Findings Of Fact The parties stipulated at hearing to the factual findings set forth in paragraphs 1-5 below. Stipulated Facts The Petitioner has four underground tanks. Two tanks are located at Petitioner's facility in Port Everglades and two tanks are located at Petitioner's facility at Miami International Airport. All four tanks are registered as "stationary tanks" with Respondent. The Petitioner filed a request for reimbursement with the Respondent pursuant to section 376.3071(12)(b), Florida Statutes. The Respondent's denial with regard to the facility at each site was based on "...the fact that this facility is not a petroleum storage system as defined in section 376.301(11), Florida Statutes." Subsequent to the Respondent's denial of the Petitioner's application, the Respondent conducted an additional inspection of the Port Everglades site. The Petitioner timely filed a petition for a formal administrative hearing in response to Respondent's denial. Other Facts Petitioner, Everglades Pipeline Company, is a single, unified pipeline facility. The sole purpose of the system is to transport petroleum product along a route from a receiving pumping station at Port Everglades via a 35 mile pipeline to various terminals and ending at a terminal at the Miami International Airport. The pipeline facility transports 400 to 3000 barrels of petroleum product per hour. The petroleum product transported by Petitioner usually consists of jet A turbine fuel, JP-4 military fuel and railroad diesel fuel. Various pipe lines, not owned or operated by Petitioner, transport petroleum product from major petroleum companies to the Petitioner's receiving station at Port Everglades where the product enters the Petitioner's pipe line facility. The process of placing the petroleum product in the care of Petitioner is known as a "custody transfer." While the product is in Petitioner's custody for purpose of transport to its destination, ownership of the product does not change. At all times, the product remains the property of the company acquiring the Petitioner's transportation service. After transfer to the Petitioner's custody and during the transportation process, tests are constantly performed on the product for the purpose of maintaining quality control. During the testing process, an amount of the petroleum product is withdrawn from the pipeline through a one fourth inch pipe. Samples for testing purposes are then taken from the quantity of the product so removed. The excess of that quantity is channeled to two underground tanks at the Everglades station and temporarily held there for later injection back into the pipeline for delivery, with the same batch of product from which it was drawn, to the recipient at the other end of the pipeline journey. In the Miami station, the same process of withdrawal of a quantity of the product occurs, with two underground tanks there fulfilling the same holding function as that performed by the tanks at the Port Everglades facility. While each of the four tanks have been registered as required by section 376.301(11), Florida Statutes, such registration is not deemed dispositive of whether the tanks are petroleum storage systems since registrations are accepted at face value by the Respondent and no independent verification of registration is made. The two tanks at the Everglades facility have a 2100 gallon, or approximately 50 barrel, capacity. The two tanks at the Miami facility have a 1764 gallon capacity. These four tanks, known as "sump" tanks, perform other functions in addition to temporarily holding amounts of product from which samples are taken. Strainers in the pipeline sometimes become clogged from impurities in the product being transported. When this happens, the product is back washed within the pipeline through the strainers to unclog them. The product used in this back wash operation is then cleansed and placed in the tanks for subsequent re- injection in the pipeline with the batch of product from which it originated. The contaminants are placed in a strainer tank. The strainer tank is necessary for the effective operation of the pipeline. It was conceded in testimony of Petitioner's witness at hearing that this tank is not a petroleum storage system. Maintenance of the system sometimes requires the draining of product from the pipeline into the sump tanks. As soon as the maintenance is completed, the product is re-injected into the pipeline with the batch from which it was drawn. A safe pipeline system requires the existence of the sump tanks to hold maintenance drainage material. The tanks at the Port Everglades station are also used to hold product when pressure builds up in the pipeline system from thermal causes or other conditions which require that pressure in the system be relieved. The product drawn off at these times is re-injected in the pipeline into the batch of product from which it originated. Some form of pressure relief is necessary for safe and effective operation of the pipeline system. The process of reinserting the product back into the pipeline is a manual operation to the extent that personnel are required to open certain valves. The product is not automatically re-injected. However, the sump tanks exist solely to "take care of the individual stations or terminal." While possible to operate the pipeline without the tanks, there is no use or purpose for them except as part of the pipeline facility. An additional tank exists at the Port Everglades station as part of a scavenger system for recovery of product from the ground, but no evidence was presented to show the tank was stationary or registered. The tank is not a petroleum storage system pursuant to section 376.301(11), Florida Statutes. In addition to the two sump tanks, two barrel shaped tanks sit above the ground at the Miami International Airport terminal. These tanks have the capacity to hold 1000 barrels or 42,000 gallons of petroleum product. Neither of these tanks is registered with the Department, nor was evidence introduced that they were otherwise licensed or comply with petroleum storage system requirements of section 376.301(11), Florida Statutes. These barrel tanks were identified at hearing as a relief tank and a settling tank. The relief tank serves the same purpose of providing pressure relief for the system as do the sump tanks at the Port Everglades station. As with the sump tanks, the product is re-injected into the pipeline as soon as the upset condition causing overpressurization is past. The tank also serves to hold certain types of contaminated product until the owner can remove it from the system. The other barrel tank at the Miami station is used as a "settling" tank to filter contaminants from petroleum product. This tank is a treatment or process tank, as opposed to a petroleum storage system. The barrel tanks at the Miami Station, like the sump tanks there and at the Port Everglades station, serve only the product transportation function of the pipeline. They are necessary for safe and effective functioning of that transportation system. Each of the Petitioner's tanks is integrally related to the transportation of product from Port Everglades to Miami. Their sole purpose is the safe and effective functioning of the pipeline. As established by testimony of John Svec, Respondent's expert on petroleum storage facilities, the Petitioner's tanks function for the convenience of the transportation system. The process of taking the product out of the pipe line, holding it, and putting it back into the pipe line is a transportation function. While the Petitioner's tanks temporarily hold petroleum product, they do not store that product in order to provide a supply for future use within the context of that term's use in the field of petroleum marketing. The term "supply" means the buying or selling of product. The Petitioner does not engage in buying and selling. Custody of materials is assumed solely for transportation of that material by the Petitioner's facility. The holding function of the tanks is a part of the overall purpose of the entire pipeline facility to transport petroleum product. Petitioner's exhibit 11 establishes that the original Senate version (Senate Bill 206) of the SUPER Act of 1986 made no mention of pipeline facilities for purpose of inclusion under coverage of the Act. The committee substitute for Senate Bill 206 did include pipelines. This inclusion was carried over to the committee substitute for the committee substitute, only to be deleted from the final enrolled version of the Act.
