Findings Of Fact Reimbursement Program The Florida Legislature created the Petroleum Contamination Site Cleanup Program to encourage responsible persons with adequate financial ability to conduct site rehabilitation and seek reimbursement in lieu of the state conducting cleanup. Section 376.3071(12), Florida Statutes (1993). Site owners and operators or their designees become entitled to reimbursement from the Inland Protection Trust Fund (IPTF) of their allowable costs at reasonable rates after completing a program task. Section 376.3071(12)(b), Florida Statutes. The costs of site rehabilitation must be actual and reasonable. Section 376.3071(12)(d), Florida Statutes. "Allowable" costs are those which are associated with work that is appropriate for cleanup tasks, i.e. whether the cost represents work that is technically necessary for the program task and otherwise not in violation of reimbursement limitations prescribed by statute or rule. In order for costs to be reimbursable, an applicant must convert charges in an application into applicable units and rates. Rule 17-773.100(5), Florida Administrative Code. DEP has a predominate rate schedule to determine whether a specific allowable cost is reasonable. DEP bases its predominate rates on a study of average rates that contractors charge for a particular task. In addition, DEP reviews each application to determine whether the overall cost and the methods used to perform the work are reasonable. DEP must also evaluate each application to determine whether a charge is an actual cost of a project. Contractors or subcontractors do not actually incur a fully reimbursable cost when they promise the site owner or its designee that they will perform work for an amount less than other professionals would charge, then allow the site owner or its designee to file a claim for reimbursement at or near the predominate rate. Such an agreement creates a back flow of funds to the site owner or its designee. This is true even though the charges are within the range of DEP's predominate rates. DEP never intended the rate schedule to create an entitlement to reimbursement regardless of the cost that contractors and subcontractors actually incur. Requests for reimbursement must apply to costs which are "integral" to site rehabilitation. Rule 17-773.100(2), Florida Administrative Code. "Integral" costs are those which are essential to completion of site rehabilitation. Rule 17-773.200(2)(11), Florida Administrative Code. After integral costs have been identified and incorporated on a units and rates basis in an invoice, the invoice may be marked up at two levels. These markups are subject to certain limitations: There can be no more than two levels of markups or handling fees applied to contractor, subcontractor or vendor invoices (Rule 17-773.350(9), F.A.C.); There can be no markups or handling fees in excess of 15 percent for each level of allowable markup applied to contractor, subcontractor or vendor invoices (Rule 17-773.350(10), F.A.C.); and There can be no markups or handling fees applied to invoices between any two entities which have a financial, familial, or beneficial relationship with each other (Rule 17-773.350(11), F.A.C.). In order to be reimbursable, costs must have been actually "incurred." Rule 17-773.700, Florida Administrative Code. "Incurred" means that allowable costs have been paid. Rule 17-773.200(9), Florida Administrative Code. A contractor must pay all invoices generated by a subcontractor at 100 percent of their face value prior to submission of an application in order to qualify those invoices for reimbursement. When a contractor pays a subcontractor's invoices, the contractor paying those invoices may apply the first-tier markup. Prior to submitting a reimbursement application, a funder or "the person responsible for contamination site rehabilitation" (PRFCSR) must pay the contractor for its invoices and markup. Then, the funder may apply the second- tier markup and submit the reimbursement application to DEP. DEP does not contest the second level of markup in these applications. DEP rules restrict reimbursement when parties within the usual "chain" of reimbursement (PRFCSR or funder, contractor and subcontractor) have financial, beneficial or familial relationships with each other or the site owner. These terms are defined in Rules 17-773.200(1), 17-773.200(6), 17- 773.200(7), Florida Administrative Code. The application form requires disclosure of such relationships through the Program Task and Site Identification Form. DEP's rules and written guidelines do not address or apply to activities, including financing arrangements, occurring outside of the chain of reimbursement if an applicant does not include charges for such activities in an application. Heretofore, DEP has not deducted finance costs that an applicant does not include as a line item in a reimbursement application. DEP must perform financial audits to ensure compliance with Chapter 376, Florida Statutes, and to certify site rehabilitation costs. Rule 17- 773.300(1), Florida Administrative Code. DEP performs this audit function: (a) to establish that the PRFCSR incurred the cost; (b) to determine that adequate documentation supports the claimed costs as incurred; and (c) and to review the reasonableness and allowance of the costs. The audit staff interprets the term "incurred" to mean that the applicant paid the costs included in the reimbursement application. DEP's audit staff usually does not inquire as to the level of a PRFCSR's financing where the application contains no line-item financing charges. However, the audit staff makes appropriate inquiries depending on the facts and events surrounding an individual application. Pursuant to Rule 17-773.350(4)(e), Florida Administrative Code, "[i]nterest or carrying charges of any kind with the exception of those outlined in Rule 17-773.650(1), F.A.C." are not reimbursable. The exceptions to the payment of interest set forth in Rule 17-773.650(1), Florida Administrative Code, are not at issue here. An interest rate charge on short-term borrowed capital from an unrelated third-party source is a "cost of doing business." DEP's predominate rates are fully loaded. They include a variable for all direct and indirect business overhead costs such as rent, utilities and personnel costs. DEP includes the cost of short-term borrowed capital in the direct and indirect overhead components of the fully-loaded personnel rates. Rule 17-773.700(5)(a), Florida Administrative Code. Petitioners PRFCSRs are entitled to make application for reimbursement of allowable markups and costs of site rehabilitation that they incur. In these consolidated cases, the site owners or operators designated either Petitioner ET or Petitioner SEI as PRFCSR. The PRFCSR is typically referred to as the "funder" in the reimbursement chain. Petitioner ET is a trust formed in 1993 and domiciled in Bermuda. It acts as American Factors Group, Inc.'s (AFG discussed below) conduit for funds that finance activities associated with Florida's petroleum contamination site cleanup program. The named beneficiaries of the trust are those contractors and subcontractors entitled to payment of costs for activities integral to site rehabilitation and for allowable markups of such costs. The sole trustee of ET is Western Investors Fiduciary, Ltd. (WIFL). WIFL is also the owner and a beneficiary of ET. Any profit that ET derives from funding petroleum contamination site cleanup flows through WIFL to investors who provide funds to finance site rehabilitation. American Environmental Enterprises, Inc. (AEE, discussed below) provided the investment funds for the reimbursement applications at issue here. WIFL is a limited liability corporation created and domiciled in Bermuda. The officers of WIFL are: William R. Robins, President; John G. Engler, Vice-President; and Peter Bougner, Secretary. The directors and shareholders of WIFL are: William R. Robins, John G. Engler, Paul H. DeCoster, Alec R. Anderson and Nicholas Johnson. Petitioner SEI is a corporation incorporated and operating under Florida law. Organized in 1994, SEI acts as AFG's conduit for funds to finance activities associated with Florida's petroleum contamination cleanup program. The officers and directors of SEI are: William R. Robins, President; John G. Engler, Executive Vice President; and Paul H. DeCoster, Secretary. William R. Robins is the sole shareholder of SEI. ET filed the petition for administrative hearing on behalf of SEI in at least four cases: Case Numbers 96-405, 96-425, 96-433, 96-437. Respondent DEP is the agency charged with the duty to administer the IPTF and Chapter 376, Florida Statutes. Financing Entities American Factors Group, Inc. (AFG) is a privately held corporation incorporated and operating under New Jersey law. AFG is not a party to this proceeding. AFG, acts as the servicing agent for contracts associated with factoring activities and other types of financing operations. AFG, through one of its divisions, Environmental Factors (EF), entered into factoring contracts with: (a) Gator Environmental, Inc. (Gator), general contractor; and (b) Tower Environmental, Inc. (Tower), prime subcontractor. Through these agreements, EF or its assignee bought the rights of Gator and Tower to future reimbursement payments at a percentage of the face value of the relevant invoices. The officers of AFG are: William R. Robins, President; John G. Engler, Vice President; and Paul H. DeCoster, Secretary. Bleak House, Inc. (Texas) owns the stock of AFG. American Environmental Enterprises, Inc. (AEE) is incorporated and operating under Nevada law. AEE is not a party to this proceeding. AEE, as the assignee under the EF contracts, is a third-party provider of capital to various entities in the reimbursement process. The officers of AEE are: William R. Robins, President; John G. Engler, Vice-President; and Paul H. DeCoster, Secretary. Bleak House, Inc., (Nevada) owns the stock of AEE. Bleak House, Inc., (Nevada) is incorporated and operating under Nevada law. Bleak House, Inc. (Texas) is incorporated and operating under Texas law. Officers of both corporations are William R. Robins, President; John G. Engler, Vice President; and Paul H. DeCoster, Secretary. Magazine Funding, Inc. owns the stock of both Bleak House corporations. Magazine Funding, Inc. is incorporated and operating under Nevada law. Officers of Magazine Funding, Inc. are William R. Robins, President; John G. Engler, Vice-President; and Paul H. DeCoster, Secretary. Family Food Garden, Inc. owns the stock of Magazine Funding, Inc. Family Food Garden, Inc. is incorporated and operating under Massachusetts law. Officers of Family Food Garden, Inc., are William R. Robins, President; and Paul H. DeCoster, Secretary. Six shareholders own the stock of Family Food Garden, Inc. None of these shareholders are related by familial ties to the officers or directors of the aforementioned companies or any relative thereof. Each of these companies -- ET, SEI, WIFL, AEE and AFG (including EF) share common officers and directors. Each of the companies maintain their own books and business records, file their own tax returns, and maintain records in accordance with the laws of the jurisdiction in which they were established. They operate pursuant to their respective bylaws or trust documents. ET, WIFL, and SEI do not have common assets with AEE or AFG (including EF). ET, WIFL and SEI do not have a beneficial, financial, or familial relationship with AEE or AFG (including EF) as Rule 17-773.200, Florida Administrative Code, defines those terms. Despite the facial organizational and structural integrity of ET, WIFL, SEI, AEE and AFG, the officers and directors of AFG and/or AEE created ET, WIFL, and SEI, in large part, for the benefit of AFG and/or AEE as a means to invest funds in petroleum contamination site cleanup programs. The officers and directors of AFG specifically created SEI to meet the needs of AFG's Florida investors. The purpose of each funder is to maximize the profits of AFG and its investors. AFG has other investment vehicles (funders) which it uses at times depending on the needs of its investors. AFG waits until the last instance before deciding which entity it will designate as funder in any particular factoring scenario. AFG usually does not make that decision until the day AFG's designated funder issues a funder's authorization to the general contractor. At the hearing, Mr. Stephen Parrish, a vice president of AFG, testified as the party representative for ET and SEI. ET, WIFL and SEI have no employees. EF or AFG responded to DEP's request for Petitioners to provide additional information about the financing scheme utilized here using stationary bearing EF's or AFG's letterhead. At least five of these letters written on SEI's behalf, refer to ET, an affiliate of AEE, as the funder. Nineteen of the letters written on ET's behalf refer to ET, an affiliate of AEE, as the funder. The greater weight of the evidence indicates that AFG and/or AEE negotiated less than arms-length contractual agreements with ET, WIFL, and SEI. Petitioners admit that they are "affiliates" of AEE and AFG through contractual agreements. However, there are no written factoring contracts between Petitioners and AFG such as the ones that exist between AFG, Gator and Tower. The only documented evidence of agreements between Petitioners and AFG are transactional based bills of sale representing the sale to AEE of Petitioners' right to receive reimbursement from IPTF. AFG created these bills of sale for bookkeeping purposes. AFG did not even go to the trouble of tailoring the form for the bills of sale for their stated purpose. For all practical purposes, Petitioners are under the management and control of AEE and AFG. Petitioners and AFG disclosed their affiliation in meetings with DEP staff and through correspondence and other documentation, including but not limited to: (a) letter to DEP dated July 13, 1994 from AFG's counsel; (b) Addendum to Certification Affidavit signed by a certified public accountant in each application; (c) funder's authorization form; (d) letters sent to DEP between August 14, 1995 and November 19, 1996. Factoring and the Factoring Transactions Factoring is the purchase and sale of an asset, such as an account receivable, at a discount. An account receivable reflects the costs that a business charges after rendering a service but before the entity responsible for payment pays for that service. When a contractor completes a rehabilitation task, the contractor's invoice is an account receivable until it receives payment. In these consolidated cases, AEE provided short-term capital to Gator and Tower at an interest rate equal to the discount percentage of the relevant invoice (account receivable). Gator and Tower did not sell their account receivables to AEE. Instead, AEE, as the assignee of EF, purchased a contractual right to receive Gator's and Tower's reimbursement payments. In exchange, AEE advanced them a discounted amount of their invoices. The discounted amount of each invoice represents a loan from AEE to Gator and Tower. The difference between the face amount of the invoices and the discounted amount of the invoices represents interest. A discount percentage and an interest rate are equivalent. The amount of the discount represents interest on the loans or advances provided by AEE. It is an interest expense to the contractor or subcontractor. The amount that Gator and Tower actually incurred is the discounted amount of their invoices. The Factoring Agreements On or about April 25, 1994, EF and Tower entered into a Prime Subcontractor Factoring Agreement which set forth the terms under which EF or its assignee would finance Tower's site remediation work. At that time, the parties to the contract anticipated that EF would retain a general contractor to perform on-site remediation services with Tower acting as prime subcontractor. In the contract, Tower agreed to sell to EF its right to receive payments from the general contractor at a percentage of the underlying invoices. Subsequent to the execution of April 1994 Prime Subcontractor Factoring Agreement, Tower experienced financial difficulties resulting in its inability to pay subcontractors for work that they performed under non-EF contracts. These financial difficulties made it impossible for Tower to meet its payroll that was due in two weeks. Tower and its subcontractors under the non-EF contracts approached AFG and EF requesting financial assistance to resolve Tower's financial difficulties and to ensure that the subcontractors would be paid for their work. At that time, the program tasks under these non-EF contracts were complete or substantially complete. Given the preexisting contractual relationship between EF and Tower on other projects, AFG determined that it could use a similar financing arrangement to resolve Tower's financial problems. Such an arrangement also would protect AFG's investment in projects being conducted under the EF-Tower contracts. On or about July 8, 1994, EF and Tower executed an addendum to the April 1994 Prime Subcontractor Factoring Agreement. This addendum applied to projects that were not covered by the original Prime Subcontractor Factoring Agreement. The addendum required Tower to sell to EF Tower's right to receive payments from the general contractor. In return, EF agreed to advance Tower a discounted amount equal to 97 percent of the face amount of Tower's invoices. Tower agreed to pay EF 100 percent of the face amount of the invoices upon receipt of payments from the general contractor. The discounted amount of each invoice represents a loan from AEE to Tower. Late in 1993 or early in 1994, Gator began negotiating a contract with EF to provide general contracting services for on-site remediation work on unspecified Florida projects being financed by EF. Gator began serving as general contractor on some of these unspecified projects prior to the execution of a contract. On or about July 8, 1994, EF and Gator entered into a General Contractor Factoring Agreement. In this contract, EF agreed to provide financing for projects on which Gator served as general contractor. Gator agreed to sell to EF its right to receive payments from the funder (ET or SEI) at a percentage of Gator's underlying invoices. On or about July 13, 1994, EF and Gator entered into an Addendum to the July 8, 1994 General Contractor Factoring Agreement. This addendum applied to projects which were not covered under the original General Contractor Factoring Agreement. The addendum required Gator to sell to EF Gator's right to receive payments from the funder (ET or SEI). In return, EF agreed to advance Gator a discounted amount equal to 88 percent of the face amount of Gator's invoices. Gator agreed to pay EF 100 percent of the face amount of the invoices upon receipt of payments from the funder. The discounted amount on each invoice represents a loan from AEE to Gator. Gator and Tower negotiated the respective factoring contracts and addenda thereto at arms-length. Pursuant to the terms of these contracts, EF assigned to AEE the rights to payments due to Tower from Gator and to Gator from ET or SEI. ET and SEI were not named parties to these contracts. The factoring contracts and the corresponding addenda apply to the reimbursement applications at issue here. Pursuant to those agreements, the following interrelated transactions took place though not necessarily in this order. First, Tower provided EF with a Site Certification Affidavit for a certain project. Tower also sent Gator a complete reimbursement application for the project and an invoice for Tower's services and the services of its subcontractors and vendors. Next, EF designated either ET or SEI as the funder. The funder then sent Gator a funder's authorization form. This form acknowledged that EF was an affiliate of the funder. It is the only documented evidence of a contract between the funder and Gator. Gator's receipt of the form constituted authorization for Gator to perform work on the project subject to reimbursement for all reimbursable costs and paid subcontractor invoices. Within two days of receiving the funder's authorization for a project, Gator issued Tower a subcontract/purchase order. Gator notified EF and the funder of such issuance. Upon receipt of the subcontract/purchase order, Tower sold to AEE (at a discount) Tower's right to receive full payment from Gator. A bill of sale evidenced this transaction. Tower agreed to repay AEE the face amount of Tower's invoice upon receipt of payment from Gator. Tower executed an agreement indemnifying the funder and guaranteeing the performance of all services and the delivery of all goods. Tower agreed to a reserve trust fund deposit as security for the ultimate reimbursement payment from the IPTF. Within four days of receiving the complete reimbursement application from Tower and within two days of receiving the funder's authorization, Gator and a certified public accountant (retained by EF) were supposed to review all supporting documentation on the project. The stated purpose of this review was to determine whether the invoices of Tower and its subcontractors were reimbursable under DEP guidelines. As to 30 of the instant applications, Tower completed the on-site work before Gator became involved. In those cases, Gator performed a minimal due diligence review, if any, of Tower's on-site work. This included comparing Tower's technical and administrative files with the applications prepared by Tower. Without Gator's minimal review and risk assessment on these 30 applications, EF would not have included them as projects covered by the addenda to the factoring contracts. As to 15 of the instant applications, Petitioners claim that Gator not only reviewed Tower's work product but also, issued subcontractor/purchase orders selected and scheduled subcontractors, and made on-site visits. However, there is no persuasive record evidence as to the specific activities or the level of Gator's involvement in on-site work on any one of these 15 applications. When Gator and EF's certified public accountant completed their assessment, Gator prepared a deficiency letter and sent it to all parties. The report advised EF, the funder and Tower whether any of Tower's charges were in excess of the reimbursable amount. Tower could accept or reject any disallowance set forth in the deficiency letter. If there was no problem with a disallowance or within five days of Tower's acceptance of a disallowance, AEE advanced Tower an amount equal to 97 percent of Tower's invoice. Tower used these funds to pay subcontractors and vendors. The discounted amount of Tower's invoice represents the actual cost that Tower incurred. Tower signed a repayment agreement in which it promised to repay AEE the face amount of Tower's invoice upon receipt of payment from Gator. When Tower received the discounted cash advance from AEE, it had to contribute the reserve deposit (to cover any reimbursement shortfalls) to a reserve trust, domiciled in Bermuda, which was affiliated with EF. Tower was a beneficiary of the reserve trust to the extent of its contribution less any monies it owed AEE after the IPTF reimbursed the funder. Meanwhile, Gator sold to AEE (at a discount) Gator's right to receive full payment from the funder. A bill of sale evidenced this transaction. Gator agreed to repay AEE the face amount of Gator's invoice upon receipt of payment from the funder. AEE advanced Gator an amount equal to 88 percent of the face amount of Gator's invoice. The discounted amount of Gator's invoice represent the amount that Gator actually incurred. Gator used these funds to pay Tower the face amount of its invoice. Tower in turn repaid AEE in full. Gator signed a repayment agreement in which it promised to repay AEE the face amount of its invoice upon receipt of payment from the funder. For the 45 applications at issue here, the addendum to the General Contractor Factoring Agreement did not require Gator to deposit any amount in the reserve trust which was domiciled in Bermuda and affiliated with EF. Next, Gator prepared an invoice for its services and the services of Tower and its subcontractors including a 15 percent markup and an application preparation fee. Gator's invoice could not include a charge for "management time." Then, Gator forwarded its invoice and Tower's invoice to the funder together with the complete reimbursement application. In the meantime, ET and SEI sold AEE their right to receive reimbursement from the IPTF at a discount equal to 87 percent of their total invoice amount. A bill of sale for each transaction is the only documented evidence of an agreement between the funders and AEE. ET and SEI agreed to repay AEE for the face amount of their invoices upon receipt of payment from IPTF. The funder prepared an invoice for the face amount of Gator's and Tower's invoices plus a 15 percent markup. Upon receipt of ET's or SEI's invoice, AEE advanced them the discounted amount as agreed. ET or SEI used the funds advanced by AEE to pay Gator the face amount of its invoice. Gator in turn repaid AEE in full. When ET or SEI receive a reimbursement payment from the IPTF, they will remit the total payment to AEE. The total cost for each project increased as the discount percentage and the face amount of each invoice passing up through the chain grew larger. In regards to some applications, the relevant dates on the subcontract/purchase order, Gator invoice, and Tower invoice are the same. It is clear that the turn around time on all of the above referenced transactions, including the time between the payment of the advances by AEE to Gator and Tower and their subsequent repayment of 100 percent of the face amount of an invoice to AEE, was very short--a matter of days or weeks. In Summary, the financing of the pending reimbursement applications involved the following interrelated transactions but not necessarily in this order: AEE as the assignee of EF purchased the right of ET, SEI, Gator and Tower to receive reimbursement for their services at a discount. ET, SEI, Gator and Tower agreed to repay AEE in full. Tower prepared and submitted to Gator an invoice for services provided by Tower and its subcontractors. Tower also prepared and submitted to Gator a reimbursement application for the program task. AEE advanced Tower the agreed upon discount amount. Tower used these funds to pay its subcontractors and vendors. AEE advanced Gator the agreed upon discount amount. Gator used these funds to pay Tower. Tower repaid AEE in full. Gator prepared an invoice for services provided by Gator, Tower and Tower's subcontractors including a 15 percent markup and submitted it with the reimbursement application either to ET or SEI. AEE advanced ET or SEI the discounted amounts as agreed. ET or SEI paid Gator in the full amount of Gator's invoice plus markup. Gator repaid AEE in full. ET or SEI prepared an invoice for its services plus the services of Gator, Tower, and Tower's subcontractors and a 15 percent markup. ET or SEI submitted the reimbursement application to DEP. When ET or SEI receives reimbursement from the IPTF, they will remit the total payment to AEE. The Applications Petitioners filed the 45 applications that are the subject of this proceeding between July 18, 1994 and February 17, 1995. The financing scheme that Petitioners utilized in these applications was unique. Prior to receiving these applications, DEP never had reviewed reimbursement applications using the type of financing scheme at issue here. In fact, the instant cases present a scenario never contemplated by DEP when promulgating rules and developing written policies. DEP has established a list by which it determines whether an applicant is charging a "reasonable rate." DEP developed that list in accordance with Petroleum Cleanup Reimbursement (PCR) Guideline Number 1. PCR 1 establishes a "predominant rate" for costs involved in the site rehabilitation process. The predominant rate may be exceeded by up to 30 percent for personnel charges, and by up to 50 percent for non-personnel charges. Within these ranges, DEP evaluates each application and determines whether the PRFCSR is entitled to reimbursement for "allowable cost" at "reasonable rates." The work performed by Tower was at or near DEP's "predominant" rate. In no instance were Tower's rates near the upper limits of the reasonable rate ceiling. Tower's invoices appear to represent work that was integral to site rehabilitation which was broken down into appropriate units and rates. There is no evidence of "price fixing" between any entities engaged in site rehabilitation. There is no evidence that Tower intentionally inflated the costs of cleanup or of the scope of cleanup services to cover the cost of financing. There are no familial, beneficial or financial relationships, or any other form of affiliation between Tower and its subcontractors. A certified public accountant (CPA) attestation accompanied the applications indicating that Petitioners incurred (paid) all relevant costs. The applications did not include charges associated with the financing arrangements as line items. The CPA attestations referenced an addendum to the Certification Affidavit. The addendum indicated that "American Environmental Enterprises, Inc., an affiliate of the Environmental Trust, has provided financing to certain contractors and subcontractors by factoring invoices which are included within this application." The CPA provided the reference to the addendum in the CPA attestation as an "emphasis of the matter" statement rather then an "exception," or a modification of the CPA's attestation that