V.
DALEE OIL COMPANY,
ILLINOIS ENVIRONMENTAL
PROTECTION AGENCY,
Dorothy M. Gunn, Clerk
Illinois
Pollution Control Board
James
R.
Thompson Center
100
West Randolph Street
Suite
11-500
Chicago, IL 60601
Petitioner,
Respondent.
RECEiVED
CLERK’S
OFFICE
OCT
0
12003
SThTE OF IWNOIS
)
PCB No.
03-118
PollutIon Control Board
)
PCB No.
03-119
)
PCB No.
03-150 (Consolidated)
)
(UST Fund Appeals)
)
NOTICE
Curtis W. Martin
Shaw & Martin,
P.C.
123 South Tenth STreet
Suite 302
P.O.
Box 1789
Mt. Vernon,
IL
62864
Carol Sudman, Hearing Officer
Illinois Pollution Control Board
1021
North Grand Avenue, East
P.O. Box 19274
Springfield,
IL
62794-9274
PLEASE
TAKE
NOTICE that
I
have
today filed
with the
office of the
Clerk of the
Pollution
Control Board a RESPONSE TO PETITIONER’S BRIEF, copies ofwhich are herewith served upon
you.
Respectfully submitted,
ILLINOIS
ENVIRONMENTAL PROTECTION AGENCY,
Respondent
Assistant Counsel
Special Assistant
Attorney General
Division ofLegal Counsel
1021
North Grand Avenue, East
P.O.
Box
19276
Springfield,
Illinois 62794-9276
217/782-5544
217/782-9143 (TDD)
Dated: September 30, 2003
BEFORE THE POLLUTION CONTROL BOARD
OF THE STATE OF ILLINOIS
RECEIVED
CLERK’S
OFFICE
OCT
0
12003
STATE OF IWNOIS
Petitioner,
Pollution~
Control Board
V.
)
ILLINOIS ENVIRONMENTAL
)
PROTECTION AGENCY,
)
Respondent.
)
RESPONSE TO
PETITIONER’S BRIEF
NOW COMES the Respondent, the Illinois
Environmental
Protection
Agency
(“Illinois
EPA”), by
one
of its
attorneys,
John J. Kim,
Assistant
Counsel
and
Special
Assistant Attorney
General, and,
pursuant to
an order entered by the Hearing Officer dated August 6,
2003,
hereby
submits its Response to
the Petitioner’s
Briefto the Illinois Pollution Control Board (“Board”).
I.
BURDEN OF PROOF
Pursuant
to
Section
105.112(a)
of
the
Board’s
procedural
rules
(35
Iii.
Adm.
Code
105.112(a)),
the
petitioner bears
the
burden of proof.
The burden of proving
that
challenged
costs in
a claim for reimbursement are reasonable and related to
corrective action
rests solely on
the
applicant
for
reimbursement.
Richard
and
Wilma
Salyer
v.
Illinois
EPA,
PCB
98-156
(January 21,
1999), p.
3; See ~
Ted Harrison Oil
Company v. Illinois EPA, PCB 99-127 (July
24,
2003), pp.
4-5
(the burden of proof is
on
the owner or operator of an
underground
storage
tank to
provide an
accounting of all
costs).
Here,
there are three decisions under appeal,
all
of
which
involve
the
same
common
issue.
Thus,
the
burden
of proving
that
those
decisions
involving a modification of costs allowed for a groundwater treatment system were erroneous is
upon the Petitioner.
DALEE OIL COMPANY
BEFORE THE
POLLUTION CONTROL BOARD
OF THE
STATE OF ILLINOIS
)
PCBNo.
03-118
PCB No. 03-119
PCB No. 03-150 (Consolidated)
(UST Fund Appeals)
1
II.
STANDARD OF REVIEW
Section
22.1 8b(g) of the Environmental Protection Act (“Act”) provides that an applicant
may appeal
an Illinois EPA decision denying reimbursement to the Board under the provisions of
Section 40
of the Act
(415
ILCS
5/40).1
Pursuant to
Section 40 ofthe Act, the Board’s standard
of review is
whether the application
submitted to the Illinois EPA would not violate the Act and
Board
regulations.
I~LHarrison,p.
5.