Recommendation Based on the foregoing findings of fact and conclusions of law, it is RECOMMENDED that a final order be entered denying the Petitioner's application for reimbursement eligibility. DONE AND RECOMMENDED this 17th day of June, 1988, in Tallahassee, Leon County, Florida. DON W. DAVIS Hearing Officer Division of Administrative Hearings The Oakland Building 2009 Apalachee Parkway Tallahassee, Florida 32399-1550 (904) 488-9675 Filed with the Clerk of the Division of Administrative Hearings this 17th day of June, 1988. APPENDIX TO RECOMMENDED ORDER, CASE NOS. 87-5374, 87-5305 The following constitutes my specific rulings, in accordance with section 120.59, Florida Statutes, on findings of fact submitted by the parties. PETITIONER'S PROPOSED FINDINGS Included, finding 1 and 6. Included, finding 13. Rejected as unnecessary for result reached. Rejected, unnecessary to result reached. Rejected, unnecessary to result reached. Rejected, unnecessary to result reached. Rejected, unnecessary to result reached. Included in finding 8. Summarily included in finding 11. Summarily included in finding 14. Summarily included in finding 16 with exception of the last two sentences. Testimony on this point indicated holding tanks do provide relief for system pressures. Rejected, unnecessary to result reached. Generally included throughout findings. Not necessary for result reached. Not necessary for result reached. As to manual valves, included in finding 17. Remainder rejected as unnecessary for result reached. Opinion as to tanks rejected as unnecessary to conclusion reached concerning the system. Unnecessary to result reached. Unnecessary to result reached. RESPONDENT'S PROPOSED FINDINGS Unnecessary to result. Unnecessary to result. Unnecessary to result. Included in finding 6. Included in finding 6. Included in finding 6. Included in finding 7. Included in finding 12 and 13. Included in finding 8. Included in finding 14. Included in finding 15. Included in finding 16. Included in finding 17. Included in finding 20. Included in finding 18. Included in finding 19. Included in finding 20. Included in finding 21. Included in finding 23. Included in part in finding 21. Remainder rejected as unnecessary. Included in finding 23. Included in part in findings 23 and 24. Included in finding 24. Included in finding 24. Included in finding 25. COPIES FURNISHED: Richard A. Pettigrew, Esquire Luis R. Figueredo, Esquire 5300 Southeast Financial Center 200 South Biscayne Blvd. Miami, Florida 33131-2339 E. Gary Early, Esquire Department of Environmental Regulation 2600 Blair Stone Road Twin Towers Office Bldg. Tallahassee, Florida 32399-2400 Daniel H. Thompson, Esquire Department of Environmental Regulation Twin Towers Office Bldg. 2600 Blair Stone Road Tallahassee, Florida 32399-2400 Dale Twachtmann Secretary Department of Environmental Regulation Twin Towers Office Bldg. 2600 Blair Stone Road Tallahassee, Florida 32399-2400 =================================================================
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 Based upon all of the evidence, the following findings of fact are determined: Petitioner, Handy Food Stores, Inc. (HFS), is a small, family owned corporation that owns and operates a chain of thirty-four convenience stores in Florida, thirty two of which sell gasoline. At issue in this proceeding is Store No. 82 (Store 82 or the store) located on State Road 378 in LaBelle, Florida. The facility has also been identified by respondent, Department of Environmental Regulation (DER), as DER facility number 268520172. This controversy concerns an application by HFS for reimbursement of costs and expenses related to cleanup activities at Store 82 incurred after that store site became contaminated with petroleum and petroleum products. The application was preliminarily denied by DER on the ground HFS was "grossly negligent" in the maintenance of the petroleum storage system at Store 82. Because the average clean-up cost per site is $330,000, and HFS denied that it was grossly negligent in its operation and management of the system, HFS requested a formal hearing to contest the agency's proposed decision. The facts in this case are not complicated, and with certain exceptions, are relatively free of dispute. Until February 1988 HFS's director of operations was Ray Collier. On February 2, 1988 Collier ordered the installation of four monitoring wells at Store 82 to determine if any leaks were occurring in two underground storage tanks located on the site. Such wells were required to be installed by DER for monitoring purposes no later than December 31, 1988. The parties have stipulated that the wells were properly installed in accordance with agency rules. When the wells were installed on February 2, the contractor's report reflected no contamination was present. Collier also contracted with Purity Well Testing, Inc. (PWT) to conduct monthly monitor system checks at the store. Such checks are required by DER to determine if any discharges of product are occurring in the storage system. On February 10, 1988 Collier resigned as director of operations to accept a position in Saudi Arabia. Prior to his resignation Collier was replaced by David A. Laughner, who still remains in that position. According to Laughner, he and Collier spent only two weeks together prior to Collier's departure, and Collier did not advise him of the details concerning the monitoring program. Thus, he had no immediate knowledge of the existence of the monitoring wells or the tests being conducted by PWT. HFS's corporate offices are located in an office building at 9330 Adams Drive, Tampa, Florida. Besides three corporate officers and the director of operations, the corporation had only three office employees who worked at the corporate headquarters. The building is owned by B & B Cash Grocery Stores, Inc. (B & B), which operates a chain of grocery stores in southwest Florida. HFS's offices are on the second floor while B & B's corporate offices are located on the first floor. Although the two corporations are legally separate entities, they have certain common directors and shareholders, and the two corporations once utilized a centralized bookkeeping and billing department which was controlled and staffed by B & B. Under that arrangement, bills sent to HFS were actually processed by B & B's accounting department which paid the invoice on behalf of HFS. In addition, the two corporations once shared the same post office box. Under that arrangement, which existed in February 1988 and continued until at least August 1988, all mail sent to HFS at the post office box was initially processed by B & B's mail room rather than being sent directly upstairs to HFS. On April 24, 1988 PWT conducted its first monthly monitor well inspection at the store. That report indicated that three inches of free product was present in monitoring well three. A second monthly monitoring well inspection was conducted on May 10, 1988 reflecting the presence of two inches of free product in well number three and twelve inches in well number four. Free product was defined by a DER witness as "material (such as a petroleum product) that will be left on the water table." The presence of a free product, including a refined petroleum product, in a monitoring well is an indication that a discharge or release of the product from a storage tank has and may be continuing to occur. If free product is observed, it is the responsibility of the tank owner to determine the cause of the discharge, and if it is determined that the discharge is coming from the tank, he must empty the tank so that the system can be repaired or replaced. Also, the owner is obliged to notify DER within three working days of discovery of the discharge. The purpose behind these reporting and investigating requirements is to try to decrease the size of the petroleum plume and the area of contamination. The results of the two tests, and the invoices for the charges, were sent by PWT to HFS's post office box. Consistent with existing procedure, B & B's mail room received the reports and invoices and forwarded both to B & B's billing department for processing and payment of the invoices. Rather than forwarding the test reports upstairs to HFS, B & B filed the reports with the invoices in B & B's billing department. The parties have stipulated that no one in the billing department knew or had reason to know of the potential significance of the monitor well inspection reports. Because the bills had been paid, PWT did not contact HFS to determine whether the reports had been received. Consequently, neither Laughner nor any other HFS corporate employee had knowledge that monitor well inspections had been conducted at Store 82 or that inspection reports had been forwarded by PWT. However, it is found that copies of such reports were either forwarded to Store 82 by someone in Tampa or by PWT because they were available for inspection by DER representatives at a store inspection that took place in late June 1988. As the result of an unconfirmed telephonic report received in early February 1988 concerning possible contamination at Store 82, on June 17, 1988 a DER inspector, Jeffrey Gould, sent a letter to Laughner at HFS's corporate post office box advising that Gould would be conducting a stationary tanks compliance inspection at Store 82 during the week of June 27, 1988. The letter also requested that all records associated with the storage tank system be available at the facility for inspection. This inspection is commonly referred to as a "17-61 compliance inspection", meaning that the storage tanks would be checked to see if they met the requirements of Chapter 17-61, Florida Administrative Code (1987). Although the letter was addressed to Laughner, it was forwarded by an undisclosed person to a Store 82 employee, Betty Smith, whose title is area supervisor, and Laughner denies having seen the letter until several months later. 