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Control Board

N ~IHEMATTER OF:

)

)

PROPOSED

AMENDMENTS

TO

)

R04-22

REGULATIONS

OF PEThOLEUM

)

(Rulemaking

-

Land)

LEAKING UNDERGROUND

STORAGE)

TANKS

(35

ILL. ADM.

CODE 732)

)

TESTIMONY OF MICHAEL W. RAPPS ON BEHALF

OF

THE ILLINOIS SOCIETY OF PROFESSIONAL ENGINEERS REGARDING.

THE ENVIRONMENTAL PROTECTION AGENCY’S PROPOSAL

TO AMEND

35 ILL. ADM. CODE

732

1.

Background

My name

is Michael

Rapps.

I

am a licensed professional

engineer

and the president and

CEO of Rapps Engineering

&

Applied Science,

Inc., a Springfield based consulting firm.

I

am

testifying

on

behalf

of

the

Illinois

Society

Of

Professional

Engineers

(ISPE),

an

association of more than 2000 Professional Engineers (P.E.’s), Engineers-in-training (EIT’s)

and

engineering

students.

Apart from

my

association

with

ISPE,

I

am a

member of a

number of other professional associations and trade associations, including most notably, as

pertains to the instant matter, the Illinois Petroleum MarketersAssociation (IPMA).

In

1994

I testified before the

Illinois

Pollution

Control

Board,

on

behalf

of

IPMA,

in

support of a proposed interim risk-based cleanup standard for leaking underground storage

tanks

(LUST’s).

This was done in connection with a sub-docket (Docket B)

created by the

Board when

it

adopted the

initial Part

732.

regulations.

The risk-based

cleanup

standard,

designed by myself, and proposed by IPMA as a means of cost containment for the Illinois

LUST Fund, was adopted by the

Board,

and remained in

use for LUST

cleanups until the

Board

amended

Part

732

in

1997

(re: R

97-10).

I testified on

behalf of

IPMA

in

that

proceeding as well.

The 1997 Board amendment ofPart 732 coincided with adoption ofthe

companion Part 742

(R97

—

12), Tiered Approach To

Conective Action Objectives

(i.e.,

TACO).

Methodology imbedded

in

the

latter replaced the

1994

interim LUST

cleanup

standard.

In addition

to being active in

LUST-related rulemaking, I have

designed and implemented

numerous

LUST

(and Brownfleld)

investigations and cleanups.

Underground storage tank

work is

not the

principal thrust

of my

company, but

it

does represent

approximately ten

percent of our professional service

billings.

Consequently,

I am familiar with the practical

elements .of LUST remediation and the

practices

of the

Illinois

Environmental

Protection

Agency (EPA,

Agency) as theyrelate to the administration oftheAgency’s LUST program.

---

2.

Observations

A.

State ofthe Program

The earlyyears ofthe Illinois LUST program were plagued by inadequate funding and a lack

of

formal

cleanup

standards.

Both

problems

have

been

corrected.

As

with

the

administration of any large program there undoubtedly

exists aspects of the LUST program

that might

be

improved.

However,

on

balance, I believe that the program is

functioning

smoothly, particularly in

comparison to its

early years.

This

is

evident at a glance in Figure

Nos.

1

and 2, which follow.

Figure No.

1

shows that the number of LUST Fund

claims

processed

and paid has

steadily increased

from

only a

few hundred claims

per year in

the

early 1990’s to

approximately 1,400 claims per year in 2002, the last year forwhich published

data

are

available.

During

the

same

period

the

average

cost

per

claim

has

steadily

diminished.

Figure No. 2 shows that the average

dollar amount per claimhas dropped from

roughly $100,000 per claim in the early 1990’s to approximately

$40,000 per claim in 2002.

Both Figure Nos.

1

and 2 were constructed from data listed

in the IEPA

2003 LUST Fund

annual report

-

No.

1:

UST Claims

Paid

Per Year

1600

~

1400

1200

~

1(100

800

~

600

G)

200

Z

0

1990

1991

1992

1993

1994

1995

1996

1997

1998

1999

2000

2001

2002

2003

Year

Figure

No.

2:

Dollars

Per Reimbursed

Claim

120,000

100,000

80,000

60,000

40,000

E

0

I-

C)

CC

0

20,000

0

1990

1991

1992

1993

1994

1995

1996

1997

1998

1999

2000

2001

2002

2003

Year

---

B.

IPCB LUST

Appeals

LUST

appeals

have

apparently

become

veiy

common.

Review

of the

Environmental

Register, the

Board’s monthly newsletter,

suggests that

LUST related appeals have

actually

become

a significant portion of the Board’s case load.

