Manufacturer’s wastewater lagoon not entitled to agricultural exemption from Sioux County zoning

by Gary Taylor

Kramer et al. and Sioux Pharm, Inc. v. Sioux County, Iowa
(Iowa Court of Appeals, November 24, 2010)

Plaintiff Sioux Pharm, Inc. manufactures chondroitin sulfate through an extraction process using cow tracheas, pig and chicken parts, and corn. This process produces 15,000 to 18,000 gallons of industrial wastewater daily at Sioux Pharm’s manufacturing facility. The wastewater is described as a “filtered food-grade bovine protein solution.” The city of Sioux Center will not accept the wastewater into its municipal treatment facility, and so in 2003 Sioux Pharm began construction, without prior approval from Sioux County or the Iowa Department of Natural Resources (DNR), of an earthen wastewater storage lagoon located on farmland in rural Sioux County owned by plaintiff Carol J. Kramer, as trustee of her revocable trust.

In April 2004, the DNR approved the wastewater storage lagoon as built, and issued Sioux Pharm a permit, but stated that “any product going to the proposed lagoon is truly waste.” The lagoon is an uncovered earthen pit that holds a total of 859,000 gallons of “high-strength organic” wastewater.  Plaintiff Dr. Allan Kramer farms the land owned by the Carol J. Kramer trust, and he periodically purchases wastewater from Sioux Pharm and applies it to nine application sites at the rate the DNR authorizes.. The wastewater contains nutrients that have some benefit to crops. Although Sioux Pharm has a commercial fertilizer manufacturer/dealer license, it is not authorized to sell wastewater after it has been stored in the lagoon, as once the wastewater is placed into the lagoon it becomes contaminated with bacteria.

Under the Sioux County zoning ordinance, “treatment facilities in an Agricultural District require a Special Exception Use permit.” Although the DNR approved both Sioux Pharm’s construction (after the fact) and use of the lagoon, Sioux Pharm had not obtained a special exception use permit from Sioux County Board of Adjustment. Upon receipt of multiple complaints about the lagoon and the odor emitting from it, the Sioux County Zoning Administrator determined that the lagoon was being operated without a special use permit. In January and March 2008, the zoning administrator provided Sioux Pharm with written notices that its construction and use of the lagoon was in violation of the zoning ordinance. Sioux Pharm met with the Sioux County Planning and Zoning Commission at its April 2008 meeting and represented to the commission that the wastewater stored in the lagoon was a “filtered food-grade bovine protein solution.” After the meeting, Sioux Pharm applied for a permit for a “non-farm” use involving “industrial wastewater.” In August 2008, the Board granted Sioux Pharm a temporary special exception use permit “for construction of an earthen wastewater lagoon used for storage of industrial wastewater from the Sioux Pharm plant in Sioux Center, Iowa.” The temporary permit was subject to several conditions, and expired on June 1, 2009 at which time the application was to be reviewed for extension or expiration by the Board of Adjustment.

The Board held a meeting on May 27, 2009 and reviewed recommendations of the Planning and Zoning Commission with regard to the status of the temporary permit. The Board determined Sioux Pharm had failed to meet the conditions imposed by the temporary permit and declined to extend the permit. The temporary permit expired on June 1, 2009, but Sioux Pharm continued to transport wastewater to the lagoon daily, despite the expiration of the temporary permit. On June 1, 2009, Sioux Pharm filed suit in district court, premised upon establishing that the use of the wastewater storage lagoon was “primarily adapted for use for agricultural purposes” under the language of Iowa Code 335.2 and was therefore exempt from Sioux County zoning regulations.  The district court entered judgment in favor of the county, concluding substantial evidence supported the Board’s finding that Sioux Pharm’s storage lagoon did not meet the agricultural exemption.  The district court specifically stated:

“The storage lagoon was built by Sioux Pharm, Inc., not the landowner. Sioux Pharm, Inc. is a manufacturer who is not involved in agriculture. Even though Sioux Pharm, Inc. calls its wastewater ‘fertilizer,’ it has never registered the wastewater as a fertilizer or soil conditioner with the Iowa Department of Agriculture and has not complied with regulations for the storage of liquid fertilizer. It has obtained a fertilizer license but is not in the business of storing or selling fertilizers or soil conditioners. It is not in the business of raising crops or livestock. Sioux Pharm, Inc., is a pharmaceutical manufacturer.”

On appeal to the Iowa Court of Appeals, Sioux Pharm argued that Sioux County Board of Adjustment and the district court erroneously interpreted Iowa Code 335.2.  In making its case Sioux Pharm drew an analogy between its wastewater lagoon and the hog waste lagoon determined to be part of an agricultural operation in the 1993 Iowa Supreme Court case, DeCoster v. Franklin County.  In that case the Supreme Court determined that the storage and disposal of hog waste from a holding basin was a part of the agricultural function, reasoning that it would be incongruous to exempt hog confinement buildings from county regulation and at the same time subject the waste storage basin adjoining those buildings to county regulation.  The Court of Appeals, however, found the factual distinction between the DeCoster case and the present case “fatal to Sioux Pharm’s claim.”

“In DeCoster, the storage basin was constructed to store the waste that was the by-product of the livestock raised in hog confinement facilities located on the plaintiff’s farm. In this case, the lagoon was constructed to store the wastewater that is the by-product of Sioux Pharm’s industrial manufacturing facility located in Sioux Center…. Although the wastewater is eventually used to fertilize the land farmed by Dr. Kramer, the fact remains that the primary purpose and functional aspect of the lagoon is to store Sioux Pharm’s industrial wastewater.”

Accordingly, the Court of Appeals found that the Sioux Pharm waste lagoon was not exempt from the regulations of the Sioux County zoning ordinance.

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