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Michigan Department of Environmental Quality v. City of Flint

United States District Court, E.D. Michigan, Southern Division

October 17, 2017

MICHIGAN DEPARTMENT OF ENVIRONMENTAL QUALITY, Plaintiff,
v.
CITY OF FLINT, Defendant, and FLINT CITY COUNCIL, Intervening defendant.

          OPINION AND ORDER GRANTING IN PART PLAINTIFF'S MOTION FOR SUMMARY JUDGMENT

          Honorable DAVID M. LAWSON UNITED STATES DISTRICT JUDGE.

         “There are risks and costs to action. But they are far less than the long-range risks of comfortable inaction.” - John F. Kennedy

         The problems that the City of Flint has encountered with operating its water system over the past several years have been grave and well-documented. See Boler v. Earley, 865 F.3d 391, 397 (6th Cir. 2017) (outlining the catastrophe that resulted when Flint changed water sources from the Detroit system to the Flint River, and holding that the plaintiffs' tort claims for damages caused by drinking contaminated Flint water were not preempted by the Safe Drinking Water Act (SDWA)); Davenport v. Lockwood, Andrews & Newnam, Inc., 854 F.3d 905, 907 (6th Cir. 2017) (holding in “one of numerous actions arising from the water crisis in Flint, Michigan” that the local controversy exception in the Class Action Fairness Act did not apply); Guertin v. Michigan, No. 16-CV-12412, 2017 WL 2418007 (E.D. Mich. June 5, 2017) (putative class action tort case in which the plaintiffs, residents of Flint, alleged that state and city defendants are legally responsible for harm that was caused when plaintiffs drank and bathed in water that was contaminated with dangerous levels of lead); Concerned Pastors for Soc. Action v. Khouri, 217 F.Supp.3d 960 (E.D. Mich. 2016) (holding that state and city officials failed to meet their responsibilities prescribed by regulations enacted under the SDWA to deliver safe drinking water to Flint residents); Concerned Pastors for Soc. Action v. Khouri, 194 F.Supp.3d 589, 593-96 (E.D. Mich. 2016) (describing history of the Flint water crisis and allowing suit under SDWA for remedial relief to proceed). Flint's mismanagement - either at the hands of the State of Michigan while it was in receivership or on its own - has earned it an enforcement order from the Environmental Protection Agency (EPA), a consent-judgment-like settlement mandating replacement of some of the water system's infrastructure, and multiple personal injury lawsuits. The City now finds itself in the cross-hairs of another lawsuit - this time by the Michigan Department of Environmental Quality (MDEQ) - aimed at ensuring that the municipal government takes appropriate steps now to ensure that the water system has access to a safe and reliable source of drinking water into the foreseeable future, at a cost that will not bankrupt the City. The foundation of the lawsuit is an EPA communique notifying the City over a year ago that it would need to make a decision about a long-term source of drinking water, probably before October 2017, when then-current supply contracts would expire. According to the complaint, the City - through its mayor and a member of city counsel - engaged in multilateral negotiations with various entities, resulting in an agreement in April 2017 that would achieve the health, safety, and financial goals consistent with the EPA's orders. All the participants signed the agreement, except the City of Flint. Although the City administration favors the agreement, the Flint City Council has not voted to approve it, nor has it offered an alternative. That failure to act, coupled with the urgency of securing a long-term source of finished water, prompted this lawsuit.

         Plaintiff MDEQ filed a motion for summary judgment, now pending, in which it documented the past problems of Flint's water system, the path to recovery, the EPA's mandate, the financial imperatives, the need for immediate action, and the lack of any practical alternatives. MDEQ asks for a mandatory injunction directing the City to sign the negotiated agreement. The City, through its municipal law department, agrees with the MDEQ and consents to the requested relief. However, the City Council hired its own attorney and was allowed to intervene. Its response to the summary judgment motion signals agreement, for the most part, with the facts outlined by the MDEQ. It opposes the motion however on these grounds: (1) it believes that the MDEQ's claim is not ripe; (2) it contends that the complaint does not raise a federal question and therefore this Court has no subject matter jurisdiction; (3) it contends that a court cannot order a public legislative body to approve a contract; and (4) even if a court could do so, no irreparable harm has been demonstrated to justify injunctive relief. For its part, the City of Flint insists that its city council is not a juridical entity separate and distinct from the City itself, and therefore it should not be allowed to intervene in the case.

         The Court heard oral argument on September 26, 2017. The Court had appointed a mediator on August 1, 2017, and settlement talks with the parties, including representatives of the City Council, continued through the oral argument date and beyond. There has been no resolution: the City Council has not voted on the negotiated agreement, it has not proposed an alternative, and the future of Flint's fragile water system - its safety, reliability, and financial stability - is in peril. Because of the City's indecision, the Court must issue its ruling.

