ILLINOIS POLLUTION CONTROL BOARD
June
3,
1993
STATE BANK OF WHITTINGTON,
)
Petitioner,
v.
)
PCB 92—152
)
(UST Fund)
ILLINOIS ENVIRONMENTAL
)
PROTECTION AGENCY,
)
)
Respondent.
EDWARD
W.
DWYER AND KATHERINE
D. HODGE APPEARED ON BEHALF OF THE
PETITIONER;
AND
DANIEL
P. MERRIMAN APPEARED ON BEHALF OF THE
RESPONDENT.
OPINION AND ORDER OF THE BOARD
(by J. Anderson):
This matter
is before the Board on the October 13, 1992
petition of the State Bank of Whittington
(Bank).
The Bank
requests review of the September 14,
1992 decision of the
Illinois Environmental Protection Agency
(Agency) regarding
reimbursement of corrective action costs from the Leaking
Underground Storage Tank Fund
(Fund).’
The Bank appeals the
Agency’s denial of reimbursement for certain costs incurred by
the Bank in response to a release of petroleum from its four
underground storage tanks
(UST).
Hearing was held on December 16,
1992 in Benton, Franklin
County; no members of the public testified.
The Bank and the
Agency filed post-hearing briefs on February 16 and April
20,
1993 respectively.
On May 5,
1993,
the Bank filed a post-hearing
reply brief.
PENDING MOTIONS
The Board will first address two pending motions.
Bank’s Second Motion to Supplement
On March 11,
1993,
the Board granted the Bank’s February 16,
1993 motion to supplement the record.
On May
3,
1993, the Agency
filed a response to the Board’s March 11 order to supplement the
On September
23,
1992,
the Agency issued another letter
correcting a computation that changed the actual amount requested
for reimbursement from $660,001.35 to $623,220.10.
That the
September
14,
1992 letter constitutes the Agency’s final decision
is not in dispute.
(Ex.
F; Joint Ex. I.)
01 L~.3-O023
2
record,
in
which
it
declined
to
file
two
original
color
photographs,
asserting
policy
and
statutory
reasons.
On
May
5,
1993,
the Board found the Agency’s response unpersuasive and
ordered the original photographs to be filed.
On May 10,
1993,
the Agency complied by filing a further response and the Bank’s
original and complete December 19,
1993 Corrective Action Report
containing the two color photographs on p.
18.
The complete
original
report
is
hereby
received
into
evidence.
(Copies
of
the
report are found in Agency Rec. Technical File Part 2 at 171-
271.)
On May 5,
1993, the Bank filed a second motion to supplement
the Agency record.
The motion accompanied the Bank’s reply
brief.
On May 17,
1993,
the Agency filed a response in
opposition.
On May 25,
1993,
the Bank filed a reply to the
Agency’s response.
The requested supplement concerns certain
records related to the UST appeal pending before the Board of
DJM
Oil Company,
Inc.
(DJM).
(DJN Oil Company.
Inc. v.
IEPA,
(October
29,
1992)
PCB 92—163.)
The
DJN
site
is
adjacent
to
the
Bank’s
site in Benton.
The Bank requests that the record be
supplemented
with
a)
certain pages of
DJN’s
December 10,
1991
reimbursement
application,
and
b)
the
September
25,
1992
final
Agency
determination
of
DJM’s application for reimbursement, of
which the Bank requests the Board to take official notice.
Both
documents accompany the motion.
The Bank asserts that the supplemented information will
render incorrect the impression, given by the testimony of Agency
witness Ms. Becky Lockhart and in the Agency’s brief, that roller
compactor charges are not corrective action and have never been
reimbursed.
Counsel for the Bank, who is also counsel for
DJM
in
DJM’s appeal,
states that the motion to supplement is necessary
because the Agency has failed to timely file the
DJM
record with
the Board.
The Bank asserts that the open waiver in the
DJM
appeal had not relieved the Agency from its obligation to file
the record within
14 days,
or November 11,
1992.
The Agency has
yet
to
file
the
DJM
record.
The Agency asserts in opposition that:
a)
such materials
were not part of the Agency’s actual administrative record in the
instant appeal;
b)
the Bank did not provide a supporting
affidavit; and c) the Agency did not consider,
and should not
have considered,
such matters as evidence.
The Agency further
argued that such extrinsic evidence should not be offered as
collateral
impeachment
or
as
a
matter
of
estoppel.
Regarding collateral impeachment, the Agency argues that
“extrinsic evidence (evidence other than that coming from the
witness
on
cross
examination)
may
not
be
introduced
to
impeach
a
witness
if
a
matter
is
considered
collateral
citation
ommitted.”
(Agency Resp.
in opposition at 3,4).
Also, the
Agency
argues
that,
while
extrinsic
evidence
may
be
introduced
to
0! ~3-O02L~
3
contradict a witness,
it may not relate solely to collateral
matters citation
omitted.”
The Agency further argues that,
absent a request by the Bank for leave to reopen the proofs and
submit additional evidence
-
which the Bank did not make
—
the
proper time to have offered such material to impeach was at
hearing when the Agency witness testified and where the issue
could have been properly aired, not at this stage of the
proceeding.
Regarding estoppel, the Agency asserted that the Board
rejected the the same position argued by the Bank in Southern
Food Park,
Inc.
V.
IEPA (December 17,
1992),
PCB 92-88.
The
Agency further argued that the Board has previously held that the
issue is whether the disputed item passes the two—part corrective
action test,
not whether the Agency has ever previously
reimbursed such an item.
In support the Agency additionally
cited Strube v.
IEPA,
(May 21,
1992)
PCB 91-20; Platolene 500 v.
IEPA,
(May
7,
1992)
PCB 92-9; and Enterprise Leasing
v.
IEPA,
(April
9,
1992), PCB 91—174.
In the interests of bringing this dispute to resolution, the
Board will accept the Bank’s May 25th reply even though the reply
lacks a request for leave to file a reply pursuant to 35 Ill.
Adm. Code 101.241
(c).
In essence, the Bank requests that the
Board accept an accompanying affidavit, which the Bank explains
was omitted from its second motion to supplement by inadvertance
because of attorney’s haste to timely file the Bank’s reply
brief.
