The Issue The issues to be resolved in this proceeding concern generally whether the Respondents named above are liable for the contamination and violations alleged in the Petitioner, Department of Environmental Regulation's (DER) Notice of Violation and Amended Notice of Violation, pursuant to the relevant provisions of Chapter 403, Florida Statutes, and the rules contained in Title 17, Florida Administrative Code, as relevant to this proceeding and treated herein.
Findings Of Fact DER is an agency of the State of Florida charged, under Chapter 403, Florida Statutes, and related rules, with preventing and alleviating environmental contaminations, as pertinent hereto, including such issues involving ground waters of the State of Florida. The property in question in this proceeding is located at the northwest corner of Blount and Guillemard Streets in Pensacola, Florida. The legal description of that property and the state of the title of the property is as described in the Prehearing Stipulation filed by the parties at page two thereof. The Belleaus are the current owners of the real property at that location. Crown is the owner and operator of a commercial laundry and dry cleaning business situated on that property in the building(s) located thereon. Crown is a corporation authorized to do business in the State of Florida and is a "person" within the meaning of Section 403.031(5), Florida Statutes. American Linen is a corporation authorized to conduct business in the State of Florida and is also a "person" within the meaning of that Statute. American Linen obtained the property by purchase by corporate warranty deed from Rentex (RCD) on April 23, 1979. It operated a commercial laundry at the property from that date until June 3, 1985, when it sold the laundry business to Crown and the real property upon which it operated to the Belleaus. In November of 1971, RCD, a Delaware corporation and a 100 percent-owned subsidiary of Rentex Services corporation (RSC), also a Delaware corporation, acquired the property. RCD owned and operated a commercial laundry and dry cleaning business on the property until April 23, 1979, on which date it sold the laundry business and property to American Linen. It actually operated a dry-cleaning service on the property during only 1974 and early 1975. Sketchley Delaware, Inc. (SDI), a Delaware corporation, purchased RSC, which then became a 100 percent- wholly-owned subsidiary of SDI in 1982. RCD, however, remained a 100 percent-wholly-owned subsidiary of RSC until 1983. In March of 1983, SDI merged with RSC, and the resulting corporation was named "Sketchley Services, Inc." RCD continued as a corporation, 100 percent-wholly-owned as a subsidiary of Sketchley. In October of 1983, RCD merged into Sketchley, and Sketchley survived. Respondent Sketchley has never held title to nor conducted any form of business on the property in question. On March 29, 1991, Sketchley was renamed "Jura Services, Inc." (Jura) and was converted to a close corporation under Delaware law. This controversy had its origins in May of 1986 when a representative of DER performed a routine sampling of tap water at the DER district office in Pensacola. Those samples were subjected to chemical analysis which revealed the presence of PCE, a widely-used solvent often associated with dry-cleaning operations. That tap water came from the public water supply for the City of Pensacola, supplied by a network of potable water wells. Upon learning of the PCE content in the water supply, DER began an investigation to attempt to locate its source. Analysis of a number of the Escambia County Utilities Authority (ECUA) wells (PW-6, PW- 8, PW-9, and east well) contained quantities of PCE in excess of the maximum contaminant levels for drinking water authorized by DER's rules. Those wells were taken out of service in June of 1986, subjected to carbon filtration which ultimately removed the PCE from the water supply for those wells, and the wells have since been put back in public service. A ground water investigation was undertaken by DER to determine the source of contamination in the upper portion of the sand and gravel aquifer and in the production zone of the deeper Floridian aquifer which supplies those wells. A total of 29 ground water monitoring wells (MW) were installed and sampled. An analysis of these was prepared (87-04 report). On February 7, 1987, DER and representatives of the utilities authority and Crown, the operator of the laundry facility, conducted an inspection and clean-out of the surge tank located in the floor of the Crown laundry building. A chemical analysis of three samples of liquid residue in the bottom of the tank revealed the presence of PCE in those sediments in concentrations of 1,952 parts per billion (PPB), 108.5 PPB, and 50 PPB. Additionally, one of the samples revealed trichloroethene at 34 PPB and 1, 2 dichloroethene at 52,800 PPB. Under certain conditions, these last two-named compounds are produced as bi-products of the breakdown of PCE. Based upon this inspection and the investigation of other potential sources, DER took the position that the surge tank at Crown had discharged waste water containing PCE into the adjacent soils and that PCE migrated into ground water produced by the ECUA's public water supply wells, PW-6, PW-8, PW-9, and "east well". Although not stipulating that the samples were representative or to the conclusions to be drawn from the analytical results of testing the samples, the parties stipulated that proper physical and technical procedures and methods were used in the collection, preservation and analysis of all of the samples and the laboratory results were consequently stipulated into evidence. Jura, American Linen, Crown, and the Belleaus had no actual knowledge that any PCE had been deposited in the surge tank between 1971 and the date in 1979, when American Linen bought the facility. A commercial laundry has been operated on the subject property since 1971. The laundry was operated by RCD at that time, and in the summer of 1974 and during at least part of 1975, a dry-cleaning operation, in addition to laundry, was conducted by RCD at the site. The dry-cleaning operation involved the use of PCE. This was the only period of time when dry-cleaning operations were conducted on the property until 1985 when Crown conducted a dry-cleaning operation. Crown's operation, however, made no use of PCE, but rather, Crown used "stoddered solvent" as its dry- cleaning fluid. During American Linen's ownership and operation of the laundry at the site, no dry-cleaning operations, whatever, were conducted. At no time during American Linen's ownership and operation of the laundry at the site nor during the Belleaus ownership, and Crown's operation, of the laundry facility was any PCE used or stored on the property. Since laundry operations commenced at the site, the waste wash water from the laundry was discharged to the surge tank located beneath the floor of the Crown building. That tank intercepts and stabilizes wash water prior to its discharge to the municipal sanitary sewer system. The surge tank also served as a component of the laundry operation as a thermal recovery system. Although the surge tank and the commercial laundry and dry-cleaning businesses which have been operated at the site constitutes an "installation" for purposes of Section 403.031(4), Florida Statutes, the tank has never been used for the intentional storage or disposal of any "hazardous substances", as defined in Section 403.703(31), Florida Statutes, by any of the Respondents. The tank has never been used for the intentional disposal of any hazardous substances by American Linen, Crown, the Belleaus, or Jura. During normal laundry operations, lint, sand and other sediment accumulated in the bottom of the surge tank over a period of time. When the accumulated quantity of sediment became too great so as to interfere with the operation, the liquid and the sediments were removed periodically by a vacuum truck and manual labor, using shovels, buckets, and a dumptruck. The surge tank was cleaned out several times over the pertinent years, including 1976, 1978, or 1979 (before American Linen's purchase), as well as in 1980-81, 1983, 1987, 1990 and 1991. It was possibly cleaned in 1972 or 1973, as well. In the 1976 clean-out, the surge tank was cleaned thoroughly enough that the workers reported searching for loose change on the concrete floor of the tank. DER must prove a violation of Section 403.161(1)(a) or (b), Florida Statutes, in order to establish liability for purposes of Section 403.141(1), Florida Statutes, and Section 403.121(2), Florida Statutes. DER has also sought, as of the time of hearing, to impose liability on the Respondents, pursuant to Section 403.727(4), Florida Statutes, which imposes strict liability on the owner and operator or former owner and operator of a facility at which a release to the environment of a hazardous substance has occurred. Section 403.161(1)(a), Florida Statutes, provides that it is prohibited for a person to cause pollution so as to harm or injure human health or welfare, animal, plant, or aquatic life, or property. In this proceeding, DER did not establish with competent, substantial evidence that the alleged pollution by PCE caused any harm or injury to human health or welfare, animal, plant, or aquatic life, or property. No risk assessment was conducted to determine the potential harm or actual harm. No testimony was presented with regard to the possible health effects or injurious impacts of PCE in the environment. There was no evidence shown to establish what amount of PCE in the environment or ground water might cause or potentially cause such harm to human health or any of the other injurious effects referenced in the above-cited Statute. DER has not adduced any evidence of a preponderant nature to show that any Respondent is thus liable for a violation of Section 403.161(1)(a), Florida Statutes. Section 403.161(1)(b), Florida Statutes, provides that it is a violation to fail to comply with any rule of DER. Section 403.161(1)(b), Florida Statutes, is implemented with regard to ground water through former Rule 17-4.245(2), Florida Administrative Code, now Rule 17- 28.700, Florida Administrative Code, which provides a cause of action for violation of ground water standards. In order to maintain a cause of action under that Rule, DER must prove that the Respondents violated either Rule 17-3.402(1), Florida Administrative Code (the "Free From" Rule), or Rule 17-3.404(1)(a), Florida Administrative Code, which sets forth the ground water criteria alleged in the NOV and Amended NOV to have been violated. Concerning Rule 17-3.402(1), Florida Administrative Code, which establishes narrative, minimum health effects-based criteria applicable to ground water, DER has alleged that the Respondents failed to comply with this Rule, but introduced no evidence concerning any health effects of PCE in the ground water. DER produced no evidence whatever regarding the concentration, if any, of PCE, which may be carcinogenic, mutagenic, teratogenic, or toxic, or which would pose a serious danger to the public health, safety or welfare, or create a nuisance, or impair the reasonable and beneficial use of any adjacent ground water. Even assuming that some amount of PCE was released from the surge tank at some period of time, DER failed to present any evidence regarding the quantity of PCE which may have been released, and the concentration in the ground water which could have resulted from a release from the Crown property. It simply was not proven that the concentration shown in the wells, at which samples were taken, all resulted from any release, if any, which came from the Crown property. Thus, DER failed to adduce evidence which can demonstrate in a preponderant way a violation of the "Free From Rule" cited above or which would support its cause of action under Section 403.161(1)(b), Florida Statutes, with regard to alleged violation of this Rule. DER has also alleged that the Respondents violated Rule 17-3.404(1)(a), Florida Administrative Code, cross- referencing and incorporating former Rule 17-22.104(1)(g), Florida Administrative Code, now Rule 17-550.310(2)(d), Florida Administrative Code, which sets forth the ground water standard, in the form of maximum contaminant level (MCL) for PCE. In order to demonstrate a violation of Rule 17-3.404(1)(a), Florida Administrative Code, as to each Respondent, DER had to prove that the Respondents caused a release of PCE to the ground water, resulting in a concentration of PCE in the ground water greater than the MCL established by the Rule. Effective May 23, 1984, DER thus established 3 parts per billion as the MCL for PCE in drinking water and as the water quality standard for PCE applicable in Class G- II ground water, which is the classification of the ground water underlying the Crown property, and occurring at all of the supply wells and monitor wells involved in this proceeding. In order to demonstrate a violation of the MCL by release of PCE from the laundry property, DER had the burden of proving: (a) that PCE entered the surge tank; (b) that the surge tank, in fact, released it to the environment and to the ground water; (c) that the release of PCE occurred during the ownership and/or operation of the laundry by one or more of the Respondents; and (d) that the amount of PCE entering the ground water during ownership and/or operation of each Respondent caused the concentration of PCE in the ground water to exceed the MCL in effect at the time of each Respondent's ownership and/or operation. Proof of PCE in the Tank Rentex installed a dry-cleaning machine at the Crown facility during mid-1974. It was equipped with two PCE holding tanks with PCE being used as the cleaning solvent in the dry-cleaning process. There was a storage tank, four to five feet tall, which stored pure PCE. The other tank was an eight to ten foot tall "cooker" tank used to heat and reconstitute PCE used in the dry-cleaning process. The machine was located near the rear of the Crown building, close to the floor drains and the wash room. The dry-cleaning machine was dismantled and removed from the Crown facility to another dry-cleaning establishment in Baltimore sometime in late 1974 or the early part of 1975. The thrust of DER's case is that spills of PCE occurred from the dry-cleaning machine and its operation at the Crown facility which were allowed to enter the surge tank and thence leaked into the soil, the environment and the ground water. Indeed, several boil-overs of PCE occurred during the period of 1974 and early 1975, when the dry-cleaning operations were being conducted at the facility. Witnesses, Mathias and Hedrick, for DER, established that one spill of PCE in the amount of four to five gallons also occurred, along with several boil-overs from the laundry machine during that time period; however, the actual amount of PCE spilled or boiled over from the dry-cleaning machine and its operation was not established by DER. Mr. Mathias worked as a maintenance man at the facility during the relevant period when dry-cleaning operations were conducted by RCD. He established that there were several boil-overs of PCE from the cooker tank and that when PCE boiled over from the top of the machine, some quantity would be sprayed onto the floor which was then hosed off into the floor drains, which communicate with the surge tank. He was unable to quantify the amount of PCE spilled on the laundry floor or which reached the surge tank, however. He was not able to definitively establish how many boil-overs he witnessed nor their severity in terms of the amount of PCE which was resultingly spilled on the floor of the laundry. He did not witness any spills of PCE other than those occurring in conjunction with boil-over events. Mr. Hedrick was also a maintenance man at the facility during RCD's period of ownership and its dry- cleaning operations. He knew of one incident in mid-1974 in which four to five gallons of PCE were spilled directly onto the floor of the laundry due to a hose connecting the holding tank to the cooker tank being inadvertently disconnected. That PCE was washed with a hose into the floor drains and thence into the surge tank. Mr. Hedrick could recall only two boil-overs of PCE from the dry- cleaning machines. These incidents involved PCE spraying over the top of the cooker tank but did not involve the release of any significant amount of PCE onto the floor. Mr. Hedrick established that employees were careful in handling the chemical because it was very expensive and they were careful not to waste it. After boil-over events which he described, he observed the level of the PCE in the holding tank, which did not appear to drop much as a result of the boil-overs. He was also responsible for refilling PCE into the holding tank as necessary. His experience was that he was not required to add PCE to the machine as the mere result of a boil-over because the boiling PCE escaped from the top of the machine mostly as foam with very little actual volume of PCE being discharged during such a boil- over event. Mr. Hedrick's testimony is corroborated by that of Dr. Mercer, an expert in hydrogeology, dense, non-aqueous phase liquid behavior (DNAPL), and the fate and transport of chemicals in the subsurface environment, presented by Jura. Dr. Mercer established that in a boil-over event, the PCE escaping from the top of the machine is pure PCE, chemically, but it escapes in the form of a foam or mist very near the boiling point of approximately 250 Fahrenheit. Because it is very volatile, most of the PCE escaping from the machine in a boil-over event, due to its volatility enhanced by its high heat, dissipates into the atmosphere. Whatever PCE did not volatilize would spread in a thin film over the floor of the facility and, because it was still a warm fluid, would continue to volatilize into the atmosphere. The small amount which did not volatilize would be washed into the floor drains and correspondingly diluted prior to entry into the surge tank, where it would be further diluted by the large volume of warm water present in the tank which would enhance dissolution and dilution. Consequently, the boil-overs would have produced only dissolved PCE entering the tank in small quantities, most of which would be flushed from the tank into the city sanitary sewer system through the outfall line exiting from the wall of the surge tank. Thus, the testimony of these witnesses establishes that only one spill of four to five gallons of PCE occurred in 1974, most of which was washed into the floor drains and into the surge tank. It was not established that the boil- over events materially contributed to the volume of PCE entering the surge tank during the dry-cleaning operations conducted in 1974 and early 1975. No PCE was shown to have been deposited in the surge tank after dry-cleaning operations ceased in 1974 or at the latest in early 1975 during the RCD ownership and operation of the facility. It was not shown that PCE was released or discharged to the environment by any other means since that time at or on the property or facility. Release of PCE to the Environment DER has thus established that some four to five gallons of PCE from a spill entered the surge tank in 1974 and that some minor quantities from boil-overs entered the tank through wash down of the laundry floor. DER also has the burden to establish the next evidentiary link; that the PCE was released from the surge tank to the environment. The surge tank consists of a poured concrete floor with concrete-block walls with a plaster or cement covering on the outside of the tank. The concrete-block mortar joints and concrete with which the tank is constructed are porous materials, although the specific porosity has not been quantified. The extent of coverage, the integrity and continuity of the exterior cement or plaster layer over the outside of the tank, and for the life of the tank, is not established. The surge tank was constructed in 1969 in conjunction with the construction of the laundry building. It is 20 feet long by 10 feet deep by 9 feet wide. It is stipulated that the surge tank leaks wash water at some rate because of the porosity of the materials and because of cracks and fissures which have opened in its walls since its construction. Testing of the tank in 1971 revealed that it leaked, at that time, at the rate of 6.5 gallons per day. No evidence establishes what the leakage rate before 1991 might have been. There is no direct evidence of a release of PCE from the surge tank to the soil or ground water. Michael Clark testified in this regard, as a member of the Operations Response Team of DER. In his opinion, DNAPL or "separate phase" PCE (undissolved PCE) had escaped from the tank into the ground water; however, he testified that he performed no calculations to determine the quantity of PCE which would have had to enter the surge tank in order to create a release of separate phase PCE. Mr. Clark assumed in the gravamen of his testimony that the contents of a 55- gallon drum of PCE had been released to the surge tank in a spill, in performing his analysis of the potential for release of PCE from the surge tank. He admitted, however, that the release of 55 gallons of PCE had been only hypothetical and no evidence was presented in this case to establish that 55 gallons of PCE had been spilled or otherwise placed in the surge tank. Mr. Clark was neither offered nor qualified as an expert in hydrogeology or any other field of expertise which could establish that he had any expertise in the movement of chemicals in the environment or in ground water or soils, nor as to the chemical state of those chemicals while in the soils or ground water at any point in time. Mr. Clark's opinion that separate phase PCE was released to the soil and then the ground water from the surge tank and that it resulted in the contamination found in the public water supply wells at issue, as well as in the monitoring wells, is not supported by competent, substantial evidence. Inasmuch as Mr. Clark's opinion testimony did not demonstrate, by preponderant evidence, that separate phase PCE was released to the environment from the tank and there being no direct evidence of such a release, then inferential evidence must be used to establish whether such a release occurred. PCE was shown to be present in the tank in 1974 based upon the above-described events. The presence of PCE has been detected in the ground water immediately downgradient of the Crown property, as well as in the public drinking water supply wells and the monitoring wells, downgradient of the Crown facility. That evidence, together with the evidence concerning the porous nature of the materials of which the tank is constructed and the tank's condition, which has deteriorated over time, is sufficient to support an inference that some undetermined quantity of dissolved PCE escaped from the surge tank over some undetermined points or periods of time. DER, however, did not adduce evidence which could establish an inference that a release of dissolved PCE or separate phase PCE from the tank would be sufficient to cause the violations