CLEFiK’S~O~F~E
BEFORE THE ILLINOIS POLLUTION CONTROL BOARD
MAR
19
2004
SWIF-T FOOD MART,
)
STATE OF ILLINO~
)
Pollution
Control aoard
Petitioner,
)
)
v.
)
PCBO3-185
)
(UST appeal)
ILLINOIS ENVIRONMENTAL PROTECTION
)
AGENCY,
)
)
Respondent.
)
PETITIONER’S CLOSING BRIEF
NOW COMES
Petitioner, SWIF-T FOOD MART, through its undersigned attorney, and
pursuant to Hearing Officer order, submits its closing brief in this Leaking Underground Storage
Tank Fund (hereinafter “LUST Fund”) appeal.
Introduction
This is a LUST Fund appeal,
brought pursuant to Section 40(a)(1) of the Illinois
Environmental Protection Act, 415 ILCS
5/40(a)(1), and Section
105
Subpart D of this Board’s
procedural regulations,
35
Ill. Adm. Code
105.400-105.412,
as permitted by
415
ILCS
5/57.8(i).
Petitioner is seeking this Board’s review and reversal ofthe decision of the Respondent Illinois
Environmental Protection Agency (hereinafter “IEPA”), dated March 3, 2003, which deducted
$13,808.86 for field purchases
and other costs by a subcontractor as unreasonable and
as
unapproved in the budget, and applying a second $10,000
deductible to
the reimbursement request.
Accordingly, Petitioner seeks a total of $23,808.86 in this proceeding.
The IEPA’s final decision
letter, dated March 3, 2003, is attached as Exhibit A to the Petition for Review in this case, and is
also included as the first three pages of the record (R.1
-
R.3).
References
to
the record will be to
R.,
followed by the page number set forth on the bottom of the record pages. Exhibits introduced
at
hearingwill be referred
to as Ex., followed by the exhibit number.
Citations to the transcript of the
February 11,
2004 hearing will be to Tr., followed by the page number of the transcript.
Hearing
was held on February 11, 2004, at which the IEPA submitted 19
exhibits with agreement of
Petitioner, all ofwhich are thereby included in the record in this case as though they were originally
a part ofthe IEPA’s record.
In addition, two witnesses, Eric Kuhlman and Niki Weller, testified
during the hearing.
As set forth in the Hearing Officer’s post-1~earing
order, no members of the
public provided any comments following the hearing, norhave any submitted
any post-hearing
written comments.
Factual Background
Petitioner owns and
operates a service station facility located at 1100 Belevidere Road, in
Waukegan, Lake County, Illinois.
(~
Ex. 1)
During a boring test in August of 1995, it was
discovered that a release had occurred from underground storage tanks at the site, and consequently
the Illinois Emergency Management Agency (IEMA) was notified and
subsequently IEMA
assigned incident number
95-1716.
(Tr.
39; Ex.
1).
Based upon the results of that boring, in
December 1995 Petitioner submitted to the Office of the State Fire Marshal an
application for an
eligibility and deductible determination from the LUST Fund.
(Ex. 2).
In March 1996 Petitioner sought
and received from the Office of the State Fire Marshal a
permit to remove the underground storage
tanks at the site, and they were removed on March 28,
1996. (Ex. 3; Ex. 4; Tr. 39-41).
A total of eight underground storage tanks were removed on that
day, six gasoline, one diesel and one kerosene. (Ex. 4).
In Petitioner’s original eligibility and
deductible application based upon the boring,
the diesel underground storage tank and gasoline
underground storage tanks number
1 and 2 were identified as having leaked (Ex.
2); the Office of
the State Fire Marshal’s UST removal log also
stated that the kerosene underground storage tank
2
and most ofthe other gasoline underground storage tanks had leaked,
as well. (Ex. 4).
In May of
1996, Petitioner installed new underground storage tanks at the facility, and at that time
reported
again to IEMA and
a second incident number (96-0723) was issued for the site; unleaded gasoline,
diesel fuel and kerosene all were identified as materials involved. (Ex.
