The Issue At issue in this proceeding is whether Respondent, a tool company, should be required to repay funds that the Department of Labor and Employment Security, Division of Workforce and Employment Opportunity (the "Department") alleges were erroneously paid under a North American Free Trade Agreement- Transitional Adjustment Assistance ("NAFTA" or "NAFTA-TAA") job training program for equipment that Respondent provided to two NAFTA-TAA trainees.
Findings Of Fact Based on the oral and documentary evidence adduced at the final hearing, the following findings of fact are made: The Department administers NAFTA-TAA, a job training program established under the provisions of the North American Free Trade Agreement and funded by the federal government. The program provides vocational training for employees adversely affected by trade agreements made by the United States with Canada and Latin America. Once a business is certified as "NAFTA eligible" based upon diminished employment opportunities attributable to international trade, the affected employees are referred to the Department for evaluation by a local NAFTA coordinator. In consultation with the Department's local NAFTA coordinator, a participant chooses from training programs taught at various public and private educational institutions and vocational training facilities. The student is provided a training allowance that includes the cost of tuition, books and fees. The Department arranges to pay training costs directly, and to pay vendors for the required books, tools and supplies. In this case, the Department alleges that two students participating in the NAFTA program purchased tools from Respondent that were not required for their training as automotive technicians. The Department alleges that, by providing tools not required for training and obtaining reimbursement therefor from the Department, Respondent acted in violation of the "rules and practices" of the NAFTA program. The Department offered no evidence that it has promulgated rules related to its administration of the NAFTA- TAA program, and offered no evidence of a Florida statute or of federal statutes, rules or policies governing the Department's administration of the program. The Department produced no documentation to indicate that it has developed official written policies regarding its administration of the NAFTA-TAA program. Henry Broomfield, the Department's statewide TAA coordinator, testified as to the actual operation of the program. Mr. Broomfield stated that the program pays for tuition, books and supplies for up to 104 weeks. He testified that the participating schools are required to present a list of the books, tools and supplies that the student will need during training, and that reimbursement is limited to the items on that list. Mr. Broomfield testified that the list is limited to items required for training, and does not include tools that students may need in the field after they complete their training. The student and the Department's local TAA coordinator are provided with copies of the list. Charles Thackrah, an instructor at P-Tech, testified as to the development of the approved book, tool and supply list at his institution. The list was developed over time by Mr. Thackrah and his fellow instructors, and includes the minimum basic hand tools required to complete the objectives of the program. The list was not developed specifically for the NAFTA program, but is the minimum tool list for all students enrolled in the automotive service technology course. Mr. Thackrah stated that P-Tech does not require the purchase of tools outside the list. Mr. Broomfield testified that when a student needs particular items on the list, the student must contact the local TAA coordinator, who authorizes the purchase from a third party vendor. When the student receives the tools, the third party vendor sends the bill to the local TAA coordinator, who then forwards the invoice to the state office for final approval. Mr. Broomfield testified that a request for an unlisted tool must be made in writing by the student's instructor. The student brings the written request to the local TAA coordinator, who forwards it to Mr. Broomfield's office for final approval. The instructor must verify that the requested tool is necessary for training. The evidence established that, aside from one incident in which a student obtained approval for a special pair of welding shoes, neither of the students in question followed the approval procedure for unlisted tools set forth by Mr. Broomfield. On February 13, 1998, Howard Spangler of Largo was enrolled in the NAFTA-TAA program by the Department's local coordinator for the Clearwater area, Margaret Brewer. Mr. Spangler was enrolled for training as an automotive technician. Also on that date, Mr. Spangler received a letter approving his request for training. The letter stated that his training would be provided by P-Tech "at a cost not to exceed $4,400.00." The letter stated that this amount "includes tuition, books, supplies and fees." Also on February 13, 1998, Ms. Brewer provided Mr. Spangler with an "Applicant Acknowledgement Form" stating that $2,400 would be allotted for "books, equipment, supplies and/or tools. This is the total amount allowed for the entire length of your training, be it a one-week, or a two-year course." The form stated that "books, special equipment, tools and uniforms will be limited to those items required by the school for every student." The form also stated that when the amount allotted for training materials has been exhausted, any additional costs must be borne by the student. Mr. Spangler signed the form, acknowledging that its contents had been "fully discussed" with him. The evidence established that Mr. Spangler obtained from Respondent tools that were not on the approved list at a total price of $4,336.92, and that the Department paid Respondent for those purchases. Mr. Spangler testified that he was aware of the limits set forth in the letter and acknowledgement form, and of the approved list of tools, but also testified that Ms. Brewer told him that he could purchase items not on the list with his instructor's approval. He stated that Ms. Brewer never told him that her approval was required for purchases of tools not on the list. Mr. Spangler testified that he approached Ms. Brewer about a pair of special shoes for his welding course. Although the welding shoes were on the approved list, Mr. Spangler wanted Ms. Brewer's approval for his purchase because he paid more for them than the price shown on the list. Mr. Spangler testified that during this conversation he also asked Ms. Brewer about purchasing tools not on the list, and that Ms. Brewer told him that he needed only his instructor's signature to obtain tools he would need in the field. Mr. Spangler understood the $4,400 limit on tuition, books, supplies and fees. Notwithstanding the limit, he purchased over $4,000 in tools alone from Respondent. He stated that he relied on Ms. Brewer's advice in making these purchases. Mr. Spangler testified that it would be difficult to hold a job in the field with only the tools included on the approved list, and that Ms. Brewer clearly imparted the understanding to him that he would be allowed to purchase whatever he needed for the field, if his instructor approved. Ms. Brewer testified that she always told the students that the state would not pay for tools outside of those on the list. She told the student that if he needed something special that the instructor believed was necessary to complete the course, then the student would have to bring her a letter from the instructor. She would then send the letter to Mr. Broomfield in Tallahassee for approval. Ms. Brewer recalled Mr. Spangler approaching her about approval for the welding shoes, but did not recall telling him that he could get approval for items outside the approved list. She testified that she would not have approved purchases of items not on the list without writing a letter of explanation to Mr. Broomfield and obtaining his final approval. The facts that Mr. Spangler approached Ms. Brewer for approval of the welding shoes, and that Ms. Brewer submitted this request to Tallahassee for final approval, tend to support Ms. Brewer's testimony as to what transpired between her and Mr. Spangler regarding the necessity of Department approval for items not on the approved list. Ms. Brewer testified that, as far as she knew, she had no independent authority to approve purchases outside the list. She stated that it was her understanding that the NAFTA program dealt strictly with the tools needed to complete the coursework, not with tools that students might need in the field after completing the courses. Ms. Brewer had no direct contact with the vendors, but relied on the students to convey the information regarding the NAFTA program to the vendors and to their instructors. Mr. Thackrah was Mr. Spangler's instructor, and testified that he did not tell Mr. Spangler that the NAFTA program would pay for tools that he would need in the field after completing his coursework. Mr. Thackrah stated that he did not have the responsibility to track the various programs that provided funding to his students, and that he did not know what the NAFTA program would provide. Mr. Thackrah testified that he was provided no written guidelines as what the NAFTA program would or would not pay for. He stated that anything he knew about the NAFTA program was conveyed to him by his students, who told him that NAFTA would cover anything they would need in the field. Mr. Thackrah recalled helping the students put together lists of tools they would need in the field. He assumed that NAFTA would pay for these tools, based on his students' explanation of the program. Mr. Thackrah testified that he might have passed along this understanding of the NAFTA program information to Keith Williams, Respondent's employee in charge of the P-Tech account. Mr. Thackrah did not believe he told Mr. Williams that the students were allowed to buy anything they wanted, but that Mr. Williams may have heard that from the students. Mr. Williams testified that he had an informal meeting with instructors at P-Tech, and that they told him that the NAFTA students were entitled to any tools that they would need in the field to perform an automotive technician's job. The instructors gave him no dollar limit on those purchases, and told him that the students needed only the instructors' approval to purchase the tools. Mr. Williams testified that these students must have "thought it was Christmas." Mr. Williams recalled that Mr. Thackrah was "probably" the person who gave him the information about NAFTA reimbursements. Mr. Williams testified that he took the P- Tech instructors at their word, because he had been dealing with them over the course of five years and never had a problem with reimbursements. On September 1, 1998, Robert Dennison of Pinellas Park was enrolled in the NAFTA-TAA program by the Department's local coordinator for the St. Petersburg area, Sylvia Wells- Moore. Mr. Dennison was enrolled for training as an automotive technician. Also on that date, Mr. Dennison received a letter approving his request for training. The letter stated that his training would be provided by P-Tech "at a cost not to exceed $3,950." The letter stated that this amount "includes tuition, books, supplies and fees." Also on September 1, 1998, Ms. Wells-Moore provided Mr. Dennison with an "Applicant Acknowledgement Form" stating that $450 would be allotted for "books, equipment, supplies and/or tools. This is the total amount allowed for the entire length of your training, be it a one-week, or a two year course." The form stated that "books, special equipment, tools and uniforms will be limited to those items required by the school for every student." The form also stated that when the amount allotted for training materials has been exhausted, any additional costs must be borne by the student. Mr. Dennison signed the form, acknowledging that its contents had been "fully discussed" with him. The evidence established that Mr. Dennison obtained from Respondent tools that were not on the approved list at a total price of $8,046.79, and that the Department paid Respondent for those purchases. Mr. Dennison testified that he looked at the list of approved tools and concluded that no one could do a mechanic's job with those tools. He asked Ms. Wells-Moore if other tools would be provided, and she said they would. Mr. Dennison did not recall whether Ms. Wells-Moore told him that he would need her approval for purchases outside the list. He testified that, as he understood the NAFTA program, he believed all the tools he purchased were authorized. Ms. Wells-Moore testified that her practice was to tell students that all their tools and supplies had to come from the approved list. She stated that students were required to come to the Department and obtain a voucher before making any purchases. The student would then take the voucher to the merchant and obtain the approved tools. The merchant is then responsible for sending the invoice to the Department of Labor for reimbursement. Documents entered into evidence at the hearing indicate that Ms. Wells-Moore provided written instructions to Jason Hoch, a salesman working for Respondent on the P-Tech account. These instructions were consistent with her description of the vouchering process. She sent these instructions by facsimile transmission on October 2, 1998, prior to the purchase of any of the unlisted tools by either Mr. Spangler or Mr. Dennison. Ms. Wells-Moore testified that she never told Mr. Dennison that he could purchase items that he would need in the field after completing his coursework. She stated that she was not authorized to approve such purchases. Ms. Wells-Moore testified that if a student approached her about a tool not on the list, her first step would be to contact the instructor to ask whether the student really needed the tool to complete the coursework. She recalled such a conversation with one of Mr. Dennison's instructors, and the instructor telling her that the unlisted tools in question were not required for the course. Richard Knight was Mr. Dennison's instructor at P- Tech. Mr. Knight provided Mr. Dennison with a copy of the approved list and told him that these were the minimum tools. Mr. Knight testified that he had no direct knowledge of the NAFTA program and was unaware of any authority he had to approve the purchase