of the MCL for PCE found at the monitoring points in the vicinity of the Crown property nor is the evidence sufficient to establish when the releases, if any, which may have contributed to a violation of the MCL for PCE at the monitoring or sampling points may have occurred. The lack of sufficient evidence to support such an inference is pointed out by the testimony of witnesses Mathias and Hedrick, testifying for DER, concerning the quantity of PCE which entered the tank and by the testimony of Jura's expert witness, Dr. James Mercer, regarding the behavior of PCE upon entering the tank and upon a release to the environment. The finding that the evidence is insufficient to support an inference that the tank released sufficient PCE to cause a violation of the MCL for PCE is further supported by the evidence that DER did not exclude, through its PCE source investigation, other potential sources of PCE contamination in the ground water, other than Crown, particularly in view of the evidence concerning the cone of influence of the "east well" and the location of the contamination in the PW-9 well, located upgradient from the Crown facility. Dr. Mercer testified concerning the behavior of separate phase PCE with regard to the spill of four to five gallons of pure PCE from the holding tank, as found above. He established that because PCE is very volatile, much of the spill would have volatilized into the atmosphere, although at a slower rate than the boiling temperature of PCE released during boil-over events, as described herein. The spilled PCE, which did not volatilize, would have been washed down with a hose, diluting it and dissolving it in water prior to its entry into the floor drains and the surge tank. In the floor drains and in the tank, some of the PCE would have been entrained or bound up in the lint present in those locations; and some of the PCE would have made its way to the surge tank. Because of prior dilution and dissolution, a relatively small amount of pure PCE would have entered the surge tank. The presence of warm water in the tank would have promoted more dissolution and dilution of the chemical, such that most of the four to five gallons of pure PCE spilled would have become mostly dissolved PCE upon entry into the tank. Some of that would have then been washed out into a sanitary sewer system through the outfall line. Since separate phase PCE is denser than water, any of it in that form entering the tank would sink to the bottom of the waste water in the tank, coming to rest on the layer of sand, lint and other sediments on the bottom of the tank. Dr. Mercer established that any separate phase PCE from the referenced spill would thus form a layer on top of accumulated sediments at the bottom of the tank, approximately .14 inches thick, assuming that it was evenly distributed over the bottom of the tank. In order for separate phase PCE to penetrate the pore spaces in the sediments, it would have to displace the waste water or wash water already occupying those pore spaces. If the layer, established by Dr. Mercer, was as thin as .14 inches thick, such a thin layer would not penetrate the pore spaces of the sediments because they would be filled already with wash water. That thin layer of separate phase PCE would not exert sufficient hydraulic pressure to displace that water because of the capillary pressure barrier formed between the water in the pore spaces and the separate phase PCE layer on top of the sediments. The capillary pressure effect is the pressure difference between two liquids, which creates a capillary pressure barrier, inhibiting the penetration of separate phase PCE into the pore spaces of the sediments. Dr. Mercer testified that a thickness of 4.7 inches of separate phase PCE, resting on top of the sediments, would be necessary to overcome the capillary pressure barrier between the wash water and the pore spaces of the saturated sediments and the separate phase PCE layer lying on top of those sediments. Therefore, most of the separate phase PCE would remain as a layer on top of the sediments. Dr. Mercer opined that if separate phase PCE does not reach the sediments in the bottom of the tank in sufficient volume to maintain the movement of the chemical through that porous medium, the separate phase PCE, which does settle to the top of the sediments, will tend to dissolve over time, partially into the wash water above the layer of PCE at the bottom of the tank and partially into the water occupying the pore spaces within the layer of sediments in the bottom of the tank. Any separate phase PCE, which dissolves into the overlying wash water, will become extremely diluted. Eventually, most of that dissolved PCE would be discharged through the tank's outfall to the public sanitary sewer system. Any separate phase PCE, which is able to overcome the capillary pressure barrier and move into the pore spaces of the sediments, by displacing wash water within those spaces, would become trapped within those pore spaces, because of an effect known as "residual saturation". When a separate phase liquid moving through a porous medium is not of sufficient volume to maintain its movement, it tends to physically break apart into globules of separate phase liquid within those pore spaces. As more globules form within the spaces, the movement of the separate phase liquid decreases until at some point the flow stops. When the flow stops, the globules of separate phase liquid become trapped within the spaces. The point at which a sufficient percentage of pore spaces are filled with globules of separate phase liquid is called "residual saturation". Because of the effect of residual saturation on any separate phase PCE at the bottom of the tank, Dr. Mercer concluded that separate phase PCE within the pore spaces of the sediments would be unable to flow and would effectually be trapped in the sediments in the bottom of the tank until those sediments were removed, either through dissolution into the wash water in the tank as flushing occurs through use of the tank over time or when the sediments were removed during clean-outs of the tank. Therefore, little, if any, separate phase PCE could have been released from the tank to the environment. Dr. Mercer's testimony was unrefuted and thus demonstrates that most PCE entering the tank would dissolve into the wash water already present, flow through the outfall to the sewer system, or become dissolved in the free water and water occupying the pore spaces in the sediments at the bottom of the tank. The evidence supports the finding that little, if any, PCE would be released to the soil surrounding or underlying the tank as a result of the spill of four or five gallons of PCE from the dry-cleaning machine. No evidence was presented to establish the quantity of PCE which could have escaped from the tank as a result of the spill of four or five gallons of PCE into the tank nor was any evidence presented which would establish during what period of time the release to the environment may have occurred. Charles Ferst testified as an expert in environmental engineering concerning the amount of PCE which may be released from the tank over time. Mr. Ferst testified that the leakage rate of the surge tank likely increased over time until reaching the current rate established in the evidence of 6.5 gallons per day, as determined by the 1991 test. Although the surge tank leaked at earlier periods, Mr. Ferst could not determine when the tank started leaking and could not calculate the leakage rate at any period of time prior to 1991 nor could any other witness. Based upon standard construction practices and the materials used in the tank at the time of its construction in 1969, Mr. Ferst opined that the tank leaked more after 1980 than in earlier years. Using that assumption and the fact that the sediments in the bottom of the tank were cleaned out several times between 1974 and 1991, he calculated the maximum amount of PCE which could have escaped from the tank after 1980. Mr. Ferst's calculations, however, are based upon a number of unsupported assumptions. Although he establishes that the tank leaked more in later years than in earlier years, his calculations and assumptions do little to establish how much PCE may have been released during any particular period of time; and little weight can be given to his conclusions regarding the specific amounts of PCE allegedly released at particular periods of time. DER did not present any evidence concerning the amount of PCE which could have escaped from the tank, even assuming that the tank leaked since 1974, when it was shown that some PCE had been placed in the tank. DER failed to prove that any amount of PCE which may have leaked out of the tank was sufficient to cause a violation of the MCL for PCE, and it did not inferentially demonstrate that any PCE which may have leaked out of the tank caused a violation of the MCL, because it simply failed to show that the violation levels found in the various wells where samples were drawn, solely resulted from contamination emanating from the Crown tank. DER failed to adduce evidence sufficient to carry its burden of proving a violation of the ground water standard for PCE caused by a release of PCE from the Crown property. Source of Contamination DER must prove that a release of PCE from the tank caused or contributed to the PCE contamination found in the public water supply wells and the monitoring wells. Dr. Mercer testified that if it is assumed that the tank is a source of contamination and the PCE concentration data collected by DER is used, the travel time of PCE from the surge tank to one of the monitoring wells, MW-3, where the highest concentrations were found, would indicate a release occurring many years prior to 1969, the year in which the Crown building and surge tank were constructed. Dr. Mercer therefore concluded that the surge tank at the Crown facility was likely not the sole or even the primary source of PCE contamination found by DER. In attempting to determine the source of the PCE discovered in the subject water supply wells, DER conducted soil sampling in suspected areas of contamination. This soil sampling revealed only two significant areas of PCE contamination in soils, neither of which was near the Crown property. DER then also selected monitoring well locations based upon ease of accessibility in order to determine the source of the contamination quickly. The monitoring wells were placed in the deep, intermediate, and shallow zones of the aquifer system underlying downtown Pensacola. Near the Crown facility, however, the intermediate zone was not present; instead, there was a shallow zone separated from the deep zone by a confining unit of relatively-impervious material. DER demonstrated that the shallow, intermediate and deep aquifer systems within the downtown Pensacola area are contaminated with PCE and PCE-derived breakdown compounds at widely-varying concentrations. DER did not prove, however, that one or more discreet plumes of PCE contamination exist. Mr. Clark, testifying for DER, attempted to calculate the travel time of contaminants found in MW-3 based upon their being released to the ground water from the Crown facility. Although Mr. Clark indicated this to be, in his belief, between 1970 and 1980, he admitted that he only estimated the travel time of ground water, as opposed to PCE, from the Crown property. Moreover, he averaged high hydraulic conductivity values for monitoring wells quite distant from the Crown property, near PW-9, and ignored data from closer, more relevant wells. Dr. Mercer, however, testified that the method used by DER to calculate travel time, which relies on conductivity values too far away from the suspected source and wells of concern, and averages only those high-conductivity values, while ignoring more pertinent values, provides a less accurate result. Hydraulic conductivity values are used to calculate ground water velocities, which can then be used to calculate travel times over a certain distance. Dr. Mercer testified that using the hydraulic conductivity values obtained from monitoring wells in close proximity to an assumed source and which reveal the presence of PCE in significant concentrations, which DER did not do, produces a much slower ground water velocity than that calculated by DER because the hydraulic conductivity values used are much lower. Averaging the hydraulic conductivity values obtained from monitoring wells which indicated significant concentrations of PCE in close proximity to the Crown facility to calculate travel time for PCE produced an estimate of 37 years for PCE released from the surge tank to reach MW-3. Thus, the PCE would have had to have been released prior to 1969 when the surge tank and the laundry facility were built (or from a different location). Because of this, it was not definitively shown that the PCE found in MW-3 came from the surge tank at the Crown facility. Dr. Mercer's testimony, because of his higher level of training, expertise and experience in hydrogeology and the fate and transport of chemicals in ground water, is accepted over that of Mr. Clark. Mr. Ross Mitchell testified regarding DER's search, which he conducted for facilities within the downtown Pensacola area which used or could have been the sources of a release of PCE. That investigation apparently concentrated on dry-cleaning establishments because DER opined that PCE was commonly used in such operations. Mr. Mitchell described his source investigation as "quick and dirty". He indicated that he did not follow up with every lead that he developed and that he established a "ball park" area within which to conduct his investigation. In fact, his investigation concentrated on a specific geographic area, in which other DER personnel had told him high concentrations of PCE had been found in ground water. As part of his investigation, he relied upon verbal representations by owners and operators regarding whether their facilities had ever used PCE. He made no effort to confirm those representations, other than cross-checking, in some instances, whether a given facility had been identified by a PCE supplier as a facility to which it had supplied PCE. However, he did not obtain customer lists from suppliers of PCE and was only able to get fragmentary information from the suppliers. Mr. Mitchell made no effort to verify whether PCE had ever been used at many of the facilities he had identified. He simply looked for readily- available evidence. That investigation was completed before DER became aware that PCE had been used at the Crown facility. Once that knowledge was obtained, Mr. Mitchell assumed that it would be the source of the PCE contamination found. He did not follow up regarding any of the other facilities which were on his list of suspect locations. He acknowledged at hearing that several of the suspect facilities, other than Crown, had not actually been eliminated as potential sources and acknowledged that he had not considered possible sources, other than dry-cleaning establishments, such as refuse dumpsters at facilities which had been identified as using or having used PCE. He did no environmental sampling around dumpsters at such facilities to detect spillage and did not investigate any records of any of the facilities he had investigated to determine whether they had purchased or used PCE. Mr. Mitchell located four dry cleaners, all upgradient of the PCE contaminated drinking water wells operated by ECUA. Among the dry cleaners suspected as potential sources of the contamination, only the Crown facility was located hydraulically downgradient of PW-9. In order for the contamination to travel from the Crown surge tank to PW-9, the pumping regimen employed by ECUA's supply wells would have to reverse the direction of ground water flow or hydraulic gradient. Dr. Mercer's calculations demonstrated that the pumping regimen employed by ECUA could not have reversed the gradient so as to pull contaminants from the Crown facility upgradient to be captured by PW-9. Dr. Mercer and Mr. Clark both agreed that the "east well" pumps continuously throughout the year. PW- 9 does not pump continuously. When the "east well" is pumping, it will capture anything that would be in the subsurface in the vicinity of the Crown facility; and its capture zone would extend upgradient as far as PW-9. Mr. Clark admitted that he had no calculations to support his conclusion that ECUA's pumping of PW-9 could have reversed the gradient in the subsurface to draw contaminants from the Crown facility to PW-9. Accordingly, it is concluded that DER did not adduce sufficient evidence to prove that the Crown facility could be the source of contamination in PW-9. The source investigation conducted by DER was inadequate to definitively determine whether the Crown facility was the source of PCE contamination or not. DER did not collect adequate soil and ground water samples throughout the area of known contaminations so as to pinpoint a specific source or sources for the contamination. No soil samples were collected from the immediate area around potential sources identified in close proximity to PW-9, for instance, such as the other four dry-cleaning establishments. Instead, once DER found PCE in MW-3 in high concentrations, it apparently focused all of its efforts on the Crown facility, assuming it to be the source of contamination. There are other upgradient PCE users (TCE), identified in Exhibit 6 which have not been ruled out as sources by competent evidence and that exhibit also shows that there may be three older dry cleaning sites in the downtown area with underground solvent tanks, which the record does not prove to have been investigated and ruled out as sources. Since Crown was shown not to be the source of PCE contamination at PW-9, there could be sources of PCE contamination other than Crown which better account for conditions observed in the ground water in downtown Pensacola. DER simply failed in its investigation to adequately rule out other potential sources of contamination within the cone of influence of the public water supply wells, PW-6, PW-8, the "east well", and PW-9. It is as likely as not, for example, that PCE emanating from whatever source or sources contaminated PW-9 (potentially four different dry-cleaning establishments) was also drawn hydraulically downgradient and into the "east well" and other wells. The record reflects that the "east well", for instance, when it is pumping, has a capture zone which extends as far as and including PW-9. DER failed to adequately investigate that potential explanation, as well as other potential sources of the contamination, including the stormwater pond, and thereby failed to prove that contamination emanating from the Crown facility, more likely than not, caused the contamination observed in the ECUA wells, or at least all of it, to the extent of its violating the MCL for PCE in the sites sampled. DER also seeks to impose liability on the Respondents pursuant to Section 403.727(4), Florida Statutes, which imposes strict liability on the current or former owner or operator at the time of disposal of any hazardous substance, as to a facility at which a release of hazardous substances has occurred. PCE is a hazardous substance, as that term is used in Section 403.727, Florida Statutes. However, Section 403.727, Florida Statutes, did not become effective until 1980; and PCE was not listed as a hazardous substance until 1984. DER has failed to prove in what quantity or during what period of time PCE may have been released from the surge tank at the Crown facility. It has established that PCE was only placed in the surge tank during 1974 and 1975 and not since, well before the effective date of this statutory provision and the listing of PCE as a hazardous substance. It has produced evidence from which it is inferred that a certain amount of dissolved PCE in laundry waste water leaked from the tank. It has not been established when the leakage started nor in what quantities PCE dissolved into the wash or waste water may have leaked into the surrounding soil, nor what rate (continuously increasing, decreasing, or static) the leakage occurred. Thus, the most that may be inferred is that leakage of dissolved PCE in an unknown concentration occurred sometime after 1974, but it has not been proven that PCE, as a hazardous substance, has been released into the environment during a specific period of time when each of the Respondents owned and/or operated the Crown facility. Thus, DER has failed to adduce evidence sufficient to carry its burden of proving a release of a hazardous substance, subjecting any of the Respondents to liability under Section 403.727, Florida Statutes. In any event, the Respondents were not on notice of the need to defend against a charge under that statutory section since the NOV and the Amended NOV did not inform them that such would be the basis of any purported liability alleged by DER. DER contended, for the first time at hearing, that the Respondents are liable for violation of the hazardous waste disposal rules. DER alleged at hearing that PCE, as a waste, is a listed hazardous waste, either as a spent solvent or a discarded commercial chemical. No such allegations were included in the NOV or the Amended NOV. However, Dr. Mercer established that any PCE which may have been released into the environment from the surge tank was in dissolved form and not as separate phase PCE. Dissolved PCE has not been shown to be a hazardous waste. Therefore, there is no evidence of record to support a finding that improper disposal of hazardous waste occurred at any point or points in time relevant to his proceeding. Moreover, Mr. Clark testified that he conducted a hazardous waste inspection of the Crown facility in 1982. Mr. Clark determined at that time that there was no hazardous waste being generated in the building or being stored in the building. DER has failed to demonstrate that any hazardous waste was generated or stored on the Crown property or disposed of into the surge tank at anytime by any of the Respondents. Finally, no evidence has been presented in this case that any of the Respondents had actual or constructive knowledge of the presence of PCE in the surge tank or of whether or not any release to the surge tank had occurred between 1971 and 1979 or any knowledge of any use or discharge of PCE to the surge tank prior to the commencement of DER's investigation in this action. Only RCD may be presumed to have had knowledge of the spillage of PCE which was discharged to the surge tank in 1974 and 1975, which entity was Jura's predecessor, ultimately merged into the corporation now known as Jura Services, Inc. Additionally, DER seeks in this proceeding only to be reimbursed for the costs of the investigation and tracing of the source of contamination and not for any natural resources damages nor any adjudication of the extent of liability for such damages, except insofar as the Order for Corrective Action which DER seeks to have imposed in this case reserves DER the opportunity to seek a determination after completion of corrective action of the extent to which the Respondents may be liable for natural resources damage, if any.
