The Issue Whether or not the agency may, pursuant to Section 525.06 F.S., assess $390.04 for sale of substandard product due to a violation of the petroleum inspection laws and also set off that amount against Petitioner's bond.
Findings Of Fact Coleman Oil Co., Inc. d/b/a Shell Oil Co. at I-75 and SR 26 Gainesville, Florida, is in the business of selling kerosene, among other petroleum products. On November 15, 1990, Randy Herring, an inspector employed with the Department of Agriculture and Consumer Services and who works under the direction of John Whitton, Chief of its Bureau of Petroleum, visited the seller to conduct an inspection of the petroleum products being offered for sale to the public. Mr. Herring drew a sample of "1-K" kerosene being offered for sale, sealed it, and forwarded it to the agency laboratory in Tallahassee where Nancy Fisher, an agency chemist, tested it to determine whether it met agency standards. The testing revealed that the sampled kerosene contained .22% by weight of sulfur. This is in excess of the percentage by weight permitted by Rule 5F- 2.001(2) F.A.C. for this product. A "Stop Sale Notice" was issued, and on the date of that notice (November 20, 1990) the inspector's comparison of the seller's delivery sheets and the kerosene physically remaining in his tanks resulted in the determination that 196 gallons of kerosene had been sold to the public. Based on a posted price of $1.99 per gallon, the retail value of the product sold was determined, and the agency accordingly assessed a $390.04 penalty. The agency also permitted the seller to post a bond for the $390.04 on November 21, 1990. The assessment is reasonable and conforms to the amount of assessments imposed in similar cases.
Recommendation Upon the foregoing Findings of Fact and Conclusions of Law, it is RECOMMENDED that the Department of Agriculture and Consumer Services enter a final order approving the $390.04 assessment and offsetting the bond against it. DONE and ENTERED this 25th day of April, 1991, at Tallahassee, Florida. ELLA JANE P. DAVIS, Hearing Officer Division of Administrative Hearings The DeSoto Building 1230 Apalachee Parkway Tallahassee, Florida 32399-1550 (904) 488-9675 Filed with the Clerk of the Division of Administrative Hearings this 25th day of April, 1991. COPIES FURNISHED TO: CLINTON H. COULTER, JR., ESQUIRE DEPARTMENT OF AGRICULTURE AND CONSUMER SERVICES 510 MAYO BUILDING TALLAHASSEE, FL 32399-0800 MR. RANDAL W. COLEMAN COLEMAN OIL COMPANY POST OFFICE BOX 248 GAINESVILLE, FL 32602 HONORABLE BOB CRAWFORD COMMISSIONER OF AGRICULTURE THE CAPITOL, PL-10 TALLAHASSEE, FL 32399-0810 RICHARD TRITSCHLER, GENERAL COUNSEL DEPARTMENT OF AGRICULTURE AND CONSUMER SERVICES 515 MAYO BUILDING TALLAHASSEE, FL 32399-0800
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
The Issue The issue presented for decision herein is whether or not Petitioner's Antiknock (octane) Index number of its petroleum product was below the Index number displayed on its dispensing pumps.
Findings Of Fact Based upon my observation of the witnesses and their demeanor while testifying, documentary evidence received, and the entire record compile herein, I make the following relevant factual finding. Rafael Ruiz is the owner/operator of Coral Way Mobil, an automobile gasoline station, situated at 3201 Coral Way in Coral Gables, Florida. Ruiz has operated that station in excess of ten (10) years. On or about May 13, 1987, Respondent, Department of Agriculture and Consumer Services, received a customer complaint alleging that the fuel obtained from Petitioner's station made her automobile engine ping. Respondent dispatched one of its petroleum inspectors to Petitioner's station at 3201 Coral Way on May 14, and obtained a sample of Respondent's unleaded gasoline. Inspector Bill Munoz obtained the sample and an analysis of the sample revealed that the produce had an octane rating of 86.9 octane, whereas the octane rating posted on the dispenser indicated that the octane rating of the product was 89 octane. On that date, May 14, 1987, Respondent issued a "stop sale notice" for all of the unleaded product which was determined to be 213 gallons. Petitioner was advised by Inspector Munoz that the unleaded produce should be held until he received further instructions from the Respondent respecting any proposed penalty. On May 15, 1987, Petitioner was advised by John Whittier, Chief, Bureau of Petroleum Inspection, Florida Department of Agriculture and Consumer Services, that the Antiknock Index number of the sampled product was 2.1 percent below the octane rating displayed on the dispenser and that an administrative fine would be levied in the amount of $200 based on the number of gallons multiplied times by the price at which the product was being sold, i.e., 213 gallons times 93.9 cents per gallon. Petitioner did not dispute Respondent's analysis of the product sample, but instead reported that he had been advised that three of the five tanks at his station were leaking and that this is the first incident that he was aware of wherein the product tested below the octane rating displayed on the dispenser.
Recommendation Based on the foregoing findings of fact and conclusions of law, it is hereby RECOMMENDED: That the Respondent, Department of Agriculture and Consumer Services, enter a Final Order imposing an administrative fine in the amount of $200 payable by Petitioner to Respondent within thirty (30) days after entry of the Respondent's Final Order entered herein. RECOMMENDED this 7th day of October, 1987, in Tallahassee, Leon County, Florida. JAMES E. BRADWELL Hearing Officer Division of Administrative Hearings The Oakland Building 2009 Apalachee Parkway Tallahassee, Florida 32399-1550 (904) 488-9675 Filed with the Clerk of the Division of Administrative Hearings this 7th day of October, 1987. COPIES FURNISHED: Rafael E. Ruiz c/o Coral Way Mobil 3201 Coral Way Miami, Florida 33145 Clinton H. Coulter, Jr., Esquire Senior Attorney Office of General Counsel Department of Agriculture and Consumer Services Room 514, Mayo Building Tallahassee, Florida 32399-0800 Honorable Doyle Conner Commissioner of Agriculture The Capitol Tallahassee, Florida 32399-0810 Robert Chastain, Esquire General Counsel Department of Agriculture, and Consumer Services Room 513, Mayo Building Tallahassee, Florida 2399-0800
Findings Of Fact The following findings of fact are based upon the stipulation of the parties and the evidence presented: During a routine inspection on June 11, 1986 at Ron's Chevron #4, 1790 North Hercules, Clearwater, Florida, samples of all grades of gasoline were taken. A sample was taken from each side of a pump labeled "Chevron Unleaded". Using a field method for measuring lead content, it was determined that both samples contained more than 0.11 grams of lead per gallon, which exceeds the standard of 0.05 grams per gallon. The results of the field measurement were confirmed at the Department's main laboratory by Nancy Fischer on June 16, 1986. A stop sale notice was issued on June 12, 1986, and the contaminated product was withheld from sale to the public. On June 17, 1986, Petitioner was required to post a bond in the amount of $1,000 in lieu of the Department confiscating 5,850 gallons of fuel. The product was released for sale as Chevron Regular, a leaded fuel. New product was placed in the tank and proved lead free. Lead in gasoline is detrimental to a car designed to run on unleaded fuel. The lead can cause serious damage to the emission system and possibly the engine by stopping up the catalytic converter. The parties stipulated that the sole issue in this case is the amount of the bond. There is no evidence that Petitioner intentionally contaminated the fuel for financial gain. The cause appears to have been carelessness at some point between, or at, wholesale and retail. The Department accepted a bond of $1,000 and allowed Petitioner to retain the fuel for relabeling and sale as leaded fuel. The Department's penalty imposed in this case is consistent with its past practice in factually similar cases.
Recommendation Based upon the foregoing, it is recommended that the Department enter a Final Order requiring Petitioner to post a $1,000 refundable bond. DONE AND ENTERED this 23rd day of October 1986 in Tallahassee, Florida. DONALD D. CONN Hearing Officer Division of Administrative Hearings The Oakland Building 2009 Apalachee Parkway Tallahassee, Florida 32399-1550 (904) 488-9675 FILED with the Clerk of the Division of Administrative Hearings this 23rd day of October 1986. COPIES FURNISHED: Ronald Trimm Ron's Chevron #4 1790 North Hercules Clearwater, Florida 33515 William C. Harris, Esquire Department of Agriculture and Consumer Services Mayo Building Tallahassee, Florida 32301 The Honorable Doyle Conner Commissioner of Agriculture The Capitol Tallahassee, Florida 32301
The Issue The issue presented is whether, pursuant to Section 376.3072, Florida Statutes, Petitioner, Asher G. Sullivan, Jr., d/b/a St. Augustine Trust, is eligible for restoration coverage pursuant to the Florida Petroleum Liability Restoration and Insurance Program (FPLRIP), Section 376.3072, Florida Statutes.