of tools not on the list. He never told Mr. Dennison that NAFTA would provide tools for use in the field. Mr. Knight stated that he never "approved" any tool purchases, but he did recall signing a list of tools that Mr. Dennison brought to him. He understood that his signature was to verify that these were tools that the student would find useful in the field. Mr. Knight never received any written guidelines from the Department as to allowable purchases under the NAFTA program. He recalled a former student in the NAFTA program who said that NAFTA would pay the students for anything they needed in the field. Mr. Knight testified that both Mr. Dennison and Mr. Spangler appeared to assume that NAFTA would pay for tools they would need in the field. Mr. Knight also conceded that he may have relayed the students' understanding to the Respondent's salespeople. Mr. Broomfield testified that he became aware of problems when a representative of Respondent called to complain that some of its invoices were not being paid. Mr. Broomfield could find no record of the invoices at issue. He investigated and discovered that Respondent was bypassing the local TAA coordinators and sending its invoices directly to Tallahassee, some to the wrong division within the Department. Mr. Broomfield testified that this explained why so many unauthorized purchases were reimbursed by the Department. When an invoice arrives at the Tallahassee office, it is assumed that the local TAA coordinator has investigated and approved the purchase. Under ordinary circumstances, the Tallahassee office does not conduct an item-by-item review; it merely processes the invoices and writes the checks. In summary, the evidence established that Mr. Spangler and Mr. Dennison purchased tools not on the approved P-Tech list valued at a total of $12,383.71. The evidence established that these students were provided written notice of the firm limits on the allotted costs for their training. The evidence established that Ms. Wells-Moore gave Respondent written notice of the proper procedure for processing its invoices, prior to any of the unauthorized purchases. The evidence established that Respondent bypassed this procedure, and was reimbursed for purchases that had not been approved at the local level. The evidence established that the Department was remiss in its administration of the NAFTA program. It has promulgated no written rules or policies setting forth the reimbursement limits of the NAFTA program. It provided no written guidelines to either the schools or the vendors regarding allowable purchases. Ms. Brewer frankly stated that she relied on the students to inform their schools and vendors as to the purchasing limits. Whether Messrs. Spangler and Dennison honestly believed their purchases were allowed, or whether they were manipulating the system, they might not have obtained the unauthorized items had the Department directly informed P-Tech of its reimbursement practices. The evidence supports the finding that Respondent at the least was aware that the NAFTA program appeared to be unusually liberal, and that Respondent should have made further inquiry. Mr. Williams likened the program to "Christmas" for its participants. He testified that the instructors explained that the students were entitled to tools they would need in the field. However, the instructors credibly testified that, if they told Mr. Williams such a thing, they were merely relaying what the students told them. At best, Respondent was content to rely on the information provided by the students rather than contacting the Department to seek confirmation. The fact that Respondent bypassed the local TAA coordinators, and offered no explanation for this breach of the billing procedure, supports an inference that Respondent's failure to inquire was not entirely innocent. The evidence established that Respondent knew or should have known that the purchases in question were not covered by the NAFTA program, absent prior approval from the local TAA coordinators and the central office in Tallahassee. The Department's failure to establish a system of informing schools and vendors of the program's requirements was sufficiently obviated in this case by Ms. Wells-Moore's contacts with Respondent's representative. Ms. Wells-Moore directly placed Respondent on notice of the Department's reimbursement practices, prior to the purchases by Messrs. Spangler and Dennison. At the hearing, Respondent asserted a claim that the Department still owes Respondent $14,119.59 for tools provided to Messrs. Spangler and Dennison. Given the findings of fact above, it is unnecessary to address this claim.
Recommendation Based on the foregoing Findings of Fact and Conclusions of Law, it is RECOMMENDED that: The Department enter a final order providing that Respondent is indebted to the Department for NAFTA-TAA program overpayments in the amount of $12,383.71, and that Respondent shall repay the aforesaid amount within six months following entry of the final order. DONE AND ENTERED this 2nd day of February, 2001, in Tallahassee, Leon County, Florida. ___________________________________ LAWRENCE P. STEVENSON Administrative Law Judge Division of Administrative Hearings The DeSoto Building 1230 Apalachee Parkway Tallahassee, Florida 32399-3060 (904) 488-9675 SUNCOM 278-9675 Fax Filing (904) 921-6847 www.doah.state.fl.us Filed with the Clerk of the Division of Administrative Hearings this 2nd day of February, 2001. COPIES FURNISHED: Jacqueline Corbett, Credit Manager Nestor Sales Company, Inc. 7337 Bryan Dairy Road Largo, Florida 34647 Sonja P. Mathews, Esquire Department of Labor and Employment Security 2012 Capital Circle, Southeast Hartman Building, Suite 307 Tallahassee, Florida 32399-2189 Mary B. Hooks, Secretary Department of Labor and Employment Security The Hartman Building, Suite 303 2012 Capital Circle, Southeast Tallahassee, Florida 32399-2152 Sherri Wilkes-Cape, General Counsel Department of Labor and Employment Security 2012 Capital Circle, Southeast The Hartman Building, Suite 307 Tallahassee, Florida 32399-2189
Findings Of Fact The parties stipulated to findings of fact set forth in paragraphs 1.- 8.,below. Stipulated Facts Respondent has documented contamination from the abandoned petroleum storage system. The abandoned petroleum storage system has been properly closed. Petitioner submitted an application to Respondent on Respondent's forms 17-769.900(3) and (4), F.A.C., which was postmarked on or before June 30, 1992. The site is not eligible for cleanup pursuant to Section 376.3071(9) and (12), Florida Statutes, the Early Detection Incentive Program, or the Florida Petroleum Liability and Restoration Insurance Program pursuant to Section 376.3072, Florida Statutes. This site is not owned or operated by the federal government. This site did not have leaking tanks that stored pollutants that are not petroleum products as defined in Section 376.301, Florida Statutes. Respondent was not denied access to this site. Petroleum contamination was not discovered after the application deadline of June 30, 1992. Additional Facts Petitioner, a Florida corporation with its principal place of business in Leon County, Florida, is in the business of owning and leasing property. Petitioner is the fee simple owner of property located at 2022 Wahnish Way in Tallahassee, Florida. The property located on Wahnish Way was leased to James T. "Pete" Thomas by Petitioner's predecessor in title. Thomas operated a gasoline station and automobile repair garage on the property. The lease with Thomas was continued by Petitioner without change upon Petitioner's assumption of the legal title to the property in 1985. Prior to Petitioner's assumption of title to the property, Thomas had installed four petroleum storage systems in a four tank pit on the property in the early 1970's. Each tank and its integral piping is a petroleum storage system, as defined by Section 376.301(15), Florida Statutes (1991). In the early 1980's, Thomas and his wholesale gasoline distributor determined that one of the four underground tanks was losing petroleum product. In 1982, Thomas ceased using the southernmost tank in the pit for the storage of petroleum products for subsequent consumption, use or sale. The distributor ceased placing gasoline in the southernmost tank. Later, in compliance with subsequent statutory enactments, Thomas registered all of the tanks, including the abandoned southernmost tank with Respondent by the statutory deadline of December 31, 1984. Although Thomas signed the registration documents as an agent of Petitioner, he was not such an authorized agent and the registration occurred without the knowledge or approval of Petitioner. As a result, Petitioner cannot be viewed as having filed the registration. Petitioner, unaware that Thomas had experienced any product loss problems or that the tanks on the property had been registered by Thomas with Respondent, became aware of both matters following receipt of a letter from government officials of Leon County, Florida, on November 20, 1990. As set forth in that letter, Petitioner was apprised that the tanks were not in compliance with State of Florida standards and would have to be closed or retrofitted to bring the tanks into compliance. Following receipt of the letter, Petitioner informed Thomas that selling of gasoline at the site was to be discontinued immediately. Closure of the tanks, performed in early 1991 by contractors retained by Petitioner, consisted of excavation and removal of the petroleum storage systems from the property. All four tanks were in the tank pit side by side, from the northernmost end of the pit to the southern end of the pit fronting on Osceola Street in Tallahassee, Florida. When the removal was completed, a Closure Assessment form was prepared by one of the contractors, Jim Stidham and Associates, in accordance with requirements of Florida law. During that process, excessive contamination from petroleum product of the soils in the extreme south end of the tank pit was discovered. Excessive contamination, defined as anything more than 500 parts per million, was located beneath the southernmost pump on the southern end of the pump island and in the southern end of the pit. Both soil sample seven in the southernmost end of the pit and soil sample 11 under the southernmost pump document these unacceptable high levels of contamination. A 20 foot soil boring as near as possible to the southernmost tank on the site revealed the unacceptable levels of contamination extended to that depth. As supported by the testimony of James A. Stidham, Petitioner's expert in the assessment of contamination caused by underground petroleum storage tanks, the location of contamination in the pit area establishes that the tank causing the contamination was the southernmost tank. In view of the location of the contamination in the pit area, the tank discovered to have a hole in it at the time of removal was the southernmost tank. The excessive contamination located at the shallow depth of two feet under the southernmost pump resulted from the improper disconnection of piping attached to the pump and is not attributable to the leak in the tank. Each tank was connected by piping on the eastern end of each tank to the corresponding pump. The southernmost pump was not used after 1982 and was missing integral parts by the time the tanks were closed. In the course of exploring options for clean up of the property, Petitioner filed for assistance from Respondent in the form of participation in the ATRP. Unaware of the true date of the cessation of use of the southernmost tank, Petitioner gave the date of last use for all tanks in the pit by stating that the "tanks were taken out of service between December 15, 1990 and January 15, 1991." Petitioner provided this response to Respondent's July 30, 1991 request for further information on August 6, 1991. Although Respondent made an initial determination to deny Petitioner's application in the middle of August, 1991, that action was not communicated to Petitioner. Instead, Petitioner's application was held by Respondent, pending possible amendment to Section 376.305(7), Florida Statutes (1991), the law controlling admission to the ATRP. Respondent held Petitioner's application for a total of 19 months before issuance of a formal decision to deny the application on February 26, 1993. Such delay by Respondent is unreasonable. Respondent's denial of Petitioner's application was based upon the eligibility requirement restricting ATRP participants to those situations where the petroleum storage system has not stored petroleum products for consumption, use or sale after March 1, 1990, and the belief of Respondent's personnel that all storage systems on Petitioner's property had stored products beyond that date. Specifically, Respondent eventually gave notice that it intended to deny Petitioner's application for participation in the ATRP for the following reason: Eligibility in the Abandoned Tank Restoration Program is restricted to those petroleum storage systems that have not stored petroleum products for consumption, use or sale after March 1, 1990, pursuant to Section 17-769.800(3)(a), Florida Administrative Code. Respondent utilized provisions of Subsection 376.305(7)(f), Florida Statutes (1991), to permit entry of some applicants into the ATRP, demonstrating that Respondent did not consider the March 1, 1990 deadline contained in provisions of Subsection 376.305(7)(b), Florida Statutes (1991), to be absolute. As attested at the final hearing by Respondent's employee, Respondent considered "variables" when determining whether to enforce the March 1, 1990, deadline. Those variables comprise the criteria listed in Subsection 376.305(7)(f), Florida Statutes (1991). By use of those variables, Respondent effectively applied provisions of Subsection 376.305(7)(f), Florida Statutes (1991), to some program applicants other than Petitioner and permitted their participation while choosing to refrain from final agency action under that same criteria with regard to Petitioner's application pending subsequent legislative enactment. Petitioner's southernmost tank is an abandoned petroleum storage system that was not required to be registered with Respondent when it was in service; the system came into the possession of Petitioner following its abandonment; was never returned to service; and is not otherwise eligible for cleanup pursuant to Subsection 376.3071(9), Florida Statutes, or Section 376.3072, Florida Statutes.