1/ Gould and another DER employee, Alicia Andersen, met with Betty Smith at the store on June 29, 1989. It may be inferred that Smith had copies of the PWT monitoring reports for she produced copies of the same for Gould, who then hand-copied and reviewed the two reports. Gould also made a physical inspection of the four monitoring wells on the site. He noted the presence of free product in two of the four monitoring wells. One had 7/8 of an inch of free product (gasoline) while a second well had fourteen inches of free product. Gould also detected a strong odor and observed sheen in the northeast monitoring well and a strong odor in the southeast monitoring well. These findings are memorialized in a written compliance inspection report received in evidence as respondent's exhibit 2. After the inspection was completed, Gould discussed generally the results with Smith, had her sign the report and gave her a copy. Since Smith was not present at final hearing, Gould's version of their conversation is the only competent evidence of record on the subject. According to Gould, he told Smith that he "had found product and that it is a problem." Gould acknowledged that he did not go into too much detail with Smith concerning the report since she was only an employee, but he specifically recalled advising her "there was a definite problem at this facility" and that he "spent a long time" with her. Finally, after giving Smith a copy of the report, Gould told Smith to "return it to her office." However, Smith did not do so. Gould's version of the events was not credibly contradicted and it is hereby accepted. On July 11, 1988 Gould, over the district manager's signature, sent Laughner by certified mail a "warning" letter and copy of the June 29 inspection report. The documents were sent to the post office box in Tampa. The return receipt was signed on July 15 by one Patty Jackson, whose relationship, if any, to HFS was not disclosed. The letter provided in pertinent part as follows: Free gasoline product was found in two of the compliance monitoring wells. Product thickness in one well exceeded the bailer limitation of fourteen inches. The presence of free product was also noted on monitor well records by Purity Well Testing Company for April 24, 1988 and May 10, 1988. A maximum thickness of twelve inches was measured. Such discharges are in violation of Chapter 376, Florida Statutes and Florida Administrative Code Rule 17-3. It is required that the discharges be stopped and the integrity of the storage system verified. Records available onsite indicate the 4000 gallon tank failed a tightness test with a leak rate of -0.1057 gallons per hour (gph) on September 26, 1986. The tank however passed the test on October 7, 1986 at +0.027 gph. Please describe all repairs, if any, to the storage system after the initial failure. The Department requests a meeting to discuss entry into a Consent Order to resolve the violations. Please contact Jeff Gould at 813/332-2667 or write the letterhead address within ten (10) days of receipt of this letter to schedule a meeting. Your cooperation is appreciated. (Emphasis added) As noted in the previous finding, the letter and report were received on July 15, 1988 but were not forwarded upstairs to Laughner or any other corporate employee. When Gould received no oral or written response - to his letter, Gould eventually telephoned Laughner on August 26, 1988. During the course of the telephone call, for the first time Laughner became aware of the existence of the contamination problem at Store 82 and the nature of the tests that had been performed that spring by PWT. It is also noted that during the telephone call, Laughner acknowledged that Gould's letter of July 11 had just been routed to his desk. The two agreed to meet at DER's Fort Myers district office on September 1, 1988 to discuss the violations. On August 29, 1988, or three days after Laughner spoke with Gould, HFS filed its incentive program application for Store 82. The application, which noted that the date of discovery of a petroleum discharge at Store 82 was on June 29, 1988, was received by DER on September 6, 1988. On September 1, 1988, Laughner met with DER representatives to discuss Store 82. Laughner was told that certain specific measures should be taken to insure the integrity of the storage tank system. That same day, in a letter to DER, HFS informed DER that a tank integrity test had been scheduled for Store 82 and that HFS was implementing initial remedial action (IRA) to remove any petroleum product and excessively contaminated soils and that an enviromental consultant had been contracted to conduct IRA, site contamination assessment and any necessary remedial action. Until that time, and dating back to June 29, 1988, HFS had only conducted a stick test at Store 82 to monitor the presence of petroleum product. Also, HFS personnel had not reviewed any repair records, monitoring well records, or inventory records during this same period of time. On September 7, 1988, HFS conducted a tank integrity test at Store 82. The integrity test passed under the criteria set by the National Fire Protection Association, which is the acceptable standard under Chapter 17-61, Florida Administrative Code. However, DER did not consider the testing to be a timely response since it considered no more than a week to be a reasonable period of time for testing once a discharge is discovered. On October 7, 1988, DER, through its inspector Gould, conducted an incentive program compliance inspection at Store 82. Although Gould observed two and one-eighth inches of free product in one well and a sheen in another well, the compliance inspection checklist noted that Store 82 was in compliance with Section 376.3071, Florida Statutes. Question 3 on the verification checklist asked if there was "evidence of gross negligence." Gould checked "yes" and made the following notations: See penalty worksheets (draft CO to OGC for review). Major violations failed tank test (enclosed) showed leaks Sept. 1986! - D.E.R. not notified, free product in well treated as a discharge and D.E.R. not notified of product in wells to take action. Gould responded in the above fashion because he concluded that nothing had been done for long periods of time to insure the integrity of the petroleum storage system at Store 82. It should be noted, however, that nothing in the checklist indicated that damages of any kind were caused by HFS's failure to take remedial action until September 1988, and DER representatives admitted they had no proof of such damages. On September 14, 1989, or approximately one year later, DER issued its proposed agency action denying Store 82's eligibility for reimbursement under the incentive program. As later amended on March 16, 1990, the agency's letter recited the following reason for denying the application: Monitor well reports dated April 24, 1988 and May 10, 1988 listed free product in monitoring wells. No report of discharge discovery was made to the Department by Handy Foods as required by Chapter 17-61, F.A.C. On June 29, 1988, an inspector from the Department discovered free product in Petitioner's monitoring wells. Petitioners were sent a warning letter by the Department on July 11, 1988, requesting that Petitioner stop any discharges and verify the integrity of its storage system. Petitioner conducted such tank tightness tests on September 7, 1988, or approximately five months after the monitoring well reports indicated the discovery of free product. Failure to report, investigate and abate where there is evidence of a discharge shall be construed to be gross negligence in the maintenance of a petroleum storage system. In other words, DER contended that HFS was "grossly negligent" within the meaning of the law by failing to "report, investigate and abate" the discharge until almost five months after the leaks were first detected by PWT. DER admits that it has no information to support a contention that, as to Store 82, HFS failed to maintain or falsified inventory or reconciliation records, intentionally damaged the petroleum storage system, failed to make monthly monitoring system checks, or failed to meet monitoring and retrofitting requirements in accordance with chapter 17-61 procedures. Although the incentive and reimbursement programs under section 376.3071 were enacted by the legislature in 1986, the agency has not promulgated formal rules that define or identify "gross negligence" or the criteria for determining eligibility under the incentive reimbursement program. Through the introduction of various agency records received in evidence as petitioner's composite exhibit 6, HFS sought to establish the fact that DER, in at least four prior cases, reached a result inconsistent with that reached in its proposed agency action regarding HFS. However, DER has processed thousands of applications of this nature, and the presence of four contrary results does not establish any binding precedent. Moreover, DER's administrator acknowledged that the agency had either erred in the cited cases or the facts were distinguishable from those presented herein. The parties disagree on the meaning of the words "gross negigence" as it is used in Subsection 376.3071(12(b), Florida Statutes (1987). Both parties presented expert testimony concerning what they perceived to be a proper interpretation of the statute. According to HFS's expert, Howard Ledbetter, he construed the term to mean a willful and reckless disregard for agency regulations that were known and understood by the alleged offender. Ledbetter established that in the spring of 1988 there was no firm understanding by the industry of what was required by DER's underground storage tank rules. Finally, he recalled receiving several different interpretations of the rules from DER personnel. In contrast, a DER expert, John Svek, opined that gross negligence occurs whenever an owner/operator commits a major violation of chapter 17-61. However, Svek conceded that chapter 17-61 does not distinguish or define major or minor violations, and nothing in chapter 17-61 equates a failure to immediately investigate a discharge to gross negligence. Further, he admitted that a lack of knowledge of a discharge is a factor to consider in determining whether gross negligence is present. A second DER expert, Patricia Dugan, acknowledged that not only is there no written document setting forth guidelines for determining when gross negligence occurs but that the term "gross negligence" does not appear in chapter 17-61. However, Dugan maintained that if notices are received by a corporation but are misfiled, as was alleged to have been done here, that conduct equates to gross negligence on the part of HFS.
