7—04;

441PM

;

217737f.641#

2

RECEflVED

CLERK’S OFFICE

JUN

07

2004

I.LLNOIS

POLLUTION CONTROL BOARD

Pollution Control Board

TNmi~

~rr~

oF~

)

)

PROPOSED

AMENDMENTS

TO

)

R04-22

REGULATIONS OF PETROLEUM

)

(Rulemaking

-

Lanc~)

LEAKJNGUNDERGROUND STORAGE)

TANKS

(35

ILL. ADM. CODE 732)

)

TESTIMONY OF MICHAEL

W. RAIPPS ON

BEHALF OF

THE

ILLINOIS SOCIETY OF PROFESSIONAL ENGINEERS

REGARDING.

THE ENVIRONMENTAL PROTECTIONAGENCY’S PROPOSAL

TO

AMEND

35 ILL

ADM.

CODE

732

1.

Background

My name

is

Michael

Rapps.

I

am

a licensed professional

engineer

and the president and

CEO

of

Rapps Engineering & Applied Science, Inc., a Springfield based consulting firm.

I

am

testifying

on

behalf

of

the

lUinois

Society

of

Professional

Engineers

(ISPE),

an

association of more than 2000 Professional Engineers (P.E.’s), Engineers-in-training (EIT’s)

and engineering

students.

Apart

from

my

association with

ISPE, I

am

a

member of

a

number of other professional associations and trade associations, including most notably, as

pertains to the instant matter, the illinois Petroleum Marketers Association (IPMA).

In

1994 I

testified before

the

Illinois

Pollution

Control Board,

on

behalf

of

IPMA,

in

support of a.proposed interim risk-based cleanup standard for leaking underground storage

tanks

(LUST’s).

This was clone in connection with a sub-docket (Docket B)

created by the

Board when it adopted

the

initial

Part

732

regulations.

The

risk-based

cleanup

standard,

designed by myself, and proposed by IPMA as a means of cost

containnierit for the Illinois

LUST Fund, was adopted by the

Board,

arid remained in use

for LUST cleanups until the

Board

amended Part

732

in

1997

(re:

1k

97-10).

I testified

on

behalf of

IPMA

in

that

proceeding as well.

The

1997 Board amendment of Part 732 coincided with adoption of the

companion Part

742

(K

97

—

12), Tiered Approach To

CorrectIve Action

Objectives

(i.e.,

TACO).

Methodology imbedded

in

the

latter replaced the

1994

interim

LUST

cleanup

standard.

In

addition

to

being

active in LUST-related rulemaking, I have

designed and implemented

numerous LUST

(and Brownfield) investigations and

cleanups.

Underground

storage tank

work is

tiot

the principal thrust

of my

company, but

it

does

represent approrimateJy ten

percent of our professional

service billings.

Consequently, I am

familiar with the practical

elements of LUST

remediation

and the

practices of the

Illinois

Environmental Protection

Agency (EPA,

Agency)

as theyrelate to the administration ofthe Agency’s LUST program..

---

4 1PM

2177876641

4

3

2.

Observations

A~State ofthe

Program

The early

years of the Illinois LUST

program were plagued by inadequate funding and a lack

of

formal

cleanup

standards.

Both

problems

have

been

corrected.

As

with

the

administration of any large program there undoubtedly exists

aspects of the LUST program

that

might

be

improved.

However, on

balance,

I believe that

the program

is

functioning

smoothly, particularly in comparison to

its early

years.

This

is evident

at a

glance in

Figure

Nos.

1

and

2, which

follow.

Figure No.

1

shows

that the number of LUST Fund

claims

processed

and paid has steadily increased

from only

a

few hundred claims

per year in the

early 1990’s to approximately 1,400 claims per year in 2002, the lastyear forwhich published

data

are

available.

During

the

same

period

the

average

cost

per

claim

has

steadily

diminishecL

Figure No- 2

thows that the average dollar amount per claim has dropped from

roughly

$100,0C0

per claim in the early

1990’s

to

approximately $40,000 per claim in 2002.

Both Figure Nos.

1

and

2

were

constructed from data listed in

the

EPA

2003 LUST Fund

annual report

Figure

No.

