A Renewed Focus on Michigan Groundwater Extraction Could Have a Ripple Effect for Michigan Auto Manufacturers

For years, Michigan auto companies have had free access to use groundwater for manufacturing and other commercial uses. In fact, some studies show that the larger auto manufacturing plants in Michigan use as much as 500 million gallons of water a year—almost entirely for free. But a recent reaction to a routine groundwater permit request could signal a change in that policy.At the center of this controversy is water-bottling giant Nestlé Waters North America. Nestlé extracts Michigan groundwater, bottles it and then sells the bottled water, branded as Ice Mountain. Operating under Michigan’s long-standing groundwater usage laws, Nestlé—like companies around the state—extracts groundwater for free. Depending on volume and use, often all that it takes for access to this free natural resource is a permit from the Michigan Department of Environmental Quality (DEQ).  In October 2016, Nestlé filed a request with the DEQ to increase its groundwater usage to 400 gallons per minute. Although this represents an increase of approximately 167% from its current extraction levels, requests like this are typically granted with little fanfare. But the DEQ has not ruled on Nestlé’s permit request yet, partly due to unusually strong public opposition. The DEQ had to extend the period for public comment due to the volume of public outcry. Tens of thousands of Michigan residents have submitted comments, and hundreds of thousands more have signed petitions in opposition to the permit. There is no doubt that the Flint Water Crisis has increased public awareness regarding access to freshwater. But that does not tell the whole story. Environmentalists, economists and even some politicians have recently acknowledged that access to fresh water will be one of the hot-button legal and political issues in the near future. As one of the world’s largest sources of fresh water, Michigan stands to find itself at the center of this issue for years to come—and it appears those opposing Nestlé’s permit request have taken notice. The response to Nestlé’s request is particularly noteworthy for auto manufacturers not only because it has been voluminous, but because Nestlé is also facing a new type of opposition to water consumption. Traditionally, conflict over groundwater consumption takes place between adjoining landowners. But Nestlé’s opposition comes from all corners of the state. The arguments against Nestlé’s permit are not that it would unreasonably deplete local water sources, but that Michigan’s freshwater should belong to the entire state—not just the manufacturer that owns the property above it. This represents a paradigm shift from centuries of Michigan water law that would not only affect companies that extract water for bottling, but any Michigan company that uses water as part of its daily operations. Michigan’s lawmakers have started to weigh in. State Representatives Terry Sabo (D) and Robert Wittenberg (D) introduced a resolution urging the state to reject Nestlé’s request. This could be the first step toward legislative solutions that some who oppose Nestlé’s request have been clamoring for. Those same voices point out that legislation in this area would not be without precedent. Michigan already imposes a severance tax on companies that extract oil and gas from the ground. A few other states have even used this same rationale to impose a tax on water extraction. Regardless of the DEQ’s decision, it appears likely that a lawsuit will follow. The outcome of that lawsuit could provide needed guidance on whether Michigan courts have also started to shift their views regarding groundwater rights, as it is an issue seldom addressed in recent Michigan case law. No matter the resolution, this case is likely one of the earliest signs that Michigan residents and leaders are rethinking Michigan’s water laws and that there could be dramatic changes in the coming years. Whether aware or not, Michigan auto manufacturers use millions of gallons of water as part of their production (cleaning, moving and cooling production inputs), to produce steam and for daily plant cleaning and sanitation. A tax or other policy change in this field would have enormous legal and financial ramifications on these plants. Automotive suppliers can take steps now to become aware of their water usage, ensure that they are in compliance with regulations in place and monitor potential changes in the law. Our Automotive Industry Group’s environmental and regulatory attorneys have substantial experience assisting automotive suppliers with these regulatory challenges. If you have questions regarding how Michigan’s current water laws—or possible future shifts in the law—might affect your business, or are interested in learning more, please contact a member of our Automotive Industry Group.