Anglers of Ausable v. Dept. of Environmental Quality

• Decision Date: 31 March 2009
• Docket Number: Docket No. 279301.,Docket No. 280265.,Docket No. 280266.,Docket No. 279306,
• Parties: ANGLERS OF the AUSABLE, INC. v. DEPARTMENT OF ENVIRONMENTAL QUALITY.
• Court: Court of Appeal of Michigan — District of US

770 N.W.2d 359

283 Mich. App. 115

ANGLERS OF the AUSABLE, INC. v. DEPARTMENT OF ENVIRONMENTAL QUALITY.

Docket No. 279301.

Docket No. 279306,

Docket No. 280265.

Docket No. 280266.

Court of Appeals of Michigan.

Submitted December 9, 2008, at Grand Rapids.

Decided March 31, 2009, at 9:10 a.m.

Olson, Bzdok & Howard, P.C. (by James M. Olson, Scott W. Howard, and Jeffrey L. Jocks), Traverse City, and Thomas A. Baird for Anglers of the AuSable, Inc.

Topp Law PLC (by Susan Hlywa Topp), Gaylord, for Mayer Family Investments, L.L.C., and the Nancy A. Forcier Trust.

Michael A. Cox, Attorney General, B. Eric Restuccia, Solicitor General, and Tonatzin M. Alfaro Maiz, Assistant Attorney General, for the Department of Environmental Quality.

Foster, Swift, Collins & Smith, P.C. (by Charles E. Barbieri and Zachary W. Behler), Lansing, for Merit Energy Company.

Before: MURRAY, P.J., and MARKEY and WILDER, JJ.

MURRAY, P.J.

In these consolidated appeals, defendants, the Department of Environmental Quality and the Director of the Department of Environmental Quality (collectively the DEQ), and Merit Energy Company, appeal as of right the trial court's June 25, 2007, opinion and final order granting in part plaintiffs' motion for clarification and modification of the court's prior order of injunction. Plaintiffs Anglers of the AuSable, Inc., and Mayer Family Investments, L.L.C., cross-appeal that same order. We reverse that order to the extent it concludes that the DEQ's easement failed to convey riparian rights to Merit Energy, and we reverse the trial court's decision not to dismiss the DEQ. In all other respects we affirm that order. Additionally, defendants appeal as of right the trial court's order awarding plaintiffs fees and costs. We reverse that order insofar as it pertains to the DEQ and to the extent that it awards costs for (1) James Janiczek's transcript under the Revised Judicature Act (RJA), MCL 600.2401 et seq., and (2) "other costs" under the Michigan Environmental Protection Act (MEPA), MCL 324.1701 et seq. In all other respects, we affirm that order.

I. BACKGROUND

This case arises out of Merit Energy's proposed plan to treat a plume of contaminated groundwater, located in the Manistee watershed, and discharge that treated water into the AuSable River water system.

In 2004, Merit Energy purchased the Hayes 22 Central Production Facility (CPF) located in Hayes Township, Otsego County, Michigan, from Shell Western Exploration and Production, Inc. Pursuant to the transfer agreement with Shell, Merit Energy entered into a settlement agreement with the DEQ to treat the plume, which originated from the CPF. Although spanning an area of 60 acres, the exact size of the plume, which continues to expand, is unknown. Among the contaminants in the plume are benzene, toluene, ethylbenzene, and xylenes (BTEX) and chlorides contained in brine. The plume has already contaminated two residential drinking wells and may contaminate other residential wells as it continues to expand.

After acquiring the CPF, Merit Energy evaluated a number of options to treat the plume, ultimately deeming air stripping — a process forcing a stream of air through water causing hydrocarbons (i.e., the BTEX) to evaporate — the most effective option.¹ Regarding disposal of treated water, Merit Energy determined that discharge into a waterway would be the most prudent alternative and selected Kolke Creek as the best outlet.²

Kolke Creek forms the headwater system for the AuSable River watershed. Groundwater feeds this creek, which originates in a wetland system owned by the Michigan Department of Natural Resources (DNR). From the wetland system, the creek flows past four beaver dams then under a driveway owned by plaintiff Nancy A. Forcier Trust (Forcier) and into Lynn Lake. Both Kolke Creek and Lynn Lake form an oligotrophic system, i.e., an ecosystem with low nutrient content and resultant high degree of clarity.³ While Mayer is the only riparian owner along Lynn Lake, members of Anglers use this lake for recreational purposes.⁴

In 2004, the DEQ approved Merit Energy's corrective action plan, which called for pumping the contaminated groundwater from the plume to the CPF for iron and air stripper treatment. In addition, the DEQ issued a general permit and certificate of coverage (COC) allowing discharge of treated water from the air stripper system into the wetland area flowing into Kolke Creek.⁵ Accordingly, Merit Energy constructed a pipeline from the CPF to the wetland system. The pipeline spans 1.3 miles and traverses nearly one-half mile of state-owned land. Merit Energy obtained an easement from the DNR for the construction over state land. Although the COC permits Merit Energy to discharge 800 gallons of treated water a minute into Kolke Creek, the plan provides for a discharge of only 700 gallons a minute, at which rate it was estimated the plume would be fully treated in 10 years. The pipeline was constructed in late 2005 or 2006. However, the remainder of the corrective action plan has not been implemented.