1:

LiST Claims

Paid

Per Year

‘C

as

lb

(C

C.,

I’-

0

E

2

1600

1400

1200

1000

800

600

400

200

9

1990 1991 1992 1993 1994 1995 1996 1997 1996 1999 2000 2001 2002

zooa

Year

Figure

No.

2:

Dollars Per Reimbursed Claim

120,000

100,000

80,000

60,000

40,000

20,000

-!

0

1990

1991

1992

1992

1994

1996 1996

1997

1998 1999 2000 2001 2002 2003

Year

---

7—04;

4:41PM

2i7787~J64;#

4

B.

IPCB LUST Appeals

LUST

appeals

have

apparently

become

vexy

common.

Review

of

the

Environmental

Register, the

Board’s monthly. newsletter,

suggests

that

LUST

related appeals have actually

become

a significant portion

of

the Board’s case load.

A tally-

of new cases

filed before the

Board,

gathered from

the

Board’s

(on-line)

Environmental

Register,

indicates that

in

a

typical year roughly- 300 new

cases

are filed (see Figure No.

3).

In

2003

more

than

One

third

of all

new

cases

filed with

the

Board

were

LUST

related

appeals,

up

from

less

than

15

percent in

1991

(see

Figure No.

4).

New cases

include

enforcement

actions, rulemakings,

permit

appeals, variance petitions

and other

such

matters.

Of

the new cases

filed in 2003

that were appeal cases, more than g~

percent

were LUST related

(see FigureNo.

5).

During the past thirteen years the annual numb~r

of

LLTST appeals filedwith

the

Board has

increased,

leveled off,

then, in

recent years,

increased

again.

A

record

number

of LUST

appeals were filed in

2003

(see Figure No.

6).

Trends

displayed in Figure

No.’s

4,

5,

and 6

do not of themselves

support the need for the rulemaking,

but they do

clearly suggest

that

there

is

steadily increasing

disagreement among the

Agency

and participants

In the

LUST

program.

To

the

extent that

it

may reduce

disputes

and

expedite

environmental

cleanups,

ISPE supports this

rulemaking.

---

.6—

7—04;

4:41pM

;

2,77276641#

6

Figure No. 4:

Portion of IPCB Cases That

Are

UST Cases

I

1990

1991

1992

1993

1994

1995

1998

1997

1998

1999

2000

2001

2002

2003

Year

---

7—04;

4:41pM

21772.7664::

The preamble to

the rulenakings

states

that changes to

Part

732

and

the proposal

for

Part

734 have been proposed

in order

to

“streamline the process for obtaining payment from

the

UST

Fund”

(p.2, R04-22).

Pre-filed testimony by Agency witnesses

parrots that rationale

but

adds

‘that there

is

a

“need

to

reform

the

current reimbursement

procedures.”

Yet,

considering

the

discussion within

the

preamble, the Agency’s pre-filed testimony, testimony

given by all parties

to

date, and apart

from the

suggestion that this proposal will “streamline”

the process,

a’ clear statement

of the problems that

this rulemaking

is intended to

address has

not

been advanced.

Consequently, it

is

difficult

to

project

just how the rulemaking will fix

those problems.

That

said,

one

need

not

be

clairvoyant

to

suspect

that

the

underlying

bases

for

this

rulemaking include, but are

not

limited

to~

1.)

The

Agency’s

belief that the LUST Fund is in

danger of

being over-taxed by claims,

2.)

The suspicion that contractors may be removing excess volumes of soil in

connection

with

“dig

and

haul” cleanups,

3.)

The suspicion that some tank owners arc engaging in

ncar

endless “pump and

treat”

4.)’ The Agencysuspicion

that

some

consultants

may be

padding their hours in

the

performance ofLUST program clçanups,

5.)

The suspicion that inefficient methods

(e.g.,

using very small trucks to

haul LUST soils)

are

being used to

raise

costs,

0

C.

Statement ofReasons,

Facts

in Support, Purpose, and Effect

6.)

The suspicion that excessive field staff are being

assigned to LUST cleanups,

---

5—

7-04;

4:41PM

2177876641#

7

7.)

The suspicion that

high priced staff are being employed to perform tasks

that can

be

performed by lower priced

staff

and,

8)

The

Agency

suspicion that

consultants are

avoiding TACO based cleanups in

favor of

the more expensive “dig

and

haul” cleanups.