The Bank also asks that the Board consider whether the
Agency’s response to the second motion to supplement is properly
supported by affidavit as required by 35 Adm. Code 101.242(a)
and
(b),
in that there are certain facts asserted which are not of
record,
and requests that the Board strike the Agency’s response.
Also in the interests of bring this dispute to resolution, the
Board will accept the Agency’s response.
Without addressing the other arguments, the Board denies the
Bank’s second motion to supplement as untimely.
The Bank does
not explain why it is first raising this issue at this time,
particularly in that it was aware of the
DJN
documents well
before the December 16,
1992 hearing at which the now-challenged
testimony took place.
Agency Motion to Strike
On May 17,
1993, the Agency moved to strike portions of the
Bank’s reply brief.
On May 25,
1993,
the Bank filed a response
to the Agency’s motion to strike.
The response accompanied the
Bank’s May 25th reply.
The portions the Agency requests be
striken are a)
references to, and a request that the Board take
judicial notice of, transcripts containing the hearing testimony
of Agency employee Mr. Doug Oakley in Southern Food Park,
specifically citing to the Bank’s reply brief at
6,
7, and fn.
3;
DL
L~3-O025
4
and b)
the Bank’s discussion of the
DJM
Oil Company material
referenced above, specifically citing to the Bank’s reply brief
at
13.
Regarding the
DJM
discussion in the Bank’s reply brief,
for
the reasons the Board expressed in response to the Bank’s second
motion to supplement,
the Board grants the Agency’s motion to
strike.
Regarding the transcripts of Mr. Oakley’s testimony in
Southern Food Park, the controversy in the instant case evolved
from a discussion
in the Agency’s post—hearing Brief.
The Bank
asserts in its reply brief
(at
5,
6.) that the discussion should
be stricken in that
it has implied, without factual basis or
citation to the record, that the Bank’s consultant is taking
unfair advantage of an unsophisticated Bank as well as the Fund.
The Bank specifically quoted the following language on pp.
21 and
22 of the Agency’s post-hearing Brief as the basis for its
protest:
Beyond a reasonable amount representing fairly the
administrative and procurement and oversight costs of an
owner or operator, handling charges represent profit to the
contractor.
The profit motive acts as an incentive to the
contractor to take as great
an advantage of the opportunity
as possible.
Usually owners and operators never see the
amount actually paid to the subcontractor for the work
performed.
They do, however, see an amount attributed to
the subcontractors by the contractor which, for all but
experienced and commercially sophisticated owners and
operators is unknown to them to contain a contractor mark
up,
or handling charge.
Since the amount of the
subcontractor bills are attributed to subcontractors who
never dealt with the owner or operator, an owner’s or
operator’s expressed concerns over high prices may be
directed away from the contractor, who can merely shrug and
reply that it’s
a costly business.
The strong influence of the profit motive may result in a
contractor unreasonably maximizing its profits at the
expense of the UST Fund
(and hence, the taxpayers).
The Bank asserts that the above quote is factually at odds
with how the handling charges were itemized in the instant
appeal.
The Bank further states that it
is the Agency that
offered Mr. Douglas Oakley’s testimony in Southern Food Park, and
that his testimony would show that the Agency will reimburse
handling charges if they are hidden in another reimbursable
category.
OI~3-OO26
5
In its response the Bank also requests that the Board
consider whether the Agency’s motion to strike is properly
supported by affidavit,
because the motion contains facts
asserted which are not of record and are unsupported by affidavit
as required by
35 Ill. Adm. Code 101.242(a)
and
(b), and also
requests that the Board strike the Agency’s motion.
Again,
in
order to bring this dispute to resolution, the Board will accept
the Agency’s motion to strike.
In resolving this issue, the Board need not recount the
Bank’s and the Agency’s supporting arguments for taking or not
taking judicial notice of the transcripts in Southern Food Park.
In reviewing the record now before us, the Board agrees with the
Bank insofar as it cannot find any evidence whatsoever that would
justify the Agency’s inclusion of the discourse quoted above.
The Board finds unacceptable what must be viewed as an attempt by
the Agency to insinuate that its description of an owner’s
inexperience and a contractor’s bad faith conduct applies to the
Bank and to the Bank’s contractor.
Therefore, the Board strikes
all discussion of this subject matter from the Agency’s brief as
well as from the Bank’s reply brief.
DENIED COSTS APPEALED
The reimbursement denied is listed in 11 paragraphs
contained in Attachment A of the Agency’s September 14,
1993
letter.
(Pet.
Exh.
E.)
The Bank appeals reimbursement denials
as specified paragraphs
2,
6,
7,
8, and
10 of Attachment A,
summarized as follows:2
Paragraph
2
-
$1,917.34, handling charges.
Paragraph
6
-
$7,050.00,
costs associated with
roller/compactor charges.
Paragraph
7
-
$5,459.81,
surveying costs.
Paragraph
8
-
$3,047.50,
nuclear density testing charges.
Paragraph 10
-
$1,771.25,
ARDL
(the Bank’s engineering
consulting firm) personnel costs associated with seeking
reimbursement from the fund.
BACKGROUND
2
At hearing, the Agency stipulated that costs contained
in paragraph
1
(tank removal costs), paragraph
3
(laboratory rush
charges), and paragraph
4
(personnel charges incurred after
notification to the Illinois Emergency Management Agency) were
reimbursable.
The remaining paragraphs were not appealed.
(Jt.
Exh.
2;
Pr.
at
5,
7,
262;
Pet. at 7—9.)
01
L~3-OO27
6
Procedural History
The procedural history has a particular bearing on certain
issues raised
in this case.
In March,
1989,
the Bank purchased
the property (site),
located at 200 North Main Street,
Benton,
Franklin County.3
From 1938 until
1973,
the site had been used
for a gas station operation.
A building that had been on the
site was demolished prior to the removal of the USTs.
On April
20,
1989,
following an inspection, the Office of the State Fire
Marshal
(OSFM)
ordered four USTs on the site to be registered.
On May 5,
1989,
the OSFM ordered the Bank to remove the tJSTs.
Between September 22 and September 25,
1989, the four USTs were
removed.