5;
Tr. 39-41).
Petitioner did
not seek a second eligibility and
deductible determination
from the Office of the State Fire Marshal
until February
25,
1999. (Ex. 6; Tr. 39-41).
In December of 1999, Petitioner, through
its consultant,
notified the IEPA of the two incident numbers for the site, identifying the second incident number
as “a re-reporting of the 95-1716 incident number.” (Ex. 7).
That correspondence was subject to a
follow-up letter from the consultant, confirming a telephone conversation during which the
consultant and IEPA agreed that the incident numbers would be combined. (Ex. 8).
This
correspondence was, in turn, confirmed by
a memorandum from the IEPA (drafted by Jay Gaydosh,
the project manager then assigned to Petitioner’s site (Tr.
23
-
Tr.
24)) dated January 20, 2000, in
which
the IEPA agreed that “the 1996 release was a rereporting of the 1995 Incident.
Therefore, all
reporting requirements should be addressed through the 95-1716 Incident number.” (Ex. 9).
Eric Kuhiman, the IEPA project manager currently assigned to Petitioner’s facility, testified
that before he was assigned to the file back in approximately 2000, Jay Gaydosh was the site’s
project manager,
and thus was qualified
to determine whether one or two incidents should be
established for the facility. (Tr. 23
-
Tr.
24).
Gaydosh, in fact, had been a project manager in the
LUST unit for a substantially longer amount of time than Mr. Kuhiman. (Tr. 27).
Shortly after the
facility was assigned to Mr. Kuhlman, Mr. Kuhiman had
occasion to
determine for himself whether
one or more incident numbers should be applied to
the facility, and based upon
discussionswith his
supervisor, Eric Ports, Kuhlman determined that a single deductible applied to
the facility. (Tr.
20
-
Tr. 23).
Like Mr. Gaydosh, Mr. Ports had been in the LUST unit a substantially longer amount of
time than had
Mr. Kuhlman. (Tr.
27).
Petitioner had submitted a reimbursement application
dated
3
May 8, 2001 (received by the IEPA on June 20, 2001), which identified the IEMA incident numbers
in question as both 95-1716 and 96-0723. (Ex.
12).
In response to this request, by letter dated July
25, 2001, the IEPA applied a single $10,000 deductible, and reimbursed the Petitioner $1,971.08,
which was the total amount requested by the Petitioner (minus the single $10,000 deductible); this
correspondence, for some reason, identified only 96-0723 as the incident number. (Ex. 14).
(This
was the only reimbursement made with respect to Petitioner’s site prior to the instant claim. (Tr.
46)).
The reimbursement application at issue in this case was dated November 7, 2002, and was
received by the IEPA on November 18, 2002, and sought a total of$203,644.16.
(R.14).
At the
time Of its submittal, the LUST unit input clerk inquired ofthe unit manager, Doug Oakley, as to
which of the two incident numbers the facility should be reviewed under, and inexplicably on this
occasion Mr. Oakley chose the 1995
incident number (R.13; Tr.
96
-
Tr. 97; Tr.
108
-
Tr.
112).
The
LUST application was given to Nilci Weller for review, and one
issue she flagged was whether one
or two deductibles should be applied to the site,
in light ofthe two incident numbers listed (Tr. 94)
(although the IEPA’s files included all previous discussions and decisions concerning the
deductible, Ms. Weller did not avail herself of those materials in conducting her review (Tr. 95
-
Tr.
96;
Tr. 114), and
in fact she did not even know ofthe prior deductible discussions or decision until
the very day of the hearing! (Tr.
114
-
Tr.
115)).
Ms. Weller took the issue directly to
the LUST
technical unit manager, Harry Chappel (Tr.
95
-
Tr.
96); even though Mr. Chappel had been in the
LUST technical unit even less time than Mr. Kuhlman (only about a year and a half), and
accordingly significantly
less time than either Mr. Ports or Mr. Gaydosh, Mr. Chappel decided to
reverse the prior decisions and instructed
Mr. Kuhlman to apply two deductibles to the site (Tr.
