GROUNDWATER WITHDRAWAL DISPUTES & AQUIFER PROTECTION FUND

According to committee testimony offered by the director of public health for Saginaw County, over the past eight years there have been 235 complaints from residents when their water wells have run dry during the summer months. The Saginaw News (1-28-03 and 3-8-02) has reported the residents believe they lose their water because of the irrigation practices of two corporate farms, one owned by Clio-based Walther & Sons, Incorporated, and the other by the Church of Jesus Christ of Latter Day Saints. The residents blame the farms’ irrigation practices and their use of 10 irrigation wells, because after the growing season ends, the residential water supply returns to normal. The farms have denied a connection between their irrigation practices and the residents’ water problems, blaming old, shallow residential wells as the cause of the problem.

Residents also have reported seasonal water shortages from their wells during the growing season in Gratiot County, and a county commissioner from Gratiot County reported that all residents who experience water loss are located near farms with irrigation systems.

Further, a spokesman for the Michigan Townships Association reported that de-watering is a serious problem in Monroe County, although in that county the water shortages are caused by sand- and gravel-mining operations.

The regulation of Michigan’s water resources falls within the purview of the Department of Environmental Quality (DEQ), and surface groundwater withdrawals are governed by the Great Lakes Charter, a compact signed by the governors and premiers of the Great Lakes States and Provinces. See BACKGROUND INFORMATION below. All water resources within the basin are recognized and treated as a single hydrologic system, and according to the charter, the management of the waters and the ecosystem are considered as a unified whole.

The subsurface water resources also are a part of the water system in the Great Lakes Basin, and their stewardship also falls to the DEQ. When residents lose their subsurface supply of water they have little recourse, since there is no dispute resolution system in Michigan that addresses concerns about groundwater withdrawals. According to reports, a dispute resolution system does operate effectively in the state of Indiana, and legislation to establish a similar conflict resolution program at the DEQ has recently been introduced.

In addition to settling present-day disputes, policies are needed to protect the water supply over the long-term.Containing one-fifth of the world’s fresh water, the Great Lakes are increasingly coveted as the world’s human population climbs steadily, pollution increases, and conservation measures do not keep pace with development. One report published by Michigan Citizens for Water Conservation asserts that global demand for water doubles every 20 years. Because water scarcity has not been a problem for Michigan, however, the state does not regulate the quantitative withdrawal of water from either the surface of the lakes or from the underground aquifers that supply between 24 percent and 32 percent of the Great Lakes’ surface water. (An aquifer is an underground water bed between rocks and soil that is recharged by rain and snow melt).

Absent regulation, Michigan landowners maintain virtually all rights to the water underneath their property. In the past three years, however, a number of water conflicts have arisen. In 2002, the Perrier Group of America, owner of the Ice Mountain brand of bottled water, built a water-bottling plant in Mecosta County and began pumping out groundwater at a rate of 130 gallons per minute. According to an article in the Detroit Free Press (5-5-03), the company plans to boost withdrawals to at least 400 gallons per minute. The group Michigan Citizens for Water Conservation has filed a lawsuit against the company, claiming that the withdrawals have harmed, or likely will harm, the environment and members of the citizens group. Further east, southern Saginaw County residents who live near large agricultural irrigators claim that their well levels and water pressure drop significantly during growing season, often leaving them without running water. Also, it is reported that groundwater supplies in several of Monroe County’s townships regularly fail to meet the needs of many local residents. Drought and large groundwater withdrawals, particularly by rock mining operations in the area, have caused significant drops in subsurface water levels there, allowing toxic elements, such as sulfur, to infiltrate private wells. Many Monroe County residents have been forced to import water for drinking and domestic use. According to the Department of Environmental Quality (DEQ), these withdrawals also threaten the water that replenishes the Great Lakes because groundwater supplies 67 percent of the water in streams that feed the Great Lakes.