A tally of new cases

filed before the

Board,

gathered

from

the

Board’s

(on-line)

Environmental

Register,

indicates

that

in

a

typical yearroughly 300 new cases are filed (see Figure No. 3).

In 2003 more than one third

of

all

new cases

filed with

the

Board were

LUST

related

appeals, up

from

less

than

15

percent in

1991

(see Figure No.

4).

New cases

include

enforcement actions,

rulemakings,

permit

appeals, variance petitions and other such matters.

Of the new cases

filed in

2003

that were appeal cases, more than 80

percent were

LUST related (see Figure No.

5).

During the past thirteen years the annual number of LUST appeals filed with the Board has

increased,

leveled off, then, in

recent years,

increased

again.

A record number

of LUST

appeals were

filed in 2003

(see

Figure No.

6).

Trends

displayed in Figure

No.’s

4,

5,

and 6

do not of themselves support

the need for the rulemaking, but they

do

clearly

suggest that

there

is

steadily increasing

disagreement

among the

Agency and participants

in the LUST

program.

To the

extent

that

it

may

reduce

disputes

and expedite

environmental

cleanups,

ISPE supports this rulemaking.

700

Figure

No.3:

New

IPCB

Cases

Filed

600

500

400

C)

L~.

(0

C)

(0

IC

0

N-

0

I-

0)

.0

E

z

300

200

100

0

1990

1991

1992

1993

1994

1995

1996

1997

1998

1999

Year

2000

2001

2003

2002

---

0.4

Figure

No. 4:

Portion of IPCB Cases

That Are

UST Cases

Year

Figure

No. 5:

Portion

of

IPCB

Appeals

that are

UST

Related

0.9

0.8

0.7

0.6

C)

~

0.5

U-

0.4

0.3

1990

1991

1992

1993

1994

1995

1996

1997

1998

1999

2000

2001

2002

2003

Year

---

C.

Statement of Reasons, Facts in Support, Purpose, and Effect

The preamble to the rulemakings states that

changes to Part 732

and the proposal for Part

734 have been proposed in order to “streamline the process for obtaining payment from the

UST Fund”

(p.2,

R04-22).

Pre-filed testimony by Agency wimesses parrots that

rationale

but

adds that

there

is

a

“need to

reform

the

current

reimbursement procedures.”

Yet,

considering the

discussion within the preamble, the Agency’s pre-filed testimony, testimony

given by all parties

to date,

and apart

from

the suggestion that this

proposal

will “streamline”-

the process, a clear statement of the problems that this rulemaking

is

intended to address has

not been advanced.

Consequently,

it is

difficult to

project just how the rulemaking will fix

those problems.

That

said,

one

need

not

be

clairvoyant to

suspect

that

the

underlying

bases

for

this

rulemaking

include,

but are not limited to:

1.)

The Agency’s belief that the LUST Fund is in danger ofbeing over-taxed by claims,

2.)

The suspicion that contractors may be removing excess volumes of soil in connection

with

dig and haul

cleanups,

-

3.)

The suspicion that some tank owners are

engaging in

near

endless

“pump

and treat”

groundwater controls,

4.)

The Agency suspicion

that some consultants may be padding theirhours in the

performance ofLUST program cleanups,

5.)

The suspicion that inefficient methods (e.g., using very small trucks to haul LUST soils)

are being used to raise costs,

-

6.)

The suspicion that excessive field staff are being assigned to LUST cleanups,

Figure No.

6:

Annual Number of New IPCB

UST Appeals

.~

140

0)

jZ

120

11

~—.

60-

Cl)

~

40-

~20-

0

1990

1991

1992

1993

1994

1995

1996

1997

1998

1999

2000

2001

2002

2003

Year

---

7.)

The suspicion that high

priced staff are being employed to perform tasks that

can be

-

performed by lower priced

staff and,

8.)

The

Agency suspicion that consultants

are avoiding TACO based cleanups in favor of

the more expensive

“dig and haul” cleanups.

It is not clear whether foregoing are perceptions or reality (no direct evidence has

been

presented in this regard).

However,

if these concerns

are driving

the rulemaking then they

should

be addressed

head on.

-

D.

Audits

-

The

legislative

language

of

the

Act,

Section

57.8,

was

carefully

crafted

-as

a

means

to

streamline reimbursements from the Underground Storage Tank Fund.

I participated in the

formulation

and negotiation ofthat language as part of a group that included theAgency, the

Illinois Environmental Regulatory Group (IERG), the Illinois Petroleum Council (IPC), and

the

Illinois

Petroleum Marketers Association

(IPMA).