Petitioners had incurred all costs in the application. The CPA firm performing the attestation services previously informed DEP of its intent with regard to "emphasis of the matter" reports. Nevertheless, the difference between the face amount of an invoice and the discounted amount of that invoice clearly represents interest. This interest was not allowable as an actual and reasonable cost of site remediation because Gator and Tower agreed to accept a lesser amount for their services prior to submittal of the applications. Therefore, they did not actually incur the amount reflected in the face amount of their invoices. DEP's predominate rates and units are fully loaded. Interest rate charges on borrowed capital from unrelated third-party sources are a "cost of doing business." DEP's fully-loaded rates include a variable for all direct and indirect business overhead costs such as rent, utilities and personnel costs. The direct and indirect overhead components of DEP's fully-loaded rates include the cost of short-term "working" capital. However, DEP never intended the predominate rate schedule to entitle an applicant to reimbursement for costs that it did not actually incur. In the instant cases, funds that passed down through the chain from ET or SEI to Gator or from Gator to Tower flowed directly and immediately back to AEE who was affiliated with the funder. Any profit derived by the funder, ET or SEI, will flow directly to AEE and its investors. The amount that Petitioner's actually incurred before they submitted the applications was the amount that AEE advanced to Tower and/or its subcontractors for integral site work plus the actual cost of Gator's allowable services, if any, which were separate and distinct from Tower's work, plus any allowable markup(s). Factoring Policy At the time that Petitioners submitted the subject applications for reimbursement, there was no rule or written guideline governing financing transactions, including factoring, occurring outside of the usual chain of reimbursement. DEP normally did not inquire about such financing so long as an applicant did not pass the costs of such financial transactions to DEP in the application as a line-item cost. There was no policy disallowing reimbursement for the face amount of the invoices when an applicant sold the right to payment, i.e. the receivable, at a discount to a disinterested third-party in an arms- length transaction. Commencing on August 31, 1994, DEP began to develop a policy regarding the use of factoring as a financing mechanism in the reimbursement program. DEP staff exchanged numerous documents regarding the subject of factoring. In one of those documents, Charles Williams, DEP's Reimbursement Administrator indicated that "we absolutely need to have a Big Meeting to decide what to do once and for all." In a November 1994 telephone conversation, DEP provided AFG's counsel with an informal opinion of how DEP would handle a factored application as described by Will Robins of AFG in an earlier meeting with DEP staff. The statement was: that the difference between the amount that a contractor accepted in payment for his services, which was a discounted amount after factoring, . . . and the face value of the invoice which was claimed and marked up in the application was determined to be a carrying charge or interest, which is specifically disallowed for reimbursement in the reimbursement rule. American Factors Group. Inc. and the Environmental Trust v. Department of Environmental Protection, DOAH Case No. 95-0343RU, Final Order issued July 24, 1995. DEP advised AFG's counsel that it would deal with factored applications involving other entities on a case by case basis. On December 20, 1994, John Ruddell, Director of DEP's Division of Waste Management, sought permission from DEP's Policy Coordinating Committee to promulgate a rule amendment to Chapter 62-773, Florida Administrative Code (formerly Chapter 17-773, Florida Administrative Code.) A draft rule accompanied the request. The draft rule was developed in compliance with Chapter 94-311, Section 6, Laws of Florida, which required DEP to revise its reimbursement rule. The draft rule provided that: nothing in this Chapter shall be construed to authorize reimbursement for the face amount of any bill or invoice representing incurred costs when the receivable has been sold at a discount. In all such cases, reimbursement shall be limited to the actual discounted amount accepted by the provider of the goods or services . . . . The draft rule had the effect of prohibiting factoring as a mechanism for financing site rehabilitation work. It did not single out any other type of financing mechanism. DEP did not promulgate the draft rule because the problems with the program were too numerous to correct in a timely fashion by rulemaking. Instead, DEP focused on drafting proposed legislation. In the meantime, DEP requested that Petitioners furnish additional information regarding the instant applications. Between March 1, 1995 and November 17, 1995, ET and SEI responded to DEP's requests with letters bearing AFG's or EF's letterhead. The letters state that prior to filing the applications, ET or SEI paid Gator for the face amount of Gator's invoices plus Gator's markup. Gator then paid the subcontractors for the face amount of their invoices. Prior to these payments, AEE an affiliate of ET, or SEI purchased the right to receive the amount due to Gator from ET and the right to receive the amount due to subcontractors from Gator. In each case, AEE bought the right to receive at a discount. According to the financing scheme, ET or SEI received sufficient funds from AEE to make the payments to Gator. ET or SEI, in turn, were obligated to pay AEE following their receipt of the funds claimed in the reimbursement application. On April 21, 1995, DEP issued a memorandum to DEP application reviewers to guide them in the processing of reimbursement applications. The memorandum indicated that: invoices from subcontractors, vendors, suppliers and/or the general contractor which were paid a factored (e.g., discounted) amount by a third party capital participant (e.g., funder) represents the actual amount incurred by that entity and subsequently by the general contractor. The memorandum directed reviewers to deduct costs in an amount equal to the difference in the face value of an invoice or application and the amount paid for the right to receive payment under that invoice or application. DEP did not direct the policy set forth in the April 21, 1995 memorandum towards any individual company. DEP intended the policy to apply to "any combination of a general contractor, management company, funder and responsible party" in any situation in which a third-party capital provider paid any program participants a factored (discounted) amount of their invoices." The April 21, 1995, policy did not condition DEP's position on factoring on any affiliation between any parties. Between August 14, 1995 and January 19, 1996, DEP took action on the 45 applications that are the subject of this proceeding. As reflected in those notices, DEP denied reimbursement of costs claimed in those applications "as a result of factoring of the supporting invoices" and because "the difference between the face amount of the supporting invoices and the amount factored represents interests or carrying charges which are specifically excluded from reimbursement pursuant to Rule 62-773.350, F.A.C." The notices properly reflect a basis of denial of costs that is consistent with DEP's policy as reflected in the December 20, 1994 draft rule and the April 21, 1995 memorandum. DEP has proven that its policy on factoring is consistent with its legislative mandate to deny reimbursement of costs which are not actual and reasonable. Affiliation Policy Not all out-of-chain affiliations between entities constitute a problem with regard to reimbursement. However, the instant cases presented DEP with unique facts as to the relationship between AEE, AFG, ET, WIFL and SEI which DEP's rules and written policies do cover. The mere existence of common corporate officers does not, in and of itself, cause AFG/AEE, ET, WIFL, and SEI to lose their integrity as separate legal entities, or make them "one and the same." Common officers of corporations are not an element of the term "financial relationship," nor does the concept of common corporate officers appear in the definitions of beneficial relationship, familial relationship, indirect interests, material interests, or sources of income. DEP's position at hearing that "affiliation" is a major key to it's position with regard to factoring does not appear in any of the documents in which DEP has either discussed or disseminated information regarding factoring. There are no requirements in DEP's application forms to disclose the nature of the relationships between an applicant and an applicant's source of financing. DEP makes no standard inquiry of funders to disclose the nature of any affiliation between the funder and the provider of capital. Nevertheless, the record supports DEP's position that it can deny reimbursement for costs when a PRFCSR has an "affiliation" with a factoring company outside of the chain of reimbursement under the facts of these cases. It is not contested that ET, WIFL, SEI and AFG and its sister company AEE are affiliated. The greater weight of the evidence indicates that this affiliation goes beyond a mere contractual agreement. AFG, AEE, WIFL (which owns ET and is a trust beneficiary), and SEI have common officers and directors. These officers and directors created ET and SEI primarily for the benefit of AFG and AEE as conduits for investment of funds in Florida's petroleum contamination site rehabilitation program. AFG has other investment vehicles, in addition to ET and SEI, which it can designate as a funder depending on the needs of its investors. AFG usually waits until the last instance to select the funder that it will use in any particular case. AFG often selects the funder on the same day that the funder issues its authorization to the general contractor. The greater weight of the evidence indicates that AFG and/or AEE and the Petitioners did not negotiate the contractual agreements between them at arms-length. A bill of sale evidencing the sale of Petitioners' right to receive reimbursement on each application is the only documented evidence of agreements between Petitioners and AFG or AEE. Any profit derived by ET flows back to AEE through WIFL. ET and SEI are under the management and control of AEE and AFG's officers and directors. For all practical purposes ET and SEI are "one and the same" as AEE and AFG. The affiliation between AEE, AFG, WIFL, ET and SEI is especially troublesome here where AEE advanced the discounted amount of invoices to: (a) Tower so that it could pay its subcontractors in full; (b) Gator so that it could pay Tower in full; and (c) its affiliates, ET and SEI, so that they could pay Gator in full. Gator's and Tower's immediate repayment in the face amount of the invoices to AEE is a back flow of funds (interest) to an entity affiliated with Petitioners. All of these transactions took place before Petitioners filed the instant applications or within a few days thereafter. They create a paper trail indicating that the parties within the "chain" at each level incurred the face amount of the next lowest level. However, the only amount actually incurred at the time Petitioners submitted the applications was the discounted amount of the invoices. Interest or Carrying Charges "Incurred" means that "allowable costs have been paid." (Rule 17- 773.200(9), Florida Administrative Code) Under DEP's rules, the facial meaning of the term is that persons must receive due return for their invoiced goods and services, billed on a units and reasonable rates basis, for allowable costs of site rehabilitation. A finance charge usually does not effect DEP's determination of charges that were "incurred" unless that charge appears as a line-item cost which is not the case here. However, these consolidated cases presented DEP with a new scenario in which Gator and Tower immediately repaid the face amount of their invoices to AEE retaining only the discount amount of their invoices to pay the actual costs of the level below them before submitting the applications. Moreover, they included the carrying charges in the applications as having been "incurred." Case Number 95-403RU, Pick Kwick No. 143, DEP Facility No. 528515448 is a typical example showing how the entities in the chain paid interest charges and included them in the application. In that case, Gator provided Tower with a subcontract/purchase order on July 8, 1994. Tower provided Gator with an invoice in the amount of $17,556.43 on July 8, 1994. Tower's invoice represented services performed in connection with the initial remedial action task at the Pick Kwick No. 143 facility including $269.90 for application preparation. On or about July 8, 1994, Gator provided ET with an invoice in the amount of $20,149.41. This invoice included Gator's 15 percent markup in the amount of $2,592.98 and $269.90 for application preparation. On August 4, 1994, AEE purchased Gator's right to receive payment from ET. AEE advanced Gator $17,696.44 or 88 percent of Gator's invoice. The interest charge on the advance was $2,452.97. On August 4, 1994, AEE purchased Tower's right to receive payment from Gator. AEE advanced Tower $17,029.74 or 97 percent of Tower's invoice. The interest charge on the advance was $526.69. On August 10, 1994, AEE purchased ET's right to receive payment from IPTF. AEE advanced ET $20,831.41 or 87 percent of ET's invoice. The interest charge on the advance was $2,981.93. On August 15, 1994, ET filed the reimbursement application in the amount of $23,813.34. This amount included ET's 15 percent markup on the face amount of Gator's invoice. Prior to filing the application, ET paid Gator, $20,149.41. Gator then paid Tower $17,556.43. Following receipt of payment from ET, Gator repaid AEE $20,149.41. Following receipt of payment from Gator, Tower repaid AEE $17,556.43. Gator and Tower made these repayments within a matter of weeks of the time that AEE advanced funds to them. Calculating simple interest, the annualized interest rate on the loan from AEE to Gator was approximately 144 percent. The annualized interest rate on the loan from AEE to Tower was approximately 36 percent. These were the interest rates, as predetermined by the discount percentage in the addenda to the factoring contracts (Gator at 88 percent and Tower at 97 percent), in approximately 30 of the 45 applications. In the other 15 applications, the Gator sold its right to receive payment at a discount percentage between 87 to 89 percent of the face amount of the invoice. In those cases, Tower sold its right to receive payment at a discount percentage between 95 and 72 percent of the face amount of the invoice. There is no evidence that Petitioners made adjustments to the costs in the applications where Gator and Tower sold their right to payments for a discount percentage at an amount other than as stated in the addenda to the factoring contracts. Analysis of the transactions involved in each of the subject applications clearly shows that the financing scheme utilized here was not equivalent to a "plain vanilla" loan from a disinterested third-party capital provider such as a bank. DEP properly deducted costs from Petitioners' applications that represented interest which Gator and Tower agreed to repay to Petitioners' affiliate, AEE, before Petitioners submitted the applications. The only costs that Gator and Tower actually incurred was the net amount that they received after factoring their invoices. That amount includes the difference between the face amount Gator's and Tower's invoices and the amount that AEE advanced to them. Gator and Tower did not actually incur allowable costs in the amount of the interest paid to AEE when they : (a) agreed to accept reimbursement for their services at a discount; (b) accepted the full amount of their invoices from the next highest level; and (c) passed the full amount of their respective invoices back to AEE. DEP did not envision this type of elaborate factoring plan when it created its simple definition of "incurred" as meaning allowable costs have been paid. It is important for participants in the program to know the "rules of the game." Applicants have to make technical and financial decisions regarding site cleanup. They have to pay all contractors and subcontractors prior to submitting an application. In this case Petitioners' attempts to win DEP's pre-approval of their various factoring proposals were unsuccessful because DEP did not have enough information about the transactions and the relationships of the entities involved. After DEP received additional information from Petitioners, it became abundantly clear that the rules were insufficient to cover the financing scheme presented here. As early as November 4, 1993, Petitioners acknowledged that "the provisions of Rule 170773, F.A.C. do not specifically address the types of situations that arise when providing capital for cleanup activities through funding groups such as AFG." Petitioners revealed their final plan in July of 1994 just before they began filing the applications. At that time, Petitioners knew DEP's concerns. They also knew DEP could not make a decision on an application until they filed the application with DEP. Inconsistent Application of Statutes, Rules and Written Guidelines DEP has authorized financial transactions by which other applicants, after incurring (paying) all costs and filing their applications, sold or pledged their right to future payment to an entity outside the usual reimbursement chain. In those cases, DEP did not deduct interest associated with such transactions. DEP's approval of such transactions came before Petitioners filed their applications in this matter. There is no evidence that those transactions involved the factoring of invoices and an agreement to repay interest before the PRFCSR submitted the applications. Likewise, there is no evidence of an affiliation and less than arms-length negotiation between the funder and the financing company in those cases. The record contains no evidence of an inconsistent application of DEP's statutes, rules or written policies before or after Petitioners filed the instant applications. Reservoir Capital On March 14, 1994, DEP met with Reservoir Capital Corporation (Reservoir) to discuss a change of address notice directing reimbursement orders and checks for Clean America Financial, Inc. (Clean America) applications to a Baltimore, Maryland address. During that meeting Reservoir's counsel informed DEP that Reservoir "paid a percentage, not the full cost, for each application." DEP representative, Paul DiGuisseppe, informed Charles Williams of that conversation by memorandum dated March 15, 1994. Mr. DiGuisseppe later spoke with a representative of Clean America (the funder) and advised him to provide a list of facilities pledged to Reservoir for which notices and payments were to be sent to the Baltimore, Maryland address. On March 30, 1994, Clean America wrote to Charles Williams and Doug Jones, providing a list of sites pledged to Reservoir and directing DEP to send payments to the Baltimore, Maryland address. Among the sites pledged to Reservoir were Curry Station, DEP Facility No. 309103537 and Scardo Automotive, DEP Facility No. 428511319. On June 17, 1994, DEP issued a reimbursement order to Scardo Automotive at the Baltimore, Maryland address. On July 1, 1994, DEP issued a reimbursement order to Curry Station at the Baltimore, Maryland address. These orders did not contain a denial of costs or deductions of interest based upon the disclosed fact that Reservoir had purchased the applications for an amount less than their face value. However, there is no evidence that either of the applicants sold the right to receive reimbursement before submitting the application. Additionally, there is no evidence that Reservoir was affiliated with Clean America. On April 11, 1996, DEP revisited the Reservoir Capital factoring mechanism. In that instance, DEP reviewed a situation in which Reservoir Capital directly paid a subcontractor's invoice in an application that All American Funding (All American) filed. Reservoir had purchased the receivable of All American, and applied part of the purchase price to directly pay a subcontractor. There is no evidence of any "affiliation" between Reservoir and any other entity in the reimbursement chain. Prior to the meeting with Reservoir, DEP intended to deny those costs since it appeared that Reservoir actually paid them rather than the applicant, All American. As a result of that meeting, DEP requested additional information from Reservoir. At the time of hearing in these cases, DEP had not made a decision in that case pending receipt of the requested information. Governor's Bank On March 9, 1994, Governors Bank wrote to Charles Williams requesting that DEP directly remit to Governors Bank any reimbursement due on an application filed by Clean America due to the fact that Clean America "secured its borrowings from the bank with any rights to payment which CAFC has in connection with certain reimbursement applications." On March 30, 1994, Clean America sent a letter to Charles Williams and Doug Jones requesting that the DEP honor the March 9, 1994 letter directing payment to Governor's Bank. On November 4, 1994, Clean America advised DEP that DEP was to remit additional final reimbursements to Governors Bank. The letter advised DEP that "based upon a loan relationship Governor's Bank established with Clean America . . ." reimbursement payments had been assigned to Governors Bank and therefore "all payments and proceeds must be remitted to Governor's Bank." There is no record evidence that Clean America entered into a loan agreement with Governors Bank prior to submittal of the application or that the applications included claims for interest paid to the bank. There is no evidence of any affiliation between Clean America and the bank. The financing mechanism that Petitioners used for these 45 applications is not similar to a "plain vanilla" bank loan where a lender advances funds after an applicant files an application and directs DEP to forward reimbursement payments to a bank lock box. Barriston Environmental Investors L.P. On March 11, 1993, Barriston Environmental Investors, L.P. (Barriston) wrote to John Ruddell, Director of the DEP's Division of Waste Management and described a mechanism of financing by which Barriston (the funder) would obtain funds, at least partially through bank debt, for the payment of subcontractors' site rehabilitation invoices. In the Barriston proposal, the subcontractor would remit an "investment banking fee" of 5 percent of the value of the invoices back to the funder upon payment of 100 percent of the invoices. Barriston's letter acknowledged that this fee would not be reimbursable under the program. In addition, the Barriston funder would receive a commitment fee from the site owner which the Barriston funder would not include in the reimbursement claim. A reference in the letter to the payment of interest on funds advanced on the site owner's behalf does not specify the time frame in which interest would be paid, i.e. before or after the filing of an application. The letter sought DEP's approval and assurance that the payment of 100 percent of the invoices would entitle Barriston to full reimbursement including both markups. Barriston's letter requested an informal response because it realized that DEP had no authority to take official agency action without the submission of an application. On April 9, 1993, DEP responded to the Barriston letter. In its response, DEP stated that the arrangements appeared to be consistent with current statutes and rules and would be eligible for the full reimbursement allowed by DEP's rules. However, there is no record evidence of any official agency action on an application submitted in accordance with Barriston's proposal. Interest Indemnification Interest indemnification encompasses a situation in which a contractor pays interest directly back to a funder during the period of time after submittal of an application but before reimbursement by the IPTF. In June 1995, a DEP employee contacted Petitioners' certified public accountant (CPA) inquiring about the practice and seeking copies of his other clients' interest indemnification contracts. After that conversation, the CPA discussed the matter with another DEP employee to confirm his understanding that financing issues were outside of the scope of DEP's review so long as an applicant did not include such charges in the application. Since the June 1995 discussions, DEP has reimbursed applications which were financed through interest indemnification without adjustments for the payment of interest. However, the interest indemnification payments applied to applications after the applicants filed them with DEP to replace long-term interest that IPTF is no longer paying. The applicants were not seeking reimbursement of those payments as incurred costs. Petitioners have not established their entitlement to reimbursement for the factored amounts of their invoices. DEP presented competent evidence to support its "factoring" and "affiliation" policies as applied here. In addition, the evidence indicates that DEP has not inconsistently applied such policies to other similarly situated reimbursement applicants. Petitioners have failed to prove that DEP's denial of costs based upon factoring is not reasonably related to the purpose of reimbursement review and otherwise unsupported by competent evidence. The April 21, 1995 policy statement is a rule as defined in Section 120.52(16), Florida Statutes. DEP was not aware of the need for such a rule when it made the last substantive amendments to Rule 17-773, Florida Administrative Code, in 1993. Nevertheless, DEP demonstrated that the non-rule policy is a reasonable interpretation of Sections 376.3071(12)(b) and 376.3071(12)(d), Florida Statutes. DEP provided an evidentiary basis to support its factoring policy in these consolidated cases. The difference between the face amount of the invoices and their factored amount did not represent allowable costs which were actual and reasonable. DEP deducted the amount of the relevant discount percentage (on a prorated basis) from each invoice submitted by Tower and its subcontractors. There is a discrepancy between the amount that DEP deducted from each invoice (itemized) and the total deduction based on a lump sum in 33 of the 45 cases which DEP did not explain during the hearing. Therefore, before DEP enters a Final Order, it should review the supporting documents to determine the correct deduction in each application. "Value Added" Policy Funders and contractors are entitled to take a markup of paid contractor and subcontractor invoices for allowable costs at reasonable rates. The invoices must represent actual and reasonable costs which are integral to site remediation. Contractors are entitled to a first-tier 15 percent markup for supervising and/or coordinating on-site remediation, for investing capital while awaiting reimbursement by paying subcontractors invoices, and for assuming liability for the performance of the subcontractors. Funders generally are entitled to a second-tier 15 percent markup as an incentive to provide funds to finance the work. Markups are expressly subject to limitations set forth in Section 17- 773.350(9), (10) and (11), Florida Administrative Code. There are no other specific or implied limitations on markups in the rules or written guidelines. Requiring each entity that receives a markup in the reimbursement chain to pay contractor, subcontractor, and vendor invoices helps ensure that each level in the reimbursement chain pays the participant at the next lowest level. In these cases, each level in the reimbursement application chain "technically" paid the next lowest level. DEP policy in effect at the time Petitioners submitted the instant applications for reimbursement was to allow markups of paid invoices at two levels. However, prior to the submission of the instant applications, DEP was not aware of a case where a general contractor claimed a markup for work that was complete before the general contractor became involved in the project. With regard to all of the pending reimbursement applications, Gator applied a 15 percent markup to all of Tower's invoices including the invoices of Tower's subcontractors. With regard to a minimum of 30 of the 45 sites, Gator clearly did not supervise, manage or direct site remediation activities performed by Tower or its subcontractors. In fact, Gator did not become involved until after Tower completed these tasks. In at least 30 of the instant cases, Tower was acting as the general contractor when all of the on-site remediation took place. However, Tower could not apply a 15 percent markup to the invoices for its own services. Gator made it possible for Petitioners to claim the markup on Tower's invoices. As to the 15 sites at which Gator allegedly had some type of involvement with on-site remediation activities, there is no persuasive evidence regarding the specific activities or the level of Gator's involvement on any particular project. On September 1, 1994, Restoration Assistance, an entity under contract with DEP to review reimbursement applications, issued a memorandum to its reviewers directing them to complete their review and do a "total denial" on "Gator Environmental packages." The memorandum advised the reviewers