New Growth in Michigan's Environmental Protection Act: State Supreme Court Enjoins Oil Development in Wilderness

The Michigan Environmental Protection Act (MEPA),¹ long and widely heralded² as one of the most ambitious legislative attempts ever to protect environmental quality, was polished to a new lustre by the Michigan Supreme Court in two decisions handed down earlier this year. In Western Michigan Environmental Action Council, Inc. v. Natural Resources Commission,³ the court seized jurisdiction over the case from the court of appeals prior to decision, and, reversing the trial court, ordered entry of judgment permanently enjoining oil and gas development in the Pigeon River Country State Forest, a large and fragile wilderness area sitting atop massive deposits of petroleum. Michigan Oil Co. v. Natural Resources Commission⁴ also turned on the environmental acceptability of oil development in the Pigeon River Forest. In that decision, a plurality of the court stated that MEPA should be read in concert with all other statutes relating to natural resources, i.e., that the state had the authority and perhaps the obligation to deny permits for activities allowing any pollution, impairment, or destruction of the natural resources of the state. While the aftershocks of the resolution of the intense political controversy involved in these cases continue to be felt, the opinions can be seen to stake out new ground in MEPA's progressive evolution.

Background: Oil in the Pigeon River Forest

In the 1950s and early 1960s, there was much speculation among geologists that the northern portion of Michigan's lower peninsula was underlain by potentially huge reserves of oil and natural gas. During this period, the state sold numerous leases authorizing petroleum exploration over much of the region, but test wells came up dry or showed no profitable deposits. For the most part the leases were allowed by their owners to lapse. In the mid-sixties, however, new geologic data showed with virtual certainty that there were indeed vast quantities of recoverable reserves in the area, with a value of as much as $2 billion. With renewed vigor but little environmental forethought, the state Department of Natural Resources (DNR) proposed in 1968 to sell oil and gas exploration leases to most of the state land holdings in the lower peninsula. No environmental studies of the lease sale were conducted, and the DNR's regional offices were given but nine days prior to the sale in which to "evaluate" all of the proposed leases. Leases covering more than half a million acres were then sold for roughly two dollars an acre. Of those, 57,000 acres were located within the 93,000-acre Pigeon River Forest.

The forest, an area of "rolling hills, deep swamps, high forests, lakes and streams,"⁵ is the only state-owned wilderness area in Michigan's lower peninsula. While this portion of the state contains many other tracts of comparable ecological significance, they are privately held and have suffered in recent years from the assault of developmental pressures. The forest is most widely known as the home of the largest surviving elk herd east of the Mississippi.It also serves as habitat for a rich multitude of rare and endangered species including the bald eagle, bear, bobcat, and osprey.⁶

The first two drilling permits under the 1968 leases were issued two years later, in the summer of 1970. By this time, however, the passage of the National [9 ELR 10145] Environmental Policy Act (NEPA),⁷ the celebration of Earth Day,⁸ and the hue and cry surrounding the enactment of the Michigan Environmental Protection Act⁹ had sparked a heightened concern among Michigan residents over environmental resources, particularly the question of oil exploration in the lower peninsula. In September of the year, the governor announced a moratorium on the issuance of additional permits. He ordered the DNR to conduct environmental studies of the program and to prepare a comprehensive management plan. Upon their completion in 1975, the DNR then negotiated with the oil companies holding 1968 leases to tracts in the Pigeon River Forest a series of "stipulation consent orders," which provided that development would be limited to the southern one third of the forest and established a rigorous regime of environmental mitigation requirements. Only one tract in the forest was not subject to the consent orders; it was the development of this tract that was at issue in Michigan Oil Co. v. Natural Resources Commission. The Western Michigan Environmental Action Council, Inc. and another environmental group sought to intervene in the settlement negotiations and to obtain a hearing on one of the consent orders, but they were rebuffed by the DNR and the state circuit court.

