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BEFORE THE POLLUTIOI4
C
TROL BOARD
STAtE OF
1LL~n~
OF THE STATE OF ILLINOIS
r’o!Iutlon
Control
Boara
DALEE OIL COMPANY,
vs.
Petitioner,
ILLINOIS ENVIRONMENTAL
PROTECTION AGENCY,
Respondent.
)
)
)
)
PCB No.
03-118
)
PCB No.
03-119
)
PCB No.
03-150
)
(UST Fund)
)
)
)
NOTICE
Dorothy.M. Gunn, Clerk
Illinois Pollution
Control Board
State of Illinois
Center
100 West Randolph Street
Suite
11-500
Chicago, IL
60601
Carol Sudman
Hearing Officer
Illinois
Pollution Control Board
1021 North Grand Avenue East
Springfield,
IL
62794
John
J.Kim
Assistant
Counsel
Special Assistant Attorney General
Division of Legal Counsel
1021 North Grand Avenue, East
P.O.
Box
19276
Springfield, IL
62794-9276
PLEASE
TAKE NOTICE that I have today filed with the office of the
Clerk of
the Pollution Control Board a Brief ofPetitioner,
a copy ofwhich is herewith served
upon you.
Curtis W. Martin
IL ARDC No. 06201592
SHAW
& MARTIN, P.C.
Attorneys
at Law
123
S.
10th Street, Suite 302
P.O.
Box 1789
Mt. Vernon,IL 62864
Telephone
(618)
244—1788
/
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7~
By
/~4;
/Curtis
W. Martin,/ttorney
for
C
DaLee Oil Comp~.ny,Petitioner
(~Iá~iV;~~IiI
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fl
CLERK’S OFFICE
H
CCD
0 ~
?OO~
BEFORE
T~ITh
~POL
•,PI
I
TROL BOARD
~jL~1
~J
-
~
O1~ThtINOIS
STATE OF
ILLINOIS
Pollution
Control Board
DALEE OIL COMPANY,
)
)
Petitioner,
)
)
PCB
No. 03-118
vs.
)
PCB No. 03-119
)
PCB No. 03-150
ILLINOIS
ENVIRONMENTAL
)
(UST Fund)
PROTECTION AGENCY,
)
)
Respondent.
)
BRIEF OF PETITIONER
NOW COMES the Petitioner, DaLee Oil Company,
(“DaLee”), by one of its
attorneys, Curtis
W. Martin of Shaw
& Martin, P.C.,
and for its Brief pursuant
to
the Hearing Report of the Hearing Officer filed August
6,
2003, states as follows:
This consolidated appeal is with regard to DaLee’s three separate
requests
for reimbursement
of corrective action costs covering the respective periods of time
ofSeptember
1 through November 30,
2001, July
1 through September 30,
2001 and
November 1,
2001 through August 31,
2002 under
a lease with United
Science
Industries,
Inc.
(“USI”) for a Groundwater Treatment and
Soil Vapor Extraction
Unit (“Unit”).
DaLee sought reimbursement
of the full $3,750.00 per month lease
fee charged by USI.
The Illinois Environmental
Protection Agency
(“Agency”)
indicated its willingness to reimburse
DaLee at the monthly
rental rate of
$2,457.31.
This consolidated appeal
followed.
Joe Kelly, the Chief Financial Officer for USI, provided testimony concerning
the Unit, its use, and the charges for its use.
Mr. K9lly is a licensed professional
engineer in Illinois
and other states,
has been employed in the environmental
remediation industry
since 1991,
is the certifying professional engineer with regard
to the DaLee project, and was involved with the design of the Unit.
The DaLee site falls within the application of Section
731
of the regulations
ofpetroleum leaking underground
storage tanks,
35 Ill. Adm.
Code Section
731,
et.
seq.
The significance of a project being governed by
Section 731 regulations,
according to Mr. Kelly,
is that remediation
work under a Corrective Action Plan
can
begin without
seeking or obtaining prior Agency approval for the costs budgeted for
the work to be performed under the Corrective Action Plan.
USI,
however,
sought
and obtained prior Agency approval for the use of the Unit at the DaLee site.
Mr. Kelly testified that the DaLee site was unique in that there existed both
soil and groundwater
contamination which had also migrated to other sites.
Therefore,
USI employed a Unit which performed soil vapor extraction in addition
to groundwater treatment.
Mr. Kelly has been involved in the design and operation
of eight
(8) other units of the kind involved in this
appeal.
The Unit involved in the
present case was larger than
any other he had
designed before.
The Unit uses a dual phase
extraction connected to recovery wells placed on
the
DaLee site to extract both groundwater and soil vapor at the same time housed
within the same Unit.
Once the Unit’s
design was approved by the Agency, it was
manufactured by Carbon
Air
Envionmental
Systems,
Inc.