that "Bruce" was drafting canned language to use in DEP's denial statement. On or about April 21, 1995, DEP presented its reviewers with a memorandum setting forth an initial overview of a "value added" policy for markups taken by a "management company" involved in site remediation activities. According to the memorandum, DEP would allow reimbursement of claims for actual project management work and value-added services. The memorandum further provided that DEP would allow markups to a management company which only provided cash-flow services for a majority of the program task period even if the management company performed no other service. However, DEP would deny a markup if the management company provided such services during a "one month time period." DEP intended for the April 21, 1995 memorandum to acquaint DEP reviewers with the emerging DEP policy on markups. DEP's rules and written guidelines do not address the distinction made in the April 21, 1995 memorandum regarding the timing during which a management company could provide cash flow services and still be entitled to a markup. On October 20, 1995, Charles Williams issued a DEP policy memorandum for reviewers to use in reviewing reimbursement applications. Through that memorandum, DEP finalized and implemented the "value added" policy. The memorandum states that: if the 'GC' [general contractor] was involved with the management of the project during the course of the actual work by subcontractors, [DEP] rules do not preclude them from applying a markup. However, if the 'GC' came along after the work was completed by other contractors and their involvement was more of a due diligence exercise to faciltiate (sic) a funding arrangement by a third party, then the 'GC' markup would not be justified, though a markup by the actual funder listed as the PRFCSR could be allowed. Prior to the establishment of the "value added" policy on October 20, 1995, DEP made no inquiry as to whether a contractor provided value added services in order for the contractor to be entitled to a markup. DEP applied the "value added" policy to all pending applications (including the ones at issue here) resulting in a deduction of Gator's markup in all of the subject cases. The Department of Banking and Finance reviewed and issued a report (Comptroller's Report) on the Petroleum Contamination Site Cleanup Reimbursement Program on November 29, 1994. This report addressed the issue of markups in the reimbursement program. The Comptroller's Report recognized that DEP found the multiple markup structure to be beneficial in that it "attracts the involvement of companies whose role in cleanup projects is limited to providing funds to finance the work [and] attracts investors who provide funds which might not otherwise be available--thus facilitating cleanup of contaminated sites." The Comptroller's Report describes a two-tier arrangement involving a "prime contractor engaged to manage the cleanup project" and a "funding entity." The report acknowledges that the prime contractor "might have only limited direct involvement in the cleanup, having engaged subcontractors for most or all of the actual work." The example in the Comptroller's report did not state what DEP's policy would be if a subcontractor had completed all of the actual work before the contractor became involved. Even without this consideration, the report was critical of DEP's allowance of markups on either level. The Petroleum Efficiency Task Force (PETF) issued its final report on financing contractors on August 17, 1994. This report discussed DEP's policy of allowing two markups. In this discussion, the PETF recognized that "funders must be able to rely on the skills and knowledge of contractors to minimize reimbursement shortfalls." The PETF recommended for future consideration that "the Department should provide in rulemaking that contractors who take the first-tier 15 percent markup on subcontracted work must adequately supervise the work." When the PETF issued its report, there was no existing rule that established any level of on site supervision or any other specific criteria for applying one of the two allowable levels of markup, other than paying invoices for integral site rehabilitation work. DEP's rules and written guidelines did not substantively change with regard to the "value added" policy from the April 22, 1993 revision of Chapter 17-773, Florida Administrative Code, to the October 20, 1995 memorandum which established a non-rule limitation on the ability of an entity to apply a markup to paid invoices. Because the rules and written guidelines do not reflect the "value added" policy, a participant in the program would not be aware of it even if the participant requested program information. Gator technically paid 100 percent of the face value of Tower's invoices. Without Gator's involvement, AFG and AEE would not have financed these applications. However, DEP presented persuasive evidence at the hearing to support its position that Gator was not entitled to a markup because Gator's services added no value to site remediation projects. In the instant cases, Gator performed some type of a minimal due diligence review of Tower's site work. Gator allegedly reviewed Tower's technical and administrative files, cross-referenced technical and administrative files with the applications which Tower prepared, made visits to some job sites, and prepared a deficiency letter to determine the appropriateness of the scope of Tower's work. However, all of these functions were repetitious of the work that was performed by Tower and the certified public accountant attesting to the Certification Affidavit. Gator limited the deficiency letters to the question of whether the scope of Tower's services were reimbursable. However, there is no evidence that Tower's deficiency letters resulted in adjustments to costs in the applications as filed by Petitioners. The deficiency letters served only to adjust the discount percentage set forth in the addenda to the factoring contracts. Tower was a qualified engineering consulting firm that employed its own engineers and geologists. Gator's employee that reviewed the technical information in Tower's files was not a Florida professional engineer. He was not qualified as a certified public accountant to determine whether a charge was within DEP's reasonable rates. The Gator employee was a Florida professional geologist but he did not sign and seal the deficiency letter as such. There is no reference in DEP's rules or written policies to a deficiency letter. AFG required Gator to prepare the deficiency letter within two days of the date on which EF provided Gator with the opportunity to review a completed task. This two-day turn around time allegedly afforded efficiency of payment. Gator did not begin its review of an reimbursement application until after Gator received an invoice from Tower. The relevant subcontract/purchase order issued by Gator to Tower, the Tower invoice and the Gator invoice were often prepared on the same day. Gator technically paid Tower's invoices with funds that AEE advanced. Tower used these funds to repay AEE. When Gator received payment from ET or SEI, it passed the funds back to AEE before ET or SEI submitted the applications to DEP or immediately thereafter. Pursuant to the addenda to the factoring contracts, Tower, not Gator, contributed to a reserve trust account which AEE will use to cover any reimbursement shortfalls. Gator indemnified AEE and guaranteed its own work but did not assume a risk of loss on Tower's work. On most if not all of the applications, Gator performed no meaningful management or supervisory functions. The greater weight of the evidence indicates that Gator's primary purpose in these consolidated cases was not to afford AFG a level of comfort as to the appropriate scope of the individual program tasks but to ensure that third-party investors maximized their profits. The "value added" agency statement has the effect of a rule which DEP did not contemplate when it promulgated its rules and written policies. Nevertheless, DEP's decision concerning the value added policy is within the scope of its delegated legislative authority. DEP has proven that reimbursement for Gator's services was not allowable as actual and reasonable costs of site remediation. Therefore, it is not entitled to a first-tier markup. Computer Costs Prior to January 1, 1995, DEP determined the reimbursability of computer costs based upon a "units and rates basis" as provided by Rules 17- 773.100(5), and 17-733.700(2)(d), Florida Administrative Code. DEP evaluated computer costs "as a certain number of hours [at] a reasonable rate." Pursuant to the units and rates rule provisions, there was no rational basis for DEP to deny the computer costs contained in applications filed prior to January 1, 1995. On January 1, 1995, DEP established a policy by which it would disallow in full any computer costs greater than $750. Under that policy, DEP would reimburse in full an applicant's computer costs with supporting invoices of $749 dollars, but disallow in full computer costs with supporting invoices of $751. DEP's reimbursement orders involving more than $750 in computer costs after January 1, 1995 routinely stated that "there was insufficient justification to demonstrate that this computer time was integral to the task or necessary." DEP applied the computer policy to all applications filed and pending review at the time it developed the policy, regardless of when an applicant performed the work or generated the records. DEP applied the January 1, 1995 computer policy to the application in Case No. 95-4606 which ET filed on July 18, 1994. In that case DEP denied $1,456.25 in computer costs allowing no reimbursement for computer time. On April 27, 1995, DEP implemented a new policy by which it evaluated computer costs based upon a calculation of allowable personnel hours per task as opposed to a units and rates basis. Under that policy DEP would evaluate the total allowable personnel hours in a task and limit computer costs to 10 percent of those hours up to a maximum of $750. Under the April 27, 1995 policy, DEP reduced the reimbursement for computer costs to $500 if the reimbursable amount exceeded $750 after DEP made the 10 percent calculation. DEP implemented the April 27, 1995 policy through the use of a calculation work sheet which it provided to its application reviewers. DEP applied the April 27, 1995 computer policy and work sheet to all applications pending review at the time DEP developed the policy, regardless of when the applicant performed the work or generated the records. DEP applied the April 27, 1995, policy in all of the subject cases subsequent to Case No. 95-4606, with the following exceptions: Case Nos. 96- 0432RU, 96-1006 and 96-1009, which had no denial of computer costs; and Case No. 96-1352, in which DEP applied the 10 percent limitation, but reimbursed 896.75 dollars of the computer costs. After implementation of the April 27, 1995 policy, DEP made no effort to adjust the denial of all computer costs in Case No. 95-4606 under the January 1, 1995 policy. The only other category in which DEP evaluates reimbursement on a percentage of hours basis, rather than a units and rates basis, is total management costs. DEP's written guidelines and Rule 17-773.350(16), Florida Administrative Code, limit management costs to a percentage of total allowable personnel hours. There are no rules or written guidelines that would limit computer costs based upon criteria other than a units and rates evaluation, or that would support DEP's policies as reflected in the January 1, 1995 and April 27, 1995 policy memoranda. DEP's rules and written guidelines did not substantively change with regard to this issue from the time Petitioners filed the subject applications, to the time DEP established the January 1, 1995 and the April 27, 1995 computer policies. DEP did not issue any PCRs or other written guidelines to place applicants on fair notice of DEP's new policies with regard to computer costs. DEP presented no persuasive evidence at the hearing to support its January 1, 1995 and April 27, 1995 policies. The only basis for the policy was DEP's representation that it developed the policies as a "reasonableness issue" in order to reduce the amount of computer costs that were appearing in reimbursement applications. DEP did not demonstrate that it based the new policies on any calculation of the amount of computer time necessary to perform a remediation task. Once the total computer costs reached $750 dollars, DEP gave no consideration to the scope or complexity of the task. Given the difference in the amounts involved in performing site remediation services (e.g. an application totaling 7,249.75 dollars in Case No. 96-0411RU versus an application totaling 149,080.02 dollars in Case No. 96-0425RU) and the differences in program tasks (see Rule 17-773.500, Florida Administrative Code), a policy establishing a flat numerical limit on computer costs that an applicant may claim in an application is not reasonable. DEP presented no evidence at the hearing to prove the basis for its retroactive application of the policies to work performed and applications submitted prior to the development of the policies. DEP did not attempt to explain the basis for its failure to apply the rules and written guidelines in effect at the time the work was performed or the records generated. Based upon the foregoing, DEP's denial of computer costs in each of these applications is not supported by the statutes, rules and written guidelines in effect at the time the work was performed or the applications were filed. Each application contains information supporting the computer costs. The application Certification Affidavits and CPA attestations demonstrate that Petitioners incurred the computer costs which DEP should reimburse. The reimbursement for computer costs should be in full except to the extent that DEP allocates to a supporting document a prorated share of the amount of a discount on a factored invoice. As a final note, of the computer costs denied in 16 of the 45 reimbursement notices, the sum of the allowances and deductions does not equal the overall claim. The differences ranged from a few dollars to over four hundred dollars. DEP provided no evidence to explain the discrepancy in the amount calculated by DEP in its notices. Miscellaneous Costs Prior to September 27, 1995, DEP reimbursed miscellaneous line-item costs when the applicant furnished support for them in the application. The miscellaneous costs policy as of May 17, 1995 even dispensed with the requirement of supporting invoices when these costs totaled less than 300 dollars. DEP's reviewers are employees of a firm that provides DEP with application review services as an independent contractor. On September 27, 1995, after a meeting with DEP staff, the application reviewers implemented a policy to deny costs for "overhead." Under the new policy, certain items were overhead, including but not limited to: gloves, mason jars, sampling disposables, phone calls, excessive faxes, excessive copying, small hand tools, shipping documents, etc. The application reviewers had to exercise their own discretion as to which items were "overhead" until they received a guideline from DEP. The reviewers decided to approve overhead expenses of less than $50 and deny items for more than $50. The policy continued in existence at least through November 9, 1995. DEP applied the miscellaneous/overhead policy to all of the subject applications, regardless of the date of cleanup work or application submittal. The application reviewers applied the miscellaneous/overhead "policy" without the knowledge of DEP's Reimbursement Administrator, Charles Williams. When Mr. Williams found out about the policy, he "counselled them that they need to reverse that position." The correct policy would allow reimbursement of "miscellaneous/overhead" costs that the reviewers denied in 33 of the 45 applications. DEP made no effort to correct the denial of these costs based upon its erroneously applied policy. DEP presented no persuasive evidence at the hearing to support its application of the miscellaneous/overhead policy in applications submitted prior to the development of the policy. DEP did not explain the basis for its failure to apply the rules and written guidelines in effect at the time the subcontractors performed the work or generated the records. Based upon the foregoing, DEP's denial of miscellaneous/overhead costs in 33 applications in which DEP denied such costs is not supported by the applicable states, rules and written guidelines. Each application contains information supporting the miscellaneous costs. The applications' Certification Affidavits and CPA Attestations demonstrate that Petitioner's incurred the miscellaneous costs. Therefore, DEP should reimburse those miscellaneous costs. The reimbursement should be in full except to the extent that DEP allocates to a supporting document a prorated share of the amount of a discount on a factored invoice. Airfare From June 17, 1993, to sometime prior to January 31, 1996, DEP's policy with regard to the reimbursement of airfare was to pay airfare integral to site rehabilitation when such costs were relatively inexpensive. By no later than January 31, 1996, DEP developed and applied a policy to deny all airfare costs regardless of whether the applicant provided justification. On March 13, 1996, DEP decided that once again it would reimburse airfare with sufficient justification such as a comparison with car travel. DEP considers the changes in reimbursability of airfare as "just procedures to follow," and applicable without regard to the timing of work performed. DEP denied airfare charges in Case No. 96-1353 as overhead charges. DEP's rules and written guidelines did not substantively change with regard to airfare from June 17, 1993, when airfare was reimbursable, to the policy implemented on January 31, 1996, in which airfare was not reimbursable, to March 13, 1996, when airfare was reimbursable once again. DEP issued no PCRs or other written guidelines to place applicants on fair notice of the changes in policy with regard to airfare. DEP has not provided any evidence to support the basis for the fluctuations in its airfare policy. DEP presented no evidence at the hearing to provide the basis for its application of the airfare policy to work performed and applications submitted prior to the development of the changes in policy. DEP did not explain the basis for its failure to apply the rules and written guidelines in effect at the time the subcontractors performed the work or generated the records. Based upon the foregoing, DEP's denial of airfare costs in the application for Case No. 96-1353 is not supported by the applicable rules and written guidelines. The application contains information supporting the miscellaneous costs. The application's Certification Affidavit and CPA Attestation demonstrate that Petitioner ET incurred the airfare costs. Therefore, DEP should reimburse airfare costs in full except to the extent that DEP allocates to a supporting invoice the prorated amount of a discount on a factored invoice. Inconsistent Agency Practice The application of DEP's factoring policy did not treat Petitioners in a manner different from other funders. Heretofore, DEP was not aware of a case where program participants factored their invoices before filing an application and claimed the face amount of those invoices for reimbursement. The affiliation between Petitioners and AFG and/or AEE was also unique. DEP issued a memorandum requiring funders to provide "clarification regarding essential cost documentation" on July 26, 1995. The purpose of this memorandum was to remind application reviewers of the need for a funder to submit an invoice documenting and supporting its line-item claim for the second- tier 15 percent markup. DEP did not intend for this memorandum to limit DEP's ability to inquire about relationships and transactions taking place outside the usual chain of reimbursement when an application on its face refers to a factoring scheme involving an "affiliation" between the factoring company and the funder. DEP does not deduct finance charges when an applicant incurs (pays) all invoices, submits the application, then sells the receivable or agrees to pay long-term interest pending receipt of payment from the IPTF. In the instant cases, Petitioners agreed to accept reimbursement for their services at a discount before they submitted the applications then included the cost of borrowing capital in the application. DEP does not routinely ask questions of other applicants regarding their financing. Nevertheless, under the facts of these cases, DEP would have been remiss in its duty if it had not made such inquiries. DEP's actions in the instant cases are not inconsistent with its actions taken in other cases with other similarly situated entities because there is no evidence that other such cases exist. Bias On August 31, 1994, Bruce French provided Charles Williams with a memorandum in which Mr. French discussed factoring. In his memorandum, Mr. French concluded that DEP could only reimburse the "discount" amount that the factoring company actually incurred/paid the funders. On September 1, 1994, Mr. French had a discussion with someone named "Toni" at McGuinnes Laboratories regarding the laboratories' use of AFG services for financing invoices to Tower. On September 2, 1994, Mr. French related in a memorandum to Charles Williams, his understanding that the laboratory had different price lists for different customers, generally depending on volume of analysis performed and individual payment agreements. Mr. French surmised that the laboratory's price for services "is inflated to deal with AFG's discount price to be paid by AFG." Mr. French concluded that, under those circumstances, AFG's financing arrangements may "represent collusion on behalf of all parties to the application to defraud DEP for the benefit of AFG. That is, prices are 'fixed' prior to performing of services." On September 2, 1994, Mr. Williams responded to Mr. French's memo by indicating that the scenario presented by Mr. French "sounds interesting" and that DEP would "absolutely need to have a Big Meeting to decide what to do once and for all." On September 12, 1994, Mr. French provided information on factoring to Bill Sittig of DEP's Office of the Inspector General and to Mr. Williams. Mr. French included a drawing entitled "The Tangled Web They Weave or the Hidden Discount Line Items and other Fluff, August 31, 1994 Interpretation of Bruce French's Discussion." At the hearing, neither Mr. Sittig nor Mr. Williams remembered seeing the drawing. There is no competent evidence as to the identity of the person creating the drawing. There is no persuasive competent evidence that Mr. French was biased against Petitioners or any other entity utilizing factoring as a mechanism of financing. Moreover, DEP had no direct and demonstrable bias against Petitioners. Timeliness of Agency Action Prior to filing the instant applications, representatives of the funders and AFG presented various financing schemes to DEP for pre-approval. In each proposal, the person speaking for AFG also spoke on behalf of the funders. At all times relevant here, Paul DeCoster was secretary and counsel for AFG. He was also secretary of SEI and a corporate director and shareholder of WIFL. In September of 1993, Mr. DeCoster wrote a letter to DEP describing a proposed financing scheme in which AFG would purchase the account receivables of contractors engaged in site rehabilitation. AFG's plans were in a formative stage at this time. Mr. DeCoster wrote DEP a follow-up letter dated October 4, 1993. This letter states that: the amount of financing required to meet [certain contractor clients'] working capital needs is so large that FEC [a funder] must find large institutional investors to accommodate them. For service of finding such investors, FEC proposes to charge a fee to the contractor client, which would be in addition to the 15 [percent] 'markup' taken by the investor providing the financing. The October 4, 1993 letter disclosed that contractor clients would deposit funds in a trust account as security for the performance of their work. The trust would invest its funds "in accounts receivable purchased from AFG, the parent of FEC, and any income earned by the trust on those investments would inure to the benefit of AFG." The plan that Mr. DeCoster proposed was markedly different from the scheme utilized here. The most noticeable differences are that the subject applications did not involve a finder's fee, FEC as a funder, or the purchase of AFG's accounts receivable by a reserve trust. In October of 1993, Will Robins met with DEP staff to discuss the manner in which the reimbursement program would apply to a proposed financing scheme. In this proposal, AFG would charge contractors an application/initiation fee and/or a commitment fee. The transactions between the entities in the instant applications did not involve an application/initiation fee and/or a commitment fee. When Mr. Robins made his presentation, DEP did not know the specific relationships between the entities involved or Mr. Robins' position as an officer, director, and or shareholder of these entities. After that meeting, counsel for AFG sent DEP a letter dated November 4, 1993. The letter acknowledges that the existing rules did not "specifically address the types of situations that arise when providing capital for cleanup activities through funding groups such as AFG." The letter identifies ET as the proposed funder through which AFG would finance cleanups. According to the letter, ET would incur the costs but AFG would hold the right to receive the ultimate reimbursement payment from the IPTF. The letter clearly reveals DEP's concern that the proposed application/initiation fee was a "kickback" which should be deducted from the funder's markup. In January of 1994, counsel for AFG wrote a letter to DEP describing a financing scheme which differs in some respects from the financing scheme at issue here. This letter states that AFG intended to purchase receivables of the funder and the general contractor at a discount. Under this plan, the general contractor and the funder would claim the two allowable markups. The subcontractors would pay AFG a finder's fee. The letter reveals that AFG, its affiliates, and investors would recover the cash equivalent of both levels of markups plus a fee from subcontractors for funding the high costs of risky projects. The letter states that: since the Department's reimbursement rules do not specifically address the issue of site cleanups that are funded through private sources of capital . . . it is important that we know if there are any obvious or glaring problems with this plan that would cause reimbursement to be withheld otherwise restricted. On July 13, 1994, counsel for AFG wrote DEP to explain some modifications in the details to the proposed plan for the purchase and sale of receivables at a discount. This letter informed DEP that AFG would have a financial affiliation with the funder (ET) which would exist outside the chain of reimbursement and which would have no effect on either the markups or the overall reimbursement amount reflected in any application. All contracts within the chain of reimbursement (between ET, SEI, Gator, Tower, and its subcontractors) would be negotiated in arms-length transactions. The letter states: In this plan the subcontractors will perform their work on the site and will prepare their invoices in a manner consistent with any publicly or privately financed cleanup. Those invoices will be complied and forwarded to the general contractor for its review and the general contractor will add on the markup allowed by rule to the subcontractor's bills. The reimbursement application will then be forwarded to the funder who will ensure that all bills have been paid and who will be identified as the "person responsible for conducting site rehabilitation" on the reimbursement application. The funder will take the second markup allowed by rule, and will submit the reimbursement application to the Department of Environmental Protection for processing. Reimbursement will ultimately be paid by the Department to the funder in accordance with the reimbursement application. At no step in this process will the Department relinquish any authority to review and approve either the scope and nature of the cleanup or the rates charged by the contractors and subcontractors. Petitioners filed the first of their applications with DEP on July 18, 1994, five days after the date of the July 13, 1994 letter. In late November, 1994, after all but 4 of the 45 applications were filed, DEP placed a telephone call to Petitioners' counsel advising him of the position DEP intended to take with regard to his client's financing arrangements. DEP did not provide any written confirmation of that call, or issue any document describing its policy, until April 21, 1995. In each of the above described letters and/or meetings, AFG's attempt to ascertain DEP's position regarding the various proposed financing mechanisms was unsuccessful. However, AFG was aware that DEP could not take a position that represented official agency action until an applicant actually filed an application. At no time did DEP make any affirmative statement which misled Petitioners regarding the acceptability of AFG's proposals. There is no persuasive evidence to support a finding that the agency did not timely respond to the claims for reimbursement.