The Michigan Environmental Protection Act

In the realm of generic environmental legislation, MEPA occupies a position of preeminence. This innovative statute and those statutes patterned upon it¹⁰ are everything that NEPA is not, and they do not carry the sometimes burdensome procedural baggage for which NEPA is so frequently criticized.¹¹ The key to MEPA is its substantive mandate: it forbids the taking of any action by public or private¹² entities which is likely to pollute, impair, or destory the air, water, other natural resources, or the public trust therein.¹³ The one exception to this prohibition is where the polluter can demonstrate to a court that there is no feasible¹⁴ or prudent¹⁵ alternative to the action and, moreover, that the polluting conduct is nevertheless "consistent with the promotion of the public health, safety and welfare in light of the state's paramount concern for the protection of its natural resources from pollution, impairment, or destruction."¹⁶

The Act does not require the preparation of environmental impact statements or their analogues, but such a duty has been imposed on state agencies by executive order.¹⁷ Trial courts are specifically directed to determine on a de novo basis all factual questions relating to the likelihood of environmental impairment.¹⁸ Thus, state agencies cannot avail themselves of the judicial deference to their expertise which in federal cases commonly tips the balance away from the plaintiffs on the merits. Also of crucial importance is that the Act confers almost universal standing to sue, i.e., there is no requirement that plaintiffs demonstrate that the challenged conduct will result in injury to themselves or anyone else.¹⁹ This aspect of the statute is central to its goal of shifting the ultimate responsibility for environmental enforcement from state agencies to an active citizenry in judicial forums.²⁰

The structure of MEPA's substantive mandate dictates the procedural course of lawsuits arising under it. First, the plaintiffs must make a prima facie showing that the activity in question has resulted or is likely to result in environmendtal pollution, impairment, or destruction. If the defendant effectively counters the plaintiff's showing with rebuttal evidence, the prima facie case has not been made and the plaintiff cannot prevail. Even where a defendant fails to rebut such a showing, however, relief is not automatic. The defendant may then attempt to prove, by way of affirmative defense, that despite the adverse environmental effects of the action it is nevertheless justified because (1) there are no feasible and prudent alternatives and (2) the public benefits of the action outweight its environmental and socdial costs. It is around the defendant's affirmative defense that the major battles in MEPA litigation are commonly fought, because in most cases it is relatively easy for plaintiffs to show that the action in question will result in at least some environmental impairment.²¹

Western Michigan

Plaintiffs in Western Michigan Environmental Action Council, Inc. v. Natural Resources Commission first filed suit in state circuit court in September 1976, [9 ELR 10146] challenging the validity under MEPA of the consent agreement between DNR and the oil companies. The case was dismissed because it was not ripe; the environmental damage with whcih they were concerned would occur not as a result of the consent agreements but through future issuance of drilling permits pursuant to them. As the state was then in the midst of issuing 10 such permits, plaintiffs were given leave to refile in the circuit court after they were issued.

Upon plaintiffs' refiling and defendants' subsequent challenge to the failure of the original complaint to address the Permits, the trial court provided an opportunity for appropriate amendment of the complaint, but plaintiffs inexplicably declined to do so. There ensued a legal squabble which threatened to engulf the rest of the litigation, and which has recently been presented to the United States Supreme Court in a petition for certiorari.²²

The significance of the dispute is that if the environmental effects of the permits, which subsume and exceed those of the consent agreement, were not properly before the trial court, then much of the evidence offered at trial should have been excluded and not deemed supportive of plaintiffs' prima facie case of environmental impairment. On the oither hand, if all such evidence were material, plaintiffs' success was virtually assured.

The trial judge frequently grappled with but never stilled this thorny pretrial issue. As a result, plaintiffs were allowed to introduce evidence as to the environmental damages wrought by all facets of the oil drilling program. The defendants, however, apparently in the belief that they had persuaded the court to rule only on the effects of the consent agreement, declined to offer much of the evidence they claimed to possess. At about the same stage in the case, and evidently for the same reasons, defendants made another tactical decision which was to prove even more costly. Rather than attempting to present an affirmative defense, they chose simply to contest the sufficiency of plaintiffs' prima facie case. This narrowed the issues to the question of environmental impairment, as opposed to the much more involved matters of alternatives and the promotion of the public welfare.