Recommendation Based on the foregoing findings of fact and conclusions of law, it is RECOMMENDED that the application of Handy Food Stores, Inc. for participation in the petroleum contamination clean-up program be approved. DONE and ORDERED this 23rd day of May, 1990, in Tallahassee, Leon County, Florida. DON ALEXANDER Hearing Officer Division of Administrative Hearings The DeSoto Building 1230 Apalachee Parkway Tallahassee, FL 32399-1550 (904) 488-9675 Filed with the Clerk of the Division of Administrative Hearings this 23rd day of May, 1990.
The Issue Are test results skewed by the use of sample bottles containing residue from earlier samples?
Findings Of Fact The Department of Agriculture and Consumer Services took unleaded gasoline samples from the Union Service Station No. 166191 located on US Highway 29 North in Century, Florida. The petroleum products provided this station were supplied by Northrop Oil Company, Inc., whose president is James W. Ash. The Department analyzed the samples taken in its mobile laboratory. The unleaded gasoline samples were found to have an elevated End Point, i.e. the maximum boiling point allowed by the rules of the Department for unleaded gasoline, which is 437 degrees Fahrenheit. Sample No. 1 had an End Point of 482 degrees Fahrenheit, and Sample No. 2 had an End Point of 464 degrees Fahrenheit. 4 The elevated End Point means that the samples contained contaminants in excess of the amounts permitted by the Department's rules. A Stop Sale Notice was issued by the Department. A bond of $1,000 was paid by Petitioner in lieu of confiscation of the remaining unleaded gasoline and as a precedent for the formal hearing. Petitioner requested and received a formal hearing. It was agreed that the contaminant did not contain lead and was most probably diesel fuel or kerosene. Mr. Ash testified concerning deliveries to the station in question and other deliveries made by the same truck. On the Monday the samples were taken, the gasoline transport delivered unleaded gasoline to Davis' Grocery, the Union Service Station, and Ross', in that order. The Department also tested the unleaded gasoline at Davis' and Ross' but found no contaminants in their unleaded gasoline tanks. On the preceding Friday, the truck delivered unleaded gasoline to the Union Service Station and two Alabama stations. The Alabama authorities checked the unleaded gasoline at those stations and found no contaminants; however, Mr. Ash did not know how much additional gasoline had been delivered to those stations before their testing. The Union Service Station in question keeps its unleaded gasoline tanks locked, and its diesel fuel tank is located on the opposite side of the station. Petitioner uses separate trucks to deliver diesel fuel and gasoline and does not mix loads. It would have been highly unlikely that the diesel truck driver and the station's operators would have permitted the introduction of diesel fuel into the unleaded gasoline storage tanks. The percentage of contaminant necessary to raise the End Point the amount it was raised in this instance would have been three to five percent of the total volume. The sample bottles used by the Department are approximately the size of a quart milk bottle. The inspector separates the bottles he uses to take diesel fuel samples from those he uses to take gasoline samples. He stores the bottles upside dawn. This was the procedure he followed in taking the samples involved in this case. Tests conducted by the Department to determine the effects of residue in sample bottles indicated that the residue from earlier samples is an insignificant factor in elevating the End Point test results. An inverted sample bottle could not retain the three-to-five percent of the bottle's total volume necessary to raise the test, results of the samples in question approximately 40 degrees Fahrenheit. The contaminant was not introduced into the samples from the bottles used to take the samples. The Department calculated that 570 gallons of contaminated unleaded gasoline were sold at $1.40 per gallon.
Recommendation Based on the foregoing Findings of Fact and Conclusions of Law the Hearing Officer recommends release of the contaminated fuel in question and return of the $1,000 bond by the Department of Agriculture and Consumer Services upon payment by Petitioner to the Department of $722.84. DONE and ORDERED this 30th day of July, 1981, in Tallahassee, Leon County, Florida. STEPHEN F. DEAN Hearing Officer Division of Administrative Hearings The Oakland Building 2009 Apalachee Parkway Tallahassee, Florida 32399-1550 (904) 488-9675 Filed with the Clerk of the Division of Administrative Hearings this 30th day of July, 1981. COPIES FURNISHED: Mr. James W. Ash, President Northrop Oil Company, Inc. c/o Union Service Station US Highway 29 North Century, Florida 32535 Leslie McLeod, Jr., Esquire Department of Agriculture and Consumer Services Mayo Building, Room 513 Tallahassee, Florida 32301 Doyle Conner, Commissioner Department of Agriculture and consumer Services Mayo Building Tallahassee, Florida 32301
The Issue Whether or not the agency may, pursuant to Section 525.06 F.S., assess $390.04 for sale of substandard product due to a violation of the petroleum inspection laws and also set off that amount against Petitioner's bond.
Findings Of Fact Coleman Oil Co., Inc. d/b/a Shell Oil Co. at I-75 and SR 26 Gainesville, Florida, is in the business of selling kerosene, among other petroleum products. On November 15, 1990, Randy Herring, an inspector employed with the Department of Agriculture and Consumer Services and who works under the direction of John Whitton, Chief of its Bureau of Petroleum, visited the seller to conduct an inspection of the petroleum products being offered for sale to the public. Mr. Herring drew a sample of "1-K" kerosene being offered for sale, sealed it, and forwarded it to the agency laboratory in Tallahassee where Nancy Fisher, an agency chemist, tested it to determine whether it met agency standards. The testing revealed that the sampled kerosene contained .22% by weight of sulfur. This is in excess of the percentage by weight permitted by Rule 5F- 2.001(2) F.A.C. for this product. A "Stop Sale Notice" was issued, and on the date of that notice (November 20, 1990) the inspector's comparison of the seller's delivery sheets and the kerosene physically remaining in his tanks resulted in the determination that 196 gallons of kerosene had been sold to the public. Based on a posted price of $1.99 per gallon, the retail value of the product sold was determined, and the agency accordingly assessed a $390.04 penalty. The agency also permitted the seller to post a bond for the $390.04 on November 21, 1990. The assessment is reasonable and conforms to the amount of assessments imposed in similar cases.