Recommendation Based upon the foregoing, it is recommended that DEP enter a Final Order in each of these consolidated cases: (a) disallowing reimbursement of the first- tier markup; (b) disallowing reimbursement of any factored invoice in an amount equal to the amount of the discount on that invoice; and (c) allowing reimbursement of costs associated with airfare, computers, and miscellaneous/overhead expenses. DONE AND ENTERED this 8th day of October, 1996, in Tallahassee, Florida. SUZANNE F. HOOD Administrative Law Judge Division of Administrative Hearings The DeSoto Building 1230 Apalachee Parkway Tallahassee, Florida 32399-1550 (904) 488-9675 SUNCOM 278-9675 Fax Filing (904) 921-6847 Filed with the Clerk of the Division of Administrative Hearings this 8th day of October, 1996. COPIES FURNISHED: E. Gary Early, Esquire Christopher R. Haughee, Esquire Akerman, Senterfitt and Eidson, P.A. 216 South Monroe Street, Suite 200 Tallahassee, Florida 32302-2555 W. Douglas Beason, Esquire Betsy F. Hewitt, Esquire Department of Environmental Protection 2600 Blair Stone Road Tallahassee, Florida 32399-2400 Virginia B. Wetherell, Secretary Department of Environmental Protection Douglas Building 3900 Commonwealth Boulevard Tallahassee, Florida 32399-3000 Perry Odom, Esquire Department of Environmental Protection 3900 Commonwealth Boulevard Tallahassee, Florida 32399-3000
Findings Of Fact Reimbursement Program The Florida Legislature created the reimbursement program to provide for rehabilitation of as many petroleum contamination sites as possible, as soon as possible. Section 376.3071(12)(a), Florida Statutes. The Legislature intended that those responsible persons who possessed adequate financial ability should conduct site rehabilitation and seek reimbursement in lieu of the state conducting the cleanup. Section 376.3071(12)(c), Florida Statutes (1993). When owners and operators of the site or their designees perform site remediation program tasks under any of the programs created by Chapter 376, Florida Statutes, those entities become entitled to reimbursement from the Inland Protection Trust Fund (IPTF) of their allowable costs at reasonable rates. Section 376.3071(12)(b), Florida Statutes. "Allowable" costs are those which are associated with work that is appropriate for cleanup tasks. Section 376.3071(12)(d), Florida Statutes, requires DEP to: Reimburse actual and reasonable costs for site rehabilitation; and Reimburse interest on the amount of reimbursable costs for applications filed after August 14, 1992, at a rate of 1 percent per month or the prime rate, which- ever is less. Interest shall be paid from the 61st day after an application is filed with the department until the application is paid, provided the department determines the application is sufficient; otherwise, interest shall be paid commencing on the date the application is made sufficient until the application is paid. . . . A site owner or operator may engage the services of firms to perform remediation activities on a site and may designate an entity to receive reimbursement for such work. Section 376.301(14), Florida Statutes. Chapter 17-773, Florida Administrative Code (as revised in April of 1993), contains DEP's rules which were in effect at the time Petitioners submitted the instant applications. This chapter is currently located in Chapter 62-773, Florida Administrative Code. Chapter 17-773, Florida Administrative Code establishes procedures and documentation required to receive reimbursement from the IPTF. Rule 17-773.100(4), Florida Administrative Code. Rule 17-773.100(5), Florida Administrative Code, provides in pertinent part: "review and approval of reimbursement applications shall be based upon the statutes, rules and written guidelines governing petroleum contamination site cleanup and reimbursement which were in effect at the time the work was performed or the records of activities and expenses were generated, as applicable. . . . In order to be reimbursable, an applicant must break charges in an application into applicable units and rates. Rule 17-773.100(5), Florida Administrative Code. DEP has a predominate rate schedule to determine whether an allowable cost is reasonable. DEP bases its predominate rates on a study of average rates that contractors charge for a particular task. Requests for reimbursement must apply to costs which are "integral" to site rehabilitation. Rule 17-773.100(2), Florida Administrative Code. "Integral" costs are those which are essential to completion of site rehabilitation. Rule 17-773.200(2)(11), Florida Administrative Code. After integral costs have been identified and incorporated on a units and rates basis in an invoice, the invoice may be marked up at two levels. These markups are subject to certain limitations established by DEP rule: There can be no more than two levels of markups or handling fees applied to contractor, subcontractor or vendor invoices (Rule 17-773.350(9), F.A.C.); There can be no markups or handling fees in excess of 15 percent for each level of allowable markup applied to contractor, subcontractor or vendor invoices (Rule 17-773.350(10), F.A.C.); and There can be no markups or handling fees applied to invoices between any two entities which have a financial, familial, or beneficial relationship with each other (Rule 17-773.350(11), F.A.C.). In order to be reimbursable, costs must have been actually "incurred." Rule 17-773.700, Florida Administrative Code. "Incurred" means that allowable costs have been paid. Rule 17-773.200(9), Florida Administrative Code. When the "person responsible for conducting site rehabilitation" (PRFCSR) has no financial interest in the site, DEP considers the following costs as incurred when the program task is complete: Reasonable rates, including profits associated with the work performed, claimed for the use of their own personnel or equip- ment with documentation pursuant to Rule 17-773.700(7), F.A.C.; and Allowable markups or handling fees applied to their paid contractor, subcontractor, or vendor invoices pursuant to Rule 17-773.350(9), (10), and (11), F.A.C. Rule 17-773.200(9), Florida Administrative Code. Other rules reference limitations on the ability of an entity to take a markup. Rule 17-773.600(2)(d), Florida Administrative Code, provides in pertinent part: . . . If the person responsible for conducting site rehabilitation manufactured the [capital expense item], or a markup is otherwise prohibited under Rule 17-773.350(9), (10) or (11), Florida Administrative Code, no markup of the equipment shall be allowed. Rule 17- 773.700(5), Florida Administrative Code, provides in pertinent part: Costs claimed in a reimbursement application for the employees, equipment or materials of the site owner, site operator or any entity which has a financial interest in the site or a familial or other beneficial relation- ship with the site owner or operator shall be considered to be in house and reimburse- ment shall be limited to actual costs only. No fee, markup, commission, percentage or other consideration shall be allowed. . . . Rule 17-773.700(7), Florida Administrative Code, provides in pertinent part as follows: Pursuant to Rule 17-773.200(9), Florida Administrative Code, reasonable rates, including profits, may be claimed for the personnel and equipment or other allowable expenses of the person responsible for conducting site rehabilitation as well as allowable markups on paid contractor subcon- tractor and vendor invoices and shall be considered incurred for the purpose of reimbursement provided: The person responsible for conducting site rehabilitation does not have a financial interest in the site pursuant to Rule 17-773.200(7), Florida Administrative Code, or a familial or other beneficial relationship with the site owner or operator; The activities performed were integral to the program task claimed pursuant to Rule 17-773.500, Florida Administrative Code; and Detailed invoices are provided by the person responsible for conducting site rehabilitation that include all subcon- tractor and vendor invoices . . . [which] must identify the person responsible for conducting site rehabilitation and clearly distinguish their costs from those for paid subcontractors or vendors. There are no other provisions in the applicable rules which pertain to markups. A contractor must pay all invoices generated by a subcontractor at 100 percent of their face value prior to submission of an application in order to qualify those invoices for reimbursement. When a contractor pays a subcontractor's invoices, the contractor paying those invoices normally may take one of the allowable levels of markup. Prior to submitting a reimbursement application, a funder or PRFCSR involved in the reimbursement chain must pay the contractor for its invoices and markup. Then, the funder may apply the second allowable markup and submit the reimbursement application for review by DEP and payment from the IPTF. DEP does not contest the second level of markup in these applications. DEP rules restrict reimbursement when parties within the usual "chain" of reimbursement (PRFCSR or funder, contractor and subcontractor) have financial, beneficial or familial relationships with each other or the site owner. The application form requires disclosure of such relationships through the Program Task and Site Identification Form. Rule 17-773.200(1), Florida Administrative Code, provides as follows: "Beneficial relationship (interest)" means a connection or association, excluding an arm's length contractual relationship, which benefits a person or company by yielding a profit, advantage or benefit, or entitlement thereto, exceeding five percent of the person's or company's annual gross income. Rule 17-773.200(6), Florida Administrative Code, provides in pertinent part: "Familial relationship (interest)" means a connection or association by family or relatives, in which a family member or a relative has a material interest. . . . Rule 17-773.200(7), Florida Administrative Code, provides as follows: "Financial relationship (interest)" means a connection or association through a material interest or sources of income which exceed five percent of annual gross income from a business entity. Banks, lending institutions, and other lenders that provide loans for site rehabilitation activities are not considered to have a financial interest in the site on that basis alone. However, as of the effective date of this rule, guarantors of loans to or co-makers of loans with persons signing as responsible party are considered to have a financial interest if the amount of the loan exceeds five percent of the net worth of either company. As used in this definition, sources of income shall not include any income derived through arm's- length contractual transactions. Rule 17-773.200(13), Florida Administrative Code, states as follows: "Material interest" means a direct or indirect interest or ownership of more than five percent of the total assets or capital stock of any business entity. The rules and written guidelines of DEP do not address activities, including financing arrangements, occurring outside of the usual chain of reimbursement, so long as an applicant does not include charges for such activities in an application. Heretofore, DEP has not deducted finance costs that an applicant does not include as a line item in a reimbursement application. Pursuant to Section 376.3071(l2)(m), Florida Statutes, DEP must perform financial audits "as necessary to ensure compliance with this rule and to certify site rehabilitation costs." Rule 17-773.300(1), Florida Administrative Code. DEP performs this audit function: (a) to establish that the PRFCSR incurred the cost; (b) to determine that adequate documentation supports the claimed costs as incurred; and (c) and to review the reasonableness and allowance of the costs. The audit staff interprets the term "incurred" to mean that the applicant paid the costs included in the reimbursement application. Pursuant to Rule 17-773.350(4)(e), Florida Administrative Code, "[i]nterest or carrying charges of any kind with the exception of those outlined in Rule 17-773.650(1), F.A.C." are not reimbursable. The exceptions to the payment of interest set forth in Rule 17-773.650(1), Florida Administrative Code, are not at issue here. An interest rate charge on short-term borrowed capital from an unrelated third-party source is a "cost of doing business." DEP's predominate rates are fully loaded. They include a variable for all direct and indirect business overhead costs such as rent, utilities and personnel costs. DEP includes the cost of short-term borrowed capital in the direct and indirect overhead components of DEP's fully-loaded personnel rates. Rule 17- 773.700(5)(a), Florida Administrative Code. However, DEP never intended for its predominate rate schedule to create an entitlement to reimbursement of claims which are not otherwise actual and reasonable costs of site rehabilitation. Petitioners PRFCSRs are entitled to make application for reimbursement of allowable markups and costs of site rehabilitation that they incur. In these consolidated cases, the site owners or operators designated either Petitioner ET or Petitioner SEI as PRFCSR. The PRFCSR is typically referred to as the "funder" in the reimbursement chain. Petitioner ET is a trust formed in 1993 and domiciled in Bermuda. It acts as a conduit for funds that finance activities associated with Florida's petroleum contamination site cleanup program. The named beneficiaries of the trust are those contractors and subcontractors entitled to payment of costs for activities integral to site rehabilitation and for allowable markups of such costs. The sole trustee of ET is Western Investors Fiduciary, Ltd. (WIFL). WIFL is also the owner and a beneficiary of ET. Any profit that ET derives from funding cleanup projects flows through WIFL to investors who provide funds to finance site rehabilitation. American Environmental Enterprises, Inc. (AEE discussed below) provided the investment funds for the reimbursement applications at issue here. WIFL is a limited liability corporation created and domiciled in Bermuda. The officers of WIFL are: William R. Robins, President; John G. Engler, Vice-President; and Peter Bougner, Secretary. The directors of WIFL are: William R. Robins, John G. Engler, Paul H. DeCoster, Alec R. Anderson and Nicholas Johnson. WIFL's directors are also its shareholders. Petitioner SEI is a corporation incorporated and operating under Florida law. Organized in 1994, SEI acts as a conduit for funds to finance activities associated with Florida's petroleum contamination site cleanup program. The officers and directors of SEI are: William R. Robins, President; John G. Engler, Executive Vice President; and Paul H. DeCoster, Secretary. William R. Robins is the sole shareholder of SEI. SEI was specifically created to meet the needs of American Factors Group, Inc.'s (AFG discussed below) Florida investors. Respondent DEP is the agency charged with the duty to administer the IPTF and Chapter 376, Florida Statutes. Financing Entities American Factors Group, Inc. (AFG) is a privately held corporation incorporated and operating under New Jersey law. AFG is not a party to this proceeding. AFG, acts as the servicing agent for contracts associated with factoring activities and other types of financing operations. AFG, through one of its divisions, Environmental Factors (EF), entered into financing contracts with entities in the reimbursement process: (a) Petitioners ET and SEI, funders; (b) Gator Environmental, Inc. (Gator), general contractor; and (c) Tower Environmental, Inc. (Tower), prime subcontractor. Through these agreements, EF or its assignee bought the rights of ET, SEI, Gator, and Tower to future reimbursement payments at a percentage of the face value of the relevant invoices. The officers of AFG are: William R. Robins, President; John G. Engler, Vice President; and Paul H. DeCoster, Secretary. Bleak House, Inc. (Texas) owns the stock of AFG. American Environmental Enterprises, Inc. (AEE) is incorporated and operating under Nevada law. AEE is not a party to this proceeding. AEE, as the assignee under the EF contracts, is a third-party provider of capital to various entities in the reimbursement process, including Petitioners. The officers of AEE are: William R. Robins, President; John G. Engler, Vice-President; and Paul H. DeCoster, Secretary. Bleak House, Inc., (Nevada) owns the stock of AEE. Bleak House, Inc., (Nevada) is incorporated and operating under Nevada law. Bleak House, Inc. (Texas) is incorporated and operating under Texas law. Officers of both corporations are William R. Robins, President; John G. Engler, Vice President; and Paul H. DeCoster, Secretary. Magazine Funding, Inc. owns the stock of both Bleak House corporations. Magazine Funding, Inc. is incorporated and operating under Nevada law. Officers of Magazine Funding, Inc. are William R. Robins, President; John G. Engler, Vice-President; and Paul H. DeCoster, Secretary. Family Food Garden, Inc. owns the stock of Magazine Funding, Inc. Family Food Garden, Inc. is incorporated and operating under Massachusetts law. Officers of Family Food Garden, Inc., are William R. Robins, President; and Paul H. DeCoster, Secretary. Six shareholders own the stock of Family Food Garden, Inc. None of these shareholders are related by familial ties to the officers or directors of the aforementioned companies or any relative thereof. Each of these companies -- ET, SEI, WIFL, AEE and AFG (including EF) share common officers and directors. Each of the companies maintain their own books and business records, file their own tax returns, and maintain records in accordance with the laws of the jurisdiction in which they were established. They operate pursuant to their respective bylaws or trust agreement. ET, WIFL, and SEI do not have common assets with AEE or AFG (including EF). ET, WIFL and SEI do not have a beneficial, financial, or familial relationship with AEE or AFG (including EF) as Rule 17-773.200, Florida Administrative Code, defines those terms. Despite the facial organizational and structural integrity of ET, WIFL, SEI, AEE and AFG, the officers and directors of AFG and/or AEE created Petitioners, in large part, for the benefit of AFG and/or AEE as a means to invest funds in Florida's petroleum contamination site cleanup program. The primary purpose of each funder is to maximize the profits of AFG and its investors. AFG has other investment vehicles (funders) which it uses at times depending on the needs of its investors. AFG waits until the last instance before deciding which entity it will designate as funder in any particular factoring scenario. AFG usually does not make that decision until the day AFG's designated funder issues a funder's authorization to the general contractor. At the hearing, Mr. Stephen Parrish, a vice president of AFG, testified as the party representative for ET and SEI. WIFL and SEI have no employees. EF or AFG responded to DEP's request for Petitioners to provide additional information about the financing scheme utilized here using stationary bearing EF's or AFG's letterhead. Nineteen of the letters written on ET's behalf refer to ET as an affiliate of AEE. At least five of the letters written on SEI's behalf refer to ET as the funder and AEE as ET's affiliate. The greater weight of the evidence indicates that AFG and/or AEE negotiated less than arms-length contractual agreements with ET, WIFL, and SEI. Petitioners admit that they are "affiliates" of AEE and AFG through contractual agreements. However, there are no written factoring contracts between Petitioners and AFG such as the ones that exist between AFG, Gator and Tower. The only documented evidence of agreements between Petitioners and AFG are transactional based bills of sale representing the sale to AEE of Petitioners' right to receive reimbursement from the IPTF. AFG created these bills of sale for bookkeeping purposes. AFG did not even go to the trouble of tailoring the form for the bills of sale for their stated purpose. For all practical purposes, Petitioners are under the management and control of AEE and AFG. Petitioners and AFG disclosed their affiliation in meetings with DEP staff and through correspondence and other documentation, including but not limited to: (a) letter to DEP dated July 13, 1994 from AFG's counsel; (b) Addendum to Certification Affidavit signed by a Certified Public Accountant in each application; (c) Funder's Authorization; (d) letters sent to DEP between August 14, 1995 and November 19, 1996. Factoring and the Factoring Transactions Factoring is the purchase and sale of an asset, such as an account receivable, at a discount. An account receivable reflects the costs that a business charges after rendering a service but before the entity responsible for payment pays for that service. When a contractor completes a rehabilitation task, the contractor's invoice is an account receivable until it receives payment. In these consolidated cases, AEE provided short-term operating capital to Gator and Tower at an interest rate equal to the discount percentage of the relevant invoice (account receivable). Gator and Tower did not sell their account receivables to AEE. Instead, AEE, as the assignee of EF, purchased a contractual right to receive Gator's and Tower's reimbursement payments. In exchange, AEE advanced Gator and Tower a discounted amount of their invoices. The discounted amount of an invoice represents a loan from AEE to Gator and Tower. The difference between the face amount of the invoice and the discounted amount of the invoice represents interest. A discount percentage and an interest rate are equivalent. The amount of the discount represents interest on the loan or advance provided by AEE. It is an interest expense to the contractor or subcontractor. The Factoring Agreements On or about April 25, 1994, EF and Tower entered into a Prime Subcontractor Factoring Agreement. On or about July 8, 1994, EF and Tower executed an addendum to the Prime Subcontractor Factoring Agreement. The addendum required Tower to sell to EF Tower's right to receive payments from Gator. In return, EF agreed to advance Tower a discounted amount equal to 97 percent of the face amount of Tower's invoices. Tower agreed to repay EF 100 percent of the face amount of the invoices upon receipt of payments from Gator. The discounted amount of each invoice represents a loan from AEE to Tower. A bill of sale evidenced the sale of Tower's right to receive payment on each application. On or about July 8, 1994, EF and Gator entered into a General Contractor Factoring Contract. On or about July 13, 1994, EF and Gator entered into an Addendum to General Contractor Factoring Agreement. This addendum required Gator to sell EF Gator's right to receive payments from ET or SEI. In return, EF agreed to advance Gator a discounted amount equal to 88 percent of the face amount of Gator's invoices. Gator agreed to repay EF 100 percent of the face amount of the invoices upon receipt of payments from the funder. The discounted amount of each invoice represents a loan from AEE to Gator. A bill of sale evidenced the sale of Gator's right to receive payment on each application. The financing of the pending reimbursement applications involved the following interrelated transactions though not necessarily in this order: AEE as the assignee of EF purchased the right of ET, SEI, Gator and Tower to receive reimbursement for their services at a discount. ET, SEI, Gator and Tower agreed to repay AEE in full. Tower prepared and submitted to Gator an invoice for services provided by Tower and its subcontractors. Tower also prepared and submitted to Gator a reimbursement application for the program task. AEE advanced Tower the agreed upon discount amount. Tower used these funds to pay its subcontractors and vendors. AEE advanced Gator the agreed upon discount amount. Gator used these funds to pay Tower. Tower repaid AEE in full. Gator prepared an invoice for services provided by Gator, Tower and Tower's subcon- tractors including a 15 percent markup and submitted it with the reimbursement application either to ET or SEI. AEE advanced ET or SEI the discounted amounts as agreed. ET or SEI paid Gator in the full amount of Gator's invoice plus markup. Gator repaid AEE in full. ET or SEI prepared an invoice for its services plus the services of Gator, Tower, and Tower's subcontractors and a 15 percent markup. ET or SEI submitted the reimbursement application to DEP. When ET or SEI receives reimbursement from the IPTF, they will remit the total payment to AEE. The on-site work on each project was complete or substantially complete prior to Gator's involvement. In regards to some applications, the relevant dates on the subcontract/purchase order, Gator invoice, and Tower invoice are the same. The amount of time between AEE's payment of the advances and Gator's and Tower's subsequent remittance of 100 percent of the face amount of their invoices to AEE varied from a few days to a few weeks. The Agency Statement--Factoring Petitioners submitted the subject applications to DEP between July 18, 1994 and February 17, 1995. The financing scheme utilized in these applications was unique. Prior to the receipt of these applications, DEP never had reviewed reimbursement applications using the type of factoring scheme at issue here. In fact, the instant cases present a scenario never contemplated by DEP when it promulgated its rules and written policies. In the instant applications, the "chain of reimbursement" included: ET and SEI as funders or PRFCSRs, Gator as the named general contractor, Tower as prime subcontractor, and numerous subcontractors and vendors. As stated above, DEP was also aware that AFG and AEE (including EF) were "affiliated" with ET and SEI and would ultimately receive all reimbursement payments from the IPTF. 56 When Petitioners submitted the subject applications, no rule or written policy disallowed reimbursement for the face amount of contractors' and subcontractors' invoices when they sold their right to payments, i.e. the receivables, at a discount. When Petitioners submitted the subject applications, DEP had rules that restricted the ability of an entity to apply markups on invoices when a familial, financial or beneficial affiliation existed between a contractor, subcontractor, PRFCSR and the site or site owner, or when such relationships existed amongst those entities in the chain of reimbursement. However, there were no rules or written guidelines restricting reimbursement, based upon financial transactions occurring outside of the chain of reimbursement, if the applicant did not pass the costs of such transactions to DEP in an reimbursement application. In that regard, DEP usually dealt only with what was apparent in an application. If an application had a line-item claim for interest, DEP would not pay that claim under the rule limiting