ILLINOIS POLLUTION CONTROL BOARD
December 19,
1991
PAUL ROSMAN,
)
Petitioner,
PCB 91—80
v.
)
(UST Reimbursement Determination)
ILLINOIS ENVIRONMENTAL
)
PROTECTION AGENCY,
Respondent.
R. DELACY PETERS, JR., JONES, WARE & GRENARD APPEARED ON BEHALF OF
THE PETITIONER,
and
RONALD
L.
SCHALLAWITZ
APPEARED
ON
BEHALF
OF
THE
ILLINOIS
ENVIRONMENTAL PROTECTION AGENCY.
OPINION AND ORDER OF THE BOARD
(by J.D.
Dumelle):
This matter is before the Board on a petition for review filed
on May
13,
1991 by
Paul Rosman
(“Rosman”)
pursuant
to
Section
22.18b(g)
of
the
Environmental
Protection
Act
(“Act”)
seeking
review of the Illinois Environmental Protection Agency’s (“Agency”)
denial
of
certain
costs
in regards
to Rosman’s
application
for
reimbursement
from
the Underground
Storage
Tank
Fund
(“Fund”).
Hearing was held on September
5,
1991 in Chicago,
Illinois.
FACTS
Rosman owned and operated
a gasoline dispensing
station for
38
years,
until
1986.
From
1986 until
1989,
Rosman
leased
the
station.
The station was eventually sold in November of 1990 after
at least two potential
sales
failed to
close
(Tr.
at
30..)
The
record
states
that
the underground storage
tanks
(“USTs”)
were
pulled
on December
13,
1989
as
a result of a contract and offer
pending as of October
31,
1989.
(R.
at 19—23.)
Subsequent to the
removal of the tanks, the contractor informed Rosman that a release
of petroleum had occurred.
As a result of this information, Rosinan notified the Emergency
Services
and
Disaster Agency
(ESDA)
and
initiated
a
full-scale
cleanup.
The total remediation costs incurred by Rosman amounted
to $107,638.82.
(R.
at
63.)
On August
13,
1990,
Rosman
filed
his application for reimbursement with the Agency.
On September
7,
1990
the
Agency
notified
Rosman
he
was
eligible
for
reimbursement
from
the
Fund
and,
further,
his
deductible
was
$10,000.
(R.
at
41.)
This letter indicated that the eligibility
determination and the appropriate deductible were based on a review
of the application for reimbursement only.
The letter stated that
“the
corrective
action
costs
will
be
reviewed
separatel~’ to
128—253
2
determine
if they are allowable”.
(R. at 41.)
On April
10,
1991,
the Agency sent
Rosmari
a letter stating
that
it had “completed its review of the claim for reimbursement
of corrective action costs
from
the Illinois Underground Storage
Tank Fund”.
(R. at 63.)
Noting that the total sum of the invoices
presented by Rosman amounted to $107,638.62, the Agency reimbursed
$92,550.42.
In arriving at this amount, the Agency subtracted the
$10,000
deductible,
$500
for
charges
incurred
prior
to
the
notificajion
of ESDA,
and $4,588.40 for the initial tank removal
costs.
In regards to the tank removal, the Agency stated that the
owner
failed
to
provide
a
demonstration
that
the
costs
were
reasonable
as submitted and cited Section 22.18b(d) (4) (C)
of the
Act
Ill.
Rev. Stat.
1989,
ch. 111—1/2, par.
1022.18b(d) (4) (C)
as
its authority.
On Nay 13,
1991,
Rosman appealed the Agency’s decision.
The
case was accepted by the Board and hearing was held on September
5,
1991 in Chicago, Illinois.
At hearing,
Rosman testified that he solicited
several
bids
and
received
four
estimates,
three
of
which
were
substantially
higher than the actual expenditure ultimately
made.
(Tr.
at
23-
25.)
Accordingly,
Rosman contends that his
actions
surrounding
the
removal
of
the
tanks
were
reasonable
and,
therefore,
recoverable under Section 22.l8b(d) (4) (C). of the Act.
Given the
language
and
the statutory
citation
of
Section
22.18b(d) (4) (C)
within the Agency’s April
10, 1991 letter, Rosman alleges this is
all he need prove
in order to be entitled to reimbursement.
The Agency, on the other hand, maintains that the “reasonable”
test in 22.l8b(d) (4) (C) consists of two stages.
First,
the Agency
must consider whether the money was spent in relation to corrective
action.
Second, there must be an assessment of whether those costs
were reasonable.
This test is admittedly an Agency interpretation.
(Tr. at
13.)
In
the
case
at
bar,
the
Agency
attempted
to
prove
that
Rosman’s
removal
of
the
tanks
did
not
meet
the
definition
of
corrective action and were therefore non—reimbursable.
