ILLINOIS POLLUTION CONTROL
BOARD
September 17, 1992
CITY OF ROODHOUSE,
Petitioner,
v.
)
PCB 92—31
)
(Underground Storage Tank
ILLINOIS ENVIRONMENTAL
)
Fund Reimbursement)
PROTECTION AGENCY,
)
Respondent.
MR. CHARLES E. MCNEELY,
APPEARED
ON BEHALF OF THE PETITIONER;
AND
MR. TODD F. RETTIG, APPEARED ON BEHALF OF
THE
RESPONDENT.
OPINION
AND
ORDER OF THE BOARD
(by J. Anderson):
On February 25,
1992,
the City of Roodhouse (Roodhouse)
filed a petition for review of the determination of the Illinois
Environmental Agency (Agency) to deny reimbursement for certain
corrective action costs from the Illinois Underground Storage
Tank Fund.’
The appeal to the Board is pursuant to Section
22.18(g) and Section 40 of the Environmental Protection Act
(Act).
(Ill. Rev.
Stat.
1991,
ch. 111 1/2, par.
1022.18(g)
and
1040.)
Hearing was held on June
6,
1992.
No members of the public
participated.
Roodhouse and the Agency filed briefs on July 29
and August 13,
1992,
respectively.
Roodhouse filed a reply brief
on August 19,
1992.
By letter dated January 21,
1992,
the Agency notified
Roodhouse of its determination that,
of the $162,333.22 requested
for reimbursement from the Illinois Underground Storage Tank Fund
(UST Fund), which covered invoices for the period from January
1990 to August 1991,
$35,178.73 was eligible for reimbursement.
The disallowed amounts included the deductible of $100,000, which
Roodhouse does not contest.
The remaining disallowed amounts
were itemized in seven separate paragraphs in Attachment A of the
1
Roodhouse
intends
to
submit
additional
claims
for
reimbursement.
On March
26,
1992,
the Board,
in response to an
Agency motion to dismiss
as not ripe,
held that this appeal
is
properly before the Board.
0
t 36-0029
2
Agency’s notification letter.2
Roodhouse does not contest the
first
2 of the
7 paragraphs in Attachment A.
Roodhouse contests
the amounts listed and explained in paragraphs
3 through 7 of
Attachment A, quoted as follows:
3.
$1,966.26,_fo
an
adlustrnent
in hand1~
charges.
The
handling charges submitted were greater than 15.
The
handling charges were reduced to 15
resulting in the above
deduction.
The owner or operator failed to provide a
demonstration that the costs were reasonable as submitted.
(Section 22.18b(d) (4) (C)
of the Illinois Environmental
Protection Act)
4.
$82.70, for an adjustment in overnight mail charges.
The
owner or operator failed to provide a demonstration that the
costs were reasonable as submitted.
(Section
22.18b(d) (4) (C)
of the Illinois Environmental Protection
Act).
5.
$11,088.47,
for an adjustment in disallowed travel costs.
The associated costs are not corrective action costs.
One
of the eligibility requirements for accessing the UST Fund
is that the costs incurred were corrective action costs or
indemnification costs which were incurred by the owner or
operator as a result of a release or
(sic) petroleum, but
not including any hazardous substance from an underground
storage tank.
(Section 22.18b(a)(3)
of the Illinois
Environmental Protection Act).
6.
$5,676.72,
for an adjustment in legal defense costs.
Corrective action does not include legal defense costs.
(Section 22.18(e)(C)
(sic
—
apparently Section
22.18(e)’ (1) (C))
of the Environmental Protection Act).
One
of the eligibility requirements for accessing the UST Fund
is that the costs incurred were corrective action costs or
indemnification costs which were incurred by the owner or
operator as a result of a release of petroleum, but not
including any hazardous substance from an underground
2
The
remaining
non—reimbursable
amount,
as
stated
by
Roodhouse
(Pet. at
1) was
(and by simple subtraction would appear
to be) costs of $27,154.49 contained in the invoices.
However, the
amounts
disallowed
by
the
Agency
in
Attachment
A
total
only
$26,074.49,
leaving $1080.00 unaccounted for.
Also,
as corrected
by the Agency
at hearing,
$837.50
should
be deducted from the
$1608.29
in paragraph
2,
and
the
Agency
had no
explanation at
hearing
for
the
discrepancy
between
the
$11,088.47
listed
in
paragraph
5
of
Appendix
A
and
the
$11,888.47
listed
in
the
vouchers. Even correcting for the above amounts,
there remains
a
discrepancy of $1106.50.
(Pr. at 83, 87, Agency Record at 691.)
0136-0030
3
storage tank.
(Section 22.18b(a) (3)
of the Environmental
Protection Act).
7.
~$4,841.O5, for an adjustment in costs associated with the
attendance of City Council meetings.
The associated costs
are not corrective action costs.
One of the eligibility
requirements
f~
àc~i~isiñgthe
UST
iñd~i~that
the costs.
incurred were corrective action costs or indemnification
costs which were incurred by the owner or operator as a
result of a release or
(sic) petroleum, but not including
any hazardous substance from an underground storage tank.
(Section 22.18b(a) (3)
of the Illinois Environmental
Protection Act).
BACKGROUND
SUMMARY
The
occurrences
surrounding
this
dispute
are
quite
unusual.
Roodhouse,
located in Greene County, has approximately 1900
residents.
Its water supply consists of two wells, which also
serve several other small municipalities.
In late 1989,
Roodhouse experienced a strong fuel odor in its well water.
The
Agency and Roodhouse’s consulting engineer, Benton and
Associates,
Inc., were called in.
(Pr. at 7.)
Mr. Frank Lewis of
the Agency investigated the situation.
Samples were taken, boil
orders were issued, and, at the suggestion of the Agency,
residents were even cautioned not to bathe in the water;
Roodhouse incurred considerable expense hauling in potable water
in
a tanker to city hail so residents could pick up water, and
the water was directly brought to the elderly confined to their
homes.