On September 22,
1989,
after a release of petroleum was
discovered during the removal of the first three UST5, the Bank
notified the Illinois Emergency Management Agency
(IEMA)
(then
called the Emergency Services and Disaster Agency)
*
(Pet.
at 1-
3;
Pet. Br. at 4,5; Agency Br. at 1-3.)
On September 22,
1989, the Bank hired ARDL,
Inc.,
an
environmental testing laboratory and consulting firm.4
Mr. Todd
Gentiles,
an engineer and field services manager of ARDL,
oversaw
all aspects of the site remediation, submitted the required plans
and reports to the Agency, and prepared the initial reimbursement
application and additional reimbursement information when
requested by the Agency.
The application and additional
supplements requested by the Agency were submitted between June
of 1991 and January of 1992.
(Pet.
at 5; Pet.
Br. at 5; Pr. at
172—174,
240; Agency Rec. TF at 47, 132.)~
By letter of May 22,
1990,
the Agency had initially deemed
the Bank ineligible to access the Fund due to a determination by
the OSFM that the UST5 were exempt from registration.
However,
based on an affidavit of Benton’s mayor, the OSFN reversed itself
and the Bank reapplied for reimbursement.
On September 6,
1991,
the Agency notified the Bank by letter that it was eligible for
~
The Bank purchased the site from a financial
institution, which had taken ownership from the Federal Savings
and Loan Insurance Corporation, which,
in turn, had taken
ownership from another financial institution.
(Pet.
at 2.)
~
We note that ARDL also was overseeing remediation of the
DJM
property, which also belongs to the Bank;
the
DJM
property is
located to the north of, and adjacent to, the site at issue here.
~
The Agency record consists of Part
1,
Fiscal File, Books
A and B
(denoted as FFA and FFB); Part 2, Technical File
(denoted
as TF); Supplemental Agency Record
(denoted as SF) that was
stipulated into evidence at the December 16,
1992 hearing; and
the Bank’s Corrective Action Report
(denoted as CAR) containing
the original photographs filed pursuant to Board order.
Qtl~3-UO28
7
reimbursement but that the deductible would be $100,000.
The
Bank appealed the deductible to the Board,
but withdrew its
appeal after the Agency reduced the deductible to $10,000.
(See
PCB 91—190; Agency Br. at
6,
7; Pet. at 3,
4,
Exh.
B,
C; FFA at
24,
44,45.)
On May 14,
1992,
the Agency approved an “interim”
reimbursement of $320,000.
On
August
10,
1992, the Bank filed a
complaint in the Circuit Court in Franklin County against the
Director and the LUST Fund Manager of the Agency.
The complaint
included counts requesting mandamus relief and alleging violation
of the Administrative Procedures Act for failure to make a final
determination.
On September 14,
1992,
two days prior to hearing
on the complaint,
the Agency issued its final determination. It
is that determination,
as further modified by stipulation at the
Board’s hearing, that is now before the Board.
(Pet.
at
5,
6,
Exh. D,
E.)
Site Remediation
The site is bounded on the south and west by two roadways,
East Washington Street, which is a city street, and North Main
Street, which is Highway 37.
To the east is
a city alley and to
the north is the earlier discussed
DJM
property, which we note
was later excavated under a separate incident number.
The
remediation at the site involved boundary—to—boundary excavation,
with vertical walls,
to a depth of 14 feet.
A sandstone
formation was encountered at the bottom of the excavation. From
September
9,
1991 through October 10,
1991, approximately 11,600
tons of contaminated soil were excavated and taken to a landfill.
Starting on October
11,
1991 and for ten days thereafter,
backfilling took place.
The site was filled using 12 to 18 inch
lifts,
each compacted with a vibratory roller.
Nuclear density
tests,
to assure 95
compaction,
were performed on each lift by
Holcomb Foundation Engineering, a civil engineering
subcontractor.
(Tr.
at 133—138,
187, 213—219; TF at 62,
76,
135,
152; see
CAR
photos at 18—20.)
Contamination and Groundwater Concerns
Following the excavation, laboratory analyses of soil
samples collected within the excavated area confirmed that soil
at the south property boundary and the sandstone formation
exceeded the Agency cleanup objectives.
The south wall samples
also indicated that the contamination had migrated off-site.
An
unanticipated concern of considerable significance was the
presence of groundwater found at 12 feet.
Corrective action
included the removal of 36,800 gallons of perched water,
precipitation and groundwater.
(TF at 135,
139,
136,
144.)
Because the soil sampling indicated a potential for
groundwater contamination,
a groundwater monitoring plan was
01 q3-0029
8
established and
is still ongoing.
The corrective action plan to
date does not provide for off-site remediation.
Whether such
remediation will be necessary will be determined by future
groundwater monitoring results.
(Bank’s Br.
at 7; TR at 136.)
HANDLING CHARGES
There are three distinct categories of the disputed
$1,917.34 in handling charges.6
As categorized by the Agency,
they are “(a) handling charges associated with denied costs,
(b)
“duplicated” handling charges,
and
(c) handling charges in excess
of fifteen percent.”
(Agency Br. at 11.)
(a).
Roller/compactor and Nuclear Density Testing Handling
Charc~~
The parties agree that the disallowed $1,123.18 in handling
charges
is dependent on the outcome of the Board’s determination
regarding the disallowed roller/compactor and nuclear density
testing costs themselves.
As addressed later,
the Board
is
reversing the Agency’s denial of the roller/compactor and nuclear
density testing costs,
so the Agency’s denial of the associated
handling charges here is reversed.
b).
15
Billing by Both Consultant and Subcontractor
The handling charges
(also called handling fees)
that the
Agency disallowed
in this category total
$735.44.
ARDL, the Bank’s consultant,7 utilized a subcontractor,
Midwest Petroleum,
for small item field purchases,
e.
g., the
securing of rock and stone.
When the subcontractor submitted its
6
Douglas Oakley,
of the Agency’s Remedial Accounting
Procurement Unit in the Bureau of Land testified as to some of
what comprised the $1917.34 in handling charges denied,
referencing documents in the FFA.
In that both parties agreed in
their briefs that the following amounts were correct, the Board
will not disturb the totals.