Findings Of Fact Asher G. Sullivan, Jr., owns and is the trustee of the Asher G. Sullivan, Jr. St. Augustine Trust (Trust). The Trust owns a Florida Department of Environmental Protection Facility known as Café Erotica Restaurant, 2620 S.R. 207, Elkton, Florida 32033, FDEP Facility No. 558515938. See Endnote 1. The Trust purchased the property in or around 1995. Neither Mr. Sullivan nor the Trust ever operated a petroleum facility or a gas station on the property. However, the property, when purchased by the Trust, had underground petroleum storage tanks. (The parties stipulated that all of the parties have standing.) Intervenors, Assad O. Knio and Selma Knio, formerly owned the property, and currently hold the mortgage on the property. The Department is charged with the statutory responsibility pursuant to Section 376.3072, to determine whether facilities are eligible to participate in FPLRIP. Insurance and Eligibility A Certificate of Insurance was issued by Commerce & Industry Insurance Company to Asher G. Sullivan, Jr. St. Augustine Trust, certifying "that it has issued liability insurance covering the following underground storage tank(s): CHEVRON-207 2630 SR 207 ELKTON FL 32033 7 Tanks."1 The effective date of the Certificate of Insurance, Policy No. FPL8079861, was September 3, 1997, and the period of coverage was from September 3, 1997, to September 3, 1998. The limits of liability are $1 million for each loss and $1 million for all losses, exclusive of legal defense costs. (Mr. Sullivan believed that a similar certificate of insurance and policy covered the facility's tanks on the property between September 1996 and September 1997 which was renewed thereafter.) The Certificate of Insurance was issued for taking corrective action and compensating third parties for bodily injury and property damage caused by sudden accidental releases and non-sudden accidental releases, in accordance with and subject to the limits of liability exclusions, conditions and other terms of the policy arising from operating the underground storage tank(s) identified above. Subparagraphs 2.d. and e. of the Certificate of Insurance provide: Cancellation or any other termination of the insurance by the 'Insurer', except for non-payment of premium and misrepresentation by the insured, will be effective only upon written notice and only after the expiration of 60 days after a copy of such written notice is received by the insured. Cancellation for non-payment of premium or misrepresentation by the insured will be effective only upon written notice and only after expiration of a minimum of 10 days after a copy of such written notice is received by the insured. The insurance covers claims otherwise covered by the policy that are reported to the 'Insurer' within six months of the effective date of cancellation or non-renewal of the policy except where the new or renewed policy has the same retroactive date or a retroactive date earlier than that of the prior policy, and which arise out of any covered occurrence that commenced after the policy retroactive date if applicable and prior to such policy renewal or termination date. Claims reported under such extended reporting period are subject to the terms, conditions, limits, including limits of liability and exclusions of the policy. The authorized agent of the insurer certified, at the bottom of page two of the Certificate, "that the wording of this instrument is identical to the wording in 40 CFR 280.97(b)(2) and that the 'Insurer' is licensed to transact the business of insurance in one or more states." See 40 C.F.R. Section 280.97(b)(2)2.d. and e. See Finding of Fact 50. Petitioner's Exhibit 1 was issued by Commerce & Industry Insurance Company, and is entitled "Florida Storage Tank Third-Party Liability and Corrective Action Policy (Policy)." It is more than a fair inference that this is the Policy referred to in the Certificate of Insurance. This Policy states that it is a Claims-Made-and-Reported policy for third party liability coverage. It is a Release- Reported Policy for corrective action coverage. This policy is site-specific: only scheduled tanks are covered. This insurance is excess over any restoration (corrective action) funding for storage tanks whose owners qualify for and are eligible for reimbursement from the Florida Inland Protection Trust Fund as part of the Restoration Insurance Program of the Florida Petroleum Liability and Restoration and Insurance Program. The Policy provides conditions for cancellation and non-renewal and, in part, states: "B.1. The NAMED INSURED may cancel this policy by mailing or delivering to the Company advance written notice of cancellation. 2. If this policy has been in effect for more than ninety (90) days the Company may cancel this policy or the coverage afforded by this policy with respect to a particular Storage Tank System only for one or more of the following reasons: a. Nonpayment of premium " (Emphasis in original.) Condition B.3. provides: "If the Company cancels this policy for [nonpayment of premium], the Company will mail or deliver to the Named Insured first listed in the Declarations, written notice of cancellation, accompanied by the reasons for cancellation at least" ten days before the effective date of cancellation. (Emphasis in original.) Conditions B.4.a. and b. of the Policy provide: Non-Renewal: If the Company decides not to renew this policy the Company will mail or deliver to the Named Insured written notice of nonrenewal, accompanied by the reason for nonrenewal, accompanied by the reason for nonrenewal, at least forty-five (45) days prior to the expiration of this policy. Any notice of nonrenewal will be mailed or delivered to the Named Insured's last mailing address known to the Company. If notice is mailed, proof of mailing will be sufficient proof of notice. (Emphasis in original.) On or about September 12, 1997, the Department issued2 a "Notice of Eligibility" (Notice) to Asher G. Sullivan, Jr. St. Augustine Trust, for a term of eligibility effective September 3, 1997, and an expiration date of September 3, 1998.3 This Notice related to Petroleum Liability and Restoration Insurance Program Coverage. The Notice also stated: The following operator/operator [Asher G. Sullivan Jr. St. Augustine Trust] has demonstrated financial responsibility for third party liability for contamination related to the storage of regulated petroleum products and is therefore eligible for Restoration Coverage under the Petroleum Restoration Insurance Program, Section 376.3072, Florida Statutes, for the facilities listed on the attached sheet(s), contingent upon continued compliance with Chapter 376, F.S., and Chapter 62-761, F.A.C. and/or 62-762, F.A.C. (Consistent with the Certificate of Insurance mentioned above, the facility name is Chevron-207.) FPLRIP provides third-party liability and excess coverage to owners and/or operators who have registered storage tank systems, such as underground storage tanks (USTs). There are several ways to demonstrate financial responsibility, including, but not limited to, obtaining insurance, as here. See Fla. Admin. Code R. 62-761.400(3). As an owner of USTs, Petitioner was required to demonstrate financial responsibility in the amount of $1 million per occurrence and $1 million on an annual aggregate amount. 40 C.F.R. Section 280.93(a)(1) and (b)(1); Fla. Admin. Code R. 62-761.400(3)(b). Participation in FPLRIP was voluntary to the extent that not every owner or operator of a UST, such as Petitioner, was required to participate in this state program, notwithstanding the state and federal requirements that financial responsibility be demonstrated by virtue of ownership or operation of a UST. See, e.g., Sections 376.301(18) and 376.309; Fla. Admin. Code R. 62-761.400(3); 40 C.F.R. Section 280.93. However, if insurance, such as the insurance policy obtained in this case, was chosen as the financial responsibility mechanism, participation in FPLRIP was required because federal law required first dollar coverage for financial responsibility. 40 C.F.R. Section 280.93(a)(1) and (b)(1). Stated otherwise, here, the Policy had a $150,000 deductible, and FPLRIP provides the first $150,000 worth of coverage, subject to a deductible. Section 376.3072(2)(d)2.d. See also Fla. Admin. Code R. 62-761.400(3)(a)3. ("Financial responsibility requirements for petroleum storage systems containing petroleum products may be supplemented by participation in the [FPLRIP] to the extent provided in Section 376.3072, F.S.") Because Petitioner chose insurance as the financial responsibility mechanism, the Department relied on the Certificate of Insurance to determine the financial responsibility of Petitioner of the Chevron-207 facility. Once this Certificate of Insurance was issued, the Department issued a Notice of Eligibility to the Petitioner, so the facility could be eligible to participate in FPLRIP. See Endnotes 3 and 5. The Department determined that Petitioner demonstrated financial responsibility under FPLRIP for a term of one year, here from September 3, 1997, through September 3, 1998. This meant that, under the Department's interpretation of FPLRIP by Lewis J. Cornman, Environmental Manager for the Department,4 a discharge would be covered under FPLRIP only if it occurred and was discovered during the insurance policy period (here September 3, 1997 through September 3, 1998) set forth in the Notice of Eligibility. See (T: 67-70, 75-77, and 83.) A penalty or deductible amount may be imposed if the discharge is not reported to the Department in a timely fashion, i.e., within 24 hours after discovery of the discharge (suspected release). Section 376.3072(2)(d)2.f.(I). (Thus, the filing of an untimely report would not affect coverage or eligibility under FPLRIP.) (T: 68-69.) Mr. Fagin, an expert witness testifying on behalf of Intervenors, opined that FPLRIP "is a discovery and reporting period program," which means that Petitioner is not eligible under FPLRIP because the date of discovery and report of the discharge was subsequent to the end of the insurance policy period, September 3, 1998, unless the Policy period is extended. Mr. Fagin focused on Section 376.3072(2)(b)4., which states in part: "Upon report of a discharge, the department shall issue an order stating that the site is eligible for restoration coverage unless the insured . . . cannot demonstrate that he or she has obtained and maintained the financial responsibility for third-party claims and excess coverage as required by subparagraph 2."5 Mr. Fagin reads this subsection to require that "upon report of a discharge," a facility owner, such as Petitioner, must maintain financial responsibility (here maintain a policy of insurance) on the date the discharge was discovered, here September 15, 1998, and reported, here September 17, 1998. (T: 106, 108, and 113.) For Mr. Fagin, the crux of the issue is whether Petitioner's insurance policy was effective on September 15, 1998, and September 17, 1998. The answer to this question, for Mr. Fagin, is whether the 10 or 60-day provisions set forth in Subparagraph 2.d. of the Certificate of Insurance, see Finding of Fact 6, apply to extend the Policy past September 3, 1998, and through September 15 and 17, 1998. For Mr. Fagin, it does not matter if the discharge was discovered prior to September 3, 1998, because of his and Mr. Cornman's interpretation of Subsection 376.3072(2)(b)4. See Finding of Fact 39. Mr. Fagin opines that the 10-day provision applies here, extending the Policy expiration date (or the effective date of cancellation or non-renewal) at least until September 21, 1998, 10 days after the September 11, 1998 letter, see Finding of Fact 25. (T: 91-92.) See also Endnote 9. Mr. Fagin believes the Department's (Mr. Cornman) interpretation, see Finding of Fact 15, is reasonable even if, according to Mr. Fagin, it may lead to a potentially absurd result whereby there may be insurance coverage under the terms of the Policy (but no coverage under FPLRIP) when a discharge is reported within the six-month extended reporting period (after the expiration of the Policy) and if the discharge occurred during the term of the Policy, here prior to September 3, 1998. See Findings of Fact 40-44, finding that the discharge occurred at Petitioner's facility prior to September 3, 1998. The Policy is Not Renewed by Petitioner or Terminated by the Insurer By letter dated August 2, 1998, Ben Harrison, Account Manager for FPLIPA,6 wrote Mr. Sullivan a letter addressed to Asher G. Sullivan, Jr. St. Augustine Trust, referencing Policy FPL8079861, the subject of the Notice of Eligibility and Certificate of Insurance, and stated: In May, 1998 we mailed renewal application to be used in renewing reference policy. We requested that application be returned to us by July 3, 1998. To date, we have not received the required paperwork that would allow us to quote this account. Please forward application and affidavit and any tight test information that you have concerning underground tanks. We cannot quote this account without the required paperwork. Policy cannot be renewed if paperwork is not received. Mr. Sullivan received the August 2, 1998, letter prior to September 3, 1998. Mr. Sullivan had the opportunity to renew the Policy before September 3, 1998. (T: 23, 30.) Mr. Sullivan did not respond to the August 2, 1998, letter "[b]ecause [according to Mr. Sullivan] the tanks were due to be pulled out before September the 3rd." (T: 29-30.) Mr. Sullivan thought, in reference to the August 2, 1998, letter, that if he did not "sign and renew the application, there would not be any insurance after September 3rd." In other words, Mr. Sullivan did not make any attempt prior to September 3, 1998, to renew the Policy, including providing any information to the insurance company or its agent, Mr. Harrison. (T: 30.) Mr. Sullivan did not mail or deliver or otherwise give any notice of cancellation of the Policy to the insurance company, or its agent. (T: 41-42.) Mr. Sullivan maintains that he had insurance coverage for the discharge in question "[b]ecause there was a six-month tail-end coverage, and also [he] was supposed to be notified by the insurance company within 10 days of the cancellation of insurance." (T: 40.) (But, Mr. Sullivan defers to his legal counsel regarding coverage issues.) (T: 45.) Mr. Sullivan stated that he did not receive a letter from the insurance company or FPLRIP until the September 11, 1998, letter that the insurance would be cancelled. (T: 40.) He interpreted this letter to mean that the Policy would not be renewed. (T: 20.) On September 11, 1998, Mr. Harrison advised Mr. Sullivan, by letter, that the Policy expired on September 3, 1998, and stated: If policy holder has not been approved by the Department of Environmental Protection under another EPA approved financial responsibility mechanish [sic], policy holder no longer has access to the State Restoration Fund for new discharges. Excess coverage over the State Fund has also expired. We have had no response from the renewal application that we mailed out nor from my letter of Aug [sic] 2, 1998 stating that we could not quote the account nor bound without the application and affidavit. If you have any questions on how to reinstate the policy please call us at 1- 800-475-4055. (Emphasis in original.) Mr. Harrison testified by deposition. In 1989, he began working for the Florida Petroleum Liability Insurance Program Administrators in Cocoa, Florida. His duties included issuing quotes, mailing out renewal paperwork applications, and upon receipt, converting "the indications into policies once the money and appropriate paperwork comes in." FPLIPA began with the issuance of third-party liability insurance. When