ALLIANCE FOR KENTUCKYS FUTURE, INC. , ET AL. VS. ENVIRONMENTAL AND PUBLIC PROTECTION CABINET , ET AL.Annotate this Case
RENDERED: OCTOBER 10, 2008; 2:00 P.M.
NOT TO BE PUBLISHED
ORDERED PUBLISHED: MAY 8, 2009; 10:00 A.M.
Commonwealth of Kentucky
Court of Appeals
ALLIANCE FOR KENTUCKY'S
FUTURE, INC.; DONALD AND
MARION STITES; MARY SWIGGUM
APPEAL FROM FRANKLIN CIRCUIT COURT
HONORABLE THOMAS D. WINGATE, JUDGE
ACTION NO. 06-CI-00066
ENVIRONMENTAL AND PUBLIC
PROTECTION CABINET; SANITATION
DISTRICT NO. 1 OF CAMPBELL,
KENTON, AND BOONE COUNTIES
** ** ** ** **
BEFORE: CLAYTON AND STUMBO, JUDGES; GRAVES,1 SENIOR JUDGE.
Senior Judge John W. Graves sitting as Special Judge by assignment of the Chief Justice
pursuant to Section 110(5)(b) of the Kentucky Constitution and Kentucky Revised Statutes
CLAYTON, JUDGE: Alliance for Kentucky’s Future (Alliance) appeals the
Franklin Circuit Court decision upholding the Environmental and Public Protection
Cabinet’s (Cabinet) administrative decision approving the Regional Facility Plan
(RFP) of Sanitation District #1 of Boone, Campbell, and Kenton Counties
(District) for the building of new Western Regional Waste Water Treatment Plant.
The administrative regulations governing RFPs are found at 401 Kentucky
Administrative Regulations (KAR) 5:006; they address wastewater planning
requirements as mandated by the Clean Water Act. We affirm.
PROCEDURAL AND FACTUAL BACKGROUND
The controversy in this case involves the planning by the District for a
new wastewater treatment plant for Boone, Campbell, and Kenton counties in
Northern Kentucky. The plan addresses wastewater treatment in the District’s
service area. It calls for two wastewater treatment plants – the Western Regional
Wastewater Treatment Plant and the Eastern Regional Wastewater Treatment
Plant. The only plant at issue in this appeal is the Western Regional Wastewater
Until 1994, the District primarily ran a single wastewater treatment
plant, Dry Creek Wastewater Treatment Plant, which served various cities in
Campbell and Kenton counties. In the late 1990’s, after consolidation of numerous
municipal jurisdictions and wastewater districts, the District became responsible
for the operation and management of the sewer and drainage system for Boone,
Campbell, and Kenton counties. The District is a publicly owned treatment works
and subject to 401 KAR 5:006, the administrative regulation that governs
wastewater planning requirements for regional areas.
Regional planning agencies are required to submit RFPs under 401
KAR 5:006. RFPs are regional water quality management plans for addressing
and controlling point sources of water pollution within designated planning areas
through the Commonwealth. The regulation sets forth when the RFP must be
submitted or updated, the entities responsible for developing an RFP or an RFP
update, and the required contents of such a plan. The general language of the
controlling regulation requires planning over a two-decade period and updates to
address certain major planning developments. As a result of the time period itself twenty years in the regulation - the only way to meet its requisites is through
broad-based planning. Furthermore, during this planning period, the District is
also mandated to follow specific Kentucky Division of Water programs including
construction and discharge permits for new regional wastewater treatment plants,
construction activity, sewer extensions and other activities and initiatives necessary
to implement an RFP.
At the conclusion of the planning process, the administrative
regulation states that the Kentucky Division of Water may approve an RFP or RFP
update when it finds the plan “has been properly submitted and is in the best
interest of the environment and the public.” 401 KAR 5:006 Section 6.
Additionally, an RFP is required when a new wastewater treatment facility is
proposed. Therefore, because both twenty years had elapsed and a new treatment
plant was needed, the District began developing the RFP, which ultimately
demonstrated the need for the Western Regional Wastewater Treatment Plant.