However, the totals don’t “add up”,
and the Board has noted below at least two amounts that appear to
be in error.
The Board leaves any corrections to the discretion
of the parties:
$1123.18 for 15
handling charges associated
with roller/compactor charges
($247.50, $810.00 and $65.68);
$735.44 for contractor and subcontractor separate billings of 15
($242.54, $30.60,
$407.27 and $55.03);
$55.98
(sic)
for
adjustment in 46
handling charges
($49.61 and $6.37
(sic,
see
FFA
at
186))
and $7.12 for adjustment in 16
handling charge.
(Tr. at 21-28; Bank’s Br.
at
8; Agency’s Br. at 18.)
~
ARDL is sometimes referred to in this record as the
Bank’s consultant and sometimes as the contractor.
0 IL~.3-U03O
9
field purchase bills to ARDL,
it included its 15
handling
charge.
These Midwest Petroleum’s billings,
including the 15
handling charge, were paid by ARDL.
Then ARDL added its 15
handling charge to the Midwest Petroleum bill.
(For example,
see
FFA at
159.)
The Agency subtracted from Midwest Petroleum’s bill
its 15
handling fee and adjusted ARDL’s computation of its 15
handling fee accordingly.
The essence of the dispute between the Bank and the Agency
is whether both
ARDL
and Midwest Petroleum can add handling fees.
The Agency asserts that combined they exceed the Agency’s 15
limit and that these charges are duplicate charges.
We will first summarize the basis for the Agency’s policy
regarding the 15
rate.
There
is no dispute that the Agency had no statutory
guidance regarding the handling charge rate.8
At hearing, Mr.
Oakley testified that at some unstated point in time the Agency’s
policy was to pay a five percent handling charge, based on the
markup of its regular state contracts.
Then the Agency met with
various representatives of industry, owners and operators,
petroleum marketers and consultants to determine what was a fair
handling charge in relation to the market place price.
As a
result of these “market place” discussions, the Agency changed
its policy and established the 15
level.
Mr. Oakley stated that
it was possible that the Agency paid more than 15
on the basis
of competitive bidding, but he wouldn’t know what those handling
charges were because “it wouldn’t be apparent”.
(Tr. at 35; also
Tr.
at 28—34.)
Next, we will summarize the “duplicate charges” dispute.
The Agency asserts that it was Agency policy that a 15
handling charge was reasonable for the prime contractor on both
subcontracts and field purchases.
The Agency argues that it
never intended that there be two 15
handling charges on the same
item,
in effect more than doubling the handling charge for
Midwest Petroleum’s field purchases.
The Agency stated that,
even though neither handling charge exceeded 15,
the total was
unreasonable.
(Tr. at 37; Agency’s Br. at 17.)
The Bank argues that:
8
Section 22.18b(i) (1) and
(2)
of the Act (P.A.
87—1171,
HB 4039,
eff. September 18,
1992)
newly defines handling charges,
and establishes
a sliding scale of the percent allowable handling
charge, with the percent allowable decreasing as the costs
increase.
Both briefs alluded to the new language to support
certain of their positions,
but neither argued that it was
applicable to this proceeding.
01
L~3-003I
10
The problem with labeling this
15
handling charge as a
“double markup”
is that
it ignores the very standard
contracting and subcontracting business practice which the
Agency has identified as the basis for its limiting handling
charges to 15..
.The application of a flat 15
handling
charge inherently assumes there is one “tier” of billing,
e.g.,
the consultant orders supplies from a vendor and seeks
a
15
handling charge for carrying these costs.
However,
in the case of contractors, subcontractors and even sub—
subcontractors,
there can be two, three or more tiers of
parties carrying costs.
At each level,
costs are incurred
in administering subcontracted work,
such as arranging for
purchases and for carrying subcontract and field purchase
debt.
(Bank’s Br.
at 9.)
The Agency responds that:
At first blush this does not sound unreasonable,
but in
theory the practice of contract “stacking” could go on
~
infinitum.
.
.
.None of the contracting parties in
an example
given by the Agency
charge more than fifteen percent(15),
but the total handling charge imposed upon the
owner/operator
—
which does not represent actual corrective
action work done at the site
—
exceeds 100.
(Agency’s Br. at 16,
17.)
The Bank replies that, insofar as the Agency is implying
that there
is
“double dipping” in the Bank’s example, this is not
true:
ARDL assumed that a handling charge of 15
applied by the
subcontractor
(e.g.
“Midwest Petroleum”)
was reasonable and
acceptable to the Agency.
ARDL,
as the contractor,
incurred
certain costs to review the subcontractor billings, evaluate
charges, prepare billings and, most importantly pay the
subcontractor while bearing the cost of carrying the money
until reimbursement is received from the UST Fund.
Similarly,
the subcontractors incurred certain costs beyond
actual bills for materials,
as did ARDL.
Proper materials
must be selected, picked—up and/or delivered,
items require
storage until use, and the items must be paid for at the
time of delivery or pick-up....Midwest Petroleum and
ARDL
each attempted to cover their respective administrative
costs.
(Bank’s reply Br.
at 10.)
The Bank asserts that the result of the Agency’s argument is
that:
•
.
.the contractor can pay the subcontractor’s handling
charge and operate his own business at a loss, or the
contractor can keep the 15
and not pay the subcontractor’s
general and administrative overhead at the risk of being
0
LL~3-U032
11
unable to locate a subcontractor willing to bid.
Petitioner
submits that it is “reasonable” to reimburse the general and
administrative overhead costs of both the contractor and the
subcontractor.
(Bank’s reply Br. at 10,
11.)
The Agency also appeared to argue that:
a) the use of the
Agency’s “Subcontractor Summary” forms incorrectly identified the
field purchases as a subcontract9
and b)
in that the materials
were used by Midwest Petroleum on the job, such labor costs were
properly billed to
ARDL
as part of Midwest’s subcontract, and
ARDL appropriately assessed a handling charge; however it was not
appropriate for both to receive the maximum allowable handling
charge on the materials purchased.
(Agency Br. at 17,18.)
