Findings Of Fact Since 1984, the Department has been the state agency charged with the responsibility to establish rules and regulate underground pollutant storage facilities in Florida. In 1988, the Legislature added the administration of the newly enacted Florida Petroleum Liability and Restoration Program to the Department's duties. The program was to be established on or before January 1, 1989. The Applicant is the owner of a petroleum storage system in Jacksonville, Florida. Since 1984, it has been subject to the rules regarding underground pollutant storage facilities promulgated by the Department. On September 18, 1989, an odor indicative of possible petroleum contamination was discovered at the site during the installation of monitoring wells. A Discharge Notification Form was sent to the Department by the Applicant on October 23, 1989. The form advised that there were no leaks in the system. It was suggested that the odor may have resulted from surface spill at the site over a number of years. In response to the notification, an inspection of the site was completed by the Department on December 5, 1989. The inspection revealed the following on-site violations: Registration requirements were not being met. The forms had not been updated to include the presence of monitoring wells and overfill protection at the facility. Two underground tanks had not been properly abandoned. Inventory and reconciliation records had not been properly maintained, as required by rule since 1987. This violation was reviewed, and discussed in detail with on-site representatives of the Applicant. The monitoring wells were not installed by the time deadlines set forth in the Department's rules regarding stationary tanks. Since the wells were installed in September 1989, samples had not been taken for visual signs of petroleum contamination. The purpose of the system is to allow the owner of the storage tanks to learn if there is a leak in the tanks that can be quickly controlled to limit contamination. The day after the inspection, the Applicant applied for a determination of eligibility for participation in the restoration coverage portion of the new Florida Petroleum Liability Insurance and Liability Program. An affidavit was signed stating that all of the Department's rules regarding stationary tanks were being complied with by the Applicant. Six days after the inspection, the Department sent the Applicant written notice of the results of the inspection. The Applicant was given time frames and instructions for correcting the listed violations that could be corrected. A contamination assessment and clean up were also required in the letter. This letter did not address the issue of eligibility for the restoration funding program because that was a matter unrelated to the inspection results. On March 7, 1990, the Department determined the facility was ineligible for participation in the restoration funding provided by the Florida Petroleum Liability and Coverage Program. The following reasons were given: Failure to properly abandon underground storage tanks, pursuant to Section 17-61.050(3)(c), Florida Administrative Code. Failure to maintain inventory records, reconciliations, and significant loss/gain investigation as per Section 17-61.050(4)(c), Florida Administrative Code. Failure to install monitoring system and overfill protection by the dates set forth in Section 17-61.06(2)(c)2, Florida Administrative Code. Failure to properly monitor leak detection system, pursuant to Section 17-61.050(5)(c), Florida Administrative Code. The 10,000 gallon fuel oil tank and the 3,000 gallon waste oil tank present at the facility were abandoned in March 1990. The notice issued by the Department after its inspection in December 1989, gave the Applicant sixty days after receipt of the notice to properly abandon the tanks. The Applicant substantially complied with this requirement after the written notice was received. Although the Applicant failed to maintain the inventory records, reconciliations, and significant loss/gain investigations required by the Department rules, some of these violations had been corrected prior to the Department's inspection in December 1989. Correct inventory recordkeeping was discussed during the inspection, and the need to immediately implement the proper recordkeeping practices was emphasized in the post-inspection notice of violations. All of the recordkeeping violations were not cured until August 1990. The records kept by the Applicant during the noncompliance period from 1984 to August 1990, did not provide a substantially equivalent degree of information regarding possible leak detection or prohibited discharges as the required recordkeeping procedures. Two underground stationary storage tanks on the site have been part of the Applicant's petroleum storage system since 1970 and 1975, respectively. The monitoring wells and overfill protection for these tanks should have been in place by December 31, 1987. Neither monitoring system was installed until September 1989. The Applicant began the contract negotiations for installation in September 1988. The Applicant did not demonstrate that the facility contained an alternative procedure between December 31, 1987 and September 1989, that provided a substantially equivalent degree of protection for the lands, surface waters, or groundwaters of the state as the established requirement for monitoring wells and overfill protection. In December 1989, the Department's notice advised the Applicant that the monitoring wells should be sampled monthly for visual signs of petroleum contamination. Since April 1990, the Applicant has been completing the monthly sampling in the monitoring wells as part of its leak detection system, as required by the Department's rule regarding underground stationary tanks.
Recommendation Accordingly, it is RECOMMENDED: That the Department enter a Final Order denying Petitioner's application for restoration coverage in the Florida Petroleum Liability and Restoration Program at the Jacksonville location. DONE and ENTERED this 28 day of December, 1990, in Tallahassee, Leon County, Florida. VERONICA E. DONNELLY Hearing Officer Division of Administrative Hearings The DeSoto Building 1230 Apalachee Parkway Tallahassee, Florida 32399-1550 (904)488-9675 Filed with the Clerk of the Division of Administrative Hearings this _28_ day of December, 1990. APPENDIX TO RECOMMENDED ORDER The proposed findings of fact submitted by Petitioner are addressed as follows: Rejected. Improper interpretation of law. As for the facts in the first sentence, they are accepted. See HO #8. Rejected. Irrelevant. See HO #9. Rejected. Contrary to fact. See HO #9 and #11. Rejected. Contract to fact. See HO #11. Rejected. Contrary to fact. See HO #12 and #13. Rejected. Contrary to fact. Improper shifting of duty ad legal responsibility. Rejected . Improper application of law. The Respondent's proposed findings of fact are addressed as follows: Accepted. Accepted. Accepted. Accepted. See HO #8. Accepted. See HO #8. Accepted. See HO #3. Accepted. See HO #3. Accepted. See HO #3. Accepted. See HO #5. Accepted. Accepted. See HO #4. Accepted. See HO #4. Accepted. Accepted. See HO #6. Accepted. See HO #4 and #6. Accepted. See HO #4 and #6. Accepted. Accepted. Accepted. See HO #4 and #9. Accepted. Accepted. See HO #4 and #9. Accepted. Accepted. See HO #9. Accepted. See HO #4 and #10. Accepted. Rejected. Contrary to fact. See HO #10. Accepted. Accepted. Accepted. See HO #10. Accepted. See HO #3 and #12. Accepted. Accepted. See HO #13. Accepted. Accepted. See HO #6. Accepted. See HO #4 and #6. Accepted. See HO #6. Accepted. Rejected. Not established by evidence. See HO #6. Accepted. Accepted. Accepted. Accepted. See HO #7. Accepted. Accepted. COPIES FURNISHED: William Chadeayne, Qualified Representative 8933 Western Way, Suite 16 Jacksonville, Florida 32256 Janet E. Bowman, Esquire Assistant General Counsel Department of Environmental Regulation 2600 Blairstone Road Tallahassee, Florida 32399-2400 Dale H. Twachtmann, Secretary Department of Environmental Regulation 2600 Blairstone Road Tallahassee, Florida 32399-2400 Daniel H. Thompson, Esquire General Counsel Department of Environmental Regulation 2600 Blairstone Road Tallahassee, Florida 32399-2400
The Issue The issues presented are whether damages resulted to Petitioner's home as a result of Respondent's use of explosives in connection with construction materials mining activities, and, if so, what is the appropriate remedy.
Findings Of Fact By Notice of Hearing entered March 10, 2016, this cause was scheduled for final hearing on May 18, 2016. An Amended Notice of Hearing dated April 20, 2016, re- noticed the hearing for May 18, 2016, changing the location to Lauderdale Lakes, Florida. On May 12, 2016, a second Amended Notice of Hearing also scheduled the hearing to start on May 18, 2016. On May 17, 2016, Petitioner filed a Notice of Filing Her Power of Attorney. At 9:30 a.m., on May 18, 2016, the date and time scheduled for the final hearing in this cause, Respondent's attorney and its witnesses, the court reporter and the undersigned were present. Petitioner did not appear. Petitioner's husband appeared at hearing indicating that he was there to represent Petitioner by Power of Attorney. In administrative proceedings, pro se parties may either be represented by an attorney or a qualified representative. On May 2, 2016, Petitioner's request that her husband represent her as a qualified representative was denied by Order Denying Motion/Request for Leave to be Represented by a Qualified Representative in this Case ("Order"). The Order held Petitioner's husband does not have the "knowledge and experience identified in Florida Administrative Code Rule 28-106.106 to serve as a qualified representative." Petitioner's Renewed Motion/Request for Leave to be Represented by Qualified Representative in this Case was also denied by Order on Petitioner's Renewed Motion, dated May 16, 2016. While addressing preliminary matters prior to starting the hearing, the undersigned held that the Power of Attorney could not substitute for rule 28-106.106. Therefore, Petitioner's husband was prohibited from representing Petitioner at the hearing due to Petitioner's husband not meeting the qualified representative standards. After waiting for Petitioner to appear, the undersigned convened the hearing. At 10:13 a.m., Petitioner still had not appeared. The final hearing was adjourned.
The Issue The issue to be determined is whether the applicant, Kanter Real Estate, LLC (Kanter), is entitled to issuance of an Oil and Gas Drilling Permit, No. OG 1366 (the Permit).
Findings Of Fact The Parties Kanter is a foreign limited liability company registered to do business in the State of Florida. Kanter owns 20,000 acres of property in western Broward County, on which it seeks authorization for the drilling of a vertical exploratory well. The exploratory well is to be located on a five-acre site that is subject to an ERP (the Well Site). The Department is the state agency with the power and duty to regulate activities related to the management and storage of surface waters pursuant to chapter 373, Florida Statutes, and to regulate oil and gas resources, including the permitting of activities related to the exploration for and extraction of such resources, pursuant to chapter 377, Florida Statutes. Miramar is a Florida municipal corporation located in Broward County, Florida. Broward County is a political subdivision of the State of Florida with jurisdiction extending to the Kanter property and the Well Site. The Application On July 2, 2015, Kanter submitted its Application for Permit to Drill (Application) to the Department. The proposed Well Site is on land to which Kanter owns the surface rights and subsurface mineral rights. The Application contemplates the drilling of an exploratory well to a depth of approximately 11,800 feet. The Application is not for a production well. The well is to be drilled, and ancillary activities are to be performed on a fill pad of approximately five acres, surrounded by a three-foot high perimeter berm on three sides and the L67-A levee on the fourth. The pad is the subject of an ERP which, as set forth in the Preliminary Statement, is not being challenged. The pad is designed to contain the 100-year, three-day storm. The engineering design incorporates a graded area, berm, and containment with a water control structure and a gated culvert to manipulate the water if necessary. The entire pad is to be covered by a 20 mil PVC liner, is sloped to the center, and includes a steel and concrete sump for the collection of any incidental spills. The pad was designed to contain the full volume of all liquids, including drilling fluid, fuel, and lubricating oil, that are in tanks and containers on the facility. The Application includes technical reports, seismic data, and information regarding the geology and existing producing oil wells of the Upper Sunniland Formation, which Kanter filed for the purpose of demonstrating an indicated likelihood of the presence of oil at the proposed site. The third Request for Additional Information (RAI) did not request additional information regarding the indicated likelihood of the presence of oil at the proposed site. After it submitted its response to the third RAI, Kanter notified the Department of its belief that additional requests were not authorized by law. As a result, the Department completed the processing of the Application without additional RAI’s. On November 16, 2016, the Department entered its Notice of Denial of the Oil and Gas Drilling Permit. The sole basis for denial was that Kanter failed to provide information showing a balance of considerations in favor of issuance pursuant to section 377.241.1/ There was no assertion that the Application failed to meet any standard established by applicable Department rules, Florida Administrative Code Chapters 62C-25 through 62C-30. In particular, the parties included the following stipulations of fact in the Joint Prehearing Stipulation which are, for purposes of this proceeding, deemed as established: The structure intended for the drilling or production of Kanter’s exploratory oil well is not located in any of the following: a municipality; in tidal waters within 3 miles of a municipality; on an improved beach; on any submerged land within a bay, estuary, or offshore waters; within one mile seaward of the coastline of the state; within one mile seaward of the boundary of a local, state or federal park or an aquatic or wildlife preserve; on the surface of a freshwater lake, river or stream; within one mile inland from the shoreline of the Gulf of Mexico, the Atlantic Ocean or any bay or estuary; or within one mile of any freshwater lake, river or stream. The location of Kanter’s proposed oil well is not: within the corporate limits of any municipality; in the tidal waters of the state, abutting or immediately adjacent to the corporate limits of a municipality or within 3 miles of such corporate limits extending from the line of mean high tide into such waters; on any improved beach, located outside of an incorporated town or municipality, or at a location in the tidal waters of the state abutting or immediately adjacent to an improved beach, or within 3 miles of an improved beach extending from the line of mean high tide into such tidal waters; south of 26°00'00? north latitude off Florida’s west coast and south of 27°00'00? north latitude off Florida’s east coast, within the boundaries of Florida’s territorial seas as defined in 43 U.S.C. 1301; north of 26°00'00? north latitude off Florida’s west coast to the western boundary of the state bordering Alabama as set forth in s. 1, Art. II of the State Constitution; or north of 27°00'00? north latitude off Florida’s east coast to the northern boundary of the state bordering Georgia as set forth in s. 1, Art. II of the State Constitution, within the boundaries of Florida’s territorial seas as defined in 43 U.S.C. 1301. 19. The proposed oil well site does not contain Florida panther habitat and is located outside of the primary and secondary habitat zones for the Florida panther. 21. There are no recorded archaeological sites or other historic resources recorded within the area of the proposed oil well site. Kanter submitted a payment of $8,972.00 for its oil and gas permit application on June 30, 2016 pursuant to Rule 62C- 26.002(5)(c), F.A.C. Kanter’s application includes sufficient information and commitments for performance bonds and securities. DEP and Intervenors do not claim that the application lacks the information required in rule 62C-26.002, F.A.C. Kanter’s application includes an organization report that satisfies the requirements of rule 62C-26.003(3), F.A.C. Kanter’s engineering aspects of the site plan for the proposed project site, are appropriate. Kanter’s survey submitted to DEP in support of its application includes a suitable location plat which meets the minimum technical standards for land surveys. Kanter’s application includes an appropriate description of the planned well completion. DEP and Intervenors do not claim that the drilling application lacks the information required by rule 62C-26.003, F.A.C. Kanter’s Application proposes using existing levees to provide access to the proposed Kanter well site. Kanter did not propose to construct additional roads for access. Kanter’s proposed well site is located 332 feet from the L67-A levee, which serves as a roadway for trucks used to perform operations and maintenance on the levees and canals in the area. Kanter’s application does not lack any information required by DEP with respect to the location of roads, pads, or other facilities; nor does it lack any information regarding the minimization of impacts with respect to the location of roads. DEP and Intervenors do not contend that the permit should be denied based upon the proposed “spacing” of the well, or drilling unit, as that term is used in rule 62C-26.004, F.A.C. Kanter’s application includes appropriate plans for the construction of mud tanks, reserve pits, and dikes. Kanter agrees to a reasonable permit condition requiring that if water is to be transported on-site, that it will add additional tanks for the purpose of meeting water needs that would arise during the drilling process. Kanter’s design of the integrated casing, cementing, drilling mud, and blowout prevention programs is based upon sound engineering principles, and takes into account all relevant geologic and engineering data and information. Kanter’s proposed casing plan includes an additional casing string proposed in its response to DEP’s Third Request for Additional Information. This casing plan meets or exceeds the requirements of 62C-27.005, F.A.C. Kanter’s proposed casing and cementing program, as modified, meets or exceeds all applicable statutory and rule criteria.[2/] Kanter’s response and documents provided in response to DEP’s 3rd RAI satisfactorily resolved DEP’s concern regarding the risk of passage of water between different confining layers and aquifers resulting from the physical act of drilling through the layers of water and the intervening soil or earth. Kanter’s application includes a sufficient lost circulation plan. Kanter’s application is not deficient with respect to specific construction requirements which are intended to prevent subsurface discharges. Kanter’s drilling fluids plan is appropriate and is not deficient. Kanter’s blowout prevention equipment and procedures are appropriate and are not deficient. Kanter’s plans for blowout prevention are not insufficient. Kanter’s proposed oil pad is above the 100 year flood elevation and under normally expected circumstances would not be inundated by water if constructed as proposed in Kanter’s application. Kanter’s application includes a Hydrogen Sulfide Safety Plan that includes standards which are consistent with the onshore oil and gas industry standards set forth in the American Petroleum Institutes’ Recommended Practice. DEP and Intervenors do not claim any insufficiencies with respect to Kanter’s Hydrogen Sulfide Gas Contingency Plan, the sufficiency of secondary containment, its construction plans for a protective berm around the drilling site and storage tank areas of sufficient height and impermeability to prevent the escape of pad fluid, its pollution prevention plan, its safety manual, or its spill prevention and cleanup plan. DEP and Intervenors do not contend that the permitting of the well would violate section 377.242(1), F.S., regarding permits for the drilling for, exploring for, or production of oil, gas, or other petroleum products which are to be extracted from below the surface of the land only through the well hole(s). DEP and Intervenors do not contend that Kanter’s application violates the applicable rule criteria for oil and gas permitting set forth in Chapters 62C-25 through 62C-30, Florida Administrative Code. In addition to the foregoing, Kanter is not seeking or requesting authorization to perform “fracking,” and has agreed to a permit condition that would prohibit fracking. As a result of the foregoing, the parties have agreed that the Application meets or exceeds all criteria for an exploratory oil well permit under chapters 62C-25 through 62C-30. The Property Kanter owns two parcels of land totaling 20,000 acres in the area of the proposed Well Site: a northern parcel consisting of approximately 11,000 acres and a southern parcel consisting of approximately 9,000 acres. Kanter assembled its holdings through a series of acquisitions by deeds from 1975 to 1996. The Well Site is to be located within the southern parcel. On August 7, 1944, Kanter’s predecessor in title, Dallas Investment Co., acquired by tax deed all interests in a parcel within the 9,000-acre southern parcel described as “All Section 23 Township 51 South, Range 38 East, 640 Acres,” including, without reservation, the oil, gas, minerals, and phosphate. The evidence of title submitted as part of the Application indicates that a “Kanter” entity first became possessed of rights in Section 23 in 1975. By virtue of a series of transactions extending into 1996, Kanter currently holds fee title to all surface rights, and title to all mineral rights, including rights to oil, gas, and other mineral interests, within Section 23 Township 51 South, Range 38 East. The Well Site specified in the Application is within Section 23, Township 51 South, Range 38 East. Kanter’s property is encumbered by a Flowage Easement that was granted to the Central and Southern Flood Control District in 1950, and is presently held by the South Florida Water Management District (SFWMD). The Flowage Easement guarantees Kanter access to the entire easement property “for the exploration or drilling for, or the developing, producing, storing or removing of oil, gas or other . . . in accordance with sound engineering principles.” Kanter has the legal property right to locate and drill the well, and the exploratory well is consistent with Kanter’s ownership interest. The Well Site is located in a 160-acre (quarter section) portion of the 640-acre tract described above, and is within a “routine drilling unit,” which is the block of land surrounding and assigned to a well. Fla. Admin. Code R. 62C-25.002(20) and 62C-25.002(40). The Kanter property, including the Well Site, is in the historic Everglades. Before efforts to drain portions of the Everglades for development and agricultural uses, water flowed naturally in a southerly direction through land dominated by sawgrass and scattered tree islands. The tree islands were generally shaped by the direction of the water flow. Beginning as early as the late 1800s, dramatically increasing after the hurricane of 1947, and extending well into the 1960s, canals, levees, dikes, and channels were constructed to drain, impound, or reroute the historic flows. Those efforts have led to the vast system of water control structures and features that presently exist in south Florida. The Well Site, and the Kanter property as a whole, is located in Water Conservation Area (WCA)-3. WCA-3 is located in western Broward County and northwestern Miami-Dade County. It was constructed as part of the Central and Southern Florida Flood Control project authorized by Congress in 1948, and was created primarily for flood control and water supply. In the early 1960s, two levees, L67-A and L67-C, were constructed on a line running in a northeast to southwest direction. When constructed, the levees separated WCA-3 into WCA-3A to the west and WCA-3B to the southeast. The Well Site is in WCA-3A.3/ The area between L67-A and L67-C, along with a levee along the Miami Canal, is known as the “Pocket.” There is no water control in the Pocket. Although there is a structure at the south end of the Pocket, it is in disrepair, is rarely -- if ever -- operated, and may, in fact, be inoperable. The Well Site is located within the Pocket, on the southern side of L67-A. L67-A and L67-C, and their associated internal and external canals, have dramatically disrupted sheet flow, altered hydrology, and degraded the natural habitat in the Pocket. Water inputs and outputs are entirely driven by rainfall into the Pocket, and evaporation and transpiration from the Pocket. From a hydrologic perspective, the Pocket is entirely isolated from WCA-3A and WCA-3B. The Pocket is impacted by invasive species, which have overrun the