When a hearing referee dismissed plaintiffs' administrative challenge to the COC in September 2005, plaintiffs filed suit in the Otsego Circuit Court, petitioning for review of that decision and alleging both common-law water rights violations and statutory violations under the Natural Resources and Environmental Protection Act (NREPA), MCL 324.101 et seq., including MEPA. The trial court separated plaintiffs' petition regarding the contested case hearing and remanded that matter for review by the DEQ director.⁶

Following a bench trial regarding plaintiffs' other claims, the trial court issued an opinion and order on May 29, 2007, enjoining Merit Energy from discharging any treated water into the Kolke Creek water system. Specifically, after determining that it had proper subject-matter jurisdiction, the court concluded that the proposed discharge would constitute an unreasonable use of riparian rights, which the DNR's easement failed to convey to Merit Energy, as well as a MEPA violation. The court noted, however, that should Merit Energy obtain an easement granting riparian rights, an evidentiary hearing would commence if the parties were unable to agree on reasonable use. Plaintiffs moved for clarification and modification of this order, and the court entered an order of clarification and modification on June 25, 2007, indicating that no bar exists for the artificial use of a watercourse for the benefit of a parcel outside a watershed, the DNR may convey riparian rights by easement to Merit Energy, and the proposed discharge was unreasonable. The court also modified the May 29, 2007, order to be the final order in this case.

On August 8, 2007, the court awarded plaintiffs fees and costs for their expert witnesses under MCL 600.2164 of the RJA or, alternatively, under MEPA in the interests of justice. In addition, the court awarded "other costs" requested by plaintiffs exclusively under MEPA.

II. ANALYSIS

A. SUBJECT-MATTER JURISDICTION

Defendants first argue that the pre-enforcement review provision of part 201, MCL 324.20101 et seq., of the NREPA deprived the trial court of subject-matter jurisdiction over plaintiffs' MEPA claim. We disagree. This Court reviews de novo both the question of subject-matter jurisdiction and application of the NREPA, but reviews a trial court's factual findings for clear error. In re Petition by Wayne Co. Treasurer, 478 Mich. 1, 14, 732 N.W.2d 458 (2007); Michigan Bear Hunters Ass'n. v. Natural Resources Comm., 277 Mich.App. 512, 526, 746 N.W.2d 320 (2008); Preserve the Dunes, Inc. v. Dep't. of Environmental Quality (On Remand), 264 Mich.App. 257, 259, 690 N.W.2d 487 (2004) (Preserve the Dunes II).

The pre-enforcement review provision of part 201 provides, in relevant part: "A state court does not have jurisdiction to review challenges to a response activity selected or approved by the department under this part or to review an administrative order issued under this part in any action. . . ." MCL 324.20137(4) (emphasis supplied).⁷ The evidence established that the DEQ's approval of Merit Energy's corrective action plan fell under part 615, not part 201. Part 615 of the NREPA regulates oil and gas well facilities and provides the DEQ with authority over matters relating to unreasonable damage to groundwater resulting from the use of such facilities. See MCL 324.61501(q)(i)(B), MCL 324.61503, and MCL 324.61505. Indeed, DEQ employees Ricky Henderson and Judith Woodcock, who reviewed and approved the corrective action plan, testified that the plan was specifically "approved by the department under" part 615.

Defendants, however, contend that the pre-enforcement bar is applicable because the corrective action plan constitutes a "response activity" under part 201. For several reasons, this argument is not persuasive. First, as noted above, the DEQ did not select or approve the corrective action plan under part 201, but instead specifically cited part 615. Second, part 201 defines a "[r]esponse activity" as the

evaluation, interim response activity, remedial action, demolition, or the taking of other actions necessary to protect the public health, safety, or welfare, or the environment or the natural resources. Response activity also includes health assessments or health effect studies carried out under the supervision, or with the approval of, the department of public health and enforcement actions related to any response activity. [MCL 324.20101(1)(ee).]

Here, even though the corrective action plan referenced part 201 to establish "risk based cleanup goals for the site," it is not clear that such guidance constituted a "response activity" under part 201. For starters, the DEQ expressly approved a "Corrective Action Plan," which is specifically referenced in part 615, and to which part 201 makes no reference. Rather, part 201 provides for a "[r]emedial action plan," which is "a work...