Recommendation Based on the foregoing, it is hereby RECOMMENDED that a final order be entered granting Petitioner's application for participation in the ATRP with regard to contamination resulting from Petitioner's southernmost petroleum storage system. DONE AND ENTERED this 1st day of February, 1994, in Tallahassee, Leon County, Florida. DON W. DAVIS Hearing Officer Division of Administrative Hearings The DeSoto Building 1230 Apalachee Parkway Tallahassee, FL 32399-1550 (904) 488-9675 Filed with the Clerk of the Division of Administrative Hearings this 1st day of February, 1994. APPENDIX TO RECOMMENDED ORDER, CASE NO. 93-2658 The following constitutes my rulings, pursuant to Section 120.59, Florida Statutes, upon proposed findings of fact submitted by the parties: Petitioner's Proposed Findings. 1.-23. Adopted, though not verbatim. Respondent's Proposed Findings. 1.-2. Rejected, not supported by weight of the evidence. 3.-4. Rejected, subordinate to HO findings on this point. 5.-11. Accepted. Rejected, relevance. A mischaracterization of the evidence in that the testimony establishes that an existing lease agreement was continued. Accepted to the extent that the evidence establishes that there were four tanks in the pit. Rejected, credibility, weight of the evidence as to the accuracy of the registration form in the face of conflicting evidence. 16.-18. Rejected, weight of the evidence. 19.-20. Accepted. 21.-22. Rejected, subordinate. Accepted. Rejected, relevance. 25.-26. Accepted. 27.-29. Rejected, subordinate. Rejected, relevance. Rejected, argumentative. Accepted. Rejected, legal conclusion, argumentative. COPIES FURNISHED: Melissa Fletcher Allaman Attorney at Law Post Office Drawer 1170 Tallahassee, Florida 32302 Jefferson M. Braswell Lisa M. Duchene W. Douglas Beason Assistant General Counsels Department of Environmental Protection 2600 Blair Stone Road Tallahassee, Florida 32399-2400 Kenneth Plante General Counsel Department of Environmental Protection 2600 Blair Stone Road Tallahassee, Florida 32399-2400 Virginia B. Wetherell Secretary Department of Environmental Protection Twin Towers Office Building 2600 Blair Stone Road Tallahassee, Florida 32399-2400
The Issue The issue is whether to approve an application by Respondent, Dan R. Hughes Company, L.P. (applicant or Hughes), for an oil well drilling permit authorizing the drilling of an exploratory oil well in Collier County, Florida.
Findings Of Fact The Parties Mosher resides on a three-acre lot at 4695 26th Avenue Southeast, Naples, Florida. His residence is around 2,500 feet west of the proposed wellsite, but Mosher says that the eastern edge of his lot "might be 2,000 feet" from the drilling site. He has not, however, measured the actual distance to confirm this assertion. Preserve is a Florida non-profit corporation whose purpose is to educate the public on issues affecting the preservation and protection of the environment, particularly the environment of south and southwest Florida. It was formed in response to Hughes' intention to drill for oil in the area. The corporation is not a membership organization; rather, it has around 25 non-member, active volunteers, six member directors, and an unknown number of donors. Excluding Mosher, the other member directors live between three and ten miles away from the proposed wellsite. The record does not show where the 25 volunteers reside. The corporate representative testified that four directors, including Mosher, regularly use the Florida Panther National Wildlife Refuge (Refuge) to observe wildlife and habitat. However, the public access point to the Refuge appears to be at least several miles from the wellsite. Based upon an email survey, he stated that a "substantial number [around 36] of donors and volunteers utilize the panther refuge," but he was unaware of when, or how often, this occurred. About every six weeks, meetings are conducted at Mosher's home, which are attended by some, but not all, of the directors and volunteers. Schwartz's primary residence is in Lake Worth (Palm Beach County) where he serves as the unpaid executive director of the South Florida Wildlands Association.3 He sometimes provides paid tours in the Everglades and Big Cypress Swamp and has led "numerous" free hikes into panther habitat to look for signs of panthers. These hikes are limited to the hiking trails in the southeast corner of the Refuge, which is the only area that can be accessed by the public. He represented himself as an advocate for the protection of wildlife habitat in the greater Everglades, with a particular interest in the Florida panther. Hughes is a Texas limited partnership engaged in the business of oil and gas exploration, which is registered to do business in the State of Florida. Hughes has applied for a permit to drill an exploratory well for oil in Collier County. If the well is commercially viable, Hughes must apply for an operating permit at a later time. The Department has jurisdiction to issue permits for the drilling and exploring for, or production of, oil under part I, chapter 377. Pursuant to that authority, the Department reviewed the oil and gas well drilling permit application. The Application and Project After the application was deemed complete by the Department, it was distributed for comment to a number of local, state, and federal agencies. While some commented on the application, no agency had any unresolved concerns at the end of the application process. Hughes met all rule requirements for performance bonds or securities, and it provided all information required by rule. The proposed site is located on the southeast corner of an active farm field in the Big Cypress Swamp watershed, just north of a speedway now used as a test track. Surface holes for oil wells are commonly located on farm land, and farm fields are compatible with oil wells. Based upon a mineral lease between Hughes and the owner of the land, Collier Land Holdings, Ltd., Hughes has the right to locate and drill the well at the proposed surface hole location. The Refuge was established by Congress in 1989 to protect the Florida panther and its habitat and is located approximately 20 miles east of Naples. Around 98 percent of the Refuge is closed to any public activity. The project is consistent with the comprehensive conservation plan for the Refuge prepared by the United States Fish and Wildlife Service (USFWS), in that the plan recommends "slant drilling" off of the Refuge. Although Mosher and Preserve argue that the drill hole should be moved further east into wetlands, and Schwartz contends that it should be moved further west away from the Refuge, the proposed location of the drilling pad and project site is reasonable with respect to the nature, appearance, and location of the proposed drilling site. Likewise, the location is reasonable with respect to the type, nature, and extent of Hughes' ownership. The proposed activity can best be characterized as a "resource play," where an operator drills toward a known resource. This is distinguished from a wildcat operation, where the operator is drilling in an unproven area. Hughes proposes to target the rubble zone (i.e., the lower zone) within the lower Sunniland formation, a geologic formation thousands of feet below the ground surface that runs through southwest Florida. Hughes will first drill a vertical pilot hole and then drill horizontally from the hole bottom in a southeast direction toward a formerly drilled oil well known as the Tribal Well. In order to increase the probability of locating commercially available petroleum, Hughes plans to proceed from west to east in order to arrive at a perpendicular direction of existing limestone fractures as the drilling approaches the Tribal Well. When that well was drilled vertically into the rubble zone in the 1970s, oil rose to the ground surface. Thus, the indicated presence of oil is sufficient to warrant and justify the exploration for oil at this location. The proposed depth of the pilot hole is 13,900 feet measured depth (MD/13,900 feet true vertical depth (TVD)), which will allow assessment of the upper Sunniland, lower Sunniland, and Pumpkin Bay Formations. If the evaluation determines that the well will likely be commercially productive, Hughes will complete a 4,100-foot horizontal leg in the lower Sunniland rubble zone with a landing depth at 12,500 feet MD/12,064 TVD and a total depth of 16,600 feet MD/12,064 feet TVD. The footprint for the drilling pad will be 225 feet by 295 feet, or 2.6 acres, with a two-foot earthen berm around the perimeter of the operating area to contain all water on the site. A secondary containment area within the perimeter of the site will be covered by high-density polyethylene to contain and collect any accidental spills. A drilling rig, generators, and other drilling equipment will be on the pad during drilling operations. A maximum of 20 persons will be at the site, and then only for one day of operations. At all other times, Hughes anticipates there will be a five-person drill crew plus support personnel on site. After drilling, Hughes will remove its equipment. Once the access road is built and the equipment put in place, the drilling activities will take place 24 hours per day, seven days per week, and will be completed in approximately 60 to 70 days. The on-site diesel generators will run simultaneously 24 hours per day while drilling is taking place. The pad will be illuminated at night with lights on the drilling derrick and throughout the pad. Construction of the drilling pad will require trucking around 12,000 to 14,000 cubic yards of fill to the drilling location. Additional traffic for bringing in fill, piping, and related equipment will occur, but the exact amount of traffic is unknown. The South Florida Water Management District (SFWMD) previously approved an environmental resource permit (ERP) to allow the construction and operation of a surface water management system on Camp Keais. The United States Army Corps of Engineers (USACE) also permitted the same system under the Clean Water Act. The latter permit requires mitigation for wetlands and Florida panther habitat compensation. Based on the proposed wellsite, the SFWMD modified the ERP to allow a culvert and access to the proposed wellsite. In addition to the oil drilling permit application, Hughes has applied for two water well drilling permits from the SFWMD, and an injection well drilling permit. Petitioners and Intervenor's Objections The challengers have raised a number of objections that they assert require denial of the application. Conflicting testimony was presented on these issues, which has been resolved in Respondents' favor as being the more credible and persuasive testimony. Mosher and Preserve Mosher and Preserve raise two broad objections. First, they contend that hydrogen sulfide gas (H2S) is likely to be encountered in the drilling of the proposed well. They further contend that the H2S contingency plan submitted by Hughes is not sufficient to evacuate the public in the event of an incident where H2S is uncontrollably released under pressure. Second, they contend that the Committee did not review the application under the process contemplated by section 377.42(2). Except for these two objections, they agree that no other issues remain. See TR., Vol. I, p. 33. Within the petroleum industry, drilling operators create H2S plans when there is reason to believe that the operator may encounter H2S while drilling. This practice is codified in Florida Administrative Code Rule 62C-27.001(7), which requires a contingency plan only when H2S is "likely" to be encountered while drilling. The plan must "meet generally accepted industry standards and practices," and it must contain measures "for notifying authorities and evacuating civilians in the event of an accident." Id. See also rule 62C-26.003(3), which requires a contingency plan "if appropriate." The plan is prepared for two main users: the personnel working at the drilling site; and local emergency management officials, who must plan and train for the implementation of emergency activities. The parties agree that the "generally accepted industry standards and practices" for the oil and natural gas industry are found in the operating standards and recommended practices adopted by The American Petroleum Institute (API), a trade association for the oil and natural gas industry. Recommended Practice 49 (API 49) is the generally accepted industry standard for oil and gas drilling operations likely to encounter H2S and was relied upon by all parties throughout the hearing. The standard includes guidance on personnel protection measures, personnel training, personnel protection equipment, and community contingency planning. API 49 recommends the use of a community warning and protection plan when atmospheric H2S exposures beyond the well site could exceed potentially harmful exposure levels and could affect the general public. Mosher/Preserve's expert opined that H2S might be encountered at levels as high as 21 percent (210,000 parts per million (ppm)) in southwest Florida, and that "it's quite likely" H2S would be encountered at the proposed wellsite. At the same time, however, he agreed with the assessment of Respondents' experts that the likelihood of encountering H2S at this site was merely "possible," "sporadic," and "unlikely," and that there was "zero" potential of a severe H2S release under high pressure. Florida has two major oil producing areas: the Sunniland Trend in southwest Florida and the Smackover formation near Jay, Florida, in the northwest part of the state. Unlike the Smackover formation which has higher temperatures and pressures and a high concentration of H2S, the Sunniland Trend has normal temperatures and pressures and a sporadic presence of H2S. Less than two percent of wells in southwest Florida have been reported to contain H2S, and those reports relate to production wells where bacteria (biological contamination) was likely introduced into the formation during production. Of over 300 oil wells drilled in southwest Florida, only six were reported to have encountered H2S. Notably, the Tribal Well, located 1.5 miles to the southeast of the proposed site, encountered relatively low pressure during drilling and had no H2S, and another well located 12 miles to the north likewise had no high pressure or H2S. It is unlikely that Hughes will encounter high pressure or H2S if it drills at the proposed site. Even though it is unlikely that high pressure or H2S will be encountered during the drilling of this proposed well, Hughes still submitted an H2S contingency plan as part of the drilling application. The Department determined the plan provided an effective design to detect, evaluate, and control any hazardous release of H2S. In response to public concerns, in January 2014 Hughes revised its plan to provide more protections. The revised plan exceeds the guidance provided in API 49. The revised plan clarifies and adds multiple protections, including implementing the plan at a vertical depth of 9,000 feet, which is 2,700 feet before the zone that Mosher claims could contain H2S; clarifying that an H2S alarm notification at 15 ppm would result in an instant well shut-in (i.e., closure of the well) to prevent the escape of