Recommendation Having considered the foregoing Findings of Fact, Conclusions of Law, the evidence of record, the candor and demeanor of the witnesses, and the pleadings and arguments of the parties, it is, therefore RECOMMENDED that DER enter a Final Order dismissing the Amended NOV against all Respondents. DONE AND ENTERED this 5th day of November, 1992, in Tallahassee, Leon County, Florida. Hearings Hearings P. MICHAEL RUFF Hearing Officer Division of Administrative The DeSoto Building 1230 Apalachee Parkway Tallahassee, Florida 32399-1550 (904) 488-9675 Filed with the Clerk of the Division of Administrative this 5th day of November, 1992. 5985 APPENDIX TO RECOMMENDED ORDER, CASE NOS. 88-3077 & 88- Petitioner's Proposed Findings of Fact 1-16. Accepted. Rejected as contrary to the preponderant evidence of record and subordinate to the Hearing Officer's findings of fact on this subject matter. Accepted but not dispositive. Rejected as contrary to the preponderant weight of the Hearing testimony and evidence and subordinate to the Officer's findings of fact on this subject matter. Rejected for the same reason. Accepted but not in itself dispositive of the material findings issues and subordinate to the Hearing Officer's of fact on this subject matter. Rejected as not in accordance with the preponderant weight of the evidence and subordinate to the Hearing Officer's findings of fact on this subject matter. 23-27. Accepted but not in themselves materially dispositive. 28-30. Accepted but not in themselves materially dispositive. 31-34. Accepted. 35-40. Accepted but not in themselves materially dispositive. 41-50. Accepted but not in themselves materially dispositive. 51. Accepted but not in itself dispositive and subordinate to the Hearing Officer's findings of fact on this subject matter. 52-53. Accepted. Accepted as to the DER intent in placement of the wells. Accepted but not materially dispositive standing alone. Accepted. Accepted to the extent that Crown Laundry has been shown source by circumstantial evidence to be inferentially a of the contamination found in the various wells mentioned but not the sole source nor the source actually causing this made on violation of appropriate standards and otherwise proposed finding of fact is subordinate to those this subject matter by the Hearing Officer. Rejected as not entirely in accordance with the preponderant weight of the evidence and as subordinate to the Hearing Officer's findings of fact on this subject matter. Accepted as to the levels of chemical depicted in this the proposed finding of fact but not as to the material import of the proposed finding of fact concerning tank being the cause of the excession of the MCL standards. Accepted but not itself dispositive of material issues presented. 61-62. Accepted. Accepted except that the presence of these chemicals in excession of the MCL inside the tank does not constitute a violation of any pertinent legal authority. Accepted. Accepted to the extent that the walls of the tank are a continuing source of PCE. Rejected as subordinate to the Hearing Officer's findings of fact on this subject matter. Rejected as subordinate to the Hearing Officer's findings of fact on this subject matter. Accepted in terms of the amount spent but rejected otherwise as being, in effect, a conclusion of law. Rejected as constituting a conclusion of law and not a proposed finding of fact. Rejected as constituting a recitation of a portion of the fact pleadings at issue and not as a proposed finding of which is materially dispositive of any issue. Rejected as not constituting a material proposed finding of fact but rather a recitation or discussion of the remedies sought by the Petitioner. Rejected as immaterial in this proceeding. Accepted but not dispositive. Rejected as constituting a conclusion of law and not a proposed finding of fact. Rejected as subordinate to the Hearing Officer's findings of fact on this subject matter. Rejected as subordinate to the Hearing Officer's findings of fact on this subject matter and as not entirely in accordance with the preponderant weight of the evidence. Respondent, American Linen Supply Company's Proposed Findings of Fact 1-21. Accepted. Rejected as subordinate to the Hearing Officer's findings of fact on this subject matter. Accepted but not as probative that leakage could have raised the level of PCE in the monitoring and production well samples above the maximum contaminant level. Accepted. Accepted but subordinate to the Hearing Officer's findings of fact on this subject matter. Accepted but not itself dispositive. 27-28. Accepted. Respondents, Belleaus and Crown Laundry and Dry Cleaners, Inc.'s Proposed Findings of Fact 1-21. Accepted. Rejected as subordinate to the Hearing Officer's findings of fact on this subject matter. Rejected as subordinate to the Hearing Officer's findings of fact on this subject matter and to some extent, as speculative. Accepted. Rejected as subordinate to the Hearing Officer's findings of fact on this subject matter. Accepted but not itself dispositive of material issues. Accepted. Respondent, Jura Services, Inc.'s Proposed Findings of Fact 1-63. Accepted. Rejected as subordinate to the Hearing Officer's findings of fact on this subject matter. Rejected as subordinate to the Hearing Officer's findings of fact on this subject matter. 66-68. Accepted. COPIES FURNISHED: Carol Browner, Secretary Department of Environmental Regulation Twin Towers Office Building 2600 Blair Stone Road Tallahassee, FL 32399-2400 Daniel H. Thompson, Esq. Department of Environmental Regulation Twin Towers Office Building 2600 Blair Stone Road Tallahassee, FL 32399-2400 Jack Chisolm, Esq. Richard Windsor, Esq. Department of Environmental Regulation 2600 Blair Stone Road Tallahassee, Florida 32399-2400 William D. Preston, Esq. Thomas M. DeRose, Esq. HOPPING, BOYD, ET AL. 123 S. Calhoun Street P.O. Box 6526 Tallahassee, Florida 32301 Thomas P. Healy, Jr., Esq. MAYER, BROWN & PLATT 190 South LaSalle Street Chicago, Illinois 60603 John W. Wilcox, Esq. Derek B. Spilman, Esq. RUDNICK & WOLFE 101 East Kennedy Blvd. Suite 2000 Tampa, Florida 33602 Jeffrey C. Bassett, Esq. BARRON, REDDING, ET AL. Box 2467 Panama City, Florida 32401
Findings Of Fact The Department (DER) is the regulatory agency of Florida charged with the duty and authority to administer and enforce Chapter 403 and Sections 376.30-376.319, Florida Statutes, and rules and regulations promulgated thereunder. Hendry is a Florida corporation that has been conducting business in excess of 60 years. The two main aspects of its business are the dredging operation and the shipyard. Hendry's site can be loosely described as an industrial site. The shipyard division performs approximately one-half its work for governmental entities, particularly the U.S. Coast Guard, which operations are largely ship refurbishing. Hendry has a Coast Guard certificate enabling it to receive mixtures containing oil and oily water waste. A significant portion of Hendry's ship refurbishing work involves repairing/replacing steel on ships which has deteriorated due to salt water exposure. That work frequently requires cutting, welding and burning. Prior to commencing the refurbrushing work, the ships must be certified as safe. In certifying a ship as being safe, the bilge area is pumped of used oil or waste oil which collects in standing waste water and oil. Also, before that works commences, the ship is defueled. Currently, Hendry's practice is to subcontract the pumping of waste oil from the ships bilge, which waste oil is pumped directly into the tanker truck of the subcontractor. Hendry no longer pumps or stores waste oil on site. In the past, the waste oil and water from the ship's bilge was pumped from the ship through a pipeline from the dry dock across the property to a 10,000 gallon above-ground storage tank. During December 1987, the U.S. Coast Guard observed a fuel spill on the water at Petitioner's facility. Based on that observation, Respondent conducted site inspections of Petitioner's facility during March and April 1988. The fuel spill was occasioned by Petitioner's refurbishment of a tuna boat at its site. Petitioner subsequently received a warning notice regarding alleged violations in its petroleum storage tanks and contamination. The transfer pipeline is of steel construction. Between 1980 and 1984, the pipeline leaked. In 1984, the pipeline was rerun with PVC line and in 1986, it was refitted with 4 inch steel pipe. The 10,000 gallon above-ground tank is located in Area 1. The removal of waste oil occasionally resulted in accidental spills. After 1985, a smaller, above-ground tank was installed adjacent to the 10,000 gallon tank to provide a storage tank for draining off water from the 10,000 gallon tank. The small tank was used to receive only water drained from the 10,000 gallon tank. Prior to installation of the small tank, a retention pond was used to drain water from the 10,000 gallon tank. The retention pond had a 2 foot berm with a visqueen liner. In October 1988, Hendry submitted an EDI Program Notification Application, a prerequisite for EDI reimbursement eligibility, under the program for costs associated with cleanup of certain petroleum contamination. In May 1989, Hendry submitted a document entitled Preliminary Contamination Assessment III Specific Areas--Task IV Rattlesnake Terminal Facility--Westshore Boulevard, Hillsborough County prepared by Mortensen Engineering, Inc. That document included reports of analysis of oil and groundwater samples taken from the site in January, March and April 1989, demonstrating extensive contamination of soil and groundwater including "free product" in monitoring wells MW-2, MW-4 and MW-4A. By letter dated November 9, 1989, the Department informed Hendry of its determination that the facility had been denied EDI reimbursement based on specific enumerated findings. Hendry entered into a stipulation with the Department on October 16, 1990, "regarding the conduct of this case and the basis for denial. " Attached to the stipulation is a sketch of the facility grounds showing a rough division of the area into four separate areas. Area 1 has two waste tanks. One was a large 10,000 gallon closed tank approximately 20 feet high and 12 feet in diameter; the other contained a volume of approximately 1,500-2,000 gallons and was an open tank. Petitioner's practice was to pump bilge in the dry dock area, located west of "Area 2" and direct the waste through underground pipes to the 10,000 gallon tank. The smaller tank was used to "bleed" water from the larger tank. Bilge waste is approximately two-thirds water. Area 2 was the location of Hendry's diesel tank farm. In the stipulation, the Department agreed to withdraw two of the seven specific grounds for the denial, namely denial of site access and failure to report discharges. Likewise, Hendry agreed to withdraw "Area 4" from its application for EDI eligibility. In the stipulation, Hendry was informed of a then recent amendment to Section 376.3071(9), which offered certain applicants who had been earlier determined ineligible for participation in the EDI program, standards and procedures for obtaining reconsideration of eligibility. The amendment required the facility to come into compliance, certify that compliance and request reconsideration prior to March 31, 1991. Additionally, compliance was to be verified by a Department inspection. Pursuant to paragraph 5(b) of the stipulation, these standards and procedures were specifically to be applied to Areas 2 and 3 at the facility. Hendry did not make a written request for reconsideration of the denial of eligibility with respect to Areas 2 and 3 on or before March 31, 1991 or at anytime subsequently. Hendry also did not come into compliance with the underground or above-ground storage tanks system regulations on or before March 31, 1991 in that Hendry failed to register a 560-gallon above-ground diesel storage tank which was onsite on that date as required by Rule 17-762.400, Florida Administrative Code. Hendry also failed to notify the Department of the Hillsborough County Environmental Protection Commission (HCEPC), as the administrator of a designated local program at least thirty days prior to closure of the storage tank system, pursuant to Subsection 376.3073, Florida Statutes. These determinations were made on April 1, 1991 by Hector Diaz, inspector in the HCEPC tanks program. Hendry submitted a registration form for the 560-gallon tank on November 18, 1991, which was of course subsequent to the March 31, 1991 deadline. Hendry stored petroleum products and waste material including petroleum constituents in the above-ground tanks until approximately March 25, 1991 when it initiated tank removal. Hendry's above-ground storage tanks, which were in use at its facility for approximately three years after extensive soil contamination was documented, were without secondary containment. In November 1991, Hendry submitted a document entitled Supplemental Preliminary Contamination Assessment Report, prepared by Keifer-Block Environmental Services, Inc. (Supplemental PCAR). The stated purpose of the study was solely to determine whether hazardous constituents were present in groundwater in Areas 2 and 3. The report included laboratory analysis of groundwater samples taken from the site in August 1991 including monitoring wells located in Area 3. The results of these analysis reflect that Area 3 is contaminated solely with heavy metals, lead and chromium. No petroleum hydrocarbon contamination was detected in Area 3. In the area adjacent to Area 2, seven of eight monitoring wells show chromium or lead contamination. Hendry had, and continues to have, a practice of removing paint from vessels by blasting them with a gritty material known as "black beauty." This practice takes place in the dry dock area near Areas 2 and 3. The waste blast grit/paint chip mixture is vacuumed or shoveled into wheelbarrels or a frontend loader and dumped into an open pile. Occasionally, the waste blast grit/paint mixture is blown about or spilled. Waste "black beauty" has been observed scattered on the ground throughout the facility. Paints sometime contain heavy metals, specifically, lead and chromium. The concentrations and distribution of lead and chromium contamination at the site are consistent with Hendry's long-standing practice of grit-- blasting paint from ships and other vessels and allowing the metal-contaminated paint and waste mixture to fall to the ground. Areas 2 and 3 are contaminated with substances other than petroleum or petroleum products, namely heavy metals. Costs associated with cleanup of lead and chromium are not reimburseable under the EDI program. Paragraph 5(c) of the stipulation allowed Hendry an opportunity to establish eligibility for Area 1 by providing information regarding operating practices at two above-ground storage tanks and a retention pond in that area demonstrating that contamination in that area is predominantly from leaks or unintentional spills of petroleum products from the tanks in that area. Hendry did not provide the required information. On January 27, 1992, Hendry submitted to the Department an affidavit executed by its principal, Aaron Hendry, which Hendry contends fulfills the requirements of paragraph 5(c) of the stipulation. Hendry, the principal who executed the affidavit, is an affiant with a legal and financial interest in the outcome of the EDI eligibility determination. The executed affidavit did not contain specific information with respect to "operating practices at the tanks and retention ponds as required by the stipulation." Specifically, the affidavit is silent as to: What the tanks were made of; When, how and by whom they were installed; What piping, leak detection or overfill protection was associated with them; What repairs or alterations had been made to them; What inventory reconciliation methods were used; Where the materials came from which was put into the tanks; In what manner, how often, and by whom material was put into the tanks; In what manner, how often, and by whom material was removed from the tanks; Disposition of material removed from the tanks; When, how, by whom and why the retention pond was dug; How and for what period of time the retention pond was used; How, often and by whom inspections of the tanks were conducted; When and how leaks occurred and were discovered at the tanks; When and how spills occurred and were discovered at the tanks; What records, including reports to state or local agencies, insurance claims, newspaper accounts, and so forth were kept with respect to leaks or spills at the tanks; What cleanup efforts were made at the time of any leaks or spills; Documentation related to registration of the tanks with state or local agencies; and Documentation with respect to any removal of the tanks, including any description of the condition of the tanks when, or if, removed. For years, the facility's retention pit was used as a "waste pit" namely, a rectangular hole in the ground, approximately 30 feet by 120 feet by 3 feet, for direct discharge of bilge waste piped from vessels at the dry dock area to the waste pit, prior to installation of the storage tank systems. After installation of the large tank in Area 1, the retention pit was used to bleed water from the bilge tank. In the past, the Department has denied eligibility to facilities where a retention pond was used for disposal of petroleum related waste and cleanup of contamination resulting from use of a retention pond. Hendry's affidavit nor other documentation submitted to the Department prior to the EDI redetermination or at hearing establishes that the bilge waste taken from the storage tanks was "a liquid fuel commodity" or recycled into such a commodity. By letter dated June 9, 1992, the Department notified Hendry that reconsideration of its EDI eligibility request for Areas 2 and 3 was denied and that the affidavit of Aaron Hendry submitted with respect to Area 1 did not satisfy the requirements of the stipulation. Thereafter, Hendry challenged the Department's denial of reconsideration and EDI eligibility which joins the issue for this proceeding. The hazardous waste allegation discovered during an inspection of Hendry's facility on April 14, 1988, resulted in a consent order which was entered as a final order of the Department on November 21, 1990. The consent order allowed Hendry an opportunity to demonstrate that not all areas at the facility were hazardous waste disposal areas and, thus, not all areas would be subject to closure and cleanup under the permitting requirements of Subsection 403.722, Florida Statutes and the remediation standards set forth in Chapter 17-730, Florida Administrative Code. To establish appropriate remediation standards and procedures which would be applicable to various areas, Hendry was required to prepare a property diagram designating areas at the property exhibiting any of the following types of contamination: Areas contaminated solely by petroleum or petroleum products or used oil which is not hazardous waste; Areas contaminated by materials which are not hazardous waste; Areas contaminated by the past or present disposal of hazardous waste. The consent order allows contamination assessment and remediation pursuant to the standards and procedures set forth in Chapter 17-770, Florida Administrative Code, for areas contaminated solely by petroleum or petroleum products. (Petitioner's Exhibit 5, paragraph 11.) The consent order requires contamination assessment and remediation pursuant to the Department's corrective action and groundwater contamination cases for all areas at the facility contaminated by used oil which is not hazardous waste or by hazardous material. (Petitioner's Exhibit 5, paragraph 12.) The consent order requires contamination assessment and remediation pursuant to a closure permit with a contingent post-closure plan to close the areas at the facility contaminated by the disposal of hazardous waste. In response to the consent order to delineate areas on the property exhibiting various types of contamination, Hendry submitted the supplemental PCAR. By letter dated March 19, 1992, the Department responded to the supplemental PCAR with a determination that: Area 1 can be assessed and remediated through the standards set forth in Chapter 17-770, Florida Administrative Code. Contamination in Areas 2 and 3 includes heavy metals, which are hazardous materials. Thus, Areas 2 and 3 should be assessed and remediated through the corrective action process for groundwater contamination cases. A hazardous waste facility closure permit application should be submitted for assessment and remediation of Area 4, which, because of the presence of Dichloroethylene, a hazardous substance and chlorinated solvent, should be expanded to include the location of monitoring well MW KBMW-2. Hendry had a practice of cleaning electrical motors by placing such motors on the ground outside the electrical repair shop near Area 4. The motors were sprayed with Trichloroethylene, a waste solvent, which was allowed to runoff into the soil. At the time of this practice, the intention was to leave the solvent contamination unchecked. The Department, pursuant to directives from the United States Environmental Protection Agency (EPA), characterizes the disposition of hazardous waste to the environment as a result of intentional, ongoing industrial practices as "disposal of hazardous waste" within the meaning of Subsection 475.703(21), Florida Statutes and 40 CFR 260.10. The consent order allowed Hendry an opportunity to challenge the Department's determination with respect to delineation of the various areas by filing a petition per paragraph 21 of the order for formal administrative hearings. Hendry filed its petition with respect to the March 19, 1992 letter, which petition is the subject of DOAH Case No. 92-2312.
