LANSING—Just weeks after Michigan Governor Jennifer Granholm signed a package of bills to prevent mass diversions and ill-advised withdrawals of water from the Great Lakes, the debate about how the state should organize economic development around its unmatched water resource is intensifying.

The dispute over whether to manage withdrawals, which helped to drive adoption of the new laws, began in earnest five years ago when Nestle Waters N.A., the world’s leading water bottler, came to rural Mecosta County. Michigan’s permitting of Nestle’s operation, and the subsidies the state provided for the company to set up shop, sparked fierce protests. Opponents said the state’s action — and a near-total lack of water withdrawal regulations — cast doubt on Michigan’s ability to properly steward its share of the largest freshwater resource on the planet.

Now, after the enactment of rigorous new water withdrawal standards, the debate is shifting to focus on another sharp question raised by Nestle’s arrival: Whether state law and investment policy should encourage or even allow growth of the bottled water business.

Nestle and many elected leaders say that the industry can generate new jobs, boost tax revenues, and provide financial relief in hard times. But critics of the newly enacted laws, many of them in the environmental community, question whether boosting the water bottling industry is actually good development policy. They assert the business provides only minimal economic benefits and that, in the long run, allowing Michigan water to be bottled and sold abroad could put the state’s most important natural resource at risk.  

The debate is escalating as jobs and the economy secure their positions as the top issues in the 2006 gubernatorial campaign. Governor Granholm, a Democrat, and Dick DeVos, the presumed Republican challenger, both contend Michigan needs a new development strategy to stem job losses and enhance economic competitiveness.

Both say they are sternly opposed to Great Lakes water exports, but neither the governor nor Mr. DeVos has proposed specific measures that would use the lakes to help develop a knowledge-driven, 21^st-century economy. Meanwhile, as Michigan allows companies to look for, bottle, and sell more water, at least one other state is busy attracting entrepreneurial companies intent on developing new technologies that conserve, rather than export the increasingly valuable resource.  

A Leaky Law
While Michigan’s new water laws disappoint some environmentalists, it is a clear victory for Governor Granholm as she heads into a contentious reelection campaign. Adopting a comprehensive water use policy was a top campaign issue for the governor in her 2002 election drive and her top environmental priority during the past three years. The new laws enable Ms. Granholm to claim the mantle of Great Lakes champion on the 2006 campaign trail.

“These new laws put Michigan second only to Minnesota in terms of progressive policy to protect the Great Lakes,” said Noah Hall, a professor at Wayne State University and one of the state’s leading water law experts. “We’ve gone from pretty much near the bottom to right up at the top as a leader in regional water policy.”

The new water use laws are the product of a rare agreement among state Republicans and Democrats, business leaders, environmentalists, and farmers. Principally engineered by state Senator Patty Birkholz, a Republican from Saugatuck, and signed on February 28 by the governor, the new laws establish the state’s first-ever water-extraction permit system and user fees to manage large-scale withdrawals from aquifers, streams, rivers, inland lakes, and the Great Lakes. The new laws also strengthen environmental standards for making decisions about major water projects, enhances water-use reporting guidelines to better collect data about the state’s hydrology, and directs industries to develop modern conservation standards.       

The laws also include new permitting requirements for proposed water bottling projects. Major bottlers must pay a $5,000 permit fee and prove that their proposed withdrawals will not damage nearby resources, such as streams and wetlands, or violate the property rights of existing riparian owners. Bottlers also must invest in environmental improvement projects to offset any measurable negative effects of their operation.

But the new laws exempt water placed in containers 5.7 gallons or smaller from the legal definition of diversion and, by extension, the potential for tighter legislative oversight. A diversion traditionally is considered to be water that leaves the natural boundaries of the basin through a pipeline, canal, or sea-going tanker, rather than via millions of plastic jugs and bottles.

David Holtz, the director of Clean Water Action’s Michigan office, said the exemption effectively allows for the first legally sanctioned mass diversion of water from the Great Lakes in 100 years. Pointing to Nestle Waters N.A.’s stated interest in expanding its Michigan operation, Mr. Holtz said lawmakers must do more to protect the state’s rich water legacy.

“By Nestle’s own count, they will bottle and ship annually nearly 170 million gallons of Great Lakes waters from the City of Evart’s municipal water supply within the next three years,” he said. “When you combine this with Nestle’s withdrawals from headwaters of a stream and lakes in Mecosta County, this one company alone will withdraw nearly 300 million gallons a year.”

“This is an entirely anticipated outcome of the new water legislation and should be a wakeup call for lawmakers and the public to close this dangerous loophole,” Mr. Holtz added.

Choosing an Economic Future
Lawyers and water activists continue to contest the legal definition of ‘diversion.’ Clean Water Action and the Michigan Citizens for Water Conservation, the nonprofit citizen group organized in 2001 to stop Nestle from opening its Mecosta bottling plant, recently called on lawmakers to put the question of water privatization and export—key questions in the bottling controversy—on the November 2006 ballot.

When she was state attorney general, Ms. Granholm said she believed that bottling Great Lakes water and shipping outside the basin was an illegal diversion. She reiterated that view last May when, as governor, she issued an executive directive that placed a temporary moratorium on new water bottling plants. The directive limited new bottling activity to water that would be sold within the Great Lakes Basin.

That effectively halted Nestlé’s decision to tap into the City of Evart’s municipal system and expand its bottling operation. But now, with the new state laws in effect, the company is free to apply for a permit and, if approved, move ahead with its plans for a new facility there — and market bottled Michigan water anywhere it chooses.

“That could open up jobs for a number of people in our district in the future,” said Representative Darwin Booher, a Republican from Evart, in a March 1, 2006 GOP Web newscast. “This is a good bill for environmentalists, farming, businesses, and generally all the people in the state of Michigan.”

But others contend that, at best, the water bottling industry represents a short-term economic development scheme that could eventually do far more harm than good. They suggest that the 20^th-century mentality of extracting and exploiting natural resources for private gain is increasingly obsolete in the global knowledge economy, where both the grandeur and the sustained utility of the Great Lakes are the region’s greatest competitive advantage.

They also point to states like Arizona, which is driving workforce development by, among other things, supporting the research, commercialization, and manufacturing of new products and services that improve water resource management and promote sustainable economies. They say that Michigan, long a leader in developing innovative technologies, should not settle for low-value jobs like bottling water on an assembly line.

“The few jobs promised by Nestle will never make up for the problems with the state's economy,” said James Olson, attorney for Michigan Citizens for Water Conservation. “If anything the giving away of a valuable public resource in exchange for a few jobs is an outrageously reckless policy decision. Michigan is giving away, not even selling its birth right to its water legacy. The original idea of establishing a Michigan legacy for water for the state has turned into a long-term liability.”

Andy Guy directs the Michigan Land Use Institute’s Great Lakes project. Reach him at aguy@mlui.org. To read Andy’s groundbreaking report, Water Works: Growing Michigan’s Great Lakes Opportunities, click here.