With Gov. Tony Evers suggesting a new Foxconn contract and Earth Day approaching, here is an excerpt from Peter Annin’s “Great Lakes Water Wars” detailing a controversial diversion to help the Taiwanese company.
Excerpt published with permission from Island Press.
For more on “Great Lakes Water Wars,” go here: https://islandpress.org/books/great-lakes-water-wars.
Also, read coverage of a WisPolitics.com/WisBusiness.com event focusing on the Great Lakes featuring Annin and others: https://www.wispolitics.com/2019/foxconn-diversion-proposal-the-latest-great-lakes-water-controversy/
Chapter 17: Who Will Win the War?
Great Lakes Water Wars, 2nd Edition by Peter Annin
Thanks in part to the invasive-species issue, Chicago will likely continue to be the most complicated and controversial diversion of this century, just as it was during the last. But southeastern Wisconsin is coming on strong, with more contemporary water-diversion hotspots than all other Great Lakes states and provinces combined: Pleasant Prairie, New Berlin, Waukesha, and to a lesser extent, Menomonee Falls and Kenosha. Following that trend is Mount Pleasant, the most recent southeastern Wisconsin community to consider a Great Lakes water diversion under the Compact’s straddling-community exception clause. Mount Pleasant is a uniquely shaped village of 26,000 people that wraps around Racine’s west and south sides. The village stretches from the shore of Lake Michigan westward, past the Great Lakes Basin line, ending at Interstate 94. Mount Pleasant’s interest in Great Lakes water was triggered by the proposal by Foxconn Technology Group to build an enormous, $10-billion liquid-crystal-display (LCD) manufacturing facility that promises to eventually employ 13,000 people. The Taiwan-based company came to Wisconsin for the water, as well as $3 billion in state incentives that helped lure the company away from Michigan and Ohio, which were also in the running. The stakes over Foxconn are high: a study by the Metropolitan Milwaukee Association of Commerce estimated that the facility could add more than $51 billion to Wisconsin’s gross domestic product over fifteen years.1
Foxconn scoured southeastern Wisconsin for a place to site its massive campus, which eventually is expected to cover 20 million square feet, roughly the size of three Pentagons. The company wanted to be close to ground transportation corridors, major airports, potential employees from either side of the Illinois border…and the abundant waters of Lake Michigan. Ideally, from a water standpoint, Foxconn would have landed completely inside the Great Lakes Basin (which would have been much easier in Michigan, of course), but due in part to the narrow width of the Basin in southeastern Wisconsin, Foxconn landed in a straddling community instead, prompting Mount Pleasant to pursue a water-diversion application to support the facility.
Foxconn brings a whole new twist to the straddling-community conversation. In an irony of ironies, its corporate campus will straddle the basin line—a characteristic that it is hard to imagine the drafters of the Compact ever envisioning. As one Wisconsin official describes it, the flat screens may end up starting the assembly process in the Mississippi River watershed, with the finished product exiting the other end of the sprawling campus in the Great Lakes Basin. The facility’s geographic position raises intriguing questions for the Great Lakes Compact. “I don’t think anybody envisioned something like this happening,” says one Wisconsin official. “So I think we’re in kind of uncharted territory here.”
So the straddling corporate campus is part of a straddling-community application. Mount Pleasant doesn’t have its own public water-supply system. The vast majority of the village is already in the Great Lakes Basin and municipal customers get Lake Michigan water from Racine. It’s just the far southwest corner of Mount Pleasant that happens to slightly jut out across the Basin line, and that’s where Foxconn has decided to build its multifaceted facility. Because the Compact says that a water diversion can only be used for public water supply purposes, and since Mount Pleasant does not have its own public water-supply utility, Racine submitted the water-diversion application on behalf of Mount Pleasant, which in turn applied on behalf of Foxconn. The application requested 7 million gallons of water per day (mgd)—5.8 mgd for the Foxconn facility—roughly 40 percent of which (2.7 mgd) will be lost to consumptive use. The rest will be returned to Lake Michigan, as required under the Compact. By comparison, the highly controversial Waukesha water diversion will pull 8.2 mgd from Lake Michigan and return 100 percent of the water. As usual, the amount of water isn’t really the issue—it is a pittance compared to the 1.2 quadrillion gallons of water in Lake Michigan. What matters is whether the Foxconn diversion meets the letter of the law under the Compact, and if it is setting any unintended precedent that the region might regret later.