the State of Florida began reducing the amount that they would provide for cleanup, FPLIPA provided, through AIG, the excess coverage that was required. According to Mr. Harrison, the Policy at issue in this case, was terminated because the Petitioner did not renew it. Mr. Harrison refers to his September 11, 1998, letter, as a "letter informing [Mr. Sullivan] that his coverage had lapsed" or expired. Mr. Harrison did not intend that either his August 2, or September 11, 1998, letters be considered as notice(s) of termination or cancellation of the Policy. Mr. Harrison was the account manager on all of the files related to Mr. Sullivan. Mr. Harrison stated that if the Policy was to be terminated, he would have had to notify Petitioner in writing and if the Policy was not going to be renewed by the insurance company, he would have had to notify Petitioner in writing 60 days prior to the renewal date. Mr. Harrison advised that termination letters are furnished by FPLIPA for an insurance company, here referring to AIG.7 Discovery and Reporting of the Discharge Several petroleum USTs were located at the facility and on the property owned by the Trust. After a one to two-week delay, on or about September 15, 1998, the storage tanks were removed from the property by a contractor who Mr. Sullivan believes was named Pipeline Industries (Pipeline).8 The removal operation was performed over the course of several days. During the course of removal, Pipeline informed him that there was a discharge of petroleum found on the property. The tanks on the property were removed intact on September 15, 1998. At that time, it was certified that the tanks were empty, and were removed without holes in them. (It appears that the Department reported the tanks as empty in February 1996.) (T: 128, 146.) Pipeline filed a Discharge Report Form with the Department on September 17, 1998. This Form recites that a discharge was confirmed on the property on September 15, 1998. Within less than a week, upon learning of the discharge, Mr. Sullivan's right-hand-man, J.C. Brunel, advised Commerce & Industry Insurance Company that the storage tanks had been removed and that there was a discharge. Thereafter, and on some unknown date, the insurance company advised Mr. Sullivan that no coverage would be provided. Mr. Sullivan was made aware of the existence of the storage tanks before the Trust bought the property. He believes that the last time that the site was used as a gasoline station was probably in 1992. Mr. Sullivan was not aware of any other spills or discharges that might have occurred on the property other than what was reported by Pipeline in September 1998. Mr. Sullivan has no personal knowledge when the discharge occurred. He was on the property on and off at the time when Pipeline removed the storage tanks, but probably not on-site when the tanks were actually removed. Pipeline could have caused the discharge, but it is uncertain. Mr. Sullivan relied upon his hired experts (ECT) to determine when the petroleum discharge occurred, the extent of the discharge, and the cost of the clean-up. The Discharge As noted above, the Discharge Report Form indicates confirmation of a discharge on September 15, 1998. The Department contends that the discharge occurred on September 15, 1998, after the insurance policy expired on September 3, 1998. Mr. Cornman determined that the site was ineligible because the site was not properly enrolled in FPLRIP because Petitioner did not maintain financial responsibility when the discharge occurred after the time period of coverage, i.e., after the Policy expired on September 3, 1998. This position was based on the Notice of Eligibility which states the coverage existed from September 3, 1997 through September 3, 1998. See also Findings of Fact 10 and 15. Petitioner contends, in part, that the discharge occurred during the policy period, i.e., prior to September 3, 1998, and was timely reported during the extended reporting period. In the alternative, Petitioner contends that the Policy was never properly terminated or cancelled by the insurance company or its agent (by not providing appropriate notice of termination or cancellation) and, as a result, the Policy was still effective on September 15, 1998, and September 17, 1998, the dates when the discharge was discovered and the report submitted to the Department, respectively. Thus, Petitioner contends that Petitioner is eligible under FPLRIP, having maintained insurance coverage through and including the report of discharge. See Finding of Fact 18. The only scientific evidence presented in this case as to when the petroleum discharge occurred on the property was elicited from Dr. William Case Zegel. Dr. Zegel has a chemical engineering undergraduate degree; and a doctor of science degree in chemical engineering. Dr. Zegel has been associated with Water and Air Research, Incorporated, in Gainesville, Florida, since 1979. He is president of the company and principal engineer. He is a licensed professional engineer in the State of Florida. Dr. Zegel has substantial experience in determining how chemicals are released into the environment. Dr. Zegel is familiar with the property at issue in this proceeding. He was on-site for a day. He spent approximately 100 hours analyzing the site conditions and the petroleum discharge related to the property owned by Petitioner. Further, he reviewed data collected by "ECT," in particular, two sets of data taken about 600 days apart. From this data, he could determine how things changed on the property. He also performed what is called "reverse modeling" to determine when a discharge may have occurred on the property. While stating that the modeling, and the estimates derived therefrom, are not precise as to a particular day or month, Dr. Zegel stated that one estimate indicated that the discharge occurred before March 12, 1999, and a second wave of modeling indicated that the discharge occurred in November 1998. (T: 124, 140.) After identifying specific details of the available data, and his analysis, Dr. Zegel's opined that the discharge occurred prior to September 15, 1998, and that the release into the environment occurred before that date. He also opined that the discharge on the property occurred perhaps as early as 1996. It is not probable that the discharge would have occurred after September 15, 1998. It seems odd that no discharge was detected prior to September 15, 1998, given the status of the tanks. Nevertheless, Dr. Zegel's testimony is credible and persuasive. The weight of the evidence, including no expert opinion to the contrary, supports the finding that the discharge reported to the Department on September 17, 1998, occurred prior to September 3, 1998, although the specific date of the discharge is unknown. Petitioner's Application for Coverage under FPLRIP Mr. Sullivan, on behalf of the Trust, applied, with the Department, for restoration coverage for the discharge under FPLRIP. On October 21, 2002, the Department issued a letter to Mr. Sullivan on behalf of the Trust, denying FPLRIP eligibility, stating that the facility was ineligible because the facility was not "properly enrolled in FRLRIP after September 3, 1998." Stated otherwise, the Department determined that the site was ineligible because the site was not properly enrolled in FPLRIP and Petitioner did not maintain financial responsibility because the discharge occurred after coverage expired on September 3, 1998. The Department relied on the dates in the Notice of Eligibility generated by FPLIPA as agent for the Department in determining the denial of Petitioner's request. As of the October 21, 2002, letter, and when Mr. Cornman testified, the only information provided the Department regarding the date of discharge was the discharge confirmation date (September 15, 1998) reported by Petitioner on September 17, 1998. The Environmental Protection Agency's (EPA) Regulations and Interpretations In 1988, the EPA promulgated financial responsibility requirements applicable to owners and operators of USTs containing petroleum, which included amendments to 40 C.F.R. Part 280, Subpart H. See 53 Fed. Reg. 433322, 1988 WL 258482 (Oct. 26, 1988) for the EPA's explanation of the regulations. See also 52 Fed. Reg. 12786, 1987 WL 131023 (April 17, 1987.) In 1989, the EPA amended several provisions of 40 C.F.R. Part 280, Subpart H and, material here, 40 C.F.R. Sections 280.97(b)(1) and (b)(2), pertaining to financial responsibility requirements for UST's containing petroleum. The 1989 amendments refined required language of endorsements to existing insurance policies and certificates of insurance for insurance and risk retention group coverage. See 54 Fed. Reg. 47077-02, 1989 WL 287711 (Nov. 9, 1989) for the EPA's explanation of the amendments. Currently, 40 C.F.R. Section 280.97 deals with "[i]nsurance and risk retention group coverage." Subsection 280.97(a), provides: "An owner or operator may satisfy the requirements of [Section] 290.93 [sic] by obtaining liability insurance that conforms to the requirements of this section from a qualified insurer or risk retention group. Such insurance may be in the form of a separate insurance policy or an endorsement to an existing insurance policy." Subsection 280.97(b) provides in part: "Each insurance policy must be amended by an endorsement, worded as specified in paragraph (b)(1), or evidenced by a certificate of insurance worded as specified in paragraph (b)(2) of this section . . . ." Pertinent here, Subsections 280.97(b)(2)2.d. and e. provide: Cancellation or any other termination of the insurance by the ["Insurer" or "Group"] will be effective only upon written notice and only after the expiration of 60 days after a copy of such written notice is received by the insured. Cancellation for non-payment of premium or misrepresentation by the insured will be effective only upon written notice and only after expiration of a minimum of 10 days after a copy of such written notice is received by the insured. [Insert for claims-made policies: The insurance covers claims otherwise covered by the policy that are reported to the ["Insurer" or "Group"] within six months of the effective date of cancellation or non- renewal of the policy except where the new or renewed policy has the same retroactive date or a retroactive date earlier than that of the prior policy, and which arise out of any covered occurrence that commenced prior to such policy retroactive date, if applicable, and prior to such policy renewal or termination date. Claims reported under such extended reporting period are subject to the terms, conditions, limits, including limits of liability, and exclusions of the policy.] * * * The issues confronting the EPA in 1989, and which prompted the revisions set forth above, pertained to, in part, the EPA's efforts to make clear that the mandatory language in the certificate of insurance (Subsection 280.97(b)(2)2.e.) "requires that a claims-made insurance contract cover claims for any occurrence that commenced during the term of the policy and that is discovered and reported to the insurer within six months of the effective date of the cancellation or other termination of the policy." 54 Fed. Reg. at 47079. "This provision was meant to address concerns that a claims-made policy might leave a gap in coverage if, for example, a claim is reported after the expiration of a policy for a release that began prior to the policy expiration date." Id. The issue for the EPA was whether insurers should be required to provide an extended reporting period and the EPA stated its intention "that insurers provide extended reporting period coverage only where the termination or non-renewal of the policy results in the owner or operator having no coverage for releases that occurred during the time period of the previous policy and which are reported within six months after the termination or non-renewal of that policy. For discussion purposes, EPA has labeled this predicament as a 'gap' in coverage." Id. The EPA identified "only two situations where the termination of a policy results in a 'gap' in coverage, and thus only two situations where the insured whose policy is terminated must obtain extended reporting period coverage. The first situation occurs when the insured renews his existing policy or purchases a new policy and the renewed policy contains a retroactive date subsequent to the retroactive date of the insured's previous insurance policy. The second situation occurs where the policy is terminated or is not otherwise renewed and the insured elects a financial assurance mechanism other than insurance (such as a guarantee, surety bond, etc.) as a replacement. EPA is today promulgating revised language to clarify EPA's intended interpretation of paragraph 2.e. of the Endorsement contained in [Subsection 280.97(b)(1)] and of paragraph 2.e. of the Certification contained in [Subsection] 280.97(b)(2)." Additionally, the EPA defines "termination," as used in Subsections 280.97(b)(1) and (2), to mean "only those changes that could result in a gap in coverage as where the insured has not obtained substitute coverage or has obtained substitute coverage with a different retroactive date than the retroactive date of the original policy." 40 C.F.R. Section 280.92; 54 Fed. Reg. at 47080. Relevant here, the EPA amended Subsections 280.97(b)(1)d., 280.97(b)(2)d., and 280.105(a)(2) [now 280.109(a)(2)] to allow an insurer to terminate an insurance contract for non-payment of premium or misrepresentation by the insured after a 10 day notice period. EPA does not intend for this shortening of the coverage period from 60 to 10 days to apply to termination for any reason other than non-payment of premium or misrepresentation. The Agency is aware that some state insurance laws mandate a longer period following cancellation. In order to accommodate these state-specific situations, the amended language of [Section] 280.97(b)(1) Endorsement paragraph d and [Section] 280.105(a)(2) [now 280.109(a)(2)] specifies that the mandatory coverage period following termination for non-payment of premium or misrepresentation shall be a 'minimum of 10 days.' The insurer is still bound to provide the owner or operator with written notice of cancellation with the 10 day period beginning upon receipt of notice by the owner or operator. 54 Fed. Reg. at 47080. See also Endnote 9. Conversely, the EPA expressly did not amend the requirement for a six-month extended reporting period following cancellation for non-payment of premium or misrepresentation. As noted in the previous section, the [EPA] believes that such a reporting period must be mandatory for all claims-made insurance contracts used to demonstrate financial assurance, regardless for the reason for termination. The six-month extended reporting period is essential to avoiding gaps in coverage that could threaten human health and environment, especially in cases where the owner or operator may have as few as 10 days upon receipt of notice of cancellation to obtain substitute coverage. The distinction between the two provisions, extended reporting period and the effective date of cancellation, is that even if a policy is cancelled for non- payment of premium, the extended reporting period merely extends the time during which an insured may report occurrences covered by the policy for which he or she has already paid. Thus the extended reporting provision does not provide the insured with a benefit for which he or she has not paid. In contrast, any delay in the effective date of a policy cancellation or termination due to regulatory requirements provides insureds who failed to pay their premium coverage for which they have not paid. Id. at 47080-47081.