         I.

         In September 2016, the EPA, which had been monitoring the Flint water system since at least October 2015 when it received a petition for an emergency order, notified the City of Flint that it would have to make a decision soon about the long-term source of its drinking water. That notification followed the issuance of an Emergency Administrative Order (EPA Order) nine months earlier on January 21, 2016, which directed Flint and the State of Michigan to take certain steps to begin to address the crisis that resulted from ill-considered decisions and actions that occurred in April 2014, when Flint began to draw its drinking water from the Flint River. The EPA emphasized the urgency of making a decision in light of the EPA Order's requirements and the impending termination of then-existing source water contracts. To date, Flint has not entered into a long-term contract. Instead, it has made a two-year agreement, and then a series of month-to-month extensions, which, the MDEQ points out, are not financially sustainable. These facts, and the ones that follow, are uncontested.

         A. Historical Background

         The City of Flint has operated a public water system for over a century. See Concerned Pastors, 217 F.Supp.3d at 964 (citation omitted). Since 1965, the City of Detroit, through the Detroit Water and Sewerage Department (DWSD), provided its treated or “finished” water. DWSD treated water drawn from Lake Huron and shipped it via a 72" pipeline to Flint.

         In November 2011, the City of Flint was put into a state-controlled receivership. In April 2013, while still under receivership, Flint announced its intention to contract with the Karegnondi Water Authority (KWA) and eventually switch from DWSD as its water source. As part of the arrangement, KWA intended to construct a pipeline that would transport raw water from Lake Huron to Flint, where the City would use its own plant (which apparently had been mothballed for nearly 50 years) to treat the raw water before distribution.

         In light of the announcement, DWSD subsequently notified Flint that effective April 2014, it would no longer be required to provide finished water to Flint. The KWA pipeline project, however, was estimated to take several years to complete, so between April 27, 2014 and October 15, 2015, Flint drew raw water from the Flint River and treated that water at its plant before distributing it to its residents. The public works department did not add the proper treatment chemicals, however, which caused the corrosive Flint River water to damage water mains and service lines, and water contaminated by lead and copper was distributed throughout the system. During that time, serious public health risks associated with Flint's water supply were discovered.

         Flint eventually decided to discontinue using the Flint River as a water source. On October 16, 2015, Flint contracted with the Great Lakes Water Authority (GLWA) - which had become the lessee of DWSD's assets - to furnish drinking water that is safe and reliable. Nonetheless, in January 2016, the EPA determined that the drinking water situation in Flint posed an imminent and substantial endangerment to public health that would continue absent preventative action. In its Emergency Administrative Order, the EPA found that Flint's public health was substantially endangered by lead contamination in drinking water that persons legitimately assumed was safe for human consumption. Because changing water sources again could exacerbate the condition, the EPA Order imposed stringent requirements on Flint if it intended to switch from GLWA to another source. One such condition was that the City must demonstrate that it has a sufficient number of qualified and trained personnel to operate its water treatment plant.

         B. Financial Impact

         In the April 2013 arrangement in which Flint would switch from DWSD to KWA as its water source, Flint agreed to pay 34% of the costs associated with the new pipeline's construction. As a consequence, it is now obligated to retire approximately $85, 000, 000 in bonds issued to fund the pipeline, as well as a share of KWA's annual fixed costs of operating its water system. Moreover, as a result of the arrangement with KWA, Flint believed it no longer needed the 72" pipeline it had previously used to receive water. In 2014, Flint entered into an agreement with the Genesee County Drain Commission (GCDC) for the sale of the pipeline in the amount of $3, 987, 700.

         When Flint switched back to GLWA as its water source, it incurred costs that currently run $14, 100, 000 per year. Flint also obtained a license from GCDC to use the 72" pipeline to receive water on a temporary basis. On October 1, 2017, Flint's licensing agreement with GCDC ran out and is subject to termination so that the pipeline may be used for other purposes by GCDC. There is no evidence that the agreement has been extended; however, GCDC has stated that it has no immediate plan to cut off water to Flint.

         C. Future Water Source Issues

         When the EPA notified Flint in September 2016 that it would need to decide on a long-term water source, it pointed out that time was not on its side. Among other considerations, the EPA noted:

A nine-mile portion of Flints' drinking water distribution system was sold to Genesee County for County distribution of KWA water, and the County currently projects that it will begin using that nine mile segment in October of 2017. Therefore, unless other arrangements are made, in October of 2017 Flint will no longer have access to finished drinking water from the Great Lakes Water Authority (GLWA), forcing a choice on an alternative source.

         In November 2016, the City responded that Flint's water treatment plant would provide its long-term, primary source of water. The City informed the EPA that the plant was under renovation to treat water provided by KWA, but it was unlikely that the improvements would be constructed and tested by October 2017. In the interim, Flint intended to obtain its water supply from Genesee County.

