Third Party Liability Relief in Kentucky

By G. Stephen Manning

The 2006 Session of Kentucky’s General Assembly recently passed, and the Governor is expected to sign into law, HB 408. This bill provides, in part, limited third-party liability relief to brownfield sites that have been issued a covenant not to sue by the Environmental & Public Protection Cabinet. The legislation passed both houses without a dissenting vote.

The legislation was originally introduced by Representative Jim Gooch (D) to transfer administrative control of the Asbestos Emergency Response Act from the Department for Environmental Protection to the cabinet. In the Senate, Senator Robert J. Leeper (I) proposed a new section to the bill to preclude any suit or claim under state law to compel the performance of remediation in excess of that required in a cabinet-approved corrective action plan to address contamination under the state’s Voluntary Environmental Remediation Program (VERP).

The bill also preserved the right of a third party or any person, other than the cabinet, to bring claims for injury to property or person resulting from contamination migrating onto an adjacent property. Such a provision is necessary due to Kentucky’s “jural rights” doctrine imbedded in case law and Kentucky’s Constitution. The jural rights doctrine restricts the authority of the General Assembly to limit common law rights of recovery. The new subsections to KRS 224.01-526 apply only to brownfield sites as defined by CERCLA, or Superfund.

What’s Missing from Brownfield Programs
Under CERCLA, a brownfield site is defined as “real property, the expansion, redevelopment, or reuse of which may be complicated by the presence or potential presence of a hazardous substance, pollutant, or contaminant.” The term also includes sites contaminated by a controlled substance (such as meth labs) and mine-scarred land. 

The U.S. EPA and Kentucky’s brownfield programs have changed the way contaminated property is perceived, addressed and managed. The brownfield program has become an economic redevelopment tool for abandoned and underutilized sites with soil and/or groundwater contamination. The programs also provide economic and tax incentives, as well as some liability relief, to private property owners and redevelopers to encourage the sustainable reuse of contaminated property.

However, one of the major drawbacks or impediments to the redevelopment and reuse of brownfield sites has been the lack of finality afforded after the assessment and cleanup have been completed. Private-sector developers demand certainty and place a very high value on third-party liability relief. Protection from additional cleanup costs in the event of a change in standards or the discovery of additional contamination is extremely important to redevelopers. 

The new legislation goes a long way toward providing more certainty by prohibiting anyone from second-guessing the regulatory agency that has approved the site remediation in accordance with states’ cleanup standards. Under the bill, a third party or adjacent property owner cannot compel, through an injunctive relief action, a more stringent cleanup of property that has been issued a covenant not to sue by the cabinet.

The covenant not to sue, issued by the cabinet, precludes any suit, enforcement action or claim by the cabinet for injunctive relief or civil penalties after a remediation but provides no protection from suits filed by third parties. The bill, therefore, fills an important gap in the brownfield program designed to encourage the voluntary remediation of contaminated properties. BFN

Stephen Manning is of counsel with with Dinsmore and Shoal LLP.