Recommendation Based on the foregoing Findings of Fact and Conclusions of Law, it is RECOMMENDED that the Department of Environmental Protection enter a final order that Petitioner is not eligible for restoration coverage under FPLRIP. DONE AND ENTERED this 12th day of November, 2003, in Tallahassee, Leon County, Florida. S CHARLES A. STAMPELOS 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 12th day of November, 2003.
The Issue The two issues for determination are: (1) whether Rhinehart Equipment Co. (Rhinehart) a foreign corporation domiciled in Rome, Georgia, during the period July 1, 2002, through June 30, 2005, had "substantial nexus" with the state of Florida through its advertising, sale, and delivery into Florida of new and used heavy tractor equipment, sufficient to require it to collect and remit sales tax generated by these sales to the Florida tax authorities; and (2) Whether the applicable statute of limitations for assessing sale tax had expired when DOR issued its "final assessment" on September 11, 2009.
Findings Of Fact The Parties Rhinehart Equipment Co. (“Rhinehart”) is a retail heavy equipment dealer located in Rome, Georgia, and does not own or maintain a showroom or office location in Florida or directly provide financing to any Florida resident for any of its sales. Rhinehart does not provide Florida customers with any after-sale services such as assembly, technical advice, or maintenance. Rhinehart does not have any employees residing in Florida. Respondent is an agency of the State of Florida charged with the regulation, control, administration, and enforcement of the sales and use tax laws of the state of Florida embodied in Chapter 212, Florida Statutes, and as implemented by Florida Administrative Code Chapter 12A-1. Background In early March 2005, the Department received an anonymous tip pursuant to section 213.30, Florida Statutes. The caller alleged that Rhinehart was selling equipment to Florida residents without including sales and use tax in the sales price and was delivering the equipment to Florida customers using its own trucks. The tipster also alleged that Rhinehart was advertising in a commercial publication Heavy Equipment Trader, Florida Edition. By letter dated March 31, 2005, Respondent contacted Rhinehart and advised that its business activities in the state might be such as to require Rhinehart to register as a “dealer” for purposes of assessing Florida sales and use tax, and that it could be required to file corporate income tax returns, potentially subjecting it to liability for other Florida taxes. Included with this letter was a questionnaire for Rhinehart to complete and return to the Department "to assist us in determining whether Nexus exists between your company and the State of Florida." On May 2, 2005, Rhinehart, without the advice of counsel, responded to the Department’s inquiry by returning the completed questionnaire, which was signed by its president, Mark Easterwood. By letter addressed to Mr. Easterwood dated May 4, 2005, the Department advised that it had determined that Rhinehart had nexus with the state of Florida and that therefore Rhinehart was required to register as a dealer to collect and remit Florida sales and use tax. According to the letter, the Department's determination was "based on the fact that your company makes sales to Florida customers and uses the company's own truck to deliver goods to customers in the State of Florida." By application effective July 1, 2005, Rhinehart registered to collect and/or report sales and use tax to the state of Florida, In a letter dated June 8, 2005, the Department invited Rhinehart to self-disclose any tax liability that it may have incurred during the three-year period prior to its registration effective date, to wit, July 1, 2002, through June 30, 2005 (the audit period). Specifically, the letter stated: At this time, we would like to extend an opportunity for you to self-disclose any tax liability that you may have incurred prior to your registration effective date (for the period July 1, 2002, through June 30, 2005). This Self-Disclosure Program affords you an opportunity to pay any applicable tax and interest due for the prior three-year period (or when Nexus was first established) without penalty assessments. In response to the Department's June 8, 2005, letter, Rhinehart's legal counsel sent a letter dated August 8, 2005, requesting a meeting or conference call to discuss a "few legal issues" concerning the Department’s determination regarding nexus. Thereafter, Rhinehart began filing the required tax returns relating to its Florida sales, noting in writing by cover letter that the returns were being filed “under protest.” Rhinehart began collecting and remitting sales and use tax starting in July 2005. However, Rhinehart declined to provide any information regarding sales made prior to July 1, 2005. On September 30, 2005, Rhinehart's legal counsel sent the Department a detailed protest letter and advised that, in Rhinehart's view: (1) the Department had not established “substantial nexus” with Florida as interpreted under the Commerce Clause of the United States Constitution; and (2) Rhinehart was not required to register as a Florida dealer for sales and use tax purposes. On May 23, 2008, the Department issued a "Notice of Intent to Make an Assessment," and on September 11, 2009, a "Notice of Final Assessment," for the audit period. The assessment totaled $354,839.30, which was comprised of $229,695.00 in taxes and $125,144.30 in interest. The assessment was calculated by Respondent using Rhinehart’s sales tax returns filed from July 2005 through March 2008. The Notice of Final Assessment advised Rhinehart that the final assessment would become binding agency action unless timely protested or contested through the informal protest process, or by filing a complaint in circuit court or petition for an administrative hearing. Rhinehart unsuccessfully sought to resolve the matter through informal review and then ultimately filed its petition seeking an administrative hearing to challenge the Department's September 11, 2009, assessment. Based on sales records and other information provided by Rhinehart, on March 9, 2011, the Department revised its September 11, 2009, assessment. The revised assessment totaled $380,967.89, which included the past due sales and use tax liability, and interest accrued through that date. Rhinehart's Florida Activities Rhinehart produced records of its sales to Florida customers during the audit period. Those records reflected sales to 116 different Florida customers as follows: one sale in the second-half of 2002; 12 sales in 2003; 84 sales in 2004; and 19 sales thorough June 2005. The total value of the merchandise sold to Florida residents was $2,928,981.00. The majority of Rhinehart's sales during the audit period were "sight unseen" by the customer, and were negotiated by telephone. Numerous hurricanes made landfall in Florida during the 2004 and 2005 hurricane season. Since 2005, Rhinehart’s sales to Florida customers have substantially dropped, with no sales occurring in some quarters. During the audit period Rhinehart accepted a number of trade-ins toward the purchase of new equipment. The records showed trade-in transactions as follows: none (0) in 2002; five (5) in 2003; eleven (11) in 2004; and none in 2005. Concurrent with the delivery of the new equipment purchased from Rhinehart, used equipment taken in trade was transported by Rhinehart employees using Rhinehart transport equipment back to Rhinehart’s location in Georgia. In these instances, the trade-in equipment remained with the Florida customer following negotiation of the sale and prior to Rhinehart physically taking possession of it. During the audit period the equipment accepted as trade-ins had a total value of $168,915.00. The valuation of trade-in equipment was done based on a customer’s representations (i.e. sight unseen, with no Rhinehart employee personally inspected the equipment) and pursuant to industry guidelines. Rhinehart’s drivers would deliver the purchased equipment, load any trade-in equipment, and return to Georgia, if possible, on the same day. To the extent that the Department of Transportation regulations mandated that they cease driving in a given day, the drivers would rest in the back of their trucks for the required amount of time, sometimes overnight, and then complete their journey back to Georgia. Rhinehart's dealership is located approximately 300 miles north of the Florida state line. Sales invoices reflect that Rhinehart's customers were located throughout the state of Florida, as far south as Miami on the east coast and Naples on the west coast. During the audit period, Rhinehart placed advertisements with with the Trader Publishing Company, located in Clearwater, Florida. The Trader Publishing Company is the publisher of the Heavy Equipment Trader magazine which is distributed in Georgia, Alabama, Florida, and Tennessee. Trader Publishing Company publishes a "Florida Edition" of the magazine which is directed to potential heavy equipment customers located in Florida. Stipulated Exhibit 19 consists of advertising invoices for advertisements placed by Rhinehart in the Florida Edition of Heavy Equipment Trader magazine during the audit period. These invoices establish that Rhinehart regularly and systematically purchased advertising for its products which was targeted toward potential customers located in Florida.
Recommendation Having considered the foregoing Findings of Fact, Conclusions of Law, the evidence of record, and the pleadings and arguments of the parties, it is, therefore, RECOMMENDED that a final order be entered by the Department of Revenue: Confirming that substantial nexus existed during the audit period and that Petitioner was therefore subject to the taxing authority of the state of Florida; Confirming that the assessment at issue is not time- barred; Allowing Petitioner a reasonable period of time to determine whether any of the sales it made during the audit period would have qualified as exempt sales pursuant to section 212.08(3) and if so, to obtain the required certifications from the purchasers; and Imposing on Petitioner an assessment for the unpaid taxes, with accrued interest, for all sales during the audit period not qualifying for exemption. DONE AND ENTERED this 27th day of August, 2012, in Tallahassee, Leon County, Florida. S W. DAVID WATKINS 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 27th day of August, 2012.
