Findings Of Fact On June 28, 1978, the respondent Department of Environmental Regulation gave notice that the Environmental Regulation Commission would consider the adoption of an emergency rule at their regularly scheduled meeting on July 12, 1978. The impetus for such an emergency rule was apparently the results of the Florida Sulfur Oxides Study which were orally presented to the Commission at a meeting held on June 20-22, 1978. The study is an eleven volume text, parts of which were separately submitted to the Commission in January, February, and April of 1978, involving the environmental effects of sulfur dioxide and related matters. The written final report was submitted in May of 1978. Pursuant to the provisions of Florida Statutes, Section 120.54(4), petitioner Florida Lung Association filed with the Division of Administrative Hearings its "petition for determining the validity of a proposed emergency rule" on July 7, 1978. The emergency rule was approved by the Environmental Regulation Commission at its meeting on July 12, 1978, and said rule was filed with the Secretary of State on July 14, 1978. On the same date, July 14th, Florida Power and Light Company and Jacksonville Electric Authority filed their motion to intervene in the rule challenge proceeding. On July 16, 1978, Jacksonville Electric Authority filed its motion to dismiss the petition. The cause was noticed for hearing on July 19, 1978. On July 20th, Florida Power and Light filed its motion to dismiss. On July 26, 1978, the Division of Administrative Hearings received petitioner's amendment to the petition seeking relief pursuant to the provisions of Florida Statutes, Section 120.56, should relief under Florida Statutes, Section 120.54 be deemed improper. The petitioner and the Department of Environmental Regulation entered into a Stipulation prior to the hearing agreeing as to certain factual matters and stipulating that the Florida Lung Association is a substantially interested party in the proceeding and had standing to bring this action. The undersigned was duly designated by the Director of the Division of Administrative Hearings as the Hearing Officer in this proceeding. It was determined by her that all pending motions would be heard and ruled upon at the time of the scheduled hearing inasmuch. as the time constraints imposed upon rule challenge proceedings did not allow for all parties to respond in writing to all motions within the seven day period specified by Rule 28-5.25(3), F.A.C., and inasmuch as the Hearing Officer was to be out of town on the three days prior to the hearing. At the beginning of the hearing on July 28, 1978, the undersigned granted the motions to intervene. The motions to dismiss were based upon the allegations that petitioner lacked standing to challenge the emergency rule in question; that the Environmental Regulation Commission, rather than the Department of Environmental Regulation, was the agency whose rule was being challenged and that an emergency rule cannot be contested under Florida Statutes, Section 120.54(4) The undersigned denied both motions to dismiss. It was and is concluded from the pleadings, the evidence adduced at the hearing and the stipulation between petitioner and respondent that the petitioner herein does have standing to challenge the emergency rule in question. Respondent the proper agency to be named in this proceeding, inasmuch as the Environmental Regulation Commission (ERC) is simply a part of that agency and sits as the agency head on certain specified matters. While Chapter 120 does not appear to make adequate provision for a challenge to a proposed emergency rule, that issue is now moot in light of the presently existing status off the challenged rule and the amendment to the petition alleging a cause of action under Florida Statutes, Section 120.56. As amended by Chapter 78-425, Laws of Florida (SB 860) Section 120.56 now provides explicitly for challengers to the validity of emergency rules before the Division of Administrative Hearings. Turning now to the merits of the petition, as amended, it is contended that the rule in question is an invalid exercise of legislative authority because no immediate danger to the public health, safety or welfare existed which would justify the enactment of an emergency rule pursuant to Florida Statutes, Section 120.54(9). The factual background of the emergency rule is not in dispute. On April 7, 1977, respondent adopted a rule which permitted Florida Power and Light and Jacksonville Electric, the intervenors herein, to burn a higher sulfur content fuel at their respective plants in Manatee and Duval Counties until August 1, 1978. On that date, those plants would be required to burn fuel with a lower sulfur content. On June 15, 1977, the ERC considered a proposed rule which would extend the time within which the intervenors herein could burn the higher sulfur content fuel from August 1, 1978, to February 1, 1979. The Commission refused to approve this proposed rule and it was not enacted. On June 20-22, 1978, the Commission was given an oral presentation of the results of the Florida Sulfur Oxides Study. As a result of this meeting, the Commission gave notice on June 28, 1978, of its intent to consider an emergency rule allowing the intervenors to extend the date for burning higher content fuel from August 1, 1978, until October 1, 1978. The Commission considered the emergency rule at its meeting held on July 12, 1978, approved it and filed it with the Secretary of State on July 14, 1978. The ERC gave the following "specific reasons for finding an immediate danger to public health, safety and welfare": If the emergency rule is not immediately adopted and Section 17-2.05(6), Table II, Item E(1)(c), F.A.C., amended, the cost to Florida Power & Light Company and Jacksonville Electric Authority to use lower sulfur fuel between August 1, 1978 and October 1, 1978 will be $1,373,000.00. This cost will be directly passed on to the customers of these utilities through fuel adjustment provisions. The additional cost would be paid to foreign countries for the purchase of oil. These passed on costs are not warranted in light of the fact that the Environmental Regulation Commission is presently considering to permanently amend by October 1, 1978 Section 17-2.p.5(6), Table II, Item E(1)(c), F.A.C., so that both of these power plants may use at least the higher sulfur fuel allowed by the emergency rule. As a result of the Florida Sulfur Oxides Study, the presentations made pursuant thereto at the June 20, 21 and 22, 1978 Environmental Regulation Commission Hearing, and the bearing held on this emergency rule on July 12, 1978, the Commission finds no significant environmental benefits to be gained by using the lower sulfur fuel during the two months period. (Copies of the monitoring data for these two power plants modeling data for the Manatee power plant and the Florida Sulfur Oxides Study may be inspected at the address below.) Both of these power plants have been using the sulfur content fuel proposed in the emergency rule since June of 1977 without violating any of the applicable ambient air quality standards. Also because of the large amounts of oil purchased at one time by the utilities and the lead time required for such purchases, it would not be economical for the utilities involved to order a different sulfur content fuel for only a two month period. Accordingly, unless the emergency rule is enacted the customers of these utilities will be charged $1,373,000.00 without obtain- ing any significant environmental benefits and the utilities will be unable to economically purchase fuel. These facts present an immediate danger to the public health, safety and welfare which can only be remedied by the enactment of the emergency rule and by making this emergency rule effective as of the date of filling (sic) or July 13, 1978 whichever is earliest. It was further stated, as "reasons for concluding that procedure used is fair under the circumstances" that the emergency rule procedure was the only procedure available to grant the relief required in that a permanent rule could not be promulgated in time. The Commission noted that the emergency rule was only effective for a two-month period "at which time the Commission will decide on a permanent rule pursuant to Chapter 120 Florida Statutes, for these two power plants." The transcript of the hearing held by the ERC on July 12, 1978, makes it abundantly clear that the Commission did not consider the adoption of the emergency rule to be a commitment to adopt a similar permanent rule which would be effective subsequent to October 1, 1978. Indeed, it was stated by several Commissioners that the entire matter would be dealt with anew and on its merits in September. Were there no emergency rule in effect permitting the intervenors to burn the higher sulfur content fuel, it would cost Florida Power and light $680,000.00 to purchase the lower content fuel for the two month period of August, and September. This cost would be passed on the the consumer. The cost to the average residential customer using one thousand kilowatt hours of electricity would be thirteen cents ($.13) per month. For the average utility bill, this would result in an increase of .03 percent. For Jacksonville Electric, the same costs are $693,000.00 or