A key question in the Foxconn debate is whether the Compact’s water-diversion exception clauses were designed to encourage corporations like Foxconn to develop large industrial facilities at the edge of the Great Lakes Basin. Or were the exception clauses designed to help water-strapped communities in need? Or both? Local officials say that Mount Pleasant was not having any water issues until the Foxconn facility was proposed. “The question was never really fully answered in the negotiations with the Compact about when exactly did we think these exemptions were okay for straddling communities,” one Wisconsin official says. “Is industrial use okay, or not okay? Is it something we want to be encouraging or discouraging as much as possible?…I think what we are seeing with the Waukesha case, and then with this case, is some of those things are going to begin to get defined just by practice and precedents that get set.” Certainly, a key driving force behind the Compact was to bring jobs to the water, rather than send water to jobs someplace else. That’s the “blue economy” that the Great Lakes governors and other boosters have been talking about for years. Foxconn is a global corporate force of nature, lured to Wisconsin personally by Governor Scott Walker. Hon Hai / Foxconn Technology Group is one of the largest multinational corporations in the world, ranking high on Fortune magazine’s “Global500” list, and it has more employees (worldwide) than Milwaukee has people. But the overriding philosophy behind the Great Lakes Compact’s approach was that, ideally, any blue-economy jobs would land completely inside the Great Lakes Basin. Foxconn came close.
But, deep in the bowels of the Compact’s fine print, there may be a hurdle for the company, and it has to do with the Compact clause that limits new diversions to “public water supply purposes.” As the document puts it: “Public Water Supply Purposes means water distributed to the public through a physically connected system of treatment, storage, and distribution facilities serving a group of largely residential customers that may also serve industrial, commercial, and other institutional operators” (emphasis added). Mount Pleasant is a community of 26,000 people, most of whom live in the Basin and don’t need a diversion. The diversion is for the small section of town that lies outside the Basin, which is expected to host 13,000 new workers. Does that mean the diversion will be serving “a group of largely residential customers”? That’s the multibillion-dollar question in Madison and Taipei. “It will be interesting if this brings up a private right-of-action, or if another state sues,” says one Wisconsin official. “That would certainly put a wrench in the whole project.”
At a packed public hearing in March of 2018, speakers zeroed in on the “largely residential customer” issue. “Here’s the rub,” said Jodi Habush Sinykin of Midwest Environmental Advocates. “A ‘group of largely residential customers’ will not be the ones served by the 7 million gallons….Rather, the complete opposite is true. Racine will use the majority, if not the entirety, of the diverted Great Lakes water to serve the industrial needs of a single, private, foreign, industrial entity, Foxconn.”
Remember that under a straddling-community application like Racine’s, the local state alone decides whether a water-diversion application can be approved. There is no requirement for regional review, and no threat of a veto from other Great Lakes states.2 (Think of New Berlin, not Waukesha.) But the other Great Lakes jurisdictions could make their views known in other ways. “Even though it may be a decision exclusively of Wisconsin under the straddling-community clause,” said Jon Allan, director of Michigan’s Office of the Great Lakes, “it’s still incumbent upon every state and province to understand the nuances and the specifics of that arrangement so we can make sure that it fully and adequately conforms to the Compact, because protection of the Compact is paramount.”
As the Racine water-diversion application moved through the approval process, the threat of environmental litigation hovered in the background. Large-scale, long-term capital investment tends to shy away from uncertainty, and Foxconn may not attain a final position of certainty in its multibillion-dollar investment until after the water diversion’s potential legal issues are resolved. “It is going to be an issue,” admits one Wisconsin official in reference to Foxconn’s straddling circumstance. “Look, this Foxconn thing was competitive in the region, and if you’re another state who lost out to Wisconsin, as Michigan and Ohio did, wouldn’t you say, ‘Hey, here’s an opportunity for me to raise all kinds of trouble?’ ” Experts agree that the Foxconn proposal could be interpreted as pushing the limits of what was intended by the Compact’s authors. “It’s definitely not what was anticipated for the limited purpose of the straddling community and straddling county,” says Noah Hall, the Wayne State Compact expert. “I’m not so sure it will be a deal-breaker….We were concerned about limiting the exceptions to public water supplies,” he says. “But that’s not to say that we will have done a good job….The thread of money in water is real.”