H2S; instituting a reverse 911 call system to allow local officials to notify the public by telephone of any incident; creating an air dispersion model to understand the likelihood of public exposure; and adding H2S scavengers to the drilling mud. Adding H2S scavengers in the mud is a protective measure. Specifically, the zinc oxide scavengers will react with H2S to create benign zinc sulfide and water. Even if H2S is present in the formation, the H2S scavengers will neutralize the H2S before it could reach the surface. The H2S scavengers will effectively eliminate the likelihood of H2S escaping from the well during drilling operations. The drilling plan requires the Trinity C formation (which Hughes estimated will begin at a depth of around 11,850 feet) to be cemented off and sealed once drilled. This formation will not be encountered in the first 15 or 20 days of drilling. Once encountered, the formation will be exposed for only four to six days. Even if H2S were encountered during this short exposed duration, all of the protections included in the revised plan would be in place, including overbalanced drilling mud, H2S scavengers, blowout preventers, H2S monitors, and alarms. When wells are drilled, there are numerous personnel monitoring the drilling fluid, or mud, which is designed not only to carry cuttings to the surface, but more importantly to act as a barrier to keep fluids or gasses in the geologic formation. The mud is weighted with additives to combat reservoir pressures. Drill operators want the same amount of mud pumped into the hole as the amount flowing back up. If more fluid is flowing back up, then the mud is not heavy enough to hold back the fluids or gasses encountered. If this imbalance occurs, the well is shut- in immediately and the mud weight is adjusted. A shut-in can be accomplished in just a few seconds. Anything in a shut-in well will stay in the well. Hughes' normal drilling plan is to slightly overbalance the mud weight. This ensures that nothing unintentionally escapes from the reservoir. Mosher and Preserve contend that if H2S is encountered, dangerous concentrations of H2S would leave the wellsite. In response to this type of concern, as part of the revised plan, Hughes conducted an air dispersion model using the methodology provided by API 49. The API 49 model is a Gaussian model with default values reflecting the worst-case exposures. The peer- reviewed and conservative model calculated by Dr. Walker looked at H2S concentrations of 10, 15, and 100 ppm. At the extreme case, a 100-ppm release at the well would be reduced below 10 ppm within about 20 feet from the well and further reduced to one ppm within 60 feet from the well. Although H2S is unlikely to escape the well, 100 ppm was selected as a precautionary level because this level is an immediate danger to human life and health. Reaching 100 ppm is highly unlikely because at an instantaneous reading of 15 ppm, the well is immediately shut-in. The air dispersion model results demonstrate that atmospheric H2S exposures beyond the wellsite could not exceed potentially harmful exposure levels nor could exposures affect the general public. Thus, even though the plan includes a community warning and protection provision, it is not required under API 49. In an abundance of caution, however, the plan provides for a public notification zone of 2,000 feet in case of an H2S release. This zone is two orders of magnitude beyond the 20- foot, 10 ppm distance dispersion of H2S based on the modeled worse case release and exceeds any required notification zones in other states. The notification boundary is conservative, as compared with industry standards. While Mosher's expert recommended more stringent standards than API 49, he knew of no contingency plan for an oil drilling permit in the United States that included his recommended standards. Mosher's expert testified that based on his review of literature, the lowest observable adverse effect from H2S was at concentrations of 2.1 ppm. Based on a worst case scenario release of 100 ppm of H2S, the gas would disperse to a concentration of 2.1 ppm in less than 40 feet from the well. The property boundary abutting the neighborhood to the west is over 800 feet from the well. API 49 expressly provides that wellsite personnel should be provided protection devices if concentrations of H2S exceed 10 ppm for an eight-hour time-weighted average. The revised plan requires wellsite personnel to don a self-contained breathing apparatus if the monitors encounter an instantaneous reading of 10 ppm H2S. Instantaneous readings are more protective of human health than the time-weighted averages proposed by Mosher's expert. Using an instantaneous trigger is another area where the revised plan exceeds the recommendation of API 49. The greater weight of evidence demonstrates that the H2S contingency plan meets or exceeds guidance of API 49. The revised plan requires hands-on training for public officials and fire/rescue staff before reaching the depth of 9,000 feet. The revised plan further requires hands-on training and drills related to the procedures for use, and location of, all self- contained breathing apparatus and evacuation procedures. The plan is a complete and accurate contingency plan that will assist operators and local emergency management in the unlikely event of an H2S escape. It exceeds the degree of caution typically employed in industry standards. Mosher and Preserve contend that the plan fails to include specific instructions and training for nearby residents in the event of an emergency. However, emergency plans are designed for use by operators at the facility and the local emergency management officials rather than nearby residents. Thus, the Department did not require the applicant to provide specific instructions for those residents. Mosher and Preserve also contend that the plan fails to adequately describe the evacuation routes in the event of an emergency. However, evacuation routes and the potential closure of roads are normally in the domain of local governments, as the operator and Department have no control over this action. Mosher and Preserve contend that the plan does not include complete and accurate information for all property owners in the area. This is understandable since some property owners either failed to respond to inquiries by Hughes when it assembled the information for the plan or were reluctant to provide any personal information. Recognizing this problem, the Department reviewed the website of the Collier County property appraiser to complete the information. To the extent information on certain parcels may not be complete, Hughes can update that aspect of the plan on an on-going basis before operations begin. If a permit is issued, the Department will continue to coordinate with Collier County and other local emergency management officials for the purpose of planning to implement the contingency plan. Based on the foregoing, the evidence establishes that the probability of a dangerous release of H2S beyond the wellsite is highly remote and speculative in nature. The revised contingency plan is consistent with industry standards and satisfies the requirements of the rule. Schwartz Like Mosher and Preserve, Schwartz agreed that except for the concerns expressed in his amended pleading, no other issues remain. Schwartz first contends that Hughes did not demonstrate sufficient efforts to select a proposed location for drilling to minimize impacts as required by rule 62C-30.005. Subparagraph (2)(b)1. requires that drilling sites be located "to minimize impacts on the vegetation and wildlife, including rare and endangered species, and the surface water resources." In particular, Schwartz is concerned about the potential impact on the Florida panther, an endangered species. Hughes selected the proposed site primarily because of its proximity to the Tribal Well, which had a significant show of oil. In order to increase the chances for commercial production, the horizontal segment of the well needs to be perpendicular to the natural fractures in the limestone. In this location, Hughes must drill horizontally from west to east in the direction of the Tribal Well. Hughes was unable to locate the well on the automotive test track directly south of the agricultural field and west of the Tribal Well because of objections by Harley-Davidson, then the owner of the track. A second proposed location just east of the test track was considered but Harley-Davidson would not grant access from the track to the upland sites on the adjacent location. A third option was to construct a lengthy access road from the north to one of the upland sites just east of the test track. However, this alternative would have resulted in significant impacts to wetlands and native vegetation. The proposed site offers the least amount of environmental impact. It is 1.5 miles from the Tribal Well. It has no federal or jurisdictional wetlands on the site, and groundwater modeling submitted with an application for a water use permit demonstrated that the proposed use of water will not adversely affect surrounding wetlands. The proposed access road and drilling pad will not impact any cypress-mixed forest swamps, hardwood hammocks, mangrove forests, archeological sites, or native ceremonial grounds. Nor will they adversely affect known red-cockaded woodpecker colonies, rookeries, alligator holes, research sites, or pine uplands. The evidence establishes that Hughes chose a site that minimized environmental impacts. Schwartz also contends that the wellsite activities will directly decrease the recovery chances of the Florida panther. According to Schwartz, this decrease will occur because the activities involve creating an access road, truck traffic, noise, lights, and vibrations. He also asserts that the proposed wellsite will result in a small amount of direct habitat loss when the cattle field is converted to a drilling pad. The USFWS has developed a panther scientific habitat assessment methodology. It relies upon peer-reviewed studies that found that panthers will select land cover types while avoiding others. The methodology ranks the value of land cover types from zero to ten based on the potential for panther selection. Applying the USFWS' scoring to the proposed wellsite, an improved pasture area has a value of 5.2, which means the land cover is neither actively selected nor avoided by panthers. The areas to the south and east of the proposed wellsite are forested wetlands and forested uplands, which have substantially higher values that range from 9.2 to 9.5. If converted to an open water reservoir under the Camp Keais ERP, the site value would be zero, the land cover type most avoided by panthers. The underlying USACE permit specifically required panther habitat compensation. Hughes' expert established that the proposed site minimizes impacts on wildlife by avoiding habitat selected by panthers such as wetlands, forested uplands, saw palmetto thickets, fresh water marshes, prairies, and native habitats. Based on a dozen visits to the site for the purpose of conducting vegetation mapping and wildlife surveys, the expert concluded there are no panthers currently known to be living, breeding, or denning on the site. A home range for a panther is the area providing shelter, water, food, and the chance for breeding. The typical home range for a male panther is 209 square miles, and female home ranges average around 113 square miles. The evidence establishes the proposed drilling activity will not interfere with the panthers' use of the site. Approval of the permit will not remove or push any panthers out of their home range. Hughes' expert opined that the four male panthers, which historically traversed the area within a mile of the proposed wellsite, would only likely move through the area every 15 or 20 months or longer. The temporary nature of the drilling activities means the panthers may not even be near the location during that time. If a panther is near the location and frightened by any activities, it will avoid the area, but will eventually return. Based on the large home range of the panther, the temporary activities will not increase the likelihood of intraspecies aggression or decrease panther survivability. The more persuasive evidence is that panthers are adaptable. They are habituated to the drilling operations in southwest Florida based on over a hundred thousand telemetry data points taken near 93 oil wells in the primary zone. Panthers are not threatened by the presence of humans. In fact, they live and den in and around residential communities and active agricultural operations. Panthers need prey, water, and shelter. The drilling activities will not adversely affect prey availability or impact water resources. The proposed wellsite's location within a disturbed agricultural field will not impact the panther's ability to shelter. During the permit review process, the Department requested input from the USFWS, the Florida Fish and Wildlife Conservation Commission (FFWCC), and other interested parties regarding the proposed drilling permit. No formal comments were offered by the USFWS, and its biologist for conservation planning indicated informally that the surface impacts from an oil well are "very minor." Likewise, the FFWCC offered no formal comments on the application. The evidence supports a finding that the proposed permit activities will not affect the panther's use of, or travel to and from, the Refuge. The activities will not affect the panthers' availability of prey or increase panther competition for food or home range territory. The drilling will not adversely affect the panther's breeding, survivability, or the recovery of the species. The only other threatened or endangered species found in the vicinity of the proposed site was an eastern indigo snake, which was located two and one-half miles away and would not travel to the proposed wellsite, as its home range is up to a maximum of 450 acres. Schwartz further contends that section 377.242 requires that the permit be denied because the proposed wellsite is within one mile from the seaward (western) boundary of the Refuge. The Refuge is located entirely inland and does not have a seaward boundary, as contemplated by section 377.242(1)(a)3. Therefore, no drilling will be located within one mile of the seaward boundary of any state, local, or federal park, aquatic preserve, or wildlife preserve. This is consistent with the Department's routine and long-standing interpretation of the statute. Big Cypress Swamp Advisory Committee Petitioners and Intervenor initially contended that the permit should be denied because a meeting of the Committee was never convened pursuant to section 377.42. The Committee, however, met on March 11 and 31, 2014. Although a majority of the Committee voted to recommend that the Department deny the permit on various grounds, the recommendation of the Committee is not binding on the Department, and after consideration, was rejected. In their Proposed Recommended Orders, the opponents now contend that the permit should be denied because the Committee did not meet before the Department issued its proposed agency action. For the reasons stated in the Conclusions of Law, this contention is rejected.
