Wis. high court asked to consider economic harm in lake dispute

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By James Nicodemus

Six hard-fought inches of extra lake water during the hot summer months have embroiled property owners and businesses around southern Wisconsin’s Lake Koshkonong in a nine-year court battle with the state Department of Natural Resources.

If the Wisconsin Supreme Court, which is set to consider Rock Koshkonong Lake District v. DNR et al., 2008 AP 1523, decides for RKLD, the district will be allowed to release an extra six inches of water into the lake every summer through the rehabilitated Indianford Dam.

Those six inches are critical, according to some Lake Koshkonong-area business and homeowners, because decreased water levels would allegedly result in local restaurants, campgrounds, boating enterprises and homeowners losing millions in potential revenues as a result of decreased boating and fishing activities, and reduced access to businesses.

As part of its responsibility to “protect property” under Wisconsin law, according to counsel for RKLD, the DNR is ignoring its obligation to consider the economic effects on property.

However, DNR counsel asserts that efforts to include “protecting property values” into its obligations under Wis. Stat. 31.02(1) to “protect property” would change the agency’s obligations under the law.

“Riparian rights which the DNR must consider as part of protecting property,” counsel said, “do not include maximizing property values, business incomes or taxes.”

The Indianford Dam was constructed in the 1850s on the Rock River, just 5.5 miles below Fort Atkinson. The dam was enlarged with water turbines and a gating system to better control water levels between 1915 and 1920, but fell into disrepair and neglect after the water turbines were removed in the early 1960s. After that, water levels on the lake rose and fell freely with seasonal rains and snowfall.

RKLD contends that the dam has made what used to be a marshy spot in the Rock River into an economically sustaining and diverse 10,500-acre inland lake, with 27 miles of shoreline and almost 4,000 acres of wetlands, all of which make the area a destination for thousands of summer tourists.

After RKLD spent millions of dollars repairing the Indianford Dam, it petitioned the DNR in April 2003 to increase summer water levels approximately six inches, and reduce winter runoff levels. The request was meant to offset the change in water levels caused by the dam repairs, according to counsel for RKLD, which allowed better water level management due to improved dam operations.

Wis. Stat. 31.02(1) delegates authority to the DNR to maintain water levels in “impounded” waters such as the Lake Koshkonong area as follows: “The department, in the interests of public rights in navigable waters or to promote safety and protect life, health and property may regulate and control the level and flow of water in all navigable waters … may order and require benchmarks to be erected, upon which shall be designated the maximum and minimum levels of water that may be impounded and the lowest level of water that may be maintained by any dam …”

The RKLD petition fell flat. In April 2005, the DNR issued a proposed water level order that denied RKLD’s summer water level increase and reduced the minimum winter drawdown, keeping water benchmark levels established in 1991.

On appeal of the DNR’s decision, administrative law Judge William Coleman, after a 10-day hearing, again supported the DNR’s proposed order. In that hearing, Coleman heard testimony from local business owners such as Norman Stanley.

University of Wisconsin-Whitewater economics professor Russell Kashian testified that Lake Koshkonong-area land values appreciated more slowly since 2003 than in Beaver Dam Lake, a comparable “shallow lake” environment in south-central Wisconsin.

The DNR focused its testimony, in part, on the actual effect of higher water levels on Lake Koshkonong and surrounding properties, which included shoreline and adjacent wetlands. Local wetland ecologist Patricia Trochlell and resource specialist Michael Halsted both testified that a six-inch increase in summer water levels could hurt area wetlands, and could have a negative effect on water quality in Lake Koshkonong.

RKLD appealed, and the appellate court issued a decision in July 2011, affirming the lower court decision to uphold the DNR water level order. The appellate court agreed that the straightforward language of Wis. Stat. 31.02(1) did not require the DNR to consider the economic impact of water-level changes.

In its appeal to the Wisconsin Supreme Court, counsel for RKLD was emphatic that the DNR was reaching too far, in part wrongly basing its decision on a misplaced intention to protect private wetlands above the high-water mark outside its jurisdiction.

“If accepted by this court,” counsel for RKLD warned, “the department’s argument would constitute a startling expansion of the Wisconsin Public Trust Doctrine and an unprecedented projection of agency power into private uplands.”

Also according to RKLD counsel, the original DNR order denying its petition overemphasized the effect of an increase in water on area wetlands and “categorically excluded petitioner’s evidence of economic harm.” Natural variations in water levels due to the larger watershed water flow sometimes exceeded the 1991 levels by two to three feet, counsel for RKLD said, and were frequently impossible to control.

Although RKLD counsel agreed that wetlands on private property should be considered property to be protected when a new water level order is established, this does not mean that these private property wetlands above the high-water mark somehow become part of “public rights in navigable waters.”

This could set a dangerous precedent, RKLD counsel said, by increasing the DNR’s authority to regulate wetlands on private land next to navigable waters above the high-water mark “in the name of public trust.” Also, counsel added, the DNR’s refusal to incorporate economic damages into its decision contrasted with the judicial and legislative backdrop of support for economic interests which surrounded the creation of Wis. Stat. 31.02(1) in 1917.

The DNR responded strongly that both Coleman and the lower court’s decisions were correct, and that the subsequent court and appellate decisions upholding the decision had a strong basis in statutory construction, case precedent and legislative history.

The RKLD is now asking Wisconsin Supreme Court to overturn case law “extending back to the time of statehood,” said counsel for DNR, including the 1972 Just v. Marinette case. In that case, DNR counsel contended, the Wisconsin Supreme Court clearly found there was a connection between wetlands, shore lands and navigable waters that deserved public trust protection.

Under a series of prior public trust doctrine cases, including Lake Beulah Management District v. DNR, 2011 WI 54, the DNR has an obligation to consider water quality and the effect on wetlands around Lake Koshkonong when any increase in water level is considered, DNR counsel explained.

The Wisconsin Supreme court has previously interpreted “public rights in navigable waters” to include protecting wetlands in and around navigable waters, DNR counsel continued, as part of its “public trust doctrine.”

The original order issued by the DNR was based upon a thorough investigation, documentary and testimonial evidence by both sides, DNR counsel said, as well as an extensive Environmental Assessment report prepared during a two-year period.

Conditions in Lake Koshkonong as they affect the general water quality and surrounding wetlands had not improved over the years. The DNR asserted that what used to be a “clear water, plant-dominant condition” of water quality has become a “degraded, turbid, algae” condition in the lake.

With these conditions in mind, DNR counsel argued, Coleman and the appellate court properly considered the “beneficial and harmful, competing and complimentary impacts (of a water change), and concluded that the modest enhancement to access and navigation from an increase in water level would be far outweighed by the substantial negative environmental impacts.”

A decision from the court is expected this term.