native species endemic to the area and transformed the area into a monoculture of cattails. Vegetation that grows in the Pocket dies in the Pocket. Therefore, there is a layer of decomposing vegetative muck, ooze, and sediment from knee deep to waist deep in the Pocket, which is atypical of a functioning Everglades system. L67-A and L67-C, and their associated internal and external canals, impede wildlife movement, interfering with or preventing life functions of many native wildlife species. The proposed Well Site, and the surrounding Kanter property, is in a rural area where future residential or business development is highly unlikely. The property is removed from urban and industrial areas and is not known to have been used for agriculture. The Department has previously permitted oil wells within the greater Everglades, in areas of a more pristine environmental nature, character, and location than the Pocket. The Raccoon Point wellfield is located 24 miles west of the Proposed Project Site within the Big Cypress National Preserve. It is within a more natural system and has not undergone significant hydrologic changes such as the construction of canals, levees, ditches, and dikes and, therefore, continues to experience a normal hydrologic flow. Mr. Gottfried testified that at Raccoon Point, “you can see the vegetation is maintaining itself because the fact that we don’t have levees, ditches canals, dikes, impacting the area. So you have a diversity of plant life. You have tree islands still. You have the normal flow going down.” The greater weight of evidence shows that the Kanter Well Site is far less ecologically sensitive than property at Raccoon Point on which the Department has previously permitted both exploration and production wells. The Biscayne Aquifer The Biscayne Aquifer exists in almost all of Miami- Dade County, most of Broward County and a portion of the southern end of Palm Beach County. It is thickest along the coast, and thinnest and shallowest on the west side of those counties. The western limit of the Biscayne Aquifer lies beneath the Well Site. The Biscayne Aquifer is a sole-source aquifer and primary drinking water source for southeast Florida. A network of drainage canals, including the L-30, L-31, L-33, and Miami Canals, lie to the east of WCA-3B, and east of the Well Site. Those canals penetrate into the substratum and form a hydrologic buffer for wellfields east of the Well Site, including that operated by Miramar, and isolate the portions of the Biscayne Aquifer near public wellfields from potential impacts originating from areas to their west. The canals provide a “much more hydraulically available source” of water for public wellfields than water from western zones of the Biscayne Aquifer, and in that way create a buffer between areas on either side of the canals. The Pocket is not a significant recharge zone for the Biscayne Aquifer. There is a confining unit comprised of organic soils, muck, and Lake Flint Marl separating the Pocket and the Well Site from the Fort Thompson formation of the Biscayne Aquifer. There is a layer of at least five feet of confining muck under the L67-A levee in the area of the Well Site, a layer that is thicker in the Pocket. The Well Site is not within any 30-day or 120-day protection zones in place for local water supply wells. The fact that the proposed well will penetrate the Biscayne Aquifer does not create a significant risk of contamination of the Biscayne Aquifer. The drilling itself is no different than that done for municipal disposal wells that penetrate through the aquifer much closer to areas of water production than is the Well Site. The extensive casing and cementing program to be undertaken by Kanter provides greater protection for the well, and thus for the aquifer, than is required by the Department’s rules. A question as to the “possibility” that oil could get into the groundwater was answered truthfully in the affirmative “in the definition of possible.” However, given the nature of the aquifer at the Well Site, the hydrological separation of the Well Site and well from the Biscayne Aquifer, both due to the on-site confining layer and to the intervening canals, the degree of casing and cementing, and the full containment provided by the pad, the testimony of Mr. Howard that “it would be very difficult to put even a fairly small amount of risk to the likelihood that oil leaking at that site might possibly actually end up in a well at Miramar” is accepted. The Sunniland Formation The Sunniland Formation is a geologic formation which exists in a region of South Florida known as the South Florida Basin. It is characterized by alternating series of hydrocarbon-containing source rock, dolomite, and limestone of varying porosity and permeability and evaporite anhydrite or mudstone seal deposits. It has Upper Sunniland and Lower Sunniland strata, and generally exists at a depth of up to 12,000 feet below land surface (bls) in the area of the Well Site. Underlying the Sunniland Formation is a formation generally referred to as the “basement.” The basement exists at a depth of 17,000-18,000 feet bls. Oil is produced from organic rich carbonate units within the Lower Cretaceous Sunniland Formation, also known as the Dark Shale Unit of the Sunniland Formation. The oil produced in the Sunniland Formation is generally a product of prehistoric deposits of algae. Over millennia, and under the right conditions of time and pressure, organic material is converted to hydrocarbon oil. The preponderance of the evidence demonstrates that active generating source rock capable of producing hydrocarbons exists in the Sunniland Formation beneath the Kanter property. The preponderance of the evidence also indicates that the oil generated in the Sunniland Formation is at a sufficient depth that it is preserved from microbial degradation, which generally occurs in shallower reservoirs. The Upper Sunniland Formation was formed in the Cretaceous geological period, between 106 and 100 million years ago. Over that period, sea levels rose and fell dramatically, allowing colonies of rudists (a now extinct reef-building clam) and oysters to repeatedly form and die off. Over time, the colonies formed bioherms, which are reef-like buildups of shell elevated off of the base of the sea floor. Over millennia, the bioherms were exposed to conditions, including wave action and exposure to air and rainwater, that enhanced the porosity of the component rudist and oyster shell. Those “patch reefs” were subsequently buried by other materials that formed an impermeable layer over the porous rudist and oyster mounds, and allowed those mounds to become “traps” for oil migrating up from lower layers. A trap is a geological feature that consists of a porous layer overlain by an impervious layer of rock that forms a seal. A trap was described, simplistically, as an upside down bowl. Oil, being lighter than water, floats. As oil is generated in source rock, it migrates up through subterranean water until it encounters a trapping formation with the ability to create a reservoir, and with an impervious layer above the porous layer to seal the trap and prevent further migration, thus allowing the “bowl” to fill. The reservoir is the layer or structure with sufficient porosity and permeability to allow oil to accumulate with its pores. The thickness of the layer determines the volume of oil that the reservoir is capable of retaining. Although rudist mounds are generally considered to be more favorable as traps due to typically higher porosity, oyster mound traps are correlated to producing wells in the Sunniland Formation and are primary producers in the Felda field and the Seminole field. The Lower Sunniland Formation is a fractured carbonate stratum, described by Mr. Aldrich as a rubble zone. It is not a traditional structural trap. Rather, it consists of fractured and crumbling rock thought to be created by basement shear zones or deep-seated fault zones. It has the same source rock as the Upper Sunniland. There is little information on traps in the Lower Sunniland, though there are two fields that produce from that formation. A “play” is a group of prospects or potential prospects that have the same source rock, the same reservoir rock, the same trap style, and the same seal rock to hold in the hydrocarbons. The producing oil fields in the Sunniland Formation, including Raccoon Point, Sunniland, Felda, West Felda, and Lake Trafford are part of a common play known as the Sunniland Trend. The Sunniland Trend is an area of limestone of greater porosity within the Sunniland Formation, and provides a reasonable extrapolation of areas that may be conducive to oil traps. The Sunniland Trend extends generally from Manatee County on the west coast of Florida southeasterly into Broward County and the northwestern portion of Miami-Dade County on the east coast of Florida. The trend corresponds to the ancient Cretaceous shoreline where rudist and oyster bioherms formed as described above. In 2003, the “Mitchell-Tapping” report, named after the husband and wife team, identified two separate trends within the Sunniland Trend, the rudist-dominant West Felda Trend, and the more oyster-based Felda Trend. Both are oil-producing strata. The Felda Trend is more applicable to the Kanter property. Throughout the Sunniland Trend, hydrocarbon reservoirs exist within brown dolomite deposits and rudist and oyster mounds. Dolomite is a porous limestone, and is the reservoir rock found at the productive Raccoon Point oil wellfield. The evidence indicates that a brown dolomite layer of approximately 20 feet underlies the Well Site, and extends in all directions from the Well Site. A preponderance of the evidence indicates that the Kanter property, including the Well Site, is within the Sunniland Trend and its Felda Trend subset.4/ Oil produced from wells in the Sunniland Trend is typically thick, and is not under pressure. The oil does not rise through a bore hole to the surface, but must be pumped. The Raccoon Point Field, which is the closest productive and producing wellfield to the proposed Well Site, is located approximately 24 miles to the west of the Well Site, within the Sunniland Trend. Raccoon Point contains numerous well sites, of which four or five are currently producing, and has produced in the range of 20 million barrels of oil since it began operation in the late 1970s. Cumulative production of oil from proven fields in the South Florida Basin, including fields in the Sunniland Formation, is estimated to be in excess of 160 million barrels. Estimates from the U.S. Geological Service (USGS) indicate that 25 new fields capable of producing five million barrels of oil each are expected to be found within the Lower Cretaceous Shoal Reef Oil Assessment Unit, which extends into the Kanter property. Estimates of the potential reserves reach as high as an additional 200 million barrels of oil. The Dollar Bay Formation Another formation that has potential for oil production is the Lower Cretaceous Dollar Bay Formation, also in the South Florida Basin. The Dollar Bay Formation exists beneath the Kanter property at a shallower depth than the Sunniland Formation, generally at a depth of 10,000 feet in the vicinity of the Well Site. Most of the Dollar Bay prospects are on the east side of the South Florida Basin. Most of the wells in the South Florida Basin are on the west side. Thus, there has not been much in the way of exploration in the Dollar Bay Formation, so there is a lack of data on traps. Dollar Bay has been identified as a known oil-bearing play by the USGS. It is a self-source play, so the source comes from the Dollar Bay Formation itself. Dollar Bay exists both as potential and mature rock. It has known areas of very high total organic content (TOC) source rock; logged reservoir in the formation; and seal rock. There have been three oil finds in the Dollar Bay formation, with at least one commercial production well. Kanter will have to drill through the Dollar Bay Formation to get to the Upper Sunniland formation, thus allowing for the collection of information as to the production potential of the prospect. Although Dollar Bay is not generally the main “target” of the Permit, its potential is not zero. Thus, consideration of the Dollar Bay Formation as a factor in the calculation of risk/success that goes into the decision to drill an exploratory well is appropriate. Initial Exploratory Activities In 1989, Shell Western E&P, Inc. (Shell), conducted extensive seismic exploration in south Florida. Among the areas subject to seismic mapping were two lines -- one line of 36,000 feet mapped along the L67-A levee, directly alongside the Well Site, and the other of approximately 10 miles in length along the Miami Canal levee. The lines intersect on the Kanter property just north of the Well Site. The proposed exploration well is proposed to extend less than 12,000 feet deep. The seismic mapping performed by Shell was capable of producing useful data to that depth. The seismic methodology utilized by Shell produced data with a high degree of vertical and spatial resolution. Given its quality, the Shell data is very reliable. Shell did not use the seismic data generated in the 1980s, and ultimately abandoned activity in the area in favor of larger prospects, leaving the smaller fields typical of south Florida for smaller independent oil companies. The Shell seismic data was purchased by Seismic Exchange, a data brokerage company. In 2014, Kanter purchased the seismic data from Seismic Exchange for the lines that ran through its property. With the purchase, Kanter received the original field tapes, the support data, including surveyors’ notes and observer sheets which describe how the data was acquired, and the recorded data. As a result of advances in computer analysis since the data was collected, the seismic data can be more easily and accurately evaluated. It is not unusual for companies to make decisions on whether to proceed with exploration wells with two lines of seismic data. Mr. Lakin reviewed the data, and concluded that it showed a very promising area in the vicinity of the L67-A levee that was, in his opinion, sufficient to continue with permitting an exploratory oil well. Mr. Lakin described the seismic information in support of the Application as “excellent data,” an assessment that is well-supported and accepted. Mr. Pollister reviewed the two lines of seismic data and opined that the information supports a conclusion that the site is a “great prospect” for producing oil in such quantities as to warrant the exploration and extraction of such products on a commercially profitable basis. Seismic Data Analysis The seismic lines purchased by Kanter consist of line 970, which runs southwest to northeast along the L67-A levee, and a portion of line 998, which runs from northwest to southeast along the Miami Canal levee. The lines intersect at the intersection of the two levees. The data depicts, among others, the seismic reflection from the strata of the Sunniland Trend, and the seismic reflection from the basement. The depiction of the Sunniland Trend shows a discernable rise in the level of the strata, underlain by a corresponding rise in the basement strata. This rise is known as an anticline. An anticline is a location along a geologic strata at which there is an upheaval that tends to form one of the simplest oil traps that one can find using seismic data. In the South Florida Basin, anticlines are typically associated with mounded bioherms. A “closed structure” is an anticline, or structural high, with a syncline, or dip, in every direction. A closed structure, though preferable, is not required in order for there to be an effective trap. Most of the Sunniland oil fields do not have complete closure. They are, instead, stratigraphic traps, in which the formation continues to dip up and does not “roll over.” Where the rock type changes from nonporous to porous and back to nonporous, oil can become trapped in the porous portion of the interval even without “closure.” Thus, even if the “bowl” is tilted, it can still act as a trap. Complete closure is not necessary in much of the Sunniland Trend given the presence of an effective anhydrite layer to form an effective seal.5/ The seismic data of the Kanter property depicts an anticline in the Sunniland Formation that is centered beneath the Well Site at a depth in the range of 12,000 feet bls. Coming off of the anticline is a discernable syncline, or dip in the underlying rock. Applying the analogies used by various witnesses, the anticline would represent the top of the inverted bowl, and the syncline would represent the lip of the bowl. The evidence of the syncline appears in both seismic lines. The Shell seismic data also shows an anhydrite layer above the Sunniland Formation anticline. The same anticline exists at the basement level at a depth of 17,000 to 18,000 feet bls. The existence of the Sunniland formation anticline supported by the basement anticline, along with a thinning of the interval between those formations at the center point, provides support for the data reliably depicting the existence of a valid anticline. A basement-supported anticline is a key indicator of an oil trap, and is a feature commonly relied upon by geophysicists as being indicative of a structure that is favorable for oil production. The seismic data shows approximately 65 feet of total relief from the bottom to the top of the anticline structure, with 50 feet being closed on the back side. The 50 feet of closed anticline appears to extend over approximately 900 acres. There is evidence of other anticlines as one moves northeast along line 970. However, that data is not as strong as that for the structure beneath the Well Site. Though it would constitute a “lead,” that more incomplete data would generally not itself support a current recommendation to drill and, in any event, those other areas are not the subject of the permit at issue. The anticline beneath the well site is a “prospect,” which is an area with geological characteristics that are reasonably predicted to be commercially profitable. In the opinion of Mr. Lakin, the prospect at the location of the proposed Well Site has “everything that I would want to have to recommend drilling the well,” without a need for additional seismic data. His opinion is supported by a preponderance of the evidence, and is credited. Confirmation of the geology and thickness of the reservoir is the purpose of the exploratory well, with the expectation that well logs will provide such confirmation. Risk Analysis Beginning in the 1970s, the oil and gas industry began to develop a business technique for assessing the risk, i.e., the chance of failure, to apply to decisions being made on drilling exploration wells. Since the seminal work by Bob McGill, a systematic science has developed. In 1992, a manual was published with works from several authors. The 1992 manual included a methodology developed by Rose & Associates for assessing risk on prospects. The original author, Pete Rose,6/ is one of the foremost authorities on exploration risk. The Rose assessment method is a very strong mathematical methodology to fairly evaluate a prospect. The Rose method takes aspects that could contribute to finding an oil prospect, evaluates each element, and places it in its perspective. The Rose prospect analysis has been refined over the years, and is generally accepted as an industry standard. The 1992 manual also included a methodology for assessing both plays and prospects developed by David White. The following year, Mr. White published a separate manual on play and prospect analysis. The play and prospect analysis is similar to the Rose method in that both apply mathematical formulas to factors shown to be indicative of the presence of oil. Play and prospect analysis has been applied by much of the oil and gas industry, is used by the USGS in combining play and prospect analysis, and is being incorporated by Rose & Associates in its classes. The evidence is convincing that the White play and prospect analysis taught by Mr. Aldrich is a reasonable and accepted methodology capable of assessing the risk inherent in exploratory drilling. Risk analysis for plays and prospects consists of four primary factors: the trap; the reservoir; the source; and preservation and recovery. Each of the four factors has three separate characteristics. Numeric scores are assigned to each of the factors based on seismic data; published maps and materials; well data, subsurface data, and evidence from other plays and prospects; and other available information. Chance of success is calculated based on the quantity and quality of the data supporting the various factors to determine the likelihood that the prospect will produce flowable hydrocarbons. The analysis and scoring performed by Mr. Aldrich is found to be a reasonable and factually supported assessment of the risk associated with each of the prospects that exist beneath the proposed Well Site and that are the subject of the Application.7/ However, Mr. Aldrich included in his calculation an assessment of the Lower Sunniland Formation. The proposed well is to terminate at a depth of 11,800 feet bls, which is within the Upper Sunniland, but above the Lower Sunniland. Thus, although the Lower Sunniland would share the same source rock, the exploration well will not provide confirmation of the presence of oil. Therefore, it is more appropriate to perform the mathematical calculation to determine the likelihood of success without consideration of the Lower Sunniland prospect. To summarize Mr. Aldrich’s calculation, he assigned a four-percent chance of success at the Well Site for the Dollar Bay prospect. The assignment of the numeric scores for the Dollar Bay factors was reasonable and supported by the evidence. Mr. Aldrich assigned a 20-percent chance of success at the Well Site for the Upper Sunniland play. The assignment of the numeric scores for the Upper Sunniland factors was reasonable and supported by the evidence. In order to calculate the overall chance of success for the proposed Kanter exploratory well, the assessment method requires consideration of the “flip side” of the calculated chances of success, i.e., the chance of failure for each of the prospects. A four-percent chance of success for Dollar Bay means there is a 96-percent (0.96) chance of failure, i.e., that a commercial zone will not be discovered; and with a 20-percent chance of success for the Upper Sunniland, there is an 80-percent (0.80) chance of failure. Multiplying those factors, i.e., .96 x .80, results in a product of .77, or 77 percent, which is the chance that the well will be completely dry in all three zones. Thus, under the industry-accepted means of risk assessment, the 77-percent chance of failure means that there is a 23-percent chance of success, i.e., that at least one zone will be productive. A 23-percent chance that an exploratory well will be productive, though lower than the figure calculated by Mr. Aldrich,8/ is, in the field of oil exploration and production, a very high chance of success, well above the seven-percent average for prospecting wells previously permitted by the Department (as testified to by Mr. Linero) and exceeding the 10- to 15-percent chance of success that most large oil companies are looking for in order to proceed with an exploratory well drilling project (as testified to by Mr. Preston). Thus, the data for the Kanter Well Site demonstrates that there is a strong indication of a likelihood of the presence of oil at the Well Site. Commercial Profitability Commercial profitability takes into account all of the costs involved in a project, including transportation and development costs. Mr. Aldrich testified that the Kanter project would be commercially self-supporting if it produced 100,000 barrels at $50.00 per barrel. His testimony was unrebutted, and is accepted. The evidence in this case supports a finding that reserves could range from an optimistic estimate of 3 to 10 million barrels, to a very (perhaps unreasonably) conservative estimate of 200 barrels per acre over 900 acres, or 180,000 barrels. In either event, the preponderance of the evidence adduced at the hearing establishes an indicated likelihood of the presence of oil in such quantities as to warrant its exploration and extraction on a commercially profitable basis.9/
Recommendation Based on the foregoing Findings of Fact and Conclusions of Law, it is RECOMMENDED that the Department of Environmental Protection enter a final order: Approving the Application for Oil and Gas Drilling Permit No. OG 1366 with the conditions agreed upon and stipulated to by Petitioner, including a condition requiring that if water is to be transported on-site, it will add additional tanks for the purpose of meeting water needs that would arise during the drilling process, and a condition prohibiting fracking; and Approving the application for Environmental Resource Permit No. 06-0336409-001. DONE AND ENTERED this 10th day of October, 2017, in Tallahassee, Leon County, Florida. S E. GARY EARLY Administrative Law Judge Division of Administrative Hearings The DeSoto Building 1230 Apalachee Parkway Tallahassee, Florida 32399-3060 (850) 488-9675 Fax Filing (850) 921-6847 www.doah.state.fl.us Filed with the Clerk of the Division of Administrative Hearings this 10th day of October, 2017.
