In the Matter of Denial of a Contested Case Hearing Request and Reissuance of National Pollutant Discharge Elimination System/State Disposal System Permit No. MN0020228 for the City of Osakis Wastewater Treatment Facility.

This opinion is nonprecedential except as provided by
Minn. R. Civ. App. P. 136.01, subd. 1(c).

STATE OF MINNESOTA
IN COURT OF APPEALS
A21-0986

In the Matter of Denial of a Contested Case Hearing Request and Reissuance of National
Pollutant Discharge Elimination System/State Disposal System Permit No. MN0020228
for the City of Osakis Wastewater Treatment Facility.

Filed May 2, 2022
Reversed and remanded
Johnson, Judge

Minnesota Pollution Control Agency

Daniel M. Marx, Robert T. Scott, Gretel L. Lee, Flaherty & Hood, P.A., St. Paul, Minnesota
(for relator City of Osakis)

Keith Ellison, Attorney General, Philip S. Pu litzer, Assistant Attorney General, St. Paul,
Minnesota (for respondent Minnesota Pollution Control Agency)

Considered and decided by Reyes, Presiding Judge; Johnson, Judge; and Cochran,
Judge.
NONPRECEDENTIAL OPINION
JOHNSON, Judge
The Minnesota Pollution Cont rol Agency (PCA) re-issued a water-discharge permit
to the City of Osakis that limits the discharge of phosphorus from the City’s wastewater-
treatment facility. The PCA also denied the City’s request for a contested-case hearing on
factual issues related to the permit. The City appeals. We conclude that the PCA erred by
misinterpreting administrative rules and regulations and by denying the City’s request for
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a contested-case hearing. Therefore, we reverse and remand for reconsideration and for a
contested-case hearing.
FACTS
The federal Clean Water Act (CWA) “was enacted ‘to restore and maintain the
chemical, physical, and biological integrity of the Nation’s waters.’” In re Alexandria Lake
Area Sanitary Dist. NPDE S/SDS Permit No. MN0040738 , 763 N.W.2d 303, 308 (Minn.
2009) (Alexandria Lake) (quoting 33 U.S.C. § 1251 (2006 )). “To effectuate this policy,
the CWA authorizes states to implement the [National Pollu tant Discharge Elimination
System (NPDES)] permit program . . . .” Id. at 308-09 (citing 33 U.S.C. § 1342(a)-(d)
(2006)). The CWA requires that every NPDES permit contain: “(1) ‘effluent limitations’
that reflect the practicable pollution reduc tion a state can achieve; and (2) any more
stringent limitations required for a body of water to meet ‘water quality standards.’” Id. at
309 (quoting American Paper Inst., Inc. v. U.S. EPA, 996 F.2d 346, 349 (D.C. Cir. 1993)).
The PCA is the state agency charged w ith implementing the requirements of the
CWA by, among other things, adopting water- quality standards for the state’s waters,
preparing total-maximum-daily-load (TMDL) st udies for waters on the state’s impaired-
waters list, and issuing permits that allow lim ited discharges of pollutants into the state’s
waters. See 33 U.S.C. §§ 1313(a), (d)(1)(C), 1342(b) (2018); Minn. Stat. §§ 114D.25,
subd. 1(a)(2), 115.44 (2020); see also Alexandria Lake, 763 N.W.2d at 312-13 (discussing
PCA’s duties in relation to NPDES permits); In re Cities of Anna ndale & Maple Lake
NPDES/SDS Permit Issuance for the Discharge of Treated Wastewater, 731 N.W.2d 502,
3
510-11 (Minn. 2007) ( Annandale) (discussing PCA’s duties in relation to water-quality
standards and TMDL studies).
The City of Osakis, which ha s a population of approximat ely 1,750, is located in
Douglas County and Todd Coun ty. The City owns and operates a wastewater-treatment
facility that discharges water directly to the Clifford Wetland and indirectly to nearby Faille
Lake and Lake Osakis.
Lake-Eutrophication Standards
In 2008, the PCA adopted lake-eutrophica tion standards as amendments to the
state’s pre-existing water-quality standards. See 32 Minn. Reg. 1699, 1722-23 (Mar. 10,
2008); 32 Minn. Reg. 87, 156, 162 (July 23, 2007). The term “eutrophication” is defined
by an administrative rule to mean
the increased productivity of the biological community in
water bodies in response to increased nutrient loading.
Eutrophication is characterized by increased growth and
abundance of algae and other aquatic plants, reduced water
transparency, reduction or loss of dissolved oxygen, and other
chemical and biological chan ges. The acceleration of
eutrophication due to excess nutrient loading from human
sources and activities . . . causes a degradation of water quality
and possible loss of beneficial uses.