Increased Great Lakes protection, including the regulation of water that feeds the Great Lakes, has been in the planning stages for a number of years. In 1985, the Great Lakes governors and Canadian premiers signed the Great Lakes Charter, a voluntary agreement through which the Great Lakes states and provinces cooperatively manage the waters of the Great Lakes. In June 2001, the governors and premiers reaffirmed their commitment to the health of the Great Lakes by signing the Great Lakes Charter Annex 2001 (“Annex 2001"). Annex 2001 focuses specifically on water withdrawals by outlining the basic principles that state and provincial governments should use when evaluating water withdrawal proposals. Annex 2001 also calls for coordinated standards that guide water use decisions toward the common goal of protecting and enhancing the Great Lakes ecosystem. Both the original charter and the Annex are nonbinding, and require statutory authority to be implemented. Also, any water withdrawal legislation must not conflict with the Interstate Commerce Clause of the U.S. Constitution or the provisions of various international trade agreements.

In August 2001, then-Senate Majority Leader Dan DeGrow created the Great Lakes Conservation Task Force, composed of five Republican and three Democratic state senators. Senator DeGrow charged the task force with upholding Article IV, Section 52 of the Michigan Constitution, in which the legislature is required to: “provide for the protection of the air, water and other natural resources of the state from pollution, impairment and destruction”. Specifically, the task force was asked to recommend to the legislature policy changes that would improve the Great Lakes ecosystem. Chaired by Senator Ken Sikkema, the task force conducted eight public hearings throughout the state, took considerable oral and written testimony, and issued its report in January 2002. In its report, the task force recommended the following two policy changes to address aquifer protection, diversion, and water withdrawals: “1. The Legislature should enact comprehensive water withdrawal laws. This process may require a step-by-step approach, beginning with the enactment of an aquifer protection statute. 2. The Legislature should also promptly enact any implementation laws arising from the consummation of the Annex 2001 process.”

As a result of the task force report, Annex 2001, and the issues in Mecosta, Saginaw, and Monroe Counties, many people believe water withdrawals from Michigan aquifers should be regulated in statute, and that dispute resolution protocols should be established.

THE CONTENT OF THE BILL:

The bill would allow the director of the Department of Environmental Quality (DEQ) to regulate disputes about groundwater withdrawals. It also would create the Aquifer Protection Revolving Fund.

A related bill, Senate Bill 289 (Public Act 148 of 2003), also deals with groundwater. It would require the preparation of a statewide groundwater inventory map, create the Groundwater Advisory Council, increase water use reporting fees, under certain circumstances regulate farms with the capacity to pump over 100,000 gallons of water a day, and require the Michigan Department of Agriculture to estimate water use for each township. For an explanation of Senate Bill 289, see the analysis by the Senate Fiscal Agency dated 8-19-03.

House Bill 4087 would add Part 317, entitled “Aquifer Protection and Dispute Resolution,” to the Natural Resources and Environmental Protection Act (MCL 324.31701 et al.) in order to establish a process that would be followed by the director of the DEQ to receive groundwater withdrawal complaints, as well as to investigate and resolve those complaints. Under the bill, the conflict resolution orders that would be issued by the director would allow for the temporary provision of potable water, quantity restrictions on high capacity wells, and compensation for small quantity well owners. In addition, the bill would allow high capacity well owners to appeal an order directly to circuit court, set penalties for violation of an order, and enable the director to promulgate rules that might be necessary to implement the complaint resolution process.

The bill also specifies that within 30 days after the effective date of this legislation, the director of the DEQ would identify two geographic areas in the state that are at greatest risk for potential groundwater disputes. Then, beginning 30 days after the effective date of the bill, the program described above would be administered in those two geographic regions. However, beginning July 1, 2004, the program would be administered on a statewide basis.

A more detailed explanation of the bill follows.

Definitions. The bill provides definitions for 19 terms, including the following. “High capacity well” is defined to mean one or more water wells associated with an industrial or processing facility, an irrigation facility, a farm, or a public water supply that, in the aggregate from all sources and by all methods, has the capability of withdrawing 100,000 or more gallons of groundwater in one day. “Small quantity well” is defined to mean one or more water wells of a person at the same location that, in the aggregate from all sources and by all methods, have the capability of withdrawing less than 100,000 gallons of groundwater in one day. “Groundwater” is defined to mean the water in the zone of saturation that fills all of the pore spaces of the subsurface geologic material. “Groundwater dispute” means a groundwater dispute declared by order of the director under section 31703 of the bill. “Fund” is defined to mean the Aquifer Protection Revolving Fund created in section 31710 of the bill.