Findings Of Fact Mr. Jewell was employed as a life insurance agent from February, 1977 until June 12, 1978, with Gulf Life Insurance Company. During his employment as a "debit agent" with Gulf Life, Mr. Jewell misappropriated $1,363.77 of premiums from the company policyholders for his own use. His defalcation was discovered by the company in May of 1978, and as a result his employment was terminated. Part of his job as a debit agent included collecting premiums from the company's policyholders on a periodic basis. He was then to forward these premiums to Gulf Life. An audit of his books by Gulf Life in May of 1978 revealed that he was in fact misappropriating the funds. When confronted with the facts he was cooperative in establishing the amount of the defalcation. He made however, no attempt at restitution. On October, 1979 Gulf Life wrote a letter to him stating that he had a deficiency in his accounts and demanded payment therefor. The letter did not state the amount owed. Mr. Jewell still made no attempt to pay the amount due even though as early as June, 1979, he knew from a partial audit that his accounts were at least $700.00 short. Thereafter Mr. Jewell was sued by Gulf Life in Circuit Court for the misappropriated funds and a default judgement was obtained against him in May, 1979 for more than $1,300.00. There is still approximately $600.00 owing on the judgement. In the last nine months prior to the hearing Mr. Jewell has been employed by Reserve Life Insurance Company. He was hired as a manager-trainee and then promoted to be the district manager for the company's Merritt Island Office. It is the policy of Reserve Life that its district managers must spend at least 30 percent of their time in direct insurance sales while devoting the balance of their time to managerial duties. If Mr. Jewell's insurance license is suspended or revoked, he could possibly lose his position with Reserve Life because of the 30 percent sales rule. Since he has worked for Reserve Life his employer has been well pleased with his performance. His office has produced a remarkable amount of new business. His present supervisor, Mr. Patrick Anthony, thinks very highly of Mr. Jewell's integrity and character. He appeared on Respondent's behalf at the instant final hearing. While he may have mentioned having had some kind of a problem at Gulf Life, it does not appear that Mr. Jewell was completely candid about the nature or the extent of his defalcation at the time he was hired by Mr. Anthony for Reserve Life.
Recommendation Based upon the foregoing Findings of Fact and Conclusions of Law, it is RECOMMENDED: That a final order be entered by the State of Florida, Department of Insurance, suspending the license of Gary Thomas Jewell to represent an insurance company as an agent for the period of three (3) months beginning from the date of the final order DONE and ENTERED this 8th day of July, 1980, in Tallahassee, Florida. MICHAEL PEARCE DODSON Hearing Officer Division of Administrative Hearings Room 101, Collins Building Tallahassee, Florida 32301 (904)488-9675 COPIES FURNISHED: L. Terry Coggin, Esquire Department of Insurance Larson Building Room 428-A Tallahassee, Florida 32301 Fred D. Leone, Esquire 3017 Riveredge Boulevard Suite 108, Riveredge Plaza Post Office Box 1536 Cocoa, Florida 32922
The Issue There are three legal issues which remain for determination: (1) Whether Florida Petroleum has standing in this case; (2) Whether proposed rule 62-770.220(3)(b), requiring constructive notice to residents or business tenants of real property into which the temporary point of compliance is allowed to extend is an invalid exercise of delegated legislative authority within the meaning of Section 120.52(8)(c), Florida Statutes; and (3) Whether proposed rule 62-770.220(4), requiring additional constructive notice of the status of site rehabilitation is an invalid exercise of delegated legislative authority within the meaning of Section 120.52(8)(c), Florida Statutes.i
Findings Of Fact On December 23, 2004, the Department published a Notice of Proposed Rulemaking regarding amendments to Florida Administrative Code Chapter 62-770. In particular, proposed rule 62-770.220(3)(b) and (4), provides: Subsequent Notice of Contamination Beyond Source Property Boundaries for Establishment of a Temporary Point of Compliance (TPOC) - Prior to the Department authorizing a temporary extension of the point of compliance beyond the boundary of the source property (i.e., the location from which the contamination originates) in conjunction with Natural Attenuation Monitoring pursuant to Rule 62-770.690, F.A.C., or Active Remediation pursuant to Rule 62-770.700, F.A.C., the PRSP shall provide the following notices: * * * (b) Constructive notice to residents [if different from the real property owner(s) notified pursuant to paragraph 62- 770.220(3)(a), F.A.C.] and business tenants of any real property into which the point of compliance is allowed to extend. Such constructive notice, which shall include the same information as required in the actual notice, shall be provided by complying with the following: * * * Status Update 5-Year Notice - When utilizing a TPOC beyond the boundary of the source property to facilitate natural attenuation monitoring or active remediation, an additional notice concerning the status of the site rehabilitation shall be similarly provided every five years to [the classes of] those persons who received notice pursuant to subsection 62-770.220(3), F.A.C., unless in the intervening time, such persons have been informed that the contamination no longer affects the property into which the point of compliance was allowed to extend. * * * (The language in brackets was added pursuant to the Department's Notice of Change and "those" was deleted.) The proposed rule implements Section 376.3071, Florida Statutes. The specific authority for the proposed rule is Sections 376.303 and 376.3071, Florida Statutes. On February 2, 2005, the Environmental Regulation Commission held a public hearing on the proposed rules and approved the proposed rules with certain amendments. On February 14, 2005, Florida Petroleum filed a Petition for Determination of Invalidity of Proposed Rule (Petition) challenging the validity of proposed amendments to proposed rule 62-770.220(3)(b) and (4). The Petition was filed pursuant to Section 120.56(1) and (2), Florida Statutes, and in each instance, Florida Petroleum alleges that the proposed rule violates Section 120.52(8)(c), Florida Statutes. On March 4, 2005, the Department published a Notice of Change regarding the above-referenced Notice of Proposed Rulemaking. With respect to the pending proceeding, the Notice of Change reflects revisions to language of proposed rule 62- 770.220(4), which are not subject to challenge. See Finding of Fact 1. On May 16, 2005, without objection, official recognition was taken of the Department's Notice of Proposed Rulemaking and Notice of Change. Florida Petroleum is a Florida voluntary, non-profit trade association, which comprise, in part, approximately 194 Marketer Members who own and/or operate petroleum storage system facilities in Florida. Florida Petroleum’s purposes include providing representation on behalf of its members in legislative and regulatory matters before the Florida legislature and agencies. Florida Petroleum routinely represents its members in rule development proceeding and other regulatory matters before the Department of Environmental Protection, Department of Revenue, and Department of Agriculture and Consumer Services. Florida Petroleum’s By-Laws state that its purposes include advancing the business concerns of its members, pooling the energy and resources of its members, and communicating with elected officials at the national, state, and local levels of government. Towards those ends, Florida Petroleum has represented it members before the Florida Legislature in matters relating to the regulation of petroleum facilities under Chapter 376, Florida Statutes, and has appeared before the Department in rulemaking proceedings involving the regulation of petroleum cleanups, and the various state restoration funding assistance programs. The subject matter of the rule at issue is within the general scope of interest and activity of Florida Petroleum, in particular, its marketer members, who own or operate facilities that store petroleum products for consumption, use, or sale. Florida Petroleum submitted oral and written comments, recommendations, objections, and proposed amendments to the Department and the Environmental Regulation Commission in connection with the rules at issue in this case. A substantial number of Florida Petroleum marketer members are "persons responsible" for assessment and remediation of one or more petroleum-contaminated sites. Florida Administrative Code Chapter 62-770, governs the remediation of petroleum-contaminated sites. A substantial number of Florida Petroleum’s marketer members are "persons responsible" for assessment and remediation of sites identified by the Department as "confirmed" or "suspected" sources of contamination beyond the boundary of the facility (i.e., "off-site contamination"). In certain instances, the Department's rules allow for the use of No Further Action with Conditions procedures in cases of petroleum contamination where applicable regulatory requirements are met because the use of conditions, such as institutional and engineering controls, may be more cost- effective than active remediation. As of February 2005, the Department estimated that it had reports of approximately 23,000 petroleum-contaminated sites. In 2004, the Department received an estimated 539 Discharge Report Forms in connection with petroleum storage facilities. As of March 2005, the Department had information indicating that approximately 2,000 "off-site" properties have been affected by contamination. Assessment Reports filed with the Department indicate that a substantial number of these sites may have been affected by discharges of petroleum or petroleum products. Petroleum discharges will in all likelihood continue to occur in the future at petroleum facilities. Petroleum discharges will in all likelihood continue to affect off-site properties in the future.
The Issue This is a license discipline case in which the Petitioner seeks to take disciplinary action against the Respondent on the basis of allegations of misconduct set forth in a four-count Administrative Complaint. The Administrative Complaint charges the Respondent with violation of the following statutory provisions: Sections 489.129(1)(g), 489.129(1)(h)2, 489.129(1)(k), and 489.129(1)(n), Florida Statutes (1996 Supp.).
Findings Of Fact The Respondent, Allen Fader, is, and has been at all times material, a licensed Certified General Contractor, having been issued license number CG C007504 by the State of Florida. At all times material, the Respondent was licensed to contract as an individual. The Respondent, by virtue of his license, advertised construction services for Gold Coast Construction Services, Inc., during 1997. The Respondent presented a business card, with the name of Gold Coast Construction Services, Inc., to Ruby M. Shepherd, a customer, in April of 1997. On April 14, 1997, the Respondent, doing business as Gold Coast Construction Services, Inc., contracted with Ruby M. Shepherd to enclose a patio and to install hurricane shutters at Ms. Shepherd's residence located at 12325 Northwest 19th Avenue, Miami, Florida. The contract was conditioned on Ms. Shepherd being able to obtain financing to pay for the construction described in the contract. The exact amount Ms. Shepherd was required to pay under the original April 14, 1997, contract cannot be determined from the evidence in this case.4 The Respondent assisted Ms. Shepherd in obtaining a loan for the financing of the construction work described in the contract. It took several months to obtain a loan. Ultimately, through the efforts of the Respondent, and of a person engaged by the Respondent to help obtain a loan, Ms. Shepherd received a loan through Town and Country Title Guaranty and Escrow. The check from Town and Country Title Guaranty and Escrow was in the amount of twelve thousand nine hundred seventy-nine dollars and fifteen cents ($12,979.15). The check was made payable to Ms. Shepherd and to Gold Coast Construction Services, Inc. At the request of the man who helped obtain the loan, Ms. Shepherd endorsed the loan check and agreed for the check to be delivered to the Respondent. The Respondent, doing business as Gold Coast Construction Services, Inc., negotiated the loan check and received all of the proceeds in the amount of twelve thousand nine hundred seventy-nine dollars and fifteen cents ($12,979.15). The Respondent received the proceeds of the loan on or about September 12, 1997. The Respondent did not take any action on Ms. Shepherd's construction project until November 14, 1997. On that day, the Respondent placed an order for the material for the hurricane shutters on Ms. Shepherd's project. Nothing more was done on Ms. Shepherd's project for quite some time. Towards the end of February of 1998, the Respondent had some health problems, which caused him to be unable to work for several weeks. Eventually, the Respondent attempted to pick up the shutter materials he had ordered for Ms. Shepherd's project. As a result of the delay, those materials had been returned to stock and had been sold to someone else. The Respondent ordered the materials again. Eventually, in June of 1998, the Respondent had the shutter materials delivered to Ms. Shepherd's residence, and began the process of installing the hurricane shutters. In the meantime, from September of 1997 until January of 1998, the Respondent did not contact Ms. Shepherd. During this period of time, Ms. Shepherd called the Respondent's office numerous times and left numerous messages asking the Respondent to return her calls. From September of 1997 until January of 1998, the Respondent did not return any of Ms. Shepherd's calls. In January of 1998, Ms. Shepherd was finally able to speak with the Respondent. From January of 1998 until the installation work began in June of 1998, Ms. Shepherd spoke to the Respondent on numerous occasions in an effort to find out when the Respondent was going to begin work or return the money he had been paid. During this period of time, the Respondent repeatedly made false assurances to Ms. Shepherd that the work would be performed within two weeks. On or about June 12, 1998, the Respondent obtained a building permit for Ms. Shepherd's project from the Miami-Dade Department of Planning, Development, and Regulation. Installation of the hurricane shutters began that same week. The installation process was delayed because some of the materials did not fit and had to be returned to the manufacturer for modifications. Following the modifications, the installation process resumed. After a few more days, the Respondent told Ms. Shepherd the hurricane shutter work was finished and that he was not going to do the patio construction work, because the loan Ms. Shepherd had received was not enough money to pay for both projects. After the Respondent told Ms. Shepherd that the installation of the hurricane shutters was complete, the Respondent never did any further work on Ms. Shepherd's construction project. The hurricane shutters installed at Ms. Shepherd's property by the Respondent were not installed correctly. Several of the hurricane shutters will not open and close properly. Several of the hurricane shutters are insufficiently fastened. A necessary shutter over the storage room door was never installed. The problems with the subject hurricane shutters can be corrected. The cost of the corrections necessary to make the shutters operate properly and to fasten them securely is approximately one thousand dollars ($1,000). The Respondent never called for an inspection of the installation of the hurricane shutters at Ms. Shepherd's residence. In their present condition, those hurricane shutters will not pass inspection, because they were installed improperly. If corrections are made, those hurricane shutters will pass inspection. By reason of the facts stated in paragraphs 12 and 13 above, the Respondent failed to properly and fully complete the hurricane shutter portion of the contracted work. The Respondent never did any work on the patio portion of the contracted work. At some point in time between September of 1997 and June of 1998, Ms. Shepherd and the Respondent agreed to a modification of their original contract due to the fact that the proceeds of the loan obtained by Ms. Shepherd were insufficient to pay for both the hurricane shutters and the enclosure of the patio. The essence of their modified agreement (which was never reduced to writing) was that the Respondent would not do the patio enclosure portion of the contracted work; the Respondent would do the hurricane shutter portion of the contracted work; the Respondent would be paid for the hurricane shutter portion of the contracted work; and any remaining balance of the loan proceeds that had been paid to the Respondent would be paid back to Ms. Shepherd. Implicit, but apparently unstated, in this modified agreement, was the notion that the Respondent would charge a fair price for the hurricane shutter portion of the contracted work. A fair price for the hurricane shutter portion of the contracted work at Ms. Shepherd's residence, including all materials, labor, overhead, and profit, would be approximately four thousand dollars ($4,000).5 The price of four thousand dollars presupposes properly installed hurricane shutters that will pass inspection. As previously mentioned, it will cost approximately one thousand dollars ($1,000) to make the corrections to the subject hurricane shutters which are necessary for the shutters to function properly and pass inspection. Accordingly, the fair value of the work performed by the Respondent at Ms. Shepherd's residence is three thousand dollars ($3,000). Ms. Shepherd has paid $12,979.15 to the Respondent, doing business as Gold Coast Construction Services, Inc. The fair value of the work performed by the Respondent at Ms. Shepherd's residence is $3,000. Therefore, the Respondent has been paid $9,979.15 more than he is entitled to keep. As of the date of the final hearing, the Respondent has not paid back any money to Ms. Shepherd.
Recommendation On the basis of the foregoing findings of fact and conclusions of law, it is RECOMMENDED that a final order be issued in this case concluding that the Respondent is guilty of the violations charged in each of the four counts of the Administrative Complaint, and imposing the following penalties: For the violation of Section 489.129(1)(g), Florida Statutes (1996 Supp.), an administrative fine in the amount of $100.00. For the violation of Section 489.129(1)(k), Florida Statutes (1996 Supp.), an administrative fine in the amount of $2,000.00. For the violation of Section 489.129(1)(n), Florida Statutes (1996 Supp.), an administrative fine in the amount of $1,000.00. For the violation of Section 489.129(1)(h), Florida Statutes (1996 Supp.), an administrative fine in the amount of $1,500.00, and placement of the Respondent on probation for a period of one year. It is further RECOMMENDED that the final order require the Respondent to pay restitution to Ms. Shepherd in the amount of $9,979.15, and to pay costs of investigation and prosecution in the amount of $266.55. DONE AND ENTERED this 9th day of September, 1999, in Tallahassee, Leon County, Florida. MICHAEL M. PARRISH Administrative Law Judge Division of Administrative Hearings The DeSoto Building 1230 Apalachee Parkway Tallahassee, Florida 32399-3060 (850) 488-9675 SUNCOM 278-9675 Fax Filing (850) 921-6847 www.doah.state.fl.us Filed with the Clerk of the Division of Administrative Hearings this 9th day of September, 1999.