Minn. R. 7050.0150, subp. 4(L) (2021). Stated differe ntly, “Eutrophication refers to the
over-enrichment of waters with nutrients, wh ich stimulates excessive growth of aquatic
plants.” Minnesota Environmental Sci. & Econ. Rev. Bd. v. Minnesota Pollution Control
Agency, 870 N.W.2d 97, 99 n.1 (Minn. App. 2015).
The PCA’s lake-eutrophication standard s include both narrative and numeric
criteria. Minn. R. 7050.0222, subp. 1(A) (20 21). For a lake with Cl ass 2B waters in the
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North Central Hardwood Forest Ecoregion, such as Faille Lake and Lake Osakis, the
narrative criteria are that “[t]he quality of [t he] waters shall be su ch as to permit the
propagation and maintenance of a healthy community of cool or warm water aquatic biota,
and their habitats” and that the waters “shall be suitable for aquatic recreation of all kinds,
including bathing, for which the waters may be usable” bu t that the waters are “not
protected as a source of drinking water.” Minn. R. 7050.0222, subp. 4; see also Minn. R.
7050.0222, subp. 4a.
The numeric criteria for lake-eutrophication standards consist of three variables that
describe the extent of eutrophication. See Minn. R. 7050.0222, subps. 4, 4a(B). The first
variable, “total phosphorus” (which is defined by an administrative rule to mean “the sum
of all forms of phosphorus,” Minn. R. 7083.0020, subp. 22 (2021)), is the maximum
permissible concentration of phosphorus in a body of water. Minn. R. 7050.0222, subp. 4.
For lakes in the North Central Hardwood Forest Ecoregion, such as Lake Osakis, the lake-
eutrophication standards set a total-phosphorus criterion of 40 micrograms per liter (µg/L).
Id. For a shallow lake in the same region, such as Faille Lake, the criterion is 60 µg/L. Id.
The second variable, chlorophyll- a, is a pigment in green plants, including algae.
Minn. R. 7050.0150, subp. 4(I) (2021). The concentration of chlorophyll-a may be
measured by a chemical test of a water sample. For lakes in the North Central Hardwood
Forest Ecoregion, the lake-eutrophication standards set a numeric criterion of 14 µg/L for
chlorophyll-a. Minn. R. 7050.0222, subp. 4. For shallow lakes in the same region, the
numeric criterion is 20 µg/L. Id.
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The third variable, “Secchi disk transparency,” is a measurement of the transparency
of water. Minn. R. 7050.0150, subp. 4(EE). A Secchi disk is an eight-inch weighted disk,
which is either white or black and white, that is suspended on a calibrated rope. Minn. R.
7050.0150, subp. 4(DD). To measure water tr ansparency with a Secchi disk, a person
lowers the disk into the wate r on the shaded side of a boat and gradually raises the disk
until it reappears, at which time the tester notes the water depth on the calibrated rope. Id.
For lakes in the North Centra l Hardwood Forest Ecoregio n, the lake-eutrophication
standards establish a numeric criterion of not less than 1.4 meters. Minn. R. 7050.0222,
subp. 4. For shallow lakes in the same region, the numeric criterion is not less than 1 meter.
Id.
The lake-eutrophication standards furthe r provide, “Exceeda nce of the total
phosphorus and either the chlorophyll-a or Secchi disk transparency standard is required
to indicate a polluted condition.” Minn. R. 7050.0222, subp. 4a(B) (emphasis added).
Similarly, another administrative rule provides that a “finding of an impaired condition
must be supported by data showing” an elevated level of total phosphorus and an elevated
level of either chlorophyll-a or Secchi-d isk transparency. Mi nn. R. 7050.0150,
subp. 5a(A). This court has referred to to tal phosphorus as a “cause criterion” and
chlorophyll-a and Secchi-di sk transparency as “response criteria.” Minnesota Ctr. for
Environmental Advocacy v. City of Winsted , 890 N.W.2d 153, 155 (Minn. App. 2017)
(Winsted). Thus, a lake is not in compliance with the lake-eutrophication standards if the
first variable (total phosphorus) and, in addition, either the second variable (chlorophyll-a)
or the third variable (Secchi-disk transparency) are exceeded.
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TMDL Studies
A TMDL study is “a scientif ic study that contains a calculation of the maximum
amount of a pollutant that ma y be introduced into a surface water and still ensure that
applicable water quality standards for that water are restored and maintained.” Minn. Stat.
§ 114D.15, subd. 10 (2020). A TMDL study determines a body of water’s “loading
capacity” (i.e., the total amount of a pollutant that may flow into it) and allocates that
allowable load by setting “waste load allocations for point sources” (such as wastewater-
treatment facilities) and “load allocations” fo r non-point sources (such as agricultural
runoff). See 40 C.F.R. § 130.2; Minn. Stat. § 114D.15, subd. 10.
The PCA must prepare a TMDL study for each water listed on the state’s impaired-
waters list. 33 U.S.C. § 1313(d)(1)(C); see also 40 C.F.R. § 130.7(d)(1) (requiring PCA to
submit biannual impaired waters list to federal government). A TMDL study prepared by
the PCA must be approved by the United States Environmental Protection Agency (EPA).
33 U.S.C. § 1313(d)(2) (2018). If the EPA has approved a TMDL that assigns a wasteload
allocation to a point source, a NDPES permit authorizing discharges from that point source
must include a water-quality-bas ed effluent level (WQBEL) th at is consistent with the
wasteload allocation in the TMDL study. 40 C.F.R. § 122.44(d)(1)(vii)(B).
PCA’s TMDL Studies
In May 2013, the PCA finalized a TMDL study for the Lake Osakis area, which
encompasses Smith Lake, Faille Lake, and Lake Osakis. At that time, all three lakes were
on the impaired-waters list because of exceedances of lake-eutrophication standards. The
2013 TMDL study did not assign a total-phosph orus wasteload allocation to the City’s
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wastewater-treatment facility for Smith Lake , Faille Lake, or Lake Osakis. The EPA
approved the 2013 TMDL study in June of that year.
The PCA later decided to revise the 2013 TMDL study to assign a total-phosphorus
wasteload allocation to the City ’s wastewater-treatment facility for Faille Lake. A 2016
draft TMDL study assigned a wasteload alloca tion to the City’s wa stewater-treatment
facility for Faille Lake of 15 0.3 pounds per year (lb./year), which the PCA determined to
be “the [phosphorus] loading expected to be delivered to Faille Lake if the facility were to
discharge its entire 121 kg/yr permitted load” and “consistent with the permit’s final
effluent limit.” The 2016 draft TMDL study does not assign a wasteload allocation to the