On cross—
examination of Rosman,
for example, counsel for the Agency sought
to establish that Rosman had removed the tanks pursuant to a real
estate contract.
The petitioner objected on relevancy grounds and
the objection was sustained.
Regardless of the ruling,
however,
the record clearly states that Rosman removed the tanks due to a
pending
real
estate
contract.
(R.
at
19-24.)
The
Board
will
therefore consider this information.
As its only witness, the Agency put on Christopher L. Nifong,
an Agency employee who was responsible for reviewing the costs of
Rosman’s application.
Mr.
Nifong testified that Rosman was not
reimbursed for his~tank removal because the expenditures were not
128—254
3
associated
with
corrective
action.
(Tr.
at
86.)
However,
petitioner’s counsel made a motion to strike this testimony, which
the hearing officer granted.
(Tr.
at 104.)
The hearing officer
held that the “testimony that has been elicited regarding the fact
that the Agency’s decision was based upon the fact that this was
a planned removal
is
not relevant to the Agency’s determination
that the costs in the amount of $4,588.40 were not reasonable.
So
I
am
going
to
grant
the
motion
to
strike.”
(Tr.
at
104.)
Consequently,
the Agency was left with no witness, but merely
an
offeç of proof.
DISCUSSION
Our
initial
inquiry
is
whether
the
hearing
officer’s
determination to strike Mr.
Nifong’s testimony was correct.
In
spite of the fact that the Agency offered no reason or authority
for
reversing
the hearing
officer1,
we will
do
so
today.
In
support thereof, we look to our enforcement rules found at 35 Ill.
Adm. Code 103.204
(a)
and
(b).
a)
The
Hearing
Officer
shall
receive
evidence
which
is
admissible
under
the
rules
of
evidence as applied in the Courts of Illinois
pertaining
to
civil
actions
except
as
these
rules otherwise provide.
The Hearing Officer
may
receive
evidence
which
is
material,
relevant,
and
would
be
relied
upon
by
reasonably prudent persons
in the conduct of
serious
affairs
provided
that
the
rules
relating
to
privileged
communications
and
privileged topics shall be observed.
b)
When
the
admissibility
of
evidence
depends
upon an arguable interpretation of substantive
law,
the
Hearing
Officer
shall
admit
such
evidence.
In
view
of
these
two
provisions,
we
hold
today
that
the
testimony of Mr. Nifong should have been admitted.
In supporting
the Agency’s assertion that costs which are unrelated to corrective
action are not reimbursable, a reasonably prudent person would have
considered the testimony of the employee who conducted the review,
especially if the basis of that reasoning (as is the case here)
is
contained within
the
record.
Accordingly, we
find the Agency’s
interpretation to be relevant.
Moreover,
the controversy
in the
instant
case
is
centered
on
an
“arguable
interpretation
of
substantive law” pursuant to subsection
(b).
Consequently,
the
1The Agency argued
that the
issue
of whether the testimony
should be stricken was a factual assessment
(Resp. Br.
at 5), when
in fact,
it
is purely of
a legal nature.
128—255
4
hearing officer should have admitted the evidence.
Having
established that
Mr.
Nifong’s testimony should have
been admitted pursuant to our rules governing admissible evidence,
we now turn to the issue of whether the Agency’s 39(a)
letter was
sufficient
so
as
to
conform
to
the principles
of
fundamental
fairness.
In
doing
so,
we
stress
that
the
admissibility
of
evidence and the adequacy of a 39(a)
letter are separate issues.
For example,
the
transcript
indicates
that the
hearing officer
struck
Mr.
Nifong’s testimony because
it did not relate
to the
denial letter.
(Tr. at 133-134.)
However, the purpose of a 39(a)
letter is to frame the issues on appeal whereas the purpose of 35
Ill. Adm. Code Section 103.204 relates solely to the admissibility
of evidence.
We can envision circumstances where evidence should
be admitted pursuant to our rules but cannot be considered due to
principles of fundamental fairness.
Therefore,
our next
inquiry
is whether
the Agency’s
39(a)
letter
is
sufficient to conform
to the precepts
of
fundamental
fairness.
In Pulitzer v. IEPA, PCB 90-142
(December 20,
1990), we
held that the Agency’s denial
of eligibility
for the
Fund must
comport
with
the
requirements
of
Section
39(a)
of
the
Act.
Consequently,
an Agency statement denying reimbursement
from the
Fund on the basis of unreasonable costs must also comply with the
dictates
of
Section
39(a).
Such
information
is
necessary
to
satisfy
principles
of ~fundamental fairness
because
it
is
the
applicant
who
has
the
burden
of
proof
before
the
Board
to
demonstrate that the regulatory and statutory bases for denial are
inadequate to support that denial.