It is not

clear

whether foregoing

are

perceptions or reality (no

direct evidence has been

presented in

this regard).

However, if

these

concerns

arc

driving the rulemaking then they

should be

addressed head on.

D.

Audits

The

legislative

language

of

the

Act,

Section

57.8,

was

carefully

crafted

as

a

means

to

streamline reimbursements

from the

Underground Storage Tank FuncL

I

participated in

the

formulation and

negotiation of that

language

as

part

ofa

group

that includedthe Agency,

the

IllinoIs Environmental Regulatory Group

(IERG), the

Illinois Petroleum Council (IPC), and

the Illinois

Petroleum

Marketers

AssocIation

(IPMA).

I

believe that

it

was the

clear

and

understood

intention of those

participants

that

the

review

of

reimbursement packages

for

corrective

action

measures would

be

limited

to random

audits

as

in

the

fashion of

the

Internal

R.evenue

Service

when

it

audits

income

tax

filings.

That

is,

provided

a

reimbursement

request

is

for

an

amount

less

than

or

equal to

the

amount

budgeted, the

request

should

be

summarily

approved

for

payment,

subject

only

to

the occasional

audit.

The

language

of

Section

57.8 (a)(l)

states in

part:

“...

The Agene/s wview shall L~

frmitai to geier4 aarptai a~udithig

anda

thgyxaaice~In no

a~shall d~

Agency

cc~icbzt

additia~ia1review ~any

pL~rirwbith ~ws

cc~rqietr4

zd~i

t~bid~

kid~di~zgforadhc~ce

to

t~

con’~ti~e

action measm-es ~

~pmp~sa1...

Based on Agency testimony

(Clay,

Tr.

P-86,

20)

it

is

undear

as to whether the

Agency

is

adheringto the

statutory

intent.

It

would

be helpful if

the Board

would

add language

to

Part

732 to

clarIfy the meaning

of audit as

it

pertains to the

review

of reimbursement packages

that

fall

within

previously

approved

budgets.

Surely

this

would

streamline

the

reimbursement process

and

reduce

the burden

on Agency resources.

Suggested

language

is

as follows:

Per

Secuon

57.8

(a) (1)theAgencyshallaidir,

byafidiandc

ereviet~?,~epe~tri~it(1/1OO)

of

a/I

thriisfir ~rñnI~w~senientfit~n

~

Unde~gn’ioid

Storage Tank

Fundthat aremadepu1~znt

to an appvurl bidget.

Auc~tdapp1iwthns

shallt~

sei~td

~ya p~rxess

that ~vs

that

t~

elet~

is randtin,

~

that

&~

a~lication

hasan equal chanceofking

selertedforafull

retir~

---

6—

;

2177B7664I~

5,

3.

Agency Proposal

—

Methods and

Outcomes

A. Published Costs vs.

the

Free Market

The

Agency

proposes

to

streamline

reimbursements

by

reducing

reliance

on

time

and

materials reviews in

favor of

lump sum payments.

As

an

example, the Agency

proposes to

reimburse a lump sum

of up to

$57.00

per

cubicyard forthe excavation, transportation, and

disposal

of LUST

impacted

soil.

In support

of

this proposal the Agency

presents

actual data

(re: Chappel

Testimony, Arrachment9,

E÷T+D)

which

for

25

data

points has

a mean value

of $47~5gwith

a

standard

deviation

of

$8.22.

The

Agency proposes

that

the

maximum

reimbursement

for excavation,

transportation, and disposal

be

computed as the

average

plus

one

standard deviation

(i.e., $47.58

+

$8.22

$55.80)

rounded to

$57.00.

Because E+T+D

expenses

represent

a

significant

part of all

“dig

and

haul”

cleanups,

it

is

reasonable

to

ask

whether the

change to

a published cost of $57.00 will save money

and

help

to

preserve

the LUST Fund,

or deplete

it more

rapidly.

Moi~over,E+T+D

data presented

by the

Agency

doesrr~t,on its

face,

suggest that

any

of the

E+T+D

rates

are

unreasonable.

In

fact,

the

data

tends

to

suggest

what

one

might

expect

in

the

free

market,

in

a

geographically diverse state, a fairly

broad spread of rates

($23.89-$60.00) centered about the

mean

($47.58).

So,

the Board

is faced

with a very fundamental and

philosophical

dilemma.