64;
Tr. 94
-
Tr.
95).
Accordingly, when the IEPA rendered its final decision on March 3,
2003, the
4
facility was considered under the 95-1716 incident number, and the IEPA deducted a $10,000
deductible from the claim. (R.1
-
R.3).
Prior to haying made the November 2002 LUST reimbursement submittal, Petitioner had
sought the budget approval for those exact same amounts as part of the technical review process.
Petitioner had submitted, and Mr. Kuhlman reviewed, an initial budget request seeking, among
other things, $229,800.00 under the category of “Field Purchases and Other Costs.”
(~
Ex.
11).
The IEPA had
requested additional information to
support that figure, and in response Petitioner,
through its
consultant, submitted a two page letter, along with a significant number of attachments,
to justify the requested budget amounts. (Ex.
17).
That correspondence explained that some of the
corrective action had been conducted for the dual purposes of site upgrade and corrective action
work, including
concrete removal and replacement necessary both as a site upgrade activity and as a
part ofthe corrective action.
The consultant noted that the work in question had been conducted by
a subcontractor, Peter J. Hartmann Company, which in turn had
engaged a sub-subcontractor,
Lindahl Bros. Inc.,
to perform certain work; the correspondence specifically noted and
discussed
that PeterJ. Hartmann had marked up the Lindahl Bros. invoice by 15.
(Ex.
17, p. 2).
Moreover,
the final page of that submittal specifically
included, as one of Peter J. Hartmann’s invoices to the
consultant, a number of payments made to sub-subcontractors, each of which was also given a 15
markup by Hartmann, and the letter sought budget approval that included these items. (Ex.
17, final
page).
In response to this submittal, Mr. Kuhlman,
on behalfof the IEPA, specifically
approved the
budget as submitted by Petitioner, and for purposes of this appeal, specifically approved the
category “Field Purchases and
Other Costs” in the amount of $229,800.00 based upon Petitioner’s
supporting justification and
documentation. (Ex.
18).
Notably, that Kuhlman letter correctly stated
that the budget approval was a final and appealable decision.
(~
Ex.
18, at page 2).
5
Notwithstanding Mr. Kuhlman’s approval, when the reimbursement request seeking that
exact amount (i.e., $229,800.00) arrived at Ms. Weller’s desk, she denied a total of $13,808.86 on
the basis that “there
cannot be a percentage markup and
a handling charge both requested and
there has not been any handling charges approved in the budget.” (R.3).
Ms. Weller acknowledged
that she had never reviewed the technical files to actually determine what the budget request had
been, nor even what the budget had approved, but instead looked only at the “bottom line,”
and
from that apparently assumed that the budget had not included the subcontractor’s handling charges
incurred in dealing with sub-subcontractor invoices. (Tr.
117-119).
In regards to the
reasonableness, Ms. Weller explained that her unit had determined that only
a prime contract is
entitled to handling c~harges:“We consider there is a prime contractor, he should get the handling
charge.
And it should take care of nobody--I mean, we feel that there is only one prime contractor.
The rest are subcontractors.
And
only one, the prime contractor, should get the handling charge.”
(Tr. 125).
Accordingly, when she rendered the final decision on behalf of the JEPA,
she deducted
the $13,808.86, in addition to the $10,000 second deductible.
Argument
Deductible
The
IEPA’s decision to apply a second $10,000 deductible was clearly contrary to law and
fact.
First, based upon a prior submittal, the IEPA had previously rendered a final decision on the
issue of how many deductibles to
apply, and had determined that only
a single deductible was
appropriate.
Mr. Kuhlman’s subsequent
decision was therefore nothing less than a reconsideration
of an
IEPA final decision.
This Board has, on many occasions, held that final decisions are binding
between the parties, and moreover, the IEPA has no authority to reconsider final decisions.