Recommendation Upon the foregoing Findings of Fact and Conclusions of Law, it is RECOMMENDED that the Department of Agriculture and Consumer Services enter a final order approving the $390.04 assessment and offsetting the bond against it. DONE and ENTERED this 25th day of April, 1991, at Tallahassee, Florida. ELLA JANE P. DAVIS, 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 25th day of April, 1991. COPIES FURNISHED TO: CLINTON H. COULTER, JR., ESQUIRE DEPARTMENT OF AGRICULTURE AND CONSUMER SERVICES 510 MAYO BUILDING TALLAHASSEE, FL 32399-0800 MR. RANDAL W. COLEMAN COLEMAN OIL COMPANY POST OFFICE BOX 248 GAINESVILLE, FL 32602 HONORABLE BOB CRAWFORD COMMISSIONER OF AGRICULTURE THE CAPITOL, PL-10 TALLAHASSEE, FL 32399-0810 RICHARD TRITSCHLER, GENERAL COUNSEL DEPARTMENT OF AGRICULTURE AND CONSUMER SERVICES 515 MAYO BUILDING TALLAHASSEE, FL 32399-0800
The Issue As stated by the Administrative Law Judge in his Recommended Order, the issue presented is: "whether the Petitioner waived its right to a hearing by failing to request a hearing within the period of time described in the Notice to Show Cause."
Findings Of Fact After review of the record in its entirety, it is determined that the Administrative Law Judge's Findings of Fact found in paragraphs 1 through 9 of the Recommended Order are supported by the record and are accepted and incorporated as if fully set forth herein.
Conclusions This proceeding was initiated by a request for a formal administrative hearing filed by Petitioner, SHELL OIL COMPANY (hereinafter SHELL), challenging the Violation and Notice to Show Cause issued by the Respondent, DEPARTMENT OF TRANSPORTATION (hereinafter DEPARTMENT), regarding SHELL'S driveway connection to State Road 7 in Dade County, Florida. This matter was referred to the Division of Administrative Hearings (DOAH) for a formal hearing on October 21, 1997. On October 27, 1997, DOAH issued its Initial Order assigning the case to Michael M. Parrish, a duly appointed Administrative Law Judge, and setting forth the responsibilities of the parties. The hearing was scheduled for January 29, 1998, in Miami, Florida. An Order Granting a Motion for Continuance was issued on December 19, 1997, rescheduling the hearing for March 19, 1998. On March 5, 1998, the hearing was again continued. The hearing was held on May 14, 1998, by telephone. Appearances on behalf of the parties were as follows: For Petitioner: John Lukacs, Esquire Lukacs & Lukacs, P.A. 1825 Coral Way, Suite 102 Miami, Florida 33145 For Respondent: Paul Sexton, Esquire Chief Administrative Law Counsel Brian F. McGrail, Esquire Assistant General Counsel Department of Transportation 605 Suwannee Street, Mail Station 58 Tallahassee, Florida 32399-0458 Stipulated Facts were filed prior to hearing with three exhibits attached. The deposition of Ingrid Birenbaum, the DEPARTMENT'S District Six Permits Engineer at the time the Notice to Show Cause was issued, was filed with DOAH together with exhibits introduced at the deposition. A transcript was prepared and filed subsequent to the hearing. By agreement of the parties, no witnesses were presented and the Stipulated Facts with the three exhibits attached and the deposition of Ingrid Birenbaum constituted the record in this case for the purpose of disposing of the limited issue of timeliness. On June 22, 1998, the DEPARTMENT filed its Proposed Recommended Order and SHELL filed its Findings of Fact, Conclusions of Law and Recommended Order. On July 21, 1998, the Administrative Law Judge issued his Recommended Order. Exceptions to the Recommended Order were filed by SHELL on August 5, 1998, and the DEPARTMENT filed its response to the exceptions on August 17, 1998. Thereafter, SHELL filed a reply to the DEPARTMENT'S response to the exceptions, the DEPARTMENT filed a motion to strike the reply as unauthorized, and SHELL filed a response to the motion to strike.
Appeal For This Case THIS ORDER CONSTITUTES FINAL AGENCY ACTION AND MAY BE APPEALED BY ANY PARTY PURSUANT TO SECTION 120.68, FLORIDA STATUTES, AND RULES 9.110 AND 9.190, FLORIDA RULES OF APPELLATE PROCEDURE, BY FILING A NOTICE OF APPEAL CONFORMING TO THE REQUIREMENTS OF RULE 9.110(d), FLORIDA RULED OF APPELLATE PROCEDURE, BOTH WITH THE APPROPRIATE DISTRICT COURT OF APPEAL, ACCOMPANIED BY THE APPROPRIATE FILING FEE, AND WITH THE DEPARTMENT'S CLERK OF AGENCY PROCEEDINGS, HAYDON BURNS BUILDING, 605 SUWANNEE STREET, M.S. 58, TALLAHASSEE, FLORIDA 32399- 0458, WITHIN THIRTY (30) DAYS OF RENDITION OF THIS ORDER.
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.