The issue before us
is one of reasonableness,
as regards:
the Agency’s limiting the handling charge to 15;
its
disallowance of a handling charge claim by the subcontractor; and
whether ARDL’s and Midwest Petroleum’s handling charge claims
were duplicates or were based on each one’s overhead.
As regards the Agency’s 15
limit per
se,
at least in this
handling charge dispute category, there seemed to be no argument
that 15
reflected practices in the market place.
We also note
that it was the Agency witness, Mr. Doug Oakley, who testified
that the 15
figure was established as a standard handling charge
only after Agency meetings with many persons familiar with the
market place.
In the absence of specifity in the Act or
regulation applicable to this proceeding, the Board agrees that
establishing the 15
handling charge by basing it on market place
practices is a reasonable approach.
The issue here is whether
the Agency, solely as a matter of policy and intent, can deny
access to the 15
handling charge to persons other than the prime
contractor.
The Board concludes that it
is inconsistent for the
Agency,
as a matter of policy, to allow a 15
handling charge on
the basis that this fairly reflects overhead costs in the market
place,
and then turn around and deny the 15
handling charge to
some persons simply because they are not the prime contractor.
The Board also is persuaded,
and so finds,
that the record
supports the subcontractor’s handling charges as based on
overhead costs separate from that of ARDL’s.
Therefore,
the Board reverses the Agency’s denial of
reimbursement of Midwest Petroleum’s handling charges.
c).
Handling charges in excess of 15
There were three billing submittals in this category.
The
~‘
We note that the Agency’s reimbursement form for
subcontractors includes the statement:
“The IEPA will pay no more
than a 15
handling charge.”
(FFA at 79.)
01 L~.3-0O33
12
Agency in all cases reduced the handling charges to 15.
They
were reduced from 46.4,
46
and 16.4
respectively, resulting in
a disallowance of $49.61,
$6.37 and $7.12 respectively.
The
Agency suggested that the 16.4
appeared to be a mathematical
error and the Bank did not discuss the issue.
Mr. Todd Gentles
of ARDL testified that the 46
handling charges resulted from
internally audited general and administrative costs plus a small
fee on small purchases, which was company policy at the time.1°
Gentles was unable to answer what constituted a small purchase,
and what the cutoff point was.
He noted that he thought it could
be as high as $5000, but that that determination is made by the
firm’s business manager.
(Tr. at 178,
179,
253.)
Mr. Gentles also testified that the company’s small purchase
policy was established years earlier, when it handled small
projects,
and then carried over to the LUST program on small
purchases.
The policy was developed at a time prior to the onset
of the high-cost LUST remediation projects and before the company
used outside subcontractors.
(Pr. at 252,253.)
The Agency argued that this testimony was insufficient to
establish that the 46
handling charge was reasonable.
The Board
agrees and so finds.
Mr. Gentles explained generally what ARDL’s
policy
~
but he was unable to provide with any specificity how
that policy was applied by his firm, certainly in a LUST setting.
‘°
Between the time of the filing of the Bank’s and the
Agency’s post-hearing briefs, the Board decided the case of
Beverly Malkey.
as Executor of the Estate of Roger Malkey, d/b/a/
Malkey’s Mufflers v.
IEPA,
(March 11,
1993),
PCB 92—104.
The
Agency quoted the Board’s holding on p.
3 of its opinion:
the
consultant...provided
no documentation to support his
claim.
Petitioner never submitted actual handling charges
by any other in the industry.
(See, Enterprise Leasing v.
IEPA (April
9,
1992), PCB 91-72,
132 PCB 79.)
...
The Board
finds that petitioner did not carry its burden of
demonstrating that the handling charges of 58
were
reasonable.
(Agency Br. at 20.)
The Bank conceded Malkey established a new element of proof
in demonstrating charges to be reasonable.
However, the Bank had
viewed that
it
had the burden to prove that the handling charges
as requested by petitioner were reasonable, and had no way of
knowing that the Board would require evidence of various industry
handling charges.
The Bank asserts that Nalkey is not applicable
to the instant appeal,
in that the Bank had no way to present
such evidence at this stage without opening the record of the
proceedings to address the Malkev holding.
The Board need not
find that Malkey
is controlling,
in that the Bank has not met its
burden of proof based on the record here.~~
0
L~3-U03k
13
Therefore, the Board affirms the Agency’s denial of
reimbursement of handling charges in excess of 15.
CORRECTIVE ACTION ISSUES
The remaining issues involve whether the activities for
which reimbursement is sought constitute corrective action,
rather than whether the charges were reasonable.
“Corrective action”
is defined in Section 22.18(e) (1) (C)
of
the Act as follows:
“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 response investigation, mitigation of fire and
safety hazards, tank removal,
soil remediation,
hydrogeological investigations,
free product removal,
groundwater remediation and monitoring, exposure
assessments,
and the provision of alternate water supplies.
Corrective action does not include removal of an underground
storage tank if the tank was removed or permitted for
removal by the Office of the State Fire Marshal prior to the
owner or operator providing notice of a release of petroleum
in accordance with applicable notice requirements.
Corrective action does not include legal defense costs.
Legal defense costs include legal costs for seeking payment
under Section 22.18b.
(415 ILCS 5/22.l8(e(l)(c)
(1992).)
The Board has held that,
in order for an action to
constitute corrective action, and thus the costs incurred to be
reimbursable,
the action must fulfill both aspects of the
“corrective action” definition,
i.
e.:
(1)
it is “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”; and,
(2)
such action “includes, but
is not limited to, release investigation, mitigation of fire and
safety hazards,
etc.
(See Enterprise Leasing Com~anvv. IEPA
(April
9,
1992),
PCB 91-174.)
We note that this holding has been
referred to variously as the Enterprise Leasing test, the “two—
pronged” test,
or “two—step” test.
We will refer to this as the
two-step test.
Roller/compactor and Nuclear Density Testing Charges
Ms. Lockhart testified for the Agency regarding the Agency’s
denial of reimbursement of $7050.00 in costs of roller-compacting
the backfill and $3047.40 in costs of nuclear density testing.
0! L~,3-0U35
14
At the time of hearing, she has been a project manager for
the past two years in the Agency’s LUST program, and made the
decision to disallow the Bank’s roller/compactor and nuclear
density testing charges.