Findings Of Fact At all times pertinent to the allegations contained in the Administrative Complaint, the Petitioner, Department, was responsible for the certification and regulation of pest exterminating services in Florida. Respondent, Bernard Kolkana,was a certified operator in charge employed by Palm Beach Exterminating Service, Inc., which is located at 2110 Florida Mango Road in West Palm Beach. The Respondent, Michael F. Kilby, was an employee of Palm Beach Exterminating Services, Inc. On September 25, 1989, Michael F. Kilby, in his capacity as a representative of Palm Beach Exterminating Service, Inc., and working under the direct supervision of certified operator in charge, Respondent Kolkana performed a termite inspection at the home of Neil S. Mallard located at 3306 Fargo Avenue in Lake Worth. At the time of the inspection, Mr. Kilby found no visible evidence of subterranean termite activity or damage and issued a written report stating he had inspected the entire structure and did not observe visible evidence of wood-destroying organisms, live wood-destroying organisms, any visible damage, or visible evidence of previous treatment. Sometime thereafter, Mr. Mallard, because he was unable to operate a sliding pocket door, removed the siding near the door base and observed what he thought to be infestation. He also observed what appeared to him to be termite damage in a kitchen cabinet. Therefore, he requested a reinspection by Mr. Kilby on October 6, 1990. At that inspection, Mr. Kilby observed extensive termite damage around the sliding glass door which was inoperable as a result of damage to the frame and wall structure; numerous areas of subterranean termite mud shelter tubing around the perimeter of the house; and termite damage throughout the garage door frame. Kilby also noted that Mr. Mallard had removedcertain areas of the house siding, and evidence of a secondary moisture source in that there were water spots in the area above the sliding door. This indicated to him a possible roof leak. When Mr. Kilby pointed out to Mr. Mallard the numerous areas of termite mud tunnels around the base of the house, he was told by Mallard that they must be new because he, Mallard, had recently had the outside of the house pressure cleaned prior to having it painted and there had been no evidence of tunnels then. Mr. Kilby did not conduct a complete inspection of the house on October 6, 1990 and he was not advised of any termite problem in the kitchen cabinets. As a result, he did not examine that area. No evidence was presented to contradict Kilby's testimony. On October 24, 1990, a subterranean termite treatment was performed at this property by Orkin Pest Control. At the time of this treatment, Orkin's representative noted no evidence of visible and accessible live wood-destroying organisms in either the kitchen cabinets, the sliding door frame, or the garage door frame. The treatment area included only the cement slab on the patio and the exterior kitchen wall. Nonetheless, on or about December 17, 1990, Mr. Mallard filed a complaint about the Respondent's September 25, 1989 inspection with the Department. On March 8, 1991, Mr. Mallard again contacted Orkin Pest Control and reported additional evidence of subterranean termites. Several days later, on March 21, 1991, Orkin's servicemanager examined the Mallard residence, performed a reinspection, and after noticing evidence of live subterranean termites, performed a re-treatment. On April 2, 1991, pursuant to Mr. Mallard's December 17, 1990 complaint, Joseph Parker, an entomologist inspector and expert in the field, inspected the residence and took photographs of the damage. Mr. Parker's report, issued on May 3, 1991, indicated his opinion that the evidence of live infestation or the visible and accessible evidence of termite damage should have been detected by Mr. Kilby when he performed his September 25, 1989 inspection because of the extensive damage the insects had done throughout the Mallard residence. He indicated that the damage he observed on April 2, 1991 appeared to him to have existed for from three to five years prior to treatment, and his inquiry of the homeowner indicated that no repairs were done to the home between the time of Kilby's inspection in September, 1989 and Parker's inspection on April 2, 1991. Mr. Parker was unaware, when he issued his report on May 3, 1991 that Orkin had done a re-treatment on March 22, less than two weeks prior to his inspection. A secondary moisture source, such as that which was observed by Mr. Kilby during his reinspection in October, 1990, can increase the rate of subterranean termite activity and damage. Subterranean termite activity in a home can be hidden for quite a while, and visibility of that activity is changeable and does not necessarily appear at the beginning of termite activity. The mud tunnels can be formed relatively quickly. While Mr. Parker visited the property and observed the damage himself, Susan McKnight, testifying on behalf of the Respondent's did not. Nonetheless, she is highly qualified in entomology, holding a Master's of Science degree in the field, and has six year's research experience and 10 years experience with the Department as the former holder of Mr. Parker's position. In fact, she spent several weeks training him when he was first hired. Based on her review of the records of the Mallard inspections, she concluded she could not have formed the opinion reached by Mr. Parker because the time between the inspections was too great. Eastern termites eat wood at a rate based on the number of insects, the moisture present, the accessibility to the structure, and other items. Because this is a tropic environment, the rules generally applicable to the determination of time of damage are questionable when the elapsed time is more than one year. She believes any estimate indicating damage existing for over a year is unreliable. The re-treatment done by Orkin normally would not be done unless there was evidence of live termites. Under Department rules, re- treatment of property is permitted if an active infestation is noted; if the certified operator determines that the chemical barrier has been disturbed or rendered ineffective; or if a technician observes an incomplete original treatment. According to Ms. McKnight, there are many ways an initial treatment might be ineffective, but the most common reason for re-treatment is the presence of moisture which makes it possible for the termites to not have to return to the soil forwater and to remain in the property. Mr. Parker indicated that in his opinion, evidence of live infestation or visible and accessible evidence of damage was available and should have been detected by Mr. Kilby when he did his September 25, 1989 inspection. Ms. McKnight, on the other hand, indicates that the evidence available was unreliable and she disagrees with Parker's conclusion. Taken together, the evidence is neither clear nor convincing that Kilby missed evidence in the Mallard house he could have and should have seen, or that his inspection was not consistent with good industry practice and standards. On March 9, 1990, Mr. Kilby also performed a termite inspection at the residence of Aladberto Valcarcal at 15 Lake Arbor Drive in Palm Springs. At this time, Kilby found no visible evidence of subterranean termite activity or damage and issued a report to that effect. Nine months later, on December 19, 1990, the homeowner filed a complaint with the Department alleging that Kilby and Palm Beach Exterminating Service, Inc. had failed to report evidence of damage at the time of the inspection. This complaint was based on the fact that on December 7, 1990, a representative of Tomasello Pest Control Company performed an inspection of that property and found evidence of subterranean termite damage and activity. As a result of the December 7 complaint, Mr. Parker did an inspection of the Valcarcal residence and on April 24, 1991, subsequent to his report being issued, Tomasello did a treatmentfor subterranean termites at that residence. On June 4, 1991, Tomasello performed a re-treatment for termite activity in the Mr. Parker did not notice, during his December, 1990 inspection, any ongoing termite activity problem in the kitchen cabinet area of the Valcarcal home. Because he saw no evidence,. he assumed there was no termite activity going on there. As the evidence shows, however, the subsequent termite damage noted in June indicates that activity had been going on for a while and must have been present at the time of Parker's inspection at which he found no activity. Again, the evidence of improper performance by Kilby is neither clear nor convincing. There is no evidence of record to demonstrate that Respondent Kilby was inadequately trained or supervised as a termite inspector for Palm Beach EXterminating Service by Respondent Kolkana.
Recommendation Based on the foregoing Findings of Fact and Conclusions of Law, it is, therefore: RECOMMENDED that the Administrative Complaints filed in these cases against Bernard Kolkana and Michael F. Kilby be dismissed. RECOMMENDED in Tallahassee, Florida this 14th day of November, 1991. ARNOLD H. POLLOCK Hearing Officer Division of Administrative Hearings The DeSoto Building 1230 Apalachee Parkway Tallahassee, Florida 32399-1550 (904) 488-9675 Filed with the Clerk of the Division of Administrative Hearings this 14th day of November, 1991. APPENDIX TO RECOMMENDED ORDER The following constitutes my specific rulings pursuant to Section 120,59(2), Florida Statutes, on all of the Proposed Findings of Fact submitted by the parties to this case. FOR THE PETITIONER; As to the Mallard property: & 2. Accepted and incorporated herein. Accepted and incorporated herein. Accepted and incorporated herein. - 7. Accepted and incorporated herein. 8. - 11. Accepted and incorporated herein. 12. - 14. Accepted and incorporated herein. & 16. Rejected as not supported by competent evidence of record. Rejected as not supported by competent evidence of record. Accepted. Accepted and, as pertinent, incorporated herein. Accepted and incorporated herein. Accepted. As to the Valcarcal Property: & 2. Accepted and incorporated herein. Accepted and incorporated herein. Accepted and incorporated herein. - 7. Accepted and incorporated herein. Not supported by competent evidence of record. & 10. Rejected as not supported by competent evidence or record. 11. Merely a restatement of testimony. FOR THE PETITIONER: As to the Mallard Property: & 2. Accepted and incorporated herein. 3a. - f. Accepted and incorporated herein. 4. - 6. Accepted and incorporated herein. 7. & 8. Accepted and incorporated herein. - 11. Accepted. Accepted. Accepted. Not proven. 15.- 17. Accepted and incorporated herein. As to the Valcarcal property: & 2. Accepted and incorporated herein. Accepted and incorporated herein. Accepted and incorporated herein. - 7. Accepted. 8.- 10. Accepted. Accepted. & 13. Accepted. 14. Accepted. COPIES FURNISHED: Karen M. Miller, Esquire DHRS District IX Legal Office 111 Georgia Avenue, 3rd Floor West Palm Beach, Florida 33401 Patrick C. Massa, Esquire Suite 110 11891 U. S. Highway One North Palm Beach, Florida 33408-2864 John Slye General Counsel DHRS 1323 Winewood Blvd. Tallahassee, Florida 32399-0700 Sam Power Agency Clerk DHRS 1323 Winewood Blvd. Tallahassee, Florida 32399-0700
The Issue The issue in this case is whether the Notice of Violation (NOV) and Orders for Corrective Action (OCA) filed by the Department of Environmental Protection (DEP) against Respondents, Thomas Kerper (Kerper) and All Salvaged Auto Parts, Inc. (ASAP) , in DEP OGC File No. 02-0447 should be sustained.
Findings Of Fact 1. The real property located at 3141 Sharpe Road, Apopka, Florida, is owned by the heirs of Donald Joynt, who owned it for the 30 years prior to his death in 2002. The property consists of approximately 40 acres in the shape of a right triangle with the west side bordered by Sharpe Road, the south side by a potting soil business, and the northeast side (the hypotenuse of the right triangle) bordered by a railroad track. Prior to his death, Joynt used the property primarily for the purpose of operating a junkyard and recycling business ultimately entitled Don's Auto Recycling. 2. At some time before 2000, Joynt became desirous of selling his property. He offered it to a neighbor named José Luis Benitez for $600,000. Benitez counter-offered for between $350,000 and $400,000 because he thought it would cost $200,000 to $250,000 to clean the property up. Joynt rejected the counter-offer, and asked Benitez to help him find a buyer who would pay more than Benitez. At some point, Joynt listed the property with a real estate broker for $600,000. 3. In 1999, Kerper was operating an automobile parts salvage business at a location near Joynt's property. Kerper needed a new location to move his business and inventory. A real estate broker showed him Joynt's property. The broker told Kerper that the seller's broker said the property was clean and had no environmental problems. The broker also told Kerper that Orange County had recently purchased an easement for $300,000 to run a drainage ditch through the property to a local lake, which was true. While this gave Kerper some level of assurance, the broker advised Kerper to have an environmental assessment done before going forward with the sale. 4. After being shown the property by the broker, Kerper spoke with Joynt directly. It was agreed that they could save the real estate commission and split the savings by waiting until the listing expired. Joynt personally assured Kerper that there were no environmental issues, as evidenced by Orange County's purchase of the easement for a drainage ditch. In late March of 2000, after expiration of the real estate commission, Kerper and Joynt entered into an informal agreement allegedly written on a scrap of paper, which was not placed in evidence. Kerper testified that the agreement was for him to buy the property for $500,000, with $100,000 down, and the balance payable over time at seven percent interest. He also testified that the required $100,000 down payment would be payable in installments, with $25,000 payable whenever Joynt cleaned 25 percent of the site to make it usable by Kerper for his business operations. 5. When it came time for Kerper to move onto Joynt's property, Kerper discovered that Joynt had not done any clean-up or removed any of his property from the site. Used cars, car parts, and tires that belonged to Joynt remained throughout the site. According to Kerper, it was agreed that Kerper would help Joynt clean off the western half of the property, which was split approximately in half by a stream, while Joynt worked on cleaning off the eastern half of the property.” 6. Starting from the gate at Sharpe Road, Kerper began removing junk from the western side to the eastern side of the site for Joynt to remove from the property. Pieces of equipment and used car parts that had been left there by Joynt were removed from this section of the property. When enough space was cleared off, Kerper began setting up his auto salvage operations on the western side. He used a bulldozer to level the driveways and spread powdered concrete where the ground was soft. He also used the bulldozer to level an area near the scale house, which was on the western side of the property, but continued to be used by Joynt for Don's Auto Recycling business. In doing this work, his workers encountered steel reinforcement bars, which Kerper had them cut with a torch. Some tires and battery casings also were visible in the ground. Kerper had several truckloads of fill dumped in the area and installed a concrete pad for storing and dismantling automobiles. 7. In September or October of 2000, Kerper was evicted from his prior business location, and he had to move to Joynt's property regardless of its condition. As he increased business operations on the cleared spaces, Kerper continued to clear more space on the western side of the property. Another concrete pad was installed farther to the north. Eventually, Kerper was operating ASAP on approximately ten acres on the western side of the 40-acre site. 8. As Kerper continued to move north, his heavy equipment began encountering assorted kinds of buried material. When a buried propane tank exploded, Kerper stopped working his heavy equipment in the area and confronted Joynt. Joynt denied any knowledge of buried tanks and stated they must have been placed there by someone else. Joynt told Kerper he would let Kerper move his operations to the east side of the property when Joynt finished cleaning it up, and then Joynt would finish clearing the western side for Kerper. Kerper agreed, and continued making payments on the required down payment. According to Kerper, he eventually paid $90,000 of the down payment. 9. By August of 2001, Kerper began to have serious misgivings about Joynt's promises and the condition of the site, and he decided to seek advice. Kerper hired David Beerbower, vice-president of Universal Engineering, to perform an assessment of the northern portion of his side of the site (in the vicinity where the exploding tanks were encountered). During his assessment on August 20, 2001, Beerbower observed various automotive parts including numerous crushed fuel tanks, antifreeze containers, and motor oil containers being excavated from the upper three feet of soil. It was determined by Beerbower, and stated in his written report to Kerper, dated September 21, 2001, that these parts appeared to have been buried there several years ago. This determination, which DEP does not dispute, was based on the high level of compaction of the soil found around these items that could be attributed to either the passing of a significant amount of time or a bulldozer passing over the items. Since the excavations Beerbower observed were in a separate location from where Kerper had already bulldozed, the soil compaction around these items could not be attributed to Kerper's bulldozing. It was stated in Beerbower's letter that the “amount of buried automotive debris qualifies this area essentially as an illicit landfill." ad 10. Mark Naughton from the Risk Management Division of the Orange County Environmental Protection Division (OCEPD), which runs the petroleum storage tank and cleanup program for Orange County under contract with DEP, was also present during the time Beerbower conducted his assessment. Naughton agreed with Beerbower's assessment that Kerper is not liable for the assessment or remediation of this area. Naughton also advised Kerper to move ASAP off Naughton's property and to seek legal advice from attorney Anna Long, who used to be the Manager of OCEPD. 11. Meanwhile, according to Kerper, Joynt changed his position and began to maintain that it was Kerper's responsibility to clean up the western side of the property. Given the newly-discovered environmental condition of the property, Kerper did not feel it was in his best interest to purchase the property "as is," and contacted Long to help him negotiate to extricate himself from his arrangement with Joynt. While negotiations proceeded, Kerper began to scale down ASAP's operations in anticipation of relocating. Kerper began fixing up more whole automobiles for resale, and had a car crusher used in connection with ASAP's business begin crushing more cars for removal from the site for recycling. 12. Eventually, Long had Beerbower conduct another assessment of portions of Joynt's property to try to establish responsibility for contamination as between Kerper and Joynt. On 10 February 13, 2001, Beerbower took a surface water sample froma "drain pipe under the north driveway," a soil sample "where the car crusher was," and another soil sample from "the sandblasting area." The evidence was not clear as to the exact location of these samples, particularly the soil samples, as described in Beerbower's written report to Long dated March 11, 2002. But it appears that the "car crusher" refers to the location of Respondents' car crusher operation in the northern part of the site, just across the northern driveway; it appears that the sandblasting area refers to a location used by Joynt on the eastern side of the property, but located just east of the trailers used by Kerper for his offices. These samples were analyzed and found not to contain volatile organic compounds (VOC) or total recoverable petroleum hydrocarbons (TRPH) in excess of Florida's cleanup target levels. 13. Kerper continued to operate his junkyard until the beginning of March of 2002. On March 5, 2002, Long filed a citizen's complaint with OCEPD on Kerper's behalf. While acknowledging that Kerper was operating on the site at the same time as Joynt in recent years, the complaint alleged Kerper's discovery that Joynt had been burying waste batteries, tires, and gasoline tanks on the property and covering the burial sites with broken concrete pieces. The complaint alleged that Kerper had been moving his personal property off of the site since August of 2001, when he backed out of his "lease to purchase" agreement 11 with Joynt, and would be "completely off the property by 3/10/02." 414. It is not clear exactly when Kerper and ASAP were completely off the property. The testimony and evidence on the point is inconsistent. Kerper, after some confusion, placed the date at March 9, 2002. His wife said it was March 2, 2002. An attorney representing Kerper and ASAP in an eviction proceeding filed by Joynt and his wife, filed a notice "that as of the evening of March 15, 2002, [ASAP had] vacated the property." In any event, the evidence seemed clear that Kerper and ASAP did not go on Joynt's property on or after March 15, 2002. 15. On March 15, 2002, DEP representatives inspected Joynt's property in response to Long's complaint. Kerper remained outside the front gate of the property and did not participate in the inspection. This inspection covered the entire property including the section that had been occupied by Kerper and ASAP. 16. doynt told the DEP inspectors that Respondents were responsible for a 55-gallon drum found tipped over on its side on the western half of the site and leaking a substance that appeared to be used oil from a hole in the side of the drum. DEP's inspectors righted the drum, which still was partly full of its contents. There also were several other unlabeled 55-gallon drums and 5-gallon containers "of unknown fluids"; a burn pile containing burned oil filters, battery casings, and electrical 12 wiring; other broken battery casings; and an area of dark-stained soil which appeared to be soaked with used oil. Joynt accepted responsibility for other contamination on the site, but told DEP that Kerper and ASAP were responsible for these items. Kerper denied the allegations. 17. As to the leaking oil drum, Kerper first contended that DEP did not prove that the overturned drum contained used oil. But the evidence was clear that DEP's inspectors were ina position to determine that the liquid was oily. Respondents also contended that the drum would have been empty, not still partly full, if Kerper or ASAP had left it on its side at the site when they vacated the property several days earlier. Kerper alleged that Joynt could have put the hole in the drum and turned it over shortly before the arrival of DEP's inspectors. But, as stated, it was not clear when Kerper and ASAP vacated the site, and it was not clear from the evidence that Respondents were not responsible. 18. Similarly, the other unlabeled drums and containers were in a part of the site occupied and used by Respondents. Despite Kerper's denials, it is not clear from the evidence that they belonged to Joynt or that they were placed where DEP found them after Respondents vacated the site. Testimony that Respondents had containers properly labeled "used oil," "antifreeze," and "gasoline" inside one of the trailers on the site did not negate the existence of unlabeled drums and 13 containers on the site. However, there was no proof whatsoever as to what the closed drums and containers held. But some were open, and DEP's inspectors could see that these held an oily substance (possibly hydraulic fluid), mixed with other substances. 19. As to the dark-stained soil, none of it was tested, and Respondents contended that it was just naturally darker in color or possibly wet from water or some other liquid, DEP's witness conceded could explain the color variation. (Natural reasons such as different soil or rainwater probably do not explain the color variations in the site.) Joynt told DEP's inspectors that the discoloration seen by them on March 15, 2002, was froma hydraulic hose on a piece of heavy equipment that burst earlier. The evidence was not clear who Joynt was saying owned and operated the equipment. But Respondents also blamed Joynt's employees for repeatedly blowing hoses on aged heavy equipment all over the site. It is found that the dark-stained soil probably was the result of one or more releases of hydraulic fluid or motor oil. However, the testimony and evidence was not clear that all of the releases were Joynt's doing and that Respondents bear no responsibility at all for the releases observed on March 15, 2002, in the areas where Respondents were operating. 20. Respondents were able only to produce documentation of proper disposal of 232 gallons of oily water through IPC/Magnum, 14 dated February 13, 2002, and 29 batteries through Battery World, dated March 8 and 14, 2002. 21. The testimony of Kerper and others was that Respondents generally removed gasoline from automobiles and placed it ina marked container for reuse within a day or two by Respondents and their employees. The testimony was that used oil and antifreeze generally also were removed from automobiles and placed in marked containers until proper disposition. The testimony was that batteries were removed from automobiles and that most were given to one of the employees to sell for a dollar apiece. There was no documentation to support this testimony. 22. There was testimony that, when Respondents had cars crushed, E & H Car Crushing Co., Inc., managed the collection and proper disposition of gasoline, used oil, and batteries. But the documentation placed in evidence contained no description of the wastes removed, but only provided a weight calculation of the materials removed from Respondents’ facility. 23. There was testimony that Gabriel Lynch, who was properly licensed, removed freon from automobiles at Respondents’ facility every two to three days, or upon request. Respondents would trade the freon Lynch recovered and used in his business, Gabe's Auto Tech, for repair work on Respondents' vehicles. However, no documentation of these transactions was produced. (Lynch testified that he did not know it was required that he provide documentation to Respondents.) 15 24. Runoff from where Respondents were operating on Joynt's property entered the stream running north-south through the center of the property. Neither Joynt nor Respondents had a stormwater permit or an exemption from stormwater permitting. 25. Kerper argued that his duties were limited to managerial responsibilities for ASAP, and that he was not at any time responsible for ASAP's day-to-day operations and did not conduct any activities that may or could have resulted in hazardous waste or petroleum discharge violations so as to be liable as an "operator." But the evidence was clear that Kerper was involved in ASAP's day-to-day operations. 26. While the evidence did not totally absolve Respondents from the allegations in the NOV, several people testified on Respondents' behalf as to their practice of properly disposing of hazardous materials generated by his business. For example, Rafael Rivera, a former employee, testified that Kerper would get mad at him if any gas or oil was spilled and left on the ground or was not disposed of properly. Meanwhile, it appeared that environmental problems at Joynt's site existed for years before the arrival of Respondents. Mrs. Sandra Lovejoy, a neighboring property owner for the past 30 years, testified that she had experienced problems with her water quality, such as a foul smell or funny taste, for many years before Respondents moved onto Joynt's property. An inspection was conducted by OCEPD in September of 2000, in response to Lovejoy's complaint regarding 16 fuel odor and a drinking well which was no longer in service. In part, OCEPD's written report on the complaint found "[m]any spots of surficial petroleum contamination . . . from gasoline, motor oil and other petroleum products leaking or spilled from the junk vehicles" at Don's Auto Recycling and included a recommendation "referring this site to the FDEP task force that has been put together to inspect and deal with junk yard facilities," although "[n]o Petroleum Cleanup issues were found at [that] time." For reasons not explained by the evidence, it does not appear that Don's Recycling was referred to any task force, or that OCEPD followed up on the reported contamination. 27. Respondents contend that this entire proceeding against them was part of a vendetta against Kerper for going to the local television station to expose the condition of the site, the failure of OCEPD and DEP to follow up on the September 2000, report and recommendation, and Orange County's purchase of a north-south drainage easement through the western portion of the property in 2000. The evidence did not prove this contention. However, it is clear that Joynt was responsible for the condition of most of the 40-acre site, not Respondents, and that Joynt shared responsibility with Respondents for the conditions alleged in the NOV. 28. While this case has been pending, Joynt's heirs have cooperated with DEP in cleaning up the site, and DEP acknowledged in its PRO that several items in the OCA--specifically, those 17 relating to Counts II, III, and VII of the NOV--are moot and unnecessary in light of Respondents' eviction from the property and subsequent cleanup operations by Joynt's heirs. It also is suggested that the corrective actions requested in DEP's PRO to address Counts IV, V, and VI of the NOV--relating to failure to document proper disposal of wastes--are unnecessary. It seems clear that, to the extent such disposals occurred, any available documentation would have been placed in evidence during the final hearing. Ordering that they be produced within 30 days of the Final Order, as suggested in DEP's PRO, would be a futile act. 29. Count VIII of the NOV alleged costs "of not less than $500. In its PRO, DEP requested recovery of $1,367.31 of costs. Some of these costs--$867.31--were itemized in the PRO. The balance appears to relate to the $500 alleged in the NOV. There was no evidence introduced at the final hearing as to any of these alleged costs, and the costs itemized in the PRO seem to represent travel costs of counsel for DEP.