Groundwater withdrawal complaints and investigations. The bill would allow the owner of a small quantity well to submit a complaint alleging a potential groundwater dispute if his or her well had failed to furnish the normal supply of water, or had failed to furnish potable water, and the owner believed the well’s problems had been caused by a high capacity well. A complaint would be submitted to the Director of the Department of Environmental Quality, or to the director of the Department of Agriculture if the complaint involved an agricultural well. A complaint would be written and submitted in person, via certified mail, via a toll-free facsimile telephone number, or via other means of electronic submittal as developed by the department. Under the bill, a complaint would have to include all of the following information: a) the name, address, and telephone number of the owner of the small quantity well; 2) the location of the small quantity well, including the county, township, township section, an address of the property on which the small quantity well was situated, and all other available information that defined the location of the well; c) an explanation of why the small quantity well owner believed that a high capacity well had interfered with the proper function of his or her well, and any information available about the location and operation of the high capacity well; d) the date or dates that the small quantity well owner alleged that the interference by a high capacity well occurred; and, e) sufficient evidence to establish a reasonable belief that the interference was caused by a high capacity well. The bill specifies that the owner of a small capacity well could call the toll-free telephone line to request a complaint form or other information regarding the dispute resolution process. Further, the director would be required to provide a toll-free facsimile telephone line to receive complaints.

Within two working days after receipt of a complaint, the director of the DEQ or the director of the Department of Agriculture (if the withdrawal would be governed under provisions of the Michigan Right to Farm Act), would be required to contact the complainant and begin an investigation. Within five working days after receipt of the complaint, the appropriate director would be required to conduct an on-site evaluation, unless the complaint was in close proximity to other small quantity wells for which documented complaints had been received and investigated during the previous 60-days.

If the director considered it necessary for an investigation, he or she could request that the owner of the small quantity well provide a written assessment by a well drilling contractor that the small quantity well failure was not the result of well failure or equipment failure. The assessment would include a determination of the static water level in the well at the time of the assessment and, if readily available, the type of pump and equipment. If an investigation were conducted, the director would be required to consider whether the owner of the high capacity well was using industry recognized water conservation management practices. After conducting an on-site investigation, the director of the DEQ or the Department of Agriculture, as appropriate, would be required to make a diligent effort to resolve the complaint, and could propose an equitable remedy. However, the bill specifies that if the Department of Agriculture was unable to resolve a complaint within 14 days following submittal of the complaint, then the complaint and all relevant information would be referred to the director of the DEQ for resolution. The bill would require the two departments to enter into a memorandum of understanding that described their complaint resolution processes when a complaint involved an agricultural well, and publicize the toll-free facsimile line and the toll-free telephone line that would be used to receive complaints, and request complaint forms and other information related to the dispute resolution process.

The bill also specifies that a complainant who submitted more than two unverified complaints within one year could be ordered by the director to pay for the full costs of investigation of any third or subsequent unverified complaint. (As used in this subsection, “unverified complaint” means a complaint in response to which the director determined that there was no reasonable evidence to declare a groundwater dispute.)

Groundwater dispute declarations. Under the bill, the director of the DEQ would be required to declare a groundwater dispute if an investigation of a complaint disclosed all of the following, based upon reasonable scientifically-based evidence: a) a small quantity well had failed to furnish the well’s normal supply of water or failed to furnish potable water; b) the small quantity well and the well’s equipment were functioning properly at the time of the failure (a determination made based upon an assessment from a well drilling contractor that was provided by the owner of the small quantity well); c) the failure of the small quantity well was caused by the lowering of the groundwater level in the area; d) the lowering of the groundwater level exceeded normal seasonal water level fluctuations, and substantially impaired continued use of the groundwater resources in the area; e) the lowering of the groundwater level was caused by at least one high capacity well; and, f) the owner of the small quantity well did not unreasonably reject a remedy proposed by the director of the DEQ or the director of the Department of Agriculture.

In addition, the bill would grant the director authority to declare, by order, a groundwater dispute, if he or she had clear and convincing scientifically-based evidence that indicated that continued groundwater withdrawals from a high capacity well would exceed the recharge capability of the groundwater resource of the area.