approximately $1.65 per month per average residential consumer, or a 3.5 percent increase in the average utility bill. The higher sulfur content fuel results in an additional discharge of from 2.4 to 2.6 tons of sulfur dioxide per hour into the air. Neither the Jacksonville nor the Manatee County plants have violated the State's ambient air quality standard during the one and a half years they have been permitted by rule to burn the higher content fuel. Section 120.54(9), Florida Statutes, permits agencies to avoid the formalities of proper rulemaking procedures only when there is a bona fide finding that "an immediate danger to the public health safety, or welfare requires emergency action." Thus, in order to sustain the exercise of emergency action, there must be a clear showing of danger to the public health, safety or welfare and that danger must be shown to be an immediate danger. As recognized in Fuller v. Gardner, 190 So. 442 (Fla. 1939), an agency's assumption of emergency powers in the absence of a bona fide emergency violates basic rights of due process, and constitutes a usurpation of power. A review of the testimony and the record of this proceeding does not support respondent's finding of either a danger to the public health, safety or welfare or an immediacy necessitating emergency action. The substance of the emergency rule -- permission to burn a higher sulfur content fuel than would otherwise be permitted -- certainly does not alleviate or obviate some immediate danger to the public health or safety. Petitioner's only witness on this subject testified that any ingested particles of sulfur dioxide could cause damage to the human lung. However, there was no testimony as to whether the higher sulfur contents allowed by the rule, as opposed to the lower content which would be binding upon the intervenors in the absence of a rule, would present a definite health hazard to residents of Duval or Manatee Counties. Nevertheless, the respondent's own statement of specific findings and reason's of immediate danger do not illustrate an emergency situation with regard to public health or safety. These findings are that there are "no environmental benefits to be gained by using the lower sulfur fuel during the two months period." A mare showing of no harm is not sufficient to satisfy the statutory test for the adoption of emergency rules. The statute requires an immediate danger to the public health. The fact that there may be no significant environmental benefit if a rule is not enacted simply does not justify noncompliance with proper rulemaking procedures. This then leaves the issue of whether there is an immediate danger to the public welfare absent the enactment of the emergency rule. The concept of public welfare is broad and embraces a variety of interests, including monetary and economic interests. It was the testimony of petitioner's expert witness on this subject that the costs involved if the intervenors were required to burn the lower sulfur content fuel would be passed on to the average consumer at the rate of increases in their utility bills of .03 and 3.5 percent. This witness opined that such an increase would not be significant for a two-month period and that the impact on the Florida economy would be inconsequential. There simply is no evidence in the record herein to illustrate that the situation was of such a nature that normal rulemaking procedures were precluded. Even if it were conceded that the total expenditure of $1,373,000.00 could have an adverse impact upon the Florida economy, where is the urgency or immediacy which must exist prior to the exercise of emergency rulemaking procedures? The rule sought to be amended has been in effect since April of 1977. It was to self-destruct on August 1, 1978. The agency was aware of this, as were the intervenors. When confronted in June of 1977 with a request to extend the rule's operation to February 1, 1979, the Environmental Regulation Commission refused the request and failed to so amend the rule. The first three volumes of the Florida Sulfur Oxides Study came in to the Commission in January, 1978. Six volumes were received in February, and the remaining two volumes were received in April, 1978. In May, the ERC received the final written report. Apparently, the summarizing results were orally presented to the Commission at a meeting held on June 20, 21 and 22, 1978. The transcript of the Commission's - July 12, 1978, hearing on the emergency rule, as well as the findings and reasons attending the emergency rule, indicate that the Commission still has not reached a decision as to whether the rule's contents will be repromulgated to be effective after October 1, 1978. 1/ Thus, it appears that any immediate danger in July of 1978 was not created by newly acquired knowledge concerning the effect of the emission of certain levels of sulfur dioxide into the air or by some sudden change which would adversely affect Florida's economy. The emergency was therefore not created by considerations of the public health, safety or welfare. Rather, if there was an emergency at all, it was created by an avoidable administrative failure to properly amend the existing rule to provide an extension for the desired time period. As clearly held in Postal Colony Co., Inc. v. Askew, 348 So.2d 338 (Fla. App. 1st 1977), an emergency created wholly by an agency's failure to take timely action cannot justify extraordinary measures. The emergency rule provisions of Florida Statutes, Section 120.54(9) constitute an extraordinary means of adopting a rule when a true emergency exists which makes compliance with normal rulemaking procedures impossible. The record in this case is barren of evidence that, in mid-July of 1978, there was an immediate danger to the public health, safety or welfare requiring emergency action. IT IS THEREFORE ORDERED THAT the respondent's emergency rule 17ER78-1, which purports to amend Section 17-2.05(6), Table II, Item E(1)(c), F.A.C., by extending the date from August 1, 1978, to October 1, 1978, constitutes an invalid exercise of legislative authority. Done and entered this 7th day of August, 1978, in Tallahassee, Florida. DIANE D. TREMOR, Hearing Officer Division of Administrative Hearings Room 530, Carlton Building Tallahassee, Florida 32304 (904) 488-9675
The Issue Does Petitioner owe Respondent sales tax for customer charges associated with the inspection/recertification of fire extinguishers, which activities were reported on invoices involving charges for parts, maintenance, recharge of fire extinguishers, provision of new fire extinguishers, pick-up and delivery, and maintenance, where the latter categories of activities included the payment of sales tax?
Findings Of Fact Petitioner does business in northeast Florida. Principally it inspects fire extinguishers at customer locations that must undergo inspection on an annual basis in accordance with Chapter 633, Florida Statutes. Petitioner also sells and services fire extinguishers to and for its customers. When performing an inspection, Petitioner's employee removes the fire extinguisher from its location, makes sure the powder in the fire extinguisher floats, checks the pressure gauge, makes sure that the pressure is acceptable in the extinguisher and examines the hose attached to the fire extinguisher; if these items are in good operating order the fire extinguisher is returned to its location and certified as operable for the upcoming period. The certification is evidenced by a tag placed on the fire extinguisher. That tag reflects a serial number, the name of the person who inspected and certified the extinguisher as acceptable, the permit number for the certifying person, and the kind of fire extinguisher that is under inspection. Beyond that point, if someone wishes to verify the status of the fire extinguisher that has been found acceptable, the tag evidences that acceptability. For the basic inspection, Petitioner charges its customers a fee depending on the number of fire extinguishers that are being inspected at a given location. If there is a problem with one of the fire extinguishers that has been inspected, Petitioner's employee will tell the customer the nature of the service that needs to be performed to assure that the fire extinguisher is in proper operating condition. In the event that a fire extinguisher has a problem which the customer wishes fixed, that fire extinguisher is removed from the customer's location and brought back to Petitioner's facility to be repaired. When the defective fire extinguisher is removed, an operable substitute fire extinguisher is provided to the customer pending repairs to the defective fire extinguisher. In effecting repairs, the customer is charged the cost of tangible items involved with the repair and for labor costs associated with the repair. The records which Petitioner maintained in the period in question in this case, reflect charges for the inspections of customer fire extinguishers and other activities and charges but not in the detail that has been set forth in the preceding paragraphs. The records are sales invoices. The invoices produced at the hearing are a fair representation of the experience associated with all invoices under question. In this case, Respondent intends to impose sales tax, penalties, and interest and an affiliated tax charge