(“Carbon Air”).
USI chose
the regenerative
blower type of unit as opposed to the liquid ring pump system
/.
2
because there was less maintenance
and operation
costs for the regenerative
blower
type unit.
USI purchased
the Unit in September,
2000 from Carbon
Air
at a cost of
$83,69L00.
USI paid $8,691.00 down for the Unit and financed the remaining
purchase price on a lease to own basis with Preferred Capital Corporation
over 36
months.
USI chose
a
36 month financing period to coincide with the length
of time
it anticipated the Unit would be necessary at the DaLee site.
USI’s monthly
payment requirements for the financed
$75,000.00 portion of the Unit’s purchase
price was $2,520.11.
The sales tax applicable
to the purchase was paid monthly
at
the rate of $157.51, causing the total
monthly payment by USI to be $2,677.62.
As a for profit corporation,
USI amortized the $8,691.00
down payment
over a
24-month period as an internal accounting
method to recoup the return of its
down
payment over a shorter period of time.
USI concluded its calculation of a monthly
rental charge by adding a 25
overhead charge bringing the total charges
to
$3,772.86.
USI
rounded this
figure down to the current $3,750.00.
USI’s intent
was to charge the monthly rate supported
by the industry
as if USI were the
manufacturer,
but charged a lesser amount than the manufacturer
would charge.
Mr. Kelly described the 25
overhead charge based upon his familiarity,
as
USI’s Chief Financial Officer,
with USI’s costs
of operation.
In determining the
monthly rental charge to assess
DaLee, USI, in addition to simply “running the
numbers” as described above, inquired ofother industry professionals
as to what a
reasonable
rental charge for a Unit at this
type wou),d be.
USI was informed that
3
the rental charge for a Unit of this type would be approximately $5,000.00 per
month.
Accordingly, USI’s rental
charge of $3,750.00 is well within the industry
standard for rental charges of a Unit of this type.
In addition,
Mr. Kelly testified
that
a smaller unit at an Alton, Illinois site which USI is remediating was charged
and reimbursed by the Agency at a rate of $3,000.00 per month.
The Unit was placed in use at the DaLee site in January or February of 2001
and the rental
charges for the Unit were first assessed by USI in February of 2001.
Although the Unit has been operating at the DaLee site for over two
(2) years,
Mr.
Kelly testified that it may be required beyond the original three-year period
estimated—the
periodic contamination data will determine the necessity for the
length ofits use.
Because the Unit was designed specifically for the DaLee site, it is
unlikely to be adapted to
a different site and an estimate ofits salvage value is
difficult, if not impossible,
to calculate at this time.
According to Mr. Kelly, the data
collected following the operation of the Unit
showed that the groundwater
contamination
and the concentration ofvapors had
diminished,
which lead him to
believe the Unit appeared to be performing the needed remediation.
Brian Bauer, a Project Manager with the Agency, who reviewed the
reimbursement
requests from USI with regard to the DaLee site, calculated the
$2,457.31 approved reimbursement rate by taking what he called the “system cost”
of $83,691.00 and subtracted
a $1,250.00
salvage value to reach an $82,441.00
net
system
cost.
He then calculated a handling charge based on the $82,441.00 net
/.
4
system cost, totaling
$6,022.05,
for a total
cost of $88,463.05 amortized over 36
months.
Mr. Bauer also testified that in response to an Agency request for a written
lease for the Unit between USI and DaLee the Agency received the lease to own
document between USI and Preferred Capital.
The lease to own document between
USI and Preferred Capital was not the Agency’s concern, according to Mr.
Bauer,
but rather the lease between USI and DaLee.
The Lease between USI and DaLee
provides for a $3,750.00 monthly rental charge for the Unit.
Yet, however,
Mr.
Bauer then uses the information provided by USI with regard to its lease to own
arrangement with Preferred Capital
to make his determination
of a reasonableness
of its reimbursement
for the use of the Unit.
This is the heart ofDaLee’s appeals.
The cost to USI to operate the Unit is not what determines
the
reasonableness
of its monthly charges.
Rather, it is what the reasonable
charge in
the industry
is
to DaLee for the rental of the Unit
of this nature.
Mr. Kelly testified
that
USI has never been requested by the Agency to provide information concerning
the costs of its operation of a backhoe or a tractor/trailer
or the wages it pays its
laborers.
It is precisely this type of information that
is not available
to the Agency
when it is called upon to determine the reasonableness of a reimbursement
request.
Mr. Bauer flatly stated that the Agency makes its reasonableness
determination
based
upon the costs of the system, the salvage value, and the appropriate handling
charges, regardless
of what the lessor may request from the owner/operator
for such
lease charge.