(Tr. at 70.)
Subsequent investigation verified what was
suspected early-on
-
that the contamination problem at the well
site was from leakage from close—by underground storage tanks
(USTs) that had once supplied diesel fuel for the water supply
pumps prior to a conversion to electric power.
Later the water
table rose and eventually the well was usable again.
(Tr.
at 13;
Pet.
Br. at
1,
2.)
The characteristics of Roodhouse’s wellwater source are
noteworthy.
About 500
gpm
is pumped from the weliwater source.
However, because the source is a spring, an additional amount of
water about equal to that which is pumped spills out and runs
down to the creek, except that the overflow diminishes during
extended dry or cold periods.
Roodhouse had experienced three
dry years.
During the contamination event,
the overflow had
ceased and the water level had dropped 50 feet of the total well
depth of 170 feet.
(Pr. at 16,
17; Pet. Br. at 1.)
In Attachment
A,
Paragraph
7
is misnumbered as another
paragraph 5.
We will hereinafter refer to it as Paragraph 7.
0136-0031
4
DISCUSSION
Roodhouse quickly focused on its water supply problem.
Starting in January 1990 and throughout that year, there were
many meetings between Roodhouse’s engineering consultant, Benton
and Associates, principally Mr. Robert H. Benton, and the City
~CbunciI.
TXiTê
fl
h~hdThdWãte~
ahd~seweb1tS~r
Roodhouse since about 1984.
During that time Roodhouse also had hired and met with an
outside consultant recommended by Mr. Benton, Layne Geosciences
of Kansas City, Kansas, to investigate the contamination cleanup
situation and prepare a report.
The distance from Roodhouse of
the consulting firm was an issue in this matter.
Mr. David B.
Killen, the district manager of Layne Geosciences, was the
principal person meeting with the Roodhouse City Council,
visiting the well site, and consulting with the Agency.
Layne
Geosciences had dealt nationwide with water supply identification
and protection and cleanup of soil and groundwater contamination.
Layne Geosciences is a geotechnical subsidiary of
Layne
Western,
and was formed as an outgrowth of the geotechnical section of the
parent company.
Layne Western specializes in well drilling and
pump maintenance;
it had performed all the work on Roodhouse’s
wells for 40 years,
including the shift from diesel power to
electric power, and had good records on Roodhouse’s wells.
Mr.
Benton felt that Roodhouse’s “best shot” was to hire someone
related to wells rather than industrial cleanup spills.
While he
was aware of, and discussed with the City Council,
other firms in
Illinois that might do cleanup work, he felt that the water
source was a tremendous asset needing protection, and he was not
aware of anybody who had done a cleanup located at a public water
supply’s well.
The City told him to contact
Layne
Geosciences.
(Pr. p.
9,
10,
11,
13,
14,
41,
45—47,
51,
55; Pet. Br., attached
Affidavit.)
During the latter part of 1990 a plan of action was
developed with the approval of the Agency.
(Tr.
14.)
Roodhouse’s
contamination problem was unusual: the contamination source and
the pumps were within the same building, within 50 feet of each
other, and the hydrogeology of
the
immediate area was complex.
Mr. Killen stated that, while it is not uncommon to have his
company find contamination problems and water problems occurring
together, he had never seen a contamination source so close to a
municipal water supply well.
Mr. Benton, Roodhouse, Layne
Geosciences, and the Agency decided to hold off groundwater
remediation until an alternate water supply was in place, so as
to guarantee that the water supply would not be interrupted
during the remediation work.
(Tr. at 57,
67.)
Benton and
Associates engineered the installation of the alternate water
supply, and Layne Geosciences engineered the remediation of the
contamination.
(Tr.
at 18,
45.)
The delay in groundwater
remediation became an issue in this matter.
0136-0032
5
The water supply part of the plan involved running a
10 inch
water line to the City of White Hall
(White Hall),
about three or
four miles away, so that water could be purchased in sufficient
quantities to stabilize the water level of Roodhouse’s well when
the water stops overflowing and the water table falls ten feet
below
t~ie surf
ac~p~ if necessary1 to provide a fullwater
supply in the event that the pumps had to be shut down.
The
contract negotiated with White Hall for the purchase of water was
handled by Mr. Benton and Roodhouse’s attorney, Mr. Charles
McNeely, and items related to the installation of the pipeline
were handled by the respective city attorneys.
(Tr. at 14-19,
71.)
Before Roodhouse chose White Hall as their alternate water
supply, Mr. Benton had, during 1990,
investigated and prepared
cost estimates, using a 20 year period,
for a number of options.
The options included on-site treatment (installing aerator
equipment); moving the wells; and purchasing water from another
municipality when the quality of the existing well water was
unacceptable.
Mr. Benton stated that the on-site treatment
alternative in particular was carefully considered.
However,
after discussions with the Agency,
it was concluded that, due to
the inability to totally clean up all of the diesel fuel
contaminant, an odor problem would develop each time the water
table dropped again.
The Agency indicated that the purchase of
water,
if it was the most cost—effective option, should be
pursued.
The City Council selected, as the most cost effective
solution, the purchase of water from White Hall.
(Pr. at 14—17,
72.)
Mr. Killen testified that Harry Chappell of the Agency
approved the pipeline option as opposed to an on—site groundwater
remediation option.4
(Pr. at 66.)
In order to bring in the water as well as to clean up the
site,
the building in which the UST and wells were located had to
be removed and replaced, the pump house had to be demolished, and
new electrical service installed..5
Cleanup of the contamination
at the site was delayed for two years,
until March of 1992, which
was the amount of time it took to implement all facets of the
~ The Agency’s April 1992 organizational chart lists Mr. Harry
Chappell as overseeing the Agency’s Leaking Underground Storage
Sites in the Division of Remedial Management in the Bureau of Land.
