May 19, 2025 – A Wisconsin Department of Natural Resources (DNR) permit did not need to require supplementary battery storage for a new natural gas-fired electric generating plant, the Wisconsin Court of Appeals decided Thursday in Sierra Club v. DNR, No. 2024AP673 (May 15, 2025).

The court remanded the permit to the DNR because part of the permit’s basis comes from the agency’s Background Concentration Protocol, which the court held was an unpromulgated rule – created outside the required rulemaking process.

Power Plant Application

Wisconsin Public Service Corporation and Wisconsin Electric Power Company sought an air permit in April 2021 that would allow the utilities to build a power plant to generate electricity from natural gas at Weston Generating Station in Kronenwetter.

Starting in the public comment period, Sierra Club argued that the DNR was required to consider, within the permit, battery storage to reduce the need for more generating units as Best Available Control Technology (BACT) to reduce air pollution.

Sierra Club also pointed to the protocol as an unpromulgated rule.

After the DNR granted the permit, Sierra Club obtained a contested case hearing, where it continued to argue about adding battery storage to units that the permit covers and against the protocol. The administrative law judge (ALJ) affirmed the permit.

Sierra Club sought judicial review of the ALJ’s decision in Dane County Circuit Court, which affirmed the DNR.

BACT Analysis

After concluding that the Sierra Club has standing to sue, Presiding Judge JoAnn F. Kloppenburg, joined by Judge Rachel A. Graham and Judge Chris Taylor, considered whether the DNR was required to include the supplementary battery storage as a part of BACT protections.

The Sierra Club bears this burden against the agency, which needs only substantial evidence to sustain its conclusion. Any “reasonable view of the evidence is sufficient,” the court of appeals explained.

BACT analysis contains five parts, of which only two are at issue. The process includes “identifying all available control technologies” for the infrastructure source of air pollution, and whether those options are feasible.

The DNR may exclude a technology from consideration if it would “redefine the design of the source.” This evaluation looks to the proposed purpose.

The utilities’ application explained they needed the new plant to efficiently ensure proper capacity, base load, and peaking generation of electricity in a manner that would support reliability of the transmission system – the electrical grid.

Utility industry conversion from fossil fuels to less consistent renewable generation, such as from wind or solar power, creates stresses in electricity availability and requires a more resilient grid to manage those variables.

The DNR concluded in reviewing Sierra Club’s comments that the addition of battery storage would alter the basic design of the proposed plant. In addition, the batteries would not meet the utilities’ business need of “continuous dispatchable energy.”

Utility testimony at the hearing added that batteries wouldn’t help insulate against grid disturbances that if not mitigated could cause power blackouts, the decision noted.

The Sierra Club’s expert disputed the utilities’ conclusion, claiming that the batteries provide another valid technique for ensuring grid reliability under stress.

The ALJ found more persuasive the applicants’ expert testimony, and the court of appeals panel agreed that substantial evidence supported the DNR’s choice.

The Sierra Club argued on appeal that the means of grid reliability weren’t a part of DNR’s original permitting decision. For the DNR to rely on that explanation now amounted to an illegal post hoc rationalization.

As the court of appeals explained, however, contested case hearings may include prehearing discovery – there will be something new for an ALJ to hear. The court of appeals found distinguishable the cases that Sierra Club raised in its argument.

In total, the DNR and the ALJ “complied with the permitting and hearing procedures, and Sierra Club had an opportunity to, and did, participate and present evidence and make arguments throughout those proceedings.”

Invalid Rule

The Background Concentration Protocol that Sierra Club claims is an unpromulgated rule forms a part of the DNR’s equation about air quality. To determine the effect of a new source of air pollution and what may be needed to preserve air quality requires knowing how good or bad the air is now.

The protocol came out of meetings in 2007 and 2008 between the DNR and stakeholders to improve accuracy of the underlying data. Not every county has ambient air quality monitors, and air quality varies from countryside to the city. The Protocol mapped out those differences.

Wisconsin courts have developed a five-part test based on the definition of an administrative rule in Wis. Stat. ​section 227.01(13): “(1) a regulation, standard, statement of policy or general order; (2) of general application; (3) having the effect of law; (4) issued by an agency; (5) to implement, interpret or make specific legislation enforced or administered by such agency.’”

The parties dispute three of those elements.

A “statement of policy,” the court of appeals held, declares “a standard course of action established by an entity, selected from among alternatives, to guide present and future decisions.”

Even if the protocol were a guidance document, as the DNR raised in defense, the protocol is a “statement of policy” necessary for a rule, the court of appeals held.

A rule also must have the “effect of law” – legal penalties can result from not following it. A “reference aid,” in contrast, is merely an agency’s internal tool. Mandatory language, the court of appeals explained, differentiates the two.

Compared with past cases, the protocol contains mandatory language that the DNR uses to grant or deny a permit compliant with the Clean Air Act. The court held the Protocol has the “effect of law.”

Finally, a rule must “implement, interpret, or make specific legislation enforced or administered by the agency.” Sierra Club argued “the protocol both ‘implements’ and ‘interprets’” Wis. Stat. section 285.63(1)(b), which are criteria for approving a clean air permit.

As defined in case law, “An agency action implements a statute when it carries out or gives practical effect to the statute.” A rule may clarify statute. It may even clarify another regulation, the court of appeals explained.

Wis. Stat. section 285.21(1)-(2) authorizes promulgating rules within federal air quality requirements and for contaminants not regulated by federal standards, the decision pointed out.

The Protocol complied with all elements of what constitutes a rule, the court of appeals held.

Because the DNR used an invalid rule, the court of appeals remanded to the circuit court to remand to the DNR the permit “to reopen the permit and proceed consistent with this opinion.” Meanwhile, the permit will remain in effect.

This article was originally published on the State Bar of Wisconsin’s Wisbar Court Review blog, which covers case decisions and other developments in the Wisconsin Supreme Court, the Wisconsin Court of Appeals, and the U.S. Court of Appeals for the Seventh Circuit. To contribute to this blog, contact Joe Forward.