Recommendation Based on the foregoing Findings of Fact and Conclusions of Law, it is RECOMMENDED that the Department enter a final order issuing Permit No. 1353H, without further modifications. DONE AND ENTERED this 3rd day of June, 2014, in Tallahassee, Leon County, Florida. S D. R. ALEXANDER 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 3rd day of June, 2014.
The Issue The issue for determination in this case is whether the affiliated facilities and proposed site of the Hardee Unit 3, a fifty acre parcel in the unincorporated area of Hardee County within the site of the Hardee Power Station encompassing 1300 acres in Hardee and Polk Counties, is consistent and in compliance with existing land use plans and zoning ordinances of Hardee and Polk Counties, pursuant to Section 403.508(2), Florida Statutes.
Findings Of Fact The site for the proposed Hardee Unit 3 electric generating plant is a 50 acre parcel within the larger 1,300 acre Hardee Power Station Site which is located in both Polk and Hardee Counties. The Hardee Unit 3 site is approximately 9 miles northwest of the City of Wauchula, which is located in Hardee County. The Hardee Unit 3 electrical generating structures will be located in the unincorporated area of Hardee County. The Hardee Unit 3 will utilize the existing cooling reservoir, the existing site access road and the existing natural gas pipeline, all of which are located in both Hardee County and Polk County. A new gas pipeline lateral may be constructed within both the Hardee County and Polk County portions of the Hardee Power Station Site if a fuel supply contract is successfully negotiated with Sunshine Pipeline Company. The Public Service Commission in its Order Granting Petition for Determination of Need, (the "need order,") found that Seminole Electric had provided adequate assurances that sufficient natural gas pipeline capacity will be available to transport natural gas to the proposed combined cycle unit. The Hardee Power Station Site was originally certified in November 1990 for an ultimate site capacity of 660 megawatts (MW) of natural gas and oil fired generating capacity. In a final order entered in August 1990, the Siting Board determined the Hardee Power Station Site was consistent and in compliance with the land use plans and zoning ordinances of Hardee and Polk Counties. In this proceeding, Seminole proposes to increase the ultimate site capacity determination for the Hardee Power Station Site by an additional 220 MW of capacity and to seek certification of the electric generating equipment for the 440 MW Hardee Unit 3 as described below. If finally certified, the ultimate site capacity determination for the Hardee Power Station Site would be increased to a total of 880 MW. With the addition of proposed Hardee Unit 3, the Hardee Power Station will consist of combined cycle electric generating facilities with an ultimate nominal capacity of 880 MW to be constructed in two phases. In the first phase, TECO Power Services (TPS) constructed 295 MW of generating capacity, which began commercial operation in January 1993, and will construct an additional 145 MW combined cycle facility, which is scheduled to be in service in January 2003. Phase 2 of the project is the addition of Seminole's proposed separate 440 MW (nominal) combined cycle facility, to be in service in January 1999. On June 21, 1994, the Florida Public Service Commission ("PSC") issued a need order based on Seminole Electric's application for a need determination for construction of a 440 MW combined cycle facility. The PSC order granted the application. The Hardee Unit 3 will utilize the existing 570 acre cooling reservoir to supply condenser cooling water for all existing and planned combined cycle units at the site. The Hardee Unit 3 also will have associated onsite oil storage and handling facilities and an onsite electrical switch yard which will connect to the existing TPS switch yard onsite for transmission access. Power generated from the Hardee Unit 3 power plant and the full build out capacity of 880 MW will be distributed via three existing transmission lines. These transmission lines were authorized and constructed pursuant to the November 1990 certification. The existing pipeline connecting to the Florida Gas Transmission system also can supply natural gas to the Hardee Unit3. No changes to these electrical and gas transmission lines will be required for the Hardee Unit 3. The new gas pipeline lateral may also supply natural gas to the site, if constructed. The Applicant published notice of the September 7, 1994 land use hearing in The Herald-Advocate (Wauchula) on July 21, 1994, The Ledger (Lakeland) on July 20, 1994, and The Tampa Tribune on July 20, 1994. Notice of the September 7, 1994 hearing also was published in the Florida Administrative Weekly on July 22, 1994. (Exhibit 20; Bachor T. 16-17) Hardee County Aspects of the Hardee Unit 3 to be located in Hardee County include: (a) the power plant facility; (b) a portion of a possible future natural gas pipeline lateral extending to Sunshine Gas Pipeline Company's main gas line which may be constructed to serve the site; and (c) miscellaneous accessory facilities. The land use plan that governs the Hardee Unit 3 site in Hardee County for purposes of this hearing is the future land use plan element of the Hardee County Comprehensive Plan, originally adopted in April 1991. The applicable zoning regulation is Hardee County Zoning Ordinance No. 82-2 as codified in the Hardee County Land Development Code. The Hardee County future land use map designates the Hardee Power Station Site as A-I, Agricultural. Power plants are identified as a permitted land use within the Agricultural land use category. The zoning category for the site of the Hardee Unit 3 generating facility located within Hardee County is 1-1 (Light Industrial). The Light Industrial district, as described in the Hardee County zoning ordinance, includes "public and semi-public plants" in an enumeration of authorized "principle uses and structures," and authorizes the proposed power plant. The Hardee County Board of County Commissioners rezoned the Hardee Power Station Site to 1-1, effective December 31, 1989, to authorize construction of a power generation plant. Expert testimony was presented demonstrating that the proposed Hardee Unit 3 is consistent and in compliance with Hardee County's land use plan and zoning ordinance. On August 31, 1991, the Applicant and Hardee County entered into a stipulation in which the County confirmed that the proposed site of the Hardee Unit 3 is consistent and in compliance with Hardee County's existing land use plan and zoning ordinance. Polk County The only new aspect of the Hardee Unit 3 which may be constructed within Polk County is a portion of a gas lateral within the Hardee Power Station Site to connect to a future natural gas pipeline that may serve the site. The existing cooling reservoir, the site access road and an existing gas pipeline all located partially within Polk County will continue to be used by the new unit. The land use plan that governs the Hardee Unit 3 pipeline facilities located in Polk County is the Polk County Comprehensive Plan, as adopted by the Board of County Commissioners on November18, 1992. The applicable zoning regulation is the 1983 Polk County zoning ordinance, as amended. The future land use map for Polk County designates the portion of the Hardee Power Station Site within Polk County as Phosphate Mining ("PM"). Electrical generating facilities and natural gas pipelines that support existing or proposed development are allowed uses within that land use category. The Polk County zoning category for the portion of the Hardee Power Station Site within Polk County is Rural Conservation, ("RC"). Natural gas pipelines are an allowed use within this zoning district as a Class I Essential Use. Expert testimony also demonstrated that the power plant site and associated linear facilities are in compliance and consistent with Polk County's land use plan and zoning ordinance. The Applicant has entered into a stipulation with Polk County, dated September2, 1994, in which the County confirms that the site of those facilities for the Hardee Unit 3 power plant which may be located in Polk County is consistent and in compliance within Polk County's existing land use plan and zoning ordinance.