Recommendation Based on the foregoing Findings of Fact and Conclusions of Law, it is RECOMMENDED that: Respondent, Department of Environmental Regulation, issue a Final Order in these consolidated cases concluding that 1) the contamination areas at issue herein are not eligible for EDI reimbursement under Subsections 376.3071(9) and (12), Florida Statutes; 2) that Petitioner cleanup the contamination in Areas 1, 2 and 3 under the guidance document entitled "Corrective Actions for Groundwater Contamination Cases"; and 3) that Area 4 be expanded to include the location of monitoring well MW KBMW-2 and closed through a hazardous waste closure/post closure permit application process. DONE AND ENTERED this 26th day of April, 1993, in Tallahassee, Leon County, Florida. JAMES E. BRADWELL 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 26th day of April, 1993. APPENDIX Rulings on Petitioner's proposed findings of fact: Paragraph 14, partially adopted in Paragraph 13, Recommended Order. Paragraph 19, rejected, contrary to the greater weight of evidence and speculative. Paragraph 20, rejected, unnecessary. Paragraph 21, rejected, contrary to the greater weight of evidence, Paragraphs 24-28, Recommended Order. Paragraph 22, partially adopted, Paragraphs 13 and 14, Recommended Order. Paragraph 23, partially adopted, Paragraph 15, Recommended Order. Paragraph 29, partially adopted, Paragraph 18, Recommended Order. Paragraphs 31, 32, 35, 48, 49, 51, 52, 60, 62 and 73 rejected, unnecessary. Paragraph 33, adopted in part, Paragraph 23, Recommended Order. Paragraph 38, adopted in part, Paragraph 23, Recommended Order. Paragraph 41, rejected, contrary to the greater weight of evidence and the two cases cited at hearing where Respondent exercises his discretion are distinguishable from Petitioner's failure to timely apply. Paragraph 43, rejected, unnecessary and/or argument. Paragraph 45, rejected, contrary to the greater weight of evidence. Paragraph 50, rejected, contrary to the greater weight of evidence, Paragraphs 37-39, Recommended Order. Paragraph 54, rejected, not probative. Paragraph 55, rejected, not probative. Paragraphs 56 and 57, rejected, contrary to the greater weight of evidence, Paragraphs 30 and 31, Recommended Order. Paragraphs 58 and 59, rejected, contrary to the greater weight of evidence, Paragraphs 23 and 24, Recommended Order. Paragraph 61, rejected, speculative and unnecessary. Paragraph 63, rejected, speculative. Paragraph 67, rejected, not probative. Paragraph 68, rejected, contrary to the greater weight of evidence, Paragraphs 30 and 31, Recommended Order. Paragraph 69, rejected, not probative. Paragraph 70, adopted in part, Paragraph 23, Recommended Order. Paragraph 72, rejected, irrelevant and not necessary to the issues posed. Paragraph 74, rejected, contrary to the greater weight of evidence and unnecessary. Paragraph 75, rejected, contrary to the greater weight of evidence, Paragraph 53, Recommended Order. Paragraph 76, rejected, contrary to the greater weight of evidence, Paragraph 53, Recommended Order. Paragraph 77, rejected, contrary to the greater weight of evidence, Paragraph 53, Recommended Order. Paragraphs 78 and 79, rejected, irrelevant and unnecessary. Paragraph 80, rejected, not probative. Rulings in Respondent's proposed findings of fact: Paragraphs 2 and 3, adopted in part, Paragraph 9, Recommended Order. Paragraph 12, adopted in part, Paragraph 23, Recommended Order. Paragraph 23, adopted in part, Paragraph 32, Recommended Order. Paragraph 27, adopted in part, Paragraphs 38 and 39, Recommended Order. Paragraph 30, rejected, unnecessary. COPIES FURNISHED: Thomas J. Patka, Esquire Rory C. Ryan, Esquire HOLLAND & KNIGHT 200 South Orange Ave - Suite 2600 Post Office Box 1526 Orlando, Florida 32802 Agusta P. Posner, Esquire Lisa Duchene, Esquire Department of Environmental Regulation 2600 Blair Stone Road Tallahassee, Florida 32399 2400 Virginia B. Wetherell Secretary Department of Environmental Regulation 2600 Blair Stone Road Tallahassee, Florida 32399 2400 Daniel H. Thompson, Esquire Acting General Counsel Department of Environmental Regulation 2600 Blair Stone Road Tallahassee, Florida 32399 2400
Findings Of Fact Petitioner is the owner of the site known as Union 76 #702 or as Taylor's 76, Inc., located at 9700 East Indigo Street, Perrine, Dade County, Florida. The prior owner of that site was Lawrence Oil Company. There appears to be a commonality of principals between Petitioner TYU, Inc., and its predecessor in title, Lawrence Oil Company. In 1986 the Legislature created the Early Detection Incentive Program (hereinafter "EDI") to encourage early detection, reporting, and cleanup of contamination from leaking petroleum storage systems. Essentially, the Legislature created a 30-month grace period ending on December 31, 1988, for owners of sites with contamination from petroleum storage systems to apply for reimbursement for cleanup expenses due to the contamination, without retribution from the State. The statute also provided several bases for which an applicant would be deemed ineligible. Prior to the December 31, 1988, deadline Petitioner checked the various sites owned by it, including the site which is the subject of this proceeding, to determine whether contamination was present. The subject site had been a service station, selling gasoline for 30 to 35 years. From 1986 forward, however, gasoline was no longer being dispensed at the site although the underground gasoline tanks were still present. It is unknown whether the tanks were emptied at the time that they were taken out of service. Automobile repairs were still performed at the site. By 1989, the site was also occupied by a lawn maintenance company and a pool company. In 1988 and 1989 a 55-gallon drum of used oil was located on the site. The lawn company employees used that oil to lubricate their chain saws. The remainder of the used oil and the solvents from the small parts washer were picked up from that site for recycling. In November or December of 1988, Harry Barkett, president of Lawrence Oil Company, personally visited the site. He sampled the monitoring wells. Because he smelled gasoline in the monitoring wells, he retained Seyfried & Associates, Inc., an environmental consultant, to prepare a report to be submitted to the Department. That report is dated December 15, 1988. Petitioner's application for participation in the EDI program, together with the report of Seyfried & Associates, Inc., was submitted to the Department prior to the December 31, 1988, deadline. At the time, Metropolitan Dade County's Department of Environmental Resources Management (hereinafter "DERM") was performing EDI inspections for the Department pursuant to a contract. On March 22, 1989, a DERM employee who performed only industrial waste inspections went to the subject site. He specifically was not there to inspect the petroleum storage systems, and he did not do so. That employee went into the service bays where the routine auto repair and maintenance services were performed. He noticed the floor drains going from the service bays to the oil/water separator. He then inspected the oil/water separator. He noted that a hole had been cut at the top of the effluent pipe, which breached the system and which might allow oil to flow into either a drain field or a septic tank system. He did not check further to ascertain which. He took three samples from inside the oil/water separator, one for oil and grease, one for phenols, and one for metals, specifically cadmium, chromium, and lead. Not surprisingly, the laboratory analysis of those samples indicated the presence of phenols, oil, and grease. The only sampling done by that employee was of the contents of the oil/water separator. No investigation was made of, and no samples were taken from, the soil or groundwater anywhere on the site. Such sampling was not part of that employee's authority or responsibility. On October 11, 1989, Dade County DERM sent a different employee to perform the EDI inspection at the subject site. To determine the presence of contamination from petroleum or petroleum products, that employee dipped an acrylic bailer into each of the monitoring wells and then "sniffed the bailer" to ascertain if the odor of gasoline could be detected. He did not dip the bailer lower than the top foot of water since he did not wish to bring the bailer up through a column of water before sniffing. Dade County DERM employees no longer "sniff the bailer" due to the health risk involved in such a procedure. In 1989, however, it was the common practice for DERM employees to "sniff the bailer," albeit cautiously. That employee failed to detect the odor of gasoline and did not see any petroleum contamination in the monitoring wells. He issued a report to that effect. He took no samples from the soil or groundwater to determine if there were contamination from petroleum or petroleum products at the site. Based upon the second report indicating the absence of gasoline odor and based upon the first report indicating the presence of oil, grease, and phenols inside the oil/water separator, Dade County DERM recommended to the Department that Petitioner's application for participation in the EDI program be denied. Based upon that recommendation, the Department sent Petitioner a letter dated May 23, 1990, denying Petitioner's application for participation in the EDI program. That letter stated as the two reasons for denial the following: Contamination is not the result of a discharge from a petroleum storage facility as defined in Section 376.301(11), Florida Statutes. Waste oil contamination found on the ground and groundwater was the result of poor maintenance practices by site owner/ operator. Participation in the Early Detection Incentive Program is restricted to contamination from such storage facilities pursuant to 376.3071(9), Florida Statutes. Contamination is a mixture of waste oil, grease and phenolic compounds. Participation in the Early Detection Incentive Program is limited to petroleum or petroleum products as defined in Section 37.301 [sic] (9) and (10), Florida Statutes. That letter further advised Petitioner of its right to request a hearing regarding that determination and advised Petitioner that its failure to timely request an administrative hearing would render that correspondence to be a final Order of Determination of Ineligibility. When Petitioner received that correspondence, one of its employees interpreted the letter to mean that the Department had determined that the site did not have contamination from petroleum or a petroleum product. Viewing that as good news, that employee merely put the letter in a file. No request for an administrative hearing was made by Petitioner, and the correspondence became a final Order of Determination of Ineligibility by its own terms. In 1990 the Legislature determined that all sites which had been declared ineligible by the Department would be re-determined for eligibility. The Legislature established March 31, 1991, as the new deadline by which owners or operators could request the Department to reevaluate eligibility for sites for which a timely EDI application had been filed but which had been deemed ineligible by the Department. The new legislation set forth several circumstances under which the Department would not redetermine the eligibility of a previously denied site. One of those exceptions related to the reason for which a site had initially been denied. Petitioner had remained convinced that the subject site was contaminated by petroleum or petroleum products prior to the original deadline for filing EDI applications. Petitioner was aware of the new legislation and new deadline by which sites determined ineligible could have their eligibility redetermined. Petitioner therefore retained Kiefer-Block Environmental Services, Inc., to do a site analysis to verify Petitioner's belief that the site had a petroleum contamination. That company issued a report indicating that was the case. Petitioner timely filed its application for redetermination before the March 31, 1991, deadline and submitted to the Department the information obtained from Kiefer-Block, the second environmental consultant to verify the presence of petroleum contamination. In reviewing applications for redetermination, the Department established a procedure whereby it simply looked at its original letter denying eligibility to ascertain the reason for denial. If that reason matched one of the exclusions under the new legislation, the Department advised the applicant that it was not eligible to have its site redetermined. The Department did not review the Department's files relating to a site and did no additional inspection. In 1991 the Legislature again amended the statute, this time carving out an exception to those sites excluded from redetermination of eligibility by directing that sites excluded due to an absence of contamination be redetermined for eligibility if contamination had in fact existed. That amendment went into effect July 1, 1991. Accordingly, that amendment was part of the law in effect when the Department made its decision as to whether it would redetermine Petitioner's eligibility. By letter dated September 3, 1991, the Department advised Petitioner that it was not eligible to participate in the redetermination process. That letter specifically provided as follows: This Order is to inform you that this site is not eligible to participate in the eligibility redetermination process pursuant to Section 376.3071(9)(b), F.S., because the original reasons for ineligibility were: Contamination is not the result of a discharge from a petroleum storage facility as defined in Section 376.301(11), Florida Statutes [definition in Section 376.301(15), F.S., current revision]. Waste oil contamination found on the ground and groundwater was the result of poor maintenance practices by site owner/ operator. Participation in the Early Detection Incentive Program is restricted to contamination from such storage facilities pursuant to 376.3071(9), F.S. Contamination is a mixture of waste oil, grease and phenolic compounds. Participation in the Early Detection Incentive Program is limited to petroleum or petroleum products as defined in Section 376.301(9) and (10), Florida Statutes [definitions in Section 376.301(13) and (14), F.S., current revision]. Section 376.3071(9)(b)3.c., F.S., states that redetermination of eligibility is not available to facilities that were denied eligibility due to contamination from substances that were not petroleum or a petroleum product, or contamination that was not from a petroleum storage system. Petitioner timely filed its request for an administrative hearing regarding that letter, contesting the Department's refusal to redetermine Petitioner's eligibility to participate in the EDI program.
Recommendation Based upon the foregoing Findings of Fact and Conclusions of Law, it is RECOMMENDED that a Final Order be entered: (1) granting Petitioner's application for redetermination of eligibility and (2) finding Petitioner ineligible to participate in the Early Detection Incentive Program. DONE and ENTERED this 26th day of August, 1992, at Tallahassee, Florida. LINDA M. RIGOT 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 26th day of August, 1992. APPENDIX TO RECOMMENDED ORDER DOAH CASE NO. 92-0678 Petitioner's three unnumbered paragraphs contained in its post-hearing submittal have been rejected as not constituting findings of fact but rather as constituting conclusions of law or argument. Respondent's proposed findings of fact numbered 1-3, 5-18, and 20 have been adopted either verbatim or in substance in this Recommended Order. Respondent's proposed finding of fact numbered 4 has been rejected as being unnecessary to the issues involved herein. Respondent's proposed finding of fact numbered 19 has been rejected as not being supported by the weight of the competent evidence in this cause. COPIES FURNISHED: C. Vittorino Special Projects Manager TYU, Inc. 1601 McCloskey Boulevard Tampa, Florida 33605-6710 Brigette A. Ffolkes, Esquire Department of Environmental Regulation 2600 Blair Stone Road Tallahassee, Florida 32399-2400 Carol Browner, Secretary Department of Environmental Regulation 2600 Blair Stone Road Tallahassee, Florida 32399-2400 Daniel H. Thompson, General Counsel Department of Environmental Regulation 2600 Blair Stone Road Tallahassee, Florida 32399-2400
Findings Of Fact Bray is the owner of and lives on property located at 5550 Pine Hills Road, Orlando, Florida. He operates a solid waste disposal site on this property. By application dated June 6, 1977, and revised June 13, 1977, Bray applied to DER for an Operation Permit for a Solid Waste Resource Recovery and Management Facility pursuant to Chapter 17-7, Florida Administrative Code. At that time, Bray held a Temporary Operating Permit which had been issued on February 4, 1976. In Bray's application materials, which included the application dated June 6, 1977 and revised June 13, 1977, and letters from Bray to DER dated June 8, 1977, and June 30, 1977, Bray proposed an alternate procedure pursuant to Rule 17-7.05(3) (q) for operation of his landfill which procedure would permit Bray to cover, spread and compact the fill material in a manner different from that specifically set forth in Rule 17-7.05, Florida Administrative Code. DER did not consider Bray's request for an alternate procedure, but responded by letter stating that Bray must apply for a variance pursuant to Rule 17-1.25, Florida Administrative Code, and recommended denial of Bray's application for a permit for the following reasons: No provisions were made for daily cover. Refuse was not spread in two (2) foot layers. No intermediate cover was applied within one week of cell completion. No cover materials were stockpiled. During the testimony presented, DER acknowledged that the fourth reason given for denial of the permits-no cover materials were stockpiled-is not a requirement of the Rules and is not a valid reason for denial of a Permit Application. This Hearing Examiner agrees and finds that Chapter 17-7, Florida Administrative Code only requires that the site have an adequate quantity of acceptable earth cover available. See Rule 17-7.05(1) (c)3, Florida Administrative Code. Bray presented adequate testimony demonstrating that sufficient acceptable cover material was available at his site. Bray conceded at the hearing that it was still his intention to operate the landfill site without daily cover, intermediate cover and compaction as required by DER. Bray's principal contention is that compaction and daily cover are not necessary for a landfill which accepts only non-putrescible waste. Bray urges that the attenuation of leachate, prevention of fires, prevention of settling and ponding of water which provide breeding grounds for mosquitoes and other vectors and reducing the area of land needed to dispose of solid waste are justifications for the requirements of compaction and daily cover of solid waste which may not be present at non-putrescible landfills. Bray concludes that the absence of these problems at his landfill obviates the necessity for the application of the provisions of the rule requiring daily and intermediate cover and compaction. However, Bray has not met his burden of establishing that non- putrescible waste does not require compaction and daily cover. There are multiple reasons for the requirement of compaction and daily cover of solid waste. When solid-waste is spread to approximately a 2-foot thickness and then compacted to a 1-foot thickness, followed by the daily application of a cover of 6 inches of compacted earth, a layering effect is created which helps attenuate, if not prevent, the formation of leachate from both putrescibles and non-putrescibles which may be contained in the waste. Leachate is a liquid that has percolated through solid waste, usually originating as rain, which contains dissolved or suspended material that may contaminate ground water supply. Leachate occurs in landfills that accept putrescible material as well as landfills that accept only non-putrescibles. Compaction and daily cover consequently slow, if not prevent, the contamination of ground water supplies. The formation of leachate containing various chemicals which would have adverse affects on the human body is expected when water percolates through strictly non-putrescible waste Commonly discarded non-putrescibles such as metals, plastics, ashes, rocks and dirt from an industrial site, miscellaneous organics, heavy metal solutions and sludges, organic solvents and oils, caustic and acid solutions, inorganic chemical solutions and sludges, pesticides and fungicide wastes, paint and ink wastes, asphalt roofing and paving material, explosive waste and radioactive waste are probable sources of leachate contamination. The process of leachate formation from non-putrescibles involve the physical and chemical reaction of compounds in the non-putrescibles with the water percolating through them. The contamination of ground water supplies by leachate from either a putrescible or non-putrescible site constitutes a threat to the health, safety and welfare of the public as many of the contaminates are toxic and have adverse affects on the human body. In particular, leachate from non-putrescibles may contain toxic metal solutions, carcinogenic pesticides and other organic compounds as well as toxic inorganic compounds. Another reason for compacting and daily cover is the prevention of fires. Exposed, non-putrescible wastes can ignite and result in serious dump fires. Daily cover, if applied, serves as a fire break and eliminates the fire hazard created by exposed combustible non-putrescible wastes. Furthermore, compaction and daily cover prevent settling and ponding which would contribute to both downward flow' of water through the solid waste and the creation of breeding grounds for mosquitoes and other vectors. Compaction and daily cover contribute to the general aesthetics of the site and reduce the area of land needed to dispose of solid waste Bray has attempted to show that his method of operation effectively screens putrescible wastes from the site and otherwise adequately protects the public health, safety and welfare. However, the evidence which belies the assertion, shows that putrescibles have, in fact, been dumped at Bray Landfill. Coliform readings obtained in samples from monitoring wells at the Bray property can reasonably be attributed to putrescible matter on site. Birds have been observed feeding on site and these would not be feeding on non-putrescible wastes. The policing techniques are largely ineffectual. The site contains unopened trash bags with undisclosed contents as well as observed putrescible garbage. Trucks enter the site and dump their loads without inspection. Two major dump fires have occurred at the Bray Landfill during the past four years.