For five years, 1996 through 2001, the District completed extensive
research, analysis, and review of the RFP by nationally credentialed engineering
and environmental consultants, and with multiple state and federal agencies. The
final version fills seven large binders. As required by 401 KAR 5:006, the District
studied the region’s existing facilities, evaluated the need for new or modified
facilities, and assessed the cost of alternative solutions to meet the area’s existing
and future needs for wastewater treatment. In August 2001, it submitted its RFP to
the Cabinet. At this point, the Cabinet issued its State Planning and Environmental
Assessment Report (“SPEAR”), which is the environmental assessment required
by 401 KAR 5:006 Section 6. Furthermore, the RFP was subject to review and
comment by the public as well as other agencies.
On November 11, 2002, the Kentucky Division of Water approved the
RFP as mandated by the procedures in 401 KAR 5:006. The RFP included
recommendation for two wastewater treatment plants - an Eastern and a Western
Regional Wastewater Treatment Plant. Here, as previously noted, the only plant at
issue is the Western Regional Wastewater Treatment Plant.
The site upon which the Boone County plant was to be built belonged
to Donald and Marion Stites, who are two of three listed members of the appellant,
the Alliance for Kentucky’s Future, Inc. While originally the Stites approached the
District to sell them the land for the new plant, they later refused to do so, and the
District had the property condemned pursuant to Kentucky Revised Statutes (KRS)
220.280. The Stites contested the condemnation, but this Court ruled in the
District’s favor in the unpublished decision, Garriga v. Sanitation District No. 1,
2003 WL 22871550 (Ky. App. 2003).
Following the Kentucky Division of Water’s decision, the Alliance
challenged the RFP by filing a petition for hearing with the Cabinet. A twenty-one
day evidentiary hearing commenced on August 19, 2003. The hearing officer
entered a 415-page report and issued a recommended order on June 1, 2005. He
recommended that the secretary uphold the Kentucky Division of Water’s approval
of the RFP, but suggested a number of conditions, including mitigative measures
and studies, updates of certain parts of the RFP, and preparation of supplemental
environmental assessment reports.
All parties filed exceptions to the hearing officer’s report and
recommended order. The Alliance objected to the recommendation that the RFP
be approved and the District and Cabinet objected to some recommended
conditions. On December 16, 2005, the deputy secretary of the Cabinet (acting
upon the Cabinet secretary’s recusal) issued a final order, which upheld the
Kentucky Division of Water’s approval of the RFP and adopted some of the
hearing officer’s recommendations. Thereafter, the Alliance appealed, pursuant to
KRS 224.10-470, to the Franklin Circuit Court. The Franklin Circuit Court entered
its order on May 8, 2007, upholding the final order of the deputy secretary of the
Cabinet. The Alliance’s appeal is taken from this order.
STANDARD OF REVIEW
When a court reviews the agency’s final order, the court may only
overturn the agency’s decision if the agency acted arbitrarily or outside its scope, if
the agency applied an incorrect rule of law, or if the decision itself is not supported
by substantial evidence on the record. Kentucky State Racing Commission v.
Fuller, 481 S.W.2d 298, 300–01 (Ky. 1972).
Arbitrariness is the focus of the court’s review of an administrative
decision. American Beauty Homes Corp. v. Louisville and Jefferson County
Planning and Zoning Commission, 379 S.W.2d 450, 456 (Ky. 1964). This
landmark case outlines the parameters for judicial review of an administrative
agency. It provides that the judicial review is not a de novo review of factual
determinations made by an administrative agency but rather a review by the court
of whether there was substantial evidence to support the agency’s conclusion,
whether the parties were afforded due process, and whether the agency acted with
its established authority. Id. Substantial evidence means “evidence of substance
and relevant consequence having the fitness to induce conviction in the minds of
reasonable men.” Owens-Corning Fiberglas v. Golightly, 976 S.W.2d 409, 414
Further, this Court is authorized to review issues of law on a de novo
basis. Mill Street Church of Christ v. Hogan, 785 S.W.2d 263, 266 (Ky. App.