~
Roodhouse “reluctantly” accepted the Agency’s disallowance
of
the costs
of
removing
the
building
and
installing
the
new
electrical equipment,
the latter because the emergency power was
torn out when the building was removed
(Tr. 20.)
0
I 36-0033
6
project involved in connecting a water line to White Hall.6
During this two year period,
the weliwater source supply became
sufficient to avoid another contamination occurrence.
(Pr. at
89.)
At hearing, there_was considerable testimony_about the
~
Coii~il,
including
f?s
committee
meetings,
and
getting
its
approval
at
various
stages
of
remediation
steps
along
the
way.
(e.g.
Pr.
at
18-21,
25,
53-58,
64,
65,
108.)
Mr.
Benton
noted
that
Roodhouse’s
meeting
pattern
was similar to 36 local governments with whom the firm has had
projects over the last five years, and that most of these entail
night meetings.
(Pr. at 19.)
Mr. Benton stated that this pattern
is in accordance with the advice he receives from every city
attorney his firm works with,
adding:
We have to have City Council approval to approve the
plans to submit to the EPA for permits, construction
permits.
We have to have City Council approval for
advertising for bids,
too.
And obviously,
if they are
going to have their approval, we have to explain it to
them, and we have to explain it to them before it’s
finalized, because we can’t come to them and say here
it
is, approve it or disapprove it.
.
.
(the
City Counsel
(sic)
is the elected body that has to make that
decision.
(Tr.
at 21,
22.)
Mr. Killen had similar observations:
A typical City Council meeting would be to revise a
draft of the remedial investigation plan based on some
of our conversations with EPA.
We come back, tell the
City this is our current draft, please look it over,
give us your opinions, whatever.
(Tr. at 64.)
Mr. Kip Proefrock,
a city alderman, testified that the Mayor
and the six alderman serve part time;
all but one, who is
disabled, have other full time jobs.
Thus,
of necessity, all
City Council meetings took place in the evening.
The City
Council met twice monthly in regular session and in a workshop in
alternate weeks.
He testified that there were many meetings with
6
In that actual groundwater remediation had not commenced
when Roodhouse’s
petition was
filed
on
February
25,
1992,
the
invoices
in
this
case
do
not
cover
those
costs.
The record
indicates that remediation was ongoing at the time of the June 6,
1992 hearing.
0136-00314
7
Mr. Killen or Mr. Benton, who were present to provide
explanations and recommendations.
Mr. Proefrock stated that Mr.
Killen was present at several of them and Mr. Benton at many of
them between January of 1990 and April of 1991.
He further
stated that it was Mr. McNeely, Roodhouse’s attorney (and
representing Roodhouse in this instant matter), who negotiated
the~contract~witkr~White~
the landowners.
Mr.
Proefrock also stated that no claims were
made against Roodhouse throughout the whole episode.
(Tr. at 68,
71,
73.)
Reimbursement of Mr. McNeely’s costs became an issue.
Mr. McNeely has been Roodhouse’s city attorney for 13 years.
He testified and proffered an affidavit concerning the nature of
his legal work and his attorneys fees with regard to the
pipeline.
At the direction of the City Council, he negotiated
the contract with White Hall,
which required a number of
redrafts; obtained legal descriptions of various parcels;
negotiated, drafted and redrafted a total of
10 separate
easements
with
the
landowners;
and
incurred
out—of—pocket
expenses
such
as
for
photocopying,
recording
the
easements,
and
title searches.
His invoices also show a number of conversations
with Agency personnel1
including conversations about the Layne
Geosciences contract.’
He asserted that none of his billings
were in connection with defending any claim.
(Tr. at 73-79; Pet.
Ex.
1, attached to transcript.)
Aaencv Testimony.
Mr. Douglas Oakley was the principal witness
for the Agency.
Since January,
1990,
he has supervised two
accountants and one office associate in the remedial projects
accounting procurement unit.
The unit processes leaking
underground storage tanks
(LUST) reimbursement applications and
invoices.
Mr. Oakley was responsible for reviewing the documents
submitted by Roodhouse and provided the disallowed amounts listed
in Attachment A,
except for those
in paragraph 7,
of the Agency’s
January 21,
1991 letter to Roodhouse.
(Tr. at 80-83.)
As earlier
noted, Paragraphs
3 through 7 are appealed.
Paragraph #3.
Regarding the handling charges of $1966.26 in
Paragraph #3 of Appendix A, Mr. Oakley stated that this referred
to the 15
handling charges, disallowed because the associated
basic charge was ineligible.
(Tr. at 84,85.)
Paragraph #4.
Regarding the overnight mail charges of
$82.70 in Paragraph #4 of Appendix A, Mr. Oakley stated that,
for
reasons of cost effectiveness, the Agency normally does not pay
for such express charges unless lab samples taken from the actual
contamination site are involved.
(Tr. at 85,
86.)
~‘
Roodhouse later stipulated that there is one phone call that
would not be reimbursable, in that it concerned whether the actual
cost of right-of-way would be reimbursable.
(Pet.
Br. at 11.)
0136-0035
8
Paragraph #5.
Regarding the travel costs of $11,088.47 in
Paragraph #5 of Appendix A, Mr. Oakley stated that, because they
felt that the costs were unreasonable, the Agency disallowed
them.
These charges involved the services of Layne Geosciences.
Certain meal charges were disallowed because of the absence of
receipts,
but
most of the charges1 for_items related_to
transportation,
were
disallowed because “...from our viewpoint,
the
actual
remediation
of
the
site
did
not
start until March of
‘92,
and
for
two
years
to
a
tune
of
$11,000
of
transportation
costs, that seemed unreasonable.”
(Pr. at
89,
90.)
Regarding “unreasonable”,
Mr. Oakley stated that there are
written guidelines “in-house”
(Tr. at 95), not available to
applicants,
as to when travel is reimbursed and when it is not,
but that “It’s basically what we consider to be reasonable travel
costs.”
(Tr. at 95.)
He stated that normally travel only by automobile is
reimbursed, at a rate of 50 cents a mile, for such activities as
preliminary site investigation.
