21-010w.v16

CADDNAR

South Lake Sailing School & Cedar Lake Yacht Club v. DNR, 16 CADDNAR 15

Administrative Cause Number: 21-010W

Administrative Law Judge: Aaron Bonar

Petitioner Counsel: Alexander Kutanovski

Respondent Counsel: Rebecca McClain

Date: March 7, 2023

[Editor’s Note: Final Order follows Findings of Fact and Conclusions of Law.]

FINDINGS OF FACT AND CONCLUSIONS OF LAW WITH FINAL ORDER

Procedural Background and Jurisdiction

1. On March 11, 2021, South Lake Sailing School, Inc. and Cedar Lake Yacht Club, Inc. (hereinafter Petitioners) filed correspondence (hereinafter Petition) with the Natural Resources Commission (hereinafter Commission) alleging that the Indiana Department of Natural Resources (hereinafter Department) improperly denied Petitioners’ permit application to place an aerator on its property bordering Cedar Lake in Lake County, Indiana. See Petition.

2. Petitioners seek to have the denial overturned so they may place the aerator near their pier on Cedar Lake. Id.

3. By filing their Petition, Petitioners initiated a proceeding governed by Indiana Code 4-21.5-3, sometimes referred to as the Administrative Orders and Procedures Act (AOPA), and the administrative rules adopted by the Commission at 312 IAC 3-1 to assist with the implementation of AOPA. See IC 4-21.5-3-1, et seq.

4. Administrative Law Judge (ALJ) Sandra Jensen was appointed under IC 14-10-2-2 to conduct this proceeding and was assigned this case on March 18, 2021.

5. A telephonic prehearing conference was set for April 14, 2021. Following notice to the parties, the parties both appeared by telephone. The parties agreed to complete discovery by July 30, 2021 and to hold another telephonic conference on August 11, 2021.

6. On July 19, 2021, Petitioners filed their Motion to Extend Discovery Deadline, which requested that the discovery deadline be extended from July 30, 2021 to September 30, 2021. ALJ Jensen granted this request on July 20, 2021 and rescheduled the telephonic conference from August 11, 2021 to October 6, 2021.

7. On September 17, 2021, the Department filed its Motion to Extend Discovery, which stated that the parties jointly requested to extend the discovery deadline to October 31, 2021. ALJ Jensen granted this request in an order dated September 23, 2021 and set the discovery deadline to November 1, 2021. Both parties were also ordered to submit status reports to the Commission no later than November 19, 2021.

8. ALJ Jensen’s order of September 23, 2021 also reassigned this case to ALJ Dawn Wilson.

9. On October 19, 2021, Petitioners filed another Motion to Extend Discovery Deadline, which stated that both parties requested an extension of said deadline to November 30, 2021 and an extension of the status report submission deadline to December 15, 2021. ALJ Wilson granted both requests in an order dated October 20, 2021.

10. On November 19, 2021, Petitioners filed their Motion to Extend Discovery Deadline, which stated that both parties requested to extend the discovery deadline to December 31, 2021 and to extend the status report deadline to December 31, 2021. ALJ Wilson granted both requests in an order dated November 22, 2021.

11. On December 28, 2021, Petitioners filed their Motion to Extend Discovery Deadline, which stated that both parties requested that the discovery deadline be extended to January 31, 2022 and to extend the status report deadline to January 31, 2022. No order could be located in the record that granted this request.

12. On January 31, 2022, the parties submitted a Joint Status Report, which stated that the parties had completed discovery and were awaiting an expert report to be completed. The parties also stated that they were involved in alternative dispute resolution options to resolve the matter without the need for a hearing.

13. The parties noted in their Joint Status Report that a new ALJ had not been assigned in this matter, as ALJ Wilson had announced her impending retirement and informed the parties, presumably in a written notice, that she would be unable to continue working on this case. No copy of said notice could be found in the record.

14. On March 9, 2022, this case was reassigned to ALJ Elizabeth Gamboa, who issued her Notice of Assignment of Administrative Law Judge and Notice of Telephonic Status Conference on the same date. ALJ Gamboa set a telephonic status conference for March 22, 2022.