Findings Of Fact Based upon the prehearing statement, the testimony of the witnesses, and the documentary evidence received at the hearing, the following findings of fact are made: The Petitioner is a Florida corporation in good standing, authorized to do business in this state. The Petitioner owns and controls the site which is the subject matter of these proceedings. Such site is located in Brevard County, Florida. The Department has identified the subject site as DER facility no. 05- 8500985 (the facility). At all times material to this case, the facility consisted of: three underground storage tanks (UST), one 3000 gallon UST used for storing diesel fuel, one 1000 gallon UST used for storing diesel fuel, and one 1000 gallon UST used for storing gasoline; five monitoring wells; and pipes and pumps related to the foregoing system. The facility constituted a storage tank system as defined in Section 376.301, Florida Statutes, and Rule 17-761.200(38), Florida Administrative Code. The Petitioner holds, and is named insured for, third party pollution liability insurance applicable to the facility. Such insurance was issued pursuant to Section 376.3072, Florida Statutes. The policy for the foregoing insurance, policy no. FPL7622040, was in force from March 22, 1991 through March 22, 1992. The Department issued a notice of eligibility for restoration insurance to Petitioner for the above-described facility. Based upon the foregoing, the Petitioner is a participating owner or operator as defined in Chapter 17-769, Florida Administrative Code. Pursuant to Section 376.3073, Florida Statutes, Brevard County operates a local program that has been approved by the Department. Such local program is managed by the Brevard County Office of Natural Resources Management (County). In July, 1990, a discharge of diesel fuel occurred at the Petitioner's facility. Petitioner's employees estimated that approximately twenty gallons of diesel fuel filled the pump box overflowed from the pump box across the seawall into the adjacent waters. Upon discovering the discharge, Petitioner shut down diesel fuel dispensing until repairs could be made to the apparent cause of the leak. Additionally, the diesel fuel remaining in the pump box and on top of the tank area was removed. Contaminated soil in the pump box was also removed. The apparent cause of the discharge described above was attributed to cracked pipe fittings which were repaired by Glover Oil Co. within a few days of the discharge. No detailed inspection was made to the system to determine if additional sources of discharge existed. Petitioner did not complete a discharge reporting form (DRF) for the above-described incident until April 18, 1991. The April DRF was completed after Petitioner was directed to do so by Ms. DiStasio, an inspector employed by the County. From August, 1990 until May, 1991, at least one monitoring well at the Petitioner's facility showed free product accumulating in the well pipe. The exact amounts of the free product found are unknown, but reports estimated the level at 100 centimeters. From August, 1990 until September, 1991, the Petitioner did not undertake any measure to explore the origin of the free product found in the monitoring well. Further, the Petitioner did not report the monitoring well testing results as a suspected or confirmed discharge. In April, 1991, an inspection of the Petitioner's facility was performed by Ms. DiStasio. That inspection resulted in a letter to the Petitioner that outlined several violations at the facility. Among those violations listed was the Petitioner's failure to report a suspected or confirmed discharge. At the time of the April, 1991 inspection, Petitioner had reported neither the July, 1990 discharge (a known discharge) nor the monitoring well test results (at the minimum a suspected discharge). In connection with the July, 1990 discharge, following the repairs made by Glover Oil, Petitioner did not have the system pressure tested. Only the area visible from the pump box was checked for leakage. In July, 1991, when Ms. DiStasio performed a re-inspection of the facility, she found Petitioner had not (in the interim period, April through July, 1991) taken any steps to test the system or to remove the fuels from the suspect tanks. Since the free product continued to appear in the monitoring well, a pressure test of the system would have definitively answered the discharge question. Alternatively, the removal of the fuels would have prevented further seepage until the system could be pressure tested. On August 6, 1991, the Petitioner issued a letter that advised the County that it had stopped dispensing fuel at the facility. The tanks were not drained, however, until on or about September 11, 1991. Further, the August, 1991, letter acknowledged that the Petitioner "had proposals for initial remedial cleanup related to diesel contamination in the tank field area." Obviously, the Petitioner must have contemplated a need for such cleanup. On September 11, 1991, at the Petitioner's request, Petroleum Equipment Contractors, Inc. attempted to pressure test the 3000 gallon diesel tank. The purpose of the pressure test was to determine if the diesel system had a leak. The company could not even run the test on the tank because of the defective system. A similar test on the Petitioner's gasoline tank passed without incident. Once the Petitioner learned the results of the test, it initiated Initial Remedial Action (IRA) as described on the IRA report filed by Universal Engineering Sciences. The IRA consisted of the removal of the excessively contaminated soil, approximately 74 cubic yards, and the removal of the USTs. The foregoing work was completed on or about September 15, 1991. On October 4, 1991, the Petitioner filed a discharge reporting form dated October 2, 1991, that identified September 11, 1991, as the date of discovery for the discharge. This discharge discovery was allegedly made incidental to the diesel tank pressure testing failure. No reference was made to the months of monitoring well reports showing a free product. On October 8, 1991, Ms. DiStasio prepared a Florida Petroleum Liability Insurance and Restoration Program Compliance Checklist that reported the Petitioner was not in compliance with applicable statutes and rules. When Petitioner applied for restoration coverage under the statute on January 31, 1992, such request was denied by the Department on March 6, 1992. The basis for the denial was as follows: Failure to notify the Department of a positive response to sampling within three working days of testing, pursuant to the rule in effect at the time of the initial response (17-61.050(1), Florida Administrative Code). An inspection by Brevard County on April 17, 1991, revealed that free product had been detected in one monitoring well since July 1990. The discharge reporting form was not submitted until October 2, 1991.
Recommendation Based on the foregoing, it is RECOMMENDED: That the Department of Environmental Regulation enter a final order denying Petitioner's claim for restoration coverage under the Florida Petroleum Liability Insurance and Restoration Program. DONE and ENTERED this 31st day of December, 1992, in Tallahassee, Leon County, Florida. JOYOUS D. PARRISH 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 31st day of December, 1992. APPENDIX TO CASE NO. 92-2121 RULINGS ON THE PROPOSED FINDINGS OF FACT SUBMITTED BY THE PETITIONER: Paragraphs 1, 2, 8, 12, 15, 16, 17, and 18 are accepted. Except as found above, paragraph 3 is rejected as not supported by the record cited. It is accepted that Brevard County acted as the local agent in this case. Paragraph 4 is rejected as not supported by the record. With regard to paragraph 5, substituting "A" for "The" and "confirmed" for "discovered" the paragraph can be accepted; otherwise rejected as contrary to the record. Similarly, with the substitution of the word "confirmation" for "discovery" in Paragraph 6, the paragraph can be accepted; otherwise rejected as contrary to the record. No suitable explanation was offered by the Petitioner for why, if a discharge were not reasonably suspected, it retained the company to immediately remove the USTs upon the failed pressure testing. Clearly, the Club had a notion the tanks were a discharge problem. Paragraph 7 is rejected as contrary to the weight of the evidence. While there was some confusion as to the exact volume of free product in the monitoring well, there was clear evidence that such was reported for many months prior to the confirmation in September, 1991. Further, the main confusion regarding the product found in the well was not as to its existence, but as to the individual's knowledge of the metric measurement of it. One hundred centimeters of product in a two or three inch pipe would not be a minute amount. Except as addressed in the foregoing findings, paragraph 9 is rejected as contrary to the weight of the evidence. Petitioner did not undertake all repairs necessary to abate a discharge problem. Paragraph 10 is rejected as not supported by the weight of credible evidence or irrelevant. Clearly, as early as August, 1990, Petitioner knew or should have known of a discharge problem based upon the monitoring well report; that all of the discharge did not necessarily flow from the fittings that had been repaired is irrelevant. Further, Petitioner did no testing to verify that the replaced fittings had solved the discharge problem (especially in light of the well reports). Paragraph 11 is rejected as an inaccurate restatement of the exhibit. Paragraph 13 is rejected as contrary to the weight of the evidence. Incidentally, the hearing in this case was in the year 1992. Paragraph 14 is rejected as contrary to the weight of credible evidence. RULINGS ON THE PROPOSED FINDINGS OF FACT SUBMITTED BY THE RESPONDENT: Paragraphs 1 through 11 are accepted. Paragraph 12 is rejected as a misstatement of the exhibit cited. Paragraphs 13 through 27 are accepted. COPIES FURNISHED: Brigette A. Ffolkes Assistant General Counsel Department of Environmental Regulation Twin Towers Office Building 2600 Blair Stone Road Tallahassee, Florida 32399-2400 Scott E. Wilt MAGUIRE, VOORHIS & WELLS, P.A. 2 South Orange Plaza P.O. Box 633 Orlando, Florida 32802 Carol Browner, Secretary Department of Environmental Regulation Twin Towers Office Building 2600 Blair Stone Road Tallahassee, Florida 32399-2400 Daniel H. Thompson, General Counsel Department of Environmental Regulation Twin Towers Office Building 2600 Blair Stone Road Tallahassee, Florida 32399-2400
The Issue The issue for determination is whether Rule 17 Administrative Code (1991), constitutes an invalid exercise of delegated legislative authority.