However, reimbursement was
disallowed for Layne Geosciences: because its expenses were
higher due to the distance (Kansas City); because of the Agency’s
responsibility to clean up hundreds of sites throughout the State
with a limited amount of money; and because the remediation
didn’t start for two years,
until 1992.
He acknowledged that he
was unaware that the Agency wanted the backup water supply in
place so the water supply would not be interrupted.
However, he
stated that this would not have altered his decision because
“...the wells have replenished themselves and the only time there
is any contamination or any problem is when the water level drops
to a certain point.”
(Tr. at 94-97.)
When asked how the time
of remediation startup makes a difference in reimbursability,
Mr.
Oakley again responded only the “we felt costs associated with
this remedial investigation were unreasonable.”
(Tr. at 97.)
In response to a question from the hearing officer as to
what objective criteria were used to determine what costs were
reasonable, Mr. Oakley replied that they rely on comparisons with
similar job sites derived from in—house lists gathered from
audits over the last two years involving hundreds of
reimbursements.
Regarding Layne Geosciences’ travel costs,
however, Mr. Oakley stated that he had never seen “$162,000.00 in
costs incurred prior to turning one shovel full of dirt”.
When
asked whether he has ever reviewed an application where the
contamination was also at the source of the water supply, Mr.
Oakley replied that he considers the costs related to the source
of the water supply as “pre remedial”, not actual remediation
costs.
He then stated that it wasn’t because such costs weren’t
corrective action, but stated again that they were unreasonable
because “they were incurred before one shovel of dirt was turned
for remediation”.
(Tr. at 101,
102.)
0136-0036
9
As referenced earlier
(see Footnote 2),
Mr. Oakley had no
explanation for the discrepancy between the $11,088.47 amount
disallowed in Appendix A and the $11,888.47
on the actual invoice
voucher.
(Pr. at 86,
87, Agency Rec. Book A, at 693.)
Paragra~ph#6.__Regardi~
the_le~g~
costs_of_$~7~.7~in
Paragraph #6 of Appendix A, Mr. Oakley testified that those
charges were disallowed because the “law requires that we do not
pay legal costs.”
(Pr. at 91.)
After being shown the Board
regulations that refer only to legal defense costs as not being
reimbursable, Mr. Oakley acknowledged that right-of-way
acquisitions and contract negotiations costs would not fit into
the regulatory definition of legal defense costs.
However, he
stated that,
as a matter of Agency policy,
it is the Agency’s
position that,
irrespective of the reason for the legal costs,
legal costs are not reimbursable at the present time.
(Tr. at
93,
94.)
Paragraph #7.
Regarding the City Council attendance costs
of $4,841.05 in Paragraph
#
7, Becky Lockart testified for the
Agency.
Ms. Lockart has been the project manager in the LUST
section since July of 1990.
She reviews applications and claims
for reimbursement and technical site data regarding corrective
action.
(Tr. at 103,104.)
Ms. Lockart testified that the costs
for Layne Geosciences and Benton and Associates to attend City
Council meetings are not reimbursable because they are not
corrective action costs.
She verified that the costs referred to
are found in the Agency Record in Book A,
pp.
618-623.
(Pr. at
103—105,
108.)8
g
A review of the vouchers and Agency notes indicates that:
Mr. Benton attended 10 meetings, all in 1990,
incurring associated
costs of
$1621.10; and Mr. Killen attended 8 meetings,
incurring
associated costs of $3219.90.
The subjects covered by Mr. Benton
are addressed above.
The Layne
Geosciences meetings included:
location
of
the
UST’s;
scope
of
work;
meetings with the
City
Council and Agency, Mr.Benton and Mr. McNeely involving preparation
of draft report, recommendations, and presentation of formal soil
remediation
plan
to
Roodhouse
and
the
Agency;
contracts with
subcontractors,
landfill
selection,
site
preparation,
formal
allocation of tasks among Layne Geosciences, Benton Associates, and
subcontractors, and presentation of health and safety plan.
(Also
see Agency Rec. Book A, at 685.)
Mr. McNee.y’s
meeting costs were
not included in Paragraph #7, but instead were denied in paragraph
#6.
A review of the Mr. McNeely’s voucher indicates that the bulk
of his time charged was spent in contract negotiations and easement
acquisition; a total of $461.18 was submitted for attendance at two
Council workshops in December, 1990 and March,
1991.
(Agency Rec.
Book A, at 242—246.)
0136-0037
10
With regard to costs incurred by the engineers when
consulting with the Agency,
Ms. Lockart stated that the
consultations with Mr.
Lewis may not be reimbursable because he
does not work for the LUST section, but that the costs of
consulting with Mr. Chappell may be.
When asked how Roodhouse is
to formulate a corrective action plan to submit to the Agency
without coi~suItationvith ~tt~~en~ineerT1Is.Lo~kar~t
respohd~d
that she believes that it is the function of the engineer, not
Roodhouse,
to compile the corrective action plan.
She
acknowledged that the regulations require the owner to submit the
plan and that she was not familiar with the Open Meetings Act of
Illinois.
(Pr. 107,108.)
ARGUMENTS
Before summarizing the arguments regarding the detailed
amounts disallowed, we will first repeat the relevant portions of
the definition of corrective action in Section 22.18(e) (1) (C) of
the Act:
“Corrective action” means an action to stop, minimize,
eliminate or clean up a release of petroleum or its
effects as may be necessary or appropriate to protect
human health and the environment.
This includes, but
is not limited to, release investigation, mitigation of
fire and safety hazards, tank removal, soil
remediation, hydrogeological investigations,
free
product removal, groundwater remediation and
monitoring,
exposure assessments, the temporary or
permanent relocation of residents and the provision of
alternate water supplies.
.
.
Corrective action does not
include legal defense costs.
Legal defense costs
include legal costs for seeking payment under Section
22. 18b.