1990). Finally, statutory guidance for judicial review of the Cabinet’s final order is
found in KRS 224.10-470. Thus, in essence, on review the function of the Court is
to ensure that the agency’s decision is based on substantial evidence of fact in the
record and that the agency did not apply an incorrect rule of law. Kentucky
Unemployment Insurance Commission v. King, 657 S.W.2d 250 (Ky. App. 1983).
Under this standard, the Court must uphold the agency’s factual findings even if
the record shows that there is evidence contrary to those factual findings. 500
Associates, Inc, v. National Resources Environmental Protection Cabinet, 204
S.W.3d 121, 132 (Ky. App. 2006). Furthermore, in the case at hand, the reviewing
Court must also consider the administrative regulation in question, 401 KAR
5:006, which contains the deferential “best interest” standard:
If the cabinet finds that the regional facility plan has been
properly submitted and is in the best interest of the
environment and the public, the cabinet will approve the
401 KAR 5:006 Section 6(2).
The Alliance challenges the Cabinet’s approval of the RFP on
numerous grounds. Each issue will be discussed separately.
Deputy secretary’s decision was not supported by substantial evidence
because the rejection of the hearing officer’s report was arbitrary.
The hearing officer submitted a 415-page report, which included a
recommended order. Of this 415-page report, the deputy secretary adopted
approximately 80 percent of its recommendations. But as KRS 224.10-440(1)
All hearings under this chapter shall be held before a
qualified hearing officer . . . . After the conclusion of the
hearing, the hearing officer shall make to the secretary a
report and recommended order which shall contain a
finding of fact and a conclusion of law. . . . The secretary
shall consider the report, exceptions, and recommended
order and decide the case . . . . The secretary’s decision
shall be served by mail upon all parties and shall be a
final order of the cabinet.
The deputy secretary considered the entire record, the 415-page report, and
decided. The decision stands on its own merits and cannot be ruled arbitrary
because he did not adopt the hearing officer’s report verbatim.
2. Franklin Circuit Court mischaracterized the controversy and misinterpreted 401
An RFP must comply with 401 KAR 5:006, which became effective
as a matter of law in 1997, to establish the process by which the Commonwealth
shall comply with sections 201, 205, 208 and 303(e) of the Clean Water Act. Both
the Cabinet and the Franklin Circuit Court correctly recognized that the Alliance’s
claims are based on their interpretation of the requirements of the administrative
regulation. The Alliance believes that RFPs, under 401 KAR 5:006, must contain
detailed plans, assess all future water projects, and address water quality issues
within the region, including package treatment plants, Sanitary Sewer Overflows
(SSO) elimination, Combined Sewer Overflows (CSO) planning, and sewer line
routes for the twenty-year planning process.
Yet, the hearing officer, the Cabinet, and the Franklin Circuit Judge
rejected this approach because they believe that the RFP is a broad-based planning
document for the purpose of regional wastewater planning. In addition, 401 KAR
5:006 is not the only administrative or statutory guidance in the area of wastewater
planning. Both the hearing officer and the deputy secretary found that detailed
requirements for dealing with water quality are established in the Clean Water Act
and the Kentucky Division of Water’s regulations. Contrary to the arguments of
the Alliance, this administrative regulation is not the exclusive provision relating to
the issue of clean water nor must it address every eventuality or contingency.
Not only are there other statutory and administrative guidelines for
water quality and planning, the tenets of statutory construction are important. The
Alliance is asking that the 401 KAR 5:006 be interpreted as a comprehensive
regulatory scheme. Significant, however, in the interpretation of the administrative
regulation, 401 KAR 5:006 and all regulatory statutes, is that “in the construction
and interpretation of administrative regulations, the same rules apply that would be
applicable to statutory construction and interpretation.” Revenue Cabinet, Com. v.
Gaba, 885 S.W.2d 706, 708 (Ky. App. 1994) (citing Revenue Cabinet v. Joy
Technologies, Inc., 838 S.W.2d 406 (Ky. App. 1992)). And the most commonly
stated rule in statutory interpretation is that the “plain meaning” of the statute
controls. Moreover, Kentucky courts have steadfastly adhered to the plainmeaning rule “unless to do so would constitute an absurd result.” Executive
Branch Ethics Commission v. Stephens, 92 S.W.3d 69, 73 (Ky. 2002).