the payment of interest. Otherwise, DEP generally did not deal with costs, including interest, for which the applicant did not seek reimbursement. The applications in the subject cases did not contain line-item claims for interest. However, the difference between the face value of the invoices and the amount for which Gator and Tower sold their right to receive reimbursement for those invoices clearly represents interest. Tower's invoices appear to represent work that was integral to site remediation which was broken down into appropriate Eunits and rates. There is no evidence that the prime subcontractor, subcontractors and vendors intentionally inflated their invoices to cover the cost of financing. However, they did agree to accept a lesser amount then the face amount of their invoices for their services prior to the filing of the applications. In September and October of 1993, Paul DeCoster wrote letters to DEP describing a proposed financing scheme in which AFG would purchase the account receivables of contractors engaged in site rehabilitation. Mr. DeCoster wrote a follow-up letter dated October 4, 1993. In this letter, Mr. DeCoster proposed that AFG would charge the contractor a finder's fee which would be in addition to the 15 percent financing "markup" taken by the investor providing the financing. This proposal referenced a funder, FEC, whose parent was AFG. The transactions between the entities in the instant applications did not involve a finder's fee or a funder identified as FEC. In October of 1993, Will Robins met with DEP staff to discuss the manner in which the reimbursement program would apply to a proposed financing scheme. In this proposal, AFG would charge contractors an application/initiation fee and/or a commitment fee. The transactions between the entities in the instant applications did not involve an application/initiation fee and/or a commitment fee. After that meeting, counsel for AFG sent DEP a letter dated November 4, 1993. The letter acknowledges that the existing rules did not "specifically address the types of situations that arise when providing capital for cleanup activities through funding groups such as AFG." The letter identifies ET as the proposed funder through which AFG would finance cleanups. AFG would receive the ultimate reimbursement payment from the IPTF. At that time DEP was concerned that the proposed application/initiation fee was a "kickback" which DEP should deducted from the funder's markup. In January of 1994, counsel for AFG wrote a letter to DEP describing a financing scheme which differs in some respects from the financing scheme at issue here. This letter states that AFG intended to purchase receivables of the funder and the general contractor at a discount. Under this plan, the general contractor and the funder would claim the two markups. The subcontractors would pay AFG a finder's fee. The letter reveals that AFG, its affiliates, and investors would recover the cash equivalent of both levels of markups plus a fee from subcontractors for funding the high costs or risky projects. The transactions between the entities in the instant applications did not involve a finder's fee. On July 13, 1994, counsel for AFG wrote DEP to explain some modifications in the details to the proposed plan for the purchase and sale of receivables at a discount. This letter informed DEP that AFG would have a financial affiliation with the funder (ET) which would exist outside the chain of reimbursement and which would have no effect on either the markups or the overall reimbursement amount reflected in any application. All contracts within the chain of reimbursement (between ET, SEI, Gator, Tower, and its subcontractors) would be negotiated in arms-length transactions. The letter states: In this plan the subcontractors will perform their work on the site and will prepare their invoices in a manner consistent with any publicly or privately financed cleanup. Those invoices will be complied and forwarded to the general contractor for its review and the general contractor will add on the markup allowed by rule to the subcontractor's bills. The reimbursement application will then be forwarded to the funder who will ensure that all bills have been paid and who will be identified as the "person responsible for conducting site rehabilitation" on the reimbursement application. The funder will take the second markup allowed by rule, and will submit the reimbursement application to the Department of Environmental Protection for processing. Reimbursement will ultimately be paid by the Department to the funder in accordance with the reimbursement application. At no step in this process will the Department relinquish any authority to review and approve either the scope and nature of the clean-up or the rates charged by the contractors and subcontractors. Commencing on August 31, 1994, DEP began to develop a policy regarding the use of factoring as a financing mechanism in the reimbursement program. DEP personnel exchanged numerous documents regarding the subject of factoring. In one of those memoranda dated September 2, 1994, Charles Williams, DEP's Reimbursement Administrator, indicated that "we absolutely need to have a Big Meeting to decide what to do once and for all." In November 1994, DEP provided AFG's counsel with an informal opinion of how DEP would handle a factored application as described by Will Robins of AFG in an earlier meeting with DEP staff. The statement was that the difference between the amount that a contractor accepted in payment for his services, which was a discounted amount after factoring, . . . and the face value of the invoice which was claimed and marked up in the application was determined to be a carrying charge or interest, which is specifically disallowed for reimbursement in the reimbursement rule. American Factors Group. Inc. and the Environmental Trust v. Department of Environmental Protection, DOAH Case No. 95-0343RU, Final Order issued July 24, 1995. DEP advised AFG's counsel that it would deal with factored applications involving other entities on a case by case basis. On December 20, 1994, John Ruddell, DEP's Director of the Division of Waste Management, sought permission from DEP's Policy Coordinating Committee to promulgate a rule amendment to Chapter 62-773, Florida Administrative Code (formally Chapter 17-773). A draft rule accompanied the request. Mr. Ruddell developed the draft rule in compliance with Chapter 94-311, Section 6, Laws of Florida, which required DEP to revise its reimbursement rule. The draft rule provided that nothing in this Chapter shall be construed to authorize reimbursement for the face amount of any bill or invoice representing incurred costs when the receivable has been sold at a discount. In all such cases, reimbursement shall be limited to the actual discounted amount accepted by the provider of the goods or services. . . . The draft rule had the effect of prohibiting factoring as a mechanism for financing site rehabilitation work. The draft rule did not single out any other financing mechanism. DEP did not promulgate that draft rule. DEP requested that Petitioners furnish additional information regarding the instant applications. Between March 1, 1995 and November 17, 1995, Petitioners responded to DEP's requests with letters bearing AFG's or EF's letterhead. The letters state that prior to filling the applications, ET (and in some cases SEI) paid Gator for the face amount of the invoices plus Gator's markup. Gator then paid the subcontractors for the face amount of their invoices. Prior to these payments, AEE, an affiliate of ET, purchased the right to receive the amount due to Gator from ET or SEI and the right to receive the amount due to subcontractors from Gator. In each case, AEE bought the right to receive at a discount. According to the financing scheme, ET or SEI received sufficient funds from AEE to make the payments to Gator. ET, in turn, was obligated to pay AEE following its receipt of the funds claimed in the reimbursement application. On or about April 21, 1995, Bruce French, Environmental Manager in DEP's Bureau of Waste Cleanup, developed a memorandum discussing the proper handling of factored and/or discounted reimbursement applications. Mr. French initially sent the memorandum to Charles Williams, DEP's Reimbursement Administrator in DEP's Bureau of Waste Cleanup. The memorandum states that: invoices from subcontractors, vendors, suppliers and/or the general contractor which were paid a factored (e.g., discounted) amount by a third party capital participant (e.g., funder) represents the actual amount incurred by that entity and subsequently by the general contractor. DEP subsequently disseminated the memorandum to all application reviewers to acquaint them with DEP's policy on invoices or applications involving factoring as the financing mechanism. DEP did not direct the policy on factoring towards any individual company. DEP intended it to apply to "any combination of a general contractor, management company, funder and responsible party" in any situation in which a third party capital provider paid those program participants or suppliers a factored (discounted) amount of their invoices. The policy memorandum directed DEP reviewers to deduct costs from an application in an amount equal to the difference in the face value of an invoice and the amount paid for the right to receive payment under that invoice. The language of the policy set forth in the April 21, 1995 memorandum was broad and did not condition DEP's position on factoring on any affiliation between any parties. Between August 14, 1995 and February 2, 1996, DEP took action on the 45 applications at issue here. As reflected in those notices, DEP denied reimbursement of costs claimed in those applications because of the factoring of the supporting invoices and because "the difference between the face amount of the supporting invoices and the amount factored represents interests or carrying charges which are specifically excluded from reimbursement pursuant to Rule 62- 773.350(4), F.A.C." DEP deducted from the cost of each application an amount equal to the amount of the discount on each relevant invoice. When DEP issued the denial letters, it had not adopted the policy against factoring by the rulemaking procedure required in Section 120.54, Florida Statutes. The notices reflected a basis of denial of costs that was consistent with DEP's policy as reflected in the December 20, 1994 Draft Rule and the April 21, 1995 memorandum. This non-rule policy, which generally applied to all factoring schemes was not apparent from the rules in effect at that time. The Agency Statement--Markup/Value Added Policy Funders and contractors are entitled to take a markup of paid contractor and subcontractor invoices for allowable costs at reasonable rates. The invoices must represent actual and reasonable costs which are integral to site remediation. Contractors usually are entitled to a first-tier 15 percent markup for supervising and/or coordinating on-site remediation, for investing capital while awaiting reimbursement by paying subcontractors' invoices, and for assuming liability for the performance of the subcontractors. Funders normally are entitled to a second-tier 15 percent markup as an incentive to provide funds to finance the work. Markups are expressly subject to limitations set forth in Section 17- 773.350(9), (10) and (11), Florida Administrative Code. There are no other specific or implied limitations on markups in the rules or written guidelines. Requiring each entity that receives a markup in the reimbursement chain to pay contractor, subcontractor, and vendor invoices helps ensure that each level in the reimbursement chain pays the entity at the next lowest level in full. In these cases, each level in the reimbursement application chain "technically" paid the entity at the next lowest level. DEP policy in effect at the time Petitioners submitted the instant applications for reimbursement was to allow markups of paid invoices at two levels. However, DEP was not aware of situations where general contractors claimed markups for work that was complete before they ever became involved in the projects. With regard to all of the pending reimbursement applications, Gator applied a 15 percent markup to all of Tower's invoices including the invoices of Tower's subcontractors and vendors. With regard to a minimum of 30 of the 45 sites, Gator clearly did not supervise, manage or direct any of the on-site remediation activities. In fact, Gator did not become involved until after Tower had undertaken and completed these tasks. In at least 30 of the instant cases, Tower was acting as the general contractor when all of the on-site remediation took place. However, Tower could not apply a 15 percent markup to the invoices for its own services. Gator made it possible for Petitioners to claim the markup on Tower's invoices. As to the 15 sites at which Gator allegedly had some type of involvement with on-site remediation activities, the record contains no evidence regarding the specific activities or the level of Gator's involvement on any particular project. Gator performed some type of minimal due diligence review of Tower's site work. Gator allegedly reviewed Tower's technical and administrative files, cross-referenced technical and administrative files with the applications which Tower prepared, made visits to some job sites, and prepared a deficiency letter to determine the appropriateness of the scope of Tower's work. However, all of these functions were repetitious of the work performed by Tower and the certified public accountant attesting to the Certification Affidavit. Tower was a qualified engineering consulting firm that employed its own engineers and geologists. Gator's employee that reviewed the technical information in Tower's files was not a Florida professional engineer. He was not qualified as a certified public accountant to determine whether a charge was within DEP's reasonable rates. The Gator employee was a Florida professional geologist but he did not sign and seal the deficiency letter as such. There is no reference in DEP's rules or written policies to a deficiency letter. AFG required Gator to prepare the deficiency letter within two days of the date on which EF provided Gator with the opportunity to review a completed task. This two-day turn around time allegedly afforded efficiency of payment. The deficiency letters were limited to the question of whether the scope of Tower's services were reimbursable. Gator did not begin its review of an reimbursement application until after Gator received an invoice from Tower. The relevant subcontract/purchase order issued by Gator to Tower, the Tower invoice and the Gator invoice often were prepared on the same day. Gator "technically" paid the invoices at the next lowest level with money that AEE advanced. When Gator received payments from ET or SEI, it immediately repaid AEE before ET or SEI submitted the applications to DEP or soon thereafter. Pursuant to the addenda to the factoring contracts, Tower, not Gator, contributed to a reserve trust account which AEE will use to cover any reimbursement shortfalls. Gator allegedly indemnified the funder and guaranteed its own work but did not assume a risk of loss on Tower's work. On most if not all of the applications, Gator performed no meaningful management or supervisory functions. Gator's primary purpose in these consolidated cases was not to afford AFG a level of comfort as to the appropriate scope of the individual program tasks but to ensure that third-party investors maximized their profits. On September 1, 1994, Restoration Assistance, Inc., an entity under contract with DEP to review reimbursement applications, issued a memorandum to its reviewers directing them to complete their review and do a "total denial" on "Gator Environmental packages." The memorandum advised the reviewers that "Bruce" was drafting canned language to use in DEP's denial statement. On or about April 21, 1995, DEP presented its reviewers with a memorandum setting forth an initial overview of a "value added" policy for markups taken by a "management company" involved in site remediation activities. The memorandum indicated that DEP would allow reimbursement of claims for actual project management work and value-added services. The memorandum further provided that DEP would allow markups to a management company which only provided cash-flow services for a majority of the program task period even if the management company performed no other service. However, DEP would deny a markup if the management company provided such services during a "one month time period." DEP intended for the April 21, 1995 memorandum to acquaint DEP reviewers with the emerging DEP policy on markups. DEP's rules and written guidelines do not address the distinction made in the April 21, 1995 memorandum regarding the timing during which a management company could provide cash flow services and still be entitled to a markup. On October 20, 1995, Charles Williams issued a DEP policy memorandum for reviewers to use in reviewing reimbursement applications. Through that memorandum, DEP finalized and implemented the "value added" policy. The memorandum states that if the "GC" [general contractor] was involved with the management of the project during the course of the actual work by subcontractors, [DEP] rules do not preclude them from applying a markup. However, if the "GC" came along after the work was completed by other contractors and their involvement was more of a due diligence exercise to faciltiate (sic) a funding arrangement by a third party, then the "GC" markup would not be justified, though a markup by the actual funder listed as the PRFCSR could be allowed." Prior to the establishment of the "value added" policy on October 20, 1995, DEP made no inquiry as to whether a contractor provided value added services which were not reflected in an application in order to be entitled to a markup. DEP applied the "value added" policy to all pending applications (including the ones at issue here) resulting in a deduction of Gator's markup in all of the subject cases. The Department of Banking and Finance reviewed and issued a report (Comptroller's Report) on the Petroleum Contamination Site Cleanup Reimbursement Program on November 29, 1994. This report addressed the issue of markups in the reimbursement program. The Comptroller's Report recognized that DEP found the multiple markup structure to be beneficial in that it "attracts the involvement of companies whose role in cleanup projects is limited to providing funds to finance the work [and] attracts investors who provide funds which might not otherwise be available--thus facilitating cleanup of contaminated sites." The report acknowledges that a prime contractor "might have only limited direct involvement in the cleanup, having engaged subcontractors for most or all of the actual work." The Comptroller's Report did not address whether a contractor would be entitled to a markup if it became involved after all site work was complete. The Petroleum Efficiency Task Force's (PETF) final report concerning financing for reimbursement contractors issued on August 17, 1994. This report discussed DEP's policy of allowing two markups on paid invoices. The report recognized that "funders must be able to rely on the skills and knowledge of contractors to minimize reimbursement shortfalls." The PETF recommended for future consideration that "the Department should provide in rulemaking that contractors who take the first-tier 15 percent markup on subcontracted work must adequately supervise the work." When the PETF issued this final report, there was no existing rule that established any level of on site supervision or any other specific criteria for applying one of the two allowable levels of markup, other than paying invoices for integral site rehabilitation work. DEP's rules and written guidelines did not substantively change with regard to the "value added" policy from the April 22, 1993 revision of Chapter 17-773, Florida Administrative Code, to the October 20, 1995 memorandum which established a non-rule limitation on the ability of an entity to apply a markup to paid invoices. The "value added" policy is not reflected in any rule or written guideline, and would not be made available to a participant in the reimbursement program who requested program information. The "value added" agency statement is a non-rule policy which has the effect of a rule. DEP intends to apply the policy in all cases where a contractor's service adds no value to a project. DEP did not anticipate the need for such a rule when it promulgated the current rules. The Agency Statement Standard During the 1994 Legislative Session, the Florida Legislature directed that "no later than January 1, 1995, DEP shall review and revise rules related to the pollutant storage tanks programs . . . ." Chapter 94-311, Section 6, Laws of Florida. DEP understood that legislative instruction to include rule revisions related to the reimbursement program. On April 7, 1994, the Office of Statewide Prosecution issued a Statewide Grand Jury Report. The final report concerning financing of reimbursement contractors was prepared for the Florida Petroleum Efficiency Task Force on August 17, 1994. The Office of Controller issued its report on the Petroleum Contamination Site Cleanup Reimbursement Program on November 29, 1994. All of these reports offered suggestions for changes to the reimbursement rule. DEP first learned about factoring from presentations by Paul DeCoster and Will Robins in 1993. After these meetings, Petitioner proposed several factoring plans as proposed schemes to finance petroleum contamination site cleanup projects. Petitioners did not finalize the exact financing scheme they intended to use until July of 1994. Petitioners filed the first applications on July 18, 1994. By that time, DEP was aware that the factoring company was affiliated with the funders. DEP was also aware that the factoring company would receive the difference between the face amount of an invoice and the discount amount of that invoice. However, DEP was not aware of the exact nature of the relationships between AFG, AEE, EF, ET, WIFL, SEI, Gator and Tower. DEP was unable to evaluate all aspects of Petitioners' factoring plan without supplemental information about the details of the purchase and sale of receivables as they related to each application. DEP requested additional information from the applicants to determine if the costs were actually incurred. As a result of the information that DEP received, it reviewed all transactions to determine whether the costs claimed in the applications were actual and reasonable. On December 20, 1994, John Ruddell, Director of DEP's Division of Waste Management, sought permission from DEP's Policy Coordinating Committee to promulgate a rule amendment to Chapter 62-773, Florida Administrative Code (formerly Chapter 17-773, Florida Administrative Code). A draft rule accompanied the request. DEP intended the draft rule to comply with the legislative mandate contained in Chapter 94-311, Section 6, Laws of Florida. By that time, Petitioners had filed 41 of the subject applications. The 1994 draft rule provided that if a program participant sold a receivable at a discount, reimbursement would be limited to the actual discounted amount accepted by the provider of the goods or services rendered. The draft rule eliminated markups of contractor and subcontractor invoices. The December 20, 1994 memorandum to DEP's Policy Coordinating Committee did not indicate any deficiency in the existing delegated legislative authority that would prevent DEP from implementing the changes to the draft rule. DEP policy coordinating committee declined to approve the initiation of rulemaking procedures. Instead, it directed DEP staff to draft a bill for the 1995 legislative session. DEP based this decision on a determination that it would take too long to correct the numerous problems through the rulemaking process. The 1995 Legislative Session made several changes to the reimbursement program, particularly as it related to the direction of future site remediation activities. Chapter 95-2, Laws of Florida, passed the 1995 Legislative Session and changed the program from reimbursement of completed work to requiring pre-approval of work before it commenced. The 1995 Legislative Session did not make any relevant amendment to the reimbursement payment procedures in Section 376.3071(12), Florida Statutes. During the period between adjournment of the 1995 Legislative Session and February 2, 1996, DEP took action on each of the 45 applications that are the subject of this proceeding. Meanwhile, DEP focused its attention on making the necessary changes to switch from a reimbursement program to the new pre- approval program. It is not unreasonable to believe that such a significant change in a large program would take an agency some time to educate itself and the program's participants, prepare documentation and forms, and take steps to begin implementation. On March 22, 1996, approximately six and one-half months (198 days) after the petition for administrative hearing in Case No. 95-4606, and almost 21 months after the effective date of Chapter 94-311, Laws of Florida, DEP published its notice of rule development in the Florida Administrative Weekly. DEP filed the notice of rule development specifically "in response to litigation pending before the Division of Administrative Hearings" in the 45 cases that are the subject of this proceeding. In these consolidated cases, DEP did not have sufficient time prior to March 22, 1996 to acquire the knowledge and experience reasonably necessary to address, through the rulemaking process, the policy statements relative to factoring and markups based on value added services. Certainly, related matters were not sufficiently resolved to enable DEP to initiate rulemaking to address the policies set forth in the March 21, 1995 and October 20, 1995 memoranda until the spring of 1996. DEP is currently using the rulemaking procedure expeditiously and in good faith to adopt rules which address these non-rule policies. Additionally, the record indicates that it was not possible for the agency to initiate rulemaking in time to give Petitioners advance notice of the new policies. Petitioners filed the last applications in February of 1995 before DEP had time to fully evaluate the factoring plan. The time it took DEP to develop the detail or precision in the establishment of the policies set forth in the March 21, 1995 and October 20, 1995 memoranda was reasonable under the circumstances.
The Issue The issue in this case is whether Petitioner's site located at 13292 N.W. 118th Avenue in Miami, Florida is eligible for reimbursement of the costs of petroleum contamination cleanup pursuant to Section 376.3071(12), Florida Statutes.
