communications to stakeholders, without first going through rulemaking.
The 5-2 decision includes extensive discussion of what types of agency communications or other actions qualify as an administrative rule, application of the five-factor test in Citizens for Sensible Zoning, Inc. v. DNR, 90 Wis. 2d 804, 814 (1979), and whether certain agency communications have the effect of law. The Court concluded that the DNR website updates, policy letters, and other guidance documents do not have the effect of law and therefore, the DNR was not required to engage in the lengthy rulemaking process before communicating such information.
The full text of the Wisconsin Supreme Court decision is available here.
The DNR’s authority to regulate PFAS as hazardous substances has been less than clear since the Waukesha County Circuit Court decision in April 2022 in favor of the commercial dry cleaner and order to stay the decision until all appeals were exhausted.
Last year, the Court of Appeals held that the DNR was required to promulgate administrative rules to create a list of hazardous substances, including PFAS, and establish in rule actionable cleanup levels in all environmental media – groundwater, surface water, soil, sediment, and vapor – before it may regulate PFAS as a hazardous substance in Wisconsin.
Here, the Court found no express statutory requirement that the DNR promulgate rules to identify any substance that meets the definition of a “hazardous substance.” In contrast, the Court identified dozens of other provisions under the Spills Law that expressly authorized or required the department to promulgate administrative rules in Wis. Stat. ch. 292.
Perhaps more importantly, the Court found that the Legislature had structured the Spills Law to place the initial burden on stakeholders, rather than the DNR:
Responsible parties must, on their own initiative, immediately report a discharge to the DNR, restore the environment to extent practicable, and minimize the harmful effects on our air, lands, and waters.
Decision at ¶63. Although the DNR may communicate to responsible parties and the public that it views certain emerging contaminants like PFAS as “hazardous substances,” the Court found that the underlying structure of the Spills Law itself, including the broad definition of “hazardous substance,” provides the legal force behind the reporting and remediation requirements of the law.
More Expansive Than Federal Remedial Action Laws
This decision expands the scope of PFAS regulations in Wisconsin beyond the two singular PFAS compounds under federal regulations. Last year, the United States Environmental Protection Agency designated two common PFAS compounds—perfluorooctanoic acid (PFOA) and perfluorooctane sulfonate (PFOS)—as hazardous substances under the federal Superfund law. This decision applies to any compound that meets the narrative definition of the term “hazardous substance” and serves as a stark contrast to federal procedures required to designate substances as hazardous substances under the Superfund law.
That said, Wisconsin joins the majority of states that regulate PFOA, PFOS and other PFAS contaminants under their respective remedial action laws.
Voluntary Party Liability Exemption Program Clarity
In its second holding of the decision, the Wisconsin Supreme Court reinforced the discretionary authority of the DNR to manage the VPLE program. For years, the VPLE program has stood out as one of the most generous state-level liability protections available in the United States. The Court affirmed that the DNR has broad discretion to implement the VPLE program according to a statutory “menu” of options, including by offering a narrow, partial liability exemption for participating in the program. As a practical matter, unless the DNR changes its policy, this means that the DNR may choose to provide liability protection only for those contaminants that were actually investigated—not every potential contaminant that could have been investigated.
This ruling is expected to provide property owners, developers, and lenders with clearer guidance in navigating Brownfield projects and other contaminated properties. Environmental practitioners expect the DNR to provide helpful guidance documents concerning the VPLE program following this decision.
Challenges to DNR Actions, Generally
This case is a continuation of recent Wisconsin case law that has provided meaningful discretion to Wisconsin’s environmental regulating authority in implementing general statutory oversight powers. In two key 2021 decisions—Clean Wisconsin v. DNR, 2021 WI 71 (Clean Wisconsin I) and Clean Wisconsin v. DNR, 2021 WI 72 (Clean Wisconsin II)—the Wisconsin Supreme Court reaffirmed DNR authority to impose certain environmental protections and other administrative requirements when issuing permits, even in the face of Wis. Stat. § 227.10(2m), which limits agency actions to explicit statutory authority. In Clean Wisconsin II, the Court held that the DNR must consider cumulative environmental impacts under its broad authority in Chapter 281 and the public trust doctrine when permitting and regulating high-capacity wells. In Clean Wisconsin I, the Court found the DNR had broad but explicit authority under Wis. Stat. § 283.31(3)–(5) to set conditions such as animal unit caps and groundwater monitoring requirements related to the permitting and regulation of certain large farms. Here, the Court found that the same principles applied to the agency action in question:
Under these principles, the Spills Law gives the DNR ‘broad but explicit authority’ to enforce a threshold for reporting a PFAS discharge without promulgating a rule.” . . . Wisconsin Stat. § 227.10(2m) cannot be read to ‘strip [the DNR] of the legislatively granted explicit authority it already has.’ Clean Wis. II, 398 Wis. 2d 433, ¶24. Accordingly, § 227.10(2m) does not preclude the DNR from enforcing a threshold for reporting discharges of PFAS and other emerging contaminants.
Decision at ¶62.
Impact to Wisconsin Businesses and Landowners
When it comes to PFAS detected at remedial action sites, Wisconsin regulators have been playing it safe. With PFAS stuck in a regulatory gray area, the DNR, confronted by emerging risk assessments and legal challenges, has opted for a cautious approach to site investigation completeness, site investigation scoping, and case closure decisions.
Environmental professionals are optimistic that this decision may allow the DNR to return to risk-based decision-making approaches that have long defined the Remediation & Redevelopment Program. If so, we expect more practical, science-driven decisions regarding site investigation scoping, completeness, and designing remediation strategies for PFAS cleanups and remedial action sites where PFAS are present.
Godfrey & Kahn will continue to monitor these regulatory developments for PFAS and provide updates to clients. If you have questions about the impact of this decision on your facility or operations, please contact a member of our Environmental practice.