(1) Informal disposition may be made of any contested case or any issue therein at any point in the proceedings by agreed settlement, stipulation or default. The parties may mutually agree to be bound by the terms of such settlement, stipulation, or default as a private contractual agreement; provided, however, that to the extent such settlement, stipulation, or default is based on conditions which the parties agree must be included in any permit to be issued, the parties' agreement shall not be binding on the department. The parties shall submit such proposed conditions to the department for review, but the department shall include them in the permit only if the conditions are designed to further compliance with the applicable statutory criteria.

(2) Department staff may propose conditions for settlement of a contested case which further compliance with the statutory criteria. Any proposed conditions which are sent to the parties in a contested case shall be accompanied by written notification that agreeing to the proposed condition(s) will not necessarily obviate the need for a hearing.