The testimony and evidence introduced at trial showed quite clearly that oil development was incompatible with the elk in the Pigeon River Forest. The herd had already abandoned 85 to 90 percent of its former range because of human intrusion. Expert testimony further showed thet the herd would shun the area within two to three miles of each drill site for at least 40 years after cessation of operations, and quite likely forever.²³ It was also demonstrated, though with somewhat less clarity, that drilling would diminish significantly the habitat and populations of bear and bobcat, would incrdease air pollution and noise levels in the forest, and would pollute surface and subsurface wat ers through seepage of oil which would inevitably be spilled in some quantities.

After receiving the evidence the trial judge issued an oral opinion in which, to the continuing exasperation of the parties, he continued to hedge as to the scope of the evidence properly before the court.²⁴ It quickly became clear, however, that this question was of no immediate import. The judge considered all of the alleged environmental effects of the drilling activities and, one by one, ruled them insufficiently grave to constitute pollution, impairment, or destruction under MEPA.

For example, the noise level created by the test wells was found to be equivalent to that of airplanes which customarily pass over the forest (although the noise emitted by drilling would admittedly be constant). Since this noise source would cease with the termination of drilling, it was found to have no long-lasting effects. The court also acknowledged the certainty of small oil spills and the possibility of more serious accidents but found that neither type of spill (the latter being covered by an emergency cleanup plan) would constitute pollution within the meaning of the statute.

While acknowledging that the drilling would inevitably have adverse effects upon indigenous wildlife, particularly elk, the court went on to state that:

The vital question is, however, is it legal impairment or destruction? It is the Court's belief, as suggested by the attorney for the defendant Commission, that the destruction of the species in the Pigeon River Country State Forest is in no way contemplated ….²⁵

The judge's conclusion was that "… the conduct is therefore approved and is not condemned as pollution, impairment, or destruction."²⁶ In these quotations lies the logical linchpin to the rationale of the trial court. The court agreed with the plaintiffs that "adverse impairment" would be visited upon the environment as a result of the state action at issue. The crucial question in the court's view was whether this impairment was sufficient "pollution, impairment, or destruction" to trigger the application of MEPA. Put differently, at what point has the plaintiff crossed the necessary threshold in making out its prima facie case? According to the court, since the defendants did not contemplate the "destruction of the species in the forest," and in the absence of proof "of a compelling nature that the State is bent on a program of total elk eradication," plaintiffs had not shown the likelihood of legal impairment under the Act. Thus, the animals and plants in the forest were seen as "innocent victims of the discovery of oil in their forest domain," the preservation of which did not justify loss of the public benefits of oil production.

In a final and possibly fatal aside, Judge Brown expressed his reluctance to overturn a decision by an agency possessed of scientific expertise and charged with advancing the public interest. In his words, "the Court should approve an honest decision honestly arrived at by honest men."²⁷ Although referring to cases in which state courts had ruled explicitly that the trial court must make findings [9 ELR 10147] of fact de novo,²⁸ the court seemed to accept the conclusion in the environmental impact statement that the environmental effects oif the drilling would be mitigated to the point where they would be acceptable. The complaint was therefore dismissed.

On plaintiffs' appeal to the court of appeals, the state supreme court took the unusual step of ordering that the case be sent up from the intermediate court before it entertained oral argument.²⁹ Then, in perhaps an equally unusual step, the court reversed the decision below and ordered not that the case be remanded for further proceedings but that drilling under the contested permits be permanently enjoined.

Justice Moody, writing for the four-man majority, first cleared away the uncertainty as to whether the environmental effects of the permits, as distinguished from those of the consent agreement, were properly addressed. It was not necessary to examine the niceties of the pleadings, he found, because all parties had been permitted to present evidence on the broader issue of the actual drilling. In fact, the trial judge had specifically made findings of fact on the question in support of his ruling.

