WEPA in the Court: Wisconsin Environmental Policy Act Receives Staunch Judicial Endorsement

In its first major decision interpreting Wisconsin's Environmental Policy Act,¹ the Wisconsin Supreme Court on July 1 announced unswerving support for the Act (known as WEPA) that promises to make environmental analysis an important component of Wisconsin agency decisions. Reviewing an electric utility rate proceeding, the court in Wisconsin's Environmental Decade, Inc. v. Public Service Commission² (WED II) settled in one stroke many thorny interpretive questions regarding judicial review and the scope of WEPA's requirement that state agencies prepare environmental impact statements on major actions that significantly affect the human environment. The court seemed at times to stretch logic and law to achieve its salutory result, but it nonetheless served notice that it will searchingly review agency actions to assure that strict compliance with WEPA's requirements has occurred.

Statutory and Factual Background

WEPA, like statutes in many other states,³ is modeled on the National Environmental Policy Act.⁴ WEPA requires state agencies to include in every "recommendation or report on proposals for legislation and other major actions significantly affecting the quality of the human environment" a detailed statement discussing the same five factors set forth in § 102(2)(C) of NEPA. Added to this parallel language are the further requirements that the statement follow the guidelines promulgated by the federal Council on Environmental Quality, that it include a discussion of the beneficial aspects of the action and the economic advantages and disadvantages, and that a public hearing be held on the proposal following circulation of the impact statement for agency and public comment.

As has been the experience with WEPA's federal counterpart, agencies have only begrudingly accepted WEPA's mandates. In fact, a recent study documents that many Wisconsin agencies have simply ignored the statute.⁵ Federal agencies could not ignore NEPA because of watchful public interest groups that successfully forced compliance with NEPA through the judicial system. But, like environmental laws in other states, notably Michigan,⁶ the relative absence of wellfunded and vocal environmental groups at the state level has hampered oversight of agency compliance with WEPA. Indeed, prior to WED II only three WEPA cases of any importance had been decided. One of them, Wisconsin's Environmental Decade, Inc. v. Public Service Commission⁷ (WED I) declared that plaintiffs had standing to enforce WEPA but did not construe the statute. In the second, Robinson v. Kunach,⁸ the Wisconsin Supreme Court interpreted WEPA's "state agency" language to mean that county governments did not have to prepare impact statements. The third important case, surprisingly, was the trial court decision in WED II, which focused state agencies' attention on WEPA by its uncompromisingly strict enforcement of the statute's provisions.⁹

WED II involved the request by the Wisconsin Electric Power Company (WEPCO), which serves about 600,000 people in the greater Milwaukee area, to raise its electricity rates in order to be "made whole" on the rate of return authorized by a previously granted rate hike. Into this seemingly routine proceeding before the Public [7 ELR 10188] Service Commission (PSC) came Wisconsin's Environmental Decade, a statewide organization whose goals are to preserve, maintain, and enhance the human and natural environment. The Decade demanded that the PSC write an impact statement before granting the rate increase because, the Decade claimed, the higher rate would attract new capital to WEPCO which would then construct more power plants and increase its electricity generation from existing facilities and thus harm the environment through increased fuel use and land disruption.

The Commission denied the Decade's request in a terse order, the substance of which reads:

The Commission's rate Order of March 16, 1973, in this proceeding does not have a direct effect upon the environment. Rather the direct effect of the Order is economic, not environmental. Whatever connection such Order has with the environment is remote and indirect. Moreover, nothing has been submitted to the Commission which would cause it to conclude that any environmental impact statement prepared for purposes of this proceeding could be based on anything other than pure speculation.¹⁰

Two commissioners went to great lengths to justify this decision, arguing essentially that a "fair" reading of WEPA showed that it applies only to agency actions with "palpable" environmental effects and that the PSC in its discretion ought to be able to determine when best to apply the statute to its proceedings.¹¹

The Decade petitioned for review of this order in the circuit court, which, in 1975, held¹² that the PSC must prepare an impact statement. Rejecting the PSC's rationales, the court held that neither alleged remoteness of impact, speculative nature of effects, nor administrative delay excused compliance and remanded the case for a WEPA investigation and evidentiary hearing.

