LANSING — As the David-and-Goliath legal clash between a citizens group and one of the world’s largest international food companies over the pumping and selling of groundwater heads to the Michigan Appellate Court today, actions taken by Governor Jennifer M. Granholm are tackling two of the crucial questions that surround the case and stirring the state capital.

One question is whether the state Department of Environmental Quality has the authority under current law to regulate heavy groundwater pumping when that activity may harm streams, lakes, wetlands, and private property. The other is whether the state can stop a company from pumping Great Lakes Basin water, a public resource, and distributing it in bottles outside the basin for private profit. The answers to both questions are crucial to Ms. Granholm's credibility on water policy, her ability to galvanize voters around a popular issue less than two years before her re-election, and whether Michigan can develop a new ethic and economy around the sustainable use of its vast fresh water supply.   

Late last month, Governor Granholm, a Democrat, took another crack at taking command of state water policy. On May 25 she directed environmental officials to write rules requiring a permit for groundwater withdrawals that would diminish the flow or size of a river or inland lake. The governor based the order on a new interpretation of Michigan’s 1972 Inland Lakes and Streams Act (ILSA), which regulates dredging and other activities directly affecting surface water. The order declares that, for the first time in Michigan’s history, the state can regulate underground water withdrawals that directly affect lakes or rivers. The decision reversed the state’s previous position, established by former Republican Governor John Engler, which maintained that the state had no authority, nor any need, to regulate large groundwater withdrawals.

Then, on May 27, Ms. Granholm put the brakes on the state’s rapidly growing bottled water industry. In a double-barrelled decision, the administration allowed Nestle to move forward with a plan to purchase and bottle tens of millions of gallons of municipal water from the City of Evart. That deal could lead to additional jobs and investment in an economically depressed area of the state. But the governor also took the unusual step of specifically restricting the company’s bottled water sales to within the Great Lakes Basin. The governor’s May 27 directive said it was meant “to provide the opportunity to fully study the appropriateness and the impact water bottling facilities have on Michigan’s water.”

By issuing the executive directive to place a moratorium on any new bottling facility that does not agree to limit its product distribution to within the Great Lakes Basin, Ms. Granholm opened a new offensive in the water policy debate. The governor said the ban would stand until the Legislature passes a more comprehensive water use policy. That was a primary focus of the suit that Michigan Citizens For Water Conservation brougt against Nestle, which now operates a water bottling plant in Mecosta County approved by the Engler administration in 2001. 

Ms. Granholm's announcement effectively defines bottled water that leaves the region as a diversion. Until now, a water diversion was generally considered water that flows out of the Great Lakes through a canal, pipeline, or sea-going tanker rather than millions of one-gallon jugs and 20-ounce bottles.

Both actions signal a significant change in how the governor is approaching what she says is her top environmental priority. Ms. Granholm formally opposed allowing Nestle to bottle Michigan groundwater as the state’s attorney general, and heavily promoted an ambitious Great Lakes Initiative during her gubernatorial campaign. But, since the election, water policy experts say the governor’s actions on the water use issue have appeared unfocused and inconsistent.

Seizing the High Ground
The governor’s new decisions appear clearly designed to counter that impression. Her two new decisions coincide with a fresh reckoning by Ms. Granholm and her staff about the dire shape of Michigan's economy. A new water policy, some authorities assert, is essential to the region’s economic competitiveness and environmental health. With globalization, rising population, climate change, over-consumption, and pollution increasingly straining the planet’s freshwater supply, they say that the Great Lakes region could gain distinct advantages in the race to develop new economic opportunities by properly protecting both the quality and quantity of the planet’s largest freshwater ecosystem.

Ms. Granholm’s actions also had a political intent. They were specifically designed, according to members of the governor's staff, to aggressively seize the issue from state Republicans, who control the state Legislature and who, as a group, refuse to take action on her legislative proposals concerning water use. By directly challenging the Legislature, Governor Granholm is taking Michigan’s bogged-down debate about water laws to higher ground.

“Great debate has been brewing in our state for a number of years over how best to protect Michigan’s water for present and future generations,” Governor Granholm wrote in the executive directive ordering the moratorium on the export of bottled water. “Water is in great supply in Michigan. However, abundance is not a license to be reckless, foolish, or wasteful. We must be good stewards of our water, and protect it long into the future.”

The twin announcements come as the governor’s proposed Water Legacy Act, which would deal more comprehensively with the issues in the Mecosta County case and other water issues, languishes in the state Legislature. The proposal aims to establish basic standards for water withdrawals, encourage resource conservation, and promote economic development based on sustainable use of the Great Lakes.

But conservative lawmakers have blocked the proposal for 15 months. Last week, they took another, more aggressive swipe at the governor’s efforts: The House added a provision to next year’s budget that prevent the DEQ from promulgating any rules regarding ground water use or withdrawals, including bottled water plants and where the water goes. The budget passed the House late last week on a party line vote.

The lawmakers may have been responding to statements made two weeks earlier by several major trade associations, which attacked the governor’s latest attempts to force the question on updating Michigan’s almost non-existent water use regulations. The associations have long opposed state regulation of water withdrawals.

“We have significant concerns about an approach that is a clear attempt to subvert and ignore the legislative process,” said Michigan Manufacturers Association Director of Regulatory Affairs Mike Johnston in the group’s May 27, 2005 weekly report. “It is highly inappropriate to abandon the legislative process and write laws in a back room at the MDEQ.”