referred to as the Chartered Transit Systems Assessment, in relation to those items invoiced under the categories fire extinguisher inspected/fire extinguisher recertification/automatic fire extinguishing system inspected. These descriptions all refer to the process of fire extinguisher inspection. The invoices that are examples of this process show that sales tax and the associated charter tax have been collected for those other charges made by the Petitioner to its customers. Petitioner sought the advice of a CPA in establishing the manner in which its invoices reflect the collection of sales tax. This advice was sought through Mr. Schaefer. The audit period for which the Respondent has assessed additional tax, penalties, and interest is November 1, 1989 through October 31, 1994. The intent to impose tax penalties and interest resulted from an audit performed by the Respondent on Petitioner's business. An audit report was rendered on October 2, 1995; Petitioner objected to the findings in that audit report. Respondent affirmed the assessment in a Notice of Decision dated July 22, 1996. Petitioner sought reconsideration of that notice of decision. Respondent again upheld the assessment through its Notice of Reconsideration dated April 18, 1997. On June 19, 1997, Petitioner petitioned for formal hearing to contest the decision to impose the tax penalties and interest. The sample invoices by their terms state the following: FIRE DEFENSE CENTERS Invoice 3919 Morton Street 49217 JACKSONVILLE, FLORIDA 32217 (904) 731-0244 DATE ORDER NO 4/12/91 1613804 BR TO: Ramada Inn 6237 Arlington Expressway prices per contract Jacksonville, Fl 32211 Quantity Description Unit Price Total 24 Fire extinguisher inspected 65.00 2 5 lb. abc maintenance 20.00 3 Fire extinguisher inspected-unserviceable 9.00 3 5 lb. abc new fire extinguisher 114.00 2 10 lb. abc maintenance 28.00 2 Valve repair 10.40 1 Handle repair 3.95 1 Syphon tube 3.10 3 O rings 2.70 7 Pick up and delivery 8.00 After 15 days pay $282.09 264.15 QUADRUPLICATE Thank You Tax on 199.15 12.94 277.09 FIRE DEFENSE CENTERS Invoice 3919 Morton Street 49210 JACKSONVILLE, FLORIDA 32217 (904) 731-0244 DATE ORDER NO 4/12/91 1148265 JW TO: Clark Trailer Sales Serv. Mgr Linden Beane 5201 W. Beaver St prices per contract Jacksonville, Fl 32236 Quantity Description Unit Price Total 10 Fire extinguisher recertification 42.00 1 10 lb. abc hydrotest and recharge 38.00 1 Pick up and delivery 80.00 Tax on 38.00 2.47 82.47 After 15 days pay $87.47. QUADRUPLICATE Thank You FIRE DEFENSE CENTERS Invoice 3919 Morton Street JACKSONVILLE, FLORIDA (904) 731-0244 32217 49208 DATE ORDER NO TO: 4/12/91 1851144 JW Walmart 6767 103 rd St Jacksonville, Fl 32216 annual inspection prices per contract Quantity Description Unit Price Total 25 Fire extinguisher recertification 75.00 4 5 lb. abc maint 40.00 2 5 lb. abc recharge 20.00 2 Valve repair 8.90 3 Locking pin 6.00 1 Syphon tube 3.10 2 O ring 1.85 6 Pick up and delivery 8.00 After 15 days pay $173.56 162.85 Tax on 87.85 5.71 168.56 QUADRUPLICATE Thank You FIRE DEFENSE CENTERS Invoice 3919 Morton Street 49203 JACKSONVILLE, FLORIDA 32217 (904) 731-0244 DATE ORDER NO 4/12/91 1592203 EF TO: Poultry Health Service 5695 Stuart Ave prices per contract Jacksonville, Fl 32205 Quantity Description Unit Price Total 20 Fire extinguisher inspected 65.00 1 Fire extinguisher inspected-unserviceable 3.00 1 5 lb. abc maintenance 10.00 1 5 lb. abc recharge 10.00 1 2 3/4 lb. abc complete maintenance 8.00 New 10 lb. abc fire extinguisher 58.00 Valve repair 8.90 Syphon tube 3.10 O ring 2.45 4 Pick up and delivery 8.00 1 Fire extinguisher installed 7.50 183.95 Tax on 118.95 7.73 191.68 After 15 days pay $ 196.98 QUADRUPLICATE Thank you FIRE DEFENSE CENTERS Invoice 3919 Morton Street 49202 JACKSONVILLE, FLORIDA 32217 (904) 731-0244 DATE ORDER NO 4/12/91 1363891 PV TO: Holiday Inn 14670 Duval Rd (I 95 & Airport) Dan Zuhowski Jacksonville, Fl 32218 741-4404 Quantity Description Unit Price Total 4 30 lb. automatic fire extinguishing 225.00 system inspected 1 10 lb. automatic fire extinguishing system inspection 1-hood 1 10 lb. automatic fire extinguishing 50.00 system inspected 2-hood 11 Fusible links 93.50 2 10 lb. abc maintenance F/X's 24.00 418.40 Tax on 143.40 9.32 427.72 After 15 days pay $436.30 QUADRUPLICATE Thank You 10 lb. CO2 maintenance 12.00 O rings 1.90 Pick up and delivery 12.00 Standing alone, the invoices do not sufficiently distinguish which, if any, of the fire extinguishers being inspected are receiving other attention, or whether the invoices refer to an entirely different set of fire extinguishers than those that had been inspected. The distinctions described in prior paragraphs between the inspection process and other business pursuits have been based upon extrinsic evidence, outside the invoices, as offered by Louis Schaefer, Petitioner's owner. More specifically, Mr. Schaefer's description of invoice 49217 concerning the entries on that document is extrinsic evidence concerning the meaning of that invoice. Again without the extrinsic evidence one cannot reasonably ascertain the relationship, if any, between the fire extinguishers inspected and other activities involving fire extinguishers for which charges were made on the invoice. Moreover, without extrinsic evidence one cannot ascertain the number of fire extinguishers for which Petitioner has replaced or repaired parts, performed other forms of maintenance, etc., aside from the inspection. The invoice alone does not make clear which of the fire extinguishers described in the inspection line received no tangible personal property which was incorporated or attached to a repaired item, as opposed to those that may have had tangible personal property incorporated into or attached to a fire extinguisher that had been inspected. The same problem exists with other sample invoices. Related to invoice 49217, Mr. Schaefer points out that twenty-four fire extinguishers were inspected at a charge of $65.00. Two five-pound fire extinguishers needed maintenance. That maintenance was the recharge of the two five-pound fire extinguishers at the cost of $20.00. Three fire extinguishers were found to be unserviceable following the inspection. For the determination of the unservicability the customer was charged $9.00. The next line refers to the provision of three five-pound abc new fire extinguishers. The charge for the new fire extinguishers was $114.00. Mr. Schaefer explained that the new fire extinguishers were sold to the customer to replace the unserviceable fire extinguishers. Two fire extinguishers needed valve repairs. The invoice shows a $10.40 charge for the valve repairs. One of the fire extinguishers had a bent handle that had to be replaced. The charge on the invoice for the handle repair was $3.95. One fire extinguisher had a siphon tube repair. The invoice reflects that the charge for that repair was $3.10. Three O rings were replaced for a charge to the customer of $2.70. Mr. Schaefer explains that seven fire extinguishers were picked up and delivered for a cost of $8.00 that was in relation to removal, repairing, and returning fire extinguishers and hanging them back in place at the customer's business. Mr. Schaefer pointed out what can be ascertained by a mathematical exercise, that is, that all charges, with the exception of the $65.00 for inspecting twenty-four fire extinguishers, had sales tax imposed as part of the charges. That tax is in relation to the $199.15 for items other than inspection of the fire extinguishers. The total of the tax is $12.94. Mr. Schaefer explained that the inspection process itself involved an estimate of whether the fire extinguisher was serviceable and whether it met the date codes required. Further, in relation to invoice 49217, Mr. Schaefer explained the total number of fire extinguishers that received some service or were replaced. The two five-pound abc maintenance for $20.00 referred to two of the twenty-four inspected. The three fire extinguishers inspected unserviceable and the three five-pound abc new fire extinguishers refers to the removal of three fire extinguishers and replacement of those three fire extinguishers with new ones. The total of the two five-pound maintained and the three replaced brings the count to a subtotal of five fire extinguishers of the twenty-four inspected. The reference to two ten-pound abc maintenance brings the total to seven fire extinguishers repaired or replaced. The two valve repairs, the handle repair, and the O rings described in the invoice, according to Mr. Schaefer, were in relation to the two five-pound abc maintenance and the two ten-pound abc maintenance mentioned earlier in the invoice. The seven pick-up and delivery refers to three fire extinguishers that had to be replaced as unserviceable by the provision of new fire extinguishers and four fire extinguishers that could be repaired and returned to the customer by Mr. Schaefer's explanation. Therefore, seven of the twenty-four fire extinguishers inspected needed to be repaired or replaced. In summary, without Mr. Schaefer's explanation one can not reasonably discern the meaning of invoice 49217, whether the fire extinguishers inspected were part of the fire extinguishers repaired or replaced, and beyond that consideration how many fire extinguishers were repaired and replaced.
