Why Michigan needs to draw more revenue from its booming bottled water industry

All bottled water comes from somewhere

Published May 27, 2018 1:30PM (EDT)


This article was originally published on The Conversation.

Michigan recently approved Nestle’s request for permission to pump 400 gallons of water per minute from a well in the rural town of Evart, about 80 miles northeast of Grand Rapids. State environmental authorities approved this 60 percent increase despite poor timing and unprecedented opposition.

Public outrage is still simmering, partly because the private company pays relatively little in exchange for its ability to profit off what many Michiganders see as a public resource.

Based on a decade of water law and policy research, I believe that Michigan should either collect taxes on companies like Nestle that harvest water or significantly raise the fees water bottlers must pay.

Water wealth

Michigan, the “Great Lakes state,” sits in the middle of one-fifth of the Earth’s surface freshwater. It has a higher percentage of surface water than any other American state.

But even in water-rich places, long-term groundwater pumping can harm wetlands while dangerously decreasing the amount of water in rivers, lakes and streams — diminishing water supplies.

Nestle pays Michigan a pittance in exchange for the 4.8 million bottles of water a day the multinational company bottles at its Ice Mountain factory there: a US$200 annual permitting fee for each of their groundwater wells. Nestle does purchase water from the town of Evart municipal water system at other locations, which generates $313,000 in local revenue.

But Michigan does not tax bottled water production. State Rep. Peter Lucido, a Republican, has introduced a bill that would charge Nestle and its competitors like Absopure, Coca-Cola and Pepsi a 5-cents-per-gallon tax on the water they harvest. Lucido estimates that Nestle would have to pay $20 million in taxes if his legislation were to become law.

The lawmaker is calling for the state to spend this new revenue on water infrastructure, a long-neglected spending priority, as the Flint water crisis illustrates.

The American Society of Civil Engineers recently gave Michigan’s infrastructure a D+ grade, estimating that the state underfunds drinking water systems by as much as $563 million per year. Gov. Rick Snyder says Michigan should invest $4 billion more each year to fix decaying infrastructure of all kinds, including roads, bridges and waterworks.

Yet the state’s leaders have not adjusted tax rates accordingly.

Public resource, private use

When state authorities sought public feedback, more than 80,000 Michiganders called on the state to deny Nestle’s permit and only 75 people said they supported it.

This unusually high number of comments surely owed something to do with the Flint water crisis and Detroit municipal water shutoffs, which have raised awareness regarding the importance of abundant clean water. The state acknowledged that public sentiment was strongly against the permit application, and then granted the permit anyway, citing its laws and regulations — that provide limited grounds for denying this type of permit.

At least one nonprofit group intends to mount a legal challenge.

This contentious permit probably sparked more public outrage than it might have had the state not granted it the same week it announced that it would stop providing free bottled water to Flint residents impacted by a water crisis. The government there harmed tens of thousands of people by distributing lead-tainted water, a problem compounded by insufficient oversight and an inept response to the disaster.

Seeking to help, and perhaps sensing a public relations opportunity, Nestle belatedly announced plans to supply Flint residents with 100,000 free bottles of water every week.

Taxing water bottles

Should Michigan’s leaders become ready to take action, they would have several options to consider in addition to Lucido’s proposal.

Other states like Connecticut and Maine collect fees for bottled water production. The revenue collected from these states and others are minimal, however.

Another approach would be to tax bottled water sales. Chicago has done that since 2008, collecting 5 cents for each bottled of water retailers sell. Chicago’s tax, designed to reduce plastic pollution by discouraging bottled water sales, generates about $10.5 million in annual revenue for the city and offers a model other communities may want to replicate.

Michigan already collects a severance tax from oil and gas production and runs a Natural Resources Trust Fund derived from those royalties. This fund helps cover the cost of public outdoor recreation opportunities across the state. I contend that it’s a great model for what the state might do with revenue from a similar arrangement with water bottlers.

Michigan water law attorney Jim Olson has also suggested creating a water ombudsman’s office. This new ombudsman would carefully study the potential water conservation and revenue generation benefits from taxing bottled water.

As long as private companies are selling Michigan’s water, I believe, the state should at least tap portion of their profits to fund public water infrastructure improvements and wetland restoration. Taking this step might also discourage bottlers from endangering the public, wildlife and Michigan’s farmers by harvesting too much water.

Nicholas Schroeck, Director of the Transnational Environmental Law Clinic; Assistant Professor of Law, Wayne State University

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