Is

it

better

to

maintain

the

status

quo

and

seek

a

process

that

will

flag

“unreasonable”

reimbursement requests

or

should

a published

“bright

line” test be

structured in

order to

B

Unintended Consequences

It

is

recognized

that

the

Cbappd E÷T+Ddata

may

not

be

“randomly”

drawn

and may

represent too small a sample

for what is

intended

to represent.

Yet it

is

actual

data.

Using

this

example,

one

of

two

things will

happen

if the

Board adopts

the

proposal.

The

first

possibility

is

that

contractors will continue charging

as they always have but that the

Agency

will flag

costs which

exceed

the $57.00

figure, and

reduce

the

errant charges

to the

allowed

figure.

The other possibility,

which

seems more likely,

is that all

contractors

will charge the

same

amount,

the maximum allowed

$57.00.

Using

the E+T+D

data

as

an

example,

and

assuming that only

the rates that

exceed $57.00

per

cubic

yard are

altered

(i.e.,

reduced to

$57.00

per

cubic

yard),

I

have

computed that

the

Agency’s

proposal

will result in

a

cost

savings of 0.33.

On the

other hand,

if all

costs

are

either increased or

reduced

so

as to

equal

the

$57.00

per

cubic

yard

figure,

I

compute

that

the

LUST

Fund will

see

a

cost

increase

of 19.78.

A reported $73,742,453

was

paid out ofthe LUST Fund

betweenApril

2003

and April 2004.

If It is

assumed that

the

portion

of

this

sum

paid

out

for E+T+D

(i.e.,

dig

and

haul)

is

between fifty percent (50)

and seventy-five percent (75),

it can

be estimated that a 0.33

cost

reduction

will

save

between

$

121,675

and

$182,512

per

year.

However,

if

all

contractors

charge

the

published

cost cap of$57.00

per cubic

yard,

which seems more

likely,

the

19.78

cost

increase

will

additionally tax the Fund

by

$7,293,128 to $10,939,692

per

year.

In

this

case

the

downside

of

posting

a cost

cap

greatly

exceeds

the

upside.

This is an

unintended

consequence.

---

6—

7—04;

4:41pM

;

2i77~7664i;

C.

Homogeneous Products

and

Services

Products

and

services

that

arc

very

similar

are

said

to

homogeneous.

Examples

are

soft

drinks,

milk,

gasoline,

haircuts,

shoe

shines,

and

similar

goods

and

services

where

there

is

little variation between prices

charted by vendors.

Some services used

in LUST remediation

may

fill

within

the category of homogeneous

services.

Other

services may

be

homogeneous

or semi-homogeneous for some but not

all work related to LUST rernediation.

Examples

are

tank

removals

and

early

action

activities.

Howcvcr,

some

services

do

not

fall

under

the

homogeneous

heading.

Non—homogeneous

services

include the

intellectual work

products

devoted

to

site

investigation

and

remedial

design.

ISPE

is

concerned

that a by-product of

this

rulemaking

could

be

the

enactment

of

arbitrary

constraints

that

would

discourage

professional engineers

from engaging

in legitimate

problem solving.

Hence,

ISPE

has asked

theAgency

to

identif~y

the

magnitude of consulting fees

(and others)

as

a relative

proportion

ofLUST reimbursement costs.

That

question has gone

4.

A Process

The

need

for

a

“process”

to

determine

the reasonableness of

a

budget

or

reimbursement

request might

very well

be

fulfilled, in

whole

or

part,

by

published

cost

caps.

However, as

already shown this

method

mayyield

unwanted consequences.

But~

the

bright line test is

not

the only

way

to

define

reasonableness.

In proposing the

$57.00

per

cubicyard E

+

T+D

cost

cap Agency

witness

Chappel described that he

arrived at

the

figure

by

computing an average

value

and

adding

to

it

one

standard

deviation.

The

use

of

a

statistical

approach

for

determining

“reasonableness” has merit.

The

standard

normal

distribution

can

be

represented

by

a

symmetrical

bell-shaped

curve

with

three standard deviations

on

either

side of the

mean.

Per the Chappel proposal the

inclusion

of all

reimbursement requests

within

one

standard deviation

on the

right

side

of

the mean

(average) would include

all

but

approximately

16

of the requests.