Findings Of Fact The parties stipulated to findings of fact set forth in paragraphs 1.-8., below. Stipulated Facts Respondent has documented contamination from the abandoned petroleum storage system. The abandoned petroleum storage system has been properly closed. Petitioner submitted an application to Respondent on Respondent's forms 17-769.900(3) and (4), Florida Administrative Code, which was postmarked on or before June 30, 1992. The site is not eligible for cleanup pursuant to Section 376.3071(9) and (12), Florida Statutes, the Early Detection Incentive Program, or the Florida Petroleum Liability and Restoration Insurance Program pursuant to Section 376.3072, Florida Statutes. This site is not owned or operated by the federal government. This site did not have leaking tanks that stored pollutants that are not petroleum products as defined in Section 376.301, Florida Statutes. Respondent was not denied access to this site. Petroleum contamination was not discovered after the application deadline of June 30, 1992. Additional Facts Petitioner, a Florida corporation, is in the business of owning and leasing property. Petitioner is the fee simple owner of property located at 2022 Wahnish Way in Tallahassee, Florida. The property located on Wahnish Way was leased to James T. "Pete" Thomas by Petitioner's predecessor in title. Thomas operated a gasoline station and automobile repair garage on the property. The lease with Thomas was continued by Petitioner without change upon Petitioner's assumption of the legal title to the property in 1985. Prior to Petitioner's assumption of title to the property in the early 1970's, Thomas had installed four petroleum storage systems in a four tank pit on the property. Thomas later registered all four of the tanks with Respondent by the statutory deadline of December 31, 1984, as required by Florida law. Although Thomas signed the registration documents as an agent of Petitioner, he was not such an authorized agent and the registration occurred without the knowledge or approval of Petitioner. Sometime in the early 1980's, Thomas and his wholesale gasoline distributor determined that one of the four underground tanks was losing product. In 1982, Thomas ceased using the southernmost tank in the pit for the storage of petroleum products for subsequent consumption, use or sale. The distributor ceased placing gasoline in the southernmost tank. Petitioner, unaware that Thomas had experienced any product loss problems or that the tanks on the property had been registered by Thomas with Respondent, became aware of both matters following receipt of a letter from government officials of Leon County, Florida, on November 20, 1990. As set forth in that letter, Petitioner was apprised that the tanks were not in compliance with State of Florida standards and would have to be closed or retrofitted to bring the tanks into compliance. Following receipt of the letter, Petitioner informed Thomas that selling of gasoline at the site was to be discontinued immediately. Closure of the tanks, performed in early 1991, by contractors retained by Petitioner, consisted of excavation and removal of the petroleum storage systems from the property. All four tanks were in the tank pit side by side, from the northernmost end of the pit to the southern end of the pit fronting on Osceola Street in Tallahassee, Florida. When the removal was completed, a Closure Assessment form was prepared by one of the contractors, Jim Stidham and Associates, in accordance with requirements of Florida law. During that process, excessive contamination from petroleum product of the soils in the extreme south end of the tank pit was discovered. Excessive contamination, defined as anything more than 500 parts per million, was located beneath the southernmost pump on the southern end of the pump island and in the southern end of the pit. A 20 foot soil boring as near as possible to the site of the southernmost tank revealed that unacceptable levels of contamination extended to that depth. As supported by the testimony of James A. Stidham, Petitioner's expert in the assessment of contamination caused by underground petroleum storage tanks, the location of contamination in the pit area establishes that the tank causing the contamination was the southernmost tank. The hole discovered in one of the tanks at the time of removal was likely located in the southernmost tank. The excessive contamination located at the shallow depth of two feet under the southernmost pump resulted from the improper disconnection of piping attached to the pump and is not attributable to the leak in the tank. Each tank was connected by piping on the eastern end of each tank to the corresponding pump. The southernmost pump was not used after 1982 and was missing integral parts by the time the tanks were closed. In the course of exploring options for clean up of the property, Petitioner filed for assistance from Respondent in the form of participation in the ATRP. Unaware of the true date of the cessation of use of the southernmost tank, Petitioner gave the date of last use for all tanks in the pit by stating that the "tanks were taken out of service between December 15, 1990 and January 15, 1991." Petitioner provided this response to Respondent's July 30, 1991 request for further information on August 6, 1991. Although Respondent made an initial determination to deny Petitioner's application in the middle of August, 1991, that action was not communicated to Petitioner. Instead, Petitioner's application was held by Respondent, pending possible amendment to Section 376.305(7), Florida Statutes (1991). Respondent held Petitioner's application for a total of almost nineteen months before issuance of a formal decision to deny the application on February 26, 1993. Respondent's denial of Petitioner's application was based upon the eligibility requirement restricting ATRP participants to those situations where the petroleum storage system has not stored petroleum products for consumption, use or sale after March 1, 1990, and the belief of Respondent's personnel that all storage systems on Petitioner's property had stored products beyond that date. Specifically, Respondent eventually gave notice that it intended to deny Petitioner's application for participation in the ATRP for the following reason: Eligibility in the Abandoned Tank Restoration Program is restricted to those petroleum storage systems that have not stored petroleum products for consumption, use or sale after March 1, 1990, pursuant to Section 17-769.800(3)(a), Florida Administrative Code.
The Issue The issues to be resolved in this proceeding concern whether the Petitioner should be assessed special fuel taxes together with interest thereon and a penalty relating to an audit period of from August 1, 1977 through July 31, 1980. In order to resolve that ultimate question, it must be decided whether proper notice of the transfer of the business of Mattick Oil Company to the Petitioner, pursuant to Section 206.18, Florida Statutes was given the department, such that the transferee, the Petitioner, would not be liable for the taxes, interest and penalty incurred by the transferor Mattick Oil Company. Regardless of the question of the timeliness of the notice to the Department of the transfer of the business, it must be decided whether Reid B. Hughes is indeed a "transferee" as contemplated by Section 206.18, Florida Statutes, and is therefore liable for the tax, interest and penalty, if timely notice of the transfer was not given the department.