Additionally, the plain-meaning rule is consistent with directions provided by the
legislature on how to interpret the statutes enacted by it. KRS 446.015.
3. The site selection process for the Western Regional Wastewater Treatment was
not supported by substantial evidence.
The Alliance also argues that the site selection process for the
Western Regional Wastewater Treatment Plant was arbitrary despite findings by
the hearing officer and the deputy secretary that the process used by the District
was appropriate and the site selected was proper. While the Franklin Circuit Court
concurred with the hearing officer and deputy director’s assessment of the site
selection process, it supported its decision by reference to the doctrine of res
judicata and held that the issue had already been decided by this Court in the
previously cited unpublished decision, Garriga, 2003 WL 22871550. Therein, this
Court affirmed the decision of the Kenton and Boone County Circuit Courts, and
held that the approval of the Judge Executive’s Committee was “based on a
professional, impartial, and comprehensive analysis.” Id.
To ascertain the efficacy of the court’s decision, it is necessary to
examine the pertinent legal doctrine. Res judicata actually involves two distinct
subparts: “claim preclusion,” which embodies the typical definition of res judicata,
and “collateral estoppel” or “issue preclusion.” Yeoman v. Commonwealth, Health
Policy Board, 983 S.W.2d 459, 464-5 (Ky. 1998). “Claim preclusion bars a party
from re-litigating [sic] a previously adjudicated cause of action and entirely bars a
new lawsuit on the same cause of action.” Id. at 465. In contrast, “[i]ssue
preclusion bars the parties from relitigating any issue actually litigated and finally
decided in an earlier action. The issues in the former and latter actions must be
identical.” Id. The general rule of issue preclusion is “[w]hen an issue of fact or
law is actually litigated and determined by a valid and final judgment, and the
determination is essential to the judgment, the determination is conclusive in a
subsequent action between the parties, whether on the same or a different claim.”
Restatement (Second) of Judgments § 27. Given that Garriga dealt with the
District’s right to condemn 144 acres of the Stites’ farm under the Kentucky
Eminent Domain Act, we do not believe that the issues in the two cases are
identical, and therefore, res judicata is not applicable here.
Nevertheless, we find that the Franklin Circuit Court also noted that
there were specific findings by both the hearing officer and the deputy director that
the process implemented by the District was proper and the site ultimately selected
was an appropriate one. Indeed, the RFP guidelines regarding site selection, found
in 401 KAR 5:006 Section 4, were determined by the circuit court judge to be fully
supported by the record. Furthermore, the record, on appeal, contains abundant
evidence supporting the reasonableness of the site selection process. 500
Associates, 204 S.W.3d at 133. (Court can review entire record to determine
agency based its decision on substantial evidence.)
4. The RFP was not properly submitted under 401 KAR 5:006 because it lacked
According to Alliance, the RFP did not contain all the information
required by the administrative regulation 401 KAR 5:006. Based on the Alliance’s
interpretation of the administrative regulation, the RFP must include detailed plans
for all wastewater management projects over a twenty-year period to meet the
water quality goals of the Clean Water Act. Consequently, Alliance contends that
the RFP must contain water quality goals for the elimination or re-permitting of
package plants, address the procedure for leaking septic tanks to hook up to
sewers, determine the elimination of SSOs, and include plans in the SPEAR to deal
with growth aspects to ascertain whether an environmental impact statement is
necessary. This broad interpretation was properly rejected by both the deputy
secretary and the Franklin Circuit Court.