Conclusions David J. Tarbert, Esquire Jason Sherman, Esquire Department of Environmental Protection The Douglas Building, Mail Station 35 3900 Commonwealth Boulevard Tallahassee, Florida 32399-3000 Albert E. Ford II, Esquire Webb, Wells & Williams, P.A. 994 Lake Destiny Road Suite 102 Altamonte Springs, Florida 32714
Recommendation Based upon the foregoing Findings of Fact and Conclusions of Law, it is RECOMMENDED that the Department of Environmental Protection enter a final order providing: 1. Under Count I of the NOV, Respondents shall be jointly and severally liable, along with Donald Joynt and Don's Auto Recycling, for cleaning up the releases of used oil evidenced by the discolored soils photographed by DEP's inspectors on 24 March 15, 2002 (DEP Exhibit 20, photographs 5 and 7 on page 2 of the exhibit). As such, they shall be responsible, along with Donald Joynt and Don's Auto Recycling, for implementation of DEP's Initial Site Screening Plan to assess and remove all contaminated soils resulting from those releases. If the results of the Initial Site Screening indicate that further assessment and/or remediation of the contamination is required, Respondents shall also participate, along with Donald Joynt and Don's Auto Recycling, in completing the required work, consistent with the "Corrective Actions for Contaminated Site Cases" (DEP Exhibit 16). 2. Counts II through VIII of the NOV are dismissed. 3. Respondents' Motion for Attorney's Fees and Costs is denied. DONE AND ENTERED this 19th day of December, 2003, in Tallahassee, Leon County, Florida. Vane ya J. LAWRENCE JOHNSTON Administrative Law Judge Division of Administrative Hearings The DeSoto Building 1230 Apalachee Parkway Tallahassee, Florida 32399-3060 (850) 488-9675 SUNCOM 278-9675 Fax Filing (850) 921-6847 www.doah.state.fl.us Filed with the Clerk of the Division of Administrative Hearings this 19th day of December, 2003. 25
Findings Of Fact Reimbursement Program The Florida Legislature created the Petroleum Contamination Site Cleanup Program to encourage responsible persons with adequate financial ability to conduct site rehabilitation and seek reimbursement in lieu of the state conducting cleanup. Section 376.3071(12), Florida Statutes (1993). Site owners and operators or their designees become entitled to reimbursement from the Inland Protection Trust Fund (IPTF) of their allowable costs at reasonable rates after completing a program task. Section 376.3071(12)(b), Florida Statutes. The costs of site rehabilitation must be actual and reasonable. Section 376.3071(12)(d), Florida Statutes. "Allowable" costs are those which are associated with work that is appropriate for cleanup tasks, i.e. whether the cost represents work that is technically necessary for the program task and otherwise not in violation of reimbursement limitations prescribed by statute or rule. In order for costs to be reimbursable, an applicant must convert charges in an application into applicable units and rates. Rule 17-773.100(5), Florida Administrative Code. DEP has a predominate rate schedule to determine whether a specific allowable cost is reasonable. DEP bases its predominate rates on a study of average rates that contractors charge for a particular task. In addition, DEP reviews each application to determine whether the overall cost and the methods used to perform the work are reasonable. DEP must also evaluate each application to determine whether a charge is an actual cost of a project. Contractors or subcontractors do not actually incur a fully reimbursable cost when they promise the site owner or its designee that they will perform work for an amount less than other professionals would charge, then allow the site owner or its designee to file a claim for reimbursement at or near the predominate rate. Such an agreement creates a back flow of funds to the site owner or its designee. This is true even though the charges are within the range of DEP's predominate rates. DEP never intended the rate schedule to create an entitlement to reimbursement regardless of the cost that contractors and subcontractors actually incur. Requests for reimbursement must apply to costs which are "integral" to site rehabilitation. Rule 17-773.100(2), Florida Administrative Code. "Integral" costs are those which are essential to completion of site rehabilitation. Rule 17-773.200(2)(11), Florida Administrative Code. After integral costs have been identified and incorporated on a units and rates basis in an invoice, the invoice may be marked up at two levels. These markups are subject to certain limitations: There can be no more than two levels of markups or handling fees applied to contractor, subcontractor or vendor invoices (Rule 17-773.350(9), F.A.C.); There can be no markups or handling fees in excess of 15 percent for each level of allowable markup applied to contractor, subcontractor or vendor invoices (Rule 17-773.350(10), F.A.C.); and There can be no markups or handling fees applied to invoices between any two entities which have a financial, familial, or beneficial relationship with each other (Rule 17-773.350(11), F.A.C.). In order to be reimbursable, costs must have been actually "incurred." Rule 17-773.700, Florida Administrative Code. "Incurred" means that allowable costs have been paid. Rule 17-773.200(9), Florida Administrative Code. A contractor must pay all invoices generated by a subcontractor at 100 percent of their face value prior to submission of an application in order to qualify those invoices for reimbursement. When a contractor pays a subcontractor's invoices, the contractor paying those invoices may apply the first-tier markup. Prior to submitting a reimbursement application, a funder or "the person responsible for contamination site rehabilitation" (PRFCSR) must pay the contractor for its invoices and markup. Then, the funder may apply the second- tier markup and submit the reimbursement application to DEP. DEP does not contest the second level of markup in these applications. DEP rules restrict reimbursement when parties within the usual "chain" of reimbursement (PRFCSR or funder, contractor and subcontractor) have financial, beneficial or familial relationships with each other or the site owner. These terms are defined in Rules 17-773.200(1), 17-773.200(6), 17- 773.200(7), Florida Administrative Code. The application form requires disclosure of such relationships through the Program Task and Site Identification Form. DEP's rules and written guidelines do not address or apply to activities, including financing arrangements, occurring outside of the chain of reimbursement if an applicant does not include charges for such activities in an application. Heretofore, DEP has not deducted finance costs that an applicant does not include as a line item in a reimbursement application. DEP must perform financial audits to ensure compliance with Chapter 376, Florida Statutes, and to certify site rehabilitation costs. Rule 17- 773.300(1), Florida Administrative Code. DEP performs this audit function: (a) to establish that the PRFCSR incurred the cost; (b) to determine that adequate documentation supports the claimed costs as incurred; and (c) and to review the reasonableness and allowance of the costs. The audit staff interprets the term "incurred" to mean that the applicant paid the costs included in the reimbursement application. DEP's audit staff usually does not inquire as to the level of a PRFCSR's financing where the application contains no line-item financing charges. However, the audit staff makes appropriate inquiries depending on the facts and events surrounding an individual application. Pursuant to Rule 17-773.350(4)(e), Florida Administrative Code, "[i]nterest or carrying charges of any kind with the exception of those outlined in Rule 17-773.650(1), F.A.C." are not reimbursable. The exceptions to the payment of interest set forth in Rule 17-773.650(1), Florida Administrative Code, are not at issue here. An interest rate charge on short-term borrowed capital from an unrelated third-party source is a "cost of doing business." DEP's predominate rates are fully loaded. They include a variable for all direct and indirect business overhead costs such as rent, utilities and personnel costs. DEP includes the cost of short-term borrowed capital in the direct and indirect overhead components of the fully-loaded personnel rates. Rule 17-773.700(5)(a), Florida Administrative Code. Petitioners PRFCSRs are entitled to make application for reimbursement of allowable markups and costs of site rehabilitation that they incur. In these consolidated cases, the site owners or operators designated either Petitioner ET or Petitioner SEI as PRFCSR. The PRFCSR is typically referred to as the "funder" in the reimbursement chain. Petitioner ET is a trust formed in 1993 and domiciled in Bermuda. It acts as American Factors Group, Inc.'s (AFG discussed below) conduit for funds that finance activities associated with Florida's petroleum contamination site cleanup program. The named beneficiaries of the trust are those contractors and subcontractors entitled to payment of costs for activities integral to site rehabilitation and for allowable markups of such costs. The sole trustee of ET is Western Investors Fiduciary, Ltd. (WIFL). WIFL is also the owner and a beneficiary of ET. Any profit that ET derives from funding petroleum contamination site cleanup flows through WIFL to investors who provide funds to finance site rehabilitation. American Environmental Enterprises, Inc. (AEE, discussed below) provided the investment funds for the reimbursement applications at issue here. WIFL is a limited liability corporation created and domiciled in Bermuda. The officers of WIFL are: William R. Robins, President; John G. Engler, Vice-President; and Peter Bougner, Secretary. The directors and shareholders of WIFL are: William R. Robins, John G. Engler, Paul H. DeCoster, Alec R. Anderson and Nicholas Johnson. Petitioner SEI is a corporation incorporated and operating under Florida law. Organized in 1994, SEI acts as AFG's conduit for funds to finance activities associated with Florida's petroleum contamination cleanup program. The officers and directors of SEI are: William R. Robins, President; John G. Engler, Executive Vice President; and Paul H. DeCoster, Secretary. William R. Robins is the sole shareholder of SEI. ET filed the petition for administrative hearing on behalf of SEI in at least four cases: Case Numbers 96-405, 96-425, 96-433, 96-437. Respondent DEP is the agency charged with the duty to administer the IPTF and Chapter 376, Florida Statutes. Financing Entities American Factors Group, Inc. (AFG) is a privately held corporation incorporated and operating under New Jersey law. AFG is not a party to this proceeding. AFG, acts as the servicing agent for contracts associated with factoring activities and other types of financing operations. AFG, through one of its divisions, Environmental Factors (EF), entered into factoring contracts with: (a) Gator Environmental, Inc. (Gator), general contractor; and (b) Tower Environmental, Inc. (Tower), prime subcontractor. Through these agreements, EF or its assignee bought the rights of Gator and Tower to future reimbursement payments at a percentage of the face value of the relevant invoices. The officers of AFG are: William R. Robins, President; John G. Engler, Vice President; and Paul H. DeCoster, Secretary. Bleak House, Inc. (Texas) owns the stock of AFG. American Environmental Enterprises, Inc. (AEE) is incorporated and operating under Nevada law. AEE is not a party to this proceeding. AEE, as the assignee under the EF contracts, is a third-party provider of capital to various entities in the reimbursement process. The officers of AEE are: William R. Robins, President; John G. Engler, Vice-President; and Paul H. DeCoster, Secretary. Bleak House, Inc., (Nevada) owns the stock of AEE. Bleak House, Inc., (Nevada) is incorporated and operating under Nevada law. Bleak House, Inc. (Texas) is incorporated and operating under Texas law. Officers of both corporations are William R. Robins, President; John G. Engler, Vice President; and Paul H. DeCoster, Secretary. Magazine Funding, Inc. owns the stock of both Bleak House corporations. Magazine Funding, Inc. is incorporated and operating under Nevada law. Officers of Magazine Funding, Inc. are William R. Robins, President; John G. Engler, Vice-President; and Paul H. DeCoster, Secretary. Family Food Garden, Inc. owns the stock of Magazine Funding, Inc. Family Food Garden, Inc. is incorporated and operating under Massachusetts law. Officers of Family Food Garden, Inc., are William R. Robins, President; and Paul H. DeCoster, Secretary. Six shareholders own the stock of Family Food Garden, Inc. None of these shareholders are related by familial ties to the officers or directors of the aforementioned companies or any relative thereof. Each of these companies -- ET, SEI, WIFL, AEE and AFG (including EF) share common officers and directors. Each of the companies maintain their own books and business records, file their own tax returns, and maintain records in accordance with the laws of the jurisdiction in which they were established. They operate pursuant to their respective bylaws or trust documents. ET, WIFL, and SEI do not have common assets with AEE or AFG (including EF). ET, WIFL and SEI do not have a beneficial, financial, or familial relationship with AEE or AFG (including EF) as Rule 17-773.200, Florida Administrative Code, defines those terms. Despite the facial organizational and structural integrity of ET, WIFL, SEI, AEE and AFG, the officers and directors of AFG and/or AEE created ET, WIFL, and SEI, in large part, for the benefit of AFG and/or AEE as a means to invest funds in petroleum contamination site cleanup programs. The officers and directors of AFG specifically created SEI to meet the needs of AFG's Florida investors. The purpose of each funder is to maximize the profits of AFG and its investors. AFG has other investment vehicles (funders) which it uses at times depending on the needs of its investors. AFG waits until the last instance before deciding which entity it will designate as funder in any particular factoring scenario. AFG usually does not make that decision until the day AFG's designated funder issues a funder's authorization to the general contractor. At the hearing, Mr. Stephen Parrish, a vice president of AFG, testified as the party representative for ET and SEI. ET, WIFL and SEI have no employees. EF or AFG responded to DEP's request for Petitioners to provide additional information about the financing scheme utilized here using stationary bearing EF's or AFG's letterhead. At least five of these letters written on SEI's behalf, refer to ET, an affiliate of AEE, as the funder. Nineteen of the letters written on ET's behalf refer to ET, an affiliate of AEE, as the funder. The greater weight of the evidence indicates that AFG and/or AEE negotiated less than arms-length contractual agreements with ET, WIFL, and SEI. Petitioners admit that they are "affiliates" of AEE and AFG through contractual agreements. However, there are no written factoring contracts between Petitioners and AFG such as the ones that exist between AFG, Gator and Tower. The only documented evidence of agreements between Petitioners and AFG are transactional based bills of sale representing the sale to AEE of Petitioners' right to receive reimbursement from IPTF. AFG created these bills of sale for bookkeeping purposes. AFG did not even go to the trouble of tailoring the form for the bills of sale for their stated purpose. For all practical purposes, Petitioners are under the management and control of AEE and AFG. Petitioners and AFG disclosed their affiliation in meetings with DEP staff and through correspondence and other documentation, including but not limited to: (a) letter to DEP dated July 13, 1994 from AFG's counsel; (b) Addendum to Certification Affidavit signed by a certified public accountant in each application; (c) funder's authorization form; (d) letters sent to DEP between August 14, 1995 and November 19, 1996. Factoring and the Factoring Transactions Factoring is the purchase and sale of an asset, such as an account receivable, at a discount. An account receivable reflects the costs that a business charges after rendering a service but before the entity responsible for payment pays for that service. When a contractor completes a rehabilitation task, the contractor's invoice is an account receivable until it receives payment. In these consolidated cases, AEE provided short-term capital to Gator and Tower at an interest rate equal to the discount percentage of the relevant invoice (account receivable). Gator and Tower did not sell their account receivables to AEE. Instead, AEE, as the assignee of EF, purchased a contractual right to receive Gator's and Tower's reimbursement payments. In exchange, AEE advanced them a discounted amount of their invoices. The discounted amount of each invoice represents a loan from AEE to Gator and Tower. The difference between the face amount of the invoices and the discounted amount of the invoices represents interest. A discount percentage and an interest rate are equivalent. The amount of the discount represents interest on the loans or advances provided by AEE. It is an interest expense to the contractor or subcontractor. The amount that Gator and Tower actually incurred is the discounted amount of their invoices. The Factoring Agreements On or about April 25, 1994, EF and Tower entered into a Prime Subcontractor Factoring Agreement which set forth the terms under which EF or its assignee would finance Tower's site remediation work. At that time, the parties to the contract anticipated that EF would retain a general contractor to perform on-site remediation services with Tower acting as prime subcontractor. In the contract, Tower agreed to sell to EF its right to receive payments from the general contractor at a percentage of the underlying invoices. Subsequent to the execution of April 1994 Prime Subcontractor Factoring Agreement, Tower experienced financial difficulties resulting in its inability to pay subcontractors for work that they performed under non-EF contracts. These financial difficulties made it impossible for Tower to meet its payroll that was due in two weeks. Tower and its subcontractors under the non-EF contracts approached AFG and EF requesting financial assistance to resolve Tower's financial difficulties and to ensure that the subcontractors would be paid for their work. At that time, the program tasks under these non-EF contracts were complete or substantially complete. Given the preexisting contractual relationship between EF and Tower on other projects, AFG determined that it could use a similar financing arrangement to resolve Tower's financial problems. Such an arrangement also would protect AFG's investment in projects being conducted under the EF-Tower contracts. On or about July 8, 1994, EF and Tower executed an addendum to the April 1994 Prime Subcontractor Factoring Agreement. This addendum applied to projects that were not covered by the original Prime Subcontractor Factoring Agreement. The addendum required Tower to sell to EF Tower's right to receive payments from the general contractor. In return, EF agreed to advance Tower a discounted amount equal to 97 percent of the face amount of Tower's invoices. Tower agreed to pay EF 100 percent of the face amount of the invoices upon receipt of payments from the general contractor. The discounted amount of each invoice represents a loan from AEE to Tower. Late in 1993 or early in 1994, Gator began negotiating a contract with EF to provide general contracting services for on-site remediation work on unspecified Florida projects being financed by EF. Gator began serving as general contractor on some of these unspecified projects prior to the execution of a contract. On or about July 8, 1994, EF and Gator entered into a General Contractor Factoring Agreement. In this contract, EF agreed to provide financing for projects on which Gator served as general contractor. Gator agreed to sell to EF its right to receive payments from the funder (ET or SEI) at a percentage of Gator's underlying invoices. On or about July 13, 1994, EF and Gator entered into an Addendum to the July 8, 1994 General Contractor Factoring Agreement. This addendum applied to projects which were not covered under the original General Contractor Factoring Agreement. The addendum required Gator to sell to EF Gator's right to receive payments from the funder (ET or SEI). In return, EF agreed to advance Gator a discounted amount equal to 88 percent of the face amount of Gator's invoices. Gator agreed to pay EF 100 percent of the face amount of the invoices upon receipt of payments from the funder. The discounted amount on each invoice represents a loan from AEE to Gator. Gator and Tower negotiated the respective factoring contracts and addenda thereto at arms-length. Pursuant to the terms of these contracts, EF assigned to AEE the rights to payments due to Tower from Gator and to Gator from ET or SEI. ET and SEI were not named parties to these contracts. The factoring contracts and the corresponding addenda apply to the reimbursement applications at issue here. Pursuant to those agreements, the following interrelated transactions took place though not necessarily in this order. First, Tower provided EF with a Site Certification Affidavit for a certain project. Tower also sent Gator a complete reimbursement application for the project and an invoice for Tower's services and the services of its subcontractors and vendors. Next, EF designated either ET or SEI as the funder. The funder then sent Gator a funder's authorization form. This form acknowledged that EF was an affiliate of the funder. It is the only documented evidence of a contract between the funder and Gator. Gator's receipt of the form constituted authorization for Gator to perform work on the project subject to reimbursement for all reimbursable costs and paid subcontractor invoices. Within two days of receiving the funder's authorization for a project, Gator issued Tower a subcontract/purchase order. Gator notified EF and the funder of such issuance. Upon receipt of the subcontract/purchase order, Tower sold to AEE (at a discount) Tower's right to receive full payment from Gator. A bill of sale evidenced this transaction. Tower agreed to repay AEE the face amount of Tower's invoice upon receipt of payment from Gator. Tower executed an agreement indemnifying the funder and guaranteeing the performance of all services and the delivery of all goods. Tower agreed to a reserve trust fund deposit as security for the ultimate reimbursement payment from the IPTF. Within four days of receiving the complete reimbursement application from Tower and within two days of receiving the funder's authorization, Gator and a certified public accountant (retained by EF) were supposed to review all supporting documentation on the project. The stated purpose of this review was to determine whether the invoices of