City’s wastewater-treatment facility for La ke Osakis. In December 2016, the PCA gave
notice of the 2016 draft TMDL study. In Fe bruary 2017, the City filed comments and a
petition for a contested-case hearing on the 2016 draft TMDL study.
In September 2020, the PCA granted the City’s request for a contested-case hearing
on the 2016 draft TMDL study on two issues related to the impact of the wastewater-
treatment facility’s phosphorus discharges on Faille Lake. After this appeal was filed, the
assigned administrative-law judge (ALJ) grante d the City’s motion to stay the contested-
case proceedings on the 2016 draft TMDL study pending this appeal. The 2016 draft
TMDL study will not be finalized until the contested-case hearing is held, the ALJ issues
a recommendation, the PCA issues a final de cision, and the EPA approves the PCA’s
decision. See 33 U.S.C. § 1313(d)(2); Minn. Stat. § 14.61-.62 (2020); Minn. R. 7000.2000
(2021).
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NPDES Permits
The CWA prohibits the discharge of a pollutant without a permit. See 33 U.S.C.
§§ 1311, 1342 (2018). The discharge of a pollutant occurs if there is “any addition of any
pollutant to navigable waters from any point source.” 33 U.S.C. § 1362(12) (2018). A
point source is defined by statute to mean “any discernible, c onfined and discrete
conveyance . . . from which pollutants are or may be discharged.” Id., § 1362(14).
An NPDES permit is one type of permit that may be issued under the CWA. See 33
U.S.C. § 1342. The CWA auth orizes the issuance of NP DES permits by states with
approved NPDES permit programs. 33 U.S.C. § 1342(b). Minnesota is such a state. See
39 Fed. Reg. 26061 (J uly 16, 1974). An NPDES permit a llows discharges of pollutants
otherwise prohibited under th e CWA. 33 U.S.C. §§ 1311(a), 1342(a). But an NPDES
permit must include a WQBEL that is “necessary to . . . [a]chieve water quality standards.”
40 C.F.R. § 122.44(d)(1) (2021); see also 33 U.S.C. § 1342(b); Mi nn. Stat. § 115.03,
subd. 5 (2020).
City’s Previous NPDES Permit
In October 2012, the PCA issued an NPDES permit to the City that allowed the City
to discharge water from its wastewater-treatment facility for a five-year period. The 2012
permit was the first NPDES permit issued to the City after the PCA’s adoption of the lake-
eutrophication standards in 2008.
Before issuing the 2012 permit, the PCA conducted a reasonable-potential analysis
and determined that a WQBEL for total phosph orus of 121 kilograms per year (kg/year)
was necessary to ensure that Clifford Lake, which is near the City’s wastewater-treatment
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facility, complied with the lake -eutrophication standards. Th e 2012 permit imposed an
interim total-phosphorus limit of 283 kg/y ear and required compliance with the 121-
kg/year limit by not later than July 1, 2021.
When the 2012 permit was issued, Clifford Lake was on the state’s impaired-waters
list because its water exceeded the lake-eutrophication standards. See 33 U.S.C.
§ 1313(d)(1)(A); Minn. Stat. § 114D.25, su bd. 1(a)(1) (2020). But the PCA later
determined, based on additiona l data, that Clifford Lake was not a lake but, rather, a
wetland. Because the lake-eutrophication st andards do not apply to wetlands, the PCA
notified the City in January 2014 that the 121-kg/year total-phosphorous WQBEL imposed
by the 2012 permit would be revised. But th e WQBEL was not revised. In September
2014, the PCA determined that the 121-kg/year total-phosphorus limit for the wastewater-
treatment facility should remain in place to protect Faille Lake, which receives output from
Clifford Wetland and was impaired for phosphorus at that time.
City’s Application for Re-issuance of NPDES Permit
In March 2017, the City applied for the re-issuance of the five-year 2012 NPDES
permit. The City requested that the interi m total-phosphorus limit of 283 kg/year be
adopted as the total-phosphorus limit in the new permit. By operation of law, the City was
allowed to continue to operate its wastewater-treatment facility under the 2012 permit
while the application was pending. See Minn. R. 7001.0160 (2021).
In October 2018, th e City requested that the PC A remove Faille Lake from the
state’s impaired-waters list. The PCA did so in February 2021. In March 2021, the EPA
approved the PCA’s removal of Faille Lake from the state’s impaired-waters list.
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In February 2021, the PCA provided notice of its intent to re-issue a permit for the
City’s wastewater-treatment facility with a 121-kg/year limit for total phosphorus. In the
Statement of Basis for the permit, the PCA e xplained that the total-phosphorus limit was
“assigned . . . to protect for eutrophication impairment in Faille Lake.” The City submitted
comments on the draft permit and requested a contested-case hearing on certain disputed
factual issues, including the two issues for which the PCA had gran ted a contested-case
hearing with respect to the 2016 draft TMDL study.
In July 2021, the PC A issued a 14-page order in wh ich it re-issued the permit for
the City’s wastewater-treatment facility wi th a 121-kg/year total-phosphorus limit and
denied the City’s request for a contested-case hearing with respect to the permit. The
PCA’s written decision explains that the total- phosphorus limit is necessary to maintain
Faille Lake’s compliance with the lake-eutrophication standards and to protect Lake Osakis
as well as Lake Pepin (a naturally occurri ng lake on the Mississippi River in Goodhue
County and Wabasha County, nearly 200 miles southeast of Lake Osakis), both of which
are impaired for excess nutrients. The decision also states that a contested-case hearing is
not warranted because, although the City iden tified disputed factua l issues, a contested-
case hearing would not aid the PCA commissioner in resolving those disputes. The City
appeals by way of a writ of certiorari.
DECISION
This court’s review of the PCA’s issuan ce of an NPDES permit and denial of a
contested-case hearing is governed by the Minnesota Administrative Procedure Act, Minn.
Stat. §§ 14.001-.69 (2020) (MAPA). Minn. Stat. § 115.05, subd. 11(1), (4) (2020); In re
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NorthMet Project Permit to Mine Application , 959 N.W.2d 731, 749 (Minn. 2021)
(NorthMet). In conducting our judicial review of an agency decision, we
may affirm the decision of the agency or remand the case for
further proceedings; or [we] may reverse or modify the
decision if the substantial right s of the petitioners may have
been prejudiced because the administrative finding, inferences,
conclusion, or decisions are:

(a) in violation of c onstitutional provisions; or

(b) in excess of the statutor y authority or jurisdiction
of the agency; or

(c) made upon unlawful procedure; or

(d) affected by other error of law; or

(e) unsupported by substan tial evidence in view of
the entire record as submitted; or

(f) arbitrary or capricious.

Minn. Stat. § 14.69. We give “substantial de ference” to agency decisions, which enjoy a
presumption of correctness. In re Minnesota Power’s Petition for Approval of
EnergyForward Res. Package, 958 N.W.2d 339, 344 (Minn. 2021) (EnergyForward); see
also NorthMet, 959 N.W.2d at 749. A relator cha llenging an agency decision bears the
burden of demonstrating that the decision violates one or more of the provisions of
section 14.69. EnergyForward, 958 N.W.2d at 344; In re Enbridge Energy, Ltd. P’ship ,
964 N.W.2d 173, 189 (Minn. App. 2021) (Enbridge), rev. denied (Minn. Aug. 24, 2021).
The City makes three arguments. First, the City argues that the 121-kg/year total-
phosphorus limit in the re-issued permit is based on an error of law. See Minn. Stat.
§ 14.69(d). Second, the City argues that the re-issuance of the permit is based on unlawful
12
procedures. See Minn. Stat. § 14.69(c). Third, the City argues that the 121-kg/year total-
phosphorus limit in the re-issued permit and the decision to deny a contested-case hearing
are unsupported by substa ntial evidence and are arbitrary or capricious. See Minn. Stat.
§ 14.69(e), (f).
I. Total-Phosphorus Limit
We begin by considering the City’s first argument and pa rt of its third argument,
which are intertwined. The City argues that the PCA erred by misinterpreting the lake-
eutrophication standards when it determined that a total-phosphorus limit of 121 kg/year
is necessary to maintain compliance with water-quality standards and that, when the lake-
eutrophication standards are properly interpreted, there is a lack of substantial evidence to
support the 121-kg/year total-phosphorus limit.
A. Law Applicable to WQBEL
The first part of the City’s argument require s this court to inte rpret the applicable
state administrative rules and federal administ rative regulations. If the language of an
administrative rule is “clear and capable of understanding,” a court does not defer to an
administrative agency’s inte rpretation of the rule. In re Reissuance of an NPDES/SDS
Permit to United States Steel Corp., 954 N.W.2d 572, 576 (Minn. 2021) (U.S. Steel). But
if the relevant language of an administrative rule is ambiguous, a court generally should
defer to the responsible agency’s interpretation of the rule, so long as the interpretation is
reasonable. Id.; see also Annandale , 731 N.W.2d at 516. To determine whether an
agency’s interpretation of an ambiguous administrative rule is reasonable, a court should
consider several factors, “including the nature of the regulation at issue and the agency’s
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expertise and judgment in relation to the subject matter of the regulation.” U.S. Steel, 954
N.W.2d at 576. We apply the same criteria to a state administrative agency’s interpretation
of an ambiguous federal regulation that the agency is responsible for administering.
Alexandria Lake, 763 N.W.2d at 312-13.
The City argues that the PCA misinterpreted the lake-eutrophication standards when
the PCA imposed the 121-kg/year total-phos phorus limit on the City’s wastewater-
treatment facility. Specifically, the City argu es that the PCA erred by relying on data
relating to only one of the thr ee variables of the lake-eutrophication standards: the cause
criterion for total phosphorus. The City argues that the PCA also should have considered
data relating to the response criteria for chlorophyll-a and Secchi-disk transparency.
As explained above, the lake-eutrophicatio n standards require consideration of three
variables. There is no violation of the lake-eutrophication standards if only one of the three
criteria are exceeded. In addition, there is no violation if only the second and third criteria
are exceeded. Rather, there is a violation of the lake-eutrophication standards only if there
is an exceedance of the first criterion (total phosphorus) and either the second criterion
(chlorophyll-a) or the third criterion (Secchi-disk transparency).
The multi-variable nature of the lake-eutrophication standards appears in the PCA’s
administrative rules in two places. First, the rule governing determinations of exceedances
of water-quality standards provides as follows:
For lakes, shallow lakes, and reservoirs, a finding of an
impaired condition must be supported by data showing:

(1) elevated levels of nutri ents under subpart 5, item
A [which includes total phosphorus]; and
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(2) at least one factor showing impaired conditions
resulting from nutrient overenrichment under subpart 5, items
B [i.e., chlorophyll-a] and C [i.e., Secchi-disk transparency].

Minn. R. 7050.0150, subp. 5a(A) (emphasis added). Second, the rule containing the lake-
eutrophication standards states, “E xceedance of the total phosphorus and either the
chlorophyll-a or Secchi disk transparency standard is required to indicate a polluted
condition.” Minn. R. 7050.0222, subp. 4a(B) (emphasis added).
The PCA contends that the first rule quot ed above, rule 7050.0150, does not apply
on the ground that it merely “provides the framework by which MPCA assesses compliance
with the standards and determines whether to place a lake on the state’s list of impaired
waters.” The PCA states further, “Assessment for placement on the state’s impaired waters
list is not at issue in this appeal.” The first subpart of the rule indicates that the rule guides
the PCA in determining more than whether a water should be on the impaired-waters list.
The rule states, “The agency shall determine an exceedance of water quality standards or
an impaired condition.” Minn. R. 7050.0150, subp. 1 (emp hasis added). Under federal
law, an NPDES permit must include a WQBEL for a particular pollutant if the WQBEL is
necessary to ensure complia nce with state water-quality standards. 40 C.F.R.
§ 122.44(d)(1); Alexandria Lake , 763 N.W.2d at 308-17. As the PCA states, rule
7050.1050 provides a framework by which the agency determines compliance with state
water-quality standards. Thus, rule 7050.0150 applies, and its plain language supports the
City’s argument that the PCA is required to consider more than just the first variable, total
phosphorus.
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The PCA also contends that this court shou ld refer only to the second rule quoted
above, rule 7050.0222, the rule containing the lake-eutrophication standards. But that rule
also supports the City’s argument. The rule not only provides specific numeric criteria for
each of the three variables but also descri bes how the agency sh ould consider those
variables, and it does so in a way that is c onsistent with rule 7050.0150: “Exceedance of
the total phosphorus and either the chlorophyll-a or Secchi disk transparency standard is
required to indicate a polluted condition.” Minn. R. 7050.0222, su bp. 4a(B) (emphasis
added). Again, the plain language of rule 7050.0222 supports the City’s argument that the
PCA is required to consider more than just the first variable, total phosphorus.
The PCA further contends th at its exclusive reliance on the first, cause variable
(total phosphorus) is require d by a provision in a federal regulation that provides, in
pertinent part:
Where a State has not established a water quality
criterion for a specific chemical po llutant that is present in an
effluent at a concentration that causes, has the reasonable
potential to cause, or contribu tes to an excu rsion above a
narrative criterion within an a pplicable State water quality
standard, the permitting authority must establish effluent limits
using one or more of the following options:

(A) Establish effluent limits using a calculated
numeric water quality criterion for the pollutant which the
permitting authority demonstrates will attain and maintain
appliable narrative water quality criteria and will fully protect
the designated use.

40 C.F.R. § 122.44(d)(1)(vi)(A). The PCA cites this provision in support of its argument
that “federal regulations provide that for purposes of WQBELs, each of the numeric criteria
comprising the standards must be attained and maintained.” We note that the words “each
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of” do not appear in the prov ision on which the PCA relies. See 40 C.F.R.
§ 122.44(d)(1)(vi)(A). Furthermore, paragraph (d)(1)(vi) of section 122.44 applies only if
“a State has not established a water quality criterion for a specific chemical pollutant.” 40
C.F.R. § 122.44(d)(1)(vi) (emphasis added). But the PCA has established a water-quality
criterion for phosphorus. Indeed, the PCA’ s brief states that “Minnesota’s lake
eutrophication standards include numeric criteria for phosphorus, chlorophyll-a (which is
a measurement of algae growth), and Secchi disk transparency (which is a measurement of
water clarity).” Accordingly, paragraph (d)(1)(vi) of section 122.44 does not apply.1
The PCA contends further that anot her federal regulation, 40 C.F.R.
§ 122.44(d)(1)(iii), “clearly directs MPCA to c onsider individual numeric criteria within
the eutrophication standards.” The relevant lang uage in that regulati on provides that an
NPDES permit must include a WQBEL if there is a “reasonable potential” that a discharge
will cause or contribute to “an in-stream excursion above th e allowable ambient
concentration of a State numeric criteria w ithin a State water quality standard for an
individual pollutant.” 40 C.F.R. § 122.44(d) (1)(iii). Contrary to the PCA’s contention,
paragraph (d)(1)(iii) does not require the PCA to include a WQBEL in an NPDES permit