Certain information must be provided in the content of the plan so that
established water quality goals may be met. See 401 KAR 5:006 Section 4. The
record clearly demonstrates by exhibits and by testimony of engineers that each
element necessary was provided for in the RFP. In fact, the administrative
guidelines for an RFP cannot be so distorted that broad-based planning is
transformed into a planning that must cover every possible detail and eventuality
related to wastewater treatment and water quality. At some point reading more and
more detailed requirements into an administrative regulation destroys the very
purpose for which the regulation was designed – managing wastewater treatment
The Alliance contends that, because the Cabinet may approve the
SPEAR for the RFP, once the SPEAR has been vetted by the State Clearinghouse,
without any judicial review of the SPEAR, the process is arbitrary. Simply put, the
administrative regulation mandates “[a]n environmental assessment report will be
written by the cabinet which summarizes the regional facility plan.” 401 KAR
5:006 Section 6(1). Thereafter, the environmental assessment is submitted to the
State Clearinghouse for review and comments. If required, mitigative measures
may be necessary to address negative comments.
To analyze whether the process is arbitrary, we first observe that the
SPEAR itself is merely one requirement for the RFP. It is used by the Cabinet to
assess the environmental impact and assist the Cabinet in its determination of
whether to approve the RFP. Second, as noted above, the SPEAR is vetted by the
State Clearinghouse and changes are made if necessary before it is approved. And
the SPEAR, as part of the RFP, is subject to scrutiny by the public, other agencies,
and the judicial system. Hence, the decision to approve the SPEAR itself was not
arbitrary because it was based on substantial evidence, vetted by the State
Clearinghouse, and ultimately must be approved during the RFP process.
Furthermore, the Alliance argues that the standard “best interest of the
environment and the public,” found in 401 KAR 5:006 Section 6(2), is vague and
overbroad and therefore, unconstitutional. They argue this standard in reference to
the SPEAR but in actuality this standard applies to the entire RFP, not just this one
section of the administrative regulation. In fact, the Cabinet will only approve an
RFP if it has been properly submitted and is in the best interests of the public and
the environment. Before approval, the RFP (and SPEAR) must meet all the
requirements and standards under 401 KAR 5:006.
When an administrative regulation is assessed for vagueness, it must
be read as a whole, not piecemeal. County of Harlan v. Appalachian Regional
Healthcare, Inc., 85 S.W.3d 607, 611 (Ky. 2002). All the factors provided in 401
KAR 5:006, which guide the Cabinet in its determination whether or not the RFP is
in the best interest of the environment and the public, must be considered. Given
the extensive and voluminous record of this case, this particular RFP, and its
SPEAR, are supported by substantial evidence and have been the subject of much
review. Therefore, the decision was not arbitrary and the “best interest” standard is
not vague or overbroad in this context.
b. Package Treatment Plants and Failing Septic Systems
The Alliance argues that the RFP fails to adequately deal with
package treatment plants and failing septic systems. Simply put, this statement is
erroneous. The RFP, as written, contains general plans to eliminate a number of
package treatment plants and failing septic systems consistent with growth
throughout the planning area. The circuit court’s decision noted that the deputy
secretary’s determination on this point was supported by substantial evidence.
c. Sanitary Sewer Overflows and Combined Sewer Overflows
Again, the Alliance argues that the RFP fails because it does not
provide a mechanism in the plan for elimination of SSOs and CSOs. The hearing
officer, the deputy secretary, and the Franklin Circuit Court Judge, however, all
found that detailed requirements for assessing SSOs and CSOs are not established
under 401 KAR 5:006 but rather are found in the Clean Water Act and the
Kentucky Division of Water Regulations. Moreover, a reading of 401 KAR 5:006
Section 4 does not specifically mention these issues. Thus, returning to the
principles of statutory construction, it is inappropriate for courts to add new
requirements to an approved regulation. Under basic principles of statutory
construction, we assume that the:
“[legislature] meant exactly what it said, and said exactly what it
meant.” Revenue Cabinet v. O’Daniel, 153 S.W.3d 816, 819 (Ky.
2005) (citing Stone v. Pryor, 103 Ky. 645, 45 S.W. 1136, 1142 (1898)
(Waddle, S.J. dissenting)). “Consequently, the intention of the
administrative agency is found in the words used in the regulation and
not from surmising an intention that is not expressed.” Flying J
Travel Plaza v. Commonwealth of Ky., Transportation Cabinet,
Department of Highways, 928 S.W.2d 344, 347 (Ky. 1996) (citing
Kentucky Association of Chiropractors, Inc. v. Jefferson County
Medical Society, 549 S.W.2d 817 (Ky. 1977)).
