Politics & Government

Jack Conway hires out-of-state lawyers to sue oil industry for polluting water; now to find the victims

One year ago, Kentucky Attorney General Jack Conway met with a group of out-of-state trial lawyers who urged him to pursue litigation against the oil industry over a now-disused gasoline additive — methyl tertiary butyl ether, or MTBE — found to contaminate groundwater.

The lawyers accurately told Conway they have won hundreds of millions of dollars in negotiated settlements and jury awards for other state and local governments that claimed MTBE contamination. Apart from its foul smell and taste, MTBE in high doses is listed as a potential human carcinogen by the U.S. Environmental Protection Agency.

By hiring them to file a lawsuit here, Kentucky could "pass the costs of providing potable water to Kentuckians who receive their water from municipal water providers and of testing and treating the contaminated private wells of a half-million Kentuckians to the entities responsible for polluting the groundwater," one of the lawyers, Robin Greenwald of Weitz & Luxenberg in New York, told Conway in a Sept. 11, 2014, follow-up letter.

Conway agreed. This summer, his office awarded a contract to that law firm and four others to investigate "potential litigation" on MTBE groundwater contamination. The state of Kentucky paid the firms only a token dollar up front, but they will get a 20-percent cut of any gross recovery from the oil industry.

The question now, as the lawyers get to work: Does Kentucky actually suffer from MTBE contamination?

The Kentucky Energy and Environment Cabinet last Wednesday denied an Open Records Act request by the Herald-Leader for documents related to MTBE contamination. It cited exemptions for "preliminary drafts, notes and correspondence with private individuals" and "preliminary recommendations ... in which opinions are expressed or policies formulated or recommended."

After the newspaper pressed the matter, the cabinet released several documents showing that state officials have not detected MTBE above the actionable level since 2004 in Kentucky's ambient groundwater, including natural springs and private wells. MTBE's actionable level, where toxicity is a concern, is 50 parts per billion, the equivalent of a tablespoon of water in an Olympic-sized swimming pool. People sometimes can detect the additive's unpleasant odor at half that level.

Out of 4,291 groundwater samples collected around the state from 1992 through June, MTBE was detected 114 times. It exceeded the actionable level in 20 of those samples, in Fayette, Morgan, Pike, Allen, Carroll and Daviess counties, said Peter Goodman, director of the Kentucky Division of Water.

Many actionable samples turned out to be isolated events, possibly from heavy rain washing gasoline off roads, Goodman said. For example, Fayette County's one actionable MTBE sample was found in October 1999 at The Blue Hole in McConnell Springs, into which much of the city drains, Goodman said. MTBE was detected at The Blue Hole at lower levels five more times until 2001, and then never again, he said.

"We just haven't seen that much of it in the groundwater ambient system," Goodman said. "Some, but not enough to be alarming."

Also, Goodman said, about 95 percent of the state's population gets its drinking water from treated water systems, not private wells.

The Office of the Attorney General last week defended its decision to hire outside lawyers pitching their services, rather than wait for state environmental regulators to say a lawsuit is necessary. Only on July 28, after Conway had chosen the lawyers, did his office write to the Energy and Environment Cabinet to ask "what data EEC has regarding MTBE, and the best way to go about collecting and reviewing the information," according to an email that Assistant Attorney General Gregory Dutton sent to environmental regulators.

"The OAG gets involved in litigation based on numerous factors, including the harm perpetrated against the commonwealth, the likelihood of success and the value to the public interest," said Conway spokeswoman Allison Martin.

"We also learn about legal causes of action from a variety of sources, including, on occasion, from our own state agencies, from other attorneys general's cases or from private attorneys," Martin said. "The source of the information that leads to litigation has no bearing on the merits of the case."

Conway — who is this year's Democratic nominee for governor — was not influenced by $5,623 in campaign donations he has received since 2010 from four lawyers at the firms hired for the project, Martin said.

"We chose the firms with the best experience for this lawsuit," Martin said. "The goals are to protect Kentucky citizens from pollution, clean up contaminated water and require the polluters — oil companies — to clean up the contamination that they caused in Kentucky."