Tower and its subcontractors were reimbursable under DEP guidelines. As to 30 of the instant applications, Tower completed the on-site work before Gator became involved. In those cases, Gator performed a minimal due diligence review, if any, of Tower's on-site work. This included comparing Tower's technical and administrative files with the applications prepared by Tower. Without Gator's minimal review and risk assessment on these 30 applications, EF would not have included them as projects covered by the addenda to the factoring contracts. As to 15 of the instant applications, Petitioners claim that Gator not only reviewed Tower's work product but also, issued subcontractor/purchase orders selected and scheduled subcontractors, and made on-site visits. However, there is no persuasive record evidence as to the specific activities or the level of Gator's involvement in on-site work on any one of these 15 applications. When Gator and EF's certified public accountant completed their assessment, Gator prepared a deficiency letter and sent it to all parties. The report advised EF, the funder and Tower whether any of Tower's charges were in excess of the reimbursable amount. Tower could accept or reject any disallowance set forth in the deficiency letter. If there was no problem with a disallowance or within five days of Tower's acceptance of a disallowance, AEE advanced Tower an amount equal to 97 percent of Tower's invoice. Tower used these funds to pay subcontractors and vendors. The discounted amount of Tower's invoice represents the actual cost that Tower incurred. Tower signed a repayment agreement in which it promised to repay AEE the face amount of Tower's invoice upon receipt of payment from Gator. When Tower received the discounted cash advance from AEE, it had to contribute the reserve deposit (to cover any reimbursement shortfalls) to a reserve trust, domiciled in Bermuda, which was affiliated with EF. Tower was a beneficiary of the reserve trust to the extent of its contribution less any monies it owed AEE after the IPTF reimbursed the funder. Meanwhile, Gator sold to AEE (at a discount) Gator's right to receive full payment from the funder. A bill of sale evidenced this transaction. Gator agreed to repay AEE the face amount of Gator's invoice upon receipt of payment from the funder. AEE advanced Gator an amount equal to 88 percent of the face amount of Gator's invoice. The discounted amount of Gator's invoice represent the amount that Gator actually incurred. Gator used these funds to pay Tower the face amount of its invoice. Tower in turn repaid AEE in full. Gator signed a repayment agreement in which it promised to repay AEE the face amount of its invoice upon receipt of payment from the funder. For the 45 applications at issue here, the addendum to the General Contractor Factoring Agreement did not require Gator to deposit any amount in the reserve trust which was domiciled in Bermuda and affiliated with EF. Next, Gator prepared an invoice for its services and the services of Tower and its subcontractors including a 15 percent markup and an application preparation fee. Gator's invoice could not include a charge for "management time." Then, Gator forwarded its invoice and Tower's invoice to the funder together with the complete reimbursement application. In the meantime, ET and SEI sold AEE their right to receive reimbursement from the IPTF at a discount equal to 87 percent of their total invoice amount. A bill of sale for each transaction is the only documented evidence of an agreement between the funders and AEE. ET and SEI agreed to repay AEE for the face amount of their invoices upon receipt of payment from IPTF. The funder prepared an invoice for the face amount of Gator's and Tower's invoices plus a 15 percent markup. Upon receipt of ET's or SEI's invoice, AEE advanced them the discounted amount as agreed. ET or SEI used the funds advanced by AEE to pay Gator the face amount of its invoice. Gator in turn repaid AEE in full. When ET or SEI receive a reimbursement payment from the IPTF, they will remit the total payment to AEE. The total cost for each project increased as the discount percentage and the face amount of each invoice passing up through the chain grew larger. In regards to some applications, the relevant dates on the subcontract/purchase order, Gator invoice, and Tower invoice are the same. It is clear that the turn around time on all of the above referenced transactions, including the time between the payment of the advances by AEE to Gator and Tower and their subsequent repayment of 100 percent of the face amount of an invoice to AEE, was very short--a matter of days or weeks. In Summary, the financing of the pending reimbursement applications involved the following interrelated transactions but not necessarily in this order: AEE as the assignee of EF purchased the right of ET, SEI, Gator and Tower to receive reimbursement for their services at a discount. ET, SEI, Gator and Tower agreed to repay AEE in full. Tower prepared and submitted to Gator an invoice for services provided by Tower and its subcontractors. Tower also prepared and submitted to Gator a reimbursement application for the program task. AEE advanced Tower the agreed upon discount amount. Tower used these funds to pay its subcontractors and vendors. AEE advanced Gator the agreed upon discount amount. Gator used these funds to pay Tower. Tower repaid AEE in full. Gator prepared an invoice for services provided by Gator, Tower and Tower's subcontractors including a 15 percent markup and submitted it with the reimbursement application either to ET or SEI. AEE advanced ET or SEI the discounted amounts as agreed. ET or SEI paid Gator in the full amount of Gator's invoice plus markup. Gator repaid AEE in full. ET or SEI prepared an invoice for its services plus the services of Gator, Tower, and Tower's subcontractors and a 15 percent markup. ET or SEI submitted the reimbursement application to DEP. When ET or SEI receives reimbursement from the IPTF, they will remit the total payment to AEE. The Applications Petitioners filed the 45 applications that are the subject of this proceeding between July 18, 1994 and February 17, 1995. The financing scheme that Petitioners utilized in these applications was unique. Prior to receiving these applications, DEP never had reviewed reimbursement applications using the type of financing scheme at issue here. In fact, the instant cases present a scenario never contemplated by DEP when promulgating rules and developing written policies. DEP has established a list by which it determines whether an applicant is charging a "reasonable rate." DEP developed that list in accordance with Petroleum Cleanup Reimbursement (PCR) Guideline Number 1. PCR 1 establishes a "predominant rate" for costs involved in the site rehabilitation process. The predominant rate may be exceeded by up to 30 percent for personnel charges, and by up to 50 percent for non-personnel charges. Within these ranges, DEP evaluates each application and determines whether the PRFCSR is entitled to reimbursement for "allowable cost" at "reasonable rates." The work performed by Tower was at or near DEP's "predominant" rate. In no instance were Tower's rates near the upper limits of the reasonable rate ceiling. Tower's invoices appear to represent work that was integral to site rehabilitation which was broken down into appropriate units and rates. There is no evidence of "price fixing" between any entities engaged in site rehabilitation. There is no evidence that Tower intentionally inflated the costs of cleanup or of the scope of cleanup services to cover the cost of financing. There are no familial, beneficial or financial relationships, or any other form of affiliation between Tower and its subcontractors. A certified public accountant (CPA) attestation accompanied the applications indicating that Petitioners incurred (paid) all relevant costs. The applications did not include charges associated with the financing arrangements as line items. The CPA attestations referenced an addendum to the Certification Affidavit. The addendum indicated that "American Environmental Enterprises, Inc., an affiliate of the Environmental Trust, has provided financing to certain contractors and subcontractors by factoring invoices which are included within this application." The CPA provided the reference to the addendum in the CPA attestation as an "emphasis of the matter" statement rather then an "exception," or a modification of the CPA's attestation that Petitioners had incurred all costs in the application. The CPA firm performing the attestation services previously informed DEP of its intent with regard to "emphasis of the matter" reports. Nevertheless, the difference between the face amount of an invoice and the discounted amount of that invoice clearly represents interest. This interest was not allowable as an actual and reasonable cost of site remediation because Gator and Tower agreed to accept a lesser amount for their services prior to submittal of the applications. Therefore, they did not actually incur the amount reflected in the face amount of their invoices. DEP's predominate rates and units are fully loaded. Interest rate charges on borrowed capital from unrelated third-party sources are a "cost of doing business." DEP's fully-loaded rates include a variable for all direct and indirect business overhead costs such as rent, utilities and personnel costs. The direct and indirect overhead components of DEP's fully-loaded rates include the cost of short-term "working" capital. However, DEP never intended the predominate rate schedule to entitle an applicant to reimbursement for costs that it did not actually incur. In the instant cases, funds that passed down through the chain from ET or SEI to Gator or from Gator to Tower flowed directly and immediately back to AEE who was affiliated with the funder. Any profit derived by the funder, ET or SEI, will flow directly to AEE and its investors. The amount that Petitioner's actually incurred before they submitted the applications was the amount that AEE advanced to Tower and/or its subcontractors for integral site work plus the actual cost of Gator's allowable services, if any, which were separate and distinct from Tower's work, plus any allowable markup(s). Factoring Policy At the time that Petitioners submitted the subject applications for reimbursement, there was no rule or written guideline governing financing transactions, including factoring, occurring outside of the usual chain of reimbursement. DEP normally did not inquire about such financing so long as an applicant did not pass the costs of such financial transactions to DEP in the application as a line-item cost. There was no policy disallowing reimbursement for the face amount of the invoices when an applicant sold the right to payment, i.e. the receivable, at a discount to a disinterested third-party in an arms- length transaction. Commencing on August 31, 1994, DEP began to develop a policy regarding the use of factoring as a financing mechanism in the reimbursement program. DEP staff exchanged numerous documents regarding the subject of factoring. In one of those documents, Charles Williams, DEP's Reimbursement Administrator indicated that "we absolutely need to have a Big Meeting to decide what to do once and for all." In a November 1994 telephone conversation, DEP provided AFG's counsel with an informal opinion of how DEP would handle a factored application as described by Will Robins of AFG in an earlier meeting with DEP staff. The statement was: that the difference between the amount that a contractor accepted in payment for his services, which was a discounted amount after factoring, . . . and the face value of the invoice which was claimed and marked up in the application was determined to be a carrying charge or interest, which is specifically disallowed for reimbursement in the reimbursement rule. American Factors Group. Inc. and the Environmental Trust v. Department of Environmental Protection, DOAH Case No. 95-0343RU, Final Order issued July 24, 1995. DEP advised AFG's counsel that it would deal with factored applications involving other entities on a case by case basis. On December 20, 1994, John Ruddell, Director of DEP's Division of Waste Management, sought permission from DEP's Policy Coordinating Committee to promulgate a rule amendment to Chapter 62-773, Florida Administrative Code (formerly Chapter 17-773, Florida Administrative Code.) A draft rule accompanied the request. The draft rule was developed in compliance with Chapter 94-311, Section 6, Laws of Florida, which required DEP to revise its reimbursement rule. The draft rule provided that: nothing in this Chapter shall be construed to authorize reimbursement for the face amount of any bill or invoice representing incurred costs when the receivable has been sold at a discount. In all such cases, reimbursement shall be limited to the actual discounted amount accepted by the provider of the goods or services . . . . The draft rule had the effect of prohibiting factoring as a mechanism for financing site rehabilitation work. It did not single out any other type of financing mechanism. DEP did not promulgate the draft rule because the problems with the program were too numerous to correct in a timely fashion by rulemaking. Instead, DEP focused on drafting proposed legislation. In the meantime, DEP requested that Petitioners furnish additional information regarding the instant applications. Between March 1, 1995 and November 17, 1995, ET and SEI responded to DEP's requests with letters bearing AFG's or EF's letterhead. The letters state that prior to filing the applications, ET or SEI paid Gator for the face amount of Gator's invoices plus Gator's markup. Gator then paid the subcontractors for the face amount of their invoices. Prior to these payments, AEE an affiliate of ET, or SEI purchased the right to receive the amount due to Gator from ET and the right to receive the amount due to subcontractors from Gator. In each case, AEE bought the right to receive at a discount. According to the financing scheme, ET or SEI received sufficient funds from AEE to make the payments to Gator. ET or SEI, in turn, were obligated to pay AEE following their receipt of the funds claimed in the reimbursement application. On April 21, 1995, DEP issued a memorandum to DEP application reviewers to guide them in the processing of reimbursement applications. The memorandum indicated that: invoices from subcontractors, vendors, suppliers and/or the general contractor which were paid a factored (e.g., discounted) amount by a third party capital participant (e.g., funder) represents the actual amount incurred by that entity and subsequently by the general contractor. The memorandum directed reviewers to deduct costs in an amount equal to the difference in the face value of an invoice or application and the amount paid for the right to receive payment under that invoice or application. DEP did not direct the policy set forth in the April 21, 1995 memorandum towards any individual company. DEP intended the policy to apply to "any combination of a general contractor, management company, funder and responsible party" in any situation in which a third-party capital provider paid any program participants a factored (discounted) amount of their invoices." The April 21, 1995, policy did not condition DEP's position on factoring on any affiliation between any parties. Between August 14, 1995 and January 19, 1996, DEP took action on the 45 applications that are the subject of this proceeding. As reflected in those notices, DEP denied reimbursement of costs claimed in those applications "as a result of factoring of the supporting invoices" and because "the difference between the face amount of the supporting invoices and the amount factored represents interests or carrying charges which are specifically excluded from reimbursement pursuant to Rule 62-773.350, F.A.C." The notices properly reflect a basis of denial of costs that is consistent with DEP's policy as reflected in the December 20, 1994 draft rule and the April 21, 1995 memorandum. DEP has proven that its policy on factoring is consistent with its legislative mandate to deny reimbursement of costs which are not actual and reasonable. Affiliation Policy Not all out-of-chain affiliations between entities constitute a problem with regard to reimbursement. However, the instant cases presented DEP with unique facts as to the relationship between AEE, AFG, ET, WIFL and SEI which DEP's rules and written policies do cover. The mere existence of common corporate officers does not, in and of itself, cause AFG/AEE, ET, WIFL, and SEI to lose their integrity as separate legal entities, or make them "one and the same." Common officers of corporations are not an element of the term "financial relationship," nor does the concept of common corporate officers appear in the definitions of beneficial relationship, familial relationship, indirect interests, material interests, or sources of income. DEP's position at hearing that "affiliation" is a major key to it's position with regard to factoring does not appear in any of the documents in which DEP has either discussed or disseminated information regarding factoring. There are no requirements in DEP's application forms to disclose the nature of the relationships between an applicant and an applicant's source of financing. DEP makes no standard inquiry of funders to disclose the nature of any affiliation between the funder and the provider of capital. Nevertheless, the record supports DEP's position that it can deny reimbursement for costs when a PRFCSR has an "affiliation" with a factoring company outside of the chain of reimbursement under the facts of these cases. It is not contested that ET, WIFL, SEI and AFG and its sister company AEE are affiliated. The greater weight of the evidence indicates that this affiliation goes beyond a mere contractual agreement. AFG, AEE, WIFL (which owns ET and is a trust beneficiary), and SEI have common officers and directors. These officers and directors created ET and SEI primarily for the benefit of AFG and AEE as conduits for investment of funds in Florida's petroleum contamination site rehabilitation program. AFG has other investment vehicles, in addition to ET and SEI, which it can designate as a funder depending on the needs of its investors. AFG usually waits until the last instance to select the funder that it will use in any particular case. AFG often selects the funder on the same day that the funder issues its authorization to the general contractor. The greater weight of the evidence indicates that AFG and/or AEE and the Petitioners did not negotiate the contractual agreements between them at arms-length. A bill of sale evidencing the sale of Petitioners' right to receive reimbursement on each application is the only documented evidence of agreements between Petitioners and AFG or AEE. Any profit derived by ET flows back to AEE through WIFL. ET and SEI are under the management and control of AEE and AFG's officers and directors. For all practical purposes ET and SEI are "one and the same" as AEE and AFG. The affiliation between AEE, AFG, WIFL, ET and SEI is especially troublesome here where AEE advanced the discounted amount of invoices to: (a) Tower so that it could pay its subcontractors in full; (b) Gator so that it could pay Tower in full; and (c) its affiliates, ET and SEI, so that they could pay Gator in full. Gator's and Tower's immediate repayment in the face amount of the invoices to AEE is a back flow of funds (interest) to an entity affiliated with Petitioners. All of these transactions took place before Petitioners filed the instant applications or within a few days thereafter. They create a paper trail indicating that the parties within the "chain" at each level incurred the face amount of the next lowest level. However, the only amount actually incurred at the time Petitioners submitted the applications was the discounted amount of the invoices. Interest or Carrying Charges "Incurred" means that "allowable costs have been paid." (Rule 17- 773.200(9), Florida Administrative Code) Under DEP's rules, the facial meaning of the term is that persons must receive due return for their invoiced goods and services, billed on a units and reasonable rates basis, for allowable costs of site rehabilitation. A finance charge usually does not effect DEP's determination of charges that were "incurred" unless that charge appears as a line-item cost which is not the case here. However, these consolidated cases presented DEP with a new scenario in which Gator and Tower immediately repaid the face amount of their invoices to AEE retaining only the discount amount of their invoices to pay the actual costs of the level below them before submitting the applications. Moreover, they included the carrying charges in the applications as having been "incurred." Case Number 95-403RU, Pick Kwick No. 143, DEP Facility No. 528515448 is a typical example showing how the entities in the chain paid interest charges and included them in the application. In that case, Gator provided Tower with a subcontract/purchase order on July 8, 1994. Tower provided Gator with an invoice in the amount of $17,556.43 on July 8, 1994. Tower's invoice represented services performed in connection with the initial remedial action task at the Pick Kwick No. 143 facility including $269.90 for application preparation. On or about July 8, 1994, Gator provided ET with an invoice in the amount of $20,149.41. This invoice included Gator's 15 percent markup in the amount of $2,592.98 and $269.90 for application preparation. On August 4, 1994, AEE purchased Gator's right to receive payment from ET. AEE advanced Gator $17,696.44 or 88 percent of Gator's invoice. The interest charge on the advance was $2,452.97. On August 4, 1994, AEE purchased Tower's right to receive payment from Gator. AEE advanced Tower $17,029.74 or 97 percent of Tower's invoice. The interest charge on the advance was $526.69. On August 10, 1994, AEE purchased ET's right to receive payment from IPTF. AEE advanced ET $20,831.41 or 87 percent of ET's invoice. The interest charge on the advance was $2,981.93. On August 15, 1994, ET filed the reimbursement application in the amount of $23,813.34. This amount included ET's 15 percent markup on the face amount of Gator's invoice. Prior to filing the application, ET paid Gator, $20,149.41. Gator then paid Tower $17,556.43. Following receipt of payment from ET, Gator repaid AEE $20,149.41. Following receipt of payment from Gator, Tower repaid AEE $17,556.43. Gator and Tower made these repayments within a matter of weeks of the time that AEE advanced funds to them. Calculating simple interest, the annualized interest rate on the loan from AEE to Gator was approximately 144 percent. The annualized interest rate on the loan from AEE to Tower was approximately 36 percent. These were the interest rates, as predetermined by the discount percentage in the addenda to the factoring contracts (Gator at 88 percent and Tower at 97 