Moving to the merits, Justice Moody pointed out the first of the trial court's errors: in lieu of reaching a de novo determination on the merits, it had plainly accepted and relied upon the defendant's minimization of the environmental impacts of the drilling as an "honest decision." The court correctly noted, however, that a central purpose of MEPA was to eliminate the veil of expertise from behind which the state had in the past so frequently defended environmentally damaging projects.

While we understand the trial judge's reluctance to substitute his judgment for that of an agency with experience and experitise, the Michigan environmental protection act requires independent, de novo determinations by the courts …. [The Act] would not accomplish its purpose if the courts were to exempt administrative agencies from the strict scrutiny which the protection of the environment demands.³⁰

Proceeding next to the substantive environmental questions, the opinion tracked the by now familiar approach in MEPA litigation. First, has the plaintiff made out a prima facie case? Justice Moody ticked off the facts which had been revealed at trial and apparently accepted as true by the trial judge. Since six of the 10 proposed drilling sites were not accessible by road, roads would have to be built. The evidence showed that elk avoid even untraveled roads, so that the effect would be to slice up those portions of the herd's range. The record made it clear that the action would exacerbate the 15-year decline in the population of the here and, to that extent, result in impairment of the resource.

Justice Moody drew a bead on the notion that the elk could be viewed as "innocent victims" of man's progress and that on this basis their loss might not be considered impairment in light of the countervailing tangible gains, deeming this analysis a fundamentally misconceived application of MEPA. Since the defendants had declined to raise affirmative defenses, the only question in the case was whether plaintiffs' had made out a prima facie case of impairment. Although the threatened injury to the elk was not quantifiable, it was apparent and serious. This was sufficient, the supreme court concluded, to entitle the plaintiffs to judgment. Implicit in the court's opinion is tht MEPA does not preclude equitable notions of balancing the public interest, but it reserves such balancing for the presentation of affirmative defenses. The initial burden of proof question is largely a factual one, and after that hurdle has been surpassed, the defendants must either convince the court that the decision to proceed was proper or halt the action.

The three dissenters took no exception to the majority's legal analysis. The point of their departure was the scope of the issues proiperly raised below. More specifically, while they agreed with the plaintiffs that the trial court should have embraced fully the issue of the validity of the permits in addition to the consent agreement, they agreed with the defendants that they had justifiably relied on the court's incorrect representation that it would be unnecessary to rebut fully plaintiffs' prima facie case. They thus would have remanded to permit further presentation of evidence on this matter.

Michigan Oil

The controversy in Michigan Oil Co. v. Natural Resources Commission³¹ arose in 1972, while the governor's limited moratorium on the issuance of new drilling permits was still in effect. At that time, the company acquired rights in an exploration lease and applied to the state for a drilling permit. Its application was denied by the state on the grounds that such activity would result in unnecessary destruction of the natural environment of the area, in reliance on two laws³² asserted to prohibit "waste" in petroleum development activities. The company unsuccessfully sought review of that denial in the circuit court and the court of appeals,³³ arguing against the agency's intserpretation of the statutes.

Ten days after issuing its opinion in Western Michigan, the supreme court strongly affirmed the lower courts in Michigan Oil. Justice Moody, writing for a plurality of three, devoted the bulk of his opinion to interpreting the petroleum laws to authorize the Commission to weigh environmental impacts when considerding applications for drilling permits. Though it was therefore unnecessary to find further support for the agency's decision, the justice went on to state that if an application of MEPA were required to support the decision, the court would held that the Act is to be read in concert with the former statutes. Its rationals was based on the common law principal of statutory construction that statutes relating to a common subject matter, in this case "natural resources," should be read as constituting one law. Though this ruling is technically dictum, it unmistakably conveys the view of those members of the court that whenever any state or private entity acts under any state law aimed at pollution control, environmental enhancement, or natural [9 ELR 10148] resources conservation, it does so subject to the stringent substantive mandate of MEPA.