Findings Of Fact Based upon my observation of the witnesses and their demeanor while testifying, the arguments of counsel and the entire record compiled herein, the following relevant facts are found. Based on an Administrative Complaint filed on July 6, 1979, the Florida Construction Industry Licensing Board (herein sometimes referred to as the Petitioner or the Board) seeks to take disciplinary action against Licensee Richard E. Ulbricht, d/b/a Ulbricht Construction, Inc., and to impose an administrative fine or $500.00. Respondent is a registered contractor who holds the following licenses: RG 0011921 - Registered General/Active/Issued RGA 0011921 - Registered General/Active/Issued RG OB 11921 - Registered General/Delinquent RM 0014920 - Registered Mechanical/Active/Issued RM 0017586 - Registered Mechanical/Delinquent RS 0019201 - Registered Sheet Metal/Active/Issued RC 0019264 - Registered Roofing/Active/Issued Respondent was first licensed by the Petitioner during February, 1972. On June 14, 1977, Respondent qualified Ulbricht Construction, Inc., as the business entity through which he would conduct his contracting business. The construction activities involved herein took place in the City of Palm Bay, Florida. Palm Bay has no local licensing board. On June 12, 1978, Respondent entered into a contract with Michael D. and Karen K. McCammack to construct a residence for the sum of $39,900.00. Respondent received the full contracted price and the transaction closed on January 4, 1979. Chelsea Title and Guaranty Company closed the transaction for Respondent and the McCammacks on January 4, 1979. Camille Guilbeau is the manager for the Palm Bay branch of Chelsea Title and Guaranty Company. Ms. Guilbeau is in charge of all closing and as such ensures that all outstanding obligations of record are paid. In keeping with Chelsea's policy of protecting itself in the event of outstanding unrecorded claims of liens, Chelsea has a policy of requiring contractors and builders such as Respondent to declare in an affidavit that there is no outstanding work which has been performed, or labor or materials for which a lien could be filed on property in which Chelsea is closing the mortgage transaction. Respondent executed such an affidavit relative to the McCammacks' property, which Chelsea relied on to close the transaction on January 4, 1979 (Petitioner's Exhibit 4). On January 4, 1979, Chelsea Title and Guaranty Company paid Rinker Materials Corporation of Melbourne, Florida, $1,201.02 based on a claim of liens filed December 15, 1978, for materials consisting of concrete block, steel and miscellaneous items which were used on the McCammack property (Petitioner's Exhibit 6). Subsequent to the date of closing, January 4, 1979, liens amounting to approximately $2,761.62 have been filed against the McCammack property based on Respondent's failure to pay bills for labor and/or materials used in connection with the construction of the McCammacks' residence. These lien claims were filed against the McCammacks' property for a drilled well, installation of a pump and tank by Perry and Leighty, Inc., of Melbourne, Florida; two septic tanks, drains and sand supplied by Pence South Brevard Sewer and Septic Tank of Melbourne, Florida (Petitioner's Exhibits 7, 8 and 9). On December 22, 1978, Respondent entered into a contract with Robert J. Greene to construct a residence for $30,500.00 in Palm Bay, Florida. Respondent filed an affidavit of no liens relative to the Greene property on January 10, 1979. Chelsea Title and Guaranty Company relied on this affidavit to close the Greene property transaction on January 10, 1979 (Petitioner's Exhibit 5). Respondent was paid thee entire contract price. On February 12, 1979, Pence South Brevard Sewer and Septic Tank filed a claim of lien in the amount of $1,015.36 for two septic tanks, drains and sand which had been furnished the Respondent for the property of Robert J. and Alice Greene of Palm Bay, Florida, on December 15, 1978 (Petitioner's Exhibits 10 and 11). Approximately $3,496.40 was retained by Chelsea Title and Guaranty Company to satisfy outstanding recorded obligations on the date the Greene transaction closed (Petitioner's Exhibit 13). On February 21, 1979, Respondent caused to be filed in the United States District Court of the Middle District of Florida, a Voluntary Petition for Bankruptcy for Ulbricht Construction, Inc. (Petitioner's Exhibit 2 Composite).
Recommendation Based on the foregoing Findings of Fact and Conclusions of Law, it is hereby RECOMMENDED: That the Respondent's contractors licenses set forth hereinabove be REVOKED. RECOMMENDED this 6th day of May, 1980, in Tallahassee, Florida. JAMES E. BRADWELL, Hearing Officer Division of Administrative Hearings The Oakland Building 2009 Apalachee Parkway Tallahassee, Florida 32301 (904) 488-9675 Filed with the Clerk of the Division of Administrative Hearings this 6th day of May, 1980.
The Issue The issue in this case is whether Respondent's assessment of sales tax against Petitioner pursuant to Section 212.0505, Florida Statutes, should be upheld.
Findings Of Fact Based upon the oral and documentary evidence adduced at the final hearing and the entire record in this proceeding, the following findings of fact are made: By Notice of Assessment and Jeopardy Findings dated October 15, 1990 (the "Assessment"), Respondent, Department of Revenue (Department), determined that taxes imposed under Section 212.0505, Florida Statutes, were due from Petitioner, Jose A. Espino, for the unlawful sale, use, consumption, distribution, manufacture, derivation, production, transportation or storage of a controlled substance, to wit: cocaine. Specifically, the notice provided Petitioner with a "Notice of Assessment of tax, penalty, and interest on the deficiency" as follows: Date of Transaction or Incident (On or About) August 22, 1990 Estimated Retail Price 2 Kilo Cocaine $25,000.00 25% Surcharge [s.212.0505(1)(a), F.S.] $12,500.00 25% Surcharge [s.212.0505(1)(b), F.S.] $ 6,250.00 Penalty of 5% per month, maximum of 25% of Tax and Surcharge Due [s.212.12(2), F.S.] $ 937.50 Additional Penalty of 50% [s.212.12(2), F.S.] $ 0 Interest of 1% per month [s.212.12(3), F.S.], accrues at the rate of $6.16 per day. INTEREST computed thru 9/21/90 $ 49.28 Total Amount Due with this Notice $19,736.78 The factual basis for the Assessment was Petitioner's involvement in the transactions described in Findings of Fact 4-9 below. Petitioner filed a timely Petition to Challenge the Notice of Assessment and Jeopardy Findings. The only basis for the challenge set forth in the Petition was a contention that Petitioner was not engaged in the unlawful transportation of cocaine and that Section 212.0505, Florida Statutes was not applicable under the facts and circumstances of this case. During discovery and at the formal hearing in this case, Petitioner also challenged the estimated retail price used by Respondent in making the calculations set forth in the Assessment. Petitioner has not contested the mathematical accuracy of the Assessment nor has Petitioner contested the form of the Assessment or presented any evidence that the procedures for issuing the Assessment were improper. No evidence was presented that Petitioner has paid the sales tax assessed by Respondent or that the sales tax assessed has been paid by another individual on his behalf. In August of 1990, Petitioner, Jose A. Espino, was the owner of a paint and body shop located at 12524 S.W. 128th Street, Miami, Florida. Petitioner was present at the paint and body shop on August 22, 1990. On this date, he had agreed to meet with an individual who was working as a confidential informant for the Metro-Dade Police Department. Petitioner had previously negotiated with this confidential informant to sell four (4) kilos of cocaine at $30,000 per kilo. On August 22, 1990, Jerry Hull, a senior narcotics detective with the Metro-Dade Police Department, and the confidential informant drove to Petitioner's place of business. Detective Hull was seated on the passenger side of the front seat and observed the Petitioner coming out of the building carrying a maroon utility bag. Petitioner approached the vehicle occupied by Detective Hull and the confidential informant. Detective Hull got out of the vehicle and allowed Petitioner to get into the front seat. Detective Hull got into the back seat and the confidential informant drove the car east on S.W. 128th Street. As the confidential informant drove the vehicle, Detective Hull introduced himself to Petitioner and asked if he "brought the merchandise..." Petitioner stated that he had and inquired if Hull had the money. By his statements, Petitioner acknowledged his readiness to sell the cocaine he brought into the van. After inquiring about the money, Petitioner opened the utility bag he had carried into the van and showed Detective Hull a package. Petitioner gave the package to Hull and opened a cut previously made in the wrapping exposing a white substance inside. Detective Hull asked Petitioner for a sample. Based on his experience, Detective Hull identified the substance in the package as cocaine. Petitioner has, by virtue of the Respondent's Request for Admissions, admitted the substance he was carrying was cocaine. Petitioner told Detective Hull he had two (2) kilograms of cocaine in the bag. The Request for Admissions confirm that Petitioner carried two (2) kilograms of cocaine into the vehicle. Shortly after Petitioner showed Detective Hull the cocaine, a police car pulled up behind the van driven by the confidential informant. The police stopped the van and Petitioner was arrested and charged with trafficking in cocaine. No evidence was presented as to the disposition of the criminal charges. A copy of the police arrest report was forwarded to the Department of Revenue. As noted above, the Department of Revenue issued the Notice of Assessment and Jeopardy Findings on October 15, 1990. This Assessment was issued based upon the information contained in the Metro-Dade Police arrest report. As set forth above, the Assessment was issued in the amount of $19,736.78. The estimated retail price used by the Department of Revenue in calculating the tax due was $12,500 per kilogram. This estimate of retail price was derived from a price list compiled by the Florida Department of Law Enforcement (FDLE). The price appearing in the FDLE report is based upon average prices for various types of illegal narcotics sold throughout Florida. The FDLE price list used by DOR in preparing the Assessment is segregated by the type of drug and by various regions of the state. The price used in this Assessment was based upon the FDLE report compiled from information available as of June 7, 1989 for the Miami region. This region included Dade, Broward and Palm Beach counties and included prices for transactions involving the sale of one (1) kilo or more of cocaine. Thus, the report reflects the economic fact that larger quantity purchases occur at relatively lower prices. The price of cocaine rose sharply between 1989 and 1990. A subsequent update of the FDLE report utilizing information available as of August 1, 1990, revealed prices in the Miami region rose to $22,000 for kilogram size sales of cocaine. Thus, it appears the price used in the Assessment in this case is significantly lower than either the anticipated sales price of the parties ($30,000 per kilo) or the price reported by the FDLE in its later report (August 1, 1990). If anything, the Assessment was based on a conservative estimate of actual retail prices in the Miami area at the time. Petitioner has not provided any persuasive evidence to show the Department of Revenue's estimated price of $12,500 per kilo is inappropriate. Interest on the Assessment continues to accrue at the rate of $6.16 per day since September 28, 1990.
