Court’s Denial of Zoning Permit for Nestlé Pump Station Exposes Achilles Heel of Private Bottled Water Industry

By Jim Olson

On December 3, the Michigan Court of Appeals released an opinion nullifying a lower court order that had allowed the water-bottling giant Nestlé to build an industrial booster pump facility to transport 210 million gallons per year of groundwater that feeds headwater creeks in Osceola Township, just north of Evart. 

In one sense, the decision was narrow. The Court simply interpreted and applied zoning law and the language of the township’s zoning ordinance, and concluded that the industrial-sized pump facility was not authorized as a listed use or “essential public service” in a long-established agricultural district. 

In another sense, the decision exposes the Achilles heel of the private bottled water industry’s water withdrawals, diversions, and sales throughout Michigan and the country.

No matter what arguments Nestlé threw at the appeals court—and there were many—the court rejected them. Nestlé tried to convince the court to allow the booster pump to expand its water diversion to Evart and then down U.S. 131 by truck to its plant in Stanwood by claiming, alternatively, that it was engaged in an essential public service, a public service, a public necessity, or a public water supply. 

But Michigan’s second highest court found that, no matter how you pump it, the removal of 576,000 gallons per day, seven days a week, of public water for private bottled water sales was not public, not essential, not necessary, not a public service, and not a public water supply. In other words, bottled water diversion and export operations can no longer be paraded as public. The bottled water industry has only one purpose—maximum profit from the sale of packaged public water.

At its core, the conversion of Michigan’s sovereign water into a product and revenue does not square with our laws and customs that view water as “a commons” for reasonable use to serve the needs of landowners, communities, and the public. Water has been considered public for more than 1,500 years. Until the last 30 years, our common law never contemplated the sale of massive quantities of water to consumers living outside a river’s or lake’s watershed, or outside the Great Lakes Basin.

It is a frequent misconception that landowners own the groundwater beneath their feet or the stream passing by the shore. Landowners or occupants of land do not own the water passing under or through their land; they have only a right of reasonable use, and may use it in connection with their land in some beneficial way, so long as the use does not interfere or diminish the water or their neighbor’s reasonable use in connection with the overlying land. 

Lower Court Decision

Along with gaining state approval to pump 400 gallons per minute, Nestlé leased farmland and filed an application for a zoning permit with Osceola Township to locate an industrial-size booster pump in the A-1 Agricultural District to expand capacity of a pipeline that runs to a truck transfer-station located two miles south of Evart. The industrial use did not appear eligible as a use in the farming district. The Planning Commission noted, however, that it might qualify as an “essential service” if Nestlé could show that the private facility constituted a “public convenience and necessity,” but ultimately denied the request because it did not meet that standard.

Nestlé appealed to the county circuit court, ruling that the proposed pump facility constituted an “essential public service,” which was exempt from the ordinance. The court reasoned that, from Nestlé’s viewpoint, the facility was an essential service, and that, because it satisfied a general public demand for consuming bottled water, it was public. 

Court of Appeals Decision

The Township then filed an appeal with the Michigan Court of Appeals. After briefing and oral arguments, the appeals court on December 3 reversed the lower court’s ruling that the pump station qualified as an “essential public service.”

Nestlé also submitted several alternative claims and arguments that its booster pump station qualified for approval under the zoning ordinance. In every instance the Court completely rejected Nestlé’s arguments.

First, Nestlé argued that its pumping station was an “essential public service.” The Court acknowledged that “water is essential” to life—sustenance, health, farming, industry, electricity, recreation, and other human needs—but rejected the argument that selling bottled water to consumers at a profit somehow constitutes a “public service.” The Court found that “public service” means supplying water as a service to the general public or community through public waterworks, in the same way as any public utility, such as for the delivery of gas or electricity; the appeals court concluded that bottled water sales are a convenience, and sometimes are a help consumers in an emergency—but not a service that’s essential to the public.

Second, as a backup claim, Nestlé argued that its pump facility qualified as an “essential public service” because the large-volume water well permit constituted a “public water supply” under Michigan’s Safe Drinking Water Act (“SDWA”). However, the appeals court determined that the private sale of bottled water was not in the nature of a public utility subject to the Michigan Public Service Commission. Moreover, in a latter section of its decision, the appeals court noted that under the SDWA a “community supply” and “non-community supply” refer to a public water supply that provides year-round service to living units of residents, places of employment, schools, or daycare centers. The Court concluded that bottled water sales to consumers do not meet the definition of a public water supply.

Third, the company argued that the pump station qualified as an agricultural use. But the appeals court pointed to the definition in the zoning ordinance, finding that farming uses included growing, irrigation, food storage, or distribution facilities for agricultural products, and concluded that the industrial pump facility did not qualify as an agricultural use. Water is not “something produced,” the appeals court stated. Water used for farming is not, in itself, a farm product.