In this situation,
the Board’s standard of review should
be whether the information submitted to the Illinois EPA would lead to
a violation ofthe Act and
Board regulations if the reimbursement requested had been granted.
Based
on
the
information
within
the
Administrative
Records
(“Records”)
and
the
testimony elicited at hearing held on July 24,
2003,2
and
applying
the relevant
law, the
Illinois
EPA respectfully requests that the Board enter an order upholding the Illinois EPA’s decision.
III.
FACTS
There
are three decisions
under
appeal
by the
Petitioner,
all
involving
the
same
issue.
The
Petitioner
has
sought, j~r
~
reimbursement of costs
associated
with
a
groundwater
treatment unit and
soil
vapor extraction unit (“unit”)
utilized at the
subject site.
In each of the
decisions
under
appeal,
the
Illinois
EPA
adjusted
the
amount
of
money
allowed
for
reimbursement on a
monthly basis for the unit.
AR
118, pp.
1-4; AR
119, pp.
1-4; AR
150,
vol.
i,pp.
1-4.
Specifically,
the Petitioner sought
reimbursement
in
the amount
of $3,750.00/month
for
the unit.
AR
118, pp. 31,
34, 47,
49; AR
119, pp.
58,
60, 76, 70,
84,
87; AR
150,
vol.
1,
pp. 47,
‘In its
brief, the Petitioner seems
to argue that the Illinois EPA’s reliance upon Section 22.18b(d)(4)(C) ofthe Act is
misplaced,
since that section
has
been repealed.
The
Illinois EPA
acknowledges that Section
22.1 8b of the Act was
repealed,
but
notes
that
provisions ofthat
section are nonetheless still applicable
here.
For a full discussion ofthis
statutory history, the Illinois
EPA refers
the Board to
its discussionat pages 4 through
5 in the Ted Harrison case.
2
Citations to the Administrative Record
will
hereinafter be made as, “AR XXX, p.
.“
The “XXX” shall refer to
either
118,
119 or
150,
as
in PCB 03-118, 03-1
19
and 03-150.
References to the transcript of the hearing will
be
made as, “TR, p.
_.“
2
50,
62,
65,
77,
80,
93,
97,
108,
111,
121,
124,
137,
140,
153,
156,
168,
171,
183,
186.
The
Illinois EPA reduced the per month allowance to
$2,457.31/month.
AR
118, p.
4; AR
119, p.
4;
AR
150,
vol.
1,
p.
4.
The
difference
between
the
amount
sought
by
the Petitioner
and
the
amount
approved
by
the
Illinois
EPA
is
$1,292.69/month.
In
PCB
03-118,
there
were
two
months
for which
reimbursement was sought
for the unit (October
and
November 2001).
AR
118, pp. 31, 34, 47, 49.
In PCB 03-119, three months were sought
for reimbursement for the unit
(July,
August and
September 2001).
AR 119, pp.
58,
60,67,
70,
84, 87.
Finally, in PCB 03-150,
10
months
were
sought
for
reimbursement
for
the
unit
(November
or
December
2001,
and
January through
September 2002).
AR
150, vol.
1, pp.
47,
50,
62,
65, 77,
80,
93,
97,
108,
111,
121,
124,
137,
140,
153,
156,
168,
171, 183, 186. The
amounts deducted in the
final decisions
under
appeal
reflect
the
number
of
months
sought
for
reimbursement
multiplied
by
$1,292.69/month.
IV.
THE PETITIONER FAILED TO DEMONSTRATE
THE COSTS IN QUESTION
ARE
REASONABLE
The
Petitioner
has failed to
demonstrate that
the monthly
rate sought
for reimbursement
for
the
unit
is
reasonable,
as
required pursuant
to
Section
22.1 8b(4)(d)(C) of the
Act.
The
Petitioner relies on two
arguments
in
its
brief,
one
being testimony presented in
the
form of an
offer
of proof
and
the
other a
more
general
argument
regarding market
or industry
standards.
Both arguments fall on the merits and should not be considered or, at best, should be discounted.
A.
The Petitioner’s Offer of Proof Should Not Be Admitted
In
its
brief,
the
Petitioner
argues
that
certain
calculations
described
by
one
of
its
witnesses should
be taken into consideration as a demonstration that the monthly rate sought
for
the unit
is
reasonable.
Petitioner’s
Brief,
pp.