Roodhouse and the Agency ask the Board to view the situation
from markedly different perspectives, which we summarize in some
detail below.
Engineering costs.
Paragraphs #3,
#4,
#5, and #7.
Regarding Paragraph #3, the Agency agrees that the
reimbursement of the 15
handling charges would accompany any
reimbursement of costs the Board determines should be made.
(Agency Br.
at
3,
4.)
Regarding Paragraph #4, the Agency argues that the overnight
mail charges of $82.70 are unreasonable because they are in a
category of costs that are not an efficient and effective use of
the Fund and that it only accepts express mailings of lab samples
from the site.
It also argued that the documentation gives no
indication that the use of overnight mail was essential,
and Mr.
0136-0038
11
Killen’s testimony did not elaborate on its reasonableness.
Roodhouse did not argue the overnight mail point specifically,
but merely noted in its summary in its Brief that the charges
relate to submitting data to the Agency and to shipping equipment
between the their office and the site.
(Pet.
Br. at 13; Agency
Br. at 4.
5.)
Regarding the engineering costs associated with Paragraphs
#5 and #7
(travel and City Council meetings), Roodhouse asks the
Board to understand the circumstances when the crisis occurred.
In January of 1990 there was no drinking or bathing water,
the
source of contamination was uncertain,
and what was needed to
alleviate the problem unknown.
Asserting that it was truly an
emergency situation,
RoodhOuse did not have the luxury of taking
a period of time to interview several firms, having had no way of
knowing that the problem would at least temporarily remedy
itself.
Also, Roodhouse asserts it had good reason to hire Layne
Geosciences, and it should not be penalized for doing so.
Its
decision was based on: Layne Western’s familiarity with,
and
records on, the wells; Mr. Benton’s belief that Layne Geosciences
would provide the best services; his knowledge as Roodhouse’s
water and sewer engineer; his previous experience with Layne
Western’s geotechnical capability; and his great concern about
the risk to Roodhouse’s wells,
a valuable asset.
Roodhouse also
points out that it was under intense pressure from the public and
the Agency to get potable water restored.
(Pet.
Br. at 2-4.)
Roodhouse asserts that it needed Layne Geosciences’
professional judgment and guidance on regulatory expectations and
technical scope, because of the unusual situation involved in
this case as regards both the hydrogeological characteristics and
the proximity of the UST to the wells.
Roodhouse relied on the
knowledge of its personnel,
its meetings with the Agency, and its
visits to the well site.
Roodhouse acknowledges that it probably
did incur higher than normal travel costs, but argues that there
was good reason for hiring the firm, that any engineer has to
travel to the site, and in this case the visits were
multipurpose,
i.e., meetings with Roodhouse officials,
site
visits, and meetings with Agency representatives.
The City
Council meetings were necessary because Layne Geosciences could
not make the decisions for the City.
Roodhouse points out that
the Agency apparently disallowed
~fl
the travel costs of Layne
Geosciences, including plane fares, meals and car rentals
“because we felt they were unreasonable”, and it was simply
unable to explain the discrepancy between the $11,088.
47 and the
$11,888.47 figures.
(Pet.
Br. at 5.)
Roodhouse argues that Mr.
Oakley’s explanation of “unreasonable” goes around full circle.
(Pet.
Br. at 5—7.)
Roodhouse submits that Layne Geosciences could not have
formulated a corrective action plan without site visits,
consultations with the Agency, and meetings with City officials.
0136-0039
12
Roodhouse points out that preliminary site investigation would
normally be reimbursable, at $0.50 per mile travel costs, but one
of the stated reasons for non—approval in this case is that the
Agency is dealing with a limited amount of money,
a reason which
Roodhouse asserts does not assist in determining whether the site
investigation is reimbursable.
Roodhouse disputes the other
A~~óbJé1àri7~thi?
the
distance from the site made the
engineering firm incur higher than usual expenses.
Roodhouse
asserts it had reasons for hiring the firm, that the travel
distance to Chicago would not have been much less than the
distance to Kansas City, and that the Agency didn’t put into
evidence what a reasonable cost would be
—
it just kept saying
that in this case they were unreasonable.
Roodhouse also
challenges the “reasonable” basis for the Agency’s not allowing
any travel costs whatsoever.
(Pet.
Br. at
7,
13; Pet Reply Br.
at 1,2.)
Regarding Mr. Benton and his firm’s interactions with the
City Council, Roodhouse argues that the planning involved would
affect the city for many years,
and that the prior decision
stages needed in deciding on a course of action were just as
important as executing it.
Even if it were legally possible,
Roodhouse asserts that it would be poor government to simply turn
over the project to its engineer.
Roodhouse emphasizes that,
as
a municipality subject to the Illinois Open Meetings Act (Ill.
Rev. Stat.
1991, ch.102, par.
41 et seq.), it could not conduct
its business in private.
Roodhouse disputes Ms. Lockart’s
assertion that it was the function of the engineer, not the City,
to compile the corrective action plan.
It argues that no
professional employed by a municipality operates in a vacuum and
that meetings are necessary.
(Pet.
Br. at 8—10.)
The Agency first states that the corrective action in
Roodhouse, when completed, will involve remediation of the public
water supply as well as provision of the alternate water supply,
and then notes that the reimbursement requested involve costs
incurred prior to the start of “actual remediation activity”.
It
particularly singles out the decision to hire an engineering firm
from Kansas City.
The Agency then states that the categories of
disallowed costs represent unreasonable and non—corrective action
costs.
It then argues that the purpose of the Fund should be
limited in scope to only reimbursement for direct corrective
action activities, and that an overly expansive definition of
corrective action and reasonableness threatens to subvert the
intent and purpose of the Fund”.
(Agency Br. at 1-3.)
Regarding the travel costs, the Agency first claims that
there is a “nexus” between corrective action costs and
reasonableness,
citing Paul Rosman v. IEPA, PCB 91—80 (December
19,
1991, at 6), where it says “(we
find that a sufficient nexus
exists between reasonable costs as articulated in Section
22.18b(d) (4) (C)
and cost associated with corrective action.”
