RECE~VE~
CLERK’S OFF~CE
BEFORE THE POLLUTION CONTROL BOARD
1
~i2004
OF THE STATE
OF ILLINOIS
STATE OF
~LUNO~S
Poflution Contw~Board
ILLINOIS AYERS OIL COMPANY,
)
)
Petitioner,
)
)
V.
)
PCB No. 03-214
)
ILLINOIS ENVIRONMENTAL
)
PROTECTION AGENCY,
)
)
Respondent.
)
NOTICE
OF FILING AND PROOF OF SERVICE
TO:
Dorothy Gunn, Clerk, Illinois Pollution Control Board, James R. Thompson Center,
100
W.
Randolph, Suite 11-500, Chicago, IL 60601-3218
Carol Sudmàn, Hearing Officer, Illinois Pollution Control Board,
1021 North Grand
Avenue East, P.O. Box 19274,
Springfield, IL 62794-9274
John Kim,
Illinois Environmental Protection Agency, Division ofLegal Counsel,
1021
North Grand Avenue East, P.O.
Box 19276, Springfield, IL 62794-9276
PLEASE TAKE NOTICE that on March
12, 2004, I sent to
the Clerk ofthe Illinois
Pollution Control Board the original and nine
(9)
copies, via U.S. mail, of Petitioner’s Reply
Brief for filing in the above-entitled cause, a copy of which is attached hereto.
The undersigned hereby certifies that
a true and correct copy ofthe Notice ofFiling
together with a copy of Petitioner’s Reply Brief, was served upon the Hearing Officer viaU.S.
mail and the Respondent via U.S. mail, on the l2t~~
day ofMarch, 2004.
MOHAN, ALEWELT, PRILLAMAN & ADAMI
1
North Old Capitol Plaza, Suite 325
Springfield,
IL 62701-1323
Telephone: 217/528-2517
Facsimile: 217/528-2553
THIS FILING SUBMITTED ON RECYCLED
PAPER
C:\Mapa\CSD Environmental\NoticeofFiling03
1 204.wpd\crk\3/12/04
RE CE
~1
V E!
CLERK’S
OFFICE
BEFORE THE ILLINOIS POLLUTION CONTROL
BOARD
~ARI ~2004
ILLINOIS AYERS OIL
CO.,
)
STATE OF
ILLINOIS
)
PoUution Control
Board
Petitioner,
)
)
PCB No. 03-214
VS.
)
(UST Appeal)
)
ILLINOIS ENVIRONMENTAL
)
PROTECTION AGENCY,
)
)
Respondent.
)
PETITIONERS’
REPLY BIUEF
NOW COMES Petitioner, Illinois Ayers Oil Company (herein “Petitioner”), by its
undersigned attorneys, and in reply to the Response to Petitioner’s Brieffiled by the Illinois
Environmental Protection Agency (hereinafter “the Agency”), state as follows:
I.
REGULATORY BACKGROUND.
While the parties largely cite many of the same legal authorities which define the issues
in this
case, the Agency largely discards these standards in its argument.
First, the issues in this case
are defined by the Agency’s denial letter, Kathe’s Auto
Service Center v.
IEPA, PCB 96-102 (Aug.
1,
1996), and the Agency does not appear to
make
any reference to its denial letter in its response.
The denial letter should contain specific reasons
why the Act and the regulations require denial or modification.
(415 ILCS
5/57.7(c)(4))
Whether or not the Agency satisfied this requirement in this
case is debatable, the Board can only
affirm the Agency’s decisionby making the legal and
factual findings to support the Agency’s
stated reasons.
See IEPA v.
IIIPCB,
138 Ill.
App.
3d 550,
551 (3~
Dist.
1985).
By avoiding
reference to its
reasons for denial, the Agency hopes to prevail on other grounds.
For example,
the Agency reduced the number ofborings from ten to
three, finding the number to
be
“excessive.”
(Rec. at p.
90) Instead ofjustifying the reasonableness ofusing only three borings
in its response brief, the Agency argues that it had insufficient information to
know the purpose
ofany of
the borings.
(Resp. Briefat
11) Petitioner rejects that contention entirely, but it is an
entirely different issue.
In addition to ignoring the reasons given in its
denial letter, the Agency would appear to
have the Board ignore
all evidence not contained in the corrective action plan and budget.