Hence,
6
this
Board has denied relief to a permit applicant who sought
approval of a request intended to
eliminate a previously-imposed permit condition, on the grounds that the proper means of obtaining
relief from challenged conditions was to
have brought an
appeal.
~
Bradd v. Illinois EPA, 1991
Ill. ENV LEXIES 367, PCB 90-173 (May 9, 1991).
Further, this case is the mirror image ofthis
Board’s ruling in Panhandle Eastern Pipe Line Co.
v. Illinois EPA,
1999 Ill. ENV LEXIS 52, at
*32, PCB 98-102 (Jan. 21, 1999), where a permit application sought reconsideration ofa previously
issued permit condition; this Board rejected the attempt, noting that the permit request “not only
seeks to revise its permit, but asks the .IEPA
to ignore the
IEPA’s
1988 permit determination.
The IEPA
may not do so.”
~
~
Panhandle Eastern Pipe Line Co.
v. Illinois Pollution Control•
Board, 314 Ill. App. 3d 296, 734 N.E.2d 18
(4th
Dist. 2000), in which the Court affirmed this Board
and expressly agreed with its reasoning.
Reichhold
Chemicals. Inc. v. Pollution Control Board, 204
Ill. App. 3d 674, 561 N.E.2d 1343 (3d Dist.
1990), which was relied upon both in this Board’s and
the appellate court’s Panhandle Eastern rulings, is also directly on point.
There the IEPA purported
to deny Reichhold Chemical’s permit application while extending an offer to reconsider if the
applicant submitted more information; Reichhold Chemicals
did not submit any new information,
but instead first asked the IEPA to
reconsider based upon information already provided,
and then
filed a timely appeal to
this Board.
The appellate court held that since no new information had been
provided by the applicant, there was no new permit application submitted, and
the IEPA lacked any
authority, to reconsider final decisions, and accordingly jurisdiction had transferred to the Board
with Reichhold Chemicals’ timely appeal.
In this
case, had the IEPA decided, in the initial determination, to apply the $10,000
deductible for each incident, then Petitioner’s relief would have been to appeal that decision; the
caselaw makes clear that the decision would
have been final, as to Petitioner, for all subsequent
reimbursement requests, particularly since no new information relating to the deductible was ever
7
submitted.
IfPetitioner would have been bound by such a decision, the IEPA clearly should be
bound by the decision it did make;
again this is
especially so in light of the fact that no new or
different information concerning the deductibles was ever presented.
The IEPA’s actions in this
case constitute a blatant reconsideration ofa final decision, which has been repeatedly prohibited by
both this Board and the courts.
Moreover, the deductible decision was made based upon a clear misunderstanding of
statutory requirements.
Pursuant
to Section 57.8(a)(4) of the Illinois Environmental Protection Act,
415 ILCS 5/57.8(a)(4), in administering the LUST Fund, the IEPA is to
subtract the appropriate
deductible “from any payment invoice paid to an eligible owner or operator.
Only one
deductible
shall
apply p~underground storage i~nk
~ii~.” Here there is no question that only a single site is at
issue,
and accordingly the IEPA’s decision to apply two deductibles is perplexing.
Further,
pursuant to Section 57.9(d), 415 ILCS 5/57.9(d), among other things “a
deductible shall apply
annually for each site at which costs were incurred under a claim submitted pursuant to
this Title,
except that if corrective action in response to an occurrence takes place over a period of one year, in
subsequent years no deductible shall apply for costs incurred in response to such occurrence.”
An
“occurrence”
is defined as “an accident, including continuous or repeated exposure to
conditions,
that results in a sudden ornonsudden release from an underground storage tank.” 415 ILCS 5/57.2.
Here, clearly only one “occurrence” is
an issue, and nothing generated by the Office of the State
Fire Marshal or otherwise included in this
Record suggests otherwise.
The underground storage
tank release was first noted following a boring test, and was confirmed upon removal of all of the
underground storage tanks at the site barely half a year later.