The Foxconn debate has prompted a legal discussion behind the scenes about the “intent” of those who authored the Compact and International Agreement. Does the Foxconn deal sound like the kind of diversion that the straddling-community exception clause envisioned? “No—it was much more aimed at residential,” says one senior Canadian official who spent years in the discussions. “It wasn’t meant that you were going to have a Tesla factory farm…put one toe into the Basin and that will allow them to get a pipe that would then provide them with the water that they needed….For some of the environmentalists, this would be exactly the horror story.” It’s called the “straddling community” exception clause for a reason, these officials say, not the “straddling factory” exception clause. But Todd Ambs, who negotiated the Compact under Wisconsin’s Democratic governor Jim Doyle, disagrees. He says the language referring to predominantly residential customers does not refer to the community that wants the water, but rather the community supplying the water. Under that line of thought, as long as Racine has plenty of water to share, and most of its customers are residential, it can supply water to Foxconn and the company can use it for whatever it wants. Mr. Ambs doesn’t see a problem with a Foxconn straddling-community application “as long as they’re getting the water through a public utility that still has room under their cap,” which Racine definitely does.3
Wisconsin officials certainly realize that they have the final say on Foxconn, but also that a controversial decision could stress the Com-pact in new and unique ways. “I do think we have a credible argument that this is copacetic under the Compact,” says one Wisconsin official. “But I am curious about how much of an issue it’s going to be….Is somebody going to sue?” Business leaders dread the thought of one state suing another over water. “I would like to believe that the region will act more regionally,” said Kathryn Buckner, president of the Council of Great Lakes Industries. “This is a program designed to be protective of the region as a whole, and hopefully we aren’t as short sighted as to see that one facility can break that down and create a fracture in that regional program. “Three states submitted official comments raising questions about the Racine diversion: Illinois, Michigan, and New York. “It is unclear that the proposed diversion is largely for residential customers,” the New York letter said. “The water is intended to facilitate the construction and operation of the future industrial site of the Foxconn facility.” Regional mayors raised questions about the application, too. The Great Lakes and St. Lawrence Cities Initiative complained that “the City of Racine is not the straddling community requesting the water; Mount Pleasant is. And in fact, Mount Pleasant isn’t the entity with the water need; Foxconn, a private business, is.”
Despite these complaints, on April 25, 2018, as expected, Wisconsin approved Racine’s 7 mgd water-diversion application. The decision allowed the city “to extend public water service to the 8 percent of [Mount Pleasant] that is in the Mississippi River Basin, partially including the Foxconn facility site,” a DNR press release said. The agency added that the annual consumptive use from the diversion would lower Lake Michigan’s water level by 0.0025 inches, or the thickness of a “light-weight” sheet of paper. “We received approximately 800 comments on the Racine application, which shows the public’s strong interest in this topic,” said Adam Freihoefer, from the DNR’s Bureau of Drinking Water and Groundwater. “We appreciate the public’s involvement and I thank those who took the time to comment.” The key quote from the agency’s Findings of Fact also focused on the language about residential use, saying Racine delivered water to more than 5,500 homes in Mount Pleasant already. “The proposed additional industrial and commercial customers within the diversion area will not significantly change the fact that the [Racine water] utility’s distribution of water to the public in the Village of Mount Pleasant will serve a group of largely residential customers.”
Environmentalists were disappointed by the Foxconn proposal, almost from the start—primarily because Wisconsin waived key non-Compact-related environmental requirements in order to fast-track construction of the giant LCD factory. Approval of the water diversion only made things worse. Environmentalists challenged the Racine/Foxconn diversion on May 25, 2018—the first litigation ever filed under the Great Lakes Compact. Midwest Environmental Advocates, which filed the petition, said diversions can only serve “a group of largely residential customers,” yet 83 percent of the 7 mgd requested by Racine “will be used to supply Lake Michigan water to one single private industrial customer, Foxconn,” and the rest of the water would be used by “industrial and commercial facilities surrounding the Fox-conn facilities.” The legal challenge remained unresolved as this book went to press.
Foxconn declined an interview request for this book, and because the company’s situation could remain dynamic for some time, few experts were willing to speak on the record about it. But all were fascinated by the geographic uniqueness of the company’s situation, and the challenges that it could pose to the next phase of Great Lakes water discussions, disputes, and debates. As one senior Wisconsin official put it, “This particular site is just fascinating from the [Great Lakes] divide standpoint….I just can’t get over it.” However things end up, the Racine / Mount Pleasant / Foxconn water diversion has landed in a familiar neighborhood for Great Lakes water disputes. It is just up the road from Pleasant Prairie, and just down the road from Waukesha and New Berlin. Southeastern Wisconsin is becoming water-diversion row.
–Annin is Director of the Mary Griggs Burke Center for Freshwater Innovation at
Northland College in Ashland, Wis.
- Metropolitan Milwaukee Association of Commerce, “State Gross Domestic Product Leveraged by Tax Credit Investment at Various Jobs/Capital Expenditure Performance Levels,” March 22, 2018, http://www.mmac.org/uploads/1/1/3/5/113552797 /mmac_foxconn_roi_release_and_tables.pdf, accessed March 24, 2018.
- If a straddling-community diversion consumes 5 mgd or more—averaged over any 90-day period—the application is subject to regional review by other Great Lakes states and provinces. Even so, the other jurisdictions do not have the authority to veto a straddling-community application.
- Racine’s water permit allows the city to withdraw more than 60 million gallons of water from Lake Michigan per day. In 2017, the year before Racine’s application was approved, it withdrew an average of approximately 17 million gallons per day, giving the city more than 40 million gallons of buffer to accommodate the 7 mgd requested in the Racine / Mount Pleasant / Foxconn diversion application.