The
hearing before the Board is the first opportunity given to the Petitioner to challenge the basis
for
the Agency’s decision.
JEPA v. IPCB,
138 Ill.
App.
3d 550,
55 1-52
(3’~’
Dist.
1985).
The Board
hearing “includes consideration ofthe record before the EPA together with the receipt of
testimony and otherproofs under the full panoply of safeguards normally associated with a due
process hearing.” j~
This includes not only information “within the possession~ofthe Agency”
at the time ofits decision.
Waste Mgt. v. IEPA, PCB No.
84-45, atpp.
17-18 (Nov. 26,
1984),
but also
testimony explaining how the Agency record demonstrates that a corrective action plan
and/or budget should have been approved.
Todd’s Service Station
v. IEPA, PCB 03-2 (Jan. 22,
2004).
In this
case, such information includes unchallenged explanations Petitioner provided to
the Agency in meetings initiated in anticipation ofthe revised corrective action plan and budget
(Hrg. Trans. at pp. 33-34, 67~70),1
documents given to
the Agency in those meetings (Pet.’s Exs.
9 &lO), documents arising from the original plan and budget (Pet’s Ex.
6) and the hearing
testimony which explained how the Agency erred in its decision.
(Hrg.
Trans.
at p.
12
1-58,
234-
Neither Harry Chappel, nor Carol Hawbaker, disputed any of the testimony relating to
the substance oftheir meetings with Truesdale.
(Hrg. Trans. at p.
29)
2
45)
The Agency either ignores this
evidence or argues that it has no
legal significance.
(Response, at pp.
12
&
14) The only decision cited to support this position is a Board decision
which was actually critical ofthat petitioner’s failure to offer explanatory testimony.
Todd’s
Service Station
v. IEPA, PCB
03-2, at p.
15
(Jan. 22, 2004).
Finally, with respect to
the burden-shifting issues, the basic point to be drawn from the
caselaw is that the petitioner has the burden of going forward with some evidence that its
proposal would not violate the Act or regulations or that the reduction in hours, scope ofwork or
costs
were not necessary to accomplish the purposes ofthe Act.
John Sexton Contractors v.
IPCB,
201
Ill. App.
3d 415, 425
(1St Dist.
1990).
Whether or not such
aprimafacie
case is
sufficient to carry petitioner’s ultimate burden ofpersuasion, however, varies greatly depending
upon what, if any, evidence the Agency presents to reftite
it.
~
at
425-26.
Therefore, it is just as
important that the Agency has no evidence from which to
base its modifications,
as it is for the
petitioner to
demonstrate the legality ofits plan and budget.
The Agency has no intelligible basis
for reducing the number ofborings
from thirteen to three or concluding that the borings
can be
completed in two days.
These reductions were not necessary to
ensure compliance with the Act.
II.
THE AGENCY’S RATE-SHEET IS INDEFENSIBLE.
The Agency erroneouslybelieves that it can manufacture internal guidance to
be used in
assessing LUST reimbursement requests without full public disclosure either through rulemaking
or during the course of an adjudication.
It is true,
as the Agency argues, that “not all statements
of agencypolicy must be announced by means of published rules.”
Kaufman
Grain Co.
v.
Director,
179 Ill. App. 3d
1040,
1047
(4th
Dist.
1989).
“When an
administrative agency interprets
3
statutory language as it applies to a particular set of facts, adjudicated cases are a proper
alternative method of announcing agency policies.”
Id. (emphasis added)
Published rules,
however,
are required for “each
agency statement of general applicability that implements,
applies, interprets, or prescribes law or policy.”
~
at
1046
(quoting
5
ILCS
100/1-70) (emphasis
added)
Barring statutory mandate, “administrative agencies may establish standards ofconduct
in
applying statutes either by rulemaking or adjudication, a decision left to the informed
discretion ofthe agency.”
In re J.R., 302 Ill.
App. 3d 87
(1St Dist.
1998).
Petitioner is not challenging the Agency’s choice of adjudication or rulemaking,
particularly since the Board has implicitly recognized that this choice was available to the
Agency in making LUST reimbursement decisions.
Platolene 500
v. IEPA, PCB No. 92-9, at p.