Even Mr. Kuhlman admitted that the
contamination from each of the eight tanks in question is so intermingled to make it impossible
to
conduct any separate remediation,
or to ultimately issue separate no further remediation letters, with
respect to any alleged or hypothesized individual “occurrences”.
(Tr. 41
-
Tr.
42; Tr. 69
-
Tr. 70).
8
Simply
put,
there is virtually nothing in the record to
suggest any separate “occurrences,” but
instead the record reveals the existence of a single occurrence, and that single occurrence took place
at a single site;
accordingly, pursuant to the Environmental Protection Act itself, only one
deductible should be applied to this
remediation.
The IEPA’s original (and final) decision on this
point, made by the IEPA managers and reviewers with the most experience, was clearly correct,
and
in any event is not subject to reconsideration at the whim of a technical
reviewer or his new
supervisor.
Handling Charges
Ms.
Weller expressed two separate reasons why she thought the $13,808.86 in handling
charges should be denied.
First, she claimed that the handling charges were never approved in the
budget.
This is an
obvious mistake, revealed by
simple review ofthe record (notably, Ms. Weller
‘admitted that she had never even looked at the budget materials in making her budget decision) (Tr.
114
-
Tr.
116; see
.ai~c~
Tr. 118
-
Tr.
119).
Mr. Kuhlman specifically had before him the handling
charges in question, and
he approved the budget as presented. (See Ex. 17; Ex.
18; Tr.
55
-
Tr. 56).
There
is no
ambiguity, nor any question that the amounts sought for budget approval by Petitioner
included the handling charges ofthe subcontractor.
Hence, Ms. Weller was simply wrong in
asserting that they had not been approved in the budget.
The IEPA apparently contends that the fact that these budget amounts were included in the
line item “Field Purchases and Other Costs,” rather than in a line item identified as “Handling
Charges,” somehow precluded their approval by Ms. Weller, notwithstanding that they were
approved by Mr. Kuhlman.
Nothing in the Environmental Protection Act would support such an
interpretation, though.
The costs requested were actually incurred, were corrective action costs as
defined by the Act,
and were even approved by Mr. Kuhlman prior to
the request for
9
reimbursement.
That is what the Act requires (it is ~Jjthat the Act requires), and so reimbursement
should be allowed.
As between Mr. Kuhlman, who approved the budget, and Ms.
Weller, whose
job was to approve
the payments, clearly any objection to where the handling charges were listed on
the budget form should have been made by Mr. Kuhlman, yet he was satisfied.
Had he objected,
Petitioner could have resubmitted, but no objection was made.
Under the circumstances Ms.
Weller’s actions, among other things, clearly were arbitrary and capricious, and constitute an
attempt
to
reconsider Mr. Kuhlman’s previous decision (again, though, the IEPA possesses no
pOwer to
make any such reconsideration).
In addition, the March 3, 2003 final decision letter says
nothing about the item being denied because it was set forth in the allegedly wrong line item
category, and that letter frames the issues in this LUST Fund appeal.
The IEPA cannot make up
new grounds for its decision after the fact.
Ms. Weller’s second basis for denying reimbursement is the assertion that the amount
requested was not reasonable, because only a subcontractor
is entitled
to a percentage markup for
handling, not sub-subcontractors.
Ms. Weller cited her unit’s policy as support for this proposition.
(Tr. 125
-
Tr.
126).
The unit policy has been expressly rejected by this Board already.
~
State Bank of
Whittington v.
Illinois EPA, 1993 Ill. ENV LEXIS 490, at *22.23,
PCB 92-152 (June 3,
1993):
“The issue here is whether the IEPA,
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 held that the IEPA
could not do so.
Moreover, Ms. Weller’s entire review overlooks the IEPA’s duties, limitations and
obligations under the Environmental Protection Act.
The IEPA concedes that Petitioner’s
reimbursement application is
subject to
the provisions ofTitle XVI ofthe Environmental Protection
10
Act,
and Part 732 ofthis Board’s regulation.