The
0136-00140
13
Agency also argues that while Rosman states that the proceeding
would be fundamentally unfair if a petitioner were unaware of an
issue,
in this case Roodhouse was well aware that such a nexus
existed. In support, the Agency cites to the Agency’s completed
invoice voucher form (dated 12/12/91, Agency Rec. at 693
sent
with the Agency’s January 21,
1992 letter.
The form included a
~
claims that reimbursing such costs are not an efficient and
effective use of the Fund.
(Agency Br.
at 5.)
The Agency next argues that there are circumstances where
“certain activities must be considered outside the scope of
corrective action”.
(Agency Br. at 6.)
The Agency asserts that:
This case is one of first impression.
Until this point
the Board has not been faced with a decision in which
the Agency disallowed certain costs because they were
not an efficient and effective use of the Fund.
However, the Fund has never faced the present fiscal
situation in which requests for reimbursement greatly
exceed the ability of the Fund to meet those requests.
This situation mandates the Agency closely scrutinize
requests for reimbursement.
(Agency Br. at 6.)
The Agency argues that these costs are outside the scope of
corrective action costs and are not costs that “the Fund is best
suited to reimburse”.
(Agency Br. at 6.)
The Agency argues that
Layne Geosciences’ travel, meeting and preliminary costs were
“remarkably higher and unreasonable” than other requests received
by the Agency and request an “incredibly expansive definition of
corrective action.”9
As an analogy, the Agency uses as an
example an instance of high charges for backhoe equipment, where,
based on Agency experience it could determine what was
reasonable.
The Agency concludes that “the
Fund must be
preserved in order that it may be used for true corrective action
purposes”, and that Roodhouse’s costs in Paragraph 5 and
7 “are
not true corrective action costs”.
(Agency Br. at
6,
7).
~
The Agency singles out two reimbursement forms that reflect
hotel room movie charges of $13.90, which Roodhouse concedes should
not be reimbursed.
In apparent reference to Mr. Benton’s testimony
(Tr.
at
24-31),
the Agency asserts
that Roodhouse newly raised
Paragraph #2
(pre-ESDA notification costs) as an issue; Roodhouse
then stipulated it did not, and noted that it only wanted to point
out that the Agency’s subtraction was incorrect.
The Agency also
pointed
to
the
disallowances
for
lack
of
receipts
or
double
receipts mentioned at hearing, which Roodhouse does not contest.
(Pr. 88,
89; Agency Br. at 2,
6,
7; Pet. Reply Br.
at 2.; Agency
Rec. Book A, summary at 624—687.)
0136-00141
14
Legal Costs. Paragraph #6.
Roodhouse argues against the Agency’s basis for its
disallowance of its legal costs,
i. e., because the costs are
legal defense costs and therefore illegal.
It cites to the
definition of “legal defense costs”
at 35
Iii. Adm. Code
731.192:
“Legal defense cost”
is any expense that an owner or
operator or provider of financial assurance incurs in
defending against claims or actions brought,
By USEPA or the State to require corrective action or
to recover the costs of corrective action;
By or on behalf of a third party for bodily injury or
property damage caused by an accidental release; or
By any person to enforce the terms of a financial
assurance mechanism.
Roodhouse next argues that:
by definition “corrective
action” includes alternate water supplies; the Agency approved
the construction of the 10 inch water line between Roodhouse and
White Hall; and all of the attorney’s legal costs are related to
matters not involving legal defense costs.
Roodhouse disputes
the Agency’s position of disallowing all legal costs,
defense or
otherwise.
It argues that if the legislature intended to limit
reimbursement of all legal costs, the word “defense” between
“legal” and “costs” in the definition of corrective action would
not be in there.
(Pet.
Br. at 10-12.)
The Agency challenged the use of the regulatory definition
of legal defense costs for this purpose, asserting that the
regulatory definition applies only to the financial
responsibility requirements of Subpart H, and that only the
language in the definition of “corrective action” in the Act
quoted
above) applies.
(Agency Br.
at 8.)
Roodhouse responds
that the Agency is arguing that “legal defense cost” has one
meaning in the regulations, but another when used in the statute.
Roodhouse asserts that,
to the contrary, the cover page for the
regulations refers to Leaking Underground Storage Tanks; and the
legislature added “legal defense costs” to the Act in 1991, and
presumably was already aware of the pre—existing regulations.
(Pet. Brief at 11-12; Pet. Reply Br. at 2,
3.)
In its arguments,
the Agency relies only on the term “legal
defense costs” in the Act,
(i.e.
disregarding the specific
definition of that term in the regulations as irrelevant).
Without giving an alternative definition, the Agency instead
argues that the language in the statutory definition of
corrective action language provides “guidance but does not set
0136-00142
15
the boundaries of the correct definition of legal defense costs”.
(Agency Br. at 8.)
The Agency further argues that it is an
unacceptably expansive view of corrective action to consider
representation of a municipality as corrective action costs, that
the Fund was designed for reimbursement of costs directly
involved in remediation of a site; that other costs should not be
rèT~iedEo
as
“
iei~ethe~ffecUvenessof the Fund”; and
that the Board must be guided by the “principals
(sic)
of
reasonableness and effectiveness” in supporting the Agency’s
position.
(Agency Br. at 9.)
Roodhouse responds that the Agency is asking the Board to
ignore the wording of the Act, that corrective action by
definition provides for alternative water supplies, and that the
Agency’s decision, not supported by the facts or law,
is now
“grasping at straws” to justify its decision.
Pet. Reply Br. at
3,
4.)
BOARD DISCUSSION
Regarding the Paragraph #4 express mail charges, the Board
finds that Roodhouse failed to present sufficient proof that the
express mail costs were reasonable expenses.
We note that the
Agency did not simply reduce the amount to allowable mail
charges, or submit other evidence to support its assertion
regarding the lab samples.