Recommendation Based upon the foregoing findings of fact and conclusions of law, it is recommended that the Governor and Cabinet, sitting as the Siting Board, enter a Final Order finding that the site of the Hardee Unit 3 electric generating facility, as proposed in the Site Certification Application and representing an incremental increase of 220 MW in the ultimate site capacity for the entire Hardee Power Station Site, is consistent and in compliance with the existing land use plans and zoning ordinances of Hardee and Polk Counties. DONE AND ENTERED this 14th day of October, 1994, in Tallahassee, Florida. DAVID M. MALONEY 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 14th day of October, 1994. APPENDIX Findings of Fact Nos. 1 - 20, proposed by the applicant and Hardee County in their Joint Proposed Findings of Fact, in substance, and insofar as material, are adopted. COPIES FURNISHED: Doug Roberts Attorney at Law Hopping, Boyd, Geen & Sams P. O. Box 6526 Tallahassee, Florida 32314 Richard Donelan Assistant General Counsel 2600 Blair Stone Road Tallahassee, Florida 32399-2400 Hamilton S. Oven, Jr. Department of Environmental Protection 3900 Commonwealth Blvd. Tallahassee, Florida 32399-3000 David Russ Assistant General Counsel Department of Community Affairs 2740 Centerview Drive Tallahassee, Florida 32399-2100 Representing DCA Michael Palecki, Chief Bureau of Electric & Gas Florida Public Service Commission 101 East Gaines Street Tallahassee, Florida 32399-0850 Representing PSC Dorothy Johnson, Chief Department of Transportation 605 Suwannee Street, M.S. 58 Tallahassee, Florida 32399-0458 Mark F. Lapp James A. Robinson Assistant General Counsels Southwest Florida Water Management District 2379 Broad Street Brooksville, Florida 34609-6899 Representing SWFWMD James Antista, General Counsel Florida Game and Fresh Water Fish Commission Bryant Building 630 South Meridian Street Tallahassee, Florida 32399-1600 Representing GFWFC Gary Alan Vorbeck Hardee County Attorney Vorbeck & Vorbeck, P.A. 207 East Magnolia Street Arcadia, Florida 33821 Representing Hardee County Timothy F. Campbell Assistant County Attorney Post Office Box 60 Bartow, Florida 33830 Representing Polk County Brian Sodt Central Florida Regional Planning Council P. O. Box 2089 Bartow, Florida 33830 Lawrence N. Curtin Attorney at Law Holland & Knight P. O. Drawer 810 Tallahassee, Florida 32302-0810 Honorable Lawton Chiles Governor State of Florida The Capitol Tallahassee, Florida 32399 Honorable Robert A. Butterworth Attorney General State of Florida The Capitol Tallahassee, Florida 32399-1050 Honorable Bob Crawford Commissioner of Agriculture State of Florida The Capitol Tallahassee, Florida 32399-0810 Honorable Douglas L. "Tim" Jamerson Commissioner of Education State of Florida The Capitol Tallahassee, Florida 32399 Honorable Jim Smith Secretary of State State of Florida The Capitol, PL-02 Tallahassee, Florida 32399-0250 Honorable Tom Gallagher Treasurer and Insurance Commissioner State of Florida The Capitol Tallahassee, Florida 32399-0300 Honorable Gerald A. Lewis Comptroller State of Florida The Capitol, Plaza Level Tallahassee, Florida 32399-0350
The Issue Whether Petitioner, Hendry Energy Services, LLC (“Hendry Energy”), is entitled to issuance of an operating permit recertification of the Red Cattle Co. #27-4 well, and an Oil and Gas Drilling Permit, Permit No. OG 0904AH.
Findings Of Fact Parties Hendry Energy is a Florida Limited Liability Company organized under the laws of the State of Florida. At all relevant times, Hendry Energy could lawfully conduct business in the State of Florida. The Department is the state agency with the authority under chapter 377, part I, Florida Statutes, to issue permits for the drilling for, exploring for, or production of oil, gas or other petroleum products which are to be extracted from below the surface of the land. Background Regarding the Mid-Felda Oil Field The Mid-Felda Field is an established oil field in Hendry County, Florida, discovered in 1977. The Mid-Felda Field generally exists within Sections 22, 23, 26, 27, 34, and 35 of Township 45 South, Range 28 East. The Mid-Felda Field includes three historically producing wells: RCC 27-4 (Permit No. 904), Red Cattle #27-1 (Permit No. 983), and Turner #26-3 (Permit No. 949). The RCC 27-4 was originally drilled and completed in 1977; the Turner #26-3 (“Turner 26-3”) was drilled and completed in 1979; and the Red Cattle #27-1 (“RC 27-1”) was drilled and completed in 1979. All three wells were vertical completions, meaning that the wellbore is vertical or nearly vertical from the surface- hole to the bottom-hole location. All three wells are located in routine drilling units. Routine drilling units are based on the U.S. Government Surveyed Township and Range system. The RCC 27-4 routine unit consists of the southeast quarter section of Section 27, Township 45 South, Range 28 East. The Turner 26-3 routine unit consists of the southwest quarter section of Section 26, Township 45 South, Range 28 East. The RCC 27-1 routine unit consists of the northeast quarter section of Section 27, Township 45 South, Range 28 East. RCC 27-4 is located approximately in the center of the southeast quarter section of Section 27. The true vertical depth of RCC 27-4 is approximately 11,686 feet. Turner 26-3 is located approximately in the center of the southwest quarter section of Section 26. The true vertical depth of Turner 26-3 is approximately 11,518 feet. Between 1978 and 2000, wells in the Mid-Felda Field produced nearly 1,500,000 barrels of oil. The RCC 27-4 and Turner 26-3 produced approximately 700,000 barrels each. The RCC 27-1 and Turner 26-3 have been plugged and abandoned. The RCC 27-4 has been temporarily abandoned with a plug installed. Facts Regarding Geophysical and Geological Data Supporting the Proposed New Bottom-Hole Location In 2013, Hendry Energy began engaging in production curve analysis of the existing wells in the Mid-Felda Field, conducted subsurface geological mapping of the Mid-Felda Field, and performed a 3D seismic survey of the Mid-Felda Field. Mr. Whitaker, a petroleum engineer, analyzed the historic production of the Mid-Felda Field, specifically production from the RCC 27-4 and the Turner 26-3 wells. This analysis was to determine whether there is additional recoverable oil that can be exploited from the Mid-Felda Field. Mr. Whitaker charted the field performance data as a graph of the production rate over time and the cumulative production versus the water to oil ratio. Using this analysis, he was able to determine that economically recoverable oil reserves likely remain in the Mid-Felda Field. Petroleum geologist Barry Falkner analyzed the subsurface geological data and developed reservoir maps for the Lower Sunniland C reservoir in the Mid-Felda Field. These maps depict the Top of Porosity, Average Permeability, and the Net Oil Pay Isopach, collectively describing the reservoir quality. Mr. Falkner also developed structural cross sections of the underground structure, on a north-south and east-west direction in the Mid-Felda Field. A 3D seismic study was conducted and analyzed by Charles Morrison, a petroleum geophysicist. The subsurface geological and geophysical seismic data revealed a structural high point at approximately 11,340 feet to 11,400 feet below ground level located on the section line between the southwest quarter of Section 26 (i.e., the routine drilling unit for the Turner 26-3 well, which was a producer) and the southeast quarter of Section 27 (i.e., the routine drilling unit for the RCC 27-4 well, which was a producer). RCC 27-4 and Turner 26-3 were drilled to depths of 11,686 feet and 11,518 feet respectively. These completion depths are both below the identified structural high point. As oil is produced, the water level in and around the well rises resulting in more water being produced and an increasing water-to-oil ratio. This phenomenon occurred in both RCC 27-4 and Turner 26-3 with the result that these wells are no longer economically productive. Accordingly, these two wells cannot extract oil reserves that may be present in the structure above their completion depths. A high point in the reservoir structure indicates a location where the presence of oil is likely. The geological and geophysical data indicate that the identified high point and point of thickness in the Sunniland C structure is a “closed contour,” which also indicates a trap of oil in the reservoir. The oil located at the top of a reservoir structure and above the completion depths of adjacent wells is also known as “attic oil.” Furthermore, a review of the subsurface geological data revealed a point of thickness in the reservoir structure as depicted on the map of the seismic data presented with net pay isopach for the Sunniland C structure. With the combined analysis of the field performance, the geophysical seismic interpretations, and the geological data, Hendry Energy identified the location of an optimal point in the subsurface structure from which Hendry Energy believes it can produce the most oil economically. This optimal point is located on the section line between the south halves of Section 26 and Section 27, between the existing RCC 27-4 and Turner 26-3 wells. Proposal to Reenter and Redrill Existing RCC 27-4 and Establish New Nonroutine Unit Based on the optimal extraction point identified through Hendry Energy’s geophysical and geological analysis of the Mid-Felda Field, Hendry Energy proposed to establish a new, nonroutine unit (consisting of the eastern half of the southeast quarter of Section 27 and the western half of the southwest quarter of Section 26), reenter the existing RCC 27-4 well, and drill a new horizontal well to the identified target bottom-hole location. Mr. Hancer, director of Hendry Petroleum, the parent company to Hendry Energy, testified that “[a]s a result of the studies that [Hendry Energy] conducted, the 3D seismic survey and the subsurface mapping and the production curve analysis, we discovered a structure that straddles the section lines between Sections 27 and 26, and we requested the establishment of a new drilling unit in order to be able to drill to that optimal bottom-hole location. And this application [Joint Exhibit 2] is a request for approval of that well.” The optimal target bottom-hole location cannot be reached by a routine, or statutory, drilling unit because of the setback requirements from section lines applicable to the bottom-hole location in routine units. See Fla. Admin. Code R. 62C-26.004(4)(a). However, establishing a nonroutine unit would allow Hendry Energy to access the target bottom-hole location. The proposed nonroutine unit is necessary to produce the “attic oil” that may exist at the proposed bottom-hole location. The identified optimal bottom-hole location is located approximately at the center of the proposed nonroutine unit, as required by section 377.25(3). Facts Regarding the Need to Horizontally Complete a New Bore to Access the Remaining Reserves from the Subsurface Structure To recover the remaining attic oil, Hendry Energy must hit a bottom-hole location at the top of the identified structure. A horizontal entry and a lateral completion of the well are required to economically drain the remaining attic oil reserves identified at this location in the Mid-Felda Field. The surface-hole location of the existing RCC 27-4 well is the optimal surface entry point to achieve a horizontal and lateral completion in the target bottom-hole location. Mr. Whitaker testified that “27-4 offers several different advantages, and we looked at this real closely, because, again, we’re all into – part of the exploitation effort is efficiency and that means capital efficiency and recovery efficiency. . . . And when you look at the geometry of where the wells sit and with the desired completion method, with the entry angle and then the lateral, 27-4 became the optimal point.” Facts Regarding the Drilling Application On April 12, 2016, Hendry Energy submitted an application for a permit to establish a new, nonroutine unit and drill a new horizontal well in the Mid-Felda Field in Hendry County, Florida (File No. 0904AH; PA No. 304674). By stipulation, except for the issue of preventing waste, the parties agree that Hendry Energy’s Oil and Gas Drilling Permit Application satisfies the criteria of chapter 377 and chapters 62C-26 through 62C-30, with regards to drilling a new oil well. Facts Regarding the Establishment of a Nonroutine Unit and the Prevention of Waste Rule 62C-26.004(6) provides: “The Department may grant drilling permits within shorter distances to adjacent drilling unit boundaries or on different drilling units than those prescribed in this rule whenever the Department determines that such steps are necessary to protect correlative rights or to prevent waste.” The terms “waste” and “physical waste” are statutorily defined as: The inefficient, excessive, or improper use or dissipation of reservoir energy; and the locating, spacing, drilling, equipping, operating, or producing of any oil or gas well or wells in a manner that results, or tends to result, in reducing the quantity of oil or gas ultimately to be stored or recovered from any pool in this state. The inefficient storing of oil; and the locating, spacing, drilling, equipping, operating, or producing of any oil or gas well or wells in a manner that causes, or tends to cause, unnecessary or excessive surface loss or destruction of oil or gas. The producing of oil or gas in a manner that causes unnecessary water channeling or coning. The operation of any oil well or wells with an inefficient gas-oil ratio. The drowning with water of any stratum or part thereof capable of producing oil or gas. The underground waste, however caused and whether or not defined. The creation of unnecessary fire hazards. The escape into the open air, from a well producing both oil and gas, of gas in excess of the amount that is necessary in the efficient drilling or operation of the well. The use of gas for the manufacture of carbon black. Permitting gas produced from a gas well to escape into the air. The abuse of the correlative rights and opportunities of