7 (May 7,
1992).
Instead, Petitioner challenges the Agency’s refusal to
accept the consequences
ofits choices.
There appear to
be two choices:
(1) If the Agency wants to create generalized
standards to assist
in the processing ofnumerous reimbursement requests, rules ofgeneral
applicability must be promulgated; (2) Ifthe Agency does not want to promulgate rules, then it
cannot rely upon secret “internal guidance” in making external decisions.
The Agency wants it
both ways
—
it desires to avoid the inconvenience and public scrutiny of a rulemaking, while
using the “internal guidance” as the basis for its
decisions.
The Agency’s response makes clear that the rate sheet is being used as an unpromulgated
rule, not as part of an adjudicatory decision.
The Agency states that the rate sheet is
a “tool to
assist project managers in their review of numerous budget sumittal from different consultants.”
(Response, at p. 9) The rate sheet “help to
ensure consistency” between the numerous budget
submitals.
(Response, at p.
8)
In other words,
the rate sheet was not created specifically for
4
Illinois Ayers
Oil Company or CSD Environmental based upon the particular facts ofthe budget
sumittal, but is
a standard of general applicability that applies to
every budget submittal.
The
case cited by the Agency is simply not applicable since it involved an adjudicatory analysis that
“related
solelyto this particular nursing home.”
Highland Park Cony.
v. Health Fac. Plan.,
217
Ill. App.
3d
1088,
1096
(1St Dist.
1991).
Given that the Agency’s explanation of the rate sheet concedes that the rate sheet is
intended to
operate as a standard of general applicability, the only question remaining is whether
the rate sheet falls within one of the statutory exceptions for rulemaking.
The Agency identifies
only one: “statements concerning only the internal management ofan agency and not affecting
private rights orprocedures available to persons or entities outside the agency.”
(5
ILCS
100/1
-
70(i))
As examples oflawful internal management standards, the Agency points to the Secretary
of State’s creation of staff positions
charged with reviewing hearing officer decisions to issue or
not issue restricted driver’s licenses.
Donnellyv. Edgar,
117 Ill.2d 59,63
(1987).
Notably, the
Secretary of State did not create
internal guidance directing the hearing officers to a certain result
if, for example, the driver had
a certain number of previous license suspensions.
This was
entirely a matter Of internal staffing and quality control.
The Agency has created similar bodies
without rulemaking, such as its
enforcement decision group and its budget assessment group.2
That an administrative agency can create internal supervisorypositions to
promote consistency
does not mean that all agency actions to promote consistency are exempt from rulemaking.
~
Berrios v. Rybacki, 190
Ill. App. 3d 338, 346
(1st Dist.
1989) (holding that a rulemaking was
2
The Budget Assessment Group was formed in the fall of2003
with the responsibility of
reviewing budget decisions prior to their issuance in order to ensure consistency.
(Pet.’s Ex. 4, at
pp. 22-23) This organization was not in existence at the time ofthe underlying decision.
(~)
5
required for “an internal method for maintaining consistency among the arbitrators who hear
worker’s compensation claims which
had a substantial effect on the rights and obligations of
persons outside the agency”).
Rates that can be charged by outside contractors are clearlynot matters ofinternal
management.
The legislature has specifically directed agencies involved in ratemaking to
promulgate rules governing its ratemaking practices and procedures.
(5
IILCS
100/5-25) The
significance ofthis provision is made more clear under the federal Administrative Procedure Act,
which also defines a rule as “an agency statement of general.
.
.
applicability.
.
.
designed to
implement,
interpret, or prescribe law
or policy..
.
and includes the approval or prescription for
the future ofrates
.
.
.“
(5
U.S.C.
§
55
1(4)) Thus, even if one were to conclude that the rate sheet
was
solely an
internal matter, the rate provisions ofthe Illinois Administrative Procedure Act
were clearly intended to encompass ratemaking activities within the obligation of rulemaking.
Finally, and although this point maybe moot if the Board agrees that the rate sheet is a
de
facto
rule (Pet.’s Brief, at pp.14-18), the Agency cannot hide behind the Board’s discovery order
to
defend its refusal to
disclose all of the rates relied upon by the Agency and
disclose the basis
of all of its rates.