Recommendation Upon consideration of the facts found and the conclusions of law reached, it is, RECOMMENDED: That a final order be entered upholding of sales tax, penalty, and interest, and related Chartered Transit System Assessment of tax, penalty, and interest for the audit period November 1, 1989, through October 31, 1994. DONE AND ENTERED this 3rd day of August, 1998, in Tallahassee, Leon County, Florida. CHARLES C. ADAMS Administrative Law Judge Division of Administrative Hearings The DeSoto Building 1230 Apalachee Parkway Tallahassee, Florida 32399-3060 (850) 488-9675 SUNCOM 278-9675 Fax Filing (850) 921-6847 Filed with the Clerk of the Division of Administrative Hearings this 3rd day of August, 1998. COPIES FURNISHED: Eric J. Taylor, Esquire Department of Legal Affairs The Capitol, Plaza Level 01 Tallahassee, Florida 32399-1050 William B. McMenamy, Esquire Donahoo, Donahoo, and Ball, P.A. 50 North Laura Street, Suite 2925 Jacksonville, Florida 32202 Marie A. Mattox, Esquire Mattox and Hood, P.A. 310 East Bradford Road Tallahassee, Florida 32303 Linda Lettera, General Counsel Department of Revenue 104 Carlton Building Tallahassee, Florida 32399-0100 Larry Fuchs, Executive Director Department of Revenue 104 Carlton Building Tallahassee, Florida 32399-0100
The Issue The central issue in this case is whether Respondents committed the violations alleged in the amended administrative complaint, and, if so, what penalty should be imposed.
Findings Of Fact The Petitioner is the state agency charged with the responsibility of regulating fire extinguisher dealers. Respondent, Ricardo Cabrera, holds a fire extinguisher permit class 03 license (No. 109176000192) and is the qualifier for the company, B.C. & A.B.C. Fire Extinguisher Maintenance (license No. 702193000190 - Fire Extinguisher Dealer Class "C"). At all times material to the amended administrative complaint, Carlos Javier Gonzalez-Clavell was employed by Respondent but was not licensed or permitted to service fire extinguishers. In August, 1995, Respondents were placed on probation for a period of two (2) years. A special condition of Respondents' probation required Ricardo Cabrera to supervise all activities undertaken by the company to insure its employees complied with all regulations. In response to a complaint unrelated to the quality of Respondent's work performance, Ms. Barrow directed an investigation of the Respondent's business premises. Mr. Parks was assigned the investigation of whether Respondents were employing unlicensed workers to perform servicing or recharge of fire extinguishers. On January 29, 1996, Mr. Parks went to Respondent's place of business and observed someone loading a vehicle with fire extinguisher equipment and supplies. He also observed the male near a tank which he presumed was nitrogen. He assumed the person was recharging a fire extinguisher. During the described activity Respondent was not in sight. The person described in paragraph 7 later identified himself as Carlos Javier Gonzalez-Clavell. The vehicle being loaded belonged to Mr. Clavell. Respondent was on the business premises at all times noted above. He was out of view but supervising Mr. Clavell's activities. Mr. Clavell did not recharge fire extinguishers and was not permitted to perform license activities.
Recommendation Based on the foregoing, it is, hereby, RECOMMENDED: That the Department of Insurance and Treasurer enter a final order dismissing the amended administrative complaint. DONE AND ORDERED in Tallahassee, Leon County, Florida, this 5th day of February, 1997. JOYOUS D. PARRISH Administrative Law Judge Division of Administrative Hearings The DeSoto Building 1230 Apalachee Parkway Tallahassee, Florida 32399-3060 (904) 488-9675 SUNCOM 278-9675 Fax Filing (904) 921-6847 Filed with the Clerk of the Division of Administrative Hearings this 5th day of February, 1997. COPIES FURNISHED: Joe Demember, Esquire Division of Legal Services 512 Larson Building Tallahassee, Florida 32399-0300 Ricardo Cabrera 3340 South Lake Drive Miami, Florida 33155 Bill Nelson State Treasurer and Insurance Commissioner The Capitol, Plaza Level Tallahassee, Florida 32399-0300 Daniel Y. Sumner General Counsel Department of Insurance and Treasurer The Capitol, LL-26 Tallahassee, Florida 32399-0300
The Issue Whether the Department of Revenue's denial of Petitioner's application for a Florida fuel license should be upheld.