Groundwater dispute orders. An order declaring a groundwater conflict would be effective when a copy was served upon the owner of a high capacity well that was reasonably believed to have caused the failure of the complainant’s small quantity well. The bill specifies that if a groundwater conflict required action before the order had been served, oral notification in person by the director of the DEQ would be sufficient until service could be completed. Oral notification would be effective for not more than 96 hours. As soon as possible after an order had been issued, the director would be required to provide copies to the local units of government in which the high capacity well and the small quantity well were located, and also to the local health departments with jurisdiction over the wells.

Temporary supply of potable water. Under the bill, upon the declaration of a groundwater dispute, the director of the DEQ would be required, by order, to arrange for the immediate temporary provision, at the point of use, of an adequate supply of potable water.

Quantity restrictions. If the director issued an order declaring a groundwater dispute, he or she could, by order, restrict the quantity of groundwater that could be extracted from a high capacity well, under either of the following conditions: a) if the high capacity well was reasonably believed to have caused the failure of the complainant’s small quantity well, and an immediate temporary provision of an adequate supply of potable water had not been provided; or, b) there was clear and convincing scientifically based evidence that continued groundwater withdrawals from the high capacity well would exceed the recharge capability of the groundwater resource of the area.

The bill would require that, when issuing an order, the director consider the impact the order would have on the viability of a business associated with the high capacity well, or other use of the high capacity well. Further, the director could not issue an order that diminished the normal supply of drinking water or the capability for fire suppression of a public water supply system owned or operated by a local unit of government.

Compensation for small quantity well owners; DEQ reimbursement. Under the bill, if a groundwater dispute had been declared by order, then the owner of a high capacity well would be required to provide timely and reasonable compensation to those who owned a small quantity well, if there were a failure or substantial impairment of those wells, and the following conditions existed: a) the failure or impairment had been caused by the groundwater withdrawals of the high capacity well; and, b) if the small quantity well had been constructed prior to February 14, 1967, or if the small quantity well had been constructed on or after February 14, 1967, in compliance with the Public Health Code.

In addition, the bill specifies that the owner of a high capacity well would be required to reimburse the director an amount equal to the actual and reasonable costs incurred by the DEQ in investigating and resolving the groundwater conflict, not to exceed $75,000. Money received would be forwarded to the state treasurer for deposit into the Acquifer Protection Revolving Fund.

Under the bill, timely and reasonable compensation would consist of (and be limited to) either or both of the following:

1) the reimbursement of expenses incurred by the complainant beginning 30 days prior to the date on which a complaint had been made, in paying the cost of conducting a well assessment to determine that the small quantity well and the well’s equipment were functioning properly at the time of the failure; paying for the cost of obtaining an immediate temporary provision at the prior point of use of an adequate supply of potable water; or obtaining either the restoration of the affected small quantity well to the well’s former capability; or the permanent provision at the point of use of an alternative potable supply of equal quantity.

2) the restricting or scheduling of the groundwater withdrawals of the high capacity well so that the affected small quantity well could continue to produce the well’s normal supply of water or the normal supply of potable water, if the well normally furnished potable water.

The bill specifies that the refusal of an owner of an affected small quantity well to accept timely and reasonable compensation would be sufficient grounds for the director to terminate an order imposed on a responsible high capacity well. Further, an owner of a high capacity well could appeal an order directly to the circuit court.

Exemption for public water supplies. Under the bill, the dispute resolution process and penalties would not apply to a potential groundwater dispute involving any of the following: a) a high capacity well owned or operated by a local unit of government, if the local unit agreed to make the aggrieved property owner whole by connecting the owner’s property to the local unit’s public water supply system, or by drilling the owner a new well with the installation costs paid by the local unit of government; b) a high capacity well associated with a public water supply system that was owned or operated by a local unit of government if the recharge area of the water well was protected by a well head protection program approved by the department under the state’s wellhead protection program; or c) a high capacity well that was a dewatering well; and, d) a high capacity well that was used solely for the purpose of fire suppression.

Aquifer protection revolving fund. Under the bill, an Aquifer Protection Revolving Fund would be created in the Department of Treasury. The fund could receive money or other assets from any source for deposit to the fund, and the state treasurer would direct the investment of the fund, and credit to the fund interest and earnings from those investments. Money in the fund at the close of the fiscal year would remain in the fund and not lapse to the general fund. The fund could be used by the department only to implement this part of the code. Finally, if money in the fund were used to conduct hydro-geological studies or other studies to gather data on the nature of aquifers or groundwater resources in the state, the department would be required to include that information in the groundwater inventory and map.