In its motion to the Board, the primary argument made by the Agency was that
it would be premature and inappropriate forthe Board to make any determination as to the proper
role ofthe rate sheet prior to
a hearing which would allow the Agency an
opportunity to present
its own witnesses and conduct cross-examination.
(Resp. to Mot. Inerloc. Appeal, at p.
3) Now
that the Agency had
its hearing, the question remains as to whether that rate sheet is competent
evidence of anything.
In Platolene 500 v.
JEPA, PCB No. 92-9, at p.
8
(May 7,
1992), the Board
made a legal finding in
its final order which gave an Agency guidance document no
legal or
6
regulatory effect in proceeding.
Even if the underlying documents were non-discoverable, the
rate sheet was not admissible evidence without disclosure ofthe underlying documents.
Wirtz v.
Baldor Electric Co., 337 F.2d 518
(D.C.
Cir.
1964).
III.
TECHNICAL REVIEW.
Missing from the Agency’s justification ofits
technical review ofthe corrective action
plan is the technical reviewer’s failure to
read the corrective action plan and her misassumptions
that
derived therefrom.
The Agency denied the corrective action plan on the basis of a mistake.
The assertion that insufficient information was contained in
the corrective action plan is belied
by the fact that the technical reviewer did not have enough time to review the information that
was available.
The purpose ofthe thirteen borings
--
indeed the entire purpose ofthe investigation plan
—
was clearly set forth.
After meeting with the Agency and agreeing to submit a plan solely
“associated with defining the extent ofBTEX contamination,” (Rec. at p.
1), Petitioner submitted
a corrective action plan that proposed thirteen borings “to better define and evaluate the extent
and relative distribution ofpetroleum contaminants in the subsurface.”
(Pet.’s Ex.
1, at p.
6) The
Agency did not reject the plan because this work did not need to be done, nor because it did not
know the purpose ofthe borings; it rejected the plan because it thought the actual number of
borings was “excessive.”
(Rec. at 86) Ifthe Agency did not understand the purpose of the
borings, it would have rejected all ofthe borings.
The Agency’s denial letter frames the issues in
this
appeal, not
post hoc
rationalizations.
Kathe’s Auto Service Center v. IEPA, PCB 96-102
(Aug. 1~1996).
The Agency reviewer testified that she thought the number ofborings was
7
excessive because of her mistaken understanding of local soil conditions.
(Pet.’s Ex.
2, at pp. 21-
22,
100-101) She
agreed that more borings
would have been justified if Petitioner had found
some heterogenous soil
layers at the site.
(Pet.’s Ex. 2, at pp.
2 1-22)
Ignoring the above stated purposes ofthe borings, the Agency claims that Petitioner
intended to perform work that had already been performed at the site classification stage because
Petitioner intended to perform and report this work “in accordance with” standards found in the
Board’s classification section of the LUST regulations.
(Pet.’s Ex.
1, at p.
68) No reasonable
person would confuse the plan’s statement of means with it’s statement ofintent.
Again, if the
Agency trulybelieved that “each of the thirteen (13) locations” were being investigated for soil
classification purposes, the Agency would have rejected the entire plan outright.
These
reductions were made under
a misapprehension that soil
conditions were uniform and therefore
the soil and groundwater investigation could be performed with far fewer borings.
IV.
FINANCIAL REVIEW.
1.
There Is No Evidence to Support
a Finding That the Number ofHours
to
Perform the Investigation Activities Was Excessive.
Petitioner fully completed the Agency’s form for investigation costs, completing every
blank and inserting additional information in footnotes where possible.
(Pet.’s Ex.
1, at p. 68) In
particular, the Agency form
sought a breakdown of drilling costs on the basis of“feet to
be
bored.”
(~)
Frustratingly, the Agency does not coordinate the information solicited in its form
with its rate sheet.
The rate sheet calculated reasonable costs on a “per day” basis (Pet.’s Ex. 2,
at Att 3), so the reviewer asked her supervisor how many direct push borings could be used in a
8
day.
(Hrg. Trans.
at p.
179) She did not tell him other relevant information in the plan and
budget, such as the number of feet to
be drilled (the actual
focus ofthe Agency’s form), the fact
that
groundwater samples would be taken, or any other site or soil conditions.
(Pet.’s Ex. 2, at
pp.