However, we also note that Roodhouse
did not argue these points or attempt to justify the mailing
either.
The Board will next address what the Agency asserts at one
point is a case of first impression, particularly as it involves
Paragraphs
#
5 and #7.
First, the Agency’s reasons for denial in paragraphs #5 and
7 were identical,
i.e.
t)he
associated costs were not corrective
action costs.
In its testimony and brief, although phrased
differently at various times, the Agency appears to be arguing
that its consideration of efficient and effective use of the Fund
is an acceptable basis for denial of reimbursement as
unreasonable, and, thus,
costs not involved directly in
remediation activities are not corrective action costs if the
sufficiency of the Fund is at risk.
There appear to be two
thrusts to the Agency’s argument: that it may limit what is
corrective action if the sufficiency of the Fund is at risk and
that it may determine when the sufficiency of the Fund is at
risk.
The Board must first emphasize that the Agency is,
as is the
Board,
a creature of statute, and that the Board must first look
to the statute in assessing the basis for an Agency
determination.
The Agency gives no statutory, regulatory or case
law support for the principle it is espousing.
01 36-00k3
16
The only support cited by the Agency is Rosman.
The
Agency’s reliance on Rosman is misplaced.
The discussion in
Rosman of the connection between corrective action costs and
reasonableness arose in conjunction with a claim that the
Agency’s letter did not meet the requirements of Section 39(a).
In Rosman, the Agency couched its denial of reimbursement for
-certa i-n
costs-
-as
not—being-
reasonable”
when—i-n—fact—those -costs
were allegedly not “corrective action” costs.
The Board held in
that case that there was a sufficient link between the
reasonableness and corrective action, so that the Agency’s letter
was not “fundamentally unfair’! because it gave sufficient notice
of the reason for denial.
Here, the Agency’s letter denies reimbursement because the
costs are not “corrective action”.
The Agency now apparently
wants to argue that the costs are not “reasonable”.
We reject
the Agency’s argument insofar as it implies that Rosman would
apply in a reverse situation and also regardless of the facts.
We point out here that the Agency’s “unreasonable” argument also
has a novel twist:
the “nexus” argument here is founded solely on
the need to make efficient and effective use of the Fund.
The Act defines what constitutes corrective action and
specifically lists a number of activities that constitute
corrective action, and some that do not, as already noted.
Insofar as the Agency appears to argue that it can supersede the
statutory listing per se, we disagree.
(Aurora Metals Division.
Aurora Industries,
Inc.
v.
IEPA,
(July
1,
1982), PCB 82—12, 47
PCB 315.
(See also In the Matter of Execptions from Definitions
of VOM,
(July 30,
1992), R91—24, pp.
8—9.)
We also reject any Agency argument that it has some implicit
authority to either deny or limit reimbursement based on the
sufficiency of the Fund.
The statute specifically articulates
the circumstances under which the sufficiency of the Fund comes
into play.
(Ill. Rev.
Stat.
1991,
ch.
111 1/2, par.
22.18b(d) (1),
(d) (2).)
Section 22.18b(d)(1) addresses a situation where the
Comptroller shall make payment of amounts a~~roved
by the Agency
if sufficient money exists in excess of amounts appropriated “for
administering the activities of the Agency, the State Fire
Marshal and the Department of Revenue relative to the Fund.”
If
money later becomes available, such payments may be made.
Section 22.18b(d)(2) states that “(in
no case shall
the Fund or the State of Illinois be liable to pay claims or
requests for costs of corrective action or indemnification if
money in the Fund is insufficient to meet such claims or
requests.”
0136-001414
17
The Agency also argues that the Board is now for the first
time facing a decision as to whether the Agency may disallow
certain costs as being unreasonable because they are outside the
scope of corrective action based on efficient and effective use
of the Fund.
The Agency asserts that the Fund has never faced
its present situation where its income is insufficient to meet
~
S~I~n
22. 18b
of
the
Act includes an articulation of what must be satisfied to be
eligible for monies from the Fund (Section 22.18b(a), defines the
limits on Agency payments, e.g.,
the deductibles
(Section
22.18b(b)-(d), and lists what the applicant must submit to
receive the full or partial claims (Section 22.18b(d)(4)).
We
also note that Section 22.18c addresses payment limits not at
issue here,
e.g.,
limits on payments per occurrence
($1,000,000)).
The only place where the word “reasonable” is
used in this context is in 22. l8b(d) (4) (C), which requires,
in
pertinent part that:
The owner or operator provided an accounting of all
costs, demonstrated the costs to be reasonable
and
provided either proof of payment of such costs or....
This language does not address the sufficiency of the Fund
at all and does not give the Agency either a mandate or the
authority to determine the size of the payment based on the
“efficient and effective” use of the Fund.
We also point out that, even if the Agency were to have such
authority,
it has given the Board no inkling as to the condition
of the Fund that would trigger such limitations, or the rules
under which the Agency would allocate the payment limitations.
What would be the risk point that would trigger such Agency
actions?
How would the cuts be made,
e.g.,
on the basis of date
of application?
Could the Agency elect to pay 10 cents on the
dollar?
While the Agency is authorized under Section 22.18b(f)
to adopt “reasonable and necessary rules for the administration
of this Section”, the Agency has not done so.”
Mr. Oakley
acknowledged that the Agency uses internal documents not publicly
available for its determinations.
The Board concludes that the Act does not allow the Agency
to determine the scope of corrective action costs based on the
sufficiency of the Fund and then deny payment because the costs
10
We observe that we have previously seen a similar concern
about
depletion
of
the
Fund.
(AKA
Land.
Inc.
v.
Illinois
Environmental Protection Agency (March 14, 1991), PCB 90—77, p. 4.)
11
Administrative Procedure Act, Ill.Rev.Stat. 1991,
ch. 127,
par. 1003.09.
0136-00145
18
are unreasonable because the Fund must be preserved.