Ms. Lockhart testified that she
performed two reviews of the technical file,
in December 1991 and
on May
12,
1992.
Ms. Lockhart did not believe that the
activities fulfilled the first step of the two—step corrective
action test.
Regarding safety concerns, she testified that
compacting clay along the boundary abutting the state highway
would depend on how close
it was, and whether the excavation was
shored pursuant to OSHA requirements.11
She did not think the
excavation had been shored.
She was not sure it needed to be in
order to support the highway, explaining that she wasn’t on site
and thus did not know exactly how close it was to the highway.
She also testified that the phrase in the corrective action
definition
“.
.
.or clean up
a release of petroleum or its effects
•
.
.“
meant environmental, not structural, effects.
(Pr. at 40,
41,
46,
49—51,
61,
71—73; FFB at 210, 211.)
Ms. Lockhart testified that each decision is site
specific, but that she had never seen a case where she has
allowed roller/compaction and nuclear density testing as
corrective action costs.
She had reviewed 120 sites,
and while
all of them used excavation and soil removal,
she did not
remember whether any of them involved compaction costs or whether
reimbursement was requested.
A primary factor she considered in
making her decision in this case was that the compaction appeared
~
In relation to the safety issue, both parties support
their positions by reference to the Bank’s alleged obligations
pursuant to certain requirements of the federal Occupational
Safety and Health Administration
(OSHA)
and of the State’s
Adjacent Landowner Excavation Protection Act.
The Agency argued
that safety factors were not corrective action because the Bank
was already obliged to do what it did.
(See.
e.
g. Agency’s Br.
at 32-34; Bank’s Reply Br.
at 14-16.)
Whatever the compliance
requirements may be in these documents
—
they are not part of the
record
-
they would not in any event be relevant to our
consideration here.
Questions of compliance with these statutes
or regulations are within the purview of those who administer
them,
not
the
Agency.
See
Rockford
Drop
Forge
Company
v.
Illinois
Environmental Protection Agency,
(December 20,
1990), PCB 90-46,
fn.
at
7;
The
Grigoleit
Company
v.
Illinois
Environmental
Protection Agency,
(June
4,
1992),
PCB 90—135, fn.
#9 at 10.)
In
like manner, we find nothing in the corrective action definition
that allows a charge to be reimbursed simply because it is
required by another statute or regulation.
If an action meets
the
definition
of corrective action it may be reimbursed whether
or
not
it
is
required
by
another
law.
If
it
does
not
meet
the
definition,
it
may
not
be
reimbursed
even
if
required
by
another
law.
01 L~.3-0036
15
to have occurred because the Bank intended to put a building on
the site.
She stated that, having never seen compaction costs
before, she discussed it with others, and was told that “the
frequence
(sic)
was done to put new buildings on the site.”
(Tr.
at 56.)
Ms. Lockhart also stated that her review included a June
12,
1992 letter from the Bank president,
Mr.
Steve Swinney,
stating that the Bank intended to construct a new building on the
“sites”, and she believed the letter was referring to the Bank’s
site and the
DJM
facility to the north.
(TF2 at 80; Tr.
56,
57,
92—93,
103.)
Ms.
Lockhart stated that she did not look at other factors,
such as groundwater conditions or other site specific issues in
reaching her decision.
(Tr. at 59-61.)
Mr. George Glass testified for the Agency regarding his site
visits.
He had been a project manager for about two—and—one—half
years and worked out of the Agency’s Marion office.
He approves
the corrective action plans after reviewing them for any
deficiencies regarding sufficiency of information and relevance
to remediating the site.
The first of his visits to the Bank’s
site occurred after the tanks had been removed.
He reviewed the
excavation with regard to the extent of the contamination and the
cleanup objectives.
If,
as here,
contamination is identified at
the boundary of a site,
and further excavation is not feasible,
because of a street or other structures,
then, based on further
testing, he confers with the owner/consultant doing the remedial
work as to the safety of proceeding further, and discusses Agency
concerns regarding devising a suitable alternative course of
remediation proposed.
He does not review reimbursement
applications,
and any recommendations he would have made to Ms.
Lockhart would have concerned only the physical aspects of the
cleanup, not questions related to reimbursement.
He has overseen
remediation for about 200—250 sites.
He was aware of one other
site in Carbondale where compaction activities occurred, but was
not aware of whether reimbursement was requested.
(Pr.
105—119,
133,
155—157,
159—161.)
Mr.
Glass testified as to his ongoing interaction with the
consultant regarding the boundary contamination, the odor and
visual stain problems on the sandstone floor and the presence of
groundwater.
He stated that monitoring wells were automatically
required in situations such as this when contamination goes off
site.
(Tr. at 142—158.)
Regarding safety concerns at the west and south wall
boundary excavations, Mr.Glass testified that there was a
potential that the soil would sluff off,
and agreed that it could
“affect the lateral subjacent support of that adjoining highway.”
(Tr.
at 158.)
Mr. Gentles testified that he is a petroleum engineering
01
I~3-OQ37
16
graduate from the University of Missouri, Rolla,
has been
employed by ARDL for eleven years, and presently administers all
ARDL’s
consulting projects related to environmental work.
He has
been involved with about 50 UST sites.
Mr. Gentles’ oversight
remediation responsibilities at the Bank site included the
investigation and remediation regarding the backfilling
activities.
He oversaw the taking of samples for lab analysis to
determine whether cleanup objectives had been achieved.
(Tr. at
168—173.)
Mr. Gentles testified that he would have advised the degree
of compaction of the soils regardless of the Bank’s future
building plans.
He stated that a lesser degree of compaction at
the site can create a tendency for the contaminants to bleed into
the backfill area, and that the contamination was confirmed as
going off the site.
He also stated that the structural integrity
of the side walls, particularly those on the west and south
walls, was a major concern.
He testified that Highway 37 was
within eight to ten feet from the property line, with city
utilities underneath the street.
He also stated that a main
water line feeds down the east alley and through Washington
Street.
His concern was that highway traffic could cause
sluffing and subsidence over time,
causing lateral movement that
would tear up the highway and fracture the underground utilities.
He was also concerned about personal injury,
in that the site
could have gradually subsided from six inches to two feet without
the compaction.