Report to the legislature. The bill specifies that not later than April 1, 2004, and every two years thereafter, the department would prepare and submit to the standing committees of the legislature, a report that included an analysis of the department’s costs of implementing this part of the code, and whether the limitation on reimbursable costs should be modified; and recommendations concerning modification to this part of the code that would improve the overall effectiveness of the program.

Penalties. A person who violated an order would be responsible for a civil fine of not more than $1,000 for each day of violation, but not exceeding a total of $50,000. A default in the payment of a civil fine or costs or an installment of the fine or costs could be remedied by any means authorized under the Revised Judicature Act. All civil fines recovered would be forwarded to the state treasurer for deposit into the General Fund. Finally, the bill specifies that the director of the DEQ could bring an action in a court of competent jurisdiction to enforce an order, including injunctive or other equitable relief.

MCL 324.31701

BACKGROUND INFORMATON:

The Council of the Great Lakes Governors comprises the governors of eight Great Lakes States (Michigan, Indiana, Illinois, Wisconsin, Ohio, Pennsylvania, and New York), who work closely with the leaders of the Canadian provinces of Ontario and Quebec. Together, they work to protect the environment and economy of the Great Lakes region, and have adopted the Great Lakes Charter, which specifies “Principles for the Management of Great Lakes Water Resources”, which they, as the lakes’ trustees, are pledged to follow.

The purposes of the charter are to conserve the levels and flows of the Great Lakes and their tributary and connecting waters; to protect and conserve the environmental balance of the Great Lakes Basin ecosystem; to provide for cooperative programs and management of the water resources of the Great Lakes Basin by the signatory states and provinces; to make secure and protect present developments within the region; and to provide a secure foundation for future investment and development within the region.

The “Principles for the Management of Great Lakes Water Resources” are as follows: I. Integrity of the Great Lakes Basin, II. Cooperation among Jurisdictions; III. Protection of the Water Resources of the Great Lakes, IV Prior Notice and Consultation; and V. Cooperative Programs and Practices.

According to the charter, the “Implementation of Principles” relies upon a common base of data. To that end, those who signed the charter have committed their agencies to “pursue the development and maintenance of a common base of data and information regarding the use and management of basin water resources and the establishment of systematic arrangements for the exchange of water data and information.” The common base of data includes the following: 1) Each state and province will collect and maintain, in comparable form, data regarding the location, type, and qualities of water use, diversion, and consumptive uses, and information regarding projections of current and future needs; 2) In order to provide accurate information as a basis for future water resources planning and management, each state and province will establish and maintain a system for the collection of data on major water uses, diversions, and consumptive uses in the basin. The states and provinces, in cooperation with the federal governments of Canada and the United States and the International Joint Commission, will seek appropriate vehicles and institutions to assure responsibility for coordinated collation, analysis, and dissemination of data and information; and, 3) The Great Lakes states and provinces will exchange on a regular basis plans, data, and other information on water use, conservation, and development, and will consult with each other in the development of programs and plans to carry out these provisions.

The charter also names the water resources management committee, sets forth consultation procedures, describes a basin water resource management program, encourages a coordinated and concerted research program, and specifies five steps that must be accomplished to ensure progress toward implementation.

For more information about the Great Lakes Charter, visit www.cglg.org/pub/charter.

FISCAL IMPLICATIONS:

The House Fiscal Agency notes that additional appropriations will be necessary if the groundwater withdrawal dispute program created by this bill is to be funded in the 2003-04 fiscal year. According to the Department of Environmental Quality, an agreement has been reached between administration officials and legislative leaders to appropriate $700,000 for groundwater withdrawal disputes for Fiscal Year 2003-04. Reportedly, this includes $200,000 from the general fund and the remainder from legal settlement collections. A supplemental appropriation bill will be necessary to finalize this funding. (Conversations with HFA on 9-17-03 and DEQ on 9-15-03) The House Fiscal Agency has noted that there would be no fiscal impact on local governmental units. (HFA analysis dated 7-15-03)

In a floor analysis (dated 6-9-03) of the Senate substitute to House Bill 4087 very nearly identical to the enacted version, the Senate Fiscal Agency said would increase the costs to the Department of Environmental Quality and the Department of Agriculture by indeterminate amounts. The proposed dispute resolution process would require staff and resources from the DEQ and the MDA for the establishment of toll-free telephone lines to receive complaints, the investigation of complaints, and complaint resolution. The MDA would be responsible for all complaints dealing with agricultural wells. The DEQ would be responsible for complaints involving all other wells. It is not known how many complaints would be made, and the cost of each investigation could vary greatly. Following an on-site investigation, if the MDA were unable to resolve a complaint, it would be referred to the DEQ for further action.