The Agency
cannot decide who does or does not get paid by shifting the scope
of what constitutes corrective action depending on the
availability of monies from the Fund.
The Agency does not argue that the specific travel_costs
ith~Cd b~théé
iñeeiing ~i~~ire
not cärré~?iveaction
costs per se as regards the nature of the specific work performed
or
the
expenses
incurred,
(as
it inferred in its example of the
high backhoe charges).
Except for some costs not really in
dispute, the Agency denied Layne Geosciences’ costs in their
entirety essentially because their total was simply too high and
would deplete the Fund.
The Agency on the one hand recognized
the unusual circumstances, but then argued that the costs were
beyond the norm of the usual situation.
The Agency’s explanation
for refusing to pay travel costs as not being corrective action
is either inconsistent or unacceptable.
The Agency never
explained why the definition of corrective action would not
include Layne Geosciences activities or pointed out wherein the
statute denial of payment would be justified.
On the other hand,
Roodhouse has persuasively argued that it was justified in
selecting the firm,
especially under the unusual circumstances
found here.
The Agency participated in the decision to delay
actual remediation so as to install an alternate water supply,
the latter project clearly listed in the definition as eligible
for corrective action.
Regarding the meetings with the City Council, we again note
that the Agency did not argue that the specific meeting costs
incurred by the engineering firms were not corrective action
costs per se as regards the nature of the specific work performed
or the expenses incurred.
In addition to its arguments relative
to preserving the Fund,
the Agency essentially argues that
corrective action does not encompass technical meetings with the
City Council as decisionmaker, and that such meetings constitutes
an overly broad view of corrective action.
Under the facts and
circumstances of this case, however, we conclude otherwise.
There was nothing ministerial or routine about the meetings in
this case,
and we cannot envision how the complex corrective
actions could have proceeded without the City Council decisions,
or how the Council could have made the decisions responsibly,
decisions involving taxpayers money, without being technically
and legally informed on an ongoing basis, or how these decisions
could have been discussed and made other than in an open meeting.
We conclude that these activities, under the circumstances here,
constitute corrective action.
The Board reverses the Agency’s denial of corrective action
costs in Paragraphs #5 and #7 and, accordingly, reverses the
Agency’s denial of the associated 15
handling charges activities
denied in Paragraph #3.
01 36-00k6
19
Legal costs.
Paragraph #6.
The Agency denied these costs on the basis that corrective
action does not include legal defense costs,
and in testimony
asserted that it was legally forbidden to pay Roodhouse’s costs.
Although at times the
Agency
seemed
to
be arguing otherwise,
~orrectivection—as—den’in’hestatute—express1y~tncIudes
the provision of alternate water supplies, and the Agency itself
was involved in the decision to secure alternate water from White
Hall.
Also, the Agency does not argue that the specific costs
incurred were excessive per se.
Regarding legal costs, the
definition of corrective action expressly forbids the use of the
Fund for “legal defense costs”, not “legal costs”.
The
definition does not list legal costs as corrective action costs,
but it does not disallow them either.
The Agency argues that the Board regulations defining “legal
defense costs” cited by Roodhouse are not controlling and that
the statute provides only guidance.
The Agency does not dispute
that the definition in the regulations would not apply to
Roodhouse’s attorney’s activities.
The problem with the Agency’s
argument is that it gives no meaning of its own as to ‘what
constitutes legal defense costs, the basis for its denial.
To
the contrary, the Agency in effect has, as a matter of present
policy,
stated that it will not pay any legal costs at all, so as
to preserve the Fund.
Aside from the “preserving the Fund”
issue,
the Agency in effect has defined corrective action as
excluding
nfl. legal
costs, not just legal defense costs.
However, that is not what the statute says.
For guidance, the
Board will take notice of the definition of legal defense costs
in its own regulations.
That definition would not include
Roodhouse’s attorney’s activities.
We note that the Agency never
argued that the definition was unacceptable, rather it argued
that it was not binding.
In the absence of any other
enlightenment from the Agency, we find that the Agency erred in
denying Roodhouse’s legal costs on the basis that they were the
“legal defense costs” forbidden by the statute.
This includes
the denied meeting costs.
We are not disputing the Agency’s statement that the Fund
is
insufficient to cover the reimbursement requests.
However, in
that eventuality, the statute has already provided how the costs
are to be paid.
If the Agency or others feel that the Fund
should be allocated differently, and that the Agency should have
the authority to make this decision, it must seek to ‘amend the
statute.
Finally,
during the course of this proceeding, there were
certain agreements regarding adjustments in the costs claimed or
denied and in the 15
handling charge which we would expect to be
computed by the Agency in consultation with Roodhouse.
However,
there were two inconsistencies identified where the record
0136-00141
20
appears to give
a clear answer.
First,
in the absence of any
Agency explanation for the discrepancy regarding the $11,088.47
in Paragraph #5, we reviewed the vouchers and the Agency’s margin
notes and concluded that they support Roodhouse’s assertion that
the correct total in Paragraph #5 should be $11,888.47, not
$11,088.47.A1so,regardingParagraph#2~ we agre
that_there_is
iiübtraction error in the corrected amount asserted by the
Agency in this record.
This opinion constitutes the Board’s findings of fact and
conclusions of law in this matter
ORDER
In reference to Attachment A of the Illinois Environmental
Protection Agency’s letter of January 21,
1992, the Board affirms
the Agency’s denial in Paragraph #4 and reverses the Agency’s
denial in Paragraphs #3, #5,
#6, and #7.
Consistent
with
the
above
opinion,
the
matter
is
remanded
to
the
Agency
for
approval
of
Roodhouses’
costs.
IT
IS
SO
ORDERED.
Board Member
B. Forcade dissented.
I, Dorothy M. Gunn, Clerk of the Illinois Pollution Control
Board, hereby certify that the above o inion and order was
adopted on the
/7i~ day of
~J~c
,
1992, by a vote of
L—i.
0136-00148
Control Board