The

question

then

becomes

whether

it

is

appropriate

to

reject

16

of

the

requests,

nearly

one

in five, as

being

“unreasonable”.

Had the

Chappel proposal used

two

standard

deviations,

then only

about 2

of

the

requests

would fall

outside of

the

acceptable region.

But, the

point

is

that

it

is

mathematically

possible,

using

properly

drawn

statistics,

to

compute

a

value

that

represents

an

excursion beyond

some

acceptable

limit,

But, it

is necessary

to

establish

the

limit.

For

example, were

the Board to declare

that

“reasonable”

should

be defined

as

being

inclusive of

95

of

the

submitted reimbursement requests, the Agency

could then compute

the

value that

represents

95

of the pool

of

data

for

a

given

category,

be it for

E÷T+D

costs,

man-hours,

or

other

such data.

The

burden

of proof in

an

ensuing

appeal

would

belong to the Agency but it would be

easily

met with

sound data.

As

such,

the number of

appeals would

quickly diminish.

The

process

just

described

requires

normally

distributed

data.

Although

scientific

and

economic data is

often non-normal, data transforms

can

be

used to convert to

normality.

The

histogram

and

fitted

curve that

follow

illustrate

a

typical distribution,

in this

case, the

Ghappel

E+T+D data.

---

6—

7—04;

4:41pM

2177676641;6

:0

The Chappel E+T+D

data is

skewed

to the left

and

somewhat truncated on

the right.

The

data

is most

likely

non-normal.

It could be converted to

normalitywith

a

datatransform.

5.

Summary

Opinion

I

have

struggled

in

this

rulemaking

to

get

a handle

on

the nature of

the

problem at

hand so

as

to

be

able

to

help

devise

solutions.

While

this

testimony

doesn’t

offer

a

crystal

clear

solution,

I am hopeful that

it

proves

useful

to

the

Board in

its deliberations.

Unfortunately,

I

believe

that more Inthrmation may

be

needed

in

order to

project the possible impact ofthe

proposal.

Illinois Society of Professional

Engineers

Dated:

821 South Durkin Drive

Springfield,

II 62704

217-787-2118

---

6—7—04;

4:41PM

FAX

TRANSMITTAL

RAPPS.

ENGINEERING

& APPLIED

SCIENCE

821

SOUTH

DURKIN DRIVE

P.O. BOX 7349

SPRINGFIELD,

ILLINOIS

6279 1-7349

PHONE NUMBER

(217) 787-2118

FAX NUMBER

(217) 787-6641

‘1779.76641:4

RECEIVED

CLERK’S OFFICE

JUN 0?

2004

STATE OF ILLINOIS

PoIiut~c,~,-~

Control

Board

COMPANY:

PHONE:

FROM:

~Y7’2~~L~

TIME:

FAX:

7~at~_

L

(1

REMAR.KS:

ORIGINAL

DOCUMENT TO BE

FORWARDED:

YES

A

PROFESSIONAL CONSULTING FIRM PROVIDING SERVICES FOR OVER 25 YEARS IN;

•SOLID WASTE MANAGEMENT

•ENVIRONMENTAL SITE ASSESSMENTS

•CONSTRUCTIONS OBSERVATION

.LEAKINGUST INVESTIGATIONS

.ENVIRONMFNTAL PERMITTING

eREGULATORY COMPLIANCE

•GROUNDWATER. INVEST

IGATION S

•CWIL &

MUNICIPAL

ENGINEERING

• GEOTECHNICAL INVESTIGATIONS

•ASEESTOS INVESTIGATIONS

•LANDFILL DESIGN

•ENVIRONMENTAL AUDITS

•WETLANDS

• SURVEYING

~2-,th~.j

ATTENTION:

(

E~

DATE:

~

_7

—

~

PAGES: COVER

+

/0

IRIS

TJ~.AT’~S~USSJON

& ENCLOSuRES

CONTAIN CONFIDENTIAL ~FORMATION

INTENDED

SOLELY FOR USE BY

THE INPJVIPUAL ORENTITY NAMED

R.EREIN.

IF YOU

ARE NQJ’

THE ~NTENDEI)

RECrPIENT.,

USE

DISCLOSURE

OR

COFitNG

OF TIllS

TRANSMISSiON

IS FROW~ITED.