(Tr. 80).
Section
57.8,
415
ILCS
5/57.8, spells out the
duties, rights and obligations with respect to reimbursement applications for such facilities:
If an owner or operator is eligible
to access the Underground Storage Tank Fund
pursuant to an Office ofState Fire Marshal eligibility/deductible final determination
letter issued
in accordance with Section 57.9, the owner or operator may submit a
complete application for final or partial payment to the IEPA
for activities taken in
response to a confirmed
release.
That is what occurred here, and
the provisions of Section 57.8(a)(1), 415 ILCS 5/57.8(a)(1),
apply to the IEPA’s review (emphasis added):
In the case of any approved plan and budget for which payment is being sought, the
IEPA
shall make a payment determination within 120 days of receipt ofthe
application.
Such
determination shall be considered a final decision.
The IEPA’s
review shall be limited
to generally accepted auditing and accounting practices.
In
‘no case Shall the IEPA
conduct additional review of any plan which was completed
within the budget, beyond auditing for adherence to
the corrective action measures in
the proposal.
This Board’s regulations further define the scope ofMs. Weller’s task.
The requirements
for submittal of reimbursement applications are set forth in 35 Ill. Adm.
Code 732.601; no question
has been raised herein concerning the sufficiency of Petitioner’s submittal, including both a
certification that the amounts approved for payment correspond to the amounts approved in the
budget, both ofwhich were in conformance with approved remediation (732.601(b)(2)), and proof.
that the amount requested did not exceed the amount budgeted (732.601(b)(4)), as well as all other
documentary requirements,.
Upon receipt of a complete reimbursement application, it was Ms.
Weller’s job to
comply with the requirements of35 Ill. Adm. Code 732.602(a); she was accordingly
to have reviewed the application to assure it contained the material required by 35 Ill. Adm. Code
732.601(b) (see discussion immediately above), and having determined (as she did) that the
information was included, she was to have approved the application for payment.
Review of
reasonableness is only permitted for applications subject to “full review”
(s~35
Ill. Adm. Code
11
from the reimbursement by the IEPA on the grounds ofnot being approved in the budget
and, being
unreasonable in amount.
Respectfully submitted,
SWIF-T FOOD MART,
Petitioner,
By its attorney,
Hedinger Law Office
2601 5. Fifth St.
Springfield, IL 62703
(217) 523-2753 phone
(217) 523-4366 fax
13
CLERK’S
OFFICE
BEFORE THE ILLINOIS POLLUTION CONTROL BOARI~AR
192004
SWIF-T FOOD MART,
)
STATE OF ILLINOIS
)
Pollution Control Board
Petitioner,
.
)
)
v.
)
PCBO3-185
)
(UST appeal)
ILLINOIS ENVIRONMENTAL PROTECTION
)
AGENCY,
)
)
Respondent.
)
NOTICE OF FILING AND PROOF OF SERVICE
To:
Bradley Halloran, Hearing
Officer
Illinois Pollution Control Board
James R. Thompson Center
100 West Randolph Street, Suite 11-500
Chicago, Illinois 60601
,
John
Kim
Division ofLegal Counsel
Illinois Environmental Protection Agency
1021 N. Grand Ave. East
P.O. Box 19276
Springfield, IL 62794-9276
The undersigned
certifies that
an
original
and nine copies
of Petitioner’s
Closing
Brief were
served upon the Clerk of the Illinois Pollution Control Board,
and one
copy was served
upon the hearing officer and
the above party of record in this case by
enclosing same in envelopes
with postage fully prepaid, and by deposit~,rygsaid envelopes in a U.S. Post Office Mail Box
before
5:30 p.m.
in Springfield, Illinois on the~day
ofMarch,
2004.
~
Hedinger Law Office
2601 S. Fifth St.
Springfield, IL 62703
(217) 523-2753 phone
(217) 523-4366 fax
THIS FILING IS SUBMITI’ED ON RECYCLED
PAPER
14