3-4.
However,
the testimony
upon
which
those
arguments are based was elicited at the hearing in the form of an offer of proof.
TR, pp.
36-38.
3
The objection made by the Illinois EPA at hearing was that the document that was the subject of
the
testimony
contained
information that
was
never
presented
to,
or
made
available
to,
the
Illinois EPA at any time up
to the dates of the decisions
in question.
TR, pp.
27-3
5.
During the
hearing,
counsel
for
the
Petitioner
did
not
make
any
arguments
as
to
why
the
information
contained
in
the
document
should
be
considered
by
the
Board
or
otherwise
admitted
into
evidence.
The information
in question
was not
found in any of the submittals
prepared by
the
Petitioner for the Illinois
EPA’s review, and
therefore the Illinois EPA had no
way to
know the
information.
In fact, there is
no evidence that the Illinois EPA had ever seen the information in
question on the document until
it
was provided at hearing.
Similarly, the testimony of Joseph
Kelly
as
elicited by the Petitioner
described figures
and
calculations
that had never
been
disclosed
to
the
Illinois
EPA.
Indeed,
Mr.
Kelly
admitted
that
if the
information
was
not
provided with
the specific breakdown of calculations
and
other factors, it would
be
impossible
for the
Illinois
EPA
to
determine
the
Petitioner’s
consultant’s
overhead
calculations
or
its
amortization terms.
TR, pp. 45-46.
It is well-settled that the Board’s review ofa final decision by the IllinoisEPAshould be
limited
to
the information before the Illinois
EPA during the period ofreview and up to the
date
of the decision itself.
Typically, information or evidence that was not before the Illinois EPA at
the time of its decision
is not admitted at hearing or considered by the Board.
Community
Landfill Company and City of Morris v.
Illinois EPA,PCB 01-170, p. 4 (December 6, 2001).
In the instant case, the principle repeated by the Board in the Community Landfill case is
applicable.
The
IllinoisEPA did not knowwhat the period of time for amortization of the down
payment for the unit, the Illinois EPA did not know the overhead percentage applied to the site’s
costs
by
the Petitioner’s
consultant,
and
generally
speaking the Illinois
EPA did
not know the
4
specific
calculations
employed
by
the
Petitioner’s
consultant
to
reach
the
monthly
rate
of
$3,750.00/month.
Since
this
information
was
not
before
the
Illinois
EPA
at
the
time
of its
decision,
the
Hearing
Qfficer
properly
excluded
the
testimony
at
hearing
but
did
allow
the
Petitioner to
make an offer of proof.
The Petitioner has offered
no explanation
in
its
briefas to
why the offer ofproof should be admitted, and the only explanation provided at hearing was that
the informatiOn was used for “demonstrative” purposes.
TR, p.
29.
That is a weak explanation,
since there
was nothing
demonstrative
about
the document
or the
testimony; rather,
both
the
document
and
the testimony
sought
to
present information to
the Board for consideration
that
was not before the Illinois EPA at the time ofits decisions.
The Board should therefore not only
uphold the Hearing Officer’s decision to
exclude the document
and testimony, but
it
should also
accordingly strike
or not consider
the arguments in the Petitioner’s
brief based on
the
offer of
proof testimony.
If
the
Board
somehow
does
decide
that
it
will
allow
the
testimony
and
resulting
arguments, then the Illinois
EPA can only respond that it
did not have any of the information in
question before it at the time of its decision and therefore
could not
possibly have taken it
into
account.
Since the information was not included with any request for reimbursement ofcosts for
the
unit’s
monthly
rate,
then the
Petitioner
failed
to
meet
its
burden of providing
an
adequate
demonstration
that
the
cost
(i.e.,
the monthly
rate)
was
reasonable.
Whether
the
Petitioner’s
arguments
regarding
the
consultant’s
calculations
are
at
all
persuasive
after
the
fact are
not
relevant to the question of whether the applications as submitted contained adequate information
to
support the requested monthly rate.
The Board should uphold the Hearing Officer’s decision
and
disregard
the
testimony,
and
resulting
arguments
in
Petitioner’s
briefs,
regarding
the
Petitioner’s consultant’s calculations.
5
B.