Alliance for Kentucky’s Future, Inc. v. Environmental and Public Protection
Cabinet, --- S.W.3d ----, 2008 WL 4531018 (Ky. App. 2008).
Notwithstanding that these factors are not specifically cited by the
administrative regulation, the RFP itself did address the issue of SSOs, CSOs, and
sewer rehabilitation. Both the seven-volume facility plan and the testimony of
many engineers show that part of the facility planning process dealt with these
issues. Additionally, the Franklin Circuit Court, following the deputy secretary’s
finding that the RFP did not have to include specific details of SSO and CSO
control and remediation plans, held that it was not necessary to render a decision
about appellees’ argument concerning the consent decree because the issue was
mooted by the finding that specifics concerning SSOs and CSOs do not have to be
included in the RFP.
d. Federal Involvement
With regards to the requirements for the SPEAR as well as the entire
RFP, the Alliance contends the Cabinet’s approval was contrary to law because it
did not comply with 40 Code of Federal Regulations (CFR) 35.3140 and 40 CFR
6.506 nor with the capitalization agreement between the Cabinet and the
Environmental Protection Agency (EPA). But the Cabinet found these assertions
to be inaccurate because no federal involvement attended this wastewater treatment
The Alliance makes a vague reference to Section 208 of the Clean
Water Act and states that it necessitates a broad interpretation of 401 KAR 5:006.
But Section 208 of the Clean Water Act provides for the creation of Regional
Water Quality Management Plans. In the 1970s, the United Sates EPA designated
the Ohio-Kentucky-Indiana Regional Council of Governments (OKI) as the
Section 208 area-wide waste treatment management agency. This plan has not
been updated since that time and is not applicable to the regional planning agencies
Also, the Alliance suggests that 401 KAR 5:006 should be construed
to require an environmental assessment process based on National Environmental
Policy Act (NEPA) standards; but, the record does not support such an assertion.
First, NEPA standards only apply in federal actions. Still no federal involvement
has occurred in the review, development, or approval of the RFP. But, even if
there had been federal involvement, there is still no basis for extending the
administrative language of 401 KAR 5:006 to encompass such a requirement.
Neither NEPA nor NEPA standards are mentioned, and therefore, there is no basis
to insert this requirement into the process. Thus, we find, relying again on the
plain meaning of the administrative regulation, that the deputy secretary and the
Franklin Circuit Court Judge correctly interpreted 401 KAR 5:006.
Based on the administrative language in 401 KAR 5:006 and the
Franklin Circuit Court’s decision that more specific plans for addressing package
treatment plants, septic systems, SSOs and CSOs, and other detailed wastewater
infrastructure design is reasonable, we uphold the trial court’s decision. And the
extensive record in the case provides substantial evidence that the RFP in question
contained the mandated information for the proposed Western Regional
Wastewater Treatment Plant to comply with 401 KAR 5:006, and thus, was not
After reviewing the entire record before us, we conclude that the
circuit court's affirmance of the deputy secretary's final order was proper. The
record reveals that the Cabinet acted within its powers granted by statute, no
evidence was provided that any party's due process rights were violated, substantial
evidence existed to support the Cabinet's decision, and the correct rule of law was
In sum, we hold that the substantial evidence supported the Franklin
Circuit Court’s determination that the RFP in question met the requirements of 401
KAR 5:006. The Western Regional Wastewater Treatment Plant has been
approved since 2002 after thorough and extensive litigation at the preliminary
stages. We, however, disagree with the appellee, Sanitation District #1 that the
appellant’s challenge to the RFP is moot. The RFP has been reviewed by a hearing
officer, a deputy secretary, a circuit court, and now by us. We affirm the decision
of the Franklin Circuit Court.
BRIEFS FOR APPELLANT:
W. Henry Graddy, IV
BRIEF FOR APPELLEE
ENVIRONMENTAL AND PUBLIC
Sharon R. Vriesenga
BRIEF FOR APPELLEE
SANITATION DISTRICT #1 OF
CAMPBELL, KENTON AND
Gerald F. Dusing
John C. Bender