Smack the piñata

In dozens of places that have pursued MTBE lawsuits, the list of defendants can run for several pages, including oil industry heavyweights BP, Chevron, ConocoPhillips, ExxonMobil, Shell Oil and Texaco.

Oil companies added MTBE to gasoline for 30 years to reduce smog emissions, starting in the 1970s. States gradually outlawed the additive as they discovered it was extremely soluble and leaked into underground water from petroleum storage tanks and other sources. Kentucky banned it in 2006.

MTBE lawsuits have proved popular ever since because trial attorneys view the wealthy, unpopular oil industry as a piñata they can smack until cash falls out, said Fadel Gheit, an oil and gas sector analyst for Oppenheimer & Co., a New York investment bank. Lawyers that specialize in these cases now frequent the hotels at national conferences where state attorneys general get together.

"You have to remember, the oil companies spent over $25 billion to develop MTBE in the first place because the federal government and the states insisted on them providing a cleaner-burning gasoline," said Gheit, previously a Mobil Oil executive. "The oil companies did not want to spend this money. They were dragged kicking and screaming into it. And then, years later, we learn there is a problem when the gasoline leaks because of water solubility, and the federal government and the states said, 'Uh-oh, I think we made a mistake.'"

Internal documents from oil companies, disclosed during the extensive MTBE litigation, paint a less sympathetic picture.

As early as 1981, a hydrologist for Shell Oil told his bosses about seven MTBE plumes leaking from petroleum storage tanks in Rockaway, N.J. Neighbors were complaining about the taste and smell of their drinking water. (The additive's possible links to cancer were not identified until the 1990s.) Within Shell Oil, employees joked that MTBE really stood for "Menace Threatening our Bountiful Environment" and "Major Threat to Better Earnings," according to court records.

By 1983, Shell Oil was warning its industry group, the American Petroleum Institute, that a problem existed.

"In our spill situation, the MTBE was detectable (by drinking) in 7 to 15 parts per billion. So even if it were not a factor to health, it still had to be removed to below the detectable amount in order to use the water," a Shell Oil engineer wrote to the group.

Identifying a victim

Arguing that energy executives disregarded a known environmental hazard, trial attorneys have won whopping sums from the industry. In one case alone, in 2008, a dozen oil companies agreed to pay $423 million to settle claims with 153 public water providers in 17 states.

That record-breaking deal was negotiated by two of the five law firms Conway hired: Weitz & Luxenberg of New York and Baron & Budd of Dallas. Greenwald, a "toxic torts" specialist at Weitz & Luxenberg, was among the lawyers who met with Conway last September and kept in touch over the months until a contract was issued.

Greenwald did not respond to requests for comment on this story. She previously has said it can be costly to get MTBE out of groundwater. Carbon filtration systems can cost $500,000 to install and $60,000 for every filter replacement, she said.

A former federal prosecutor, Greenwald is known for aggressively searching for plaintiffs once she has selected her defendant. She advertised on the Internet for clients willing to sue General Motors over defective ignition switches "so you can get any share coming to you." After the 2010 BP oil spill in the Gulf of Mexico, Greenwald went on stage with a translator to recruit Vietnamese-born fishermen as clients. According to The New York Times, she also brought a musician to sing Woody Guthrie's This Land is Your Land, but with the lyrics rewritten to reflect the struggles of Gulf Coast fishermen.

It remains to be seen how many MTBE victims await the law firms in Kentucky. Tom FitzGerald, director of the Kentucky Resources Council, said he personally wouldn't rank MTBE among the state's most pressing environmental concerns.

"It's a question of, what's the scope of the problem here?" said FitzGerald, an environmental lawyer who closely watches state government. "Are we looking at enough of a widespread problem to justify bringing in these serious litigation resources to pursue damages? And I just don't know."

The attorney general's office declined to say what it knows about the extent of Kentucky's MTBE groundwater contamination or estimated cleanup costs.

"This question would require disclosure of attorney-client and work product protected information that we are developing in conjunction with the Division of Water in preparation for the lawsuit," said Martin, Conway's spokeswoman. "But obviously, we believe there is a contamination problem or we wouldn't be pursuing the litigation."