1We note that paragraph (d)(1)(vi) applied in the Alexandria Lake case, which also
concerned a WQBEL for total phosphorus in an NPDES permit for a wastewater-treatment
facility. 763 N.W.2d at 305. But the agency decision in that case was made in 2006, before
the PCA promulgated the lake-eutrophication st andards in 2008, so the PCA was, at that
time, bound only by narrative criteria. See id. at 308; see also Minn. R. 7050.0222, subp. 4
(2005). In a subsequent opinion concerni ng a WQBEL for phosp horus in an NPDES
permit for a wastewater-treatment facility based on the river-eutrophication standards, we
did not apply paragraph (d)(1)(vi) but, rather, applied paragraph (d)(1)(iii). Winsted, 890
N.W.2d at 157-60.
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solely because total phosphorus in a receiving water exceeds the first, cause criterion. The
regulation uses the plural word “criteri a,” not the singular word “criterion.” See id. As
noted above, Minnesota’s lake-eutrophication standards require consideration of three
numeric criteria. See Minn. R. 7050.0222, subp. 4a(B); Minn. R. 7050.0150, subp. 5a(A).
Furthermore, the PCA’s argument is inc onsistent with this court’s caselaw
concerning the federal regulation. In Winsted, this court considered whether the PCA
properly declined to include a WQBEL in an NPDES permit for a wastewater-treatment
facility pursuant to the state’s river-eutrophication standards, which were promulgated in
2014. 890 N.W.2d at 157-59. The river-eutro phication standards are similar to the lake-
eutrophication standards in that they incl ude one cause variable and multiple response
variables. See Minn. R. 7050.0222, subp. 4a(B). We noted in our Winsted opinion that the
PCA had obtained “data on phosphorus and response-criteria levels ” for the purpose of
determining “whether there was a reasonable potential for exceedance of water-quality
standards.” 890 N.W.2d at 159 (emphasis added). The PCA had urged the court to engage
in such reasoning by arguing in its brief in that case that “PCA’s interpretation of 40 C.F.R.
§ 122.44(d)(1)(i)-(iii) is reasona ble because for an impairme nt to be found under the
eutrophication water quality standard both the causal criterion—phosphorus—and one or
more response criteria must ex ceed the value in the standard .” Brief of Resp. Minn.
Pollution Control Agency, at 17, Winsted, 890 N.W.2d 153 (No. A16-0854), 2016 WL
6571688, at *17 (emphasis added). The PCA’s interpretation of paragraph (d)(1)(iii) of
section 122.44 at the time of the Winsted appeal reflects the prop er interpretation of the
regulation.
18
Thus, in this case, the PCA misinterpret ed the applicable ru les and regulations,
which are unambiguous for purposes of this appeal, by considering only the cause criterion
in determining that there is a reasonable potential that discharges from the City’s
wastewater-treatment facility will cause or contribute to a violation of the lake-
eutrophication standards and in determining that a WQBEL for the facility is necessary to
ensure compliance with the lake-eutrophication standards. The PCA is required to consider
whether there is a reasonable potential that a discharge will cause or contribute to an
exceedance of the lake-eutroph ication standards based on m easurements that exceed the
criteria for both the one cause variable and at least one of the two response variables.
Furthermore, the PCA is required to include in the permit a WQBEL that is necessary to
ensure compliance with the lake-eutrophication standards based on consideration of both
the cause variable and the response variables. Therefore, the PCA’s issuance of the permit
was affected by an error of law. See Minn. Stat. § 14.69(d).
B. Evidence Supporting WQBEL
To resolve the City’s arguments concerning the total-phosphorus limit in the permit,
we must determine whether ther e is substantial evidence in the record to support a total-
phosphorus WQBEL of 121 kg/year.
The PCA states in its brief that “all parties agree that . . . Faille Lake is not impaired
because at the moment the chlorophyll-a and Secchi depth criteria are being met” and
because Faille Lake has been removed from the state’s impaired-waters list. Nonetheless,
the PCA contends that the 121-kg/year total-phosphorus limit is justified by its finding of
a reasonable potential that the conditions of Faille Lake will fail to comply with the lake-
19
eutrophication standards in the future. But the PCA’s contention is based on the premise
that its reasonable-potential analysis may be based solely on the cause criterion in the lake-
eutrophication standards, i.e., the question whether the tota l-phosphorus level of Faille
Lake will exceed 60 µg/L. The PCA asserts that “the relationship between phosphorus and
the response variables specific to Faille Lake is irrelevant because the Clean Water Act
requires that permit limits be set at the leve l necessary to achieve the numeric criteria
adopted in rule (i.e., 60 µg/L phosphorus for Faille Lake).” For the reasons stated above,
the PCA’s premise is incorrect. The PCA’ s reasonable-potential analysis requires