The nuclear density testing was undertaken to
achieve as much as possible the permeability values,
if not the
full cleanup objectives,
of the natural soils that had been
removed.
He stated that, as an engineer, he was concerned that
the backflow migration of subsurface waters would cause the
recontamination of the soils,
and asserted that the compaction
would very much minimize this problem.
He stated that the Agency
requested the monitoring wells because of its concern about the
impact of the site on the groundwater system.
(Tr. at 185-196,
220,
221.)
Mr Gentles also stated that he did not recommend use of a
geomembrane liner.
He asserted that,
although there was lesser
cost using
a liner without compaction, with compaction testing
there was lesser migration of contaminants.
He testified that
with the soil types in Illinois there is more benefit from actual
compaction than from a liner, which also could be damaged in the
process of backfilling and such damage would not be evident.
(Tr. at 227,228.)
We have reviewed the record and the arguments presented.
In
their arguments, both parties cite to Platolene 500 v. IEPA
(May
7,
1992), PCB 92—9,
a case which involved concrete replacement.
Platolene distinguished between corrective action and
restoration, and stated that which one applies is determined by
the particular facts surrounding the action.
(Also see Strube
V.
0! t43-0038
17
IEPA (May
21,
1992),
PCB 91-205.)
Both parties also refer to a
“safety hazard” exception,
citing to Platolene.
The Bank states,
“Platolene 500,
Inc., provides a ‘safety hazard exception”.
(Bank’s Reply Br.
at 14.)
The Board notes that Platolene
provides no such exception.
The word “safety” appears only one
time in Platolene,
and that is within a quotation on page
6 to
Section 22.18(e) (1) (C)
of the Act, which is the section defining
corrective action.
We also take note of a more recent Board
holding,
in Princeton/Beck Oil Company v.
IEPA
(May 5,
1993), PCB
93-8.
Beck involved compaction of a backfill.
The Agency argued
that the sole purpose of Beck’s compaction of backfill was to
shore up the foundation of
a building on the premises, pointing
out that the compaction did not affect the contamination.
The
Board agreed with the Agency that, under the facts presented,
Beck did not meet the first part of the two-step test,
and found
that the backfill in that case was analogous to the replacement
of concrete.
(Ibid. at
3,
4.)
The facts here are quite distinguishable from the other
cases.
Here,
the post—excavation environmental concerns are
evident, and the Agency shared those concerns.
Indeed, only
future results from the monitoring wells will show whether the
boundary-to—boundary roller/compaction and the nuclear density
testing were sufficient to prevent further contamination.
The
Agency record and the testimony show the growing, and often
unexpected,
environmental and safety problems as the remediation
progressed.
The Agency did not present any testimony addressing
its actual reimbursement decision that took into consideration
the actual conditions specific to the site; the testimony shows
that the decision that these activities did not constitute
corrective action was based solely on the Agency’s observations
that such compaction
is unusual and usually
is for the purpose of
providing building support.
In so stating, we note that the
record indicates that Ms. Lockhart was mistaken
(as the Bank
argues without Agency rebuttal, see Bank’s Br. at 17; Bank’s
reply Br. at 19)
when she testified that Mr. Swinney’s June
2,
1992 letter indicating planned construction was part of her
technical review,
in that this letter was not in the record at
the times she testified her reviews occurred,
namely in December,
1991 and on May 12,
1992.
We conclude, and so find, that the roller/compaction and
nuclear density costs meet the two-part test in the definition of
corrective action.
More specifically, the Bank took these
actions 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”, and the actions are of
the type contemplated by the statute.
Therefore,
the Board reverses the Agency’s denial of the
reimbursement of the Bank’s costs for the roller/compaction and
nuclear density tests.
As earlier discussed, the Agency’s denial
0
I
t43-0f339
18
of the accompanying handling charges are reversed as well.
Surveying Costs
The $5459.81 in survey costs for which the Agency denied
reimbursement were commissioned and paid for by the Bank, not
ARDL’s
engineer,
Mr. Gentles.
(FFA 214-228.)
A. Real Estate Plat
of Survey and Property Line Agreement was performed by Lawrence
A. Lipe and Associates,
Consulting Engineers
(surveyor).
The
survey encompassed the Bank site, the
DJM
property north of the
Bank,
and property across the alley to the east of the Bank site.
Included is a
property line agreement between the owners to the
east and the Bank.
(TF at 172; Agency Br.
at 41.)
Ms. Lockhart testified that the Agency did not require
surveys,’2 and to her knowledge the Agency had never reimbursed
for survey costs.
She acknowledged that ARDL appeared to rely on
the survey to conduct its corrective action, but that the
“physical act of performing
a survey is not corrective action”
(Pr.
at 70).
She stated that surveying costs do not meet the
first part of the two—part test of corrective action and are thus
not reimbursable.
(Tr.
at 61-70; FFB at 211.)
Mr. Gentiles testified that he was aware of a survey being
conducted.
The Bank’s purpose, to his knowledge, was to find out
the true boundaries of the site.
Mr. Gentles testified that he
had never ordered a survey for any other remediation project, but
that he had never before conducted a boundary—to—boundary
excavation,
adjacent to roads and water and sewer utilities.
He
asserted that even if the Bank had not commissioned the survey,
he still would have done so for this site.
He wished to keep the
DJM cleanup distinct; the survey assisted in remediation
decisionmaking,
including the question of off-site remediation;
and it was an important tool for addressing safety
considerations.
(Tr. at 198,
199,
202,
203,
240,
250,
251, 261;
TF 55.)
The Agency argued that requesting reimbursement for surveyor
costs
is analagous to Mr. Gentles’ use of the Joint Utility
Location Information for Excavators
(JULIE) map and the United
States Geological Survey
(USGS) topographical map; the fact that
such documents are used does not make the government’s costs
reimbursable as corrective action.
(The Agency also refers to
Mr. Swinney’s June 2,
1992 letter, which requested an Agency
12
There was considerable discussion as to whether
questions on the Agency’s reimbursement forms required a survey
to properly respond to them.
As the Board has earlier held, the
Board does not weigh the contents of such Agency documents in
reaching its UST determinations.