percent), in approximately 30 of the 45 applications. In the other 15 applications, the Gator sold its right to receive payment at a discount percentage between 87 to 89 percent of the face amount of the invoice. In those cases, Tower sold its right to receive payment at a discount percentage between 95 and 72 percent of the face amount of the invoice. There is no evidence that Petitioners made adjustments to the costs in the applications where Gator and Tower sold their right to payments for a discount percentage at an amount other than as stated in the addenda to the factoring contracts. Analysis of the transactions involved in each of the subject applications clearly shows that the financing scheme utilized here was not equivalent to a "plain vanilla" loan from a disinterested third-party capital provider such as a bank. DEP properly deducted costs from Petitioners' applications that represented interest which Gator and Tower agreed to repay to Petitioners' affiliate, AEE, before Petitioners submitted the applications. The only costs that Gator and Tower actually incurred was the net amount that they received after factoring their invoices. That amount includes the difference between the face amount Gator's and Tower's invoices and the amount that AEE advanced to them. Gator and Tower did not actually incur allowable costs in the amount of the interest paid to AEE when they : (a) agreed to accept reimbursement for their services at a discount; (b) accepted the full amount of their invoices from the next highest level; and (c) passed the full amount of their respective invoices back to AEE. DEP did not envision this type of elaborate factoring plan when it created its simple definition of "incurred" as meaning allowable costs have been paid. It is important for participants in the program to know the "rules of the game." Applicants have to make technical and financial decisions regarding site cleanup. They have to pay all contractors and subcontractors prior to submitting an application. In this case Petitioners' attempts to win DEP's pre-approval of their various factoring proposals were unsuccessful because DEP did not have enough information about the transactions and the relationships of the entities involved. After DEP received additional information from Petitioners, it became abundantly clear that the rules were insufficient to cover the financing scheme presented here. As early as November 4, 1993, Petitioners acknowledged that "the provisions of Rule 170773, F.A.C. do not specifically address the types of situations that arise when providing capital for cleanup activities through funding groups such as AFG." Petitioners revealed their final plan in July of 1994 just before they began filing the applications. At that time, Petitioners knew DEP's concerns. They also knew DEP could not make a decision on an application until they filed the application with DEP. Inconsistent Application of Statutes, Rules and Written Guidelines DEP has authorized financial transactions by which other applicants, after incurring (paying) all costs and filing their applications, sold or pledged their right to future payment to an entity outside the usual reimbursement chain. In those cases, DEP did not deduct interest associated with such transactions. DEP's approval of such transactions came before Petitioners filed their applications in this matter. There is no evidence that those transactions involved the factoring of invoices and an agreement to repay interest before the PRFCSR submitted the applications. Likewise, there is no evidence of an affiliation and less than arms-length negotiation between the funder and the financing company in those cases. The record contains no evidence of an inconsistent application of DEP's statutes, rules or written policies before or after Petitioners filed the instant applications. Reservoir Capital On March 14, 1994, DEP met with Reservoir Capital Corporation (Reservoir) to discuss a change of address notice directing reimbursement orders and checks for Clean America Financial, Inc. (Clean America) applications to a Baltimore, Maryland address. During that meeting Reservoir's counsel informed DEP that Reservoir "paid a percentage, not the full cost, for each application." DEP representative, Paul DiGuisseppe, informed Charles Williams of that conversation by memorandum dated March 15, 1994. Mr. DiGuisseppe later spoke with a representative of Clean America (the funder) and advised him to provide a list of facilities pledged to Reservoir for which notices and payments were to be sent to the Baltimore, Maryland address. On March 30, 1994, Clean America wrote to Charles Williams and Doug Jones, providing a list of sites pledged to Reservoir and directing DEP to send payments to the Baltimore, Maryland address. Among the sites pledged to Reservoir were Curry Station, DEP Facility No. 309103537 and Scardo Automotive, DEP Facility No. 428511319. On June 17, 1994, DEP issued a reimbursement order to Scardo Automotive at the Baltimore, Maryland address. On July 1, 1994, DEP issued a reimbursement order to Curry Station at the Baltimore, Maryland address. These orders did not contain a denial of costs or deductions of interest based upon the disclosed fact that Reservoir had purchased the applications for an amount less than their face value. However, there is no evidence that either of the applicants sold the right to receive reimbursement before submitting the application. Additionally, there is no evidence that Reservoir was affiliated with Clean America. On April 11, 1996, DEP revisited the Reservoir Capital factoring mechanism. In that instance, DEP reviewed a situation in which Reservoir Capital directly paid a subcontractor's invoice in an application that All American Funding (All American) filed. Reservoir had purchased the receivable of All American, and applied part of the purchase price to directly pay a subcontractor. There is no evidence of any "affiliation" between Reservoir and any other entity in the reimbursement chain. Prior to the meeting with Reservoir, DEP intended to deny those costs since it appeared that Reservoir actually paid them rather than the applicant, All American. As a result of that meeting, DEP requested additional information from Reservoir. At the time of hearing in these cases, DEP had not made a decision in that case pending receipt of the requested information. Governor's Bank On March 9, 1994, Governors Bank wrote to Charles Williams requesting that DEP directly remit to Governors Bank any reimbursement due on an application filed by Clean America due to the fact that Clean America "secured its borrowings from the bank with any rights to payment which CAFC has in connection with certain reimbursement applications." On March 30, 1994, Clean America sent a letter to Charles Williams and Doug Jones requesting that the DEP honor the March 9, 1994 letter directing payment to Governor's Bank. On November 4, 1994, Clean America advised DEP that DEP was to remit additional final reimbursements to Governors Bank. The letter advised DEP that "based upon a loan relationship Governor's Bank established with Clean America . . ." reimbursement payments had been assigned to Governors Bank and therefore "all payments and proceeds must be remitted to Governor's Bank." There is no record evidence that Clean America entered into a loan agreement with Governors Bank prior to submittal of the application or that the applications included claims for interest paid to the bank. There is no evidence of any affiliation between Clean America and the bank. The financing mechanism that Petitioners used for these 45 applications is not similar to a "plain vanilla" bank loan where a lender advances funds after an applicant files an application and directs DEP to forward reimbursement payments to a bank lock box. Barriston Environmental Investors L.P. On March 11, 1993, Barriston Environmental Investors, L.P. (Barriston) wrote to John Ruddell, Director of the DEP's Division of Waste Management and described a mechanism of financing by which Barriston (the funder) would obtain funds, at least partially through bank debt, for the payment of subcontractors' site rehabilitation invoices. In the Barriston proposal, the subcontractor would remit an "investment banking fee" of 5 percent of the value of the invoices back to the funder upon payment of 100 percent of the invoices. Barriston's letter acknowledged that this fee would not be reimbursable under the program. In addition, the Barriston funder would receive a commitment fee from the site owner which the Barriston funder would not include in the reimbursement claim. A reference in the letter to the payment of interest on funds advanced on the site owner's behalf does not specify the time frame in which interest would be paid, i.e. before or after the filing of an application. The letter sought DEP's approval and assurance that the payment of 100 percent of the invoices would entitle Barriston to full reimbursement including both markups. Barriston's letter requested an informal response because it realized that DEP had no authority to take official agency action without the submission of an application. On April 9, 1993, DEP responded to the Barriston letter. In its response, DEP stated that the arrangements appeared to be consistent with current statutes and rules and would be eligible for the full reimbursement allowed by DEP's rules. However, there is no record evidence of any official agency action on an application submitted in accordance with Barriston's proposal. Interest Indemnification Interest indemnification encompasses a situation in which a contractor pays interest directly back to a funder during the period of time after submittal of an application but before reimbursement by the IPTF. In June 1995, a DEP employee contacted Petitioners' certified public accountant (CPA) inquiring about the practice and seeking copies of his other clients' interest indemnification contracts. After that conversation, the CPA discussed the matter with another DEP employee to confirm his understanding that financing issues were outside of the scope of DEP's review so long as an applicant did not include such charges in the application. Since the June 1995 discussions, DEP has reimbursed applications which were financed through interest indemnification without adjustments for the payment of interest. However, the interest indemnification payments applied to applications after the applicants filed them with DEP to replace long-term interest that IPTF is no longer paying. The applicants were not seeking reimbursement of those payments as incurred costs. Petitioners have not established their entitlement to reimbursement for the factored amounts of their invoices. DEP presented competent evidence to support its "factoring" and "affiliation" policies as applied here. In addition, the evidence indicates that DEP has not inconsistently applied such policies to other similarly situated reimbursement applicants. Petitioners have failed to prove that DEP's denial of costs based upon factoring is not reasonably related to the purpose of reimbursement review and otherwise unsupported by competent evidence. The April 21, 1995 policy statement is a rule as defined in Section 120.52(16), Florida Statutes. DEP was not aware of the need for such a rule when it made the last substantive amendments to Rule 17-773, Florida Administrative Code, in 1993. Nevertheless, DEP demonstrated that the non-rule policy is a reasonable interpretation of Sections 376.3071(12)(b) and 376.3071(12)(d), Florida Statutes. DEP provided an evidentiary basis to support its factoring policy in these consolidated cases. The difference between the face amount of the invoices and their factored amount did not represent allowable costs which were actual and reasonable. DEP deducted the amount of the relevant discount percentage (on a prorated basis) from each invoice submitted by Tower and its subcontractors. There is a discrepancy between the amount that DEP deducted from each invoice (itemized) and the total deduction based on a lump sum in 33 of the 45 cases which DEP did not explain during the hearing. Therefore, before DEP enters a Final Order, it should review the supporting documents to determine the correct deduction in each application. "Value Added" Policy Funders and contractors are entitled to take a markup of paid contractor and subcontractor invoices for allowable costs at reasonable rates. The invoices must represent actual and reasonable costs which are integral to site remediation. Contractors are entitled to a first-tier 15 percent markup for supervising and/or coordinating on-site remediation, for investing capital while awaiting reimbursement by paying subcontractors invoices, and for assuming liability for the performance of the subcontractors. Funders generally are entitled to a second-tier 15 percent markup as an incentive to provide funds to finance the work. Markups are expressly subject to limitations set forth in Section 17- 773.350(9), (10) and (11), Florida Administrative Code. There are no other specific or implied limitations on markups in the rules or written guidelines. Requiring each entity that receives a markup in the reimbursement chain to pay contractor, subcontractor, and vendor invoices helps ensure that each level in the reimbursement chain pays the participant at the next lowest level. In these cases, each level in the reimbursement application chain "technically" paid the next lowest level. DEP policy in effect at the time Petitioners submitted the instant applications for reimbursement was to allow markups of paid invoices at two levels. However, prior to the submission of the instant applications, DEP was not aware of a case where a general contractor claimed a markup for work that was complete before the general contractor became involved in the project. With regard to all of the pending reimbursement applications, Gator applied a 15 percent markup to all of Tower's invoices including the invoices of Tower's subcontractors. With regard to a minimum of 30 of the 45 sites, Gator clearly did not supervise, manage or direct site remediation activities performed by Tower or its subcontractors. In fact, Gator did not become involved until after Tower completed these tasks. In at least 30 of the instant cases, Tower was acting as the general contractor when all of the on-site remediation took place. However, Tower could not apply a 15 percent markup to the invoices for its own services. Gator made it possible for Petitioners to claim the markup on Tower's invoices. As to the 15 sites at which Gator allegedly had some type of involvement with on-site remediation activities, there is no persuasive evidence regarding the specific activities or the level of Gator's involvement on any particular project. On September 1, 1994, Restoration Assistance, an entity under contract with DEP to review reimbursement applications, issued a memorandum to its reviewers directing them to complete their review and do a "total denial" on "Gator Environmental packages." The memorandum advised the reviewers that "Bruce" was drafting canned language to use in DEP's denial statement. On or about April 21, 1995, DEP presented its reviewers with a memorandum setting forth an initial overview of a "value added" policy for markups taken by a "management company" involved in site remediation activities. According to the memorandum, DEP would allow reimbursement of claims for actual project management work and value-added services. The memorandum further provided that DEP would allow markups to a management company which only provided cash-flow services for a majority of the program task period even if the management company performed no other service. However, DEP would deny a markup if the management company provided such services during a "one month time period." DEP intended for the April 21, 1995 memorandum to acquaint DEP reviewers with the emerging DEP policy on markups. DEP's rules and written guidelines do not address the distinction made in the April 21, 1995 memorandum regarding the timing during which a management company could provide cash flow services and still be entitled to a markup. On October 20, 1995, Charles Williams issued a DEP policy memorandum for reviewers to use in reviewing reimbursement applications. Through that memorandum, DEP finalized and implemented the "value added" policy. The memorandum states that: if the 'GC' [general contractor] was involved with the management of the project during the course of the actual work by subcontractors, [DEP] rules do not preclude them from applying a markup. However, if the 'GC' came along after the work was completed by other contractors and their involvement was more of a due diligence exercise to faciltiate (sic) a funding arrangement by a third party, then the 'GC' markup would not be justified, though a markup by the actual funder listed as the PRFCSR could be allowed. Prior to the establishment of the "value added" policy on October 20, 1995, DEP made no inquiry as to whether a contractor provided value added services in order for the contractor to be entitled to a markup. DEP applied the "value added" policy to all pending applications (including the ones at issue here) resulting in a deduction of Gator's markup in all of the subject cases. The Department of Banking and Finance reviewed and issued a report (Comptroller's Report) on the Petroleum Contamination Site Cleanup Reimbursement Program on November 29, 1994. This report addressed the issue of markups in the reimbursement program. The Comptroller's Report recognized that DEP found the multiple markup structure to be beneficial in that it "attracts the involvement of companies whose role in cleanup projects is limited to providing funds to finance the work [and] attracts investors who provide funds which might not otherwise be available--thus facilitating cleanup of contaminated sites." The Comptroller's Report describes a two-tier arrangement involving a "prime contractor engaged to manage the cleanup project" and a "funding entity." The report acknowledges that the prime contractor "might have only limited direct involvement in the cleanup, having engaged subcontractors for most or all of the actual work." The example in the Comptroller's report did not state what DEP's policy would be if a subcontractor had completed all of the actual work before the contractor became involved. Even without this consideration, the report was critical of DEP's allowance of markups on either level. The Petroleum Efficiency Task Force (PETF) issued its final report on financing contractors on August 17, 1994. This report discussed DEP's policy of allowing two markups. In this discussion, the PETF recognized that "funders must be able to rely on the skills and knowledge of contractors to minimize reimbursement shortfalls." The PETF recommended for future consideration that "the Department should provide in rulemaking that contractors who take the first-tier 15 percent markup on subcontracted work must adequately supervise the work." When the PETF issued its report, there was no existing rule that established any level of on site supervision or any other specific criteria for applying one of the two allowable levels of markup, other than paying invoices for integral site rehabilitation work. DEP's rules and written guidelines did not substantively change with regard to the "value added" policy from the April 22, 1993 revision of Chapter 17-773, Florida Administrative Code, to the October 20, 1995 memorandum which established a non-rule limitation on the ability of an entity to apply a markup to paid invoices. Because the rules and written guidelines do not reflect the "value added" policy, a participant in the program would not be aware of it even if the participant requested program information. Gator technically paid 100 percent of the face value of Tower's invoices. Without Gator's involvement, AFG and AEE would not have financed these applications. However, DEP presented persuasive evidence at the hearing to support its position that Gator was not entitled to a markup because Gator's services added no value to site remediation projects. In the instant cases, Gator performed some type of a minimal due diligence review of Tower's site work. Gator allegedly reviewed Tower's technical and administrative files, cross-referenced technical and administrative files with the applications which Tower prepared, made visits to some job sites, and prepared a deficiency letter to determine the appropriateness of the scope of Tower's work. However, all of these functions were repetitious of the work that was performed by Tower and the certified public accountant attesting to the Certification Affidavit. Gator limited the deficiency letters to the question of whether the scope of Tower's services were reimbursable. However, there is no evidence that Tower's deficiency letters resulted in adjustments to costs in the applications as filed by Petitioners. The deficiency letters served only to adjust the discount percentage set forth in the addenda to the factoring contracts. Tower was a qualified engineering consulting firm that employed its own engineers and geologists. Gator's employee that reviewed the technical information in Tower's files was not a Florida professional engineer. He was not qualified as a certified public accountant to determine whether a charge was within DEP's reasonable rates. The Gator employee was a Florida professional geologist but he did not sign and seal the deficiency letter as such. There is no reference in DEP's rules or written policies to a deficiency letter. AFG required Gator to prepare the deficiency letter within two days of the date on which EF provided Gator with the opportunity to review a completed task. This two-day turn around time allegedly afforded efficiency of payment. Gator did not begin its review of an reimbursement application until after Gator received an invoice from Tower. The relevant subcontract/purchase order issued by Gator to Tower, the Tower invoice and the Gator invoice were often prepared on the same day. Gator technically paid Tower's invoices with funds that AEE advanced. Tower used these funds to repay AEE. When Gator received payment from ET or SEI, it passed the funds back to AEE before ET or SEI submitted the applications to DEP or immediately thereafter. Pursuant to the addenda to the factoring contracts, Tower, not Gator, contributed to a reserve trust account which AEE will use to cover any reimbursement shortfalls. Gator indemnified AEE and guaranteed its own work but did not assume a risk of loss on Tower's work. On most if not all of the applications, Gator performed no meaningful management or supervisory functions. The greater weight of the evidence indicates that Gator's primary purpose in these consolidated cases was not to afford AFG a level of comfort as to the appropriate scope of the individual program tasks but to ensure that third-party investors maximized their profits. The "value added" agency statement has the