15. At the March 22, 2022 telephonic status conference, Petitioners stated their willingness to enter settlement negotiations upon the completion of their expert witness’ report. The Department requested that a hearing be scheduled for this matter.

16. On March 23, 2022, ALJ Gamboa issued an order setting the deadline to exchange expert witness reports to March 31, 2022; the deadline to depose any witnesses to May 13, 2022; and the deadline to exchange prospective witness lists and evidence exhibits no later than July 12, 2022.

17. The order also set a telephonic status conference for July 12, 2022 and an administrative hearing in this matter for July 27, 2022.

18. On May 24, 2022, Petitioners filed their Motion to Continue Review Hearing and Extend Witness List and Stipulation Deadline. The Motion requested that the hearing be rescheduled to August 24, 2022 or to another date preferred by the ALJ, and that the witness list and stipulation deadlines be extended to fifteen (15) days prior to the new hearing date.

19. On May 25, 2022, this case was reassigned to ALJ Aaron Bonar. ALJ Bonar granted the request to continue the hearing and set a telephonic status conference for July 12, 2022.

20. At the telephonic conference on May 25, 2022, both parties agreed to extend the witness list and stipulation deadline to August 30, 2022; to set a telephonic conference for September 6, 2022; and to hold an administrative hearing on September 13, 2022.

21. At the September 6, 2022 telephonic conference, Petitioners and the Department noted several issues related to proposed witnesses and agreed to a new case management plan. The deadline for exchanging proposed witness lists and evidence exhibits was extended to September 28, 2022; a final telephonic conference was set for October 5, 2022; and the administrative hearing was rescheduled for October 12, 2022.

22. An administrative hearing was conducted as scheduled on October 12, 2022. Petitioners’ Representatives, Counsel for Petitioners Alex Kutanovski, and Counsel for the Department Rebecca McClain appeared in person at the Commission Hearing Room at the Indiana Government Center in Indianapolis, Indiana.

23. The following witnesses testified at the administrative hearing: Craig Parker, Ben Carstens, Terry Millefoglie, Albert Strong, Jim Hebenstreit, Gary Whittaker, and Jon Eggen.

24. Petitioners’ Exhibits 1, 2, 3, 4, 5, 6, and 13 were offered for admission into the record at the administrative hearing. Exhibits 1, 2, and 13 were admitted without objection. Exhibits 3, 4, 5, and 6 were admitted over the Department’s objections.

25. Department’s Exhibit A was admitted over Petitioners’ objection.

Findings of Fact [1]

1. South Lake Sailing School, Inc. and Cedar Lake Yacht Club are organizations that operate on Cedar Lake in Lake County, Indiana. See testimony of Craig Parker.

2. The Yacht Club operates on property the South Lake Sailing School has owned since at least the mid-1950s. See testimony of Craig Parker.

3. Petitioners have a pier extended into Cedar Lake that only members of the Yacht Club may use. The pier has been on the Petitioners’ property since the mid-1950s. See testimony of Craig Parker.

4. The average depth of the water surrounding the pier is likely between four (4) and four and a half (4.5) feet. Petitioners estimate the pier to be worth $200,000.00. See testimony of Craig Parker and Ben Carstens.

5. In January 2021, the Department contacted Petitioners regarding an aerator that Petitioners had placed near Petitioners’ pier. An aerator is defined as “a mechanical device placed within a public freshwater lake that is used to accomplish any of the following:

1) Increase the amount of dissolved oxygen in the water.

2) Increase the decomposition of organic materials.

3) Alter water flow or circulation.

4) Reduce icing [ice buildup].

5) Enhance audio or visual enjoyment by bubbling or spraying water.”

See testimony of Craig Parker and Ben Carstens, and 312 IAC 11-2-1.5.

6. Petitioners placed the aerator near the pier to keep ice from building up and potentially damaging the pier in the winter months. Petitioners placed signage and lights around the area to warn other lake users of the aerator. See testimony of Craig Parker and Ben Carstens.

7. The Department informed Petitioners that they would need to apply for a permit to place the aerator near the pier in the winter months. Petitioners submitted permit application PL-24219-0 and the Department acknowledged receiving said permit application on January 21, 2021. See testimony of Craig Parker and Exhibit 1.