Since the question of MEPA's applicability had not been addressed by the lower courts, four justices were unwilling to express an opinion on the matter without first remanding for further proceedings. In separate opinions, however, three of the justices indicated that the MEPA questions should have been analyzed fully by the DNR and the courts from the outset. In sum, six of the seven members of the court would agree either (1) that MEPA should be read in concert with all other laws relating to natural resources, or (2) that MEPA should be applied at the earliest stages in administrative or judicial proceedings involving activities with environmental impacts. Both views lead to the same practical result, i.e., that when any proposed action appears likely to have significant environmental impacts, the Act's mandate must be satisfied from the outset.

Conclusion

While neither WesternMichigan nor Michigan Oil is properly viewed as a landmark decision, each represents a high water mark in MEPA's development. Together, they stand as a strong affirmation of the Michigan Supreme Court's committment to strict application of the Act's protectionist policies regardless of the economic or political ramifications. Their importance can be gauged by reference to MEPA's federal counterpart: whereas NEPA has been observed frequently to yield in the face of massive energy projects,³⁴ MEPA has held fast.

In one sense Western Michigan is from the same mold as th court's earlier applications of the law, in that it patiently nudges an intransigent lower court away from use of the traditional burdens of proof and the traditional equitable balancing which MEPA swept away. On the other hand, the aggressiveness in the court's seizure of the case from the court of appeals and its order for immediate entry of a permanent injunction shows that it will continue to view the law as possessing every bit of the potency that its early proponents dared hope. Of perhaps equal significance is the lesson learned by the defendants: when defending a MEPA suit, one is ill-advised to stake one's case on the rebuttal to plaintiff's prima facie case and to forego the route of affirmatively showing that the proposed action is in the public interdest and the best of the available alternatives.

Michigan Oil can also be expected to appear frequently in the briefs of future MEPA plaintiffs. There the Act was read to impose a silent but continuous and substantive duty on all agencies and citizens to protect the state's environment. If MEPA was once thought to provide little more than convenient access to the courts for environmental groups with an axe to grind, it must now be acknowledged as a potent environmental charter which, with continuing strong support from the judiciary, stands as a bulwark against unnecessary despoliation of the state's environment.

1. MICH. COMP. LAWS ANN. §§ 691.1201-691.1207 (Supp. 1976), ELR STAT. & REG. 43001.

2. See, e.g., J. DiMENTO, MANAGING ENVIRONMENTAL CHANGE (1976); Haynes, Michigan's Environmental Protection Act in its Sixth Year: Substantive Environmental Law From Citizens suits, 6 ELR 50067 (1976); Sax & Conner, Michigan's Environmental Protection Act of 1970: A Progress Report, 70 MICH. L. REV. 1003 (1972); Sax & DiMento, Environmental Citizen Suits: Three Years Experience Under the Michigan Environmental Protection Act, 4 ECOLOGY L.Q. 1 (1974).

3. 255 N.W.2d 538, 9 ELR 20487 (Mich. 1979).

4. 276 N.W.2d 141, 9 ELR 20625 (Mich. 1979).

5. Id. at 142-43.

6. At trial in Western Michigan, a state wildlife biologist testified to the importance of the forest to these species:

[I]t looked like if they were going to survive the human race it's gonna be here.

Western Michigan Environmental Action Council, Inc. v. Department of Natural Resources, 255 N.W.2d 538, 9 ELR 20487, 20489 n.3 (Mich. 1979).

7. 42 U.S.C. §§ 4321-4361, ELR STAT. & REG. 41009.

8. April 22, 1970.

9. Public Act 127 of 1970 (June 26, 1970).

10. See statutes and authorities listed at Haynes, supra note 2, at 6 ELR 50068 n.6.

11. See, e.g., Bardach & Pugliesi, The Environmental Impact Statement vs. The Real World, 49 THE PUBLIC INTEREST 22 (1977); Fairfax, A Disaster in the Environmental Movement, 149 SCIENCE 743 (1978).

12. See DiMento, supra note 2. Cf. Wayne Cty. Department of Health v. Olsonite Corp., 79 Mich. App. 668, 263 N.W.2d 728, 8 ELR 20097 (1977).