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
The Issue The issue in this case is whether the Petitioner is eligible for reimbursement for allowable costs pursuant to Section 376.3071(12), Florida Statutes, related to the cleanup of certain contamination at the Petitioner's ground transportation facility.
Findings Of Fact Based on the evidence received at the hearing, I make the following findings of fact: Facts stipulated to by the parties The subject facility is a bus, limousine and van storage, dispatch, and service area for a ground transportation company serving Miami International Airport which contains a parking lot, fuel storage tanks, an administration building, and a maintenance shop. The Department of Environmental Regulation is the agency charged with responsibility for administering the provisions of Section 376.3071, Florida Statutes. Red Top Sedan, Inc., through its agents, notified the Department of possible ground and ground water contamination on or about September 10, 1986. The Department received said notification and on September 19, 1986, advised Red Top that the notice was adequate and requested further information. Following various correspondence and requests for information, the Department determined that it had sufficient information and, on February 1, 1988, issued its Notice of Intent regarding the eligibility of the subject sites for participation in the program. One area, adjacent to and surrounding the diesel fuel pumps, was found to be eligible. Another area, east and west of the maintenance shop (Exhibit "2" to the Notice) was found to be ineligible. Red Top filed a Petition for Administrative Determination which was received by the Department on February 23, 1988. The Petition was subsequently referred to the Division of Administrative Hearings and a Hearing Officer assigned. Facts Established at Hearing General Information About The Facility The subject facility also contains a parking area for approximately 95 buses, 40 to 45 vans, two dozen mini-buses, and 15 or 16 limousines and Lincoln towncars. There is also employee parking on the site. To the east of the Red Top office building there is a fuel island used for fueling Red Top's vehicles. The tanks associated with that fuel island have discharged diesel fuel. That petroleum contamination site is entirely separate from the one involved in this proceeding and has been found to be eligible for reimbursement. When the subject facility was constructed, Red Top employed an engineering company. It also employed a company named Service Station Aid. Service Station Aid is in the business of servicing tanks and other equipment used in connection with the handling of oil, gasoline, diesel fuel, and other similar products. Among other things, Service Station Aid installed underground waste oil tanks and tanks to hold automatic transmission fluid and new motor oil in the area of the maintenance facility. A drainage system servicing the asphalt parking areas and driveways surrounding the various buildings was also installed on the subject site. That system contained various grease traps which conformed to accepted practice at the time of their construction. Facts Regarding The East Side of the Maintenance Building Two underground waste oil tanks are on the east side of the maintenance building. The two waste oil tanks have been in operation since 1976, when the facility was built. Each of these two tanks has a capacity of 560 gallons. Employees of Red Top regularly pour used motor oil into the two waste oil tanks on the east side of the maintenance facility. The used oil is periodically removed by an EPA approved company. That company removes the waste oil to a fuel recycling facility in the Port Everglades area where it is made into recycled fuel. It is possible, even probable, that used oil has been spilled from time to time both while being poured into the waste oil tanks and while being removed from the waste oil tanks. However, there is no persuasive competent substantial evidence that any such spillage was a significant contribution to the contamination at the site. .1/ It is possible that one or both of the waste oil tanks has leaked. However, there is no persuasive competent substantial evidence that any such leakage was a significant contribution to the contamination at the site. In this regard it is noted that Red Top has not tested either of the waste oil tanks to determine whether they are leaking. Approximately 70 feet to the east of the maintenance building there are three storm drains. The storm drains are attached by way of a catch basin to soakage pits. Soakage pits are specifically designed to allow materials entering the soakage pit to be discharged directly to the earth. Storm drains are designed to catch stormwater runoff rather than large amounts of pollutants. The area to the east of the maintenance facility is paved with asphalt. That paved area is sloped so that any discharge of pollutants in that area of the site will flow to the storm drains. On numerous occasions waste oil has been observed in the storm drains. Instances of direct discharges of waste oil onto the ground or into the storm drains have been observed. Oil stains around the storm drains and observations by Dade County inspectors indicate that such direct discharges have been regular, if not frequent. Other sources of contamination at the Red Top facility include leaking drums of oil, oil leaking from stored or discarded equipment, oil discharged to the ground, disposal of contaminated waters from the maintenance building, and engine washing water discharged on the site. In the ground to the east of the maintenance building there is a large plume of dissolved oil and grease. This plume includes a plume of free product in the vicinity of the southernmost of the two waste oil tanks. Extending beyond the identified plume there are additional areas contaminated by constituents of waste oil. The primary cause of the contamination on the east side of the maintenance building is the direct discharge of contaminants. Discharge from the two waste oil tanks constitutes, at most, only a very minor cause of the overall contamination. .2/ Facts Regarding the West Side of the Maintenance Building On the west side of the maintenance building there are two underground tanks that are used to hold new motor oil and new transmission fluid. Motor oil and transmission fluid are lubricants used to lubricate engines and transmissions. They are not fuels. Pollutants which were discharged onto the floor of the maintenance building during maintenance work have been washed directly into the storm drains on the northwest side of the maintenance facility. There are two small areas of contamination on the west side of the maintenance facility. One such area is around a storm drain at the northwest side of the maintenance facility. The other is around the two tanks that contain new motor oil and transmission fluid. The contamination in the area of the storm drain includes lead, cadmium, and chromium. Motor oil and transmission fluid do not contain lead, nor do they contain levels of cadmium or chromium in amounts sufficient to be detected in groundwater. There is also an area of free product near the storm drain. There is no storage tank adjacent to the storm drain on the northwest side of the maintenance facility that could account for the lead, cadmium, and chromium contamination or that could account for the area of free product. The contamination at the storm drain on the west side of the maintenance facility resulted from direct discharges of contaminants to the storm drain and catch basin and was not a result of a discharge from a storage tank. The contamination in the area of the two tanks used for new motor oil and transmission fluid also contains lead, cadmium, and chromium. The metals contamination at this area is a result of discharge to the storm drain, and is not the result of discharge of new motor oil or transmission fluid from the two tanks. The groundwater in the area around these two tanks is also contaminated by dissolved oil and grease. The dissolved oil and grease plume is consistent in terms of substance and concentration with the dissolved waste oil to the east of the building. Within that plume of dissolved oil and grease there is also a small plume of free product. There is no waste oil tank on the west side of the maintenance facility that could account for waste oil contamination at that location. The dissolved oil and grease plume on the west side of the maintenance facility is most likely the result of waste oil discharge to the catch basin. The tanks containing new motor oil and transmission fluid may have contributed to the small free product plume in that area as a result of overfilling, but any such contribution was only a minor part of the overall contamination. In reviewing an application for eligibility for reimbursement, the Department looks at the relative importance of eligible and ineligible portions of a contaminated site. In cases where a potentially eligible source is minor in comparison to an overall otherwise ineligible contamination site, the Department's policy is to treat the entire site as ineligible. This policy is based on the fact that as a practical matter it is not possible to clean up one part of a contaminated site without affecting any adjacent contaminated areas. For the same reason, if the majority of a contaminated site is eligible, but it contains minor ineligible sources, the Department's policy is to treat the entire site as eligible.
Recommendation Based on the foregoing Findings of Fact and Conclusions of Law, it is RECOMMENDED that the Department of Environmental Regulation issue a final order in this case concluding that the contamination area at issue in this proceeding is not eligible for reimbursement under Section 376.3071(12), Florida Statutes. DONE AND ENTERED in Tallahassee, Leon County, Florida, this 15th day of June 1989. MICHAEL M. PARRISH Hearing Officer Division of Administrative Hearings The DeSoto Building 1230 Apalachee Parkway Tallahassee, Florida 32399-1550 (904) 488-9675 Filed with the Clerk of the Division of Administrative Hearings this 15th day of June 1989.
The Issue There are two issues in this case: whether the Petitioner, Thomas M. Parham, is maintaining an unpermitted stationary installation that is reasonably expected to be a source of air or water pollution; and whether installations on Mr. Parham's property are discharging into groundwater, and whether he should therefore be required to obtain a groundwater monitoring permit and conduct groundwater monitoring as ordered in the Department's Final Order, DEP OGC File No. 08-0521 (the Order).
Findings Of Fact Thomas Parham purchased the property at 5401 Pickettville Road, Jacksonville, Florida (the Property), in a tax sale on November 21, 2007. His intention was to use it to park and store trucks and heavy equipment. At the time of purchase, there were no signs posted on the Property indicating that it was hazardous or toxic or otherwise compromised environmentally. At the time, there was no statute or rule requiring the Property to be posted to give the public notice of any of those conditions. Parham drove past the Property before buying it, but it was fenced, and the gates were locked, and he was unable to get in to inspect it. From the fence, he saw no indication that the Property was hazardous or toxic or otherwise compromised environmentally. However, Parham knew that there was fill material on the Property. He states that he did not know the Property was toxic or hazardous, but he did no due diligence to determine what kind of fill was on the Property. Parham has bought and sold property in tax sales for a living for the past 11 years. He owns 115 different properties, and has been involved in 795 property transactions. Once, he accidentally bought a contaminated property, which the City of Jacksonville bought back from him after the contamination was discovered. Based on his experience, Parham knew or should have known to conduct due diligence on the Property before buying it. After purchasing the Property, Parham saw that part of it had a significant amount of a black material. He testified that he believed it was charcoal or bituminous coal, which he called "black beauty." Instead of determining what it was, Parham decided to cover it with dirt. He had 124 truckloads of fill delivered to the Property and covered all of the supposed "black beauty." Someone saw the activity on the Property and contacted the Department of Environmental Protection (DEP). DEP inspected and entered a Final Order, DEP OGC File No. 08-0521 (the Order) to require Parham to install monitoring wells and implement a monitoring program to determine whether the Property was causing pollution and contamination offsite. Parham challenged the Order, which resulted in this proceeding. Actually, the black material on the Property was not charcoal or bituminous coal. It was sandblasting grit material used by Jacksonville Shipyards, Inc. (Jacksonville Shipyards), in its shipyard operations to sandblast old paint coatings and rust from ships before re-painting. It would be expected that the used grit would be contaminated with metals and volatile organic compounds (VOCs). The used grit was trucked to and deposited on the Property when it was owned by Jacksonville Shipyards in the 1970's and early 1980's. Prior to Jacksonville Shipyards' purchase of the Property in 1972, it was used as a sand mine. In the process, two large pits, each 20 to 25 feet deep, were excavated on the Property. Later, waste was dumped into the pits, including concrete, asphalt, metal pipes, wire, and wooden demolition material. When Jacksonville Shipyards purchased the Property in 1972, sandblasting grit was added to the waste placed into the pits. Initially, these activities were not regulated, and the pits were not lined before being used for waste disposal. By July 1980, leachate generated when waste material (including the sandblasting grit, which was being delivered to the Property daily) came in contact with water was running off the Property towards Six Mile Creek, which flows east to where it is joined by Little Six Mile Creek, from which the combined flow towards the east becomes the headwater of the tidal Ribault River. In addition, leachate was entering the groundwater on the Property, which also flowed generally to the north towards Six Mile Creek. When DEP's predecessor, the Department of Environmental Regulation (DER) began to regulate land fills, it required Jacksonville Shipyards to submit a groundwater monitoring plan, which DER approved. Monitoring wells were installed, and the groundwater on the Property was sampled once in 1984 and showed groundwater contamination. DER groundwater standards and criteria for arsenic, barium, chromium, lead, chlorides, copper, iron, manganese, total dissolved solids (TDS), and zinc were exceeded. DER attempted to negotiate a consent order with Jacksonville Shipyards to address the contamination, but those efforts failed, and then Jacksonville Shipyards and related business entities went into bankruptcy proceedings. After the bankruptcy proceeding was initiated, Jacksonville Shipyards conducted no further groundwater monitoring at the Property. Neither DER nor DEP issued a solid waste permit or a groundwater monitoring permit for the Property. No waste has been removed the Property, and no liner has been installed. Leachate has continued to run off the Property and infiltrate the groundwater on the Property and flowed towards Six Mile Creek. After bankruptcy proceedings were initiated, representatives of DER and DEP checked from time to time to see if overdue property taxes had been paid, reasoning that payment of the taxes would be an indication that the bankruptcy proceedings had progressed to the point that a financially viable owner of the Property could be required to implement an appropriate monitoring program for the Property. In fact, unbeknownst to DEP, title to the Property was conveyed to Picketsville Realty Holdings, LLC, in 1998. In 1998 DEP contracted with a consultant to conduct sampling at the Property to identify the source of the groundwater contamination detected in the onsite monitoring wells in 1984. Groundwater, soil, and surface water samples were collected and analyzed, as were reports on assessments conducted at the Pickettville Road Landfill, a federal Superfund site located across Pickettville Road from the Property. The consultant reported in 1999 that lead in groundwater samples exceeded the maximum contaminant level (MCL) in shallow well 11 and in deep well 2. In shallow well 9, N-nitrosodiphenylamine also exceeded the MCL. Lead was detected in all twelve soil samples collected in areas where sandblasting grit was found on the surface although none of the soil samples exceeded DEP's residential direct exposure Soil Cleanup Target Level (SCTL) of 400 mg/kg. The report concluded that the Property was the source of most if not all of the contamination detected in the monitoring wells on the Property. The Pickettville Road Superfund site was not considered to be contributing to the groundwater contamination on the Property because groundwater data indicated that the Superfund site is not up-gradient of the Property. Groundwater flow from the Property was found to be generally westerly towards Six Mile Creek. In approximately 2003, the federal Environmental Protection Agency (EPA) contracted with a consultant to perform an Expanded Site Inspection (ESI) on the Property to determine whether it should be placed on the federal National Priorities List (NPL) of sites at which a release, or potential release, of hazardous substances poses a serious enough risk to the public health or the environment to warrant further investigation and possible remediation under the Comprehensive Environmental Response, Compensation, and Liability Act (CERCLA) of 1980 and the Superfund Amendments and Reauthorization Act of 1986. In this assessment, surface and subsurface soils and groundwater were collected from the Property, sampled, and analyzed. In addition, surface water and sediment samples from Six Mile Creek and from the Ribault River were collected, sampled, and analyzed. The federal ESI report was issued in 2004. It found arsenic, copper, benzo(a)pyrene equivalents in the surface soil samples that exceeded the default levels of concern for direct exposure, as provided in Florida Administrative Code Rule Chapter 62-777. It also found arsenic, copper, iron, lead, polychlorinated biphenyls (PCBs), and benzo(a)pyrene equivalents in the subsurface soil samples that exceeded the default levels of concern for direct exposure, as provided in Rule Chapter 62- 777. It also found chromium, iron, and lead in one groundwater sample at concentrations exceeding DEP's groundwater standards. Aluminum, arsenic, barium, chromium, copper, nickel, vanadium, acenaphthene, fluorine, and phenanthrene levels in various groundwater samples were elevated but did not exceed DEP's groundwater standards. It also found that surface water samples from Six Mile Creek contained barium, copper, manganese, and vanadium at elevated concentrations. Sediment samples from Six Mile Creek and the Ribault River contained numerous metals, bis(2-ethylhexyl)phthalate, several polyaromatic hydrocarbons (PAHs), and PCB-1260 at concentrations exceeding EPA Region 4 guidance values. It was concluded that from the elevated concentrations in the surface water samples that contamination of the surface water pathways continues to occur from inorganic contaminants from the Property. The number of impacted groundwater monitoring wells decreased from 1984 to 2004. However, arsenic concentrations increased in shallow well 9, and barium concentrations increased in shallow well 8, during that time. Also, acenapthene, which is a semi-volatile compound associated with PAHs, was reported in two wells in the 2004 ESI report but no detection was reported in the 1985 report. The 1985, 1999, and 2004 reports indicate that the waste-filled pits on the Property are discharging to groundwater. This is not surprising since there is no liner beneath the waste that has been placed in the pits. Rain and runoff on the Property would percolate through the waste and leaches contaminants out of the waste. The leachate enters the groundwater on the Property. Parham contends that contamination found on the Property is from the 53-acre Pickettville Landfill, which was operated by the City of Jacksonville. He contends that a large number of lead batteries were placed in the Pickettville Landfill from extensive lead battery disposal. The evidence proved that the Pickettville Landfill is a Superfund site but did not prove composition or amount of the waste placed in the Pickettville Landfill over the years. Even if the Pickettville Landfill was used extensively for lead battery disposal over the years, the evidence was that little or none of the contamination on the Property is attributable to the Pickettville Landfill. Besides groundwater flow from the Pickettville Landfill likely being away from the Property, lead contamination was found in the surface and subsurface soils of the Property, making it very unlikely that the contamination on the Property came from the Pickettville Landfill. Parham also questions the estimate in the three contamination reports on the Property that 200,000 cubic yards of sandblasting grit were dumped on the property. He estimated that would amount to 13,000 truckloads, which would not fit on the 4-acre Property. But a witness for DEP estimated that two- acres of 20-25 foot deep pits would hold that quantity of sandblasting grit. Even if the actual quantity of sandblasting grit dumped on the Property was less, the evidence was that it was the likely source of the metal contamination found in the soils and groundwater on and under the Property. Similarly, Parham suggests that waste oil and other waste in the Pickettville Landfill could be the source of PAH or PCB contamination on the Property. Besides groundwater flow from the Pickettville Landfill likely being away from the Property, those contaminants move very slowly and do not move large distances, making it very unlikely that the contamination on the Property came from the Pickettville Landfill. Even if some did, the Pickettville Landfill would not account for much of the contamination on the Property. Parham contends that, even if the Property is contaminated, his placement of 124 truckloads of dirt on the Property will prevent any further groundwater contamination. But dirt is not impervious and will not prevent rain and runoff from percolating through the waste on the Property and leaching contamination into the groundwater on the Property. Eventually, this groundwater leaves the Property and enters Six Mile Creek.