Whether or not the governor will be able to keep the upper hand in another intense debate over Michigan’s management of Great Lakes water use is unclear. While Michigan citizens remain staunchly opposed to diverting Great Lakes water, the governor has so far had a hard time gaining much political traction on the issue.

A Big Change
The reason is that Ms. Granholm's rhetoric and decisions on water policy haven't matched up. During the 2002 gubernatorial campaign, Ms. Granholm said she opposed mass water diversions outside the Great Lakes. Yet, in December 2003, as governor, she filed a legal brief siding with Nestle in its legal battle to pump, bottle, and sell spring water from Mecosta County. The governor's brief stayed a lower court ruling in November 2003 that said the Nestle operation was harming a nearby stream, wetlands, and the property rights of a neighboring landowner. The judge ordered the company to cease its operation.

But three weeks ago, on May 19, 2005 the state Department of Environmental Quality filed a new brief with the Court of Appeals. In that brief, the DEQ agreed with the Mecosta County Circuit Court’s original ruling. The brief not only reverses the policy of former Governor Engler’s administration, it also reversed the Granholm administration’s previous position.

Wanted: Proactive Policy
The question, of course, is whether the governor's new tack will weather the storm of legal and political opposition that is already gaining strength. A Nestle spokesman quickly rejected the rationale behind the governor's “no export” rule and promised to fight it.

“Bottled water companies, as a group, use a miniscule amount of Michigan’s groundwater,” claimed Nestle President and CEO Kim Jeffery. “We are currently evaluating the implications the condition may have for our business. We are also exploring legal options available to remedy this untenable situation.”

“Nestle Waters agrees that Michigan’s water use laws are not strong enough,” Mr. Jeffery added. “We have actively participated in a process to improve those laws, which would bring certainty to business.”

A Major Breakthrough?
It is also not clear, said legal authorities outside the administration, whether the moratorium or the specific restrictions placed on Nestle’s water distribution will survive in a court of law. Some legal experts say that the orders may unfairly discriminate against a single industry, indeed a single company, and would likely not withstand a challenge under basic commerce laws. But the state’s courts have never examined the question; a trial could inform and even shift the ongoing legal debate.

And while the new restrictions on exporting bottled water may force a new legal battle, Governor Granholm’s more basic decision — revising the administrative rules of the Inland Lakes and Streams Act in order to better protect state waterways — could have long-lasting effects. The move has already begun to build bipartisan support. Republican Attorney General Mike Cox filed the Granholm administration’s new position with the Court of Appeals.

“This is a major breakthrough for state water policy,” said Chris Shafer, an associate professor at Thomas M. Cooley Law School in Lansing.

But Mr. Shafer and others say that the Granholm administration’s ILSA revisions do not go far enough. More comprehensive legislation is needed, legal and environmental experts say, in order to establish clear standards for water withdrawals, promote more proficient water use, and generate the funds to support an expanded state water program. Without it, they say, attempts to protect Michigan residents, businesses, and the Great Lakes from over-consumption, water use conflicts, and diversions will be difficult.

Still, environmentalists applauded the governor’s moves as her most meaningful public action yet to safeguard Michigan’s water quantity.

“The administration is back in the business of water resource protection,” said Noah Hall, water resource program manager for the National Wildlife Federation. “This latest action is decisive and strategic. They’re doing what needs to be done.”

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WHAT HAPPENED

June 24, 2005

With Michigan’s Republican-led Legislature refusing to write a modern water withdrawal law, the courts now are deciding a new legal framework for water use in the Great Lakes State.

The Court of Appeals on June 14, 2005 heard arguments in the Nestle Waters North America v. Michigan Citizens for Water Conservation, with the three-judge panel pressing attorneys on both sides for a definition of reasonable water use.

Jim Olson, an attorney from Traverse City representing the Michigan Citizens for Water Conservation, said that, as water becomes increasingly valuable throughout the world, Michigan needs a new standard to manage water projects that take water from a watershed for commercial purposes and diminish the flow of interconnected streams, lakes, and wetlands.

“The rule I propose is where a groundwater extraction by a nonriparian is for diversion or sale outside the watershed, and that extraction diminishes a stream in a real way, that extraction should be deemed unreasonable. That should be the rule. That will protect streams until the Legislature acts,” Mr. Oslon said.   

But Adam Charnes, an attorney from North Carolina representing Nestle, said that the law should treat water bottlers the same as other industries that depend on water, such as manufacturers. He proposed a standard that is “general and flexible.”

 “The scientific reality is that one gallon of water taken from the ground is one gallon,” Mr. Charnes said. “The law can’t distinguish between Nestle, farmers, or other companies that use water.

A ruling in the case is expected later this summer. And in a separate legal action, Nestle on June 17 filed a lawsuit against the State of Michigan. The company is challenging recent restrictions that would restrict the company’s water sales to within the Great Lakes Basin. Those restrictions came in a permit issued by the state Department of Environmental Quality allowing Nestle to purchase water from the City of Evart. The water bottler claims the state lacks the authority to impose such restrictions and that the conditions violate U.S. commerce law.

State officials said the lawsuit was expected.

“We are hoping the Legislature will take action to address these important water issues,” said Governor Granholm spokesperson Liz Boyd.

Andy Guy directs the Michigan Land Use Institute’s Great Lakes project. You can reach him at aguy@mlui.org