Recommendation Based upon the foregoing Findings of Fact and Conclusions of Law, it is RECOMMENDED that the Department of Revenue issue a Final Order in this case concluding that the Petitioner, Jose A. Espino, is liable for taxes, penalties, and interest pursuant to Section 212.0505, Florida Statutes (1989), and assessing the amount of such liability at $19,736.78, plus interest at the rate of $6.11 per day since September 28, 1990. DONE and ENTERED this 31st day of July, 1992, at Tallahassee, Florida. J. STEPHEN MENTON Hearing Officer Division of Administrative Hearings The DeSoto Building 1230 Apalachee Parkway Tallahassee, Florida 32399-1550 (904) 488-9675 Filed with the Clerk of the Division of Administrative Hearings this 31st day of July, 1992. APPENDIX Both parties have submitted Proposed Recommended Orders. The following constitutes my rulings on the proposed findings of fact submitted by the parties. The Petitioner's Proposed Findings of Fact Proposed Finding Paragraph Number in the Findings of Fact of Fact Number in the Recommended Order Where Accepted or Reason for Rejection. Adopted in substance in Findings of Fact 3 and in the Preliminary Statement. Rejected as constituting legal argument. While the Petition in this case did not challenge the mathematical accuracy of the tax assessment, Petitioner asserted in discovery and at the formal hearing that the estimated retail value utilized by Respondent in making the Assessment was not accurate. This suggestion is rejected. As set forth in Findings of Fact 12 and 13 and Conclusions of Law 12, the estimated retail value utilized by Respondent in this case was reasonable. Rejected as vague and constituting legal argument rather than a Finding of Fact. Subordinate to Findings of Fact 12 and 13. Subordinate to Findings of Fact 5 and addressed in Conclusions of Law 10. The Respondent's Proposed Findings of Fact Proposed Finding Paragraph Number in the Findings of Fact of Fact Number in the Recommended Order Where Accepted or Reason for Rejection. Adopted in substance in the Preliminary Statement. Adopted in substance in Findings of Fact 3. Adopted in substance in Findings of Fact 3. Adopted in substance in Findings of Fact 3. Addressed in the Preliminary Statement. 6. Adopted in substance in Findings of Fact 4. 7. Adopted in substance in Findings of Fact 5. 8. Adopted in substance in Findings of Fact 5. 9. Adopted in substance in Findings of Fact 6. 10. Adopted in substance in Findings of Fact 7. 11. Adopted in substance in Findings of Fact 8. 12. Adopted in substance in Findings of Fact 9. 13. Adopted in substance in Findings of Fact 10. 14. Adopted in substance in Findings of Fact 11. 15. Adopted in substance in Findings of Fact 12. 16. Adopted in substance in Findings of Fact 13. COPIES FURNISHED: Vicki Weber, General Counsel Department of Revenue 204 Carlton Building Tallahassee, Florida 32399 Thomas Herndon, Executive Director Department of Revenue 104 Carlton Building Tallahassee, Florida 32399-0100 Angel M. Gonzalez, Esquire 28 W. Flagler Street Suite 806 Miami, Florida 33130 James McAuley Assistant Attorney General Tax Section, Capitol Building Tallahassee, Florida 32399-1550
Findings Of Fact Based upon the prehearing statement, the testimony of the witnesses, and the documentary evidence received at the hearing, the following findings of fact are made: The Petitioner is a Florida corporation in good standing, authorized to do business in this state. The Petitioner owns and controls the site which is the subject matter of these proceedings. Such site is located in Brevard County, Florida. The Department has identified the subject site as DER facility no. 05- 8500985 (the facility). At all times material to this case, the facility consisted of: three underground storage tanks (UST), one 3000 gallon UST used for storing diesel fuel, one 1000 gallon UST used for storing diesel fuel, and one 1000 gallon UST used for storing gasoline; five monitoring wells; and pipes and pumps related to the foregoing system. The facility constituted a storage tank system as defined in Section 376.301, Florida Statutes, and Rule 17-761.200(38), Florida Administrative Code. The Petitioner holds, and is named insured for, third party pollution liability insurance applicable to the facility. Such insurance was issued pursuant to Section 376.3072, Florida Statutes. The policy for the foregoing insurance, policy no. FPL7622040, was in force from March 22, 1991 through March 22, 1992. The Department issued a notice of eligibility for restoration insurance to Petitioner for the above-described facility. Based upon the foregoing, the Petitioner is a participating owner or operator as defined in Chapter 17-769, Florida Administrative Code. Pursuant to Section 376.3073, Florida Statutes, Brevard County operates a local program that has been approved by the Department. Such local program is managed by the Brevard County Office of Natural Resources Management (County). In July, 1990, a discharge of diesel fuel occurred at the Petitioner's facility. Petitioner's employees estimated that approximately twenty gallons of diesel fuel filled the pump box overflowed from the pump box across the seawall into the adjacent waters. Upon discovering the discharge, Petitioner shut down diesel fuel dispensing until repairs could be made to the apparent cause of the leak. Additionally, the diesel fuel remaining in the pump box and on top of the tank area was removed. Contaminated soil in the pump box was also removed. The apparent cause of the discharge described above was attributed to cracked pipe fittings which were repaired by Glover Oil Co. within a few days of the discharge. No detailed inspection was made to the system to determine if additional sources of discharge existed. Petitioner did not complete a discharge reporting form (DRF) for the above-described incident until April 18, 1991. The April DRF was completed after Petitioner was directed to do so by Ms. DiStasio, an inspector employed by the County. From August, 1990 until May, 1991, at least one monitoring well at the Petitioner's facility showed free product accumulating in the well pipe. The exact amounts of the free product found are unknown, but reports estimated the level at 100 centimeters. From August, 1990 until September, 1991, the Petitioner did not undertake any measure to explore the origin of the free product found in the monitoring well. Further, the Petitioner did not report the monitoring well testing results as a suspected or confirmed discharge. In April, 1991, an inspection of the Petitioner's facility was performed by Ms. DiStasio. That inspection resulted in a letter to the Petitioner that outlined several violations at the facility. Among those violations listed was the Petitioner's failure to report a suspected or confirmed discharge. At the time of the April, 1991 inspection, Petitioner had reported neither the July, 1990 discharge (a known discharge) nor the monitoring well test results (at the minimum a suspected discharge). In connection with the July, 1990 discharge, following the repairs made by Glover Oil, Petitioner did not have the system pressure tested. Only the area visible from the pump box was checked for leakage. In July, 1991, when Ms. DiStasio performed a re-inspection of the facility, she found Petitioner had not (in the interim period, April through July, 1991) taken any steps to test the system or to remove the fuels from the suspect tanks. Since the free product continued to appear in the monitoring well, a pressure test of the system would have definitively answered the discharge question. Alternatively, the removal of the fuels would have prevented further seepage until the system could be pressure tested. On August 6, 1991, the Petitioner issued a letter that advised the County that it had stopped dispensing fuel at the facility. The tanks were not drained, however, until on or about September 11, 1991. Further, the August, 1991, letter acknowledged that the Petitioner "had proposals for initial remedial cleanup related to diesel contamination in the tank field area." Obviously, the Petitioner must have contemplated a need for such cleanup. On September 11, 1991, at the Petitioner's request, Petroleum Equipment Contractors, Inc. attempted to pressure test the 3000 gallon diesel tank. The purpose of the pressure test was to determine if the diesel system had a leak. The company could not even run the test on the tank because of the defective system. A similar test on the Petitioner's gasoline tank passed without incident. Once the Petitioner learned the results of the test, it initiated Initial Remedial Action (IRA) as described on the IRA report filed by Universal Engineering Sciences. The IRA consisted of the removal of the excessively contaminated soil, approximately 74 cubic yards, and the removal of the USTs. The foregoing work was completed on or about September 15, 1991. On October 4, 1991, the Petitioner filed a discharge reporting form dated October 2, 1991, that identified September 11, 1991, as the date of discovery for the discharge. This discharge discovery was allegedly made incidental to the diesel tank pressure testing failure. No reference was made to the months of monitoring well reports showing a free product. On October 8, 1991, Ms. DiStasio prepared a Florida Petroleum Liability Insurance and Restoration Program Compliance Checklist that reported the Petitioner was not in compliance with applicable statutes and rules. When Petitioner applied for restoration coverage under the statute on January 31, 1992, such request was denied by the Department on March 6, 1992. The basis for the denial was as follows: Failure to notify the Department of a positive response to sampling within three working days of testing, pursuant to the rule in effect at the time of the initial response (17-61.050(1), Florida Administrative Code). An inspection by Brevard County on April 17, 1991, revealed that free product had been detected in one monitoring well since July 1990. The discharge reporting form was not submitted until October 2, 1991.
Recommendation Based on the foregoing, it is RECOMMENDED: That the Department of Environmental Regulation enter a final order denying Petitioner's claim for restoration coverage under the Florida Petroleum Liability Insurance and Restoration Program. DONE and ENTERED this 31st day of December, 1992, in Tallahassee, Leon County, Florida. JOYOUS D. PARRISH Hearing Officer Division of Administrative Hearings The DeSoto Building 1230 Apalachee Parkway Tallahassee, Florida 32399-1550 (904) 488-9675 Filed with the Clerk of the Division of Administrative Hearings this 31st day of December, 1992. APPENDIX TO CASE NO. 92-2121 RULINGS ON THE PROPOSED FINDINGS OF FACT SUBMITTED BY THE PETITIONER: Paragraphs 1, 2, 8, 12, 15, 16, 17, and 18 are accepted. Except as found above, paragraph 3 is rejected as not supported by the record cited. It is accepted that Brevard County acted as the local agent in this case. Paragraph 4 is rejected as not supported by the record. With regard to paragraph 5, substituting "A" for "The" and "confirmed" for "discovered" the paragraph can be accepted; otherwise rejected as contrary to the record. Similarly, with the substitution of the word "confirmation" for "discovery" in Paragraph 6, the paragraph can be accepted; otherwise rejected as contrary to the record. No suitable explanation was offered by the Petitioner for why, if a discharge were not reasonably suspected, it retained the company to immediately remove the USTs upon the failed pressure testing. Clearly, the Club had a notion the tanks were a discharge problem. Paragraph 7 is rejected as contrary to the weight of the evidence. While there was some confusion as to the exact volume of free product in the monitoring well, there was clear evidence that such was reported for many months prior to the confirmation in September, 1991. Further, the main confusion regarding the product found in the well was not as to its existence, but as to the individual's knowledge of the metric measurement of it. One hundred centimeters of product in a two or three inch pipe would not be a minute amount. Except as addressed in the foregoing findings, paragraph 9 is rejected as contrary to the weight of the evidence. Petitioner did not undertake all repairs necessary to abate a discharge problem. Paragraph 10 is rejected as not supported by the weight of credible evidence or irrelevant. Clearly, as early as August, 1990, Petitioner knew or should have known of a discharge problem based upon the monitoring well report; that all of the discharge did not necessarily flow from the fittings that had been repaired is irrelevant. Further, Petitioner did no testing to verify that the replaced fittings had solved the discharge problem (especially in light of the well reports). Paragraph 11 is rejected as an inaccurate restatement of the exhibit. Paragraph 13 is rejected as contrary to the weight of the evidence. Incidentally, the hearing in this case was in the year 1992. Paragraph 14 is rejected as contrary to the weight of credible evidence. RULINGS ON THE PROPOSED FINDINGS OF FACT SUBMITTED BY THE RESPONDENT: Paragraphs 1 through 11 are accepted. Paragraph 12 is rejected as a misstatement of the exhibit cited. Paragraphs 13 through 27 are accepted. COPIES FURNISHED: Brigette A. Ffolkes Assistant General Counsel Department of Environmental Regulation Twin Towers Office Building 2600 Blair Stone Road Tallahassee, Florida 32399-2400 Scott E. Wilt MAGUIRE, VOORHIS & WELLS, P.A. 2 South Orange Plaza P.O. Box 633 Orlando, Florida 32802 Carol Browner, Secretary Department of Environmental Regulation Twin Towers Office Building 2600 Blair Stone Road Tallahassee, Florida 32399-2400 Daniel H. Thompson, General Counsel Department of Environmental Regulation Twin Towers Office Building 2600 Blair Stone Road Tallahassee, Florida 32399-2400
The Issue By this action Petitioner seeks to recover costs, expenses and damages associated with state response to an oil spill incident occurring February 26, 1987, within three miles of the Florida shoreline. Respondent's vessel was responsible for that spill. In particular the costs, expenses and damages claimed are related to salaries, per diem allowances, Federal Express charges, beach sand replacement, equipment, use of a cellular phone, and consulting work at the shore and off site. Petitioner also seeks damages for bird mortality resulting from the spill. See Chapter 376, Florida Statutes, and Chapter 16N- 16, Florida Administrative Code.