Recommendation Based on the foregoing Findings of Fact and Conclusions of Law, it is RECOMMENDED that the Department enter a final order requiring Thomas Parham to: Submit a complete application for monitoring plan approval on Form 62-520.900(1) to the Department of Environmental Protection, Northeast District, 7825 Baymeadows Way, Suite B200, Jacksonville, Florida 32256-7590 within 90 days of entry of the Final Order; Implement the approved monitoring program within 90 days after Department approval; and Install monitoring wells in accordance with the approved monitoring program and Rule 62-520.600(6). DONE AND ENTERED this 9th day of December, 2008, in Tallahassee, Leon County, Florida. S J. LAWRENCE JOHNSTON Administrative Law Judge Division of Administrative Hearings The DeSoto Building 1230 Apalachee Parkway Tallahassee, Florida 32399-3060 (850) 488-9675 Fax Filing (850) 921-6847 www.doah.state.fl.us Filed with the Clerk of the Division of Administrative Hearings this 9th day of December, 2008.
The Issue Whether permit application SWO 13-5152, should be granted under Chapter 403, Florida Statutes. This case involves the application of Respondents City of North Miami and Munisport, Inc. to Respondent Department of Environmental Regulation (DER) for an operating permit under the provisions of Chapter 403, Florida Statutes, and Chapter 17-7, Florida Administrative Code, to operate a sanitary landfill located in North Miami, Florida. DER granted provisional approval of the application by the issuance of a Notice of Intent to issue the permit on January 27, 1978. Petitioners filed the instant petition of February 13, 1978, challenging the issuance of the proposed permit. Final hearing herein was originally scheduled for April 7, 1978, but at the instance of the parties was continued and reset to commence on October 18, 1978. During the course of the final hearing, 29 witnesses presented testimony, including six public witnesses. (List of public witnesses - Hearing Officer's Exhibit 3) A total of 35 exhibits were admitted in evidence. Three exhibits (Exhibits 5, 13 and 15) were rejected by the Hearing Officer.
Findings Of Fact By application dated November 14, 1977, Respondent City of North Miami, Florida, as owner, and Respondent Munisport, Inc. as the "responsible operating authority" requested Respondent DER to issue a permit to operate a solid waste resource recovery and management facility consisting of 345.90 acres located at 14301 Biscayne Boulevard, North Miami, Florida. The site, known as the North Miami Recreation Development, had been operating as a sanitary landfill under temporary operating permits (TOP) issued by the DER on May 8, 1975 and September 21, 1976. The 1976 TOP provided for an expiration date of July 1, 1977, and contained various conditions designed to give the permittees a reasonable period of time to conform to the DER regulations relative to sanitary landfills. These included standard requirements such as the rendering of reports on the operation of the facility and prohibiting the deposit of raw and infectious waste, or hazardous waste that had not been rendered safe and sanitary prior to delivery. Additionally, the permit conditions required the facility to be so operated that it would cause minimum adverse effects on the environment, such as objectionable odors, contaminated storm water runoff, or leachates causing degradation of surface of ground waters. Further, the permit provided for a three-month review program after its issuance to consider the feasibility of dumping solid waste in 63 acres of submerged land subject to previous filling with clean fill and/or construction debris, filling of land above mean high water with garbage either above clean fill or above trenches filled with wood and construction debris and covered with clean fill, and a six-week period of weekly water quality monitoring at agreed to sites for analysis by both permittees and the Dade County Environmental Resources Management (DERM). The permit further prohibited the placement of refuse waterward of the mean high water line or in trenches cut below the natural ground water table. (Exhibits 1, 4). By letter of January 27, 1978, DER gave notice to the applicant of its intent to issue the requested operation permit for the solid waste disposal facility and stated therein the following reasons for its determination: The solid waste disposal site is in the public interest. The Department feels that the site will not substantially affect the water quality or interfere with the area's wildlife. The applications and plans for this facility have been evaluated and found to be in conformance with Chapter 403, F.S., Chapter 17-4, FAC, and Chapter 17-7, FAC. The letter stated standard conditions to which the permit would be subject, including special conditions that had been noted in the 1976 TOP. It also prescribed specific conditions that no solid wastes could be placed within 30 feet of any existing or future lake area, no dumping below water at any time nor in any dewatered excavations, and that a quarterly water quality monitoring program at monitoring wells No. 4 through 12 be sampled for specified substances. Proposed Condition 16 stated as follows: Solid waste shall be deposited in locations consistent with those approved in the Army Corps of Engineers' dredge and fill permit #75B-0869. No solid waste shall be deposited in the areas commonly known as the wetlands and transitional zones of said wetlands, as shown on the attached map. Subject to the Corps approval of proposed modifications to permit #75B-0869, a revised DER solid waste permit will be issued consistent with the approved modifications. A sketch of the landfill site purporting to designate the landfill deposal area, wetlands and transitional zone, and mean high water line was attached. (Exhibit 3) The Petitioners consist of the Florida Audubon Society, which has some 2,000 members residing in Dade County, Tropical Audubon Society, which is affiliated with Florida Audubon Society; Keystone Point Homeowners Association, Inc., comprised of approximately 425 owners of mostly waterfront or canal homes in North Miami within a mile of the landfill site; Thomas Pafford, North Miami, Florida, who uses the waters of Biscayne Bay and nearby wetlands for recreational purposes; and Maureen B. Harwitz, who resides within a half mile of the landfill site and uses Biscayne Bay and the mangrove preserve adjacent to the landfill site for recreational purposes. Members of the above-named organizational groups use the waters surrounding the landfill site for recreational purposes and are concerned that the waters and fish and animal life therein will be adversely affected if the operation permit is granted. (Testimony of Lee, Brown, Pafford, Lippelman, Harwitz) Munisport has been operating the North Miami landfill under a lease with the City of North Miami since approximately 1974. The ultimate aim is to convert the area into a recreational complex consisting of golf courses, club house, and other sports facilities. The site was used as an unregulated dump for many years prior to initiation of the Munisport operation. The site has been the subject of previously issued state and Corps of Engineer dredge and fill permits which are not the subject of this proceeding. The landfill site occupies an area generally between Northwest 135th Street on the south and Northwest 151st Street on the north. It lies between Biscayne Boulevard on the west, and state mangrove preserves and land of Florida International University on the east. It is less than a mile to Biscayne Bay on the east side of the landfill. The nearest point of entry is in the southeast area where Arch Creek empties into the Bay. At this time, Munisport has filled approximately 210 acres at the site with ten feet or more of fill material. A final cover has been completed over about 70 acres of this land and a golf course is presently being constructed. Pursuant to the dredge and fill permits, five lakes approximately 35 feet deep are nearly completed and some six or seven more are to be dug in the future pursuant to those permits. These lakes are separated from the solid waste by a 30 foot wide dike of clean fill. Although some cover material has been trucked to the site, about 1.6 million cubic yards of fill from the excavated lakes have been or will be utilized in cover operations for the landfill. The solid waste layer averages 15 feet in depth and lies about two feet above the ground water table. About 230 acres lie within the upland fill area above the mean high water line which is not within the area of jurisdiction of the Army Corps of Engineers. The mean high water line has been established by appropriate procedures under Chapter 177, F.S., and the surveying procedures were approved by the Department of Natural Resources on April 6, 1978. Although not stated in the Notice of Intent to issue the requested permit, DER intends to restrict the life of any permit to the time when the Metropolitan Dade County Resources Recovery Facility commences operation in approximately two years. The applicants and Dade County also have a memorandum of understanding to this effect. (Testimony of Stotts, Checca, Exhibits 1, 2, 35, 36, Hearing Officer's Exhibit 1) Munisport receives solid waste from a variety of firms, institutions, and surrounding municipalities. Its procedures are for vehicles to enter and exit the site from an access road leading to Biscayne Boulevard. A sign is located along the road indicating the operating hours, fee schedule, waste restrictions and other pertinent information. A large portion of the site is virtually inaccessible due to dense mangroves and mosquito control canals and ditches. At the check-in gate, a cursory inspection of vehicle loads is made by Munisport personnel who check the contents for quantity. Each load is directed to a designated place at the site where Munisport employees spread and compact the waste. At this stage, they are instructed to look for any unauthorized materials, such as hazardous and infectious waste. If such wasted is found, the offending party is required to remove it from the site. compactors and bulldozers push the solid waste to the face of the landfill and spread it out to facilitate compaction. During the hours of 6:00 P.M. to 6:00 A.M., a watchman is on duty at the site to accommodate customers. If less than four or five truckloads arrive during the night hours, the material is not processed. If a larger quantity is involved, a Munisport employee moves and covers the material prior to the following workday. Due to the high ground water tabled, the area method is used for filling the site. This is a procedure by which refuse cells are constructed in lifts not to exceed ten feet in vertical height. They are composed of cells which constitute a one-day quantity of refuse. Six inches minimum cover of clean fill is applied daily, and a one foot intermediate cover is applied within a year after compaction. The cells are compacted in two-foot layers and, upon completion of a particular area, a minimum of two feet of final cover is applied. A dike constructed of compacted limerock borders the east side of the site and basically constitutes the present mean high water line. It is designed to protect the adjoining 129 acres of mangrove preserve and Biscayne Bay from any adverse water quality which might occur from runoff of degraded waters from the landfill site in the event of contamination. (Testimony of Haddad, Checca, Exhibit 1, 9) The shallow soil underlying the landfill at depths ranging to almost ten feet consists of a combination of organic matter and debris from prior dump use, muck, and sand. Soil borings taken at the site show that limestone or calcareous rock known as Miami oolite is about eight feet below the soil layer. At this depth is found the Biscayne aquifer that carries the unconfined ground water in the area. The aquifer is approximately 160 feet deep under the site and constitutes the major source of water supply in Dade County. The gradient of the water table for the landfill site runs in a southeasterly direction toward Biscayne Bay. Approximately 75% of the surface soil layer consists of organic muck, whereas in approximately 25% of the area, which was previously filled in the southern and westerly portions before commencement of the Munisport operation, the soil is primarily of a sandy type. (Testimony of Checca, Pitt, Exhibit 1) Leachate is produced in sanitary landfills by precipitation that percolates down through decomposing refuse cells and picks up polluting substances created from the decaying solid waste. It can form a "plume" or "bubble" that takes the course of least resistance in flowing laterally or vertically through a landfill site. The strength and concentration of the leachate is dependent upon various factors including the composition, compaction, and the age of decomposing refuse, and the amount of water being introduced into the area. As it passes slowly through the soil beneath the solid waste material, the unsaturated soils act as filters and permit ion exchange which reduces the quantity of contaminants. Dilution takes place where leachate comes in contact with ground water and leachate movement occurs gradually through the ground water aquifer in its direction of the flow. The presence and movement of leachate normally can be detected by analysis of ground water samples taken at various places throughout the landfill site. (Testimony of Checca, Pitt, Coker, Exhibit 1) Commencing in 1975, a monitoring program was instituted at the sanitary landfill to determine its effects on the ground water regime. A number of monitoring wells at various depths were constructed at different sites at the landfill, and samples were withdrawn and evaluated periodically to determine the types and degrees of pollution being generated by the landfill. Background samples were also obtained from wells off the site to establish the general character of water quality in the area and to compare these samples with those obtained from the site. Additionally, "grab" samples were taken of water from the bay and nearby canals and wetlands. Locations of the background and sampling wells were established by the applicants in conjunction with the DER and the Environmental Protection Agency. To determine the amount of leachate that probably would be generated at the site, the "water balance method" of computing the estimated time required to produce leachate, as well as the quantity that probably would be generated upon completion of the landfill, was made by representatives of the EPA in 1975 utilizing specific climatological and surface conditions at the site. This study indicated that percolation of surface water would increase during the operation of the landfill and before final soil and vegetative cover were in place, and that leachate would occur in about a year in larger quantities than would be produced by a completed landfill. Tests conducted during the ensuing three-year period of both surface and ground water through the monitoring program have failed to produce evidence that water quality is not within acceptable parameters or that water quality in the area surrounding the landfill site has been degraded. No significant differences in the concentrations of various ground water constituents were found between samples obtained at the disposal site and those collected in the adjacent mangrove forest or background areas. Neither was any evidence of contamination from leachate found in samples of surface water collected in the vicinity of the landfill or in nearby natural areas. (Testimony of Checca, Pitt, Linett, Perez, Exhibit 1, Exhibit 33) Three basic factors have undoubtedly accomplished reduction in the amount of leachate generated at the landfill. These are (a) attenuation and filtration of pollutants by unsaturated soils between and beneath the refuse cells, (b) biological assimilation by organisms living within the refuse cells and underlying soils, and (c) dilution upon contact with the ground water. A hydrogeologic study shows that the uppermost 14 feet of the aquifer immediately below the landfill represents only 0.2% of the total discharges with a ground water velocity of less than 0.1 foot per day. This part of the aquifer therefore provides considerable detention time for the water that percolates through the landfill. The strata, as well as the overlying organic marine soils, provide the absorption and assimilation that removes pollutants from the water. After water percolates through this layer, it reaches the highly permeable Miami oolite that carries about 43% of the ground water flow. The effects of soil absorption, filtration through the upper 14 feet of the aquifer, and dilution within the aquifer have demonstrably been sufficient to assimilate the water that percolates through the landfill. It is estimated that the time of travel of ground water from the landfill site to the closest discharge point in Biscayne Bay is approximately 68 years. Although the attenuation capability of the organic muck soil underlying the greater part of the landfill is high, the older area of the site in the southwestern portion which had been filled before the Munisport operation commenced, has no muck and consists primarily of sand with a higher rate of permeability. (Testimony of Checca, Pitt, Teas, Exhibits 1, 33) The fact that the organic muck material under the landfill is not uniform throughout the site, plus the fact that there have been various breaches in the permeable oolite layer below the soil, will, in the opinion of some experts, eventually lead to the generation and movement of a leachate plume into such breaches and ultimately to Biscayne Bay. These breaches consist of the deep lakes at the site, the Arch Creek Canal to the south of the site and a dredged excavation at the exit of that body of water into the bay some 3,600 feet distant from the landfill. Additionally, these experts postulate that the dike located on the eastern border of the site will not prevent leachate from moving into the surrounding mangrove area. It is therefore estimated that in the above ways, large amounts of leachate would enter the bay and adjacent wetlands within a period of five to ten years. (Testimony of Coker, Hudson, Pasley, Browder, Exhibits 12, 14, 29, 30) Although water monitoring at various levels in and at probable discharge points near the site have not found degradation of water quality, the applicants propose to address any future leachate problems in a variety of ways. These include continuous periodic testing of water quality and monitoring wells, excavation of a canal on the upland side of the site to intercept leachate and treatment of any contaminated water therein or by pumping the water to an interior lake for treatment. Based on the particular type of any degradation, chlorination and precipitators would be utilized. Long-range problems will be further reduced by the ultimate construction of the golf courses and placement of final soil and vegetative cover to reduce percolation of surface water. This will be aggravated to an undetermined degree, however, by periodic irrigation of the golf courses. (Testimony of Checca, Pitt, Kelman, Exhibits 1,33) During the early years of the Munisport operation, a number of violations of the conditions of the temporary operating permit occurred, but for the most part these were caused either through simple negligence of landfill personnel, breakdown of equipment, or introduction of unauthorized materials to the site by Munisport customers. In these situations, Munisport usually took prompt and effective action to prevent recurrence and to remedy the problem. For example, on one occasion in 1977, some 12 drums containing residue of a chemical substance deemed to constitute "hazardous waste" was brought into the site by persons unknown and was found leaking into the ground. A number of violations and warning notices were issued to Munisport by the Dade County Department of Environmental Resources Management (DERM), primarily in 1976, involving the placement of tree cuttings and wood scraps into excavations containing water at the south end of the site. These occurred, however, during a period when Munisport was engaging in tests to determine the suitability of such operations in conjunction with DER. Additionally, in 1976 and 1977, Munisport was advised of violations in the placement of garbage in exposed water, uncovered garbage, and delivery of garbage after hours. Munisport has had a continuing problem over the years with the unauthorized delivery of hospital wastes from various customers to the landfill in spite of letters written to hospital facilities and delivery firms cautioning them concerning the prohibition against the introduction of such material to the landfill. DERM personnel concede, however, that the operation has been continuously improved and that it is well-conducted in comparison with other landfills in the country. However, they believe that lakes should not exist in landfills and that the North Miami landfill is too close to the wetlands. (Testimony of Morrissey, Karafel, Sobrino, Haddad, Checca, Exhibits 6-11, 17, 18, 20-24, 27, supplemented by testimony of Pafford and Exhibit 16) In a letter of January 17, 1977, DERM expressed concerns about the Munisport operation to DER. One of these concerns was that leachate would migrate to proposed golf course lakes and the resulting pollution would produce poor water quality. Although 1976 testing of then existing lakes at the site reflected unusually high amounts of fecal coliform, subsequent tests in late 1978 showed very little, but tests again in January, 1979, showed that several lakes were again somewhat high in coliform. Coliform is not considered to be a strong parameter in assessing the presence of leachate and amounts vary considerably from day to day in lake areas. Additionally, great numbers of birds are normally present on the landfill site during operations and contribute in raising coliform readings to some extent. Dade County has a current policy that does not permit lakes to be excavated on landfills operated by the county. (Testimony of Checca, Morrissey, Sobrino, Karafel, Kosakowski, Linett, Newman, Kelman, Perez, Exhibits 17, 19, 20, 24, 25, 31, 32, 37, 38)
Recommendation That a permit be issued to the City of North Miami, Florida and Munisport, Inc. to operate the solid waste disposal facility as described and under the conditions stated in the letter of the Department of Environmental Regulation, dated January 27, 1978, wherein it gave notice of its intent to issue the said permit. DONE and ENTERED, this 13th day of April, 1979, in Tallahassee, Florida. THOMAS C. OLDHAM Hearing Officer Division of Administrative Hearings 530 Carlton Building Tallahassee, Florida 32304 (904) 488-9675 COPIES FURNISHED: David Gluckman, Esquire 5305 Isabelle Drive Ken VanAssenderp, Esquire Tallahassee, Florida Smith, Young and Blue, P.A. Post Office Box 1833 Josepy D. Fleming, Esquire 620 Ingraham Building Marvin Sadur and 25 Southeast Second Avenue Richard J. Potash, Esquires Miami, Florida 33131 2000 L Street NW - Suite 612 Washington, D.C. 20036 Silvia Alderman, Esquire Assistant General Counsel Department of Environmental Regulation 2600 Blair Stone Road Tallahassee, Florida 32301
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 in this case is the amount of reimbursement to which Petitioners are entitled under the Petroleum Cleanup Reimbursement Program. Petitioners--supported by the Intervenor, Environmental Corporation of America (ECA)--seek reimbursement of contractor markups; Respondent, the Department of Environmental Protection (Respondent, DEP, or the Department), seeks to recover alleged overpayments related to interest payments.