Findings Of Fact Petitioner Rinker Material Corporation ("Rinker") owns and operates a site known as the Rinker FEC Quarry located at 13292 N.W. 118th Avenue, Miami, Florida 33127 (the "site"). At the Site, Rinker operated three (3) one thousand (1,000) gallon tanks which stored waste oil, virgin oil and hydraulic fluid. The DER Facility ID Number for the Site is 138628827. On December 2, 1988, Petitioner, as part of a tank replacement program that it was attempting to conduct in compliance with the applicable state and county regulations, began excavating the three underground storage tanks at the Site. During the excavation, a visible sheen was discovered. At the time of the excavation on December 2, 1988, Alan Gillespie of the Dade County Environmental Resource Management (DERM) was present to conduct a closure inspection of the Site. The December 2, 1988 closure inspection was conducted for Dade County DERM in its own capacity and not as an agent for DER. The purpose of the December 2, 1988 visit by Alan Gillespie was to inspect the removal and closure of the three 1,000 gallon tanks containing, respectively, waste oil, new oil and hydraulic fluid. Mr. Gillespie's inspection indicated that, while there appeared to be no holes in the tanks, free product was visible. Mr. Gillespie noted in his inspection report, dated December 2, 1988, that the contamination was not caused by a tank leak, but, instead, by overspills caused by the pouring of waste oil into the tank, spilling locally around the riser and then contaminating the soil around the tank. Rinker took samples at the Site and submitted them to a laboratory for analysis. It is not clear when the laboratory report was returned, but it generally takes two (2) weeks to obtain the laboratory analysis. Upon receipt of the laboratory report, Rinker initiated its efforts to apply for participation in the Inland Protection Trust Fund for reimbursement or site rehabilitation. In order to participate in the Inland Protection Trust Fund, an applicant was required to submit an Early Detection Incentive Program Notice (the "EDI Form") to DER prior to midnight on December 31,. 1988. The back of the EDI Form states that the form must be filed with and received by DER during the 15 month grace period beginning July 1, 1986 and ending October 1, 1987. The EDI program was; originally scheduled to end on September 30, 1987. However, the deadline for filing was extended by the legislature to December 31, 1988. The EDI Notification Form was not amended to change the dates to reflect subsequent amendments to the reporting date made by the legislature. While the back of the EDI Application Form indicates that the notification form must be filed with and received by DER on or prior to the initial deadline, DER considered as timely all applications with a postmark on or before the extended deadline of December 31, 1988. Petitioner's EDI Form for the Site was prepared by William Voshell, environmental manager for Rinker. Mr. Voshell was out of the state during the last few days of December, 1988. Petitioner's EDI Form was reviewed and signed by William Payne as Vice President of Real Estate for Rinker, on Friday, December 30, 1988. William Payne was informed by Mr. Voshell that the EDI Forms needed to be sent out before the end of the year. A cover letter accompanying the EDI Form for the Site was signed for Mr. Voshell by his secretary, Linda Vasquez on December 30, 1988. After signing the EDI Form, William Payne returned the application to Linda Vasquez to "process to mail". He reminded her that it had to be mailed that day. Ms. Vasquez placed the EDI Form and the cover letter in the Petitioner's mail system on December 30, 1988. The Certified Mail Number P 533059801 appears on the envelope containing Petitioner's EDI Form. January 3, 1989 was the first business day of 1989. The envelope containing the EDI Form was postmarked January 3, 1989. A certified mail return receipt attached to the envelope containing the EDI Form and cover letter shows that the return was stamped by the post office on January 3, 1989. The postal receipt for the EDI Form and cover letter was returned to Rinker from the post office on January 3, 1989. DER received Petitioner's EDI Form for the Site on January 9, 1989. Petitioner's normal procedure is to internally meter regular mail and affix a postmark date. However, certified or registered mail is metered and taken to the post office for processing. Registered mail received in the Petitioner's mailroom on December 30, 1988 should have been metered and taken to the post office for processing the same day or at the latest the next business day (December 31st, a Saturday). After the EDI Form was filed but prior to the eligibility determination, Petitioner was required to submit Site characterization information and documentation of the Site conditions before the initiation of cleanup. The evidence did not establish the expense or costs incurred by Rinker in gathering this information. Prior to ruling on Petitioner's EDI application, DER, through DERM, conducted an eligibility inspection at the Site. Alan Gillespie of DERM conducted the EDI eligibility inspection on April 20, 1989. During an EDI inspection, the inspector examines and reports on the existing conditions of a facility including: recordkeeping, the age of the tanks and the conditions of the monitoring wells and whether there is any negligence involved with the contamination that has occurred. During the April 20, 1989 inspection, Alan Gillespie reported that the three 1,000 gallon underground tanks had been removed and replaced with a new aboveground petroleum storage system. On the EDI inspection report, Mr. Gillespie reported evidence of soil contamination and/or recent product loss and noted that such contamination was discovered at the time of tank removal. After completion of the April 20, 1989 inspection report, Mr. Gillespie's supervisor at DERM sent the report to DER in Tallahassee. In 1989, final Early Detection Incentive Program or Reimbursement Program eligibility determinations were made in Tallahassee by DER. At the time of the EDI eligibility inspection of the Site on April 20, 1989, the role of Dade County DERM was only to conduct an EDI inspection at the site and to forward the information to Tallahassee. Prior to making an eligibility determination on the Site, Patricia Dugan, Environmental Administrator of the DER Petroleum Cleanup Reimbursement Section, reviewed the EDI application, the inspections from DERM, documentation of the site conditions prior to initiation of cleanup and the envelope that the application came in. On November 23, 1989, DER issued an order finding the Site to be ineligible for participation in the Reimbursement Program. Initially, Petitioner's reimbursement application was deemed ineligible because of mixed contamination (i.e., the Site contained used oil) and because the application was deemed untimely. Subsequent to the date of the denial, certain legal decisions made it clear that, contrary to DER's position, sites containing used oil were eligible for participation in the Reimbursement Program. Thus, the only remaining predicate for DER's denial of Rinker's application is that the application was not timely filed. Because Petitioner's EDI application was postmarked on January 3, 1989, after the December 31, 1988 statutory deadline, the Petitioner's application was deemed untimely by DER. DER's policy of relying on the postmark date for purposes of determining timeliness was informally arrived at in 1987. DER has never promulgated a rule on this matter nor conveyed its interpretation to affected parties. Petitioner could have and would have internally placed a postmark date of December 30, 1988 on the envelope containing the EDI Form had it been aware of DER's policy.
Recommendation Based upon the foregoing findings of fact and conclusions of law, it is RECOMMENDED that the Department of Environmental Regulation enter a Final Order approving Petitioner's application for eligibility under the state's reimbursement program. DONE AND ORDERED in Tallahassee, Leon County, Florida, this 23rd day of July, 1990. J. STEPHEN MENTON 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 23rd day of July, 1990. APPENDIX Both parties have submitted Proposed Recommended Orders. The following constitutes my rulings on the proposed findings of fact submitted by the parties. The Petitioner's Proposed Findings of Fact: Proposed Finding Paragraph Number in the Findings of Fact of Fact Number in the Recommended Order Where Accepted or Reason for Rejection. Adopted in substance in Findings of Fact 1. Adopted in substance in Findings of Fact 3, 9 and 10. Adopted in substance in Findings of Fact 17 and 20. Adopted in substance in Findings of Fact 20. Adopted in substance in Findings of Fact 26. Adopted in substance in Findings of Fact 22, 36, 37 and 38. Adopted in substance in Findings of Fact 37 and 38. Adopted in substance in Findings of Fact 40. Adopted in substance in Findings of Fact 41. Rejected as constituting argument rather than a finding of fact. Rejected as argument rather than a finding of fact. The Respondent's Proposed Findings of Fact: Proposed Finding Paragraph Number in the Findings of Fact of Fact Number in the Recommended Order Where Accepted or Reason for Rejection. Adopted in substance in Findings of Fact Adopted in substance in Findings of Fact 2. Adopted in substance in Findings of Fact 25. Adopted in substance in Findings of Fact 22. Adopted in substance in Findings of Fact 21. Adopted in substance in Findings of Fact 17. Adopted in substance in Findings of Fact 16. Adopted in substance in Findings of Fact 18. Adopted in substance in Findings of Fact 19. Adopted in substance in Findings of Fact 20. Adopted in substance in Findings of Fact 23. Adopted in substance in Findings of Fact 24. Rejected as constituting argument rather than a finding of fact. Adopted in substance in Findings of Fact 22. Rejected as unnecessary and irrelevant. Adopted in substance in Findings of Fact 15. 17. Adopted in substance in Findings of Fact 15. 18. Adopted in substance in Findings of Fact 37, 38 and 39. 19. Adopted in substance in Findings of Fact 4. 20. Adopted in substance in Findings of Fact 5. 21. Adopted in substance in Findings of Fact 6. 22. Adopted in substance in Findings of Fact 7. 23. Adopted in substance in Findings of Fact 8. 24. Adopted in substance in Findings of Fact 28. 25. Adopted in substance in Findings of Fact 29. 26. Adopted in substance in Findings of Fact 30. 27. Adopted in substance in Findings of Fact 31. 28. Adopted in substance in Findings of Fact 32. 29. Adopted in substance in Findings of Fact 33. 30. Adopted in substance in Findings of Fact 34. 31. Adopted in substance in Findings of Fact 36. 32. Adopted in substance in Findings of Fact 35. 33. Adopted in substance in Findings of Fact 37. 34. Adopted in substance in Findings of Fact 39. 35. Adopted in substance in Findings of Fact 15. 36. Adopted in substance in Findings of Fact 12. 37. Adopted in substance in Findings of Fact 14. 38. Adopted in substance in Findings of Fact 15. 39. Adopted in substance in Findings of Fact 36, 37 and 38. COPIES FURNISHED: Richard A. Pettigrew, Esquire Morgan, Lewis & Bockius 200 South Biscayne Boulevard Miami, Florida 33181 Janet E. Bowman Department of Environmental Regulation Twin Towers Office Building 2600 Blair Stone Road Tallahassee, Florida 32399-2400 Dale W. Twachtmann, 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 is whether Florida Petroleum Markers and Convenience Store Association (Florida Petroleum) is entitled to reasonable attorney’s fees and costs pursuant to Section 120.595(2), Florida Statutes, and if so, in what amount.1
Findings Of Fact Introduction Florida Petroleum is the prevailing party in the underlying rule challenge and requests an award of reasonable attorney's fees pursuant to Section 120.595(2), Florida Statutes.2 Florida Petroleum prevailed in DOAH Case No. 05-0529RP on one of two challenged proposed rule revisions to Florida Administrative Code Chapter 62-770, which governs cleanup of petroleum contamination. Proposed rule 62-770.220(3)(b) was held to be an "invalid exercise of delegated legislative authority." Proposed rule 62-770.220(4), was "not an invalid exercise of delegated legislative authority, except insofar as notice must be given every five years to persons other than 'local governments and owners of any property into which the point of compliance is allowed to extend,' as provided in Section 376.3071(5)(b)2., Florida Statutes."3 The Department argues that its actions were "substantially justified" because there was a reasonable basis in law and fact at the time its actions were taken. The proposed rules were approved by the Environmental Regulation Commission (ERC) on February 2, 2005, which is the time when the Department's "actions were taken." The Department does not argue that special circumstances exist that would make the award of fees unjust. Department Contamination Programs The Department's Division of Waste Management is comprised of the Bureau of Petroleum Storage Systems, the Bureau of Waste Cleanup, and the Bureau of Solid and Hazardous Waste. The Bureau of Petroleum Storage Systems administers the state's petroleum contamination cleanup program. This cleanup program encompasses the technical oversight, management, and administrative activities necessary to prioritize, assess, and cleanup sites contaminated by discharges of petroleum and petroleum products from petroleum storage systems. There are approximately 23,000 petroleum-contaminated sites statewide. Florida Administrative Code Chapter 62-770 establishes petroleum contamination site cleanup criteria. These criteria are established for the purposes of protecting the public health and the environment and for determining, on a site-specific basis, the rehabilitation program tasks that comprise a site rehabilitation program and the levels at which a rehabilitation program task and site rehabilitation program may be deemed complete. Fla. Admin. Code R. 62-770.160(8). The petroleum contamination cleanup program incorporates risk-based corrective action (RBCA) principles to achieve protection of human health, public safety, and the environment in a cost-effective manner. The phased RBCA process is iterative and tailors site rehabilitation tasks to site-specific conditions and risks. Fla. Admin. Code R. 62-770.160(8). The Bureau of Waste Cleanup administers the state's drycleaning solvent cleanup program. This program is for the cleanup of property that is contaminated with drycleaning solvents as a result of the operations of a drycleaning facility or wholesale supply facility. Florida Administrative Code Chapter 62-782 establishes drycleaning solvent cleanup criteria, established for the purposes of protecting the human health, public safety and the environment under actual circumstances of exposure and for determining, on a site-specific basis, the rehabilitation program tasks that comprise a site rehabilitation program and the levels at which a rehabilitation program task and site rehabilitation program may be deemed complete. Fla. Admin. Code R. 62-782.150(1). The drycleaning solvent cleanup program, like the petroleum contamination cleanup program, the brownfield site rehabilitation program, and the global RBCA contamination cleanup program mentioned below, incorporates RBCA principles to achieve protection of human health and the environment in a cost-effective manner. Fla. Admin. Code R. 62-782.150(1) and 62-785.150(1). In 2003, the Legislature adopted Section 376.30701, Florida Statutes, which authorizes the Department to adopt rule criteria for the implementation of what is referred to as "global RBCA," which extends the RBCA process to contaminated sites where legal responsibility for site rehabilitation exists pursuant to Chapter 376 or Chapter 403, Florida Statutes. Global RBCA is a cleanup program for contaminated sites that do not fall within one of the Department's other contamination cleanup programs. Department Rulemaking Efforts After the passage of Section 376.30701(2), Florida Statutes, the Department initiated rulemaking to develop Florida Administrative Code Chapter 62-780 (global RBCA). Section 376.30701(2) established July 1, 2004, as the date the Department was to adopt rule criteria to implement the global RBCA contamination cleanup program. At the same time, the Department initiated rulemaking with respect to revisions to Florida Administrative Code Chapters 62-770 (petroleum), Chapter 62-782 (drycleaning solvents), and Chapter 62-785 (brownfields). This decision was predicated on the similarities among the four waste cleanup programs and the Department's desire to ensure a consistent approach across the four programs and pursuant to one large rulemaking effort. As such, the Department sought to include the same notification provisions in each rule for consistency purposes. (T 33-34, 55). However, the Department also recognized at the time that the notice provision for RBCA for petroleum contamination cleanups, i.e., Section 376.3071(5)(b)2., was different from the notice provisions for RBCA cleanups for the drycleaning solvent (Section 376.3078(4)(b)), brownfields (Section 376.81(1)(b)), and global RBCA (Section 376.30701(2)(b)) programs. (T 69, 115, 126-129). In each of these three statutes, the Legislature expressly expanded the class of persons to whom notice is required to be given and expressly referred to a specific type of notice to be given (actual or constructive) depending on the class of persons designated to receive notice. Each of the latter statutes was enacted after, and presumably with knowledge of Section 376.3071(5)(b)2., which was materially amended in material part in 1996 to add, in part, the notice provision. See Ch. 96-277, § 5, at 1131, 1135-1136, Laws of Fla. In May 2004, the Department became aware of concerns with regard to on-going efforts to assess the groundwater contamination at the former American Beryllium plant in Tallevast, Manatee County, Florida. (The party's refer to the city as Tallavast, whereas the Transcript (T 36) and DEP Exhibit 1 refer to the city as Tallevast.) For approximately two years, the owner of the plant, Lockheed Martin, had been conducting an on-going assessment of the extent of the solvent (trichloroethylene) contamination. The Department was concerned that there were residential areas located adjacent to and in the immediate vicinity of the former industrial plant. In May 2004, it became apparent that there were problems with certain assumptions concerning the assessment of the groundwater contamination. First, there had been an erroneous assumption that the contamination plume was small and located predominantly on-site. Second, based on well surveys, there was an assumption that there were no human health exposure points in the form of contaminated off-site potable water wells. Significant concerns arose when it became apparent the contamination plume was more extensive than anticipated and had migrated off-site. These concerns were exacerbated when it became apparent that groundwater contamination was impacting off-site potable water wells. Tallevast residents raised concerns that they were being exposed to contamination and that they were never properly notified by the Department, upon the initial discovery of the groundwater contamination. Tallevast residents were also concerned about whether the Department had failed to properly notify then once it was discovered the groundwater contamination had migrated off-site. The problems experienced at Tallevast emphasized to the Department the need to explore available avenues to enhance public notification procedures as a whole.4, 5 The Department asserted as to a reasonable basis in fact for the proposed rules, that contamination affecting Tallevast residents provided an impetus for the Department in May 2004 to address notification of contamination to affected off-site property owners. The situation in Tallevast arose because well surveys failed to indicate the extent of the contamination plume and that residents were using private wells for potable water. The Department's objective was to make sure that if there was exposure potential, the potentially affected parties should be notified. The Department seems to agree that the failure to discover the contamination of the potable wells in Tallevast occurred during the assessment phase of the cleanup and that it had not yet gotten to the stage of determining the remediation strategy. (T 45-46). The Department's stated concerns regarding Tallevast are not specifically addressed by proposed rule 62-770.220(3)(b) and (4). (T 74-75, 95-96). The Department’s procedure for granting a temporary extension of the point of compliance is that the responsible party will propose such an extension in its remedial action plan. (The four cleanup programs provide for the establishment of a TPOC.) The Department will then issue its notice of intended agency action, notice of the agency action will be provided to the enumerated persons, and the persons receiving notice will have a 30-day comment period. (T 149-155). (Pursuant to proposed rule 62-770.220(3)(a), the person responsible for site rehabilitation (PRSR) "shall provide" actual notice "to the appropriate County Health Department and all record owners of any real property into which the point of compliance is allowed to extend . . . ." In this regard, as Mr. Chisolm testified, the process is "similar to a permit.") Mr. Sole testified that, in the course of rulemaking, Florida Petroleum argued to the Department that the "petroleum statute under 376.3071 is different as it addresses the temporary point of compliance. It's not as prescriptive as the other statutory provisions for Risk-Based Corrective Action and the dry-cleaning, the Brownfields, and now the Global RBCA [statutes]. And their concern was that because it's not as prescriptive, [the Department] should not be establishing these additional notice provisions, such as constructive notice . . . But their fear was or concerns . . . were that you're going to engender a lot of litigation that's unnecessary because, as soon as you say the word 'contamination,' somebody is going to want to sue me . . . . And I understood that position. But at the same time, the lessons that we learned were that failure to provide that notice, unfortunately, can cause exposure and can cause a public health concern; and [the Department] needed to balance the two." (T 63-64, 122). Mr. Chisolm testified, in part, about the development of the constructive notice provision in proposed rule 62- 770.220(3)(b) and explained that the global RBCA, brownfields, and drycleaning solvent statutes required constructive notice to residents and business tenants of impacted properties.6 Mr. Chisolm further explained: So, if you're going to give notice to the legal owners of a piece of property, many cases there are tenants there. And they may not get the word, and they may be the ones that are drinking the water. The same with business tenants. So the idea was let's give notice to the people who are going to be or potentially going to be affected by this contamination, which is, after all, under the property which they may be inhabiting and using. So that was the purpose for the rule change in this case. Let's give notice to everybody who could potentially be affected by the rule, by the contamination beyond the property boundaries . . . . The whole idea behind RBCA, Risk- Based Corrective Actions, is that, if there's no exposure, there's no risk. There's no danger to the individual, to any individual. (T 116-117).
The Issue The issue to be determined in this case is whether CJC Properties, Ltd. (CJC), is eligible for state restoration funding assistance under the Petroleum Contamination Participation Program or the Florida Petroleum Liability and Restoration Insurance Program for one or more discharges of gasoline at DEP Facility No. 378943938 (“the facility”).