Judicial Review of Threshold Decisions

On appeal, the Wisconsin Supreme Court first had to determine the appropriate standard with which to review the PSC's threshold decision not to file an impact statement. Noting that this decision is neither typically adjudicatory nor rulemaking and that an agency might necessarily be biased against filing an impact statement, the court said that WEPA's broad purpose demanded a searching inquiry by the reviewing court. In other words, the crucial decision for the agency comeswhen it decides whether or not to prepare the impact statement and possibly foreclose investigation of environmental considerations. Therefore, the court followed the majority of federal circuits¹³ and applied the test of whether the PSC's decision not to file was reasonable under the circumstances and high standards set by the statute. Furthermore, the agency was allocated the burden of proving that a negative decision is justified.

Applying this standard to the PSC's decision, the court in no uncertain terms declared the PSC's choice to be woefully inadequate. In so doing, the court — for the most part — deftly avoided dealing with the substance of the PSC's rate decision and the attendant economic morass of price elasticity of electricity demand.¹⁴ It was able to do so by emphasizing the nondiscretionary procedural requirements of WEPA and focusing on the record — or lack thereof — used by the Commission in reaching its decision not to file an impact statement. The court looked at the procedural adequacy of the agency's effort rather than the substantive adequacy of the agency's conclusion. Measured against this standard, the Commission's brief order and its supporting concurring opinions did not substitute for the preliminary factual investigation that is necessary to support the agency's decision.

WEPA and Electricity Rates

The court picked an unusually difficult case to use as a vehicle for elaborating its views on WEPA. Admittedly, environmental effects are only indirectly connected to electric ratemaking, and they are harder to forecast than the effects from concrete threats to the environment such as highway construction. Furthermore, there are no federal cases directly on point.¹⁵ Defendants' attempt to rely on federal natural gas curtailment cases,¹⁶ in which the Federal Power Commission has been relieved of the duty to file impact statements on its interim natural gas curtailment plans, was particularly unfortunate in view of the court's companion decision announced the same day in Wisconsin's Environmental Decade, Inc. v. Public Service Commission¹⁷ that WEPA requires the PSC to "study, develop and describe" alternatives to its gas curtailment scheme.

Moreover, the court could easily have ruled the other way in WED II without irreparably damaging WEPA. Plaintiffs admitted in their brief that an impact statement might not have been necessary if the PSC had made a [7 ELR 10189] factual conclusion that prediction of the environmental effects of electric rate structures was impossible.¹⁸ The court could have seized upon exactly that point, which was made in the concurring opinions, and waited for an easier WEPA case to come along. Yet in this instance, it seems that hard cases make thorough law because the court was able to examine the scope of judicial review of agency threshold decisions not to file as well as to explain that WEPA's procedural requirements are not inherently flexible and demand strict compliance. In the context of rate proceedings, the court made clear that the gratuitous sentiments in the concurring opinions to the PSC's order, to the effect that the Commission already considers environmental factors, do not suffice and that the PSC must carry out its WEPA duties to the letter of the law.

Conclusions

In another sense, the decision in WED II comes very near to being an advisory opinion. The challenged rate increase had taken effect, and WEPCO had been granted several additional rate increases. The court recognized the consequent futility of ordering the PSC to prepare an impact statement on a four-year-old, already-implemented rate decision. So the court must actually have been aiming its language at future agency compliance with WEPA. Indeed, the court took notice of newly-adopted PSC rules that would have, if they had existed in 1973, required the PSC to do a factual evaluation of this rate increase to determine whether or not to file an impact statement.¹⁹ Furthermore, the court relied in its analysis on the newly-revised (in 1976) WEPA Guidelines, issued by the Interagency WEPA Coordinating Committee,²⁰ to buttress its point that WEPA applies to actions with indirect as well as direct environmental effects.

Again pointing toward future court review, the court noted that the PSC is currently preparing a generic impact statement on electric rates and approved this exercise of the Commission's discretion. But the court reemphasized that any challenge to this generic statement or consequent individual statements would be measured under a strict standard of judicial review. In its opinion, the court drew substantial support from the D.C. Circuit's early NEPA decision in Calvert Cliffs' Coordinating Committee v. AEC²¹ to demonstrate the non-discretionary nature of agency compliance with WEPA. The Wisconsin court has served notice that as Calvert Cliffs' did at the federal level, the standards set forth in WED II will promote close administrative and judicial adherence to the environmental goals of WEPA.

1. WIS. STAT. § 1.11 (1975).

2. __ Wis. 2d __, __ N.W.2d __, 7 ELR 20563 (July 1, 1977).

