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Enbridge Energy Company, Inc. v. Dane County

Supreme Court of Wisconsin

June 27, 2019

Enbridge Energy Company, Inc. and Enbridge Energy, Limited Partnership, Petitioners-Respondents-Petitioners,
v.
Dane County, Respondent-Appellant, Dane County Board of Supervisors, Dane County Zoning and Land Regulation Committee and Roger Lane Dane County Zoning Administrator, Respondents. Robert Campbell, Heidi Campbell, Keith Reopelle, Trisha Reopelle, James Holmes, Jan Holmes and Tim Jensen, Plaintiffs-Appellants,
v.
Enbridge Energy Company, Inc., Enbridge Energy, Limited Partnership and Enbridge Energy Limited Partnership Wisconsin, Defendants-Respondents-Petitioners.

          Submitted on Briefs Oral Argument: March 26, 2019

          Circuit Court Dane County (L.C. No. 2016CV8 & 2016CV350) Peter Anderson Judge

         REVIEW OF DECISION OF THE COURT OF APPEALS Reported at 382 Wis.2d 830, 917 N.W.2d 232 (2018 - unpublished)

          For the defendants-respondents-petitioners (2016AP2503) and petitioners-respondents-petitioners (2017AP13), there were briefs filed by Eric M. McLeod, Jeffrey L. Vercauteren, Joseph S. Diedrich, and Husch Blackwell LLP, Madison. There was an oral argument by Eric M. McLeod.

          For the respondent-appellant, there was a brief filed by David Gault, assistant corporation counsel. There was an oral argument by David Gault.

          For the plaintiffs-appellants, there was a brief filed by Patricia Hammel and Herrick & Kasdorf LLP, Madison; and Thomas R. Burney and Law Office of Thomas R. Burney LLC, Crystal Lake, Illinois. There was an oral argument by Patricia K. Hammel.

          An amicus curiae brief was filed on behalf of State of Wisconsin by Sopen B. Shah, deputy solicitor general, with whom on the brief was Misha Tseytlin, solicitor general, and Brad D. Schimel, attorney general.

          An Amicus curiae brief was filed on behalf of Wisconsin Manufacturers & Commerce by Corydon J. Fish and Wisconsin Manufacturers and Commerce.

          REBECCA GRASSL BRADLEY, J.

         ¶1 Enbridge Energy Company[1]operates an interstate pipeline transporting liquid petroleum. Dane County issued to Enbridge a conditional use permit ("CUP") including two conditions requiring Enbridge to procure additional insurance prior to expanding its pipeline pump station. After Dane County initially approved the CUP with these insurance conditions, but pending Enbridge's appeal to the Dane County Board of Supervisors, the Wisconsin Legislature passed 2015 Wisconsin Act 55, which prohibits counties from requiring an interstate pipeline operator to obtain additional insurance when the pipeline operating company carries comprehensive general liability insurance with coverage for "sudden and accidental" pollution liability. Although Dane County recognized the impact of Act 55 on the enforceability of the insurance conditions, it nevertheless issued the CUP with the invalid conditions.

         ¶2 In response, Enbridge filed a petition for writ of certiorari, which the Dane County Circuit Court granted. The circuit court struck the two insurance conditions from the CUP as unenforceable under Act 55. The court of appeals reversed, concluding that Enbridge failed to show it carried the requisite coverage triggering the statutory prohibition barring Dane County from imposing additional insurance procurement requirements. Enbridge maintains that because it carries the requisite insurance, Act 55 rendered Dane County's extra insurance conditions unenforceable, and the proper remedy is to strike the illegal conditions, leaving the remainder of the permit in place. We agree with Enbridge, reverse the court of appeals decision, and reinstate the circuit court's order.

         I. BACKGROUND

         ¶3 In 2014, Enbridge applied for a zoning permit to expand the pumping capacity at its Waterloo Pump Station ("Pump Station") in the Town of Medina. The Pump Station is part of a pipeline that runs from Douglas County in northern Wisconsin, through Dane County, and into Illinois. The Dane County Zoning Administrator issued the permit on April 29, 2014, and Enbridge agreed to comply with all Dane County Ordinances.

         ¶4 On June 12, 2014, however, the Zoning Administrator revoked the zoning permit because the expansion and other improvements required a CUP. Enbridge applied for a CUP on August 19, 2014, which the Town Board of Medina approved on October 1, 2014. The Town Board attached two conditions requiring Enbridge to sign an agreement for the use of the Town's roads and to construct a spill basin, respectively.

         ¶5 On November 11, 2014, the CUP application came before the Dane County Zoning and Land Regulation Committee ("Zoning Committee"), which directed its staff to "pursue a condition requiring a surety bond for assurances of spill clean up due to the increase[d] pressure that the pumping station will create on the existing line," and requested that Enbridge produce documentation of its insurance for catastrophic events.[2] The Zoning Committee considered the CUP again on January 27, 2015, and voted to retain an insurance expert "for the purposes of determining the insurance needs of the proposal." The insurance expert, David Dybdahl, prepared an insurance and risk management report for the Zoning Committee. He recommended:

• That Enbridge agree to indemnify and hold harmless Dane County for pollution losses Per the terms as outlined in Enbridge's proposal titled "CONDITIONAL USE PERMIT ("CUP") CONDITIONS";
• That Enbridge procures and maintains liability insurance, including Environmental Impairment Liability Insurance, making Dane County an Additional Insured to a level equal to 10% of the Line 6 B loss costs, $125, 000, 000;
• As part of this overall liability insurance requirement, Enbridge should purchase $25, 000, 000 of EIL [Environmental Impairment Liability] Insurance on the proposed pumping station in Dane County.