consideration of both the cause variable and the response variables in the lake-
eutrophication standards.
The PCA also attempts to justify th e 121-kg/year total-phosphorus limit by
contending that the limit is necessary to protect downstream wate rs, especially Lake
Osakis. The PCA asserts in its brief that it “found the City’s fac ility has the reasonable
potential to cause or contribu te to exceedance of the eutrophication standards for Lake
Osakis.” To support that statement, th e PCA cites a June 2020 document entitled
“Justification for 121 kg/yr TP effluent limit and supplemental data” and the December
2020 Statement of Basis for the re-issued permit. But neither document supports the PCA’s
argument. The PCA concluded in the Statem ent of Basis that the City’s wastewater-
treatment facility “is found to have [reasonable potential] for [total phosphorus] upstream
of Faille Lake.” (Emphasis added.) But the PCA did not conclude in either of the cited
documents that the City’s wastewater-treatment facility would have a reasonable potential
20
to cause or contribute to a violation of state lake-eutrophication standards in Lake Osakis,
which is downstream of Faille Lake.
The PCA stated in both of the cited do cuments that the 121-kg/year WQBEL is
justified by the 2016 draft TMDL study. The justification memo states, “The 121 kg/yr TP
final limit is needed in order for the TP in Faille Lake and downstream Lake Osakis to be
consistent with the” 2016 draf t TMDL study. Similarly, th e Statement of Basis states,
“Based on the results of the TMDL study, the [City’s wastewater-treatment facility]
received a wasteload allocati on of 121 kg/year.” The 201 6 draft TMDL study assigns a
wasteload allocation to the City’s wastewater-treatment facility only with respect to Faille
Lake; it does not do so with respect to Lake Osakis. In any event, the PCA does not cite
any legal authority for the propositi on that a wasteload allocation in a draft TMDL study
may justify a WQBEL. As stated above, a WQBEL must be included in an NPDES permit
if a discharge would have a reasonable potential to cause or contribute to an exceedance of
state water-quality standards, which includ es lake-eutrophication standards, and the
WQBEL must be “necessary to . . . [a]chi eve water quality sta ndards.” 40 C.F.R.
§ 122.44(d)(1), (d)(1)(iii). Bu t the concept of state water-quality standards does not
include a wasteload allocation in a draft TMDL study. Compare 40 C.F.R. § 131.6
(describing components of water-quality standards) with id., § 130.2(i) (defining TMDL).
A WQBEL must be “consistent with the assu mptions and requirements of” a wasteload
allocation in a TMDL study if the TMDL study has been approved by the EPA. 40 C.F.R.
§ 122.44(d)(1)(vii)(B). But a wasteload allocation in a draft TMDL study is not given such
effect.
21
We note that the EPA-approved TMDL study for Lake Pepin incorporates the same
wasteload allocation for the City’s wastewate r-treatment facility as the 2016 draft Lake
Osakis area TMDL study. Consequently, the WQBEL in the City’s permit must be
“consistent with the assumptions and requirements of” the wasteload allocation in the Lake
Pepin TMDL study. See id. But the EPA’s approval of the Lake Pepin TMDL study states
that “individual [wasteload allocations] may be adjusted during the NPDES permitting
process” so long as the total allocation is achieved and “localized impairments” do not
result. Nothing in the record suggests that such adjustments could not be made. Hundreds
of point sources received wast eload allocations in the Lake Pepin TMDL study, and the
wasteload allocation to the City’s wastewate r-treatment facility ( 121 kg/year) is a very
small fraction (five thousandths of one percen t) of the allowable total-phosphorus load
(2,220,152 kg/year).
In sum, the record does not contain substa ntial evidence that there is a reasonable
potential that a discharge from the City’s wastewater-treatment facility will cause or
contribute to an exceedance of the lake-eut rophication standards based on measurements
that exceed the criteria for both the one cause variable and one of the two response variables
in either Faille Lake or Lake Osakis . Likewise, the record does not contain substantial
evidence to support the PCA’s determination that the 121-kg/year total-phosphorus limit
is necessary to achieve water-quality standards in either of those two lakes. Thus, there is
not substantial evidence in the record to support the 121-kg/year total-phosphorus limit in
the NPDES permit issued to the City. See Minn. Stat. § 14.69(e).
22
II. Contested-Case Hearing
The City also argues that the PCA erred by denying its request for a contested-case
hearing with respect to the re-issued permit on the grounds that the decision is unsupported
by substantial evidence and is arbitrary or capricious. See Minn. Stat. § 14.69(e), (f).
The PCA is required to grant a petition for a contested-case hearing if:
A. there is a material i ssue of fact in dispute
concerning the matter pending before the board or
commissioner;