The Petitioner’s Argument That Industry Standards
Support The Request Is Unfounded And Without Merit
The other argument
proffered
by
the Petitioner in support of its
request
that the
Illinois
EPA’s
decisions be
overturned
is
that
the
costs
sought
for the
unit’s
monthly
rate
are
“well
within the industry standard for rental
charges of a Unit ofthis type.”
Petitioner’s Brief, p. 4.
It
should
first
be
noted
that
this
statement,
made by
Mr.
Kelly
at hearing,
was
based
on
some
inquiries of other industry professionals.
i~h
There
is no
information in any of the applications
for payment
submitted
by
the Petitioner’s
consultant
to
that
effect,
and
such testimony of Mr.
Kelly arguably
is
akin to the testimony described above,
in
that the substance of the testimony
was not before
the IllinoisEPA at the time
of its decisions.
For that reason alone the testimony,
and resulting argument, should
be disregarded.
Reliance on Mr. Kelly’s testimony forms the basis for the Petitioner’s argument that the
requested
cost ofthe unit
was reasonable.
The Petitioner states that 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 ofthis nature is the $3,750.00 per month requested by DaLee rather than the $2,457.31
approved by the Agency.”
Petitioner’s Brief, p. 6.
Looking at
the
specific
testimony of Mr.
Kelly,
there
is
no
reason
to
give the weight
accorded by the Petitioner to the testimony.
The Petitioner argues that Mr.
Kelly
is
the
only
witness with the experience
and
information necessary
to
determine the reasonableness of the
unit’s charges.
However,
Mr.
Kelly testified that
he
only
had
prior
involvement
with
similar
types of equipment
in
“about
eight
other sites.”
TR,
p.
16.
That
is
not
a
broad
and
diverse
background that confers
the ability of Mr. Kelly alone to determine what
is or is
not reasonable
6
for the unit’s cost.
In fact, Mr. Kelly testified that he based reasonableness on two factors;
namely, what the market bears
and recouping his company’s
costs. TR, p. 58.
However, that method of determination
is inconsistent with both the Act
and
common
sense.
There
is
no
provision
in
Section
22.1 8b of the Act that
“reasonableness”
is
determined
solely
by
what
the market
will
bear.
While
industry standards
should be
taken into
account to
some
extent,
the
vague reference
to
what
the
market
will
bear
has
no
definitive
standard or
explanation.
Further, there
is a serious question as to
whether Mr.
Kelly has a sufficiently
broad
background to determine what the market will actually bear forthis type of unit.
Mr. Kelly’s
other stated factor is recouping his company’s costs.
In this case,
the purchase price for the unit
in question $83,691.00. AR 150, vol. 2, pp. 151-152.
If Mr. Kelly’s company received the
requested $3,750.00/month for 36 months as requested, then a total
of $135,000.00
would
be
paid for the unit.
This would represent a difference of $51,309.00, which Mr. Kelly would
apparently consider to
be
his company “recouping” its
costs.
Put
another way, if the consulting
company purchased the unit for$83,691.00, then was paid $135,000.00 for
the
purchase price, it
would recover over61
of the actual purchase price.
Itwould be difficult to imagine that
any
overhead costs would come anywhere close to that difference.
To be
fair, there were certain financing charges that the consultant apparently took into
account
in
reaching
its
requested
figure
of
$3,750.00/month.
Mr.
Kelly
testified
that
the
consultant had to pay approximately $2,677.00/month to its financierfor 36 months. TR, p.
57.
Even under that viewpoint, there
was
a difference ofover $1,000.00/month in what
was
sought
forreimbursement and what was owed to the financier. Thatdifference multipliedby 36 months
(the stated anticipated life of the unit and period for financing) would result in a difference of
L
7
over
$36,000.00
between
what was
paid
to
the
financier
and
what was
received
in
reimbursement.
The Petitioner
did, not
successfully
argue that
the
costs
sought
for reimbursement were
reasonable.
The consultant
for the Petitioner testified
that
despite the large difference
in
what
was paid to
the financier for the unit and what would have been received
in reimbursement (had
the total
amount
sought been approved), the determinative factor
in
whether the unit’s
cost was
reasonable was what the market would bear and whether the
consultant’s costs would be
recouped.
The consultant never specifically defined what costs needed to be recouped, and there
was no comprehensive testimony regarding industry
standards other than Mr.