Findings Of Fact Based on the oral and documentary evidence presented at the final hearing and on the entire record of this proceeding, the following findings of fact are made: On or about May 22, 2001, Armando Yzaguirre submitted to the Department a completed Florida Fuel Tax Application, Form DR-156, seeking licensure as a private carrier and wholesaler on behalf of Yzaguirre Oil Company, Inc. ("Yzaguirre Oil"). The application listed Mr. Yzaguirre as the president and sole stockholder of Yzaguirre Oil. Form DR-156 requests information about the applicant business and its principals, including a list of 33 questions requiring a "yes" or "no" answer from the applicant. Question number 33 asks: Have you or other owners, officers, directors, or stockholders with a controlling interest, been convicted of, or entered a plea of guilty or nolo contendere to, a felony committed against the laws of any state or the United States? Mr. Yzaguirre's sworn answer to Question number 33 was "yes." Mr. Yzaguirre provided the Department with no elucidation as to the circumstances of his admitted felony conviction. On or about June 22, 2001, Maria Yzaguirre, the wife of Armando Yzaguirre, submitted to the Department a completed Florida Fuel Tax Application, Form DR-156, seeking licensure as a private carrier and wholesaler on behalf of My Oil Company, Inc. ("My Oil"). The application listed Mrs. Yzaguirre as the president and sole stockholder of My Oil. On June 29, 2001, Mrs. Yzaguirre filed with the Department articles of incorporation for My Oil. On July 5, 2001, Mrs. Yzaguirre filed these articles of incorporation with the Secretary of State to obtain registration as a Florida domiciled corporation. Aaron Hood, a revenue specialist in the Department's motor fuel registration unit, was assigned to process both the Yzaguirre Oil application and the My Oil application. Mr. Hood conducted a standard background investigation of both applicants, securing investigative reports from the Federal Bureau of Investigation and the Florida Department of Law Enforcement on the criminal histories of Armando and Maria Yzaguirre. The reports revealed that Maria Yzaguirre had no criminal record, either of arrest or conviction. The reports revealed a lengthy list of arrests for Armando Yzaguirre. The reports included a 1980 arrest for felony arson of a structure in Collier County, and a 1990 arrest and conviction for marijuana possession in Texas. The reports were inconclusive as to whether the Collier County felony charge resulted in conviction, or whether the Texas conviction was a felony. Having difficulty determining the precise nature of the felony to which Mr. Yzaguirre admitted in his application, Mr. Hood enlisted the aid of Pete Welch, a Department investigator. On January 3, 2002, Mr. Welch reported to Mr. Hood that information received from the Clerk of the Circuit Court of Collier County confirmed that Mr. Yzaguirre had been convicted by a jury of the 1980 felony charge. However, aside from Mr. Welch's e-mail report to Mr. Hood, the Department offered no evidence confirming this felony conviction. Mr. Welch's investigation also obtained details of the Texas marijuana possession charge. In December 1990, Mr. Yzaguirre's plea of nolo contendere to a second-degree felony charge of possession of more than five but not more than 50 pounds of marijuana was accepted by the court. Mr. Yzaguirre's ten-year sentence was suspended in favor of eight years' probation and a $5,000 fine. No evidence was presented to show that Mr. Yzaguirre failed to comply with the terms of probation. Neither was evidence presented that Mr. Yzaguirre has been pardoned or that his civil rights have been restored. At the hearing, Mr. Yzaguirre indicated that he is taking steps to seek restoration of his civil rights. In his review of the Yzaguirre Oil and My Oil applications, Mr. Hood discovered that the companies claimed many of the same assets. Each company listed the same two tanker trucks to be used in transporting fuel. Each company listed 211 New Market Road, East, in Immolakee as its principal business address. Each company claimed exactly $1 million in accounts receivable. The timing of the filings and the common assets led Mr. Hood to suspect that the later My Oil application was submitted under Maria Yzaguirre's name to evade the possible disqualification of the Yzaguirre Oil application because of Mr. Yzaguirre's felony convictions. In short, Mr. Hood suspected that My Oil was a "front" corporation over which Mr. Yzaguirre would exercise control. The common assets also led Mr. Hood to suspect the truthfulness and accuracy of the financial affidavits filed by Maria Yzaguirre on behalf of My Oil. While it investigated the criminal history of Mr. Yzaguirre, the Department also investigated the extent of Mr. Yzaguirre's possible control over My Oil's business activities. Armando B. Yzaguirre is the 25-year-old son of Armando Yzaguirre and the stepson of Maria Yzaguirre. Testimony at the hearing established that Armando B. Yzaguirre completed both license applications and was the driving force behind the creation of both Yzaguirre Oil and My Oil. The elder Armando Yzaguirre's chief business is farming. His tomato and melon operation earns over $1 million per year. To save money on transporting the large amounts of fuel needed for his farming operations, Mr. Yzaguirre purchased two sizable tanker trucks in 2001, a new Peterbilt with a capacity of 9,200 gallons, and a 1998 Ford with a 2,500 gallon capacity. If these trucks were used only for Mr. Yzaguirre's farm, they would sit idle much of the time. This idle capacity gave Armando B. Yzaguirre the idea of going into the fuel transport business, using his father's tankers to deliver fuel to other farms and businesses in the area. Yzaguirre Oil was incorporated to operate as a fuel transport business. The business would be operated entirely by Armando B. Yzaguirre, who was the only member of the family licensed to drive the large tanker truck. The trucks were owned by and licensed to Yzaguirre Oil. Armando B. Yzaguirre was going through a divorce at the time Yzaguirre Oil was established. He was concerned that his wife would have a claim to half of any business he owned, and wished to ensure that ownership of Yzaguirre Oil would remain in his family. Thus, Armando B. Yzaguirre placed all ownership of Yzaguirre Oil in the name of his father, though his father would have no connection with the operation of the company's business. Subsequent to incorporating Yzaguirre Oil, Armando B. Yzaguirre discussed his prospective business with his stepmother, Maria Yzaguirre. Mrs. Yzaguirre was pleased that young Armando was establishing a business for himself. They discussed the future of the six younger Yzaguirre children and ideas for businesses that could be established to eventually be taken over by the children. Ultimately, the younger Armando and Maria Yzaguirre settled on the idea of a convenience store and filling station that could be established on part of a city block in Immolakee that the senior Mr. Yzaguirre already owned. This would be the type of business that the children could learn and work at while they were still in school, then take over after their graduation. This was the genesis of My Oil. Mrs. Yzaguirre contacted a lawyer to draft articles of incorporation and later transferred $100,000 from her personal money market account into a My Oil bank account to provide start-up money. The younger Armando Yzaguirre filled out the fuel license application, using his earlier application for Yzaguirre Oil as a model. As with the earlier application, the younger Armando Yzaguirre kept his name off the corporate documents and the fuel license application to avoid any claim by his soon-to- be ex-wife to the company's assets. He anticipated that My Oil would lease the two tanker trucks from Yzaguirre Oil, and thus listed them on the application as assets of My Oil. At the hearing, Mr. Yzaguirre conceded that he made mistakes on both applications. As noted above, he listed $1 million in accounts receivable for each of the companies. These were actually accounts receivable for his father’s farming operation, and should not have been included as assets for either Yzaguirre Oil or My Oil. Testimony from witnesses for both parties indicated that communications between the Yzaguirres and the Department were poor during the application review process. The Yzaguirres often telephoned Mr. Hood to learn the status of their applications, so often that Mr. Hood felt harassed. From their standpoint, the Yzaguirres could not understand why the applications were taking months to process, and felt that Mr. Hood was continually placing obstacles in their path and avoiding their queries. As noted above, early in the review process, the Department began to suspect that My Oil was a front for Yzaguirre Oil. At the hearing, however, the Department was unable to establish that the Yzaguirres knew of the likely rejection of the Yzaguirre Oil application in the month before they filed the My Oil application. Due to illness, Mr. Hood was unable to testify at the hearing as to his conversations with the Yzaguirres. For their part, the Yzaguirres adamantly denied any prior knowledge that the elder Mr. Yzaguirre’s criminal record would disqualify his application. Armando B. Yzaguirre, who was the Yzaguirres' point person in dealing with the Department, testified that no one at the Department made him aware that his father's criminal history was a problem until December 2001. The Yzaguirres also denied that the elder Mr. Yzaguirre would have any connection with the operation of My Oil. The Department pointed to several alleged discrepancies in the My Oil application as grounds for its suspicion that the company was a "front" for Yzaguirre Oil. First, the My Oil application, filed June 20, 2001, lists a corporate asset of $100,000 in cash on deposit at an unnamed bank, when in fact the cash was not deposited in a My Oil account at Florida Community Bank until September 10, 2001. Second, the My Oil application lists the two tanker trucks as corporate assets as of the date of application, when in fact the trucks were titled in the name of Yzaguirre Oil and the anticipated lease arrangement had yet to be consummated. Third, the My Oil application claimed the property at 211 New Market Road, East, as a corporate asset as of the date of application, when in fact the property was titled in the name of the elder Mr. Yzaguirre. Fourth, the My Oil application listed $1 million in accounts receivable as a corporate asset. As noted above, Armando B. Yzaguirre admitted at the hearing that these receivables were from his father's farming operation and should not have been listed on the application as assets of My Oil. Armando B. Yzaguirre plausibly explained that My Oil anticipated leasing the trucks, but that there was no reason to spend the money to finalize that arrangement until the fuel license was obtained and My Oil could actually commence operations. Similarly, Mrs. Yzaguirre clearly had on hand the $100,000 in cash claimed as a My Oil asset, and the timing of her actual transfer of that money into a My Oil account would not alone constitute cause for suspicion, given that My Oil had yet to commence operations when the application was filed. Armando B. Yzaguirre also convincingly