3. See Comment, "Little NEPA's" in the Courts: Washington and Montana Environmental Policy Acts are Alive and Well, 6 ELR 10216 (Oct. 1976).

4. 42 U.S.C. § 4321 et seq., ELR Stat. & Reg. 41009.

5. Special Student Project, Agency Decisionmaking Under the Wisconsin Environmental Policy Act, 1977 WIS. L. REV. 111.

6. See Haynes, Michigan's Environmental Protection Act in Its Sixth Year: Substantive Environmental Law from Citizen Suits, 6 ELR 50067, 50068 (Sept. 1976).

7. 69 Wis. 2d 1, 230 N.W.2d 243 (1975). Although denominated the same as the case discussed in this Comment, WED I involved WEPA's application to natural gas curtailment plans. See text at note 17 infra.

8. __ Wis.2d __, 251 N.W.2d 449, 7 ELR 20365 (1977).

9. See Special Student Project, supra note 5, at 125 n. 64.

10. In re Wisconsin Electric Power Co., No. 2-U-7131, Order After Rehearing (Wis. Pub. Serv. Comm'n, Aug. 1, 1973), reprinted in Appellants' Joint Appendix at 144, 147, Wisconsin's Environmental Decade, Inc. v. Pub. Serv. Comm'n, __ Wis. 2d __, __ N.W.2d __, 7 ELR 20563 (July 1, 1977).

11. Id. at 148-75.

12. Wisconsin's Environmental Decade, Inc. v. Pub. Serv. Comm'n, 6 ELR 20192 (Wis. Cir. Ct. June 17, 1975), reprinted in Appellants' Joint Appendix, supra note 10, at 101-28.

13. Save Our Ten Acres v. Kreger, 472 F.2d 463, 3 ELR 20041 (5th Cir. 1973); Minnesota Public Interest Research Group v. Butz, 498 F.2d 1314, 4 ELR 20700 (8th Cir. 1974); Wyoming Outdoor Coordinating Council v. Butz, 484 F.2d 1244, 3 ELR 20830 (10th Cir. 1973). Contra Hanly v. Kleindienst, 471 F.2d 823, 2 ELR 20717 (2d Cir. 1972).

14. See generally Comment, Energy Conservation Through Rate Structure Reform: Electricity Rates Based on Marginal Costs, 6 ELR 10221 (Oct. 1976).

15. Aberdeen & Rockfish R. Co. v. SCRAP, 422 U.S. 289, 5 ELR 20418 (1975), which held that the Interstate Commerce Commission could file an abridged impact statement for railroad haulage rates, cannot help defendants because of the peculiar nature of the administrative proceedings in that controversy. See Comment, SCRAP II: No Excuse for NEPA Foot-Dragging, 5 ELR 10126 (1975).

16. American Smelting & Refining Co. v. FPC, 494 F.2d 925, 4 ELR 20348 (D.C. Cir. 1974); Louisiana v. FPC, 503 F.2d 844 (5th Cir. 1974); Alabama Gas Light Co. v. FPC, 476 F.2d 142, 3 ELR 20213 (5th Cir. 1973). Accord, Louisiana Power & Light Co. v. FPC, __ F.2d __, 7 ELR 20672 (5th Cir. Aug. 19, 1977).

17. __ Wis. 2d __, __ N.W.2d __, 7 ELR 20578 (July 1, 1977). This decision is the holding on the merits of the earlier WED I. See note 7 supra.

18. Respondent's Brief and Appendix on Appeal at 33, Wisconsin's Environmental Decade, Inc. v. Pub. Serv. Comm'n, __ Wis. 2d __, __ N.W.2d __, 7 ELR 20563 (July 1, 1977).

19. WIS. ADMIN. CODE PSC § 2.90(2) provides in part:

The following types of commission actions shall be individually screened using a screening worksheet to determine whether an environmental impact statement is required:

(e) Electric rate orders in which the utility involved sells more than 5 percent of the total electric sales in the state by all public utilities.

WEPCO accounts for more than five percent of the total electric sales in Wisconsin.

20. INTERAGENCY WEPA COORDINATING COMM., REVISED GUIDELINES FOR THE IMPLEMENTATION OF THE WISCONSIN ENVIRONMENTAL POLICY ACT 3 (Feb. 1976).

21. 449 F.2d 1109, 1 ELR 20346 (D.C. Cir. 1971).