Findings Of Fact On the evening of February 26, 1987, the motor vessel Fernpassat struck the south jetty at the entrance to the St. Johns River at a location within three miles of the Florida shoreline. In doing so it ruptured the hull and spilled a substantial amount of heavy fuel oil. The type of the oil was No. 5 or 6 Bunker C. A preliminary estimate placed the amount of oil in excess of 100,000 gallons. While the true amount may have been somewhat less, it was a significant spill in that it substantially threatened the public's welfare and the environment and generated wide public interest. Petitioner's exhibit 3 is a map which depicts the basic location where the vessel collided with the jetty with an "X" mark. The area impacted by the discharge ran from roughly Atlantic Beach, Florida, to Guana State Park in St. Augustine, Florida. This is approximately 25 miles of beach front. Beach property over which Petitioner has regulatory and proprietary responsibility had oil deposited upon it. The oil spill killed or injured a number of birds. The event was responded to by the "Federal Region IV Regional Response Team" (RRT). The federal on-scene coordinator (OSC) was Captain Matthew Woods, U.S. Coast Guard. The RRT, through management and control provided by the OSC, took necessary steps to combat the effects of the spill. Respondent immediately accepted responsibility for the cleanup through the use of a consultant and cleanup contractor. Under this arrangement the OSC monitored the contractor's cleanup efforts to make certain that the job was done satisfactorily. Florida officials were part of the RRT. Rule 16N-16.009(21), Florida Administrative Code, calls for personnel from Petitioner; the State of Florida, Department of Environmental Regulation (DER); and the State of Florida, Department of Community Affairs (DCA) to represent state interests as members of the RRT. Each of these agencies participated as members of the RRT. This furthered the legislative intent expressed at Section 376.021(6), Florida Statutes, to support the RRT through implementation of the "Federal Water Pollution Control Act," which is also known as the "Clean Water Act," 33 U.S.C. ss. 1251-1376. By its efforts the RRT promoted the removal of the oil in accordance with a national contingency plan. Pursuant to Section 376.021(6), Florida Statutes, the state is expected to complement applicable provisions within the "Federal Water Pollution Control Act" as well as render the support previously described. Both the support and complementary functions of the state are part of Florida's "Pollutant Spill and Prevention Control Act," Sections 376.011-376.17, 376.19-376.21, Florida Statutes. Chapters 16N-16, Florida Administrative Code, more completely identifies the role played by the state agencies in this instance. This chapter was adopted pursuant to authority set out in Section 376.07, Florida Statutes, which, among other things, empowered Petitioner to make rules which developed and implemented criteria and plans to respond to spills such as the one at issue. In its complementary role the state has established a "State Response Team" (SRT). This organization in defined at Rule 16N-16.009(13), Florida Administrative Code. It is constituted of predesignated state agencies available continually to respond to a major spill. This incident was a major spill or discharge as defined in Rule 16N-16.009(18), Florida Administrative Code. The predesignated state agencies, pursuant to the rule defining the SRT and Section 376.07(2)(e), Florida Statutes, act independently of the federal authorities, although they are expected to cooperate with the federal authorities in the efforts at cleanup. What that meant here is that notwithstanding the concerns which Captain Woods had and the state participation in the RRT through Petitioner, DER and DCA, there was a parallel function by the SRT which had its own mandate. This allowed the SRT to pursue an independent agenda in the spirit of cooperation with the OSC in an attempt to protect the resources over which the state has jurisdiction, including the beach front and birds. Both Captain Woods and the consultant to the spiller, James L. O'Brien, who is a man of considerable credentials in giving advice about oil spill problems, expressed their understanding of the interests which the state might have in carrying out its functions and did not find that reality a hindrance in performing their duties. As a result, even though state employees and equipment and consultants to the state had limited utility for the OSC and the consultant to the spiller in carrying out their duties, it does not follow that claims by the state for reimbursement in categories set out in the statement of issues must fail unless found to support the OSC or spiller's choice in attempts at cleanup. The question is whether the costs, expenses and damages are reasonably related to support for the RRT or complementary of that function through the SRT and owed or expended from the Florida Coastal Protection Trust Fund (Fund) for recoverable items. See Section 376.11, Florida Statutes. Petitioner's exhibit 15 is a copy of the state contingency plan. See Section 376.07(2)(e), Florida Statutes. It identifies the membership of Petitioner, DER and DCA. Other claimants for costs, expenses, and damages who were involved in the response to this incident as predesignated agencies are the Florida Game and Fresh Water Fish Commission (Commission), the State of Florida, Department of Transportation (DOT), and the Attorney General. The state contingency plan explains the operational responsibilities of state agencies when responding to the incident. This is a more specific reference to those responsibilities as envisioned by the general guidelines announced in the "Pollution Spill Prevention and Control Act." Having considered the testimony and exhibits in the context of the state support and complementary role in responding to the spill contemplated by the aforementioned laws, regulations and contingency plans, the costs, expenses and damages sought by the Petitioner are reasonably related to those purposes. Those costs, expenses and damages are detailed in Petitioner's exhibit 16 and summarized in Petitioner's exhibits 8 and 9. With the exception of $15,654.37 in costs and expenses for Petitioner's Executive Office and Division of Law Enforcement and $3,336.16 for salaries for the Commission, DOT and DCA, all claims for expenses and costs have been paid from the Fund. Petitioner wishes to impose the costs, expenses and damages in the state response whether or not claims were disbursed from the Fund. The damage claim associated with future beach re-nourishment by replacement of sand that had been befouled by oil and needed to be removed is a reasonable claim in the amount of $10,222.50. It has been paid from the Fund and is held in the Erosion Control Trust Fund until needed. The on-scene consulting fee of $3,525.00 and the oil spill assessment study fee of $9,880.00 commissioned by Petitioner through Jacksonville University are reasonably related to the Department's role in response to the spill. As Petitioner's exhibit 8 depicts, $30,312.53 has been disbursed from the Fund in costs, expenses and damages reasonably related to the response to the spill. There remains unpaid from the Fund the aforementioned costs and expenses in the amount of $18,990.53 which are reasonably related to the response to the spill. Those latter amounts, although presented for payment from the Fund by the agencies in question, were not paid, based upon some fiscal anomaly. By inference, it does not appear from this record that the Fund owes the agencies for these claims. According to Section 376.13, Florida Statutes, on February 27, 1987, Governor Martinez declared a state of emergency in response to the oil spill. That proclamation was withdrawn on March 25, 1987. The activities for which claims for costs and expenses are advanced transpired in the time frame of the state of emergency declaration. The amount which Respondent has expended in the cleanup effort is $700,000 plus or minus $200,000. None of this money has been paid to satisfy claims for costs, expenses and damages previously described. While it has been found that costs, expenses, and damages are reasonably related to the state's purposes in responding to the spill, not all items are recoverable. They are only recoverable if recognized for recovery by Chapter 376, Florida Statutes, and Chapter 16N-16, Florida Administrative Code, and owed or expended from the Fund. Petitioner's claims in its exhibit 8 in the amount of $12,901.30 and DOT claims for $675.19 in that exhibit qualify for recovery as well as the on-scene consulting fee of $3,525.00. Other claims do not qualify with the exception of a limited recovery for bird mortality. Reasons for this fact finding are set forth in the conclusions of law. Petitioner has disbursed $176,058.00 to the Commission for damages related to alleged bird mortality. This money was disbursed from the Fund. Petitioner now concedes that the amount should be reduced by half. This recognizes that the cost estimate for damages dealt with pairs of birds not single birds. Petitioner now asks for $88,075.00. Two hundred fourteen (214) birds are said to have died as a result of the spill, according to Petitioner. Petitioner seeks damages for each of these birds. The number proven to have been killed by the event and the theory upon which the damage claim is predicated leads to a result which diminishes the claim for reasons to be explained. As with other claims, Section 376.021.(4)(c), Florida Statutes, anticipates the payment of damages from the Fund. Section 376.11(1), Florida Statutes, is in aid of recovery of damages, as is Section 376.11(4)(d), Florida Statutes. However, these claims must be susceptible to proof that readily identifies and explains valuation methods of the birds and recognizes the predicate of establishing the actual number lost in this episode. For the most part, Petitioner has failed in the endeavor. Mark Damian Duda is a wildlife biologist with the Commission. He earned a bachelor of science degree from West Virginia University and received his master's degree in natural resource policy and planning from Yale University, both with honors. He was assigned the task of trying to arrive at an acceptable method for valuing birds that had been killed. His assessment is generally set forth in a report, a copy of which is Respondent's exhibit 3. Having considered a number of options, he reached the decision to employ what he describes as the replacement value method. Quoting from his report concerning this method, he has this to say: Replacement Value Method We believe the replacement value method is the most useful and logical method to determine the value of wildlife lost in the February 27 Jacksonville oil spill. A replacement cost approach can avoid many of the problems involved in attempting to estimate the use of value of biological resources. Under the replacement cost approach, the resource is valued at what it would cost to replace it. If the resource is replaced, the problems of identifying all its uses, the monetary value of these uses, and the users affected by the resource loss are eliminated, except for the period between the initial loss and the replacement. Four Florida institutions were asked to estimate the cost of obtaining specimens of the birds killed in the Jacksonville oil spill, or the price at which they would be willing to sell members of each species. Their estimates are shown in Table 4. One problem with most of these estimates is that they are not true replacements costs; but rather the cost of collecting already existing specimens from the wild and redistributing them to the Jacksonville Area. This does not represent true replacement, since true replacement requires a complete recovery of the species population. This can be most clearly assured by using only captive breeding programs for replacement. However, many of the species in this list probably cannot be bred in captivity. Therefore, true replacement of these species through captive breeding is probably impossible. It is absurd to value them at zero since they cannot be replaced. Therefore, this section presents some calculations on the assumption that they could be redistributed or replaced. Table 1 presents the replacement costs for the birds. The numbers were derived by multiplying the number of dead birds times the average replacement costs given in Table 4. Using this approach, the total replacement costs for the birds estimated to have been killed in the Jacksonville oil spill is $176,058.00. It should be noted that we use a deliberately conservative approach, using body counts only, and thereby underestimating the total mortality. There is an increasing amount of scientific literature indicating that actual body counts appear to significantly underestimate the total mortality resulting from a spill. For example, there have been a variety of experiments that show only 5 percent to 25 percent of the birds that die at sea, wash in or beach themselves on shore. The percent of loons found is probably even lower because of their low buoyancy and wide-ranging distribution. An alternative approach to estimating replacement costs is to estimate the cost of creating new habitat or enhancing existing habitat to support enough nesting pairs of each species to replenish the population. Again, to represent true replacement costs, this should be new or enhances habitat, not just the cost of acquiring already existing habitat. Tables 1 and 4 within Respondent's exhibit 3 are replicated here for convenience as Appendix 2 and Appendix 3, respectively. The numbers of birds shown in Duda's table are not numbers about which he has direct knowledge. They are numbers purportedly obtained from Tim O'Meara and Peter Southall, biologists who work for the Commission who got their information from the Central Region and Northeast Region, respectively. In particular, they allegedly received their information from rehabilitators working in the two regions. Neither biologist testified at hearing, and the exhibits do not satisfactorily establish what involvement the biologists had in a direct inventory of birds, if any, or the other sources of their information which was then given to Duda in preparing his report. The rehabilitators in the Central Region did not testify nor were any exhibits presented which spoke to records kept by those individuals