explained that leasing the tanker trucks from his father's company would not give Yzaguirre Oil effective control over My Oil's business. The younger Mr. Yzaguirre contemplated that the lease agreement would be an arms-length arrangement between the two companies. If the companies could not arrive at a mutually satisfactory lease agreement, or if the lease agreement should later fall through, My Oil could lease trucks from another company and continue doing business. However, no witness for My Oil offered a satisfactory explanation as to how the elder Mr. Yzaguirre's ownership of the real property would not give him some degree of control over My Oil's business. At the time of the hearing, title to the property at 211 New Market Road, East, was in the name of Armando Yzaguirre. A warranty deed for at least a portion of the property, executed by the prior owners on July 16, 1998, was in the name of Armando Yzaguirre. The Yzaguirres did not explain whether My Oil would purchase or lease the property from the elder Mr. Yzaguirre. The structure of the arrangement is critical to the issue of the elder Mr. Yzaguirre's control over My Oil. Substitutes for the tanker trucks could be obtained in short order with little or no disruption of My Oil's business. However, the physical location of the convenience store and filling station could not be changed so readily, and the elder Mr. Yzaguirre's position as owner of that property could give him great leverage over the operation of the business. The Department also raised the issue of the undisclosed participation of Armando B. Yzaguirre in the business affairs of My Oil. The testimony of Maria Yzaguirre and of her stepson strongly indicated that the younger Mr. Yzaguirre would have substantial control over the business activities of My Oil. However, because Armando B. Yzaguirre's identity was not disclosed on My Oil's application, the Department had no opportunity to conduct a review of his background and character to determine whether he met the standard set by Section 206.026, Florida Statutes. In summary, there was no direct evidence that the Yzaguirres deliberately attempted to deceive the Department or that My Oil was established as a front to obtain licensure for the presumptively ineligible Yzaguirre Oil. The evidence did establish that Armando Yzaguirre has been convicted of at least one felony, and that his ownership of the real property on which My Oil would conduct business could provide him with control of My Oil's business activities. The evidence further established that Armando B. Yzaguirre will have control over My Oil's business, and that the Department should have had the opportunity to conduct a background review to determine his fitness under Section 206.026, Florida Statutes. In conclusion, the facts established at the hearing support the Department's denial of My Oil's application as filed, but also establish that such denial should be without prejudice to My Oil's ability to file a subsequent application curing the defects of its initial application.
Recommendation Based on the foregoing Findings of Fact and Conclusions of Law, it is RECOMMENDED that the Department of Revenue enter a final order denying the application of My Oil Company, Inc. for a Florida fuel license, without prejudice to the ability of My Oil Company, Inc., to file a new application curing the defects addressed in this Recommended Order. DONE AND ENTERED this 3rd day of July, 2002, in Tallahassee, Leon County, Florida. LAWRENCE P. STEVENSON 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 3rd day of July, 2002. COPIES FURNISHED: E. Raymond Shope, II, Esquire 1404 Goodlette Road, North Naples, Florida 34102 Robert F. Langford, Jr., Esquire Office of the Attorney General The Capitol-Tax Section Tallahassee, Florida 32399-1050 Bruce Hoffmann, General Counsel Department of Revenue 204 Carlton Building Tallahassee, Florida 32399-0100 James Zingale, Executive Director Department of Revenue 104 Carlton Building Tallahassee, Florida 32399-0100
The Issue Whether a proposed amendment to Florida Administrative Code Rule 69A-6.005(2) constitutes an invalid exercise of delegated legislative authority in violation of section 120.52(8)(e), Florida Statutes (2011).1/
Findings Of Fact Combs Oil is engaged in the distribution and storage of petroleum products in southwest Florida. The distribution and storage facility (facility) operated by Combs Oil, which is located at 76 Industrial Boulevard in Collier County, Florida, contains both underground and aboveground petroleum storage tanks and is considered a bulk petroleum storage facility. As a bulk petroleum storage facility, the operation does not directly dispense fuel to cars, boats, planes, and the like. Through its operations, Combs Oil distributes petroleum products to retail locations and to entities, such as governmental agencies, golf courses, and the commercial fishing, cattle, and citrus industries. Several years ago, Combs Oil purchased three 29,000- gallon aboveground, double-walled storage tanks and currently desires to utilize the tanks at its facility to store Class I petroleum products. These tanks are considered secondary containment-type tanks. Regulatory officials in Collier County have advised Combs Oil that the company will not be able to store petroleum in the 29,000 gallon aboveground tanks because to do so would be in violation of the 12,000-gallon capacity limit established by NFPA 30. NFPA 30, section 22.11.4.1 (2008), is included within NFPA Standard 1, as referenced in section 633.0215(2), Florida Statutes. NFPA 30, section 22.11.4.1 (2008), provides that where a secondary containment-type tank is used to provide spill control, the capacity of the tank shall not exceed 12,000 gallons. The 2008 version of NFPA 30 made no change to the existing prohibition against the use of secondary containment- type, aboveground tanks in excess of 12,000 gallons. Substantively, NFPA 30, section 22.11.4.1 (2008), is the same as the 2000 and 2003 versions; however, the 2008 version, according to Combs Oil, includes commentary from NFPA's technical committee that was not in previous versions of the rule. The commentary from NFPA's technical committee reads, in material part, as follows, Subsection 22.11.4 was initially added, in 1993, as an exception to the spill control provisions of NFPA 30. The exception addressed the growing use of factory-built aboveground tanks that incorporated some form of secondary containment. The secondary containment is primarily an environmental protection measure and usually takes the form of a double shell with an annular (interstitial) space or an integral spill pan. In developing this exception, the NFPA 30 Technical Committee on Tank Storage and Piping Systems considered many issues and determined that a double shell alone would not provide the level of spill control originally intended. First, the technical committee recognized that secondary containment and spill control are not synonymous. Secondary containment is a term that was originally applied to double shell underground tanks; such tanks have been in use for many years and are now the choice for underground installations, as a result of stricter environmental regulations. The outer shell contains any release of product if the inner primary tank develops a leak. The concept has now been applied to aboveground tanks. However, almost all product releases from aboveground tanks result from overfilling or a break in a pipe connected to the tank. Rarely does an aboveground tank release product because of a leak in its shell. In a sense, secondary containment, when applied to an aboveground tank, is a solution in search of a problem. Second, the technical committee was not convinced that the bare steel outer shell would not fail prematurely from an exposure fire. Their concern arose from the fact that the contained liquid is not in contact with the outer shell and, therefore, cannot absorb the thermal energy impinging on it. Third, for smaller tanks, the outer shell offered virtually no impact protection. Piercing the outer shell would likely result in piercing the primary tank as well. Even if the primary tank were not damaged, secondary containment would have been compromised. Nevertheless, the technical committee determined that an aboveground secondary containment-type tank could be installed without meeting the original spill control provisions of NFPA 30, if the protective features enumerated here are provided. The maximum capacity of 12,000 gal for Class 1 liquids and 20,000 gal for Class II and III liquids was chosen to correlate with the maximum capacities allowed by NFPA 30A, Code for Motor Fuel Dispensing Facilities and Repair Garages, for aboveground tanks at service stations. Piping connections below the liquid level are not allowed and an anti-siphon device is required to prevent release of liquid should there be a break in the pipeline. The emphasized portion of the quoted material provides the basis for Petitioner's assertion that "NFPA has done no study to warrant the application of this standard to terminal or bulk facilities." Combs Oil did not offer any testimony from any person affiliated with NFPA's technical committee. Combs Oil did not call any witness who has served on NFPA's technical committee. Combs Oil did not offer any documentary evidence showing the workings of NFPA's technical committee as the committee contemplated the inclusion of the newly inserted notes into the technical committee's commentary. Per the requirements of section 633.0215, the Department, as part of its three-year update to the Florida Fire Prevention Code, seeks to amend rule 69A-6.005(2) to reflect the adoption of the 2008 version of NFPA 30. It is undisputed that NFPA 30 governs the facility operated by Combs Oil. It is also undisputed that NFPA 30A, when considered in isolation, does not apply to the facility at issue. Mr. Charles Frank works as an operations review specialist for the State Fire Marshall's Office, Bureau of Fire Prevention. In this capacity, Mr. Frank offers "informal interpretation for various agencies that are looking for code interpretations." Mr. Frank does not serve in a policy-making position with the State Fire Marshall's Office. From 2005 until 2009, Mr. Frank was a member of the NFPA. Mr. Frank is familiar with how NFPA develops and compiles its fire code, but he has personally never participated in NFPA's code development process. Mr. Frank is neither qualified, nor authorized to speak on behalf of NFPA with respect to technical matters related to NFPA's rules. Prior to filing the instant challenge, Combs Oil, pursuant to section 120.542, filed with the Department on or about August 3, 2007, a "Petition for Variance From, or Waiver of, Rule 69A-3[.]012(1), Florida Administrative Code [Waiver]." Petitioner's Waiver application requested that the Department waive the requirements of the applicable rule and allow Petitioner to install the three 29,000-gallon tanks. On or about November 2, 2007, the Department denied Petitioner's Waiver request. In response to the denial, Petitioner filed a Petition for Formal Administrative Hearing, which was assigned DOAH Case No. 08-1714. On July 8, 2008, pursuant to a Joint Motion to Dismiss, the Division of Administrative Hearings issued an Order closing its file and relinquishing jurisdiction to the Department.
