Source: http://www.lexology.com, February 15, 2013
By: David Erickson and Mark Anstoetter, Shook Hardy & Bacon LLP
A federal court in California has dismissed the City of San Diego’s claims against the owner of a former petroleum depot. California v. Kinder Morgan Energy Partners, L.P., No. 07-cv-1883 (S.D. Cal. 1/25/13). Petroleum from the former depot operation had reached the groundwater and was found in water below the city’s property. Remediation of the depot site had proceeded with cooperation and oversight by the San Diego Water Board. The subsurface petroleum contamination was addressed in accordance with agreed cleanup levels. San Diego, however, later ordered remediation to pre-release conditions and sued seeking damages.
San Diego raised a variety of claims, all of which in some way sought damages for other uses that the city might have made of its property absent the contamination, including use as a water storage site and for multiuse development. According to the court, the city failed to prove that it was necessary to remediate the property beyond the levels contemplated in the existing remediation. It also held that the city could not obtain damages (largely measured by loss in rental value) for “lost” uses that the city had neither attempted nor proved were possible at the site. Although the petroleum was within a groundwater zone that had historically been used to provide potable water, no such use had been made since 1936. The court thus determined that the city had not proven that it could make such use of the property, even if remediation were to return the contamination to background levels.