that set out bird deaths in that area. The only person who presented any reliable information concerning bird mortality was Cindy Mosling, rehabilitator in the Northeast Region. Any records which she maintained were not produced at hearing. Nonetheless, she did remember some details concerning bird mortality, and from this testimony 56 common loons, 3 gannets, 1 black skimmer and 2 hooded mergansers are found to have died as a result of the oil spill. The replacement value method by Duda speaks to the fact that his method does not constitute a complete recovery of the species population. Instead, what is shown in Respondent's exhibit 3 is averaging of estimates from Table 4 on costs for collecting existing specimens from the wild and releasing them back to the Jacksonville area after a period as opposed to a captive breeding program. That explanation is not correct, either, because there is no intention to release birds to the wild after raising them or rehabilitating them in captivity in one of the Florida institutions mentioned in Table 4. Moreover, only one of those programs has been relied upon by Petitioner in arriving at a cost estimate. That program is Sea World. As a consequence, the cost analysis in Table 1 related to hooded mergansers is incorrect in that it reflects an average of $150 and not the $200 quoted by Sea world. Again, the prices reflect pairs and not single birds. Robin Friday is the curator from Sea World who supplied cost estimates for pairs in Table 4 to Respondent's exhibit 3. He arrived at his price estimates in a 15 to 20 minute telephone conversation with Duda. To the extent he had no actual experience with price lists reflecting cost of a specie, he assumed that theoretical permits would be issued to collect live birds or eggs in the wild and that he would keep them in a captive environment, hoping they would breed while in captivity. In the latter category, the costs to promote the outcome of breeding in captivity formed his estimate. It can be seen that this departs from Duda's method for valuation. Notwithstanding this fact, Duda relied upon the price quotation by Friday. The main species of birds which Friday has had experience with are waterfowl. Of the species which have been verified as lost in this incident, he had had experience with common loons and hooded mergansers. The hooded merganser is a waterfowl with which he has close experience in breeding, acquisition and disposition. The common loon is a shore bird. In his career he has worked to rehabilitate two or three of those birds. He has had no experience with gannets and black skimmers, which are shore birds. As Friday identified, waterfowl may be sold, shore birds may not. Sale of the shore birds is prohibited by law. His price quotes for the hooded mergansers are from actual experience in sales. His quotations on the other species are matters of conjecture in collecting, housing, feeding and establishing a breeding program for them based upon limited experience in rehabilitating common loons and no experience with gannets and the black skimmer. The price estimate on the hooded merganser of $100 per bird is accepted. The price estimates for common loons, gannets and black skimmers are not. They are too speculative. Jean Benchinol is a curator in Gulf Breeze, Florida, who works for Animal Park, Inc. She testified at hearing. She was presented as a witness who could corroborate the Friday opinion on bird valuation. Her cost estimates may be found as Petitioner's exhibit 14, quotes for single birds. She has had direct involvement with hooded mergansers. She has sold those birds and quoted the price at hearing as being $100. This coincides with the price per bird quoted by Friday. For other birds in her price estimates that cannot be bought and sold and that remain at issue here, that is, common loons, gannets and the black skimmer, she categorized them as capable of surviving in captivity or not. The black skimmers can live in captivity and the common loon and gannet cannot, according to the witness. She had had a common loon in captivity before and noted that it did not do well, being more receptive to northern climes. At hearing her opinion about birds that could not survive in the Florida environment was rejected. In this final analysis, that refers to the common loons and gannets. Likewise, having considered her explanation concerning her valuation for the black skimmer, that opinion is rejected. In rejecting this method, the cross examination at hearing concerning valuation for the royal tern was significant in that it pointed out the inexact and unreliable nature of the method. This method contemplated receiving a live bird in her facility and the costs for medication, housing, feeding and staff time for approximately 60 days. In summary, on the subject of bird mortality, there is no inherent prohibition against valuation; birds do have a value that can be measured in monetary terms. Here the effort to arrive at that understanding fails in the inventory of casualties and method of valuation, with a limited exception. It is also observed that the Respondent had paid the rehabilitators to house, feed and nurse birds back to health that were injured, a similar activity to the theoretical exercise envisioned by Duda, Friday and Benchinol.
Recommendation Based upon the consideration of the facts and the conclusions of law reached, it is, RECOMMENDED: That a Final Order be entered which requires the Respondent to reimburse the Fund in the amount of $17,301.58 and dismisses all other charges against Respondent. DONE and ENTERED this 26th day of July, 1990, in Tallahassee, Florida. CHARLES C. ADAMS, 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 July, 1990. APPENDIX 1 The following discussion is given concerning the proposed facts of the parties. Petitioner's Facts Paragraphs 1 and 2 are subordinate to facts found. Paragraph 3 is not necessary to the resolution of the dispute. Paragraphs 4 and 5 are subordinate to facts found. The first two sentences of Paragraph 6 are subordinate to facts found. The last two sentences are not necessary to the resolution of the dispute. Paragraph 7 is not necessary to the resolution of the dispute. Paragraph 8 is subordinate to facts found. The first two sentences of Paragraph 9 are subordinate to facts found. While it is agreed that the correspondence from Petitioner to Respondent did not indicate that claims for costs and expenses were only subject to collection if paid from the Florida Coastal Protection Trust Fund, in the administrative forum recoupment of costs, expenses and damages may only be permitted for monies owed or expended from the fund. Paragraphs 10-13 are subordinate to facts found. It is acknowledged as set forth in Paragraph 14 that money was transferred from Coastal Protection Trust Fund to the Erosion Control Trust Fund for future beach renourishment. The more relevant fact is whether the claim for damages of value under the renourishment is legitimate and that determination has been made favoring the Petitioner. The concept of using the funds that are being held for purposes of future renourishment is in keeping with a reasonable disposition of the damage claim. Paragraphs 15-24 are subordinate to facts found. The first sentence to Paragraph 25 is contrary to facts found. The second sentence is subordinate to facts found. The third sentence is an accurate statement of what Table 1 contributes but the findings in that table are rejected in part. The first sentence to Paragraph 26 is subordinate to facts found. The second sentence is accepted in the sense of recognizing that a list was maintained; however, that list was not produced at hearing as an aide in determining the number of birds that were killed. The third sentence is rejected. The fourth and fifth sentences are knowledged and those underlying facts were taken into account in accepting the representations by the witness Mosling concerning the number of birds that died as a result of the oil spill which she could recall. Paragraph 27 is subordinate to facts found. Paragraph 28 is subordinate to facts found. Paragraph 29 is not necessary to the resolution of the dispute. The first sentence to Paragraph 30 is subordinate to facts found. The second sentence is not necessary to the resolution of the dispute. The first sentence to Paragraph 31 is subordinate to facts found. The second sentence is accepted with the exception that certain categories of water fowl are bought and sold in the free market. Concerning the third sentence, while it is acknowledged that curators are the better persons to attempt valuation, they must have sufficient understanding of the varieties on which they are commenting to have their opinions accepted and their methods of analysis of costs must stand scrutiny. This was not achieved in this instance. The last sentence in Paragraph 31 is not accepted in that the replacement value method was not adequately explained and does not allow a ranking of whether it is inexpensive, or cheaper or some where in the middle. Paragraph 32 is subordinate to facts found. The first sentence to Paragraph 33 is subordinate to facts found. The second sentence is subordinate to facts found as it references hooded mergansers. The other references are to species which have not been found to have been lost to the spill. The last sentence is accepted in the sense that the remaining species have limitations placed upon their use by state and federal law which prohibits the buying and selling. Paragraph 34 in its reference to the cost of hooded mergansers is accepted. The balance of the information was not utilized in that the Petitioner failed to demonstrate that other species had been lost to the spill. In Paragraph 35 of the species that testimony was presented about, only the common loon, gannets and black skimmer pertain. While it is acknowledged that the method that the witness Friday used to estimate the value of those species is an accurate portrayal of his efforts, those efforts were rejected as were those of Ms. Benchinol described in Paragraph 36. In Paragraph 36 the explanation of her methods is correct. The methods were not accepted either in support of the testimony by Friday or in her own right. There is no significance to the discussion concerning the brown pelican and inadequate proof was made that the brown pelicans were lost. Respondent's Facts The first sentence to Paragraphs 1 is subordinate to facts found. The last two sentences are not necessary to the resolution of the dispute. As to Paragraph 2, it is acknowledged that Mr. Healey served as the liaison to the RRT and OSC. In the second sentence to that paragraph it is accepted that the state supports the RRT. It also has the function to compliment the RRT and to act independent of the federal response. The first sentence to Paragraph 3 is subordinate to facts found. The second and third sentences are not necessary to the resolution of the dispute. The fourth and fifth sentences are subordinate to facts found. While Paragraph 4 accurately describes the circumstance, this did not deter the state from pursuing its independent function in responding to the spill event. Paragraph 5 accurately portrays the OCS's idea of who was necessary to support the federal response. It does not preclude the activities of other state employees in carrying out their functions. Paragraph 6 is contrary to facts found. Paragraph 7 is a correct statement but does not preclude the state's efforts in its own right at responding to the spill. Paragraph 8 is subordinate to facts found. Paragraph 9 while an accurate portrayal does not preclude the state in its efforts. The same pertains to Paragraph 10. Paragraph 11 is contrary to facts found. Paragraph 12 is subordinate to facts found. Paragraph 13 is contrary to facts found as is Paragraph 14. Paragraph 15 is subordinate to facts found. Paragraph 16 is not relevant. Paragraph 17 is an accurate portrayal of the federal use of the state helicopter but does not preclude request for reimbursement for uses which the state had of that helicopter. Paragraph 18 is subordinate to facts found. The first two sentences within Paragraph 19 are subordinate to facts found. The third and fourth sentences are not relevant to the issue of whether the state was entitled to seek the assistance or Jacksonville University for its own purposes distinct from those of the federal response. The latter sentence is a correct portrayal of the outcome but for reasons different than contemplated by the Respondent. Paragraph 20 is subordinate to facts found. Paragraph 21 is subordinate to facts found. Paragraph 22 is subordinate to facts found in its first two sentences. The third sentence is not accepted beyond the fact that the Department of Interior using a nonconsumptive use technique, whether other federal agencies use that method was not subject to determination from the record. The first three sentences to Paragraph 23 are not necessary to the resolution of the dispute. The fourth sentence is not accepted. The fifth and sixth sentences are subordinate to facts found. As to the seventh sentence, it is not clear that there was the intention of redistributing to the Jacksonville area. The eighth sentence is subordinate to facts found. Paragraph 24 is subordinate to facts found as are Paragraphs 25 and 26. The suggestion of the price for hooded mergansers as set out in Paragraph 27 is not accepted. The lesser scaup was not found to have been lost to the spill. The state price of $100.00 per bird for hooded mergansers is accepted. Paragraphs 28-31 are subordinate to facts found as it pertains to the species that were proven to have been lost. Paragraph 32 is not necessary to the resolution of the dispute. Paragraphs 33 and 34 are subordinate to facts found, with the exception that it has been determined that the number of dead birds which Ms. Mosling can recall involvement with is accepted. Paragraphs 35 through 37 are subordinate to facts found in the species determined to have been lost, with the exception that the actual price for hooded mergansers was $100. COPIES FURNISHED: Tom Gardner, Executive Director Department of Natural Resources 3900 Commonwealth Boulevard Tallahassee, FL 32399 Kenneth J. Plante, General Counsel Lynn M. Finnegan, Assistant General Counsel Department of Natural Resources 3900 Commonwealth Boulevard Tallahassee, FL 32399 Robert B. Parrish, Esquire James F. Moody, Jr., Esquire Taylor, Moseley & Joyner 501 West Bay Street Jacksonville, FL 32202