         ¶6 Dybdahl noted that in preparing his report, "Enbridge declined to provide the actual insurance policies (42 of them in total) to [him] for review, claiming that the documents contain trade secrets." Instead, Enbridge gave him summaries of the policies. Although he did not review the actual policies, Dybdahl "found [Enbridge's] summary of their insurance program to be credible," and he additionally observed that reading the policies "was not necessary to evaluate the insurance coverage parameters of concern."

         ¶7 Dybdahl determined that Enbridge had $700, 000, 000 of general liability insurance coverage for bodily injury, property damage, personal injury, and defense costs. His report noted that this coverage was "confirmed by a certificate of insurance prepared by [Enbridge's] insurance broker." The policy period ran through May 1, 2015. Dybdahl also wrote that Enbridge's general liability policy had an exception to the standard pollution exclusion:

"Sudden and accidental pollution liability" is what Enbridge shows for insurance coverage in their financial statements today. However, the pollution exclusion exemption in the Enbridge policy is not limited to sudden or quick events. A Property Damage or Bodily Injury claim arising from a pollution event that begins and is discovered within 30 days and is reported to the insurance company within 90 days is not excluded by the Pollution Exclusion in the primary Enbridge General Liability insurance policy. Hence the words "sudden and accidental" carry no weight in the current pollution exclusion. A more accurate term to describe the limited coverage for pollution events within the current General Liability Insurance policy is "Time Element Pollution" coverage.

(Emphasis added.) Enbridge did not have separate environmental impairment liability insurance, also known as pollution insurance. Dybdahl acknowledged that "it is very possible that Enbridge is already purchasing all of the General Liability insurance capacity available in the world for their operations. Therefore, I do not recommend the purchase of higher G[eneral] L[iability] limits for the operation of the . . . Pumping Station."

         ¶8 Dybdahl appeared before the Zoning Committee on April 14, 2015. When asked by a Zoning Committee member to describe a "time element" exception, he explained:

So the total pollution release from the time it begins to the time it is discovered, in the Enbridge policy must transpire in 30 days. That's the time element, and then there's 90 days to report it to the insurance company. It used to be referred to as sudden and accidental pollution insurance, but the words sudden and accidental were removed from the insurance coverage in 1986. So it doesn't-no one really could define what sudden meant, so they went to we're not going to argue whether it's sudden, because nobody can figure out how darn quick that needs to be, so we'll just say [it] has to happen within 30 days start- start to the time it's discovered. That's the time element.

(Emphasis added.)

         ¶9 After reviewing the report and hearing Dybdahl's testimony, the Zoning Committee considered the CUP with twelve conditions. Two of those conditions imposed insurance coverage requirements and are the subject of this appeal:

7. Enbridge shall procure and maintain liability insurance as follows: $100, 000, 000 limits in General Liability Insurance with a time element exception to the pollution exclusion (currently in place), and $25, 000, 000 of Environmental Impairment Liability insurance. Enbridge shall list Dane County as an Additional Insured on the total of $125, 000, 000 of combined liability insurance.
8. The required General Liability Insurance and Environmental Impairment Liability insurances shall meet the technical insurance specifications listed in Appendix A of the insurance consultant's report, which is incorporated herein by reference.

(Emphasis added.) The Zoning Committee unanimously approved the CUP with the twelve conditions. The Town of Medina then re-approved the CUP with the additional requirements on April 20, 2015. On May 4, 2015 Enbridge appealed to the Dane County Board of Supervisors ("County Board"), challenging the two insurance requirements.

         ¶10 Before the appeal was heard, however, the Legislature passed Act 55. Two sections of the Act addressed CUPs and insurance, respectively. First, § 1922am created Wis.Stat. § 59.69(2)(bs) (2017-18), [3] which states:

As part of its approval process for granting a conditional use permit under this section, a county may not impose on a permit applicant a requirement that is expressly preempted by federal or state law.

(Emphasis added.) Second, § l923e created Wis.Stat. § 59.70(25), which states:

A county may not require an operator of an interstate hazardous liquid pipeline to obtain insurance if the pipeline operating company carries comprehensive general liability insurance coverage that includes coverage for sudden and accidental pollution liability.

         ¶11 Because "the county cannot enforce the insurance requirements of [the] CUP . . . that were the subject of the Enbridge appeal," the County Board removed the CUP appeal from its July agenda. A few days later, the Dane County Assistant Corporation Counsel wrote to the Zoning Administrator:

A recent enactment of the legislature that was included in the Budget Bill prohibits counties from requiring an operator of an interstate hazardous liquid pipeline to obtain insurance if the company carries comprehensive general liability coverage that includes sudden and accidental pollution liability. Since Enbridge has the required general liability coverage, the CUP condition requiring additional insurance is unenforceable by the county.
[Wisconsin Stat. ยง] 59.70(25) expressly prohibits a county from requiring a pipeline operator to obtain insurance if they have the required coverage. Therefore, Dane County has no authority to require Enbridge to obtain additional insurance coverage. There is no issue of retroactive application of the statute. By the express language of the statute, effective July 14, 2015 the county is prohibited from requiring the insurance coverage. When the CUP was approved is ...

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