Findings Of Fact Mattick Oil Company, Inc. is a wholesaler and retailer of fuel oil, motor oil, gasoline and other petroleum products and auto accessories. On May 8, 1980, Mattick Oil Company, Inc. entered into a contract called an "Agreement for Sales and Purchase of Business" with Hughes Oil Company, also a Florida corporation. By this agreement, Reid B. Hughes, doing business as Hughes Oil Company was to purchase certain assets of Mattick Oil Company. It was stipulated by the parties that for the period of August 1, 1977 through July 31, 1980, Mattick Oil Company, Inc. failed to pay certain special fuel taxes in the amount of $5,411.04 of actual tax, $4,428.70 of interest through August 12, 1985 with interest accruing from that day forward at a rate of $1.78 per day. It was also stipulated that the relevant penalty, if applicable, would be $541.10. The purchase price pursuant to the agreement, was $225,900, with the buyer to pay the seller's actual delivered cost of inventory. The agreement provided that Hughes would purchase assets consisting of real estate and a bulk storage facility on South Seagrave Street in South Daytona, Florida; certain real estate and a service station located in New Smyrna Beach, as well as miscellaneous pumps, tanks, and other equipment, consumer and customer accounts and customer lists. The agreement to purchase also included certain contractual distributorship rights with Gulf Oil Company and Phillips Petroleum Company, prepaid expenses, vehicles and leasehold improvements, any covenants against competition which the seller held as transferrable rights, all jobberships, supply sale and purchase agreements owned by the seller, as well as city and county licenses, furniture, fixtures, signs, hoses, meters, registers and other personal property. The agreement also provided that the buyer, Hughes, would assume the seller's commitment for the 1980 yellow page advertising already purchased and the seller agreed not to engage in any business activity which involves the wholesale distribution of petroleum products and other auto accessories in Volusia County for a period of five years from the date of closing of the sale. This transfer of assets took effect on June 1 or June 2, 1980. Thereafter, on June 9, 1980, a notice was sent from Gene L. Mattick of Mattick Oil Company to the Department notifying it that he had sold his business to Hughes, giving the address and informing the Department that Hughes would be doing business as "Mattick Oil". Mr. Mattick indicated in the notice that this was his "final return". He also requested that a sales tax certificate be cancelled. In fact, Mr. Mattick had not sold his entire business to Mr. Hughes and Hughes Oil Company. Mattick Oil Company, Inc. continued to do business in other parts of Florida, especially the Tampa Bay area. It only sold to Hughes its distributorship contracts with Phillips Petroleum Company and Gulf Oil Company and the other assets described above. Hughes did not buy Mattick's distributorship contracts with Eastern Oil Company, Ashland Oil Company, or Colonial Oil Company. Hughes only purchased the Volusia County assets from Mattick Oil Company, Inc., in which location Mattick had been Hughes' competitor. In fact, Mr. Hughes was primarily interested in purchasing the service station in New Smyrna Beach in Volusia County. Mattick Oil Company, Inc. continued to engage in the petroleum business in its own right and, with the transfer of the Volusia County assets at issue, it did not cease to do business in Florida. It is true that the Department received a surety bond (Bond NO. 112789) bearing the name "Reid B. Hughes, d/b/a Mattick Oil of Daytona Beach, Florida, as principal, d/b/a Mattick Oil". Mr. Hughes testified that he had not executed the signature shown on that bond, purporting to be his signature. That possibly was done by a former controller of the company, who was terminated. In any event, it was offered to show that Reid B. Hughes was using the Mattick Oil Company name or variation thereof and was operating and using the assets purchased from Mattick Oil Company, Inc. and had essentially supplanted that entity entirely. The mere fact of the filing of the surety bond, aside, from the question of who actually executed the bond, does not establish, even with the use of the Mattick name, that Mattick Oil Company, Inc. had ceased doing business in Florida, and had transferred its entire assets and business operations to Hughes. In fact, Mattick Oil Company, Inc. continued thereafter to do business in Florida and did not transfer all its assets to Hughes, as found above. The same consideration is true concerning the document entitled "Gasoline Distributor-Confidential Questionnaire and Required Sales Information" which was provided to the Department on July 8, 1980 with a notarized signature of Reid B. Hughes depicted thereon. This document indicated that the business would operate as Mattick Oil Company, but the operations under the Mattick name were for the Volusia County area only and this, again, does not establish that Mattick Oil Company had ceased engaging in the petroleum business in Florida and transferred all assets and operations to Reid B. Hughes, the Petitioner. A new special fuel license, license No. 9454 was issued on June 18, 1980 to Reid B. Hughes, d/b/a Mattick Oil, with an alternate principal place of business listed thereon as South Daytona Florida, County of Volusia. The record does not establish that any special fuels license held by Mattick Oil Company, Inc. was correspondingly cancelled, however. Only the specific sales tax certificate number 74252470445 was returned for cancellation with the notice mentioned above, filed by Gene A. Mattick as president of Mattick Oil Company, Inc. on June 9, 1980. In summary, none of the above-mentioned facts establish that Mattick Oil Company, Inc. ceased doing business elsewhere in the state of Florida. In fact, the Petitioner established that Mattick Oil Company, Inc. is still doing business in the state, specifically the Tampa Bay area. The Petitioner never negotiated the purchase or purchased any of the business rights or assets owned and operated by Mattick in the Tampa Bay area. In any event, an audit was conducted by the Department for the period August 1, 1977 through July 31, 1980. A "Notice of Decision" was ultimately issued by the Department on September 30, 1985 and a petition for reconsideration of that decision, which had assessed the above-mentioned tax and interest, was filed on October 30, 1985. Finally, pursuant to a "Notice of Reconsideration" dated May 19, 1988, the Department sought to assess Reid B. Hughes, d/b/a Mattick Oil Company for the above-discussed unpaid taxes and interest due originally from Mattick Oil Company, Inc., and representing a period of time and audit period occurring before the transfer to Reid B. Hughes of the above-mentioned assets. The tax period involved thus ended July 31, 1980. It was at this point that the Petitioner then sought a formal proceeding pursuant to Section 120.57, Florida Statutes.
Recommendation Having considered the foregoing Findings of Fact and Conclusions of Law, the evidence of record and the candor and demeanor of the witnesses, it is therefore, RECOMMENDED that a Final Order be entered finding that the Petitioner, Reid B. Hughes, is not liable to pay the tax, accrued interest and related penalty, referenced above and that his petition to be relieved of this assessment be GRANTED. Case No. 88-3562 DONE AND ENTERED this 5th day of September, 1989, in Tallahassee, Leon County, Florida. P. MICHAEL RUFF 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 5th day of September, 1989. APPENDIX PETITIONER'S PROPOSED FINDINGS OF FACT: 1-5. Accepted. Rejected as not materially dispositive and subordinate to the Hearing Officer's findings of fact on the subject matter. Rejected as constituting a recitation of the statute instead of a finding of fact. Accepted. Accepted. Accepted. Accepted. 12-14. Rejected as subordinate to the Hearing Officer's findings of fact on this subject matter. RESPONDENT'S PROPOSED FINDINGS OF FACT: 1-3. Accepted. 4-7. Accepted. 8. Accepted. 9-10. Rejected as subordinate to the Hearing Officer's findings of fact on the subject matter. 11. Accepted, but not itself dispositive of material issues. 12. Accepted. Accepted. Accepted, but not dispositive. Accepted, but not dispositive. Accepted, although not at issue. COPIES FURNISHED: Steven T. Vasilaros, Esq. Post Office Drawer 2140 Daytona Beach, FL 32015 Ralph R. Jaeger, Esq. Department of Legal Affairs The Capitol - Tax Section Tallahassee, FL 32399-1050 William D. Moore, General Counsel Department of Revenue 203 Carlton Building Tallahassee, FL 32399-0100 Katie D. Tucker, Executive Director Department of Revenue 104 Car1ton Building Tallahassee, FL 32399-0100 =================================================================