The Issue Whether the application of Getty Oil Company for a permit to conduct dredge and fill activities by the construction of an oyster shell platform and by dredging (drilling) in East Bay, Santa Rosa County, should be approved, pursuant to Chapters 253 and 403, F.S. Whether the application of Getty Oil Company for a variance from Rule 17-4.28(8)(a), F.A.C., to construct a shell foundation pad and to drill one natural gas exploratory well in East Bay, Santa Rosa County, should be approved, pursuant to Chapter 403, F.S. Whether the application of Getty Oil Company for a permit for natural gas flare construction should be approved, pursuant to Chapter 403, F.S. Whether the application of Getty Oil Company for a drilling permit should be approved, pursuant to Chapter 377, F.S. These proceedings stem from Getty Oil Company's intent to erect a structure and drill a test well in East Bay, Santa Rosa County, for the purpose of natural gas exploration. The waters of East Bay are Class II, approved for shellfish harvesting. Getty holds leasehold rights for drilling at the proposed site under an assignment of a lease granted by the Trustees of the Internal Improvement Trust Fund in 1968. DER issued Notices of Intent to grant Getty's three applications, subject to specific conditions, as follows: Request for Variance By letter of April 3, 1980, the DER Director of Division of Environmental Permitting issued its Notice of Intent to grant a variance from Section 17- 4.28(8)(a), Florida Administrative Code, pursuant to Section 403.201(1)(a)(c) Florida Statutes, to permit the requested dredge and fill activities in an area approved for shellfish harvesting by the Department of Health and Rehabilitative Services. Dredge and Fill permit By letter of April 3, 1980, the DER manager of the Northwest District issued Notice of Intent to issue a dredge and fill permit for the construction of the exploratory gas drilling platform provided that the applicant obtained a variance from the requirements of Sections 17-4.28(8)(a), Florida Administrative Code. Natural Gas Flare Construction Permit By letter of June 16, 1980, the DER manager of the Northwest District issued Notice of Intent to issue a permit for natural gas flare construction at the East Bay test site in Santa Rosa County. DNR issued the following Notices of Intent regarding the Chapter 377 drilling permit: By letter of June 18, 1980, as amended by letter of June 23, 1980, the Executive Director of the Department of Natural Resources issued Notice of Intent to recommend denial of Getty's application for a permit to drill in East Bay for the reason that Section 377.242, Florida Statutes, prohibits the construction of structures for the production of oil, gas and other petroleum products on submerged lands within the lease area. However, by further order of the Executive Director, dated duly 28, 1980, Notice of Intent was issued to recommend approval of the drilling permit application, subject to specified conditions in the event that the legal opinion expressed in his prior letters concerning the prohibition against drilling as set forth in Section 377.242, Florida Statutes, was found to be incorrect. Although the DER cases were originally scheduled for hearing in August, 1980, the consolidation of the DNR cases resulted in the granting of a motion for a continuance of the hearing until November, 1980. At the commencement of the hearing, the parties announced that they had arrived at a stipulated settlement and that all issues raised in the consolidated cases were, with two exceptions, withdrawn by the parties with respect to the three permit applications and the variance application. The two issues reserved by the Stipulation involved the application of Section 377.242(1), Florida Statutes, with respect to the requested drilling permit from the Department of Natural Resources. The Stipulation was accepted by the Hearing Officer as sufficiently comprehensive to meet the requirements of pertinent statutes and regulations with regard to the permits under consideration. Paragraph VI of the Stipulation provides that paragraphs II and IV of the Stipulation shall be specifically incorporated into the agency permits or variance to which those paragraphs refer. In view of the agreed resolution of the two DER permit applications, a hearing on those matters became unnecessary. However, as to the application for variance, subsection 403.201(2), Florida Statutes, mandates that the Department hold a hearing on each application for variance. Inasmuch as the parties to the proceedings had resolved all factual and legal questions in their Stipulation, the only remaining purpose for a hearing was to permit public participation. Accordingly, twelve public witnesses testified at the hearing (Hearing Officer's Exhibit 1), four of whom submitted documentary materials (Exhibits 1-4). These included a petition signed by local area citizens in support of the project, a favorable recommendation by the Pensacola Area Chamber of Commerce, a statement from the League of Women Voters from the Pensacola Bay Area expressing concern for preservation and protection of estuaries and wetlands, and various publications submitted by one witness. After the receipt of public testimony, the hearing was continued until November 24, 1980 for presentation of evidence concerning the two remaining issues reserved by the parties in their Stipulation. Due to the fact that the DER was not a party to the matters remaining for consideration, its representative did not participate in the further proceedings. During the hearing sessions on November 12- 13, 1980, twenty eight exhibits were provisionally received in evidence. (Hearing Officer's Exhibit 2) . Eight additional exhibits were received in evidence during the session on November 24-25, 1980. (Hearing Officer's Exhibit 2) By Recommended Order, dated December 15, 1980, the Hearing Officer recommended to DER that the Stipulation of the parties be accepted, and that the requested DER permits and variance be issued in accordance with the terms thereof. The two issues reserved by the Stipulation involving the application of Section 377.242(1), Florida Statutes, are as follows: Whether Section 377.242(1), Florida Statutes, prohibits the proposed drilling on submerged lands located in East Bay. Whether Section 377.242(1), Florida Statutes, can be constitutionally applied to prohibit Getty from conducting the proposed drilling on submerged lands located in East Bay. Evidence was received at the hearing as to whether Getty Oil Company is authorized by the statutory provision in question to drill at the proposed site. As to the constitutional issue, Getty was permitted to proffer testimony to preserve such issue for any future judicial determination. The following findings of fact are restricted accordingly.