each owner of oil and gas in a common reservoir due to nonuniform, disproportionate, and unratable withdrawals, causing undue drainage between tracts of land. § 377.19(31), Fla. Stat. The paragraphs of the definition specifically at issue were paragraphs (b), (f), and (k). Hendry Energy performed extensive geophysical and geological due diligence in the Mid-Felda Field to identify and assess the likelihood of finding producible quantities of oil in the field. As a result, Hendry Energy identified an optimal location in the subsurface structure of the Mid-Felda Field for exploiting oil reserves remaining in the field. This optimal target straddles the Section 26 and 27, Township 45 South, Range 28 East, section lines. Hendry Energy’s oil and gas drilling application proposes the establishment of a nonroutine drilling unit, consisting of 160 acres straddling Section 26 and 27. This proposed drilling unit consists of portions of two existing routine drilling units and wells, the RCC 27-4 and the Turner 26-3. Both wells previously produced oil in economic quantities until they were no longer economically viable. Hendry Energy’s application locates the nonroutine unit and the proposed bottom-hole at the optimal location for extracting any remaining oil. This is verified by the geophysical and geological analysis conducted. This target bottom-hole cannot be accessed from a routine drilling unit. As stated by Michael Whitaker, Hendry Energy’s expert in petroleum engineering, “[T]he statutory units as they exist today, even if we wanted to reactivate them, just physically don’t permit us to reach the target.” The drilling permit application proposes using existing surface infrastructure of the RCC 27-4 well. Using the existing surface-hole location and surface infrastructure of the RCC 27-4 well is the most efficient manner of draining the remaining reserves. The existing RCC 27-4 surface-hole is in the optimal location and provides the proper geometry for a lateral completion in the target bottom-hole. Not allowing the target bottom-hole location or attempting to drain the target point from another surface location would reduce the quantity of oil ultimately recovered and leave underground waste. Specifically, failure to authorize the permit for the well as proposed by Hendry Energy will prevent recovering the oil and thus leaving the oil underground without benefit to Hendry Energy or the mineral owners and other stakeholders. Mr. Hancer testified that a horizontal completion of the well allows the operator to more efficiently reach and drain oil from the underground structure. This increases the ultimate recovery and minimizes underground waste. Increased recovery equates to increased royalty payments. The remaining reserves are contained in an area that lies across the section lines of Section 26 and 27. The proposed nonroutine unit also lies across the section lines of Section 26 and 27. This proposed unit allows for a proportionate production of oil and therefore protects correlative rights. The proposed horizontal completion penetrates the structure in a way that encompasses portions of both Section 26 and 27, and therefore implicates the mineral owners in both sections. The proposed well will be draining the minerals of both parties, and thus paying royalties to both parties, creating a fair and equitable arrangement. Over 90 percent of the mineral rights in the proposed unit have been leased to Hendry Energy, evidencing the mineral owners’ desire to drain the reserves in the nonroutine unit. The greater weight of evidence supports that the nonroutine unit is necessary to prevent waste.
The Issue The issue in this case is whether, under Section 57.111, Florida Statutes, Respondent is liable for attorneys' fees and costs incurred by Petitioner in an earlier proceeding. The purpose of the earlier proceeding was to determine the eligibility of Petitioner's site for state-administered cleanup of discharge from a petroleum storage system under the Early Detection Incentive program described in Section 376.3071(9), Florida Statutes.
Findings Of Fact Petitioner informed Respondent of a pollutant discharge at Petitioner's gasoline station by filing a Discharge Notification Form on March 9, 1987. The form states that the discovery was made on March 5, 1987, as a result of a manual test of one or more monitoring wells. The form is marked "unknown" in response to questions concerning the estimated gallons lost, the part of storage system leaking, the type of tank, the cause of leak, and the type of pollutant discharged, although next to the last response are the typewritten words: "appears to be motor oil." A cover letter from Petitioner dated March 5, 1987, accompanied the Discharge Notification Form. The letter restates that the source of pollution is unknown, but adds that "there is a possibility that [the pollution] is the result of a septic tank, drain field discharge." The letter discloses that Blackhawk Environmental Services, Inc. ("Blackhawk") and NEPCCO/IT are investigating "to determine the extent of the contamination as well as the source." The letter provides the name and telephone number of the Blackhawk employee for further information. A separate cover letter from the Blackhawk employee to Respondent states that the notification was being submitted for consideration for Site Rehabilitation Reimbursement Costs. The letter also states that the site has been the subject of groundwater contamination from an "unknown source." Following the notification, Orlando Laboratories, Inc. submitted to Blackhawk a written analysis of the groundwater at the site. The report, which is dated March 19, 1987, contains quantitative data without any interpretation and was submitted without interpretation to Respondent on March 20, 1987. Petitioner applied to participate in the Early Detection Incentive ("EDI") Program by filing an EDI Program Notification Application dated March 23, 1987, together with a cover letter of the same date. The application supplied no more information than did the notification form. In response to the question as to the type of product discharged, Petitioner circled the choice, "used oil," but added the word, "possibility." Although the application may not have been immediately filed, Respondent received it prior to July, 1987. As part of a site inspection, an employee of Respondent prepared an Early Detection Incentive Program Compliance Verification Checklist, which was dated April 28, 1987. The checklist notes that Blackhawk "is looking into problem [and] will forward results from lab when available." The checklist also states: Odor found in E[ast] & W[est] M[onitoring] W[ells]. No other contamination found on site. Site has old waste oil tank on site that could possibly be contaminating drainfield next to tank. Also old abandoned tank (since 1967) on site. Asked owner to investigate tank's conditions. If not needed, he will remove & adjust registration accordingly. Floordrain in shop area dumps into on-site septic tank which could also contribute. The repeated mention of motor oil is due to at least two factors. First, a Blackhawk employee had mentioned to Belvin Marr, who owns and operates Petitioner, that the contaminant "looked like" motor oil. Second, Mr. Marr knew that he had, for many years, discarded used motor oil down a floordrain leading into a septic tank with an onsite drainfield. By letter dated July 22, 1989, Respondent informed Petitioner that its site was ineligible for state-administered cleanup under for the EDI program described in Section 376.3071(9), Florida Statutes. The letter states that the decision was "based upon information given in this [Notification Application] and a compliance verification evaluation of your reported site." The July 22 letter explains that the site is ineligible because, according to the application and district inspection: the source of contamination at Marr's Exxon has been attributed to used oil. Petroleum, as defined by Section 376.301(9), Florida Statutes (F.S.), included [sic] only crude oil and other hydrocarbons in the form in which they are originally produced at the well. Petroleum product, as defined by Section 376.301(10), F.S., means fuel in its refined state which is similar in nature to fuels such as diesel fuel, kerosene, or gasoline. Used oil cannot be considered "petroleum" or "petroleum products" because it has become unsuitable for its original purpose due to the presence of impurities or loss of original properties. Therefore, your site, which is contaminated by unrefined used oil, is not eligible for participation in Early Detection Incentive (EDI) Program. The July 22 letter advises Petitioner that he could obtain administrative and judicial review of the decision by filing a petition within 21 days of the date of receipt of the letter. The letter thus provided Petitioner with a clear point of entry. By letter dated July 30, 1987, Petitioner requested a 30-day extension to allow for retesting. Additional testing took place in early August, 1987. However, there is no indication that the resulting data, which again omit textual interpretation, were submitted to Respondent until the filing of the more definite statement described in the following paragraph. The next communication between Petitioner and Respondent took place when Petitioner requested a formal hearing by filing a Petition for Hearing dated August 26, 1987. By Order for More Definite Statement entered September 14, 1987, Respondent ordered Petitioner to file a more definite statement. By Response to Order for More Definite Statement dated September 28, 1987, Petitioner filed a more definite statement. The additional test data were attached to the more definite statement, although they are not in the DOAH case file. The Response offers the following chronology with all dates being approximate dates. March 5, 1987: Respondent notified of groundwater contamination from unknown source. March 20, 1987: analysis of contamination conducted by Orlando Laboratories, Inc. and forwarded to Respondent. March 23, 1987: Petitioner applied for participation in Early Detection Incentive ("EDI") program, and the application is attached to the More Definite Statement. April 27, 1987: Compliance Verification checklist issued. July 22, 1987: Respondent denied Petitioner's application. July 30, 1987: Petitioner requested 30-day extension to conduct further testing, the results of which are attached to the More Definite Statement. August 26, 1987: Petitioner requested formal administrative hearing. Following receipt of the more definite statement, Respondent forwarded the pleadings to the Division of Administrative Hearings for assignment of a Hearing Officer to conduct a hearing. The pleadings were received on October 9, 1987, and the file was assigned DOAH Case No. 87-4448. In a Motion for Continuance filed on January 14, 1988, Respondent asserted that the case involves the issue whether "used oil," which was what had been discharged at Petitioner's facility, is a "petroleum product." The motion refers to a pending case, Puckett Oil v. Department of Environmental Regulation, and states that this case, which had been heard in September, 1987, involves the same question. By Motion for Continuance filed on May 13, 1988, Respondent requested a continuance on the same grounds as previously cited and represented that Petitioner had no objection. An internal memorandum of Respondent dated March 17, 1988, acknowledges that Petitioner requested a review of the available data based on an "inaccurate assessment by his contractor." Reviewing the data, some of which had been provided after July 22, 1987, the memorandum notes that the majority of the contamination is from gasoline, but the involvement of the drainfield as the source of contamination "is the reason eligibility was denied." After the issuance of the final order in Puckett Oil v. Department of Environmental Regulation, 10 FALR 5525 (September 1, 1988), Respondent, filing a Motion to Set Hearing Date, disclosed that "[Respondent's] review of the Final Order indicates that Petitioner's site remains ineligible for SUPER Act funding." However, on July 28, 1989, the parties filed a fully executed Joint Stipulation and Motion to Dismiss. An Order Closing File, which was entered the same date, returned the matter to Respondent for final disposition consistent with the stipulation. The Joint Stipulation and Motion to Dismiss states: On July, 22, 1987, [Respondent] denied eligibility for the [EDI] Program, Section 376.3071(9), Florida Statutes, to [Petitioner's) site . . .. The basis for the denial was that the site was contaminated with used oil. Subsequent to [Respondent's] denial, Petitioner conducted a series of ground water tests to more accurately determine the nature and extent of contamination at the site. The results of that testing indicate that the site was contaminated with significant amounts of gasoline constituents and minor amounts of used oil constituents emanating possibly from a septic tank drainfield and a used oil storage facility. The gasoline constituents exist at levels many times that of the other constituents. Based upon the overwhelming contribution to the overall contamination presented by the gasoline constituents, [Respondent] agrees that the presence of minor amounts of contaminants from something other than a tank should not preclude [Petitioner's] site from being eligible for the EDI Program. [Respondent reserves the right not to pay for the cost of cleanup of contamination not related to discharge from a tank.] WHEREFORE Petitioner . . . and Respondent request that the hearing officer adopt this stipulation . . . and retain jurisdiction for an award of attorney's fees and costs (Fla. Stat. Sect. 57.111 (1986 Supp.) and Fla. Admin. Code Rule 22I-6.035). . .. The parties stipulated that Petitioner was a small business party. The parties also stipulated to reasonable attorneys' fees of $6625 and costs of $4690. Following the final hearing, Petitioner filed supplemental affidavits showing, in connection with the prosecution of the subject case and not the earlier proceeding, additional attorneys' fees of $1875 and costs of $490.85.
