Business Ethos Blog

The Right Thing To Do: Exporting Michigan Water

We have had a number of reminders last year about the importance of water as a vital resource.  Certainly Flint comes to mind, but there has also been a devastating drought and wild fires in California and more recently the same problems in the Southeastern US.  Michigan is certainly blessed surrounded by 4 of the 5 Great Lakes and what appears to be ample ground water.  However, there is a controversy concerning the bottled water operations of Nestle in Stanwood and other Michigan cities.  Nestle pays virtually nothing to extract billions of gallons of water from Michigan aquifers. Should Nestle be taxed or charged in some way for the water extracted and bottled?  The company has now requested a 167% capacity increase to extract even more water.   Environmental groups and others oppose the increase.  What about other uses of Michigan water by farmers and industry and municipalities?  Should there be limitations on water usage?  What role does the Michigan Department of Environment Quality (DEQ) have to ensure that Michigan does not have a water crisis?  What is the “Right Thing to do?”  Let’s look at some issues:

  1. Nestle Waters of North America, the world’s largest bottled water company, shipped the first bottle of its Ice Mountain plant in Stanwood in May 2002.  Between 2005 and 2015 the company has extracted over 3.5 billion gallons of water from underneath Michigan and has paid next to nothing for it.  The company pays an annual $200 fee to operate.  There is no state tax, license fee or royalty.
  2. The company employs over 200 employees and ships between 225,000 and 370,000 cases of water per day.
  3. Nestle’s has requested a 167% capacity increase on a high volume well it owns in Osceola county.  The approval is pending with the DEQ.
  4. Environmental law experts say developing a ground water tax or pricing scheme could be tricky and could be fought not only by Nestle but also by industry, farmers and possibly municipalities.  In Michigan,Nestle extracts water under the “reasonable use” doctrine, a riparian right that allows landowners use of water under their and adjacent property as long as the use doesn’t adversely impact neighboring ground or surface waters.
  5. Nestle appears to be within their legal rights under Michigan’s water withdrawal law, part 327 of the Natural Resources and Environmental Protection Act.  Since part 327 was passed in 2008, more than 3,800 large quantity water withdrawals have been requested and only 580 have either been retracted, canceled or denied.  That’s about one request on par with Nestle’s latest application submitted daily for the past 7 years.  About 90% of the withdrawals are for agriculture.
  6. Michigan uses a computer model to assess the environmental impacts of any large water extraction.  The Nestle request flunked the DEQ test.  However, it was claimed that the computer tool was being overly conservative.  There is no indication that the DEQ estimates the size of the aquifers or monitors the aquifers to determine whether extraction has had an impact.  Aquifers are replenished through the gradual seepage of rain water.
  7. Michigan farms, parks and golf courses used 1.37 trillion gallons of water between 2005 and 2014, according to the DEQ.  Most of that water came from groundwater, not deep aquifers, for irrigation.  More than 3 quarters of Michigan’s total drinking water supply comes from the Great Lakes, most inland counties rely heavily on groundwater, not aquifers. Michiganders drank, cooked and bathed in about 782 billion gallons of groundwater between 2005 and 2014.
  8. Michigan is one of 8 states where Nestle extracts spring water for regional brands.  Only 18 states tax water bottling operations, some on the basis of water used.
  9. Nestle representatives say that if Michigan were to start charging for the groundwater it pumps, closure of their plant is not likely.  They have invested about $36 million into a plant expansion.

Should Nestle pay a fee or tax for the use of Michigan water?  Would that tax or fee affect other water users such as farmers and municipalities?  What methods are the DEQ using to track the impact of water extraction–especially the Nestle operations, other than a computer model which they say may be too conservative?  Is there a differentiation between water extraction users?  What is the “Right Thing to do?”  The Great Lakes states have been concerned about the potential for Great Lakes water to be piped to the dry Western states and have taken action to block any export of water. Isn’t that what Nestle is doing with Michigan groundwater one 8 ounce bottle at a time? Isn’t there a distinction between water extraction users, that is farmers use the water on the land, which can at least somewhat replenish the groundwater.  The same can be said for municipalities with treatment of water from households and industry.  The DEQ has to step up its monitoring of the impact of all extraction operations on groundwater and especially the aquifers. Nestle should be taxed or pay a fee for water extracted, but not farmers, municipalities or industry.  There is a difference between exporting the water and using it in the state.