Findings Of Fact The Facility CJC is a Florida Limited Partnership. It is the current owner of property located at 5691 U.S. Highway 27 North, in Tallahassee. Prior to CJC’s acquisition of the property, the property was owned by Carolyn J. Chapman, John W. Chapman, Jane Chapman Latina, and Carolyn Chapman Landrum (“the Chapmans”). The property was leased to various entities and operated as a gas station. The tanks and dispensers remained in service until November, 1995. The last operator of the facility was Lake Jackson 76, Inc. There were five underground petroleum storage tanks at the facility. Before 1991, one of the tanks at the facility was used for regular, leaded, gasoline. When leaded gasoline was phased out, the tank was used for unleaded gasoline. Site Assessments and Sampling Data On November 30, 1995, the Chapmans employed Petroleum Contractors, Inc., to remove the five storage tanks. During the tank removal, Environmental and Geotechnical Specialists, Inc. (“EGS”) performed an assessment to determine whether the facility was contaminated with petroleum or petroleum products. The Underground Storage Tank Removal Report prepared by EGS noted that all five tanks appeared to be intact. Soils in the tank pit wall and bottom were not discolored. No significant contamination was observed directly below the tanks. Soil from the tank pit was stockpiled on the site. EGS observed no significant signs of contamination of this soil. The soil stockpile was also screened with a Flame Ionization Detector Organic Vapor Analyzer (OVA). No organic vapors were detected. An OVA detects any organic vapor, but is used as a screening tool to find petroleum vapors. Department rules require that an OVA reading be performed both unfiltered and filtered. The filtered reading screens out everything but methane and is “subtracted” from the unfiltered reading to determine the presence of petroleum vapors. Twenty-four soil samples were taken from various depths at nine locations in the tank pit. These samples were tested using an OVA. Nine of the soil samples, taken from four locations, had corrected OVA readings indicative of petroleum contamination. EGS concluded that “soil contamination detected in the tank pit is likely the result of a leak in the piping” between the dispensers and the tanks. Soil samples were also taken from three borings in the vicinity of the dispenser island and OVA-tested. In boring D-2, organic vapors were detected from the surface to a depth of approximately seven feet. The OVA readings from D-2 declined with depth. EGS reported that “some contamination was detected beneath a dispenser; however, it does not ‘appear’ to significantly extend below six (6) feet.” EGS did not report both filtered and unfiltered OVA readings for the soil samples taken from the dispenser area, as it had done for soil samples taken from the tank pit and the stockpile. For the dispenser area soil samples, EGS reported a single OVA reading for each sample, without indicating whether the reading was “corrected” after filtering. For this reason, the Department contends that these data are unreliable. CJC points out that EGS stated in the text of its report that the soil samples were filtered. CJC also argues that, because the filtered OVA readings for soil samples taken from the tank pit area were not different from their unfiltered readings, the OVA readings for the soil samples from the dispenser area would not have changed after filtering. The preponderance of the evidence is that the contamination in the dispenser area was petroleum. Based on EGS’ findings during the tank removal in November 1995, Petroleum Contractors, Inc., filed a Discharge Reporting Form on December 1, 1995, stating that there had been a discharge of unleaded gasoline at the facility. In January 1996, the Chapmans applied to participate in FPLRIP based on the discharge reported on December 1, 1995. By order dated January 26, 1996, the Department determined that the reported discharge was eligible for state-funded remediation assistance under FPLRIP. In 1997, another consultant, Levine Fricke Recon (LFR) conducted a site assessment at the facility and submitted its Interim Site Assessment Report to the Department. As part of its own soil sampling at the site, LFR collected a “direct push” soil boring in the dispenser island area, near the place where EGS had reported organic vapors. The boring data showed no petroleum vapors until the interval 16-to-20 feet below ground surface. LFR also collected and analyzed groundwater samples from the site. It reported that a sample taken from beneath the former diesel dispenser contained lead. Because lead occurs naturally in soils, its presence in a water sample does not confirm that a discharge of leaded gasoline occurred. In 1998, LFR conducted a second assessment of the facility site. It installed and sampled four shallow monitoring wells, designated MW-1S through MW-4S, and three deep monitoring wells, designated MW-2D through MW-4D. Groundwater samples from MW-3S and MW-3D were analyzed for lead, ethylene dibromide (EDB), and 1,2-Dichloroethane. All three substances are usually detected in a groundwater sample contaminated with leaded gasoline. On August 28, 1998, LFR submitted its Interim Site Assessment II to the Department, which shows lead and EDB were found in a sample taken from MW-3S, but not 1,2-Dichloroethane. LFR did not conclude or express a suspicion in either of its two assessment reports that leaded gasoline had been discharged at the facility. The deadline for submitting a Discharge Reporting Form or written report of contamination was December 31, 1998. A site assessment report received by the Department before January 1, 1999, which contained evidence of a petroleum discharge, was accepted by the Department as a “report of contamination.” The petroleum discharge information received by the Department before January 1, 1999, consisted of the Underground Storage Tank Removal Report, the FPLRIP claim, the Interim Site Assessment Report, and the Interim Site Assessment Report II. Post Deadline Site Assessment Data After the statutory deadline, LFR submitted its Interim Site Assessment III. This report includes January 1999 groundwater sampling data from four monitoring wells which show the presence of low levels of EDB. When EDB is found in a groundwater sample, it is a common practice to re-sample the well from which the sample was taken. Of the wells that showed the presence of EDB, only MW- 10D was re-sampled, after January 1, 1999. There was no EDB present in the groundwater when MS-10D was re-sampled. In June 2000, as part of the remediation of the contamination at the facility, an area of contaminated soil was removed to a depth of 14 feet. The area of soil removed included the former dispenser area. In January 2003, the Department notified CJC that the $300,000 FPLRIP funding cap would soon be reached. In March 2003, CJC signed a Funding Cap Transition Agreement, acknowledging that “At no time will the DEP be obligated to pay for cleanup of this discharge any amount that exceeds the funding cap.” CJC further acknowledged that it “is responsible for completing the remediation of the discharge in accordance with Chapter 62-770, F.A.C.” In 2005, CJC re-sampled one of the monitoring wells for lead and EDB. Neither substance was present. The site is not currently being actively remediated. Periodic groundwater sampling indicates that concentrations of contaminants are dropping. No further active remediation has been proposed. The cost to complete remediation is a matter of speculation. The record evidence is insufficient to make a finding about future remediation costs. Eligibility Determinations On September 2, 2003, CJC submitted a PCPP Affidavit to the Department, seeking state funding under PCPP. On October 30, 2003, the Department denied CJC eligibility for PCPP funding on the basis that the contamination was covered under FPLRIP and, therefore, was excluded from funding under PCPP. The Department has never granted PCPP eligibility for the cleanup of a discharge previously being funded under FPLRIP. Apparently, in 2005, CJC hired Glenn R. MacGraw, an expert in the assessment of petroleum-contaminated sites, to review the EGS and LFR assessments. In a letter to CJC’s attorney dated August 19, 2005, MacGraw expressed the opinion that “at least 2 discharges have occurred on this site, one in the former tank area, and one in the former dispenser area.” MacGraw’s opinion that there had been a discharge of leaded gasoline was based on the detection of EDB and lead in the groundwater. He also thought the presence of methyl tetra-butyl ether (MTBE) in groundwater samples taken from the tank pit area showed a tank leak of unleaded gasoline. CJC requested FPLRIP funding for the other alleged discharges at the facility. On March 23, 2006, the Department issued a letter formally stating its disagreement that there were other reported discharges and denying eligibility for FPLRIP funding. On March 30, 2006, the Department issued an Amended Order of Ineligibility under PCPP. The amended order added a second ground for denial, that the reported discharge was not shown to have occurred before January 1, 1995. Whether There Was A Second Discharge Eligible for Funding CJC argues that the presence of lead and EDB in the groundwater sample taken from MW-3S shows that there was a discharge of leaded gasoline at the facility. However, LFR reported that the well screen for MW-3S had probably been damaged during installation, because a significant amount of filter sand was observed in the purge water. The Department contends, therefore, that the source of the lead detected in the groundwater sample from MW-3S could have been (naturally) in the soil that entered the well. The Department also discounts the detection of EDB in the groundwater sample because EDB is an ingredient of some pesticides and can show up in groundwater when pesticide has been applied to the overlying land. Furthermore, EDB was not detected in the groundwater sample taken from MW-3D, a deeper well located near MW-3S. MacGraw does not think the EDB came from a pesticide application, because the EDB contamination at the site occurs in an elongated “plume,” in the former dispenser area, whereas one would expect to see EDB distributed evenly over the site if the source was a pesticide application. MacGraw mapped the plume of EDB by using data obtained after the discharge reporting deadline. Michael J. Bland, a Department employee and expert in geology and petroleum site assessment, believes the data from the facility are insufficient to confirm the presence of EDB or its distribution. LFR reported in its Interim Site Assessment that no significant soil contamination was found near the dispenser island. Groundwater samples from MW-3D, a deep monitoring well near MW-S3, showed no EDB, lead, or 1,2-dichlorothane. Bland opined that, if the detection of EDB in the shallow well was reliable, EDB would have been detected in the deep well, too, because EDB is a “sinker.” EDB is persistent in groundwater, so when it is not detected when a well is re-sampled, reasonable doubt arises about the detection in the first sample. Of all the wells sampled in 1999 that showed EDB, only MW-10D was re-sampled in 2003. When the well was re-sampled, there was no EDB. CJC contends that EDB was not found in the re-sampling of MW-10D because of the soil removal in 2000, but the Department contends that the soil removal would not have affected the presence of EDB in MW-10D, because the well is significantly down-gradient of the area of soil removal. It was undisputed that the presence of 1,2- dichoroethane in MW-S3 was not reliably determined. There is insufficient evidence in the record to establish that the contamination reported in the dispenser area is the source of contamination which persists at the facility. The reported contamination only affected the top six feet of soil. The soil removal to a depth of 14 feet in that area in 2000 should have fully remediated the reported contamination. The data upon which CJC relies in claiming eligibility under FPLRIP or PCPP for a second discharge are, at best, incomplete and ambiguous. CJC failed to prove by a preponderance of the evidence that a discharge of leaded gasoline occurred. CJC also failed to prove that the reported contamination in the dispenser is associated with a discharge that still exists to be remediated with state assistance.
Recommendation Based on the foregoing Findings of Fact and Conclusions of Law, it is RECOMMENDED that the Florida Department of Environmental Protection enter a final order determining that CJC is ineligible to participate in the Petroleum Cleanup Participation Program for the discharge reported to the Department on December 1, 1995, and that CJC has not demonstrated eligibility to participate in the Petroleum Cleanup Participation Program or the Florida Petroleum Liability and Restoration Program for any other discharges. DONE AND ENTERED this 9th day of July, 2008, in Tallahassee, Leon County, Florida. BRAM D. E. CANTER Administrative Law Judge Division of Administrative Hearings The DeSoto Building 1230 Apalachee Parkway Tallahassee, Florida 32399-3060 (850) 488-9675 SUNCOM 278-9675 Fax Filing (850) 921-6847 www.doah.state.fl.us Filed with the Clerk of the Division of Administrative Hearings this 9th day of July, 2008.
The Issue At issue in this proceeding is the reasonable cost to be reimbursed Petitioner, under the provisions of Section 376.3071(12), Florida Statutes, for the development of a Monitoring Only Plan (MOP) program for the Dagam Oil Company (DEP Facility No. 138504146), at 331 23rd Street, Miami Beach, Florida.
Findings Of Fact Background Petitioner, Panhandle Industries, Inc., is a Florida corporation engaged in the business of consulting, engineering and construction. George M. Hidle, a professional geologist licensed in the State of Florida, is the president and sole owner of the Petitioner corporation. In September 1992, Dagam Oil Company, doing business as Sierra Fina, employed Petitioner to do environmental assessment work and prepare a Contamination Assessment Report (CAR) under the then existing Rule 17-770.630, Florida Administrative Code, for a site located at 331 23rd Street, Miami Beach, Florida (DEP Facility No. 138504146).4 That CAR was submitted to DERM (Metropolitan Dade County, Department of Environmental Resources Management) July 13, 1993. (Petitioner's Exhibit 1.) Pertinent to this case, the CAR provides the following background or historical information: . . . PHYSICAL SETTING . . . Sierra Fina is located at 331 23rd Street in Miami Beach, Florida . . . The facility is bordered to the north by Collins Canal, to the east by the light commercial properties, and to the south/southeast by property that once contained Chevron and Fina service stations. . . . * * * . . . FACILITY HISTORY AND OPERATION Sierra Fina was built in 1963. The station originally operated as a Sunoco service station with a 3 bay garage. Dagam Oil Company purchased the facility in March 1981 from Charles Rosenblatt. At the time the station had five underground fuel tanks. . . . * * * . . . PREVIOUS INVESTIGATIONS Dagam Oil Company contracted with another environmental company in November 1988 to collect groundwater samples from . . . five monitoring wells at the facility. Groundwater samples were collected on November 9, 1988 and analyzed by EPA Method 602. Monitoring well MW-3 was also analyzed by EPA Method 610. All five of the wells had hydrocarbon contaminant concentrations in excess of state guidelines. . . . A discharge notification form was mailed to the DER and DERM on December 9, 1988, the date of receipt of the analytical results from the November 9, 1988 groundwater sampling event. . . . * * * . . . INITIAL REMEDIAL ACTIONS [IRA] [The F]ive underground storage tanks [and associated piping] were removed from the facility during March and April 1989 [, and replaced with four new cathodically protected underground petroleum storage tanks]. Approximately 400 cubic yards of contaminated soil was also removed at that time. On March 31, 1989 a composite sample of the soil was collected for analysis . . . Because of limited space at the station, the contaminated soil was hauled to a Metro Trucking Inc. storage yard located at 112th Avenue and 143 Street in Miami. The contaminated soil was landfarmed at this Metro Trucking facility for a period of seven months, during which time the soil was spread onto visqueen and tilled on a regular basis. On November 21, 1989 the soil was resampled and analyzed . . . Results of this second round of analyses met clean fill criteria. Also at the time of tank replacement, a sheen of free floating hydrocarbons was observed on water in the tank pit. A vac truck was used to skim this product from the pit prior to tank replacement. Approximately 2100 gallons of oily water were removed, transported, and disposed of by Cliff Berry, Inc. . . . Other than these IRA activities, no other assessment or remediation work had been performed at the facility until Petitioner was employed in September 1992. Petitioner's CAR concluded that: Soil and groundwater at Sierra Fina are contaminated with gasoline and diesel hydrocarbons. Excessively contaminated soil is confined to an area at the western end of the station building that is approximately 20 feet in width by 30 feet in length, extending down to a water table of between 6 and 8 feet below land surface. No free phase floating product is present on the groundwater underlying this facility. However, dissolved hydrocarbon contamination is present in the groundwater. A dissolved hydrocarbon plume is present in the western half of the site. This plume measures 80 feet in length by 60 feet in width and extends to a depth of less than 22 feet below land surface, yielding approximately 134,640 gallons of hydrocarbon contaminated water. Volume calculations are based on an average depth to groundwater of 7 feet below land surface and an effective soil porosity of 25%. The highest benzene (53.3 ppb) and total napthalenes (752 ppb) concentrations were detected in MW-12. * * * Groundwater within the Biscayne Aquifer beneath Sierra Fina is nonpotable because of salt water intrusion from the Atlantic Ocean. For this reason there are no private or public potable wells in the area. Contamination at Sierra Fina is limited onsite to the western half of the station, and poses no threats to sensitive receptors in the area, with the possible exception of Collins Canal. The cause of hydrocarbon contamination was never determined; however, the most probable source, i.e. previous petroleum tanks and lines, were removed in March and April of 1989. Based on these findings and the data presented about or elsewhere in this report, it is known that soil and groundwater contamination does exist at this facility in concentrations that exceed guidelines specified in Section 17- 770.730(5)FAC; however, the levels of contamination may not warrant the need for any extensive remediation activities at this site. Petitioner's CAR was approved by DERM on October 8, 1993, and Petitioner was directed to submit a Remedial Action Plan (RAP) within 60 days.5 At the time, Mr. Hidle (Petitioner) was aware that the levels of contamination were low or near target levels, and that it was likely that the contamination levels would decrease naturally over time. Consequently, Petitioner elected to seek approval of a Monitor Only Plan (MOP), as opposed to a RAP. Such choice was favored based on the nature and location of the contaminants. In this regard, it was observed that the soil contamination consisted of both gasoline and diesel fuel, with much of the contaminated soil abutting or underneath the building. Excavation and removal of the soil was not an alternative because it would undermine the structural integrity of the building. Moreover, given the fuel mix, vapor extraction was not a viable option. Given Petitioner's choice to pursue approval of a MOP, it gave notice to the Department and DERM on October 18, 1993, as well as November 12, 1993, and December 2, 1993, of its intention to undertake groundwater sampling and soil sampling on the site. Groundwater sampling was undertaken by Mr. Hidle between 1:30 p.m., November 30, 1993, and 2:30 a.m., December 1, 1993,6 at which time he drew water samples for laboratory analysis from 10 monitor wells (MW) and one deep well (DW). A duplicate sample was also retrieved at MWs 12R and 14, and equipment blanks were also obtained for laboratory analysis. Between 8:25 p.m., December 4, 1993, and 3:40 a.m. December 5, 1993,7 Mr. Hidle and a senior technician (Martin Hidle) augured 6 soil borings for use in preparing the MOP and collected one soil sample for laboratory analysis. Petitioner delivered the water samples to the laboratory (Envirodyne, Inc.) on December 2, 1993, and the soil sample on December 6, 1993, for analysis. The laboratory completed its analysis of the water samples on December 13, 1993, and of the soil sample on December 14, 1993, and rendered its written reports (analysis) to Petitioner.8 Upon receipt of the laboratory data, Mr. Hidle completed his preparation of the MOP. (Petitioner's Exhibit 4.) That MOP contained the following conclusions and recommendations: The initial dissolved hydrocarbon plume dimensions were based on data from groundwater sampling events of January and February 1993. Laboratory results from a more recent sampling event (11/30/93) indicate that plume size and hydrocarbon compound concentrations therein have decreased substantially (Table 4-2). Maximum groundwater contaminant concentrations decreased as follows: benzene from 53.3 ppb to 11.1 ppb; BTEX from 111.7 ppb to 20.6 ppb; total naphthalenes from 752 ppb to 246.1 ppb. During the contamination assessment program task a small area of contaminated soil was found to be abutting the western end of the station building (CAR, Fig. 3-1, p. 35). Because of the presence of diesel compounds in the groundwater, it was assumed during preparation of the CAR that the soil too was contaminated with diesel. In early December 1993 PI Environmental personnel installed six additional soil borings (Figure 3-1, SB-16 through SB-21) and collected one soil sample for laboratory analyses. The soil borings were augered in the immediate area of the previously defined contaminated soil plume, and soil samples were analyzed in the field by using a Foxboro OVA 128. Soil samples were collected vertically every two feet, beginning at one foot below ground surface and continuing until the water table was encountered. A soil sample was collected from boring SB-17 at a depth of six feet below land surface. A net OVA reading of 160 ppm was observed from a duplicate sample taken from the same depth. The soil sample was tested by EPA Methods 3540/8100 (diesel compounds) and 9073 (TRPH). Laboratory results indicated that all diesel compounds were below laboratory detection limits, and the TRPH concentration was below normal background readings. Soil contamination was reclassified as being gasoline in origin, because no diesel compounds were detected in the soil sample from SB-17. Section 17-770.200(2) Florida Administrative Code defines excessively contaminated soil, associated with gasoline contamination, as those that have a net OVA/FID reading equal to or greater than 500 ppm. From December 1993 sampling event, a maximum net OVA/FID reading of 316 ppm was obtained from a sample that was collected at five fee below land surface in SB-17. Based on these results, no excessively contaminated soil was found during the most recent sampling event. It is the recommendation of PI Environmental Inc. that a Monitoring Only Plan be implemented at Sierra Fina. This recommendation is based on the following findings: 1) Absence in the study area of any potable water wells within the Biscayne Aquifer because of salt water intrusion from the Atlantic Ocean 2) Absence of free phase hydrocarbons 3) Absence of excessively contaminated soil 4) Substantial decrease in concentrations of dissolved hydrocarbon compounds within the groundwater during the last year, and 5) relatively low levels of hydrocarbon contamination in the groundwater, i.e., based on the November 30, 1993 sampling event, maximum benzene of 11.1 ppb, maximum BTEX of 20.6 ppb, and maximum total naphthalenes of 246.1 ppb. It is our recommendation that groundwater from monitoring wells MW-8, MW-12R, MW-6, and MW-17 be sampled on a quarterly basis. Groundwater from the source area wells, MW-8 and MW-12R, should be analyzed quarterly by EPA Methods 602 and 610. Groundwater from the perimeter wells, MW-6 and MW-17, should be analyzed quarterly by EPB Method 602 and semiannually by EPA Methods 602 and 610. Petitioner submitted the MOP to DERM on January 24, 1994. Pertinent to this case, it is observed that the MOP was a brief document, consisting of only 13 pages of textual material, much of which was a restatement of material contained in the CAR. The balance of the report consisted of 5 "Figures" (three of which were contained in the CAR and one of which is an updated version of a CAR Figure); 2 "Tables" (an update of the Water Table Elevation table contained in the CAR to include the November 30, 1993, data, and an update of the Summary of Groundwater Analyses contained in the CAR to include the November 30, 1993, and December 1, 1993, data); 6 "Geologic Log[s]" (a restating of the soil boring results noted in the field notes for December 4 and 5, 1993); copies of the laboratory (Envirodyne, Inc.'s) reports of groundwater analysis; and the laboratory's report on the soil analysis. In all, while apparently adequate and nicely presented, the MOP does not address a complex or unique issue, and does not evidence the expenditure, or need to expend, an inordinate amount of effort to produce. Petitioner's MOP was disapproved by DERM on May 11, 1994, for the following reasons: A complete round of groundwater analyses, no greater than six months old, is required. Therefore, all wells at this site must be sampled for EPA Method 418.1, and monitoring wells numbered MW-6, MW-9, MW-10, MW-11, MW-13, MW-16, and MW-17 must be sampled for EPA Method 610. Because diesel contamination is present at this site, soil OVA readings above 50 ppm are considered to indicate excessively contaminated soil. Based on this OVA readings obtained for your Contamination Assessment Report (CAR) and this MOP, excessively contaminated soil does exist at this site. Since this coil could be a continuing source of contamination, it must be removed prior to the approval of a MOP. Consequently, Petitioner was directed to submit an addendum to the MOP to address those issues. On June 1, 1994, Petitioner gave notice to the Department and DERM of its intent to collect groundwater samples to address issues raised by DERM's MOP review letter. These samples were collected by Mr. Hidle and a technician (Leo Iannone) between 1:15 p.m. and 10:00 p.m., June 15, 1994.9 Petitioner delivered the water samples to the laboratory (Envirodyne, Inc.) on June 16, 1994. The laboratory completed its analysis and delivered its written reports to Petitioner on or about June 23, 1994. Upon receipt of the laboratory data, Mr. Hidle completed the Monitoring Only Plan Addendum (Petitioner's Exhibit 8), and submitted it to DERM on July 5, 1994. The addendum addressed the additional groundwater analysis that was performed, and with regard to the diesel contamination it observed, as follows: Soil analytical results (MOP, Page 62) are below laboratory detection limits for EPA 610 compounds; however, because groundwater at this facility is contaminated with both gasoline and diesel, we are concurring with DERM by reclassifying excessively contaminated soil as any soil that exhibits net OVA/FID readings of 50 ppm or greater, per Chapter 17-770 FAC. OVA/FID soil analyses were performed in accordance to Panhandle Industries, Inc. approved Comp QAP. Net OVA/FID soil results obtained during the CAR program task are shown in Figure 1-5. A maximum net OVA/FID reading of 887 ppm was obtained during CAR soil assessment activities which ended on November 29, 1992. Figure 1-6 shows net OVA/FID results obtained during the MOP program task. These MOP analyses are current through December 5, 1993. A maximum net OVA/FID of 316 ppm was obtained during this latter event. As is shown in comparison of Figures 1-5 and 1-6, it can be seen that the size of the soil contaminant plume and OVA/FID net soil readings therein have decreased significantly since initiation of the CAR. Also, by observing Figure 1-6, which has a scale of 1" = 20', it is evident that very little soil, if any can be excavated without jeopardizing the structural integrity of the station building. Furthermore, there exist the possibility that some soil contamination may underlie the building itself; therefore, soil excavation would most likely result in only partial removal of the contaminated soil plume. The addendum concluded by recommending that the MOP be implemented as originally proposed, but with additional monitoring to assure a continuing decline in contamination. The addendum, like the MOP, was a brief document and contains only 6 pages of textual material. The balance of the addendum contains 6 "Figures" (all of which appeared in the CAR or MOP); 2 "Tables" (an update of the Water Table Elevations table contained in the MOP to include June 15, 1994, data, and an update of the Summary of Groundwater Analyses contained in the MOP to include the June 15, 1994, data); and the laboratory reports of groundwater analyses. As with the MOP, the addendum did not appear to address any complex or unique issues, and did not evidence the expenditure, or need to expend, an inordinate amount of time to produce. On August 16, 1994, and August 26, 1994, DERM and the Department, respectively, approved the "monitoring only" proposal. The request for reimbursement Petitioner submitted its reimbursement application on or about August 23, 1994, and it was apparently complete on or about April 18, 1996. (Petitioner's Exhibit 11). That application sought recovery of the following sums for the items noted: 6. REMEDIAL ACTION PLAN [MOP and MOP Addendum] PREPARATION . . . Personnel 31442.55 Capital Expense Items Rentals 1127.45 Mileage 68.05 Shipping 35.00 Well Drilling Permits Analysis 3680.00 Miscellaneous 1601.25 REMEDIAL ACTION PLAN PREPARATION TOTAL 37954.30 * * * 13. REIMBURSEMENT APPLICATION PREPARATION Supplementary Forms Personnel 795.00 Capital Expense Items Rentals 15.00 Mileage .80 Shipping 86.81 Well Drilling Permits Analysis Miscellaneous 60.75 APPLICATION PREPARATION TOTAL 958.36 CERTIFIED PUBLIC ACCOUNTANT REVIEW FEE 500.00 APPLICATION GRAND TOTAL 39412.66 By letter (Order of Determination of Reimbursement) of June 27, 1996, the Department responded to Petitioner's reimbursement request as follows: We have completed review of your Reimbursement Application for expenses incurred during the Remedial Action Plan/Monitoring Only Plan program task at this site and have determined that $13,198.70 of the total $39,412.66 requested is allowable for reimbursement. This amount will be paid to the person responsible for conducting site rehabilitation when processing is completed by the Comptroller's Office. Some adjustments to the amount of reimbursement requested have been made. The following list details these adjustments. Citations refer to the specific sections of the enclosed Reimbursement Application Summary Sheets: 1. $24,766.25 in Section 6A, $259.95 in Section 6C, $28.20 in Section 6D and $63.25 in Section 6I were deducted because the total personnel hours (413.15 hours) and the total cost of $39,412.66 claimed for performing a limited scope of work consisting of 78.34 hours of field activities, two rounds of analyses (59 samples) and two letter reports have been determined to be excessive. However, actual field activities (including a reasonable amount of preparation), two rounds of analyses and a reasonable amount of personnel time to prepare two letter reports have been allowed. 