B. the board or commissioner has the jurisdiction to
make a determination on the disp uted material issue of fact;
and

C. there is a reasonable basis underlying the
disputed material issue of fact or facts such that the holding of
a contested case hearing woul d allow the introduction of
information that would aid the board or commissioner in
resolving the disputed facts in making a final decision on the
matter.

Minn. R. 7000.1900, subp. 1 (2021). A petitioner bears the burden of establishing each of
the three requirements of the rule. See NorthMet, 959 N.W.2d at 745 (interpreting similar
language in Minn. Stat. § 93.483, subd. 3(a) (2020)). An agency’s decision as to whether
to conduct a contested-case hearing is entitled to deference. Id. at 747. If an agency’s
decision to deny a request for a contested-case hearing is challenged on the ground of lack
of substantial evidence, a c ourt should ask two questions : “whether the agency has
adequately explained how it derived its c onclusion and whether that conclusion is
reasonable on the basis of the record.” Id. at 749; see also Enbridge, 964 N.W.2d at 189-
92 (applying two-part substantial-evidence standard).
23
In its petition for a contested-case hearing, the City identified el even issues. On
appeal, the City contends that the PCA erre d by denying a contested-case hearing with
respect to five of those issues: the first, third, fifth, ninth, and tenth. In response, the PCA
contends that it properly denied the City’s request for a contested- case hearing on those
five issues for the reasons stated in the agency’s July 2021 order.
We begin by considering whether the PCA has adequately explained the reasons for
denying the City’s contested-case hearing with respect to the five identified issues. See
NorthMet, 959 N.W.2d at 749. We observe th at the PCA’s explanations are quite
conclusory and repetitive. For each of the disputed factual issues, the order states that the
PCA disagrees, that the PCA and the City have exchanged communications concerning the
issue, that the City’s information is in the administrative re cord and has been considered,
and that no new information has been presented. But the order does not discuss the factual
issue and the evidence in detail and does not explain with specificity why a contested-case
hearing would not be appropriate. The PCA’s or der is similar in natu re to other agency
decisions that have failed the first part of the substantial-evidence test. See id. at 753-54
(concluding that DNR erred by denying contested-case hear ing because of “conclusory
statements” without “analysis of the scientific basis for [its] assumptions”); In re PolyMet
Mining, Inc., 965 N.W.2d 1, 9-11 (Minn. App. 2021 ) (concluding that PCA did not have
substantial evidence to support its decision because its conclusory statements did not
adequately explain its reasons), rev. denied (Minn. Sept. 30, 2021).
Furthermore, to the extent that the PCA has stated reasons for denying a contested-
case hearing, the reasons are not legally viable. In denying the requests on each issue, the
24
PCA repeated the error of law that is described above. See supra part I.A. Specifically,
the PCA’s explanations consiste ntly focus solely on the one cause variable in the lake-
eutrophication standards and consistently rely on the 2016 draft TMDL study. This is an
additional reason why the PCA has not adequa tely explained the reasons for denying the
City’s contested-case hearing with respect to the five identified issues.
We continue by considering whether, with respect to each disputed issue, the PCA’s
conclusion “is reasonable on the basis of the record.” See NorthMet, 959 N.W.2d at 749.
We have concluded that the total-phosphorus limit in the re-issued permit is not supported
by substantial evidence. See supra part I.B. No additional evid ence is cited in the July
2021 order denying the City’s request for a contested-case hearing.
Thus, the record does not contain substan tial evidence that th ere is a reasonable
basis for denying the City’s request for a contes ted-case hearing with respect to the five
identified issues.
III. Conclusion
The PCA’s re-issuance of the permit and its decision to deny the City’s request for
a contested-case hearing were based on an error of law and are not supported by substantial
evidence. Accordingly, we reverse the PC A’s re-issuance of the permit and remand the
matter to the PCA for reconsideration in light of the legal principles discussed above in
part I.A. and for a contested-case hearing on each of the five issues identified in the City’s
appellate brief. The contested-case hearing should focus on evidence relevant to whether
there is a reasonable potential that a discharge from the City’s wastewater-treatment facility
will cause or contribute to an exceedance of the lake-eutrophication standards and whether
25
a WQBEL is necessary to ensu re compliance with either th e cause criterion or response
criteria in the lake-eutro phication standards. See NorthMet, 959 N.W.2d at 754, 759-60
(reversing and remanding for contested-case hearing on issue for which agency’s decision
was not supported by su bstantial evidence); In re City of Owatonna’s NPDES/SDS
Proposed Permit Reissuance, 672 N.W.2d 921, 927, 930 (Minn. App. 2004) (reversing and
remanding for contested-case h earing on questions of fact regarding phosphorus limit in
NPDES permit). On remand, the PCA may, in its discretion, petition for consolidation of
the contested-case hearing in this matter with the contested-case hearing in the 2016 draft
Lake Osakis area TMDL study matter, OAH No. 60-2200-37167. See Minn. R. 1400.6350
(2021). Because we are granting relief to the City for the reasons discussed above in parts
I and II, we need not c onsider the City’s argument that the PCA’s decision to grant the
permit is based on an unlawful procedure or its argument that the PCA’s decision to deny
the request for a contested-case hearing is arbitrary or capricious.
Reversed and remanded.