A Stretch Of The Lake Michigan Shoreline, With A Sloping Sand Beach In the Foreground, At Sunset

Jan. 2, 2024 – The Wisconsin Court of Appeals has upheld a decision by an administrative law judge (ALJ) that reversed the Department of Natural Resources’ decision to grant a wetland permit for a golf course development.

In Kohler Co. v. Wisconsin Department of Natural Resources, 2021AP 1187 (Dec. 5, 2023), the Court of Appeals District III held that the ALJ decision was supported by substantial evidence.

New Golf Course

In 2018, the state Department of Natural Resources (DNR) issued the Kohler Company (Kohler) a wetland individual permit under Wis. Stat. section 281.36(3m). The permit allowed Kohler to discharge dredged and fill material into 3.69 acres of wetland.

Kohler applied for the permit because it planned to build a golf course on 247 acres adjacent to Lake Michigan in the City of Sheboygan.

After the DNR issued the permit, Friends of the Black River Forest (Friends) filed a petition for a contested case hearing. The DNR granted the petition, and an ALJ reversed the DNR’s decision to issue the permit.

The ALJ concluded that the DNR lacked sufficient information to adequately assess: 1) the significant adverse impacts to wetland functional values (WFV) and water quality; and 2) other significant environmental consequences.

The DNR adopted the ALJ’s decision as its final decision. Kohler petitioned the Sheboygan County Circuit Court for judicial review.

The circuit court affirmed the ALJ’s decision. Kohler appealed.

Review of Whole Project Was Proper

On appeal, Kohler argued that the ALJ made the following errors:

  • considered wetlands other than the 3.69 acres of wetlands covered by the permit, as well as unregulated activities not related to those wetlands;
  • determined that the DNR lacked sufficient information when it issued the permit;
  • made findings without substantial evidence;
  • reversed the DNR decision instead of modifying it; and
  • required the DNR and Kohler to make quantitative findings about secondary impacts.

Judge Gregory Gill began his opinion for a three-judge panel by pointing out that section 281.36(3n)(b) requires the DNR to consider the following factors when reviewing an application for a wetland individual permit:

  • direct impacts to WFVs;
  • cumulative impacts to WFVs;
  • secondary impacts to WFVs; and
  • the net positive or negative environmental impact of the proposed project.

Gill concluded that state law allowed the DNR to consider the entirety of Kohler’s proposed project when assessing its application for a wetland individual permit.

He noted that section 281.36 makes a distinction between the effects of regulated conduct and the broader effects of projects of which the regulated conduct is a part.

“Under Kohler’s interpretation, the DNR’s analysis would essentially end at the consideration of direct impacts to WFVs … [A]ll the other considerations dictated by Wis. Stat. section 281.36 would be meaningless because after the direct impacts take place … there would be no wetlands to be impacted and nothing left for the DNR to consider,” Judge Gill wrote.

Supported by Substantial Evidence

Gill also concluded that the ALJ’s decision to deny the permit was supported by substantial evidence.

Kohler argued that the ALJ’s finding regarding the cumulative impacts to WFVs was not supported by substantial evidence.

But Judge Gill reasoned that, assuming Kohler was correct on that point, the ALJ’s decision did not depend on cumulative impacts – Gill pointed out that the ALJ’s analysis of secondary impacts was much longer and thorough regarding Kohler’s failure to submit sufficient information.

Kohler argued that the ALJ’s decision contained no evidence that pesticides would have significant adverse impacts on groundwaters and wetlands.

But the ALJ had determined that the DNR issued the permit without final versions of a management plan and water table map, Judge Gill noted.

Gill also noted that the ALJ had determined that the permit did not require groundwater monitoring, even though a witness had testified that a greater share of nutrients, including phosphorous, would leach into the groundwater while the golf course grass was putting down roots.

“While the ALJ’s findings can be countered by other evidence in the record, the record supports the ALJ’s finding that the DNR did not have sufficient evidence to support its determination that the nutrients and pesticides applied as part of the project would not result in significant adverse impacts to WFVs,” Judge Gill wrote.

No Authority to Modify Permit

Gill concluded that the ALJ lacked any authority to modify the conditions of the permit.

Judge Gill noted that the Court of Appeals has held that failure to provide a notice defining the issues in a contested case hearing as required under section 227.44(2)(c) constitutes a due process violation.

In this case, Gill pointed out, the contested case hearing notice listed only two issues: 1) whether the permit met the standards in section 218.36(3n)(c)3; and 2) whether the DNR had sufficient information to make a decision governed by those standards.

“Missing from this list is whether the ALJ could, or should, amend the conditions if it found them lacking in scope,” Judge Gill wrote.

“The ALJ therefore did not possess the authority to raise an issue sua sponte without it first being presented as an issue under Wis. Stat. section 227.44(2)(c).”

Reference to Quantitative Findings Not Error

Kohler also argued that the ALJ misrepresented the law by mentioning that the DNR made no quantitative findings about: 1) when the secondary adverse impacts would become significant; and 2) how the permit conditions would lead to fewer non-significant adverse impacts.

But Judge Gill pointed out that the ALJ had mentioned quantitative findings only once.

“It is clear that the ALJ’s single reference to ‘quantitative findings’ was based on a much larger critique of the DNR’s lack of information regarding secondary impacts,” Judge Gill wrote.

“The ALJ correctly stated that the DNR was ‘required’ to make a determination that the project would not result in significant adverse impacts to WFVs.”

The ALJ had never said that the DNR or Kohler was required to make quantitative findings regarding which chemicals would make it into the groundwater or wetlands and in what amounts, Judge Gill noted.