Findings Of Fact Petitioners funded efforts to rehabilitate (clean-up) petroleum and petroleum product contamination at the Joy Food Store (some, former Coastal Mart) facilities involved in these cases. As such, they were the persons responsible for conducting site rehabilitation (PRFCSR) at those sites. Cloyd Toney, Case No. 98-2021, funded a contamination assessment report (CAR) at former Coastal Mart #688 in Fort Lauderdale, Florida. James Scelfo, Case No. 98-4535, funded a CAR at former Coastal Mart #430 in Gainesville, Florida. Leo Cohen and Mark Grosby, Case No. 98-4537, funded a remedial action report (RAP) at Joy Food Store #669 in Kissimmee, Florida. Leo Cohen and John H. Roth, Case No. 98-4538, funded a CAR at Joy Food Store #667 in Kissimmee, Florida; Cloyd Toney, Case No. 98-4540, funded a CAR at Joy Food Store #662 in Eaton Park, Florida. Luella R. Ceaser, Case No. 98-4541, funded a CAR at former Coastal Mart #684 in Pompano Beach, Florida. Peter D. Kleist, Case No. 98-4543, funded a RAP and Remediation Action (RA) at Joy Food Store #704 in Cocoa, Florida. As PRFCSR's, Petitioners filed applications with the Department of Environmental Protection (DEP, Department, or Respondent) for reimbursement under an amnesty program created by Section 376.3071, Florida Statutes, for owners who notified the Department that their property was contaminated by petroleum or petroleum products. Under the statutory reimbursement program someone (usually the site owner) typically would hire a contractor to rehabilitate petroleum-contaminated sites. All contractors performing site rehabilitation tasks would have to file a Comprehensive Quality Assurance Plan ("CompQAPP") with the Department. Field work not performed under and in accordance with the CompQAPP would not be accepted by the Department. The contractor would then perform up to four rehabilitation program tasks, often through subcontractors and suppliers. The first potential program task would be an Initial Remedial Action (IRA). In an IRA, site-contaminated soil at the site would be identified by taking soil samples (soil borings), the contaminated soil would be removed, and the excavation would be backfilled with uncontaminated soil. The next step would be preparation of a Contamination Assessment Report (CAR). The purpose of the CAR would be to define the vertical and horizontal extent of groundwater contamination. Definition of groundwater contamination would require installation and sampling of groundwater wells. Additional soil samples sometimes would be necessary. The third step would be the Remedial Action Plan (RAP). In a RAP, a system to remediate the groundwater at a site is designed and approved. The final program task would be the Remedial Action (RA), which would implement the system designed in the RAP. Upon completion of a program task, the site owner, operator, or his designee would submit a reimbursement application to the Department for payment for the costs of the rehabilitation activities. Petitioners each claimed a 15% "second-tier" markup on the amount they funded (i.e., paid) the Intervenor, Environmental Corporation of America (ECA), a company owned and operated by Jack Ceccarelli. The amount each paid to ECA included ECA's 15% "first-tier" markup on amounts it said it paid subcontractors for site rehabilitation work. Ceccarelli's Initial Involvement in Clean-up Projects Ceccarelli worked for Joy Food Stores from December 1980 until August 1992. Joy, which sold gasoline at its stores, was owned and operated by Mike Hughey. Hughey hired Ceccarelli, who worked his way up from lower-echelon positions to eventually become responsible for overall operations of Joy Food Stores (Joy). In 1986, Joy leased some of its retail facilities to a competitor doing business under the name Coastal Mart. After petroleum contamination was discovered at these and numerous other Joy locations, Coastal Mart sued Joy in early 1992. Meanwhile, Joy began to rehabilitate (assess and clean-up) its sites under the amnesty program created by Section 376.3071, Florida Statutes. Joy initiated its clean-up projects under the so-called "state-lead" program. Under this program, the Department would contract directly with a private contractor to perform the rehabilitation work at an eligible site and pay the contractor monthly for work performed. However, the Department only had ten approved contractors doing work under the "state-lead" program. As a result, clean-up progressed slowly state-wide, and a large backlog of work developed. Clean-up of the Joy sites was at a standstill. When Ceccarelli left Joy in August 1992, he formed a petroleum clean-up company called Environmental Directions Incorporated ("EDI"). Subsequently, he approached Hughey with a proposal to clean-up the Joy and Coastal sites, using the reimbursement program, third-party financing, and multiple subcontractors. Hughey agreed with Ceccarelli that Ceccarelli's proposal could be a way to settle the Coastal Mart lawsuit. In February 1993, Ceccarelli secured a financing agreement from Clean America Corporation (CAMCOR) and environmental consulting services from Environmental Solutions and Services, Inc. (ESSI) based in Longwood, Florida. Under the arrangements made by EDI, ESSI contracted directly with Joy and agreed to compensate EDI as "Project Coordinator." EDI was to be compensated at an hourly rate of $100 for project coordination (described as "client/funder coordination), with a minimum of 50 hours per week for the Coastal/Hughey (i.e., Joy) sites; EDI also was to receive 2% of ESSI's 15% contractor markup. Joy settled the Coastal Mart lawsuit in February or March 1993 by taking back the Coastal Mart locations. These sites were included in the seven applications at issue in these cases. Clean-up work proceeded on the basis of those contractual agreements, with some amendments, but CAMCOR never provided funding, and ESSI reluctantly made only a partial payment to EDI in August 1993. In October 1993, ESSI was bought by Omega Environmental Services (Omega). Omega confirmed the prior contractual arrangements and continued with the clean-up work begun by ESSI. But since CAMCOR never funded the enterprise, Omega was not paid for its work and did not pay EDI under the prior contractual provisions. In October 1994, Omega bought Gurr and Associates (Gurr), another environmental consulting firm. Initially, Omega operated Gurr as a subsidiary but later dissolved Gurr and operated it as a division of Omega. Gurr/Omega initially continued under Omega's prior contractual arrangements, but Gurr/Omega still was not being paid by CAMCOR, and Gurr/Omega still was not paying EDI. When lack of financing began to threaten the continued viability of the clean-up projects, Ceccarelli sought alternative funding through another company he incorporated under the name Environmental Corporation of America (ECA). An immediate problem confronted by ECA in getting financing was that a prospective funder's anticipated profit was at risk of erosion by passage of time between funding and reimbursement from the Department, which was taking anywhere from eight months to two, even three years. From August 1993 through August 1994, the law allowed the Department to pay interest to claimants pending processing of reimbursement applications. These interest payments compensated funders for the time value of money and protected their anticipated profit from being eroded by passage of time during which reimbursement applications remained pending. After August 1994, interest payments from the Department ceased. See Conclusion 70, infra. The practical effect was to put the funders' rate of profit at risk. As a result, to help entice funders, other contractual means were devised to replace the interest previously paid by the Department. Eventually, ECA entered into contracts with funders to provide funding for the Joy and Coastal Mart sites. Each Agreement to Fund between ECA and the funders of these sites provided: INTEREST "Contractor" agrees to pay "Funder" a rate of interest equal to the published prime interest rate (Nations Bank) fixed at time of funding on such funds advanced by "Funder". Interest shall be payable twelve (12) months in advance. An additional five percent (5%) will be deposited in a reserve account to be paid to the Funder as follows: two and one-half percent (2 1/2%) at the end of month fifteen and two and one-half percent (2 1/2%) at the end of month eighteen. Reimbursement by the State in less than eighteen months may result in an interest adjustment due "Contractor" from "Funder" or reserve account. Any interest paid by the State of Florida under Section 62-773.650 will accrue to "Contractor" on the same basis as it was paid "Contractor" to "Funder" and shall be paid by "Funder" to "Contractor" within five(5) days of funders [sic] receipt of disbursement from the State of Florida to "Funder". Reimbursement by the State which takes more than eighteen (18) months will result in an interest adjustment due "Funder" from "Contractor" at the rate of prime fixed at the time of funding plus three percent (3%) for months 19 and beyond, paid quarterly in advance to the escrow account and paid to the Funder quarterly in arrears. ECA also entered into a series of agreements with Gurr/Omega, each called a Participation Agreement for Rehabilitation of Petroleum Contamination Site. Under these agreements, ECA was said to be acting for "its investors." Gurr/Omega was identified as having "heretofore entered into contracts with reimbursement eligible site owners or operators to fund, manage and rehabilitate specific sites." Gurr/Omega was required to "provide all labor, equipment and materials and [was to have] performed all work needed to complete certain specified sites selected and approved by ECA." Gurr/Omega was to "complete such performance in strict compliance with all applicable statutes rules and regulations and to the satisfaction of FDEP." Gurr-Omega would submit its invoices for remediation work to ECA, which would pay Gurr/Omega with money obtained from third-party investors. ECA would receive an assignment of Gurr/Omega's right to reimbursement from the State of Florida. In effect, Gurr/Omega gave up its contractor markup on invoices submitted by its subcontractors and suppliers; instead, ECA charged a contractor markup on Gurr/Omega's invoices. ECA would then be responsible for preparing reimbursement packages for submission to the Department. Each Participation Agreement for Rehabilitation of Petroleum Contamination Site also contained a provision requiring Gurr/Omega to pay ECA a share of what ECA was required to pay the funders under the corresponding Agreement to Fund. ECA hired Restoration Assistance, Inc., to prepare reimbursement applications for all of the Joy and Coastal sites, including the sites funded by Petitioners in these cases. (In addition to preparing reimbursement applications, Restoration Assistance had a subcontract with Halliburton NUS, which had a contract with the Department to review reimbursement applications filed by others for completeness and entitlement to reimbursement.) ECA would send Restoration Assistance a package of invoices and technical documentation for each application. Restoration Assistance would compare the invoices with the technical documentation to determine whether costs in the invoices were allowable and to categorize the costs and enter the costs and other required information in the appropriate places on the reimbursement applications. In some cases, Restoration Assistance noted costs not believed to be allowable and recommended their deletion. In some cases, ECA required invoices to be adjusted so that they only included allowable costs. In other cases, ECA required Gurr/Omega to pay portions of payments it received from ECA into a retention account for "anticipated denials." The packages sent to Restoration Assistance included invoices from Gurr/Omega and from ECA. ECA's invoices included a 15% contractor markup on Gurr/Omega's invoices. In some cases, Gurr/Omega also marked-up subcontractor and subcontractor invoices it paid for rehabilitation work. Sometimes, after review by Restoration Assistance, the funders paid the invoices, and the application packages were returned to Restoration Assistance with certifications from the funders and an attestation from a certified public accountant (CPA) that the costs reflected in the invoices had been "incurred," i.e., in fact paid. Restoration Assistance would then file the completed application with the Department. After application packages were completed, ECA's "investors" would "fund" (pay) all invoices and markups. At approximately the same time, ECA would pay Gurr/Omega's invoices, and ECA and Gurr/Omega would make the initial interest payments required under the applicable Agreement to Fund and Participation Agreement for Rehabilitation of Petroleum Contamination Site. However, the reimbursement packages did not include any evidence of the interest payments by Gurr/Omega and ECA or their agreements to make interest payments, respectively, to ECA and Petitioners. Nor were the interest payments or agreements to pay interest made a part of the CPA's attestation that all costs were "incurred." ECA began filing reimbursement applications for "its investors" in November 1994. The Scelfo application was filed in February 1995; the Ceaser application was filed in March 1995; the Toney and Grosby applications were filed in March 1996; and the Roth and Kleist applications were filed in May 1996 (among 30 applications filed that month, which were the last filings by ECA, except for a handful filed in September 1996.) At about the time ECA began filing applications for "its investors," the Department was trying to decide how to deal with serious problems that had arisen in the reimbursement program. It had come to the Department's attention that entities known as Environmental Trust, Inc. (ET) and Sarasota Environmental Investors, Inc. (SEI), together with other entities related through interlocking ownership and directorship arrangements, were filing reimbursement applications claiming "first-tier" markups for a so-called contractor called Gator Environmental, Inc. (Gator), who was not involved until after rehabilitation work already had been completed by Tower Environmental, Inc. (Tower). It seemed Gator's primary function actually was to perform a "due diligence" site inspection for the funders. In addition, participants at various levels of the rehabilitation efforts in these applications, including the ultimate funders, ET and SEI, were claiming reimbursement for the full amount of invoices when they only paid a discounted portion of the invoices, which were being factored by a related financing company called American Factors Group (AFG). The Department began to devise a means of addressing problems like these in the context of the applicable statutes and rules. In September 1994, the Department began to require reimbursement applicants to provide documentation showing that entities claiming contractor markups "added value" to the rehabilitation effort. Specifically with respect to Gator, the Department wanted to know the date and duration of its involvement; if Gator came on the scene after the CAR submittal for which reimbursement was being claimed, no markup would be allowed for Gator. In October and November 1994, the Department held meetings to discuss the ET case in general and the "factoring" (discounting) of invoices in particular. It was decided at these meetings that Gator's charge for a CPA's due diligence was not "integral" to site rehabilitation since it was related to financing, not rehabilitation. It also was decided that the Department would not reimburse the difference between invoices and the factored (discounted) amount paid since the difference between the two represented carrying charges (i.e., interest) not reimbursable under applicable rules. In time, the Department denied these portions of approximately 46 reimbursement applications filed by ET and a related entity, Sarasota Environmental Investors, Inc. (SEI). At about the time these decisions were being made on the ET and SEI applications, the Department informed its contract application reviewers (such as Restoration Assistance), orally and later in writing, that additional documentation would be required to support claims for contractor markups to determine whether the contractor's activities were "integral to site rehabilitation associated with active management and oversight of subcontractors and vendors." Reviewers were informed that, in asking for additional information, they should inform applicants: Costs integral to site rehabilitation associated with active management and oversight of subcontractors and vendors may include: negotiation of contracts with subcontractors and vendors; development of specifications and solicitation of quotes for equipment and supplies; scheduling and coordination of subcontractor activities; and on-site supervision of activities performed by subcontractors. The following are examples of activities that are not considered integral to site rehabilitation: . . . activities performed as due diligence on behalf of the funding entities. Reviewers also were advised that they could deny contractor markups for the following reasons: Although the activities performed appear to include some amount of active management and oversight of subcontractors and vendors, they can not be differentiated from non- reimbursable activities and/or activities that appear not to be integral to site rehabilitation. Therefore, these activities do not constitute sufficient responsibility and participation to warrant the 15% markup claimed . . . . The documentation provided does not demonstrate a sufficient level of effort integral to site rehabilitation . . . in actively managing and overseeing subcontractors and vendors to warrant the 15% markup. The activities documented do not show any active management and oversight of subcontractors and vendors and do not constitute sufficient responsibility and participation integral to site rehabilitation to warrant the 15% markup claimed . . . . In December 1994, John M. Ruddell, Director of Waste Management for the Department, submitted a draft revision of Florida Administrative Code Rules Chapter 62-773 (the rules for the reimbursement program), which included elimination of markups entirely. However, the draft revision never went to rulemaking. In January 1995, the Department instructed Restoration Assistance, acting in the role of the Department's contract reviewer, to act in accordance with the decisions made at the Department's staff meetings in September, October, and November 1994. Specifically, Restoration Assistance was instructed not to allow a markup for Gator, not to allow the cost of the CPA's due diligence for funding purposes, and not to pay the difference between invoices and the factored (discounted) amounts actually paid. As reflected in an April 1995 intra-office memorandum, the Department continued to take the positions that factored (discounted) general contractor invoices could not be paid in full and that: II. The next tier entity (e.g., management company) may be allowed claims for actual project management work and value-added services; services provided by the general contractor and duplicated by the management company should not be claimed by the management company. Management company claims (e.g., markups) would be denied if the general contractor's claims simply passed through (e.g., one month time period) the management company to the responsible party without any services provided. However, if the management company only provided cash flow services for a majority of the program task period and no other service was provided, then a markup on the general contractor's claims would be allowable. In August 1995, the Department instructed its reviewers as to an application involving Gator. The reviewers were told not to allow Gator a markup if it did not become involved until after the work was completed. They were told that if Gator was involved in rehabilitation work, not to pay for management costs duplicative of "services provided by the subs or the resp[onsible] party." They also were instructed that Gator's non-duplicative management, if any, "counts towards the total project management percentage of personnel time." ET and SEI filed approximately 46 petitions for formal administrative proceedings on their application denials between September 1995 and February 1996. These cases were referred to DOAH. In October 1995, Charles Williams, the Administrator of the Department's Petroleum Clean-Up Section, e-mailed a memorandum to its contract reviewers reiterating instructions regarding contractor markups. The memorandum also noted a claim for reimbursement of a 15% contractor markup where the work of the so-called general contractor "was limited to a 1 hour meeting with the sub." In January 1996, the Department referred another 37 related cases to DOAH, each having two counts--one challenging reimbursement application denials, and another