(Russell
L. Bacon v. IEPA
(December 17,
1992),
PCB 92—111.)
Ut
L43-QQL~Ø
19
sign—off regarding corrective action at the Bank site in order to
complete a real estate closing for the
DJM
site, which was
necessary to construct its new building.
Ms. Lockhart did not
testify about this.
The Board will not give weight to this
argument for this reason as well as for our reasons expressed
earlier
-
that this letter was not before Ms. Lockhart during her
review.)
(Agency Br.
at 40-43; TF at 79,
80.)
The Bank argues that the survey of the neighboring areas was
valuable in remediation decisionmaking.
The Bank argued that
conducting and relying on the survey were activities that
directly related to soil remediation,
and as such constituted
reimbursable corrective action.
(Bank’s Br.
at 20—22.)
While the Agency’s attempt to compare a government map with
a privately conducted survey map is off—point,
it does
articulate,
even if indirectly, what concerns the Board.
The record is clear that the Bank, not
ARDL,
commissioned
and paid for the survey.
As this opinion earlier states, ARDL
was the Bank’s engineering firm throughout the clean—up, starting
from September 22,
1989.
Mr. Gentles testimony leaves no
suggestion that the Bank ever even discussed the survey with him,
much less what he thought it should consist of.
The scope of the
survey, which included the boundaries of three properties, surely
went beyond the uses articulated by Mr. Gentles.
Even if the
survey might have been valuable for separate billing purposes
related to the cleanup of the two sites, this would not support
the argument that the survey constituted corrective action.
We do not dispute that Mr. Gentles made good use of the
survey, or that he felt the need to rely on a survey.
However,
the record persuades the Board that the Bank conducted the survey
for other purposes, and was made available to Mr. Gentles in the
same manner as would any other useful Bank document.
The
corrective action needs appear to have played little,
if any,
role in the rationale for commissioning the survey,
including its
scope.
In so saying, we do not wish to imply that survey costs
could not constitute corrective action in another factual
situation.
Here, however, the nexus between the particular
survey undertaking and the corrective action undertaking is
unacceptably remote.
Under these circumstances the Board
concludes, and so finds, that the costs of the survey do not meet
the first step of the two—step test.
The survey was not “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”.
Therefore, the Board affirms the Agency’s denial of
of reimbursement of the Bank’s survey costs.
Costs associated with Seeking Reimbursement from the Fund
01 L~3-Q0L~
I
20
The issue related to the denial of reimbursement for the
Bank’s personnel costs
of $1771.25 for preparing the application
is not a difficult one to define.
Essentially, the question is,
do
ARDL’S
costs for preparing reimbursement packages constitute
corrective action.
The Bank presents essentially two arguments:
1) that it
is a costly undertaking because much of the cost is
incurred in response to the Agency’s format/information
requirements and subsequent requests for large amounts of
information; and b) that the Agency had been reimbursing these
costs since the inception of the reimbursement program, and then
abruptly reversed its policy.
(Bank’s Br. at 23,
24.)
The Agency argues that the notion that reimbursement of
costs is somehow associated with what remediation services are to
be performed is incorrect.
The Agency also contends that, what
may be reimbursable from the Fund for documentation costs is not
determined on the basis of whether the Agency required it.
(Agency Br.
at 43-45.)
The Board finds that the definition of corrective action
does not encompass the recovery of moneys from the Fund.
Costs
of corrective action involve abating a release of contamination.
Costs of applying for reimbursement from the Fund involve who
pays.
Whether or not the Fund existed,
corrective action would
be required.
Seeking monies from the Fund is not required.
We
find nothing in the definition of corrective action that links
those actions with actions taken to seek access to the Fund.
We
particularly reject the notion that corrective action strategies
can be dictated by whether the costs are reimbursable from the
Fund.
We also note that the Board has previously found that the
Agency’s prior actions,
if in error,
are properly remedied by
correcting the error,
not perpetuating it.
(Chemrex,
Incorporated
v.
IEPA (February
4,
1993), PCB 92-123.)
Therefore,
the Board affirms the Agency’s denial of
reimbursement for the Bank’s costs associated with seeking UST
Fund reimbursement.
CONCLUSION
For the reasons expressed above,
the Board affirms the
Agency’s denial of reimbursement to the Bank for: handling
charges in excess of 15;
surveying costs,
and costs associated
with seeking reimbursement from the Fund.
For the reasons
expressed above, the Board reverses the Agency’s denial of
reimbursement to the Bank for:
15
handling charges related to
roller/compactor and nuclear density testing costs;
15
handling
charges of the contractor/subcontractor; and costs associated
with roller! compaction and nuclear density testing.
This opinion constitutes the Board’s findings of fact and
conclusions of law in this matter.
0! L~.3-0QL~.2
21
ORDER
The Board hereby affirms the Agency’s September 14,
1992
determination to deny reimbursement to the State Bank of
Whittington for:
1)
$55.98 in handling charges in excess of
15.
(But see footnote #6.)
2)
$5,459.81 in surveying costs.
3)
$1,771.25 in personnel costs associated with seeking
reimbursement from the Fund.
The Board hereby reverses the Agency’s September 14,
1992
determination to deny reimbursement to the State Bank of
Whittington for:
1)
$1,123.18 in handling charges associated with
roller/compactor and nuclear density testing charges.
2)
$735.44 for contractor/subcontractor 15
handling
charges.
3)
$7,050.00 and $3,047.50 in costs associated with
roller/compactor and nuclear density testing charges,
respectively.
IT IS SO ORDERED
Section 41 of the Environmental Protection Act, (415 ILCS
5/41
(1992)), provides for appeal of final orders of the Board
within 35 days.
The Rules of the Supreme Court of Illinois
establish filing requirements.
(But see also 35 Ill. Adm. Code
101.246,
“Motions for Reconsideration”.)
J. Theodore Meyer concurs
I, Dorothy M.
Gunn,
Clerk of the Illinois Pollution Control
Board, hereby certify that the abov
opinion and order was
adopted on the
~
day of
____________,
1993, by a vote
of
~
.
Dorothy N.,4unn, Clerk
Illinois E(9!llution Control Board
01~3-00t~3