8. On February 22, 2021, Petitioners received notice from the Department that the application for an aerator permit had been denied because “[t]he open water and thin ice created by an aerator will constitute an unreasonable hazard to public safety and will pose a hazard to lake users.” Petitioners were not aware of any complaints or safety incident reports related to the use of the aerator. See testimony of Craig Parker and Exhibit 2.

9. The denial surprised the Petitioners as they had been issued a permit to use an aerator during the winter months on March 31, 2010, though Petitioners were unaware that the permit expired twenty-four (24) months after it was issued. Petitioners had used the aerator off-and-on in the winter from 2010 to 2021 but stopped using it upon being informed of the permit’s denial. See testimony of Craig Parker and Ben Carstens, Exhibits 3 and 4.

10. Before August 2010, a permit was not required to operate an aerator on a public freshwater lake. As the dangers and risks of aerators became known to the Department, a permit requirement was put in place per the Lake Preservation Act alongside a general use license applicable from March to October of any given year. The Act requires any alterations to the shoreline of the lake be permitted, but aerators are not mentioned specifically in the Act. See testimony of Jim Hebenstreit, 312 IAC 11-3-1.2, and IC 14-26-2.

11. The use of aerators is a safety concern because aerators create thin ice. Department Conservation Officers do not endorse the use of aerators due to safety concerns. See testimony of Terry Millefoglie and Gary Whittaker.

12. Albert Stong, a longtime engineer who frequently analyzes de-icing and water projects, testified that it was his belief that a de-icing plan, which incorporated aerators, could be implemented that would comply with any Indiana Administrative Code requirements and be, in his professional opinion, safe. See testimony of Albert Stong, Exhibits 6 and 13.

13. Stong’s analysis of the plan included reviewing the proposed aerators, their zones or areas of impact, and the safety factor of the proposed aerators. See testimony of Albert Stong, Exhibits 6 and 13.

14. The safety factor, a measurement considering the factor that an aerator may affect an area bigger than the manufacturer’s stated zone of impact, is largely arbitrarily determined, meaning that there is not a set means to determine the safety factor. See testimony of Albert Stong.

15. The safety factor could indicate that thin ice would form in the area covered by the safety factor beyond the manufacture’s stated zone of impact, but that the area would have to be personally inspected to determine whether the thin ice was caused by an aerator. See testimony of Albert Stong.

16. Department photos taken between January 4 and March 1, 2021 show open water around Petitioners’ pier and ice at various thicknesses, though no evidence of the thickness of the ice was presented. Further, no evidence of the exact dates and times each photo was taken was presented. See testimony of Terry Millefoglie and Exhibit A.

17. While a few permits for the use of aerators in the winter months may have been granted after 2010 by accident, there was essentially a blanket ban on permitting the use of aerators on public lakes during the winter months. This resulted in nearly all permit applications for aerator use in the winter being denied by the Department based on safety concerns. See testimony of Jim Hebenstreit and Jon Eggen.

18. No specific standards or written policies could be identified regarding how to judge if a specific project or aerators in general were dangerous. However, the Department considered safety, environmental, and public trust concerns when deciding to deny permits for winter-use aerators as an unwritten general policy. See testimony of Jim Hebenstreit, Jon Eggen, and Gary Whittaker.

Conclusions of Law

1. The Department’s Information Bulletin (IB) 61 identifies Cedar Lake (Lake County) as a public freshwater lake pursuant to Indiana Code (IC) 14-26-2-5. See IB 61.

2. IC 14-26-2-5, also known as the Lake Preservation Act, provides that the State “has full power and control of all the public freshwater lakes in Indiana … [and] hold and controls all public freshwater lakes in trust for the use of all of the citizens of Indiana for recreational purposes.” See IC 14-26-2-5(d)(1-2).

3. The Commission has jurisdiction over public freshwater lakes and has the power to make administrative rules to implement relevant sections of the Indiana Code, including the issuing of permits. See IC 14-10-2, 14-15-7-3, 14-26-2-23, and 4-22-2.

4. The Department enforces the Commission’s administrative rules and policies. See IC 14-9-8-16.

5. The Commission is the ultimate authority of the Department under IC 4-21.5-3. See IC 14-10-2-3.

6. The Commission has adopted Indiana Administrative Code 312 IAC 11-3-1.2, which provides the conditions under which a general license for placing and maintaining an aerator may be obtained. To qualify for a general license, the aerator may only be operated from March to October and must comply with the other requirements of the rule. See 312 IAC 11-3-1.2.

