Kentucky tried to keep oil spill deal secret

FRANKFORT, Ky. — The Kentucky Energy and Environment Cabinet agreed this month to keep secret a proposed settlement of its lawsuit against an Eastern Kentucky oil company that had been repeatedly cited for contaminating the North Fork of the Kentucky River.

The proposed settlement in the case against Childers Oil Co. contained a sweeping confidentiality clause in which cabinet officials agreed to seal the settlement and “forever remain silent at all times and places and under all circumstances” regarding all aspects of the settlement — even the existence of the settlement itself.

On Sept. 18, Franklin Circuit Judge Thomas Wingate rejected the proposed agreement, which called for Childers Oil to pay the state $48,057 to resolve claims stemming from a diesel fuel leak on its property in Whitesburg in February 2011.

Wingate said he was required to reject the agreement because it was not signed by any attorney representing the cabinet. In the same order, Wingate rejected a request from the cabinet and Childers Oil for terms of the settlement be kept confidential.

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Jon Fleischaker, attorney for The Courier-Journal, said the cabinet’s confidentiality agreement is a violation of the Kentucky Open Records Act.

“I think Judge Wingate did exactly the right thing. Such an agreement with a confidentiality clause is unenforceable because under the Open Records Law, a contract — which is what a settlement agreement is — is a public document and they cannot mutually agree to make it a non-public document,” Fleischaker said.

Mike Haines, general counsel for the cabinet, said it maintains its rights to enter into confidentiality agreements in such cases.

“But I would agree that it’s rare,” Haines said, adding he could not recall any other instance in which the cabinet agreed to such a secrecy provision.

Haines said the cabinet agreed to the clause in this case because that’s what it took for Childers Oil to agree to pay the entire amount of the state's cost to respond to the spill — $23,057 — plus a $25,000 penalty.

Haines said it was a good deal for Kentucky.

“We did it to resolve the case,” he said.

Susan Maines, the attorney for Childers Oil, did not respond to a phone message and an email seeking comment on the case.

Evan Smith, president of Headwaters Inc., a Whitesburg-based group that advocates for water quality, said the confidentiality agreement was troubling.

“The most important danger that comes from this is not what’s actually in the water, it’s the public perception that you can’t trust what comes out of your pipe and what the government is doing to protect the water,” Smith said. “And when you’ve got confidential settlements that look like sweetheart deals, it further erodes the public’s trust in our government’s process and ability for protecting our drinking water.”

The Feb. 12 diesel oil spill into the North Fork of the Kentucky River by a Childers Oil plant in Letcher County triggered a water advisory in Whitesburg that lasted three days.

The Herald-Leader reported at the time that the spill involved only a small amount of diesel fuel that leaked from an underground pipe associated with an above-ground storage tank that had been out of commission for three months. But it was the third diesel spill within three years state investigators attributed to Childers Oil.

Josephine Richardson, of Whitesburg, said the spill forced her to shut down her restaurant.

"I remember it very clearly, it happened around Valentine's Day," she said. "There was a horrible smell of fuel in the water from the tap. It was a huge deal for the city, not a happy time.

As for the state agreeing to keep the settlement confidential, Richardson said, "I think that's horrific. Who's supposed to be protecting the people?"

Haines said the fact that no cabinet attorney signed the settlement was an oversight. He said settlement documents were drafted for the signature of Jeffrey Cummins, director of enforcement in the Department of Natural Resources, who is not an attorney. Cummins signed them, but Haines said they were filed without also getting a signature from an attorney.

“We just didn’t catch it,” Haines said. “And I agree that it was totally appropriate for Judge Wingate to reject it since it wasn’t signed by an attorney.”

Wingate has ordered parties in the case to appear in his court at a date not yet scheduled to discuss the settlement. Haines said he's unsure what the cabinet will say at that hearing.

Childers Oil was founded by prominent Whitesburg businessman Don Childers, who is chief executive officer of the company, according to the most recent annual report the company filed with the Kentucky Secretary of State. In 2010, Childers Oil agreed to pay $500,000 to settle a state lawsuit stemming from a spill of diesel fuel waste into the North Fork of the Kentucky River.

You can reach reporter Tom Loftus at (502) 875-5136 or tloftus@courier-journal.com.