13. MEPA §§ 3(1), 5(2), MICH. COMP. LAWS ANN. §§ 691.1203(1), 691.1205(5), ELR STAT. & REG. 43001, 43002. See also Ray v. Mason Cty. Drain Comm'r, 393 Mich. 294, 224 N.W.2d 883, 5 ELR 20176 (1975); Michigan State Highway Comm'r v. Vanderkloot, 392 Mich. 159, 220 N.W.2d 415, 4 ELR 20694 (1974); Superior Public Rights, Inc. v. Department of Natural Resources, 6 ELR 20435 (Mich. Cir. Ct. 1976).

14. Wayne Cty. Department of Health v. Olsonite Corp., 79 Mich. App. 668, 263 N.W.2d 778, 8 ELR 20097, 20101-02 (1977) ("feasible" construed).

15. Id. at 20101 ("prudent" construed).

16. MEPA §§ 3(1), 5(2), MICH. COMP. LAWS ANN. §§ 691.1203(1), 691.1205(2), ELR STAT. & REG. 43001, 43002.

17. Exec. Order No. 1974-4 (May 3, 1974).

18. MEPA § 4(3), MICH. COMP. LAWS ANN. § 691.1204(3), ELR STAT. & REG. 41002. See Superior Public Rights, Inc. v. Department of Natural Resources, 6 ELR 20435, 20436-37 (Mich. Ct. App. 1976).

19. MEPA § 2(1), MICH. COMP. LAWS ANN. § 691.1202(1), ELR STAT. & REG. 41001.

20. The drafter of the statute has noted its success in precipitating aggressive citizen enforcement. Sax, That Dangerous Little Experiment in Public Participation — Six Years Later, 85 NATURAL HISTORY NO. 6 at 10 (1976).

21. See, e.g., Wayne Cty. Department of Health v. Olsonite Corp., 79 Mich. App. 668, 263 N.W.2d 778, 8 ELR 20097, 20101-02 (1977); Dwyer v. City of Ann Arbor, 261 N.W.2d 231, 8 ELR 20229, 20232 (Mich. Ct. App. 1978); Superior Public Rights, Inc. v. Department of Natural Resources, 6 ELR 20435, 20437 (Mich. Cir. Ct. 1976).

22. Shell Oil Co. v. Western Michigan Environmental Action Council, Inc., petition for cert. filed, 48 U.S.L.W. 3132 (Aug. 29, 1979) (No. 79-335).

23. 9 ELR at 20490.

24. Western Michigan Environmental Action Council, Inc. v. Department of Natural Resources, No. 76-19335-CE, slip op. at 3-5 (Mich. Cir. Ct. Dec. 5, 1977).

25. Id. at 10.

26. Id. at 12.

27. Rey v. Mason Cty. Drain Comm'r, 393 Mich. 294, 224 N.W.2d 883, 5 ELR 20176 (1975); Irish v. Green, 2 ELR 20505 (Mich. Cir. Ct. 1972).

28. Western Michigan, opinion of Circuit Court Judge Brown, slip at 12 (Dec. 5, 1977).

29. 402 Mich. 845 (1978).

30. 9 ELR at 20488-89.

31. 276 N.W.2d 141 (Mich. 1979).

32. Oil Conservation Act, MICH. COMP. LAWS ANN. § 319.1 et seq.; Department of Conservation Act, § 299.1 et seq.

33. Michigan Oil Co. v. Natural Resources Commission, 71 Mich. App. 667, 249 N.W.2d 135, 7 ELR 20213 (1976).

34. See Alasks v. Andrus, 580 F.2d 645, 8 ELR 20237 (D.C. Cir. 1978) (oil drilling on Alaska's outer continental shelf permitted to continue despite acknowledged violations of NEPA); Sierra Club v. Interstate Commerce Commission, __ F.2d __, 8 ELR 20265 (D.C. Cir. 1978) (construction of coal-carrying transportation system permitted to proceed despite NEPA violations). See generally Comment, NEPA Meets the Energy Crisis: D.C. Circuit Finds Statutory Violations But Refuses to Enjoin Ongoing Energy Projects, 8 ELR 10062 (1978).