challenging the Department's alleged use of unadopted rules (the Department's various memoranda regarding factoring and markups) in denying the applications. These and other related cases were consolidated for final hearing in April 1996. In internal correspondence of contract reviewer Halliburton NUS, sent through the Department's contract manager, Grace Rivera, in May 1996, Halliburton's reviewers were instructed to apply an "8-hour" benchmark for gauging contractor participation. Part of the internal correspondence stated: Middle Man Markup: A funders [sic] service is funding, so pay the 15% markup. Also allow a 15% markup to a "middleman" who has done work for the site for at least 8 hours during the time that the work was going on. Do not allow the 15% if the middleman did not do any value added services while the site work was going on, or if their [sic] was no funding. Before you deny a markup because there was no work done by the middleman while site work was going on, call the PR [person responsible] and ask if "any information was not included in the application" to see if they had hours they did earlier but did not claim. In October 1996, a Recommended Order was entered in the ET and SEI cases upholding the application denials. The Department entered a Final Order adopting the ALJ's Recommended Order, and ET and SEI appealed to the District Court of Appeal, First District. In October 1996, Charles Williams sent Sewell, Todd, and Broxton, Inc. (STB), which reviewed reimbursement applications filed by Restoration Assistance, a letter providing "Written Confirmation of Verbal Guidance for Review of Reimbursement Claims with General Contractor Markups." The letter referred to a meeting of September 18, 1996, and Williams' October 1995 e-mail. It also referred to the Department's January 1996 decision to have reviewers request "additional documentation of general contractor activities that may have been performed beyond those billed in the claim prior to denying their markup." It stated: "This was done because several firms had indicated that they did not bill all of their activities due to the management time limitations in the rule." It referred to the Department's guidance in February 1996 as to the wording of such requests for additional documentation. Finally, it noted that the contractor markup issue was discussed at a public workshop in July 1996 on proposed clarifications to Florida Administrative Code Rules Chapter 62-773. Prior to October 1996, the Department only entered a few orders of determination (OOD's) on the reimbursement applications submitted by ECA for "its investors." Out of 29 OOD's, contractor markups were paid on 12 applications and denied on 17. Meanwhile, as to the other applications, the Department requested more documentation and information as to ECA's involvement in these and other projects. ECA responded to this request and provided the Department with a variety of documents, but the Department delayed its determination. After the Recommended Order in the ET and SEI cases in October 1996, the Department entered 41 more OOD's; 45 more OOD's were entered in November 1996. All denied ECA's markups. Subsequently, another 117 OOD's were entered on the applications filed by ECA for "its investors." Of these, ECA's markups were paid on 32 applications; the rest were denied. Petitioners' applications were denied in October 1996 or later. With respect to the Petitioners in these cases, the Department disallowed the following amounts of ECA markup: Toney (Case No. 98-2021), $8,120.80; Scelfo (Case No. 98-4535), $6,495.29; Cohen and Grosby (Case No. 98-4537), $5,302.33; Cohen and Roth (Case No. 98-4538), $10,303.12; Toney (Case No. 98- 4540), $9,293.40; Ceaser (Case No. 98-4541), $4,231.91; and Kleist (Case No. 98-4543), $13,446.66. These amounts included ECA's 15% markups, plus Petitioners' 15% markups on ECA's markups. The Department did not reduce any ECA claims by the interest payments required under the applicable Agreement to Fund and Participation Agreement for Rehabilitation of Petroleum Contamination Site. By the time of the presentation of evidence during the hearing in the ET and SEI cases in April 1996, the Department had information that many rehabilitation efforts were arranging to replace the post-application interest the Department no longer was paying. See Conclusion 75, infra, Findings of Fact 120-121. Certainly, by the summer of 1996, the Department was aware of these kinds of arrangements. But the Department was not looking beyond the contents of the application packages to ascertain whether such arrangements were involved, and the ECA application packages contained no evidence of the interest payments being made in accordance with the applicable Agreement to Fund and Participation Agreement for Rehabilitation of Petroleum Contamination Site. During discovery in these cases, the Department obtained evidence that interest payments were made in accordance with the applicable Agreement to Fund and Participation Agreement for Rehabilitation of Petroleum Contamination Site. At that point, the Department sought to recover those interest payments, together with any markups on them. Subsequently, Petitioners stipulated to receipt of the following interest payments from ECA under the Agreement Petitioner to Fund: DOAH Case Interest Amount Cloyd Toney 98-2021 $6,282.52 James Scelfo 98-4534 $6,670.50 Cohen/Grosby 98-4537 $4,030.68 Cohen/Roth 98-4538 $7,783.00 Cloyd Toney 98-4540 $7,160.79 Luella Ceasar 98-4541 $4,135.42 Peter Kliest 98-4543 $8,469.25 There also was evidence that Gurr/Omega paid ECA : $3,688.56 of interest under the Participation Agreement for Rehabilitation of Petroleum Contamination Site for Cohen and Grosby, Case No. 98- 4537, Joy Food Store #669; and $2,789.72 of interest under the Participation Agreement for Rehabilitation of Petroleum Contamination Site for Luella Ceaser, Case No. 98-4541, Coast Mart #684. (There was no evidence of other interest payments from Gurr/Omega to ECA with respect to these cases.) However, under the Participation Agreement for Rehabilitation of Petroleum Contamination Site, those payments constitute part of the interest payments from ECA to Petitioners. The documentation and evidence establish that, in all the Joy/Coastal clean-up projects, including the seven funded by Petitioners in these cases, ESSI-Omega-Gurr/Omega was a full service contractor employing all the licensed geologists and engineers, draftsman, project coordinators, field technicians, and support staff necessary to rehabilitate theses sites. ESSI- Omega-Gurr/Omega personnel planned, performed, supervised, and supported all field activities performed at these sites--e.g., preparation of field work plan, including locating, scheduling, drilling, installing and sampling of soil borings and monitoring wells; designing monitoring well and remedial action system specifications, disposal of contaminated soil; measuring monitoring well water levels and conductivity. (All field work was performed under the ESSI-Omega-Gurr/Omega CompQAPP.) ESSI-Omega-Gurr/Omega personnel contracted and interacted with laboratories obtaining all soil and water sampling test kits and sampling results. ESSI-Omega-Gurr/Omega personnel analyzed all soil and water sampling test results and re-directed the scope of the rehabilitation of these sites accordingly. ESSI-Omega-Gurr/Omega personnel obtained permission and access from neighboring property owners to install monitoring wells on their property. ESSI-Omega-Gurr/Omega personnel interacted with local state and county officials securing permits, responding to their inquiries, and requesting permission to conduct additional remediation activities. ESSI-Omega-Gurr/Omega owned, rented, or bought all equipment, vehicles, instruments, tools, and materials used to remediate these sites. ESSI-Omega-Gurr/Omega office personnel performed, supervised, reviewed, and supported all activities necessary to produce the CAR's and RAP's for these sites. They wrote, reviewed, edited, and typed the reports; they drafted all figures, maps, tables, and indexes. ESSI-Omega-Gurr/Omega office personnel recorded, tracked, and invoiced all their work, the work of all their subcontractor activities, and their costs. At the outset of rehabilitation work on the Joy/Coastal site, Ceccarelli and Hughey discussed the overall rehabilitation effort on the sites. Hughey wanted the clean-up to proceed as quickly as reasonably possible. He also wanted work at the various sites to be timed and performed so as to disrupt retail operations as little as possible. Hughey expected EDI to communicate his concerns and desires with ESSI and make sure that ESSI's performance of the Joy-ESSI contract would conform with those concerns and desires. At the outset, Ceccarelli met with ESSI's executives in Orlando, Florida, to carry out Hughey's desires. EDI also assembled helpful historical information on the sites, including information Joy developed in connection with the Coastal Mart lawsuit. As ESSI became Omega, and Omega became Gurr/Omega, and EDI became ECA, Ceccarelli continued in his role as liaison between ESSI-Omega-Gurr/Omega and Joy and general overseer of the projects. In addition to meeting with ESSI-Omega-Gurr/Omega's executives, Ceccarelli discussed various aspects of the projects with ESSI-Omega-Gurr/Omega personnel, especially those housed in their Tampa office, which was in the same building as EDI/ECA; Ceccarelli, in turn, discussed these things with Hughey on a regular basis. Ceccarelli also had ESSI-Omega-Gurr/Omega prepare monthly summary progress reports, which Ceccarelli reviewed and went over with Hughey. Ceccarelli also usually visited the sites, including at least six of the seven sites at issue in these cases. (The invoice for Joy Food Store #669 in Kissimmee was missing from Petitioners' Exhibit 4, and no other documentation evidenced a site visit.) Sometimes, Hughey accompanied Ceccarelli on a site visit. ECA's invoice for Joy Food Store #688 in Ft. Lauderdale (Case No. 98-2021) billed for eight hours for travel and a site visit, plus another 6.75 hours of general contractor management and administration time for such things as: review of well installations; review of the scope of work for the CAR with Omega; review with the Broward Natural Resources Department; estimate of the cost to complete and scheduling work; and review the CAR after preparation by ESSI-Omega-Gurr/Omega. Of this time, only 8.75 hours was claimed as management time on the reimbursement application forms prepared by Restoration Assistance. ECA's invoice for Coastal Mart Store #430 in Gainesville (Case No. 98-4535) billed for four hours for travel and a site visit, plus another 7.5 hours of general contractor management and administration time for such things as: reviewing the file for a work plan; reviewing monitor well installations; reviewing a drilling well report (or soil borings); reviewing the CAR after preparation by ESSI-Omega-Gurr/Omega; and reviewing of invoices/billings. Of this time, only 11.5 hours were claimed as management time on the reimbursement application forms prepared by Restoration Assistance. As mentioned in Finding 50, supra, ECA's invoice for Joy Food Store #669 in Kissimmee (Case No. 98-4537) was missing from Petitioners' Exhibit 4. But Restoration Assistance's Personnel Supplementary Form for Management/Project Management time shows 12 hours of general contractor management time. ECA's invoices for Joy Food Store #667 in Kissimmee (Case No. 98-4538) billed for four hours for travel and a site visit, plus another 26.25 hours of general contractor management and administration time for such things as client consultation (probably with Hughey); sorting site data and review of site file; review of wells with client (possibly due to problems with well installation); review with senior project manager; review of well installation; and review of CAR and CAR addendum after preparation by ESSI-Omega-Gurr/Omega. Of this time, 26.25 hours were claimed as management time on the reimbursement application forms prepared by Restoration Assistance. ECA's invoice for Joy Food Store #662 in Eaton Park (Case No. 98-4540) billed for three hours for travel and a site visit, plus another 17.25 hours of general contractor management and administration time for such things as reviewing scope of work and budget; copying and data and setting up files; reviewing hand auger data; coordinating well installation; reviewing additional wells; reviewing groundwater results; reviewing site access requests and data; reviewing the CAR and CAR addendum after preparation by ESSI-Omega-Gurr/Omega. Of this time, only three hours were claimed as management time on the reimbursement application forms prepared by Restoration Assistance. ECA's invoice for Coastal Mart Store #684 in Pompano Beach (Case No. 98-4541) billed for 2.5 hours for pro rata share of travel and a site visit, plus another 11.25 hours general contractor management and administration time for such things as data reviewing and compiling information for CAR; reviewing the CAR; project coordination in Broward County; reviewing billings; and reviewing general project coordination. All of this time was claimed as management time on the reimbursement application forms prepared by Restoration Assistance. ECA's invoice for Joy Food Store #704 in Cocoa (Case No. 98-4543) billed for 6.5 hours for travel and a site visit, plus another 24.5 hours of general contractor management and administration time for such things as client consultations; the sorting and review of file data; review with senior project manager; financial review and tracking; review of RAP with client and sub; review of file and prepare invoice; and review of and response to Brevard County RAP questions with sub. Of this time, only 13.5 hours were claimed as management time on the reimbursement application forms prepared by Restoration Assistance. The Department contends that part of ECA's invoice for Joy Food Store #662 is not legitimate because it records Ceccarelli's review of the CAR addendum on February 10, 1995, the same day the CAR addendum was signed and sealed by the project geologist in Orlando. The Department also contends that another part of ECA's invoice for Joy Food Store #662 is not legitimate because it records the review of a well drilling report on March 7, 1994, the same day the wells were installed. The installation of these wells took eleven hours, and the Department contends that the chances of generating a well-drilling report that day under these circumstances are minimal. The explanation for these discrepancies probably lies in the way in which Ceccarelli prepared his invoices. Ceccarelli admittedly was far from meticulous in keeping track of the time he spent on these projects, in part because of his personal disinclination and in part because of ECA's understanding that meticulous time-keeping was not critical for reimbursement of a markup. To the contrary, it was ECA's understanding that the Department would not reimburse for excessive management time for ECA when ECA was being compensated in the form of the 15% markup on ESSI-Omega-Gurr/Omega's invoices. Indeed, Restoration Assistance reduced ECA's management time in at least five of the seven claims for reimbursement at issue in these cases. (This could not be ascertained for Joy Food Store #669 without the invoice for that store.) For the most part, the activities listed in ECA's invoices were not recorded contemporaneously with the performance of the listed activity. Rather, the invoices were created based on Ceccarelli's review of his personal calendar, telephone bills, and reports generated by ESSI-Omega- Gurr/Omega. The Department contends also that part of ECA's invoice for Joy Food Store #684 is not legitimate because it indicates a total of 4.25 hours for project coordination activities on July 1, 1994, November 14, 1994, and January 31, 1995, while the CAR for this facility was finalized on April 15, 1994. This length of time appears to be erroneous; it probably represents time spent on the RAP phase of rehabilitation at that site, not the CAR phase. The CAR reimbursement claim should be reduced by $488.25 for ECA's time, and by $73.24 for Ceaser's 15% markup. The evidence on Joy Food Store #684 also was that Gurr/Omega paid ECA $649.00 for anticipated denials. These moneys were deposited in an escrow account, and the record is void as to whether these costs were denied by the Department or whether ECA ever returned these moneys to Gurr/Omega. But the disposition of the escrow fund would be a matter for ECA and Gurr/Omega to resolve; it would not affect Ceaser's reimbursement application. The Department criticizes the lack of documentation evidencing what Ceccarelli claims he did on these projects; the lack of such documentation contributed to the Department's doubts as to the veracity of the invoices. But in the numerous cases of Ceccarelli's review of work by ESSI-Omega-Gurr/Omega recorded in the invoices, no EDI/ECA work product was generated, so none could be produced. Documentation supplied to the Department supported ECA's claims that ESSI-Omega-Gurr/Omega sent EDI/ECA reports to review and supported some other claims of time spent on the projects, as well as ECA's claim that a considerable amount of time spent on these projects was not recorded in ECA's invoices. There also came a point in time when ECA stopped responding to Department requests for additional information because ECA came to believe that the Department intended to deny ECA's markups regardless what documentation was produced. ECA came to this belief based in part on learning during a meeting with Department staff that Charles Williams had issued notices of intent to deny ECA's markups in some cases without even looking at documentation produced by ECA. When the parties began to litigate, documents were produced only in response to discovery requests. Ceccarelli testified that his telephone records were not produced because the Department did not ask for them. The Department also criticized Ceccarelli's inability to recall in detail from memory what he did during the time recorded in the invoices for these projects. But, under the circumstances, it was understandable for him not to have such a clear, detailed recollection. It was not proof of dishonesty.
Recommendation Based upon the foregoing Findings of Fact and Conclusions of Law, it is RECOMMENDED that the Department of Environmental Protection enter a final order: granting Petitioners' claims for ECA's 15% markups, together with Petitioners' 15% markups on ECA's markups, as follows: Petitioner DOAH Case Amount Cloyd Toney 98-2021 $8,120.80 James Scelfo 98-4534 $6,495.29 Cohen/Grosby 98-4537 $5,302.33 Cohen/Roth 98-4538 $10,303.12 Cloyd Toney 98-4540 $9,293.40 Luella Ceasar 98-4541 $4,231.91 Peter Kliest 98-4543 $13,446.66 requiring recovery of overpayments of interest paid from ECA to Petitioners, plus ECA's 15% markups on the interest payments, plus Petitioners' 15% markups on ECA's markups, as follows: ECA's Interest Overpayments Petitioner DOAH Case Interest Amount Cloyd Toney 98-2021 $6,282.52 James Scelfo 98-4534 $6,670.50 Cohen/Grosby 98-4537 $4,030.68 Cohen/Roth 98-4538 $7,783.00 Cloyd Toney 98-4540 $7,160.79 Luella Ceasar 98-4541 $4,135.42 Peter Kliest 98-4543 $8,469.25 ECA's Markups on ECA's Interest Cloyd Toney 98-2021 $942.38 James Scelfo 98-4534 $1,000.58 Cohen/Grosby 98-4537 $604.60 Cohen/Roth 98-4538 $1,167.45 Cloyd Toney 98-4540 $1,074.12 Luella Ceasar 98-4541 $620.31 Peter Kliest 98-4543 $1,270.39 Petitioners' Markups on ECA's Markups on ECA's Interest Cloyd Toney 98-2021 $141.36 James Scelfo 98-4534 $150.09 Cohen/Grosby 98-4537 $90.69 Cohen/Roth 98-4538 $175.12 Cloyd Toney 98-4540 $161.12 Luella Ceasar 98-4541 $93.05 Peter Kliest 98-4543 $190.56 requiring recovery of the $561.49 overpayment on the Ceasar reimbursement application (Case No. 98-4541) reflected in Finding 61, supra. DONE AND ENTERED this 16th day of December, 1999, in Tallahassee, Leon County, Florida. J. LAWRENCE JOHNSTON Administrative Law Judge Division of Administrative Hearings The DeSoto Building 1230 Apalachee Parkway Tallahassee, Florida 32399-3060 (850) 488-9675 SUNCOM 278-9675 Fax Filing (850) 921-6847 www.doah.state.fl.us Filed with the Clerk of the Division of Administrative Hearings this 16th day of December, 1999. COPIES FURNISHED: J. A. Spejenkowski, Esquire Department of Environmental Protection Douglas Building, Mail Station 35 3900 Commonwealth Boulevard Tallahassee, Florida 32399-3000 Bradford C. Vassey, Esquire Environmental Corporation of America 205 South Hoover Street, Suite 101 Tampa, Florida 33609 Carter B. McCain, Esquire MacFarlane, Ferguson & McMullen 400 North Tampa Street, Suite 2300 Tampa, Florida 33601 Kathy Carter, Agency Clerk Department of Environmental Protection Douglas Building, Mail Station 35 3900 Commonwealth Boulevard Tallahassee, Florida 32399-3000 Teri Donaldson, General Counsel Department of Environmental Protection Douglas Building, Mail Station 35 3900 Commonwealth Boulevard Tallahassee, Florida 32399-3000