         The EPA's order was later amended in November 2016 after the City announced its latest intention to switch from obtaining finished water from GLWA to treating raw water from the KWA. In the amendment, the EPA noted that a change in source water or treatment has the potential to cause corrosion and leaching of lead if the water system and the primacy agency had not planned appropriately for the change. In order to ensure that Flint continued to provide safe and reliable drinking water to its residents, the amended order prescribed the tasks and time frames required to make a water source switch in compliance with the SDWA. Those included a requirement that the City confirm its new water source and emergency back-up water source and submit a written plan for completing the KWA pipeline connection to Flint's water treatment plant, as well as a plan that provides a preliminary evaluation for Flint's treatment of its identified new source water. The EPA also required Flint to demonstrate that necessary infrastructure upgrades and other identified improvements to its water treatment plant will be implemented and to submit a written “new source treatment plan” (NSTP) to address the City's technical, managerial, and financial capacity to operate its water system in compliance with the SDWA. The NSTP also included a mandatory “performance period” of at least three months that will allow for the demonstration of the adequacy of treatment of the new source to meet all SDWA requirements before distribution to consumers. The order required Flint to submit the NSTP by March 1, 2017, and upon approval by MDEQ, the City would be required to implement it. Under the order, Flint is required to continue to use the GLWA source until the City has demonstrated all requirements are met and the EPA has concurred. To date, Flint has not submitted an NTSP.

         On December 22, 2016, GCDC's Director of Water & Waste Services informed Michigan's Director of the Department of Natural Resources that if Flint is not ready by October 2017 to deliver treated KWA water to its residents, it must either stay with GLWA or reach a supply agreement with GCDC, subject to MDEQ and KWA approval. If Flint were to stay with GLWA, which would in turn require GCDC to stay with GLWA, the City or the State would be required to pay the cost of continuing with GCDC until completion of the KWA pipeline. GCDC estimated the cost to be over $45 million for the two-year period. The letter expressly noted that it is imperative that Flint reach an agreement “quickly” for water supply to avoid unnecessary legal problems.

         It is undisputed that Flint has yet to demonstrate that it has met the EPA's conditions for switching from GLWA to KWA as a water source for its residents. For one, Flint has yet to build the connector pipeline necessary to deliver raw water from KWA to the Flint water treatment plant. For another, Flint's water treatment plant is not yet in compliance with the EPA's treatment and infrastructure requirements. MDEQ asserts, and the City does not dispute, that it will take approximately three-and-a-half years and between $58, 800, 000 and $67, 900, 000 for the plant to achieve compliancy. The necessary upgrades would not be complete until September 2020, and, after factoring in the EPA's three-month performance period, Flint would not be able to distribute water obtained from KWA until at least December 2020. Additionally, Flint has not disputed that it lacks capable and qualified personnel required by the EPA to perform compliance checks and effectively operate its treatment plant.

         D. Funding Issues

         In addition to the technical, logistical, and potential health problems the EPA associated with a decision to switch water sources from Flint's current supplier, the MDEQ asserts, once again without opposition by the City, that any short-term deal to continue using water from its current supplier - which would be required if Flint's proposed switch to KWA has any vitality - presents a number of other difficulties. First, as noted above, Flint's license to use GCDC's pipeline to receive GLWA water expired earlier this month. GCDC has the right (although apparently not the present intention) to terminate Flint's use of the pipeline at any time. Second, if the City maintains its current short-term contract with GLWA, it will pay approximately $14, 100, 000 per year for drinking water. In addition to these payments, beginning October 1, 2017, the City became contractually obligated to pay $7, 000, 000 per year in bond debt associated with the cost of building the KWA pipeline and at least $1, 100, 000 per year for KWA administrative expenses. Those bond debt payments are due even if Flint does not use KWA water.

         If that scenario persists, MDEQ forecasts, Flint would have to increase water prices charged to its residents by over 40% in order to keep its water fund solvent. And even if the City is able to cover its current water expenses, the water fund is projected to be depleted by June 2018 unless the City significantly improves its fee collection rate. Under even the most optimistic estimates, insolvency is nearly certain by the first quarter of 2019.

         Moreover, Flint's water distribution infrastructure is aging, with some of the water mains dating to the 1900s. An asset management report commissioned by the MDEQ in June 2016 recommended that at least 13 miles of Flint's water mains should be replaced annually so as not to exceed their 100-year useful life. Likewise, the valves in the system - essential to route water and isolate leaks - are aging, some are inoperative, and many need to be replaced. The cross connections and hydrants also require substantial repairs, which are necessary to avoid backflow and the resulting system contamination. MDEQ estimates that an investment of $204, 220, 000 in the next five years is necessary to ensure the system is not a danger to ...


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