Findings Of Fact Getty Oil Company proposes to drill a hydrocarbon exploration well pursuant to State Drilling Lease No. 2338. The lease was issued by the Trustees of the Internal Improvement Trust Fund of the State of Florida on July 9, 1968, to J. Melvin Young, Arden A. Anderson, and Philip D. Beall. Getty purchased the lease from the original lessees on March 10, 1970. The lease grants the right to explore for and produce oil and gas from the state-owned submerged water bottoms of East Bay, Blackwater Bay, and that portion of Escambia Bay lying in Santa Rosa County, a combined total of 47,932 acres. The proposed well would be drilled from submerged lands located in approximately the center of East Bay to a depth of approximately 17,800 feet. (Testimony of Anderson, Exhibits 6, 27) The well site will be located some 2.7 miles from the nearest shore and about six miles from the Gulf of Mexico. The site is not within one mile from the seaward boundary of the Yellow River Marsh Aquatic Preserve, the Fort Pickens State Park Aquatic Preserve, or the Gulf Islands National Seashore. East Bay is an estuary which is part of an estuarine "system" in the immediately surrounding area of Pensacola. An estuary is an area that is a buffer zone between the open ocean where the salinity is equal to 35 parts per thousand, and the fresh water river areas which drain into the system. The fresh water runoff carries nutrients into the system which in turn result in productivity of plants and organisms, including fish, shrimp, oysters, and other shellfish of various types. Estuarine systems are therefore one of the most productive types of ecosystems. East Bay is one of the best parts of the estuarine system from the standpoint of both water quality and general health of the system. Although during the major periods of river drainage in the winter and spring months, low water salinity exists on the surface of East Bay, the bay is not considered to be a fresh water lake, river or stream from an ecological standpoint. (Testimony of Herbert, Livingston, Exhibits 6, 15, 26, 29-32) The coastline of Florida in the vicinity of East Bay coincides with the seaward boundary of Santa Rosa Island, a barrier island, and extends across the mouth of the entrance to Escambia Bay. East Bay is connected to Escambia Bay, but does not connect directly to the Gulf of Mexico. (Stipulation, Exhibits 29, 31 and 32) Based on seismic data obtained from a 1970 survey of the Getty Oil Company's leased area, including East Bay, the only possible structure where hydrocarbons could be located beneath submerged lands is one covering 2,860 acres or approximately 4 1/2 square miles. The proposed well site is at the top center of the structure, which extends some 17,800 feet below the surface of the submerged land. There is no evidence that there are commercially recoverable deposits of salt, brines, or sulphur under the lands of the leasehold area. Hydrocarbon accumulations tend to occur along the crest of regional arches. The crest of the Santa Rosa Arch has been projected to be underneath the East Bay area. (Testimony of McCarthy, Greenwell, Exhibits 34-35) Studies conducted by Getty Oil Company to determine the advisability of drilling at the proposed site led it to the conclusion that there is one chance in twelve that hydrocarbons would be present in the target structure in commercially productive amounts. These studies also produced an estimate that Getty would accrue about $537,000,000 before state and federal income taxes if it vertically drilled four producing and one non-producing wells in the area. (Testimony of Greenwell) Directional well drilling is performed by the oil industry to maximum lateral deviations of 10,000 to 12,000 feet, depending upon varying conditions at the site. In such instances, an angle is formed at periodic intervals which eventually deviates sufficiently to reach the target structure. Straight-line slant drilling is only feasible in cases of shallow wells. Directional drilling creates varying problems based on the depth and lateral deviation required in a particular place. The "doglegs" required in creating the necessary angles pose extreme difficulties in removing cuttings from the drill hole. The angles created in the process produce tremendous torque and cause pipe "fatigue." Drill collars are subject to sticking and, at extreme depths, it is doubtful if turning of the pipe can be achieved. Such a method of drilling makes it difficult to control direction, particularly at great depths. Additionally, at extreme depths where the temperature is some 325 degrees, the rubber material of "down-hole" motors is melted. (Testimony of Porterfield, Moore) In order for Getty Oil Company to directionally drill from land to the target structure under East Bay, it would be necessary to commence drilling on land approximately 3.3 miles from the bay site at a point about 1 1/4 miles due north of White Point. Drilling at that location would require a 50 percent lateral deviation of some 17,500 feet and a total drilling distance of some 25,000 feet. Such a distance has never been attempted in the history of directional drilling and is considered by experts in the field to be virtually impossible from a technological standpoint. Such a well would require that 2 1/2 degree angles be formed every 100 feet. These bends in the well hole through which the pipe must be extended and bent would create extremely severe pipe failure problems and exacerbate the other traditional difficulties encountered in directional drilling. Further, the cost of directional drilling at the Getty site would make such an undertaking economically undesirable even if it were technically possible. In view of all the considerations, Getty Oil Company does not consider directional drilling a viable alternative to vertical drilling, and therefore would not undertake drilling by such a method. Getty does not own or hold property interests in any dry-land areas near the shore of East Bay. (Porterfield, Moore, Englert) Prior to 1972, the Department of Natural Resources issued permits to drill in submerged lands of the state. Subsequent to the 1972 enactment of Section 377.242(1), Florida Statutes, no such permits have been issued and the pending application of Getty Oil Company is the only one which has been received by the Department since that time. Based on prior policy, the Chief of the Department's Bureau of Geology recommended to the Executive Director that Getty's application be approved. His reason for such recommendation was that he had not been aware that there was a variation in the 1972 statute and the Department's prior policy. Dr. Elton J. Gissendanner, Executive Director, however, determined that the statutory provision prohibited the placement of structures for the purpose of producing oil or gas anywhere in submerged lands in the state within a mile seaward from the coastline, which he considered to be located at the seaward border of Santa Rosa Island. He interpreted additional language in the statutory provision (which prohibited the issuance of a drilling permit within one mile inland from the coastline unless estuaries, beaches and shore area were adequately protected in the event of accident) to refer to uplands, and that therefore unrestricted drilling on land could only occur more than a mile from the coastline. In this manner, he concluded that the legislature intended to protect all estuaries of the state. He views his decision to constitute a proposed departmental policy which would require ratification by the Governor and Cabinet as head of the Department. However, no rules have been issued in implementation of the statutory provision. Based on his interpretation of the statute, the initial letter of intent to deny the requested permit was issued on June 18, 1980, as amended by his letter of June 23, 1980. By his further letter of July 28, 1980, the Executive Director informed Getty Oil Company that he had been directed by the Governor and Cabinet to issue a Notice of Intent to recommend final agency action concerning the merits of the application in the event that his legal position was overruled. The letter stated that pursuant to that mandate, and after review of the application, he intended to recommend approval of a permit to drill the requested test well in East Bay for the reason that the application complied with all criteria set forth in Chapter 16C-2, Florida Administrative Code. Certain conditions were stated in the letter to which any permit would be subject. These conditions were the subject of tide later stipulation between the parties at the commencement of the final hearing in these proceedings. The statutory interpretation of the Executive Director was confirmed in a later departmental legal opinion. (Testimony of Henry, Gissendanner, Exhibits 15, 20, 36) Various legislative materials, including bills, committee reports, and transcripts of committee meetings which primarily were preliminary to or contemporaneous with the passage of the legislation that became Section 377.242(1), F.S., were admitted in evidence (Exhibit 33a-p). A post-hearing Motion of Getty Oil Company to supplement the record with additional legislative materials was granted in part by the official recognition of a Report of the House Committee on Environmental pollution Control (Exhibit 33q). A further post-hearing Motion of United Citizens Against pollution, Inc. to supplement the record with further pertinent legislative materials was similarly granted (Exhibit 33r, s).