effect of a rule which DEP did not contemplate when it promulgated its rules and written policies. Nevertheless, DEP's decision concerning the value added policy is within the scope of its delegated legislative authority. DEP has proven that reimbursement for Gator's services was not allowable as actual and reasonable costs of site remediation. Therefore, it is not entitled to a first-tier markup. Computer Costs Prior to January 1, 1995, DEP determined the reimbursability of computer costs based upon a "units and rates basis" as provided by Rules 17- 773.100(5), and 17-733.700(2)(d), Florida Administrative Code. DEP evaluated computer costs "as a certain number of hours [at] a reasonable rate." Pursuant to the units and rates rule provisions, there was no rational basis for DEP to deny the computer costs contained in applications filed prior to January 1, 1995. On January 1, 1995, DEP established a policy by which it would disallow in full any computer costs greater than $750. Under that policy, DEP would reimburse in full an applicant's computer costs with supporting invoices of $749 dollars, but disallow in full computer costs with supporting invoices of $751. DEP's reimbursement orders involving more than $750 in computer costs after January 1, 1995 routinely stated that "there was insufficient justification to demonstrate that this computer time was integral to the task or necessary." DEP applied the computer policy to all applications filed and pending review at the time it developed the policy, regardless of when an applicant performed the work or generated the records. DEP applied the January 1, 1995 computer policy to the application in Case No. 95-4606 which ET filed on July 18, 1994. In that case DEP denied $1,456.25 in computer costs allowing no reimbursement for computer time. On April 27, 1995, DEP implemented a new policy by which it evaluated computer costs based upon a calculation of allowable personnel hours per task as opposed to a units and rates basis. Under that policy DEP would evaluate the total allowable personnel hours in a task and limit computer costs to 10 percent of those hours up to a maximum of $750. Under the April 27, 1995 policy, DEP reduced the reimbursement for computer costs to $500 if the reimbursable amount exceeded $750 after DEP made the 10 percent calculation. DEP implemented the April 27, 1995 policy through the use of a calculation work sheet which it provided to its application reviewers. DEP applied the April 27, 1995 computer policy and work sheet to all applications pending review at the time DEP developed the policy, regardless of when the applicant performed the work or generated the records. DEP applied the April 27, 1995, policy in all of the subject cases subsequent to Case No. 95-4606, with the following exceptions: Case Nos. 96- 0432RU, 96-1006 and 96-1009, which had no denial of computer costs; and Case No. 96-1352, in which DEP applied the 10 percent limitation, but reimbursed 896.75 dollars of the computer costs. After implementation of the April 27, 1995 policy, DEP made no effort to adjust the denial of all computer costs in Case No. 95-4606 under the January 1, 1995 policy. The only other category in which DEP evaluates reimbursement on a percentage of hours basis, rather than a units and rates basis, is total management costs. DEP's written guidelines and Rule 17-773.350(16), Florida Administrative Code, limit management costs to a percentage of total allowable personnel hours. There are no rules or written guidelines that would limit computer costs based upon criteria other than a units and rates evaluation, or that would support DEP's policies as reflected in the January 1, 1995 and April 27, 1995 policy memoranda. DEP's rules and written guidelines did not substantively change with regard to this issue from the time Petitioners filed the subject applications, to the time DEP established the January 1, 1995 and the April 27, 1995 computer policies. DEP did not issue any PCRs or other written guidelines to place applicants on fair notice of DEP's new policies with regard to computer costs. DEP presented no persuasive evidence at the hearing to support its January 1, 1995 and April 27, 1995 policies. The only basis for the policy was DEP's representation that it developed the policies as a "reasonableness issue" in order to reduce the amount of computer costs that were appearing in reimbursement applications. DEP did not demonstrate that it based the new policies on any calculation of the amount of computer time necessary to perform a remediation task. Once the total computer costs reached $750 dollars, DEP gave no consideration to the scope or complexity of the task. Given the difference in the amounts involved in performing site remediation services (e.g. an application totaling 7,249.75 dollars in Case No. 96-0411RU versus an application totaling 149,080.02 dollars in Case No. 96-0425RU) and the differences in program tasks (see Rule 17-773.500, Florida Administrative Code), a policy establishing a flat numerical limit on computer costs that an applicant may claim in an application is not reasonable. DEP presented no evidence at the hearing to prove the basis for its retroactive application of the policies to work performed and applications submitted prior to the development of the policies. DEP did not attempt to explain the basis for its failure to apply the rules and written guidelines in effect at the time the work was performed or the records generated. Based upon the foregoing, DEP's denial of computer costs in each of these applications is not supported by the statutes, rules and written guidelines in effect at the time the work was performed or the applications were filed. Each application contains information supporting the computer costs. The application Certification Affidavits and CPA attestations demonstrate that Petitioners incurred the computer costs which DEP should reimburse. The reimbursement for computer costs should be in full except to the extent that DEP allocates to a supporting document a prorated share of the amount of a discount on a factored invoice. As a final note, of the computer costs denied in 16 of the 45 reimbursement notices, the sum of the allowances and deductions does not equal the overall claim. The differences ranged from a few dollars to over four hundred dollars. DEP provided no evidence to explain the discrepancy in the amount calculated by DEP in its notices. Miscellaneous Costs Prior to September 27, 1995, DEP reimbursed miscellaneous line-item costs when the applicant furnished support for them in the application. The miscellaneous costs policy as of May 17, 1995 even dispensed with the requirement of supporting invoices when these costs totaled less than 300 dollars. DEP's reviewers are employees of a firm that provides DEP with application review services as an independent contractor. On September 27, 1995, after a meeting with DEP staff, the application reviewers implemented a policy to deny costs for "overhead." Under the new policy, certain items were overhead, including but not limited to: gloves, mason jars, sampling disposables, phone calls, excessive faxes, excessive copying, small hand tools, shipping documents, etc. The application reviewers had to exercise their own discretion as to which items were "overhead" until they received a guideline from DEP. The reviewers decided to approve overhead expenses of less than $50 and deny items for more than $50. The policy continued in existence at least through November 9, 1995. DEP applied the miscellaneous/overhead policy to all of the subject applications, regardless of the date of cleanup work or application submittal. The application reviewers applied the miscellaneous/overhead "policy" without the knowledge of DEP's Reimbursement Administrator, Charles Williams. When Mr. Williams found out about the policy, he "counselled them that they need to reverse that position." The correct policy would allow reimbursement of "miscellaneous/overhead" costs that the reviewers denied in 33 of the 45 applications. DEP made no effort to correct the denial of these costs based upon its erroneously applied policy. DEP presented no persuasive evidence at the hearing to support its application of the miscellaneous/overhead policy in applications submitted prior to the development of the policy. DEP did not explain the basis for its failure to apply the rules and written guidelines in effect at the time the subcontractors performed the work or generated the records. Based upon the foregoing, DEP's denial of miscellaneous/overhead costs in 33 applications in which DEP denied such costs is not supported by the applicable states, rules and written guidelines. Each application contains information supporting the miscellaneous costs. The applications' Certification Affidavits and CPA Attestations demonstrate that Petitioner's incurred the miscellaneous costs. Therefore, DEP should reimburse those miscellaneous costs. The reimbursement should be in full except to the extent that DEP allocates to a supporting document a prorated share of the amount of a discount on a factored invoice. Airfare From June 17, 1993, to sometime prior to January 31, 1996, DEP's policy with regard to the reimbursement of airfare was to pay airfare integral to site rehabilitation when such costs were relatively inexpensive. By no later than January 31, 1996, DEP developed and applied a policy to deny all airfare costs regardless of whether the applicant provided justification. On March 13, 1996, DEP decided that once again it would reimburse airfare with sufficient justification such as a comparison with car travel. DEP considers the changes in reimbursability of airfare as "just procedures to follow," and applicable without regard to the timing of work performed. DEP denied airfare charges in Case No. 96-1353 as overhead charges. DEP's rules and written guidelines did not substantively change with regard to airfare from June 17, 1993, when airfare was reimbursable, to the policy implemented on January 31, 1996, in which airfare was not reimbursable, to March 13, 1996, when airfare was reimbursable once again. DEP issued no PCRs or other written guidelines to place applicants on fair notice of the changes in policy with regard to airfare. DEP has not provided any evidence to support the basis for the fluctuations in its airfare policy. DEP presented no evidence at the hearing to provide the basis for its application of the airfare policy to work performed and applications submitted prior to the development of the changes in policy. DEP did not explain the basis for its failure to apply the rules and written guidelines in effect at the time the subcontractors performed the work or generated the records. Based upon the foregoing, DEP's denial of airfare costs in the application for Case No. 96-1353 is not supported by the applicable rules and written guidelines. The application contains information supporting the miscellaneous costs. The application's Certification Affidavit and CPA Attestation demonstrate that Petitioner ET incurred the airfare costs. Therefore, DEP should reimburse airfare costs in full except to the extent that DEP allocates to a supporting invoice the prorated amount of a discount on a factored invoice. Inconsistent Agency Practice The application of DEP's factoring policy did not treat Petitioners in a manner different from other funders. Heretofore, DEP was not aware of a case where program participants factored their invoices before filing an application and claimed the face amount of those invoices for reimbursement. The affiliation between Petitioners and AFG and/or AEE was also unique. DEP issued a memorandum requiring funders to provide "clarification regarding essential cost documentation" on July 26, 1995. The purpose of this memorandum was to remind application reviewers of the need for a funder to submit an invoice documenting and supporting its line-item claim for the second- tier 15 percent markup. DEP did not intend for this memorandum to limit DEP's ability to inquire about relationships and transactions taking place outside the usual chain of reimbursement when an application on its face refers to a factoring scheme involving an "affiliation" between the factoring company and the funder. DEP does not deduct finance charges when an applicant incurs (pays) all invoices, submits the application, then sells the receivable or agrees to pay long-term interest pending receipt of payment from the IPTF. In the instant cases, Petitioners agreed to accept reimbursement for their services at a discount before they submitted the applications then included the cost of borrowing capital in the application. DEP does not routinely ask questions of other applicants regarding their financing. Nevertheless, under the facts of these cases, DEP would have been remiss in its duty if it had not made such inquiries. DEP's actions in the instant cases are not inconsistent with its actions taken in other cases with other similarly situated entities because there is no evidence that other such cases exist. Bias On August 31, 1994, Bruce French provided Charles Williams with a memorandum in which Mr. French discussed factoring. In his memorandum, Mr. French concluded that DEP could only reimburse the "discount" amount that the factoring company actually incurred/paid the funders. On September 1, 1994, Mr. French had a discussion with someone named "Toni" at McGuinnes Laboratories regarding the laboratories' use of AFG services for financing invoices to Tower. On September 2, 1994, Mr. French related in a memorandum to Charles Williams, his understanding that the laboratory had different price lists for different customers, generally depending on volume of analysis performed and individual payment agreements. Mr. French surmised that the laboratory's price for services "is inflated to deal with AFG's discount price to be paid by AFG." Mr. French concluded that, under those circumstances, AFG's financing arrangements may "represent collusion on behalf of all parties to the application to defraud DEP for the benefit of AFG. That is, prices are 'fixed' prior to performing of services." On September 2, 1994, Mr. Williams responded to Mr. French's memo by indicating that the scenario presented by Mr. French "sounds interesting" and that DEP would "absolutely need to have a Big Meeting to decide what to do once and for all." On September 12, 1994, Mr. French provided information on factoring to Bill Sittig of DEP's Office of the Inspector General and to Mr. Williams. Mr. French included a drawing entitled "The Tangled Web They Weave or the Hidden Discount Line Items and other Fluff, August 31, 1994 Interpretation of Bruce French's Discussion." At the hearing, neither Mr. Sittig nor Mr. Williams remembered seeing the drawing. There is no competent evidence as to the identity of the person creating the drawing. There is no persuasive competent evidence that Mr. French was biased against Petitioners or any other entity utilizing factoring as a mechanism of financing. Moreover, DEP had no direct and demonstrable bias against Petitioners. Timeliness of Agency Action Prior to filing the instant applications, representatives of the funders and AFG presented various financing schemes to DEP for pre-approval. In each proposal, the person speaking for AFG also spoke on behalf of the funders. At all times relevant here, Paul DeCoster was secretary and counsel for AFG. He was also secretary of SEI and a corporate director and shareholder of WIFL. In September of 1993, Mr. DeCoster wrote a letter to DEP describing a proposed financing scheme in which AFG would purchase the account receivables of contractors engaged in site rehabilitation. AFG's plans were in a formative stage at this time. Mr. DeCoster wrote DEP a follow-up letter dated October 4, 1993. This letter states that: the amount of financing required to meet [certain contractor clients'] working capital needs is so large that FEC [a funder] must find large institutional investors to accommodate them. For service of finding such investors, FEC proposes to charge a fee to the contractor client, which would be in addition to the 15 [percent] 'markup' taken by the investor providing the financing. The October 4, 1993 letter disclosed that contractor clients would deposit funds in a trust account as security for the performance of their work. The trust would invest its funds "in accounts receivable purchased from AFG, the parent of FEC, and any income earned by the trust on those investments would inure to the benefit of AFG." The plan that Mr. DeCoster proposed was markedly different from the scheme utilized here. The most noticeable differences are that the subject applications did not involve a finder's fee, FEC as a funder, or the purchase of AFG's accounts receivable by a reserve trust. In October of 1993, Will Robins met with DEP staff to discuss the manner in which the reimbursement program would apply to a proposed financing scheme. In this proposal, AFG would charge contractors an application/initiation fee and/or a commitment fee. The transactions between the entities in the instant applications did not involve an application/initiation fee and/or a commitment fee. When Mr. Robins made his presentation, DEP did not know the specific relationships between the entities involved or Mr. Robins' position as an officer, director, and or shareholder of these entities. After that meeting, counsel for AFG sent DEP a letter dated November 4, 1993. The letter acknowledges that the existing rules did not "specifically address the types of situations that arise when providing capital for cleanup activities through funding groups such as AFG." The letter identifies ET as the proposed funder through which AFG would finance cleanups. According to the letter, ET would incur the costs but AFG would hold the right to receive the ultimate reimbursement payment from the IPTF. The letter clearly reveals DEP's concern that the proposed application/initiation fee was a "kickback" which should be deducted from the funder's markup. In January of 1994, counsel for AFG wrote a letter to DEP describing a financing scheme which differs in some respects from the financing scheme at issue here. This letter states that AFG intended to purchase receivables of the funder and the general contractor at a discount. Under this plan, the general contractor and the funder would claim the two allowable markups. The subcontractors would pay AFG a finder's fee. The letter reveals that AFG, its affiliates, and investors would recover the cash equivalent of both levels of markups plus a fee from subcontractors for funding the high costs of risky projects. The letter states that: since the Department's reimbursement rules do not specifically address the issue of site cleanups that are funded through private sources of capital . . . it is important that we know if there are any obvious or glaring problems with this plan that would cause reimbursement to be withheld otherwise restricted. On July 13, 1994, counsel for AFG wrote DEP to explain some modifications in the details to the proposed plan for the purchase and sale of receivables at a discount. This letter informed DEP that AFG would have a financial affiliation with the funder (ET) which would exist outside the chain of reimbursement and which would have no effect on either the markups or the overall reimbursement amount reflected in any application. All contracts within the chain of reimbursement (between ET, SEI, Gator, Tower, and its subcontractors) would be negotiated in arms-length transactions. The letter states: In this plan the subcontractors will perform their work on the site and will prepare their invoices in a manner consistent with any publicly or privately financed cleanup. Those invoices will be complied and forwarded to the general contractor for its review and the general contractor will add on the markup allowed by rule to the subcontractor's bills. The reimbursement application will then be forwarded to the funder who will ensure that all bills have been paid and who will be identified as the "person responsible for conducting site rehabilitation" on the reimbursement application. The funder will take the second markup allowed by rule, and will submit the reimbursement application to the Department of Environmental Protection for processing. Reimbursement will ultimately be paid by the Department to the funder in accordance with the reimbursement application. At no step in this process will the Department relinquish any authority to review and approve either the scope and nature of the cleanup or the rates charged by the contractors and subcontractors. Petitioners filed the first of their applications with DEP on July 18, 1994, five days after the date of the July 13, 1994 letter. In late November, 1994, after all but 4 of the 45 applications were filed, DEP placed a telephone call to Petitioners' counsel advising him of the position DEP intended to take with regard to his client's financing arrangements. DEP did not provide any written confirmation of that call, or issue any document describing its policy, until April 21, 1995. In each of the above described letters and/or meetings, AFG's attempt to ascertain DEP's position regarding the various proposed financing mechanisms was unsuccessful. However, AFG was aware that DEP could not take a position that represented official agency action until an applicant actually filed an application. At no time did DEP make any affirmative statement which misled Petitioners regarding the acceptability of AFG's proposals. There is no persuasive evidence to support a finding that the agency did not timely respond to the claims for reimbursement.
Recommendation Based upon the foregoing, it is recommended that DEP enter a Final Order in each of these consolidated cases: (a) disallowing reimbursement of the first- tier markup; (b) disallowing reimbursement of any factored invoice in an amount equal to the amount of the discount on that invoice; and (c) allowing reimbursement of costs associated with airfare, computers, and miscellaneous/overhead expenses. DONE AND ENTERED this 8th day of October, 1996, in Tallahassee, Florida. SUZANNE F. HOOD Administrative Law Judge Division of Administrative Hearings The DeSoto Building 1230 Apalachee Parkway Tallahassee, Florida 32399-1550 (904) 488-9675 SUNCOM 278-9675 Fax Filing (904) 921-6847 Filed with the Clerk of the Division of Administrative Hearings this 8th day of October, 1996. COPIES FURNISHED: E. Gary Early, Esquire Christopher R. Haughee, Esquire Akerman, Senterfitt and Eidson, P.A. 216 South Monroe Street, Suite 200 Tallahassee, Florida 32302-2555 W. Douglas Beason, Esquire Betsy F. Hewitt, Esquire Department of Environmental Protection 2600 Blair Stone Road Tallahassee, Florida 32399-2400 Virginia B. Wetherell, Secretary Department of Environmental Protection Douglas Building 3900 Commonwealth Boulevard Tallahassee, Florida 32399-3000 Perry Odom, Esquire Department of Environmental Protection 3900 Commonwealth Boulevard Tallahassee, Florida 32399-3000