I believe that

it

was the

clear

and

understood

intention of those

participants that the review of reimbursement packages for

corrective

action

measures

would

be

limited

to

random

audits

as

in

the

fashion

of the

Internal

Revenue

Service

when

it

audits

income

tax

filings.

That

is,

provided

a

reimbursement request

is

for an

amount

less

than or equal to

the

amount

budgeted, the

request

should

be

summarily

approved for

payment,

subject

only to

the

occasional

audit.

The language of Section

57.8

(a)(1) states in part:

-

“i..

The Agency’s reuiew shall ~

limited to generally aciptedauditing and

ccaunthig practices.

In no

case shall the Agency ctnduct additional re~iew

ofa.~ry

plan

which ~s

completed within

~

he~ndaudith’zgfor

acfr.rcnceto thecoirective action measures in theprojxsal...”

-

-

Based on Agency testimony

(Clay, Tr.

P-86,

20)

it

is

unclear

as to

whether the Agency is

adhering to the statutory intent.

It would be helpful if the Board would add language to Part

732 to

clarify the

meaning of audit

as it pertains to the review of reimbursement packages

that

fall

-

within

previously

approved

budgets.

Surely

this

would

streamline

the

reimbursement process

and reduce the

burden on Agency resources.

Suggested language-is

as follows:

-

-

-

-

Per Section 57.8(a) (1) theAgencyshallaudit, byaflill andcomplete retie~

onepe~zt(1/100) of

all applicationsfor ~ursementfit~n

the Und~undStorage

Tank Fund that are madepursuant

to an apprOwdbudget~ Auditedapplications shall he selected by apnxess~that

insures that the selection

is random, such that each application has an equalchance ofheing sekctedfora$

re~iew.

---

3.

Agency Proposal

-

Methods and Outcomes

-

-

A. Published Costs vs. the Free Market

-

The Agency

proposes

to

streamline

reimbursements

by

reducing

reliance

on

time

and

materials reviews in

favor of lump

sum payments.

As

an

example, the Agency proposes to

reimburse a lump sum of up to

$57.00 per cubic yard for the excavation, transportation, and

disposal ofLUST impacted soil.

In support ofthis proposal the Agency presents actual data

(re: Chappel Testimony, Attachment 9, E+T÷D)which for 25

data points has a mean value

of

$47.58

with

a

standard deviation

of $8.22.

The

Agency

proposes

that

the maximum

reimbursement for excavation, transportation, and disposal be computed as.the average plus

-

one standard deviation (i.e., $47.58

+

$8.22

=

$55.80) rounded to $57.00.

Because E+T+D

expenses

represent a

significant part

of all

“dig

and

haul” cleanups,

it

is

reasonable to

ask whether the change to

a published cost of $57.00 will save money and help

to preserve the

LUST Fund, or deplete

it

more rapidly.

Moreover, E+T+D data presented

by the Agency doesn’t,

on its

face,

suggest that any of the E+T+D rates are unreasonable.

In

fact,

the

data

tends

to

suggest

what

one

might

expect

in

the

free

market,

in

a

geographically diverse state, a fairly broad spread of rates

($23.89-$60.00) centered about the

mean

($47.58).

So, the Board is faced with a very fundamental and philosophical dilemma.

Is

it better

to

maintain

the

status

quo

and

seek

a

process

that

will

flag

“unreasonable”

reimbursement requests or should a published “bright line”

test

be

structured in

order to

create a cost ceiling.

-

-

B

Unintended Consequences

-

It

is

recognized that the

Chappel

E+T+D -data may not

be

“randomly”

drawn and may

represent too small

a sample for what is intended to represent.

Yet it is actual

data.

Using

this

example,

one of two things will happen if the

Board

adopts

the proposal.

The

first

•

possibility is that contractors will continue charging as they always have but that the Agency

-

will

flag

costs which exceed the

$57.00 figure, and reduce the errant charges to the allowed

figure.

The other possibility, which

seems more likely,

is that

all contractors will charge the

same

amount,

the maximum allowed $57.00.

Using the E+T+D data as

an

example,

and

assuming that

only -the rates that

exceed

$57.00. per cubic yard are

altered

(i.e., reduced to

$57.00

per

cubic

yard),

I have

computed that

the

Agency’s proposal will result in

a

cost

savings

of 0.33.

On the other hand,

if

all

costs are

either increased or reduced so

as to

equal

the

$57.00

per

cubic

yard

figure, I

compute that

the

LUST Fund

will

see

a

cost

increase

of 19.78.

-

A reported $73,742,453 was paidout of the LUST Fund between April 2003 and April 2004.