2. $162.50 in Section 6A, $9.00 in Section 6E and $331.15 in Section 6I were deducted for costs associated with providing backup for the Contamination Assessment reimbursement application. These costs are not reimbursable in this application which is for the Remedial Action Plan/Monitoring Only Plan program task. $184.80 in Section 6A and $394.56 in Section 6I were deducted for field supplies, ice, conducting database modifications and purchasing office supplies, which are considered to be overhead. These costs are not justified in addition to the loaded personnel rates which already include overhead and profit. $11.76 in Section 6I was deducted because the rate for reproduction ($0.99 per page) has been determined to be excessive. However, $0.15 (per page) has been allowed based on the predominant rate claimed in other reimbursement applications for similar rates. $19.56 in Section 13E was deducted for costs added to the application preparation claimed as a markup. Reimbursement for application preparation is limited to actual costs only. $17.02 was added to the application grand total to cover the cost of reproducing the reimbursement application and invoices and shipping the replacements to the Department. (Petitioner's Exhibit 12.) Petitioner filed a timely challenge to contest the Department's decision. That challenge disputed the Department's action, as set forth in paragraphs numbered 1 through 4 of the letter, but Petitioner did not then, or at hearing, dispute the Department's action with regard to the matters contained in paragraphs numbered 5 and 6 of the Department's letter. (Petitioner's Exhibit 13). Subsequently, at hearing, Petitioner withdrew its request for reimbursement regarding the items contained in paragraph 3 of the Department's letter. (Transcript, page 101). The claim for the cost of preparing the reimbursement application Petitioner's claim for the cost of preparation of the reimbursement application totalled $1,458.36 (including the certified public accountant review fee). The Department proposed to deduct $19.56 (in Section 13E), and to add $17.02 to cover certain costs, as noted in the Department's letter. (Petitioner's Exhibits 12 and 13). Petitioner offered no objection to the Department's decision and, therefore, Petitioner should be awarded $1,455.82, without the need for further discussion, as the cost of preparing the reimbursement application. The claim for the cost of preparation of the MOP and MOP Addendum Petitioner's application for reimbursement claimed 413.15 personnel hours ($31,442.55) were dedicated to the development of the MOP (329.42 hours/$25,500.95) and the MOP Addendum (83.73 hours/$5,941.60). (Respondent's Exhibit 7, and Transcript, pages 188-190). In its initial review, the Department approved 55.67 hours ($3,790.45) for the MOP and 41.92 hours ($2,538.55) for the MOP Addendum, for a total award of $6,329.00. Subsequently, the Department resolved to accept as reasonable, 89 hours ($6,308.00) for the MOP and 83.73 hours ($5,941.60) for the MOP Addendum, for a total award of $12,249.60 for personnel costs.10 The 83.73 hours ($5,941.60) agreed to by the Department for the MOP Addendum was the precise amount Petitioner requested in its reimbursement application; however, the 89 hours ($6,308.00) accepted by the Department for the MOP is clearly less than the 329.42 hours ($25,500.95) Petitioner had requested. With regard to the difference, the Department views the request as excessive. In contrast, Petitioner contends the time requested was reasonable. Here, the Department's view has merit. To support the reasonableness of the hours (labor) claimed, Petitioner pointed to the "Daily Time Log[s]" which were contained within the reimbursement application, and which it contended contain an accurate recording of the hours worked and the task performed. (Petitioner's Exhibits 11, and Transcript, pages 29 through 31). According to Mr. Hidle, all employees of the company were required to keep a notepad on which they were to record the job (customer), hours worked, and task performed. At some future date, perhaps up to a week or more, those entries were ostensibly transferred to the "Daily Time Log." (Transcript, pages 29 through 31, and page 84). Consequently, Mr. Hidle contends Petitioner's "Daily Time Log[s]" may be relied upon to accurately reflect the hours actually worked, and that those hours were reasonably expended. Here, considering the record, Mr. Hidle's testimony is rejected as not credible or, stated otherwise, inherently improbable and unworthy of belief. In so concluding, it is observed that there is nothing of record, either in the exhibits or testimony offered at hearing, that could possibly explain the dichotomy between the number of hours claimed for development of the MOP (329.42) and the number of hours claimed for development of the MOP Addendum (83.73). Notably, neither project was particularly complex, and the tasks performed were reasonably alike. Similarly, it is inherently improbable, given the limited field work and the product produced (the MOP), that production of the MOP could require 329.42 hours or, stated differently, eight and one-quarter weeks, at 40 hours per week. Finally, most of the entries for which substantial blocks of time are assigned contain only vague or general terms to describe the task, such as "literature review," "MOP/RAP preparation," "file review," and "schedule/plan/coordinate RAP/MOP." Such practice renders it impossible to determine what work was actually done, whether the work was duplicative, and whether the time was actually expended or reasonable. Given the record, it must be concluded that the proof offered by Petitioner to support the number of hours claimed for development of the MOP is not credible or persuasive, and that it would be pure speculation to attempt to derive any calculation or meaningful estimate based on such proof. In the end, Petitioner must bear the responsibility for such failure. While Petitioner's proof offers no credible basis upon which to derive the number of hours dedicated to the MOP and their reasonableness, Petitioner obviously dedicated time to the MOP, and to the extent the record provides a reasonable basis on which to predicate an award, it is appropriate to do so. Here, given the lack of credibility of Petitioner's "Daily time Log[s]," as well as the testimony of Mr. Hidle, to provide a basis on which to derive the number of hours actually worked, and then test those hours against the standard of reasonableness, the only option is to award the 89 hours or $6,308.00, which the Department agrees were reasonably expended. Finally, with regard to the miscellaneous cost items, as opposed to personnel hours, rejected by the Department's letter of June 27, 1996, it must be resolved that Petitioner failed to offer, at hearing, any compelling proof that the items rejected by the Department were reasonable expenditures incurred in development of the monitor only program. Consequently, the following sections of Petitioner's reimbursement application have been reduced by the sums stated: $295.95 deducted from Section 6C; $28.20 deducted from Section 6D; $9.00 deducted from Section 6E; and $800.72 deducted from Section 6I. The award for reimbursement Given the proof, Petitioner should be awarded the following sums, for the items indicated, as reimbursement for preparation of the MOP and MOP Addendum: Personnel $12,249.60 Capital Expense Items Rentals 867.50 Mileage 39.85 Shipping 26.00 Well Drilling Permits Analysis 3680.00 Miscellaneous 800.53 TOTAL 17,663.48 For expenses involved in preparation of the reimbursement application, Petitioner should be awarded the following sums for the items indicated: Personnel $ 795.00 Capital Expense Items Rentals 15.00 Mileage .80 Shipping 67.25 Well Drilling Permits Analysis Miscellaneous 77.77 APPLICATION PREPARATION TOTAL 955.82 CERTIFIED PUBLIC ACCOUNTANT REVIEW FEE 500.00 TOTAL FOR APPLICATION PREPARATION 1,455.82 In all, Petitioner should be accorded a total reimbursement of $19,119.30.
Recommendation Based on the foregoing Findings of Fact and Conclusions of Law, it is RECOMMENDED that a final order be entered which awards Petitioner the sum of $19,119.30, as reimbursable costs. DONE AND ENTERED this 22nd day of February, 1999, in Tallahassee, Leon County, Florida. WILLIAM J. KENDRICK Administrative Law Judge Division of Administrative Hearings The DeSoto Building 1230 Apalachee Parkway Tallahassee, Florida 32399-3060 (850) 488-9675 SUNCOM 278-9675 Fax Filing (850) 921-6847 www.doah.state.fl.us Filed with the Clerk of the Division of Administrative Hearings this 22nd day of February, 1999.
The Issue The issue to be determined in this case is whether the Notice of Intent to Issue Order Requiring Access to Property (“Access Order”) issued by the Department of Environmental Protection (“Department”) and directed to Glenda Mahaney, as the property owner, is a valid exercise of the Department’s authority.
Findings Of Fact Petitioner Glenda Mahaney is a natural person and the owner of the property identified in the Access Order. The Department is the state agency which has been granted powers and assigned duties under chapters 376 and 403, Florida Statutes, for the protection and restoration of air and water quality and to adopt rules and issue orders in furtherance of these powers and duties. Background The groundwater beneath a parcel of land adjacent to Petitioner’s property was contaminated with petroleum when the land was used in the past for auto salvage operations. Initial groundwater sampling near the border of Petitioner’s property showed groundwater contamination by gasoline constituents which exceeded Groundwater Cleanup Target Levels (“GCTLs”). In other words, the contamination was at levels that required cleanup. However, later sampling showed the concentration of contaminants had decreased below GCTLs, probably as a result of natural attenuation. The existing data suggests that any groundwater contamination beneath Petitioner’s property is probably now at a level that would not require cleanup. However, the Department issued the Access Order because the Department is not certain about the contamination beneath Petitioner’s property and because Petitioner has continually requested further investigation. Petitioner believes contamination from the auto salvage site has caused illness in a tenant and even contributed to other persons’ deaths. However, no expert testimony was received on this subject and no finding is made about whether contamination exists on Petitioner’s property which has caused illness or death. The Department’s Site Investigation Section wants access to Petitioner’s property in order to determine whether contamination has migrated beneath Petitioner’s property and, if it has, the extent and concentration of the contaminants. The Department wants to: (a) install up to five temporary groundwater monitoring wells, (b) collect groundwater samples from the wells, (c) collect a groundwater sample from Petitioner’s potable water well, and (d) remove the monitoring wells after the sampling. The Access Order includes terms related to advance notice, scheduling, and related matters. Liability Although Petitioner believes petroleum contamination is present and wants it cleaned up, she objects to the provision of the Access Order related to liability. Paragraph 9(e) of the Access Order provides: Ms. Mahaney shall not be liable for any injury, damage or loss on the property suffered by the Department, its agents, or employees which is not caused by the [sic] negligence or intentional acts. Petitioner insists that she should not be liable under any circumstances for injuries or damages suffered by Department’s agents or employees who come on her property for these purposes. She demands that the Department come onto her property “at their own risk.” At the final hearing, the Department stated that it did not intend to impose on Petitioner a level of liability different than the liability that would already be applicable under Florida law. The Department offered to amend Paragraph 9(e) of the Access Order to indicate that Petitioner’s “liability, if any, shall be determined in accordance with Florida law.” Scope of the Investigation Petitioner objects to the proposed groundwater sampling because she does not believe it is extensive enough. Petitioner also believes the Department should test for soil contamination. The Department’s expert, David Phillips, testified that the proposed monitoring well locations were selected based on the direction of groundwater flow in the area and the wells are along the likely path of migration of any contaminated groundwater from the former auto salvage site. Another Department witness, Tracy Jewsbury, testified that no soil contamination was found on the auto salvage site, so the Department has no reason to expect there would be soil contamination on Petitioner’s property that came from the auto salvage operation. The Department will use the data collected from the wells to determine if contamination is present and whether future contamination assessment and/or remediation activities are necessary.
Recommendation Based on the foregoing Findings of Fact and Conclusions of Law, it is RECOMMENDED that the Department of Environmental Protection withdraw the Access Order or, alternatively, that Paragraph 9(e) of the Access Order be amended to provide that Ms. Mahaney’s potential liability, if any, shall be determined in accordance with Florida law. DONE AND ENTERED this 15th day of November, 2017, in Tallahassee, Leon County, Florida. S BRAM D. E. CANTER 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 COPIES FURNISHED: Filed with the Clerk of the Division of Administrative Hearings this 15th day of November, 2017. William W. Gwaltney, Esquire Department of Environmental Protection Mail Station 35 3900 Commonwealth Boulevard Tallahassee, Florida 32399-3000 (eServed) Glenda Q. Mahaney Post Office Box 123 Mount Dora, Florida 32756 Lea Crandall, Agency Clerk Department of Environmental Protection Douglas Building, Mail Station 35 3900 Commonwealth Boulevard Tallahassee, Florida 32399-3000 (eServed) Robert A. Williams, General Counsel Department of Environmental Protection Legal Department, Suite 1051-J Douglas Building, Mail Station 35 3900 Commonwealth Boulevard Tallahassee, Florida 32399-3000 (eServed) Noah Valenstein, Secretary Department of Environmental Protection Douglas Building 3900 Commonwealth Boulevard Tallahassee, Florida 32399-3000 (eServed
The Issue The issue for determination is whether Redd’s Cleaners, DEP Facility No. 139502588 is eligible for state-administered cleanup under the Drycleaning Solvent Cleanup Program pursuant to Section 376.3078, Florida Statutes.
Findings Of Fact Metropolitan Dade County (Petitioner) is a political subdivision of the State of Florida. Pursuant to Chapter 24, Metropolitan Dade County Code, Petitioner regulates, among other things, the use, storage, and disposal of industrial wastes and hazardous substances in Dade County. Sekoff Investments, Inc. (Intervenor) is a Florida corporation and is the owner of commercial real property located at 5821 Ponce de Leon Boulevard, Coral Gables, Florida. Intervenor is a "real property owner" as defined by Section 376.301(25), Florida Statutes (1995). Florida Department of Environmental Protection (Respondent DEP) is an agency of the State of Florida. Pursuant to Chapters 20, 376, and 403, Florida Statutes, Respondent DEP has jurisdiction, among other things, over the regulation and protection of the State's surface waters, groundwater, and other natural resources. From 1956 to December 1994, Intervenor leased its property to "drycleaning facilities," as that term is defined by Section 376.301(8), Florida Statutes (1995), which operated under the name "Redd's Cleaners" (Respondent Cleaners). Intervenor was not an owner of the drycleaning facilities, nor did it participate in their management or operation. Intervenor's property has never been served by sewers and has a septic tank. Intervenor's property is not in an area served by private drinking water wells or in a cone of influence of a County wellfield. Starting in 1988, Petitioner began inspecting drycleaning facilities and requiring them to obtain operating permits pursuant to Section 24, Metropolitan Dade County Code. On February 28, 1989, Petitioner issued Operating Permit No. IW5-3387-88 to Jen-Dan, Inc., d/b/a Respondent Cleaners. Operating Permit Nos. IW5-3387-89, IW5-3387-90, IW5-3387-91, IW5-3387-92, and IW5-3387-94 were subsequently issued for the period between April, 1989 through April, 1995. On October 14, 1993, Petitioner collected soil and groundwater samples from the septic tank and storm drain/soakage pit at Intervenor's property and discovered elevated levels of perchloroethylene, a "drycleaning solvent," as that term is defined by Section 376.301(9), Florida Statutes (1995). On March 15, 1994, Petitioner issued Respondent Cleaners and Intervenor a Notice of Violation and Orders for Corrective Action (NOV). The NOV provided that the presence of drycleaning solvents in the septic tank and storm drain/soakage pit violated Sections 24-11, 24-13, 24-14, 24-26, and 24-55, Metropolitan Dade County Code, and ordered Respondent Cleaners and Intervenor to submit a formal plan for the assessment and cleanup of the drycleaning solvent contamination. The cited provisions of the Dade County Code generally provide that it is unlawful to throw, drain, run, seep, or otherwise discharge industrial or liquid wastes into septic tanks, sewers, or waters of the County; to cause or maintain a nuisance or sanitary nuisance as defined by the Metropolitan Dade County Code; or to violate any provision or condition of an operating permit. Intervenor hired the environmental consulting firm, REP Associates, Inc., which prepared and submitted to Petitioner a Contamination Assessment Plan (CAP) dated April 21, 1994. By letter dated May 5, 1994, Petitioner approved the CAP with modifications, and required the immediate pump out and disposal of the contaminated contents of the septic tank and storm drain/soakage pit. In May and June, 1994, Intervenor began collecting soil, groundwater, and sediment samples from the septic tank and storm drain, and installed a groundwater monitoring well, as required by the CAP. The test results disclosed the presence of drycleaning solvents in the soils and groundwater at Intervenor's property. The contaminants in the septic tank and storm drain/soakage pit were a source or a likely source of soil and groundwater contamination at the facility. On May 8, 1994, Respondent DEP announced that it was suspending all enforcement actions against drycleaning facilities based on the Florida Legislature's anticipated passage of the Florida Drycleaning Solvent Contamination Cleanup Act (Drycleaning Act). On June 3, 1994, the Drycleaning Act became effective. On August 23, 1994, Petitioner mailed Intervenor and Respondent Cleaners a Final Notice Prior to Court Action stating that they were not in strict compliance with the deadlines set forth in the NOV. On September 22, 1994, Intervenor submitted to Petitioner a Report of Sampling and Analysis summarizing the results of the work performed in May and June, 1994. By letter dated September 23, 1994, Intervenor further advised Petitioner that it would be applying for participation in the Drycleaning Solvent Contamination Cleanup Program (Drycleaning Cleanup Program) as soon as Respondent DEP promulgated the necessary implementation rules. Intervenor proposed that Petitioner approve a no further action plan pending its notice of eligibility under the Drycleaning Act. By letter dated September 30, 1994, Petitioner disapproved Intervenor's no further action plan. Petitioner again notified Intervenor and Respondent Cleaners that they must immediately remove and dispose of the contents of the septic tank and storm drain. In December, 1994, Intervenor evicted Respondent Cleaners. Since that date, the former drycleaning facility has remained vacant. On July 18, 1995, Intervenor's environmental consultants removed and properly disposed of the contents of the septic tank and storm drain. 18.1 On October 3, 1995, Intervenor's consultants advanced new soil borings and installed a new groundwater monitoring well. Groundwater samples were collected on October 24, 1995. 19.2 On February 21, 1996, Intervenor submitted its Contamination Assessment Report Addendum to Petitioner, summarizing the results of the work performed in July and October, 1995, and requesting a monitoring only plan (MOP). By letter dated February 29, 1996, Petitioner disapproved Intervenor's proposed MOP. 20. In March 1996, Respondent DEP began to accept applications for the Drycleaning Cleanup Program. Intervenor submitted its application for Respondent Cleaners on March 8, 1996. 21.3 By letter dated June 11, 1996, Respondent DEP approved Intervenor's application and determined that Respondent Cleaners' drycleaning facility was eligible to participate in the Drycleaning Cleanup Program. By Petition for Formal Administrative Hearing served July 11, 1996, Petitioner appealed Respondent DEP's eligibility determination. According to Petitioner, Intervenor's failure to timely comply with Petitioner's order to assess and remediate Respondent Cleaners constitutes gross negligence in the operation of the cleaner, thereby precluding its eligibility in the Drycleaning Cleanup Program.
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 finding Redd's Cleaners, DEP Facility No. 139502588 eligible to participate in the Drycleaning Solvent Contamination Cleanup Program.DONE AND ENTERED this 14th day of May, 1997, in Tallahassee, Florida. ERROL H. POWELL Administrative Law Judge Division of Administrative Hearings The DeSoto Building 1230 Apalachee Parkway Tallahassee, Florida 32399-3060 (904) 488-9675 SUNCOM 278-9675 Filed with the Clerk of the Division of Administrative Hearings this 14th day of May, 1997.
The Issue The issue for determination is whether Angie's Quality Cleaners, d/b/a Tony's Cleaners, DEP Facility No. 139500552 is eligible for state-administered cleanup under the Drycleaning Solvent Cleanup Program pursuant to Section 376.3078, Florida Statutes.
Findings Of Fact Angie's Quality Cleaners, d/b/a Tony's Cleaners, DEP Facility No. 139500552 (Respondent Cleaners) operates as a drycleaning facility at 1197 West 35th Street, Hialeah, Florida. Colombina Holding Company, N.V., Inc. (Intervenor) is the owner of the real property located at 1197 West 35th Street, Hialeah, Florida. Respondent Cleaners made application with the Florida Department of Environmental Protection (Respondent DEP) for state-administered cleanup under the Drycleaning Solvent Contamination Cleanup Program (Drycleaning Cleanup Program). By letter dated October 25, 1996, Respondent DEP notified Respondent Cleaners, among other things, that its application was approved and that it was eligible to participate in the Drycleaning Cleanup Program. Prior to Respondent Cleaner's approval to participate in the Drycleaning Cleanup Program, Metropolitan Dade County (Petitioner) issued to Respondent Cleaners a Notice of Violation and Orders for Corrective Action (NOV) for contamination at the drycleaning facility. The NOV required Respondent Cleaners to assess and remediate the contamination and to pump out and clean a soakage pit. Having received the NOV, Respondent Cleaners obtained the services of an environmental consultant to assess the contamination on the site and to propose a plan of remediation. Respondent Cleaners maintained contact with Petitioner and advised Petitioner of the progress. Petitioner required Respondent Cleaners to submit a Contamination Assessment Report (CAR) and IW Process Change Plans for the facility. Respondent Cleaners complied with the requirement. By letter dated November 21, 1996, counsel for Respondent Cleaners made inquiry to Respondent DEP as to whether pump out or cleaning of contamination in a soakage pit was included within the Drycleaning Cleanup Program. On November 20, 1996, Petitioner's Department of Environmental Resources Management (DERM) conducted a routine inspection and a receptor survey of Respondent Cleaners. No violations were observed by the inspector. Respondent Cleaners has not remediated the contamination at the facility site.
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 finding Angie's Quality Cleaners, d/b/a Tony's Cleaners, DEP Facility No. 139500552 eligible to participate in the Drycleaning Solvent Contamination Cleanup Program. DONE AND ENTERED this 21st day of April, 1998, in Tallahassee, Leon County, Florida. ERROL H. POWELL Administrative Law Judge Division of Administrative Hearings The DeSoto Building 1230 Apalachee Parkway Tallahassee, Florida 32399-3060 (850) 488-9675 SUNCOM 278-9675 Fax Filing (850) 921-6847 Filed with the Clerk of the Division of Administrative Hearings this 21st day of April, 1998.