7. 312 IAC 11-3-1.2(b) states in part that “[a] person who wishes to place or maintain an aerator, which does not qualify under this section, must obtain a written license in advance of placement.” This license is equivalent to the permit discussed in this matter, and a general permit application used under the Lake Preservation Act is used to apply for the permit.

8. “[P]roceedings before an administrative law judge are de novo.” Ind. Code 4-21.5-3-15.

9. Here, Petitioners’ desired use of their aerator falls outside the window of March to October of a given year as Petitioners explicitly wish to use the aerator during the winter months to prevent the buildup of ice near their pier on Cedar Lake. Thus, they require a permit to use the aerator during those months even if the other requirements for a general license are met.

10. The Department may consider issues of the public trust and environmental concerns when deciding whether to issue a permit. The public trust encompasses dangers presented to the public by a proposed project, which might affect the general public’s ability to enjoy the lake.

11. Per testimony heard at the hearing, it seems that there is a consensus within the Department that operating aerators during the winter months, including to counter ice buildup, poses a general danger to the public trust due to the creation of thin ice by the aerator. This led the Department’s decision to deny virtually all requests to issue a permit to operate an aerator from October to March of any given year.

12. While Petitioners’ argument that their permit was not significantly reviewed by the Department as an individual application but denied as part of an inaccessible, unwritten policy has worth, the evidence presented in this matter shows that the Department examined the general risks posed by operating aerators in the winter months and decided that using aerators in those months may be a danger to the public even if potential operators attempted to alleviate the danger.

13. The Department then decided to refrain from issuing permits as a means of fulfilling its duty to the citizens of Indiana to hold public freshwater lakes in trust for the citizens’ enjoyment.

14. Based on public trust doctrine alone, the permit denial is justified given the safety concerns regarding aerator use during the winter months. Petitioners have failed to meet their burden to show that their permit request was improperly denied.

15. Petitioners presented several additional arguments, one of which was that a permit had been issued to Petitioners to operate an aerator during the winter months in 2010.

16. However, as rules and regulations change, what was once considered appropriate and safe may no longer be considered as such. The fact that Petitioners’ request for a new permit was not granted despite Petitioners having been granted a permit in the past is not indicative of foul play or unfair treatment toward Petitioners, rendering this argument unpersuasive.

17. Similarly, Petitioners pointed out several times during the hearing that other properties along Cedar Lake used aerators during the winter months. Except for one case discussed in paragraph 19 below, no evidence was presented by either party to show that other properties had been granted permits to use the aerators in the winter months or that the Department was generally aware of or approved of other aerators being used on Cedar Lake in the winter months.

18. Given the absence of evidence that the Department issued permits to the property owners maintaining aerators on Cedar Lake, it is reasonable to assume that those aerators do not comply with the requirements of 312 IAC 11-3-1.2(b). Petitioners likely did not intend to invoke the use of unlicensed aerators as a justification for their desired permit, but that is generally where this line of argument leads. This argument is thus not an adequate basis for relief in this matter.

19. Petitioners’ Exhibit 5 includes an agreed order between the Department and another party on Cedar Lake that specifically grants that party a right to use aerators during the winter months. The agreed order was approved by a previous ALJ on December 23, 2009 and adopted by the Commission on January 4, 2010.

20. 312 IAC 11-3-1.2 was adopted on August 27, 2010, over seven (7) months after the order in Exhibit 5 was adopted by the Commission. See notes under 312 IAC 11-3-1.2. Given testimony heard at the administrative hearing, it is unlikely that such an agreement would be created today. However, simply because a similar project was approved in the past, especially prior to the adoption of a new administrative rule that explicitly limits similar projects in the future, such prior approval does not guarantee or entitle Petitioners to a permit for their project.

FINAL ORDER

The denial of Petitioners’ permit application is UPHELD.

[1] A Finding of Fact more appropriately construed as a Conclusion of Law or a Conclusion of Law more appropriately considered a Finding of Fact shall be so considered.