Technical Services Co. v.
IEPA,
PCB 81-105
(November
5,
1981).
For that
reason,
an
applicant
seeking
reimbursement
from the Fund
is
entitled
to
a
statement
detailing the reasons for denial and the statutory and regulatory
support
for
such
denial.
Pulitzer
v.
IEPA,
PCB
90—142
at
6,
(December 20,
1990)
In Pulitzer, we also stated that:
Pursuant
to
Section
39(a)
of
the
Act,
where
the Agency has determined
that permit
denial2
is
warranted,
the
denial
statement
constitutes
the
Agency’s
“final
action”.
Principles
of
fundamental
fairness
require
that
an
applicant
be
given
notice
of
the
statutory and regulatory bases for denial
of
an application of reimbursement and that the
Agency be bound on review by those cited bases
for
denial
given
in
its
denial
statement.
Fundamental fairness would be violated if the
Agency were free to cute additional statutory
2For purposes of 39(a),
a “permit denial” is akin to denial of
reimbursement.
128—256
5
and
regulatory
reasons
for
denial
for
the
first time at
the
Board hearing.
The Board
concludes
that
the Agency
cannot
rely
upon
those regulations not previously cited in the
denial
letter
as
support
for
its denial
of
Pulitzer’s application for reimbursement.
PCB 90—142 at 7,
(October 20,
1990).
(Emphasis added.)
Thu~ we must decide
whether the Agency’s
39(a)
letter
is
sufficient to inform Rosman of the basi~sof the Agency’s denial.
The Agency’s letter in pertinent part,
states:
The Agency
has completed the review of
the
claim
for
reimbursement
of
corrective
action
costs
from
the
Illinois Underground Storage Tank
Fund.
The
invoices
reviewed
covered
the
period
from
November
17,
1989
through Nay 5,
1990.
The total amount represented by the
above invoices came to $107,637.82.
The deductible
amount to be assessed on this claim
is
$10,000.00, which
is being deducted from this payment.
Listed below are costs which are not being reimbursed,
including
the
re-ason
these
costs
are
not
being
reimbursed.
1.
$500.00
for
charges
incurred
prior
to
the
notification made
to
the Illinois
Emergency
Services
and
Disaster
Agency.
(Ill.
Rev.
Stat.
1989,
Chap.
111-1/2,
Para.
1022.18b(d) (4) (D))
2.
$4,588.40
for
an adjustment
in tank
removal
costs.
The
owner
or
operator
failed
to
provide
a demonstration that the
costs
were
reasonable
as
submitted.
(Ill.
Rev.
Stat.
1989, Chap. 111—1/2, Para. l022.l8b(d) (4) (C)).
(R. at
63, emphasis added.)
Rosinan does not dispute the pre-ESDA costs3 but maintains that
the costs of the tank removal were reasonable pursuant to Section
22.18b(d) (4) (C) of the Act.
Section 22.18b(d) (4) (C)
states:
3upon review of the record, the Board notes that the $4,588.40
removal expenditure was incurred on December
13,
1989
-
two days
prior to the ESDA notification.
(Tr. at 96,
R. at 62,
74, 75.)
On
this basis alone, the costs •are not reimbursable pursuant to North
Suburban Development v.
IEPA,
PCB 90-109
(December
6
& 19,
1991).
128—257
6
•
.
.
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 demonstrated
the
financial need for
joint payment to the
owner
or
operator
and
the
owner’s
or
operator’s
contractor
in
order
to
pay
such
costs...
(Emphasis added.)
Based on the provision cited by the Agency, Rosman maintains
that the
cost
of
the tank
removal
is
reasonable
in
that
four
estimates
were
received
and
Rosman
used
the
lowest
bid.
Conversely,
the
Agency
asserts
that
the
costs
are
inherently
unreasonable because
they
are
outside
the
scope
of
corrective
action.
For the
following
reasons,
we
find that
the Agency’s
argument does not violate the principles of fundamental fairness.
It
is
well-settled
that
the
information
in
the
denial
statement frames the issues on review.
Centralia v.
IEPA,
PCB 89—
170
at
6
(May
10,
1990);
City
of Metropolis
v.
IEPA,
PCB
90-8
(February
22,
1990).
As mentioned
above,
this
information
is
necessary because the burden of proof is on the petitioner to prove
that
the
Agency’s
denial
reason
was
insufficient
to
warrant
affirmation.
If
the
petitioner
is
unaware
of
the
issues,
the
proceeding would be fundamentally unfair.
In the instant case,
the Agency did not categorically state that reimbursement was being
disallowed because the tank removal did not constitute corrective
action.