Fourth, Nestlé argued that its pump station qualified as an “extraction” of natural resources like sand and gravel under a special use permit provision in the ordinance. But once more the appeals court rejected the company’s argument because extraction or mining of a natural resource is not the same as the removal of water that continually moves through subsurface soils to replenish a stream, lake, or wetland, or provide a source of water for overlying landowners. In other words, water is not owned and extracted, water is a common resource reasonably used by others as it moves through the watershed. The sale of water permanently removed or severed from the water cycle by its nature does not replenish a shared common resource, it irretrievably depletes the resource: “… [E]xtracting water and sending it to other places where it cannot return to the water table… faster than the aquifer can replenish is an ‘irretrievable’ depletion,” the appeals court ruled. The court’s reasoning is entirely in accord with the common law rule in Michigan that water cannot be diverted off-tract or out of a watershed for sale in distant places if it diminishes other uses of water in connection with land in the watershed, the level of a marsh, lake, or stream. A large-volume pump diverting water from the land used by others for farming purposes is not compatible with farming or agricultural use.

Fifth, Nestlé argued that Michigan’s 2008 Water Withdrawal Act preempted local zoning ordinances that restricted the withdrawal of water: “[A] local unit of government shall not enact or enforce an ordinance that regulates a large quantity withdrawal,” stipulated the act. But the appeals court distinguished the regulation of groundwater withdrawal from the regulation of allowable land uses under a zoning ordinance, and concluded that the zoning ordinance “does not have the effect of regulating… the removal of water.”

Finally, Nestlé argued that its pumping station was an inextricable part of its large-volume water well that had been permitted by the State as a “public water supply” under the SDWA. However, the appeals court, again, ruled that water withdrawn for sale as bottled water for private gain did not fit the definition of a “public water supply,” emphasizing that the 2008 amendments to the SDWA created an entirely new classification for permitting bottled water operations, completely apart from sections of the SDWA that governed permits for a public water supply.

Future of Free Public Water for Private Bottling, Sale, and Profit

As a result of the court of appeals decision, for Nestlé to locate an industrial pumping station in Osceola Township, it will have to convince the Township’s board to amend the zoning ordinance. But the ruling goes far beyond zoning law.

In its broadest sense, the Osceola Township case could mean a lot more. Over the past two decades, bottled water has represented a battleground in many locations, including Maine and Vermont, Maryland and Florida, Texas and California, and across the border in Hamilton, Ontario. 

There are three fundamental issues in play: First, as seen by the court findings in the 2005 Nestlé case in Mecosta County, Michigan, groundwater withdrawals diverted for bottled water on a permanent basis cause substantial local impacts to fish, canoeing, kayaking, wildlife, and habitat in tributary creeks, lakes, and wetlands. Second, the removal of water for sale out of a watershed is not a use of water like farming or manufacturing in connection with land and returned to the watershed; it is a diversion and sale or export. Third, almost no one—regardless of their political persuasions—warms to the notion that someone can withdraw water, bottle it, and then claim it as its own to sell and profit without paying a penny for it. The public, in effect, subsidizes the company’s profit, without ever authorizing the company to sell the water.

Private large-volume groundwater operations like Nestlé’s in Michigan aren’t the only threat. Many water bottlers like Dasani and Aquafina hook up to a public water supply, package it, and convert it into a product to sell after paying a tiny fraction of a penny per gallon to the local municipality. In these cases, the corporations do not need a groundwater permit. They simply convert a public water service based on a nonprofit rate structure—spread across all those using the service—into profit. Like Nestlé, water bottlers who convert a public water supply into a package to sell at lucrative prices are subsidized by the other ratepayers and the public water supply service.

How can a bottled water company pay only an infinitesimal fraction of a penny for a gallon of water—based on a pro-rated cost of the municipal operation spread across all ratepayers—package, or bottle it, and convert it into a product or export t for sale for its own profit without authorization to sell or profit from the sale of a public water service?

The Court of Appeals decision in Osceola Township is a significant victory for local communities, water users, and citizens of Michigan who so often struggle to combat large, exploitive operations such as high-volume bottled water exports, Confined Animal Feeding Operations (CAFOs), fracking, and mining extraction. Just because a company thinks it can withdraw water and sell it because it holds a permit that says the withdrawal doesn’t violate impact standards, doesn’t mean the extraction is authorized or lawful under zoning laws, water rights law, or the sovereign state and public trust interest in water for the benefit of all citizens. Corporate water bottling is a private use, bent on convenience and profit. Even in humanitarian situations, like supplying bottled water in Flint, the water withdrawal still benefits the company. 

The answer to the larger question, “Who owns the groundwater?” is that, “No one owns the water.” Not the landowners, not bottled water companies, not even the local public water works. Groundwater is public water held by the State for the benefit of its citizens’ health, safety, and wellbeing. Michigan water is for use here in our local watersheds and the Great Lakes Basin, not for sale in some distant land.