If it is

assumed that

the portion

of this

sum

paid out

for E+T+D

(i.e~.,dig

and

haul)

is

betweenfifty percent (50)

and seventy-five percent (75),

it can be estimated that a 0.33

cost

reduction

will

save

between

$

121,675

and

$182,512

per

year.

However,

if

all

-

contractors

charge the published cost cap of $57.00 per cubic yard, which seems

more likely,

the

19.78

cost

increase

will additionally tax the Fund

by $7,293,128

to

$10,939,692

per

year.

In

this case the downside of posting a cost cap

greatly exceeds the upside.: This is an

unintended consequence.

-

•

-

---

C.

Homogeneous Products and Services

-

Products

and

services

that

are

very

similar

are

said

to

homogeneous.

Examples

are

soft

drinks,

milk,

gasoline, haircuts, shoe

shines,

and

similar

goods and

services

where

there

is

little

variation between prices charged by vendors.

Some services

used in

LUST remediation

may fall within the category of homogeneous-services.

Other

services may be homogeneous

or semi-homogeneous for some but not

all work related to

LUST remediation.

Examples are

tank

removals

and

early action

activities.

However,

some

services

do

not

fall

under

the

homogeneous

heading.

Non-homogeneous -services

include

the

intellectual

work products

-

devoted to

site

investigation

and

remedial design.

ISPE

is

concerned

that

a

by-product

of

this

rulemaking

could

be

the

enactment

of

arbitrary

constraints

that

would

discourage

professional

engineers from engaging in legitimate problem solving.

Hence,

ISPE has asked

theAgency to identify the magnitude ofconsulting

fees

(and others)

as a relative proportion

ofLUST reimbursement costs.

That question has gone unanswered.

-

-

4.

AProcess

-

-

The need for a “process”

to

determine the reasonableness of a

budget or reimbursement

request

might very well be

fulfilled, in whole or part, by published cost

caps.

However,

as

already shown this method mayyield unwanted consequences.

But, the bright line test is not

the only wayto define reasonableness.

In proposing the $57.00 per cubicyard E+T+D cost

cap Agency witness Chappel described that he arrived at the

figure by computing an average

value

and

-

adding to

it

one

standard

deviation.

The

use

of

a

statistical

approach

for

determining “reasonableness” has merit.

The standard normal distribution

can

be

represented

by

a

symmetrical

bell-shaped curve

with three standard deviations

on

either

side of the

mean.

Per the

Chappel proposal the

-

inclusion

of all reimbursement requests within one

standard deviation

on

the right

side of

the mean

-

(average)

would include

all but approximately 16

of the requests.

The question

then becomes whether it is appropriate to reject

16

of the requests,

nearly one

in five, as

being “unreasonable”.

Had the Chappel proposal used two

standard deviations, then only

-

about 2

ofthe requests would fall outside of the acceptable region.

But, the point is that it

is

mathematically

possible,

using

properly

drawn

statistics,

to

compute

a

value

that

represents

an

excursion beyond some

acceptable liniit.

But, it

is

necessary to

establish the

-

-

limit.

For example,were the Board to declare that

“reasonable” should be

defined as being

inclusive of 95

ofthe submitted reimbursement requests,

the Agency could then compute

the

value that

represents 95

of the pool of data for a given

category, be

it for E+T+D

costs,

man-hours, or

other

such data.

The burden of proof in

an

ensuing

appeal

would

belong to the

Agency but

it would -be

easily met with sound data.

As

such, the number of

appealswould quickly diminish.

The

process

just

described

requires

normally

distributed

data.

Although

scientific

and

economic- data is

often non-normal, data transforms

can

be used to

convert to -normality.

The

histogram and

fitted curve that

follow illustrate a typical distribution, in this

case, the

-

Chappel E+T+D data.

-

-

-

-

-

-

---

The Chappel E+T+D data is skewed to the left and somewhat truncated on the right.

The

data is most likely non-normal.

It

couldbe converted to normalitywith a data transform.

5.

Summary

Opinion

I

have struggled in

this rulemaking to

get a handle

on

the nature of the problem at hand

so

as

to

be

able

to

help

devise

solutions.

While

this

testimony

doesn’t

offer

a crystal

clear

solution, I am hopeful that

it

proves useful to the

Board in its

deliberations.

Unfortunately,

I believe that more information may be needed in order

to project the possible

impact ofthe

proposal.

Respectfully submitted,

Illinois Society

ofProfessional Engineers

Chappel

14;

10

~

8

U)

~

6

-~

-l

‘-4

2

.-

0

—2

-‘

~-

Dollars Per Cubic Yard

.E.

Dated:

821

South Durkin Drive

/

Springfield, 1162704

217-787-2118

L