If the investigation of a complaint resulted in the declaration of a groundwater dispute by the DEQ, the owner of a high capacity well would be required to reimburse the DEQ for actual and reasonable costs incurred up to $75,000, in addition to making restitution to the affected property owner. The reimbursement would be deposited into the Acquifer Protection Revolving Fund (created by House Bill 4087) and would reduce the costs of the dispute resolution program of the DEQ. Expenses incurred by the DEQ in the investigation of complaints that did not result in a groundwater dispute declaration would not be reimbursed. The MDA would not be eligible to receive reimbursement from the Water Use Protection Fund for any of its additional costs associated with complaint investigation and resolution.

The bill would set a statewide implementation date of July 1, 2004. However, the DEQ director would have to identify the two geographic areas in the state at greatest risk for potential groundwater disputes, and implement the dispute resolution process in those two areas within 30 days of the bill’s effective date. This would cost the Departments of Environmental Quality and Agriculture an indeterminate amount, dependent upon the number of conflicts reported and the investigation costs.

The bill would provide for civil fines for violation of an order issued under the bill. A fine of up to $1,000 per day of violation, but not more than $50,000 total, could be assessed. All civil fines collected would be deposited into the general fund.

ARGUMENTS:

For:

Disputes about water use in at least three of the state’s 83 counties can be addressed by House Bill 4087. The legislation would allow the Department of Environmental Quality to investigate residents’ complaints when they fear that farms or mining operations threaten their water supply. There have been more than 200 complaints in Saginaw County, alone, during the past eight years, and litigation has been threatened in Marion Township (within Saginaw County) because its township board imposed an irrigation well moratorium in 2000, despite the possibility that such a move exceeded the township board’s legislative power since it could deny businesses their right to farm. The people of Saginaw County and elsewhere in the state who experience seasonal water shortages deserve relief. This legislation would provide a process to investigate their complaints, and make potable water available to them when the seasonal shortages occur.

For:

This bill, along with Senate Bill 289, should increase compliance with the water use reporting requirements, and help conservationists know more about the water supply they protect. The current water reporting system is faulty. According to the Michigan Groundwater Association, a professional association for well drillers, a relatively low percentage, between 10 percent and 25 percent, of the owners of 100,000-gallon facilities actually submit their water use report as required. The association believes the low reporting rates are due to lack of awareness of the requirement; an assumption by facility owners that if they have secured the appropriate local permits, their obligations have been met; and a lack of readily available reporting forms.

Against:

House Bill 4087 would impose an unfunded mandate on the DEQ.Concern has been expressed that the costs of the dispute resolution system described in House Bill 4087 may be too great for the Department of Environmental Quality to bear, given the state’s current budget difficulties. Although the bill provides for penalties, they may not be adequate to fund the dispute resolution program that is envisioned by the legislation.

Indeed, the DEQ originally estimated that the resources that would be needed to fully implement this bill are extensive. Specifically, the DEQ estimated that it would require 5 to 7 FTEs to analyze the data and investigate the disputes. That cost estimate would not address the issue of obtaining data that would be necessary to determine whether a conflict was occurring. For example, it might be necessary to create groundwater computer models to determine what “normal” water levels are since the investigations would occur after the conflicts were initiated. Determining water levels in the areas of disputes could be expensive and could range from several thousand dollars to over $20,000 for each

conflict. Just investigating 100 conflicts per year could cost over $2 million. These costs would be in addition to the approximately $500,000 for the 5 to 7 FTEs.

Analyst: J. Hunault

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This analysis was prepared by nonpartisan House staff for use by House members in their deliberations, and does not constitute an official statement of legislative intent.