DaLee submits that this is virtually impossible
in every other
5
reimbursement request scenario because those costs and salvage values are
proprietary
information to a lessor.
It is
only in this particular case that the Agency
was made privy to USI’s costs, and the Agency has now used that information to
approve a reimbursement
of an amount even less than the costs
USI incurs.
In addition,
the Agency’s approved reimbursement rate is
only for a
maximum of 36 months because “the system would be paid offin that period of
time” according to Mr. Bauer.
Again,
this is based
upon the
36 month lease to own
arrangements between USI and Preferred Capital, information the Agency would
not normally be privy
to.
The truth ofthe matter
is the Unit could very well be
required for the remediation at the DaLee site far beyond 36 months, but the
Agency will not
allow rental charges to be reimbursed beyond the
36 month
period.
The Agency
sites Section 22. lb(d)(4)(C)
ofthe Environmental
Protection
Act,
415
ILCS 5/22.lb(d)(4)(c),
as a basis
for its disallowance of the rate ofrent for the
Unit requested by DaLee.
Section 22.lb(d)(4)(C) has been repealed.
Nevertheless,
the gist of the Agency’s position is that the charges requested by DaLee are
unreasonable.
The testimony of Mr. Kelly, the only witness
with the experience and
information necessary to determine the reasonableness
of the charges for the Unit
involved in this
case, proved that the reasonable charge in the industry
for a unit of
this nature
is the $3,750.00 per month requested by
DaLee rather than the
$2,457.31
approved by the Agency.
For the foregoing reasons, DaLee Oil Company requests
that the Board
reverse the decision ofthe Agency and rule in favor ~f it’s request for
6
reimbursement as being reasonable, justified,
necessary, consistent with general
accepting engineering practices
and eligible for reimbursement
from the Leaking
Underground Storage Tank Fund, and that Petitioner
recover its attorney’s fees and
costs incurred herein pursuant
to
415 ILCS
5/57.8(1) and
35 Ill. Adm.
Code
732.606(g).
Curtis
W. Martin
ILARDC
No. 06201592
SHAW & MARTIN,
P.C.
Attorneys at Law
123
S.
10th Street, Suite
302
P.O.
Box
1789
Mt.
Vernon, Illinois
62864
Telephone (618) 244-1788
Respectfully
submitted,
SHAW
& MARTIN, P.C.
BY
Curtis
W. Marti
,Attorney for
DaLee Oil C~y,
Petitioner
7
CERTIFICATE
OF SERVICE
I, the undersigned
attorney at law, hereby certify that
on September
______
2003, I served true and correct copies of the Brief of Petitioner,
by placing true and
correct copies in properly sealed and addressed envelopes and by depositing
said
sealed envelopes in a U.S. mail drop box located within Mt. Vernon, Illinois,
with
sufficient postage
affixed.thereto,
upon the following named persons:
Dorothy M.
Gunn, Clerk
John J. Kim
Illinois Pollution
Control Board
As~istantCounsel
State of Illinois Center
Special Assistant
Attorney General
100 West Randolph Street
Division ofLegal
Counsel
Suite
11-500
1021 North Grand Avenue, East
Chicago, IL
60601
P.O.
Box
19276
Springfield,
IL
62794-9276
Carol Sudman
Hearing Officer
Illinois
Pollution Control Board
1021 North Grand Avenue East
Springfield,
IL
62794
Curtis
W. Martin, A)~rneyfor
Petitioner, DaLe,~~il
Company
/
~1ECE1VED
CL~i~c~
OFFICE
SEP
052003
Robert E. Shaw
123
SOUTH
TENTH STREET
-
SUITE
302
Curtis W. Martin
P.O.
BOX
1789
MT. VERNON,
ILLINOIS
62864
TELEPHONE:
618/244-1788
FAX:
618/244-2588
e-mail:
shawmartin@mvn.net
September
2,
2003
VIA FAX
312-814-3669
Ms. Dorothy Gunn
Clerk of Illinois Pollution Control Board
State
ofIllinois
Center
100
W. Randolph, Suite
11-500
Chicago, IL
60601
RE:
DaLee Oil Company vs. Illinois Environmental
Protection Agency; PCB Nos.
03-118; 03-119,
03-150
Dear Ms.
Gunn:
Pursuant
to the hearing
officer’s Hearing Report, enclosed is a faxed copy of
Petitioner’s
Brief in the above cause.
The original
of the Brief will follow by mail.
Upon receipt of the original and copy ofthe Brief, please return a file-marked copy
to me in the enclosed self-addressed,
stamped envelope.
Thank
you for your
assistance in this matter.
CWM/cm
Enclosures
cc:
Duane
Doty
Carol Sudman
John
Kim
STATE
OF
ILLINOIS
Pollution Control Board
Very truly yours,