Yet the Agency’s September 7,
1990 letter granting Rosnian’s
eligibility stated that “(t)he above decision is based on a review
of the Application for Reimbursement only,
the corrective action
costs
will
be
reviewed
separately
to
determine
if
they
are
allowable.”
(R.
at
41,
emphasis
added.)
Further,
the
denial
letter of April
10,
1991 stated that “(t)he Agency has completed
the
review
of
the
claim
of
reimbursement
of
corrective
action
costs...”
(P. at 63, emphasis added.)
Finally, the reimbursement
form
which
Rosman
or
his
agent
filled
out
is
entitled
“Reimbursement for UST Correction Action Costs”.
We find that a
sufficient nexus exists between reasonable costs as articulated in
Section
22.l8b(d) (4) (C)
and
costs
associated
with
corrective
action.
We also note that the Agency did not cite
additional
statutory or regulatory bases for its denial, but instead attempted
to define the scope of what is “reasonable”.
Accordingly, we find
that the Agency’s denial letter,
although poorly
articulated,
is
not fundamentally unfair.
There is little doubt that the denial letter could have been
framed more precisely.
The Agency could have simply cited 22.l8b
et. seq., and stated that the costs were unreasonable as submitted
128—258
7
because they were unrelated to corrective action.
A quick review
of
the
statute
reveals
many
sections
which
state
that
only
corrective action costs
can be reimbursed.
(See,
e.g.,
Sections
22.18b,
22.18b(b)
,
22.18b(c)
,
22.18b(d) (2),
22.18b(d) (3) (D)
22.l8b(d)(3)(E).)
Additionally,
the Agency could have cited the
definition of corrective action.
However, the Board does not find
that the Agency’s failure to be more specific resulted in a denial
of
fundamental
fairness.
Therefore,
we
hold
today
that
the
Agency’s denial letter comports with the dictates of Section 39(a).
Our
final
inquiry
remains
an
assessment
of
the
Agency’s
central argument; namely, whether the removal of the tanks did not
constitute corrective action.
While the Agency equates costs which
are not related to corrective action with a “planned removal”,
we
fail
to see
the
correlation.
Simply because
a
tank removal
is
planned does not rule
out the possibility of corrective
action.
Instead,
the relevant
inquiry
is whether
a
tank
removal
always
constitutes corrective action.
We hold today
that
it does not.
Corrective action is defined within the Act as:
• 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.
Ill.
Rev.
Stat.
1989,
ch.
111—1/2, par 22.18(e) (1) (C).
In the case at bar,
Rosi-nan, by his own admission4, removed the
tanks due to a pending real estate contract.
This is not an action
to
“stop,
minimize
or
eliminate.
.
.a
release
of
petroleum”.
Irrespective
of
the
existence
of
the
Fund,
Rosman
would
have
removed his tanks
in order to sell the property.
Had he removed
the tanks and found no release, he would not have been reimbursed.
We find today that the only way tank removal can be classified as
corrective action is if that removal was undertaken in response to
a preidentified release.
Because Rosman’s activity in the instant
case does not meet this standard, it follows that his tank removal
does not comprise corrective action.
In making this determination,
we recognize that “corrective
4Although Rosman did not fill out his application to the Fund
personally,
his agent did and he signed it.
(Tr.
at 27.)
128—259
8
action”
includes “tank removal” by statutory definition.
Reading
the entire definition in context, however,
it is clear that tank
removal, release investigation or those other specified activities
found within the definition must be an action to “stop, minimize,
eliminate or clean
up a release of petroleum...”
In this case,
the evidence demonstrates that Rosman’s removal of the tanks was
not for this purpose.
Rather, the tanks- were removed in order to
expedite a real estate transaction.
Accordingly, we find merit in
the Agency’s argument and hold today that a tank removal does not,
in and of itself, always constitute corrective action.
ORDER
For the reasons stated herein, the April 10,
1991 decision of
the
Agency
denying
Rosman’s
tank
removal
costs
($4,588.40)
is
hereby affirmed.
IT
IS SO ORDERED.
Board Members
J. Anderson and B.
Forcade concurred.
Section
41
of
the Environmental
Protection Act,
Ill.
Rev.
Stat.
1989
ch.
111—1/2,
par.
1041,
provides for appeal of
Final
Orders of the Board within 35 days.
The rules of the Supreme Court
of Illinois establish filing requirements.
I,
Dorothy M.
Gunn,
Clerk of the Illinois Pollution Control
Board, hereby certify that, he above Opinion and Order was adop’ted
on the /~‘~ day of
—--i
,
1991 by a vote of
~
Dorothy
M. ,G~j~nn,Clerk
Illinois P~lution Control Board
128—260