Kelly’s testimony,
which
was
limited
at
best.
The
Petitioner
failed
to
provide
any
information
within
the
applications for reimbursement that substantiated their claims for the monthly rate, and
the only
explanation offered by Mr. Kelly at hearing was
that the market would bear the cost
and it would
be sufficient to allow for a recouping ofthe consultant’s
(undefined) costs.
That explanation is
simply insufficient,and the Board should not accord
any
weight to theargument.
V.
THE ILLINOIS EPA’S DECISION WAS BASED ON THE APPLICATIONS
The calculations employed by the Illinois EPA were based entirely on the information
provided within the applications for payment, and were consistent with the Act’s
guidelines.
Brian
Bauer of the IllinoisEPA testified that the figure used by the Illinois EPA was based on
the
total
cost
of the
unit
(as
documented by the supplier, Carbonair),
the
salvage
price,
the
appropriate handling charge allowed by Section 22.18b(i)(2) of the Act,
and
the term of 36
months provided by the Petitioner’s consultant.
TR, pp. 65-66; AR 150, vol. 2, pp. 151-152,
154-155.
Interestingly,
Mr. Kelly testified that he relied in part
on the information provided by
Carbonair when determining whether he
thought the requested
rate was
reasonable.
The
8
difference between
Mr. Kelly’s calculations and Mr. Bauer’s calculations
is that Mr. Kelly’s
included factors not provided to the Illinois
EPA at thetime ofits decisions, and that Mr. Bauer’s
comported
with
not
only~commonsense but the Act’s
guidelines.
Mr. Bauer’s calculations
resulted in the Illinois EPA taking into account the documented total purchase price ofthe unit in
question,
discounting
that
purchase
price
by
the
salvage
value
described
by
the
Petitioner’s
consultant (AR 150, vol. 2, pp. 154-155), allowing for the statutory handling charge, and then
dividing that final amount by the time period provided by the Petitioner’s consultant as the
anticipated life of the unit (AR
150, vol. 2, pp.
154-155).
The
Illinois
EPA argues that the methodology employed by
its reviewer was fair and
appropriate,
took
into
consideration
the
awarding
of a
handling
charge
(which
includes
an
allowance for overhead), and did not unfairly reward or penalize the Petitioner’s consultant in its
leasing of the
unit to the Petitioner.
To
the contrary, if the amount
sought
for reimbursement
were
awarded, the Petitioner’s consultant would stand to
gain an
inappropriate windfall.
VI.
CONCLUSION
For
all the reasons and, arguments included herein, the Illinois EPA respectfully requests
that the Board affirm its decisions under appeal. The Petitioner failed to
present applications that
contained information adequate
to
support
the
requested
monthly
rate.
The
Illinois
EPA’s
calculations in determining a reasonable rate were appropriate and
sound,
given that they
were
based on the information provided by the Petitioner and statutory guidelines
for handling
charges.
9
Respectfully submitted,
ILLINOIS ENVIRONMENTAL PROTECTION AGENCY,
Special Assistant Attorney General
Division of Legal Counsel
1021
North
Grand Avenue, East
P.O. Box 19276
Springfield,
Illinois 62794-9276
217/782-5544, 217/782-9143 (TDD)
Dated: September 30, 2003
This filing submitted
on recycled paper.
Assistant Counsel
10
CERTIFICATE OF SERVICE
I, the undersigned attorney
at
law,
hereby certify
that
on
September
30,
2003,
1
served
true and correct copies of a RESPONSE TO PETITIONER’S BRIEF,
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
Springfield,
Illinois,
with sufficient
First
Class Mail postage
affixed thereto,uponthe following named persons:
DorothyM. Gunn, Clerk
Illinois
Pollution Control Board
James R. Thompson Center
100 West Randolph Street
Suite
11-500
Chicago, IL 60601
Assistant Counsel
Special
Assistant Attorney General
Division of Legal Counsel
1021
North Grand Avenue, East
P.O. Box 19276
Springfield, Illinois 62794-9276
217/782-5544
217/782-9143
(TDD)
Curtis W. Martin
Shaw& Martin, P.C.
123
South Tenth STreet
Suite 302
P.O.Box 1789
Mt. Vernon, IL 62864
ILLINOIS ENVIRONMENTAL PROTECTION AGENCY,