32-33; Pet.’s Ex.
3, at pp.
34-36; Hrg Trans. at pp. 209-10)~In addition to the information in
the plan and budget, Truesdale explained the investigation plan to the Agency in pre-decision
meetings
and again explained the record at the Board hearing.
The Agency’s decision was not
based upon
the absence ofany necessary information in
the budget form, but the Agency’s failure
to consider all ofthe information available to
it.
2.
The Other
Costs are Supported by the Record.
The Agency’s statement that its
reductions were correctly “based onpast experience of
the Illinois EPA staff’ must be rejected.
(Response, at p.
13)
The reductions were made by a
single individual at the Agency whose experience in the environmental field began in September
of2000 when she joined the Agency.
(Pet.’s Ex.
at p.
5)
She does not have a technical or
scientific background, has never prepared a budget or conducted any type ofsubsurface
investigation.
(Pet.’s Ex.
at pp.
6
& 26) Most ofher cost reductions made were based upon the
• rate sheet, and her reductions of time to perform different tasks can be fairly summarized as her
feeling that the tasks could be
performed in less time.
~
Pl.’s Ex. 2,
at p. 28; Hrg.
Trans. at p.
~ If the Agency needed different
information than that which was solicited in its forms, it
would appear to be a circumstance where the Agency was required to give Petitioner an
opportunity to
submit information.
See Wells Mfg.
Co.
v. EPA,
195
Ill. App.
3d
593, 597
(1~
Dist.
1990).
9
189 & 19l)~Her supervisor is a licensed professional engineer, but he did not review the plan
and budget (Pet.’s Ex. 3, at p.
25)
and he did not offer
any testimony in support of the Agency’s
decision.
The supervisor simply offered an
answer to a hypothetical that failed to contain all of
the information he admits would have been relevant.
(Pet.’s Ex. 3, at pp. 34-36) In contrast to
employing the experience of the Agency’s staff, it is clear that the underlying decision was not
the result of staff experience, but the Agency’s increasing reliance on rate sheets as a substitute
for that experience.
Although Petitioner denies that therewas insufficient information before the Agency, it
must be pointed out that the Agency in this appeal is demanding to
be fed more information in
the plan and budget for which it refuses to pay.
The project reviewer is charged with preparing
the plan and budget, meeting and corresponding with the client and the Agency, coordinating the
project
and preparing the reimbursement request
—
all tasks Petitioner believes will take
156
hours.
(Rec. at pp.
72-73) The Agency feels that 40 hours is sufficient
—
a reduction of
approximately 75.
(Hrg. Trans.
at p. 59)
If the Agency is
to be taken seriously in claiming
that budget items
such as $10 pH tests need substantially more documentation, then the time
allotted for the project reviewer should be at least doubled.
However, the Agency cannot be
~ The Agency states that the reviewer currently has 201
sites assigned to
her, which is
certainly too many for anyone.
Given this type of workload, the Agency has most certainly
misconstrued its
statutory mandate to
ensure that the costs associated with the corrective action
plan
are reasonable.
(415 ILCS
5/57.7(c)(3))
The Agency was not directed to
set maximum rates
are try to
force costs down, but to
reimburse costs that are not excessive.
That the Agency is
running a program in which a $10 pH test is at issue, not because Petitioner failed to
complete all
ofthe information in the
form, but because the reviewer was not sure of the purpose ofthe pH
teat,
indicates that the Agency’s approach is completely unreasonable.
10
taken seriously given that its forms do
not request any information that was not provided and not
all ofthe information that was provided was considered by the Agency.
V.
CONCLUSION.
Petitioner renews its request that the Board reverse the Agency’s changes in the corrective
action plan, reverse the Agency’s cuts to the associated budget, and provide such otherrelief as
the Board deems meet and just.
ILLINOIS AYERS
OIL CO.,
Petitioner,
BY:
MOHAN, ALEWELT, PRILLAMAN & ADAMI,
By
MOHAN,
ALEWELT, PRIILLAMAN & ADAMI
One North Old State Capitol Plaza
Suite 325
Springfield, IL 62701
Tele:
217/528-2517
Fax: 217/528-2553
M:\My Documents\IllinoisAyersReply.wpd\crk\3/12/04
11