The Issue The issue in this case is whether Petitioner's site, Circle K General, Inc., Store #2375, located at U.S. #1 and Pennekamp Park, is eligible for restoration pursuant to the Florida Petroleum Liability and Restoration Program (FPLIRP) set forth in Section 376.3072, Florida Statutes.
Findings Of Fact Petitioner, Circle K General, Inc., Store #2375 owns and operates a petroleum storage site located at U.S. #1 and John Pennekamp Park, Key Largo, Florida. The DER Facility ID Number for the site is 448624728. Circle K operates at the site three 10,000 gallon fiberglass tanks which contain gasoline. The tanks currently operated at the site were installed in 1987. Four monitoring wells for the site were installed at the same time as the Circle K tanks were installed in 1987. Monthly monitoring well reports were completed each month beginning on December 12, 1987, and ending on July 30, 1989, by Professional Services Industries on behalf of Circle K. Steve Belin is the individual at Circle K responsible for reviewing or supervising the review of the monitoring well reports for Store #2375. The November 26, 1988, monthly monitoring well report indicated the presence of petroleum odor in all four of the monitoring wells at the site. After receipt of the November 26, 1988, monthly monitoring report, neither Steve Belin nor any employee of Circle K filed a Discharge Notification Form with the Department. After receipt of the November 26, 1988, monthly monitoring report, neither Steve Belin nor any employee of Circle K undertook steps to investigate the source or cause of the petroleum odor. The monthly monitoring report dated March 20, 1989, indicates the presence of a petroleum odor in one of the four monitoring wells. After receipt of the March 20, 1989, monitoring well report, neither Steve Belin nor any employee of Circle K filed a Discharge Notification Form with the Department. After receipt of the March 20, 1989, monthly monitoring report, neither Steve Belin nor any employee of Circle K undertook steps to investigate the source or cause of the petroleum odor. The July 30, 1989, monthly monitoring well report indicates the presence of petroleum product in all four monitoring wells. The July 30, 1989, monthly monitoring well report was not received by Steve Belin until September, 1989. On July 31 and August 1, 1989, Combustion Engineering installed a set of four new compliance monitoring wells. Circle K contracted for the installation of new monitoring wells because the four existing monitoring wells were only 15 feet deep and were dry. By letter dated August 17, 1989, Combustion Engineering notified Steve Belin that a petroleum odor was detected in the soils retrieved while drilling one of the new monitoring wells and that a petroleum odor was also detected in one of the old monitoring wells. On August 21, 1989, Steve Belin filed a Discharge Notification Form with the Department for Circle K Store #2375. After the discharge notification was filed on August 21, 1989, none of the tanks were taken out of service. After the filing of the August 21, 1989 Discharge Notification Form, Circle K inspected the inventory records for the site beginning in October, 1988, through September, 1989, and detected no significant loss of petroleum product. On October 6, 1989, an inspection of Circle K Store #2375 was conducted by Leslie Rueth of the South District Office of the Department of Environmental Regulation. At the time of the October 6, 1989, DER inspection, free product was noted in two of the four new monitoring wells, and all of the wells contained a petroleum odor. On October 19, 1989, the South District Office of Department of Environmental Regulation notified Steve Belin of the October 6, 1989, inspection results and requested (1) that a tank and line tightness test be performed to determine if there was a leak in the petroleum storage system and (2), if free product was present, that an initial remedial action (IRA) be implemented as defined in F.A.C. Rule 17-70.006. An Initial Remedial Action consists of the removal of free product through the bailing or pumping of free product off the water table and may include the removal of excessively contaminated soil. On October 30, 1989, Steve Belin submitted tank tightness test results for the three 10,000 gallon tanks located at Circle K Store #2375. All three tanks passed the tank and line tests. By letter of October 17, 1989, Steve Belin requested ATEC Associates, Inc. to have all of the monitoring wells of Store #2375 bailed of free product once a week for one month. The free product present at Store #2375 resulted from old tanks and piping installed by Circle K's predecessor, U Under Florida Administrative Code Rule 17 presence of a layer or odor, or the positive report of a laboratory that the monitoring well sample contains pollutant, shall be treated as a discharge. A properly installed monitoring well should have at least one foot of water in the well in order to be able to take a water sample from the well. If a foot or less of water is present in a monitoring well, a vapor monitoring device should be used to test the wells. From December, 1987, until July, 1989, the Circle K monitoring wells were usually dry. Under Florida Administrative Code Rule 17 wells must be constructed such that the bottom of the casing is at least five feet below the water level at the time of drilling but no deeper than 25 feet. The monitoring wells constructed at Circle K Store #2375 did not meet the construction specifications set forth in Chapter 17-61, Florida Administrative Code. Florida Administrative Code Rule 17-61.050(b)(6) requires discharges to be reported to the Department within three working days of discovery. DER was not notified of a discharge subsequent to either the November 26, 1988, or the March 20, 1989, monitoring well reports, nor did Circle K contain the leak.
Recommendation Based on the foregoing Findings of Fact and Conclusions of Law, it is recommended that the Department of Environmental Regulation enter a Final Order denying the Petitioner's application for site restoration pursuant to the Florida Petroleum Liability and Insurance Program (FPLIRP). DONE and ENTERED this 27th day of August, 1990, in Tallahassee, Florida. J. LAWRENCE JOHNSTON Hearing Officer Division of Administrative Hearings The DeSoto Building 1230 Apalachee Parkway Tallahassee, FL 32399-1550 (904) 488-9675 Filed with the Clerk of the Division of Administrative Hearings this 27th day of August, 1990. APPENDIX TO RECOMMENDED ORDER, CASE NO. 90-2065 To comply with the requirements of Section 120.59(2), Florida Statutes (1989), the following rulings are made on the Respondent's proposed findings of fact (the Petitioner not having filed any): 1.-27. Accepted and incorporated. Cumulative. Accepted; subordinate to facts found. 30.-33. Accepted but subordinate and unnecessary. 34.-38. Accepted and incorporated. 39. Cumulative. 40.-41. Accepted and incorporated. 42. Accepted but subordinate to facts found and unnecessary. 43.-44. Accepted but subordinate and unnecessary. Conclusion of law. Accepted but unnecessary. 47.-48. Accepted but subordinate and unnecessary. 49. Cumulative and unnecessary. COPIES FURNISHED: Steve Belin The Circle K Corporation Regional Environmental Director 500 South Faulkenburg Road Tampa, FL 33619 Janet E. Bowman, Esquire Assistant General Counsel Department of Environmental Regulation 2600 Blair Stone Road Tallahassee, FL 32399-2400 Dale H. Twachtmann, Secretary Department of Environmental Regulation 2600 Blair Stone Road Tallahassee, FL 32399-2400 Daniel H. Thompson General Counsel Department of Environmental Regulation 2600 Blair Stone Road Tallahassee, FL 32399-2400
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.
Findings Of Fact Petitioner deals in fuel oil. It buys fuel oil from several wholesalers and sells it at retail, mainly to people who use fuel oil for heating purposes. Petitioner operates a low pressure pump on its premises for pumping fuel oil from a ten thousand gallon tank into five gallon cans and similar containers brought to the pump by its customers. At peak demand, the ten thousand gallon tank supplying this pump had to be refilled twice a week. In general, however, during the cold season, the tank was refilled only every other week or less often still. No fuel oil was ever pumped from the low pressure pump into any motor vehicle. Petitioner also maintained two big dispersing pumps for filling its tank trucks with fuel oil and a gasoline pump for fueling the truck engines. The trucks were equipped with pumps for emptying their fuel oil tanks, which pumped at the rate of forty gallons per minute. Petitioner advertised home delivery of fuel oil in the newspaper, and dispatched its trucks in response to the resulting telephone calls. In addition to delivering fuel oil for home heating purposes, petitioner occasionally sold larger quantities to fellow fuel oil dealers and to other commercial concerns. In February, March and April of 1974, petitioner sold particularly large quantities of fuel oil to Tampa Electric Company. During the period covered by the audit, petitioner sold from 50,000 to 70,000 gallons to other fuel oil dealers. Petitioner did not get resale certificates from its commercial customers, but Mr. Hayes, until recently petitioner's proprietor, required dealers to show him their dealer's licenses and he copied the dealers' license numbers onto the invoices. In March of 1976, Mr. Donald E. Snyder, a tax examiner in respondent's employ, began auditing petitioner's books. At this time most of petitioner's records were in Orlando in the custody of the Federal Energy Administration. Subsequently, some, but not all, of these records were returned to petitioner. In an effort to reconstruct records which were unavailable, Mr. Snyder contacted petitioner's suppliers and examined their records of sales to petitioner. On January 2, 1977, Mr. Hayes and Mr. Snyder took an inventory of petitioner's fuel oil. Mr. Snyder used this information as well as what records petitioner was able to furnish him, and concluded that petitioner had sold, during the audit period, two thousand four hundred seventy-nine (2,479) gallons of fuel oil to persons or concerns who were users of fuel oil for non-exempt purposes. Written on the invoices evidencing these sales, however, was the phrase "non-road use" or words to that effect. The limited materials with which he worked gave Mr. Snyder no indication as to the disposition of an additional two hundred fifty- eight thousand three hundred forty (258,340) gallons of fuel oil. Although Mr. Snyder approximated petitioner's sales month by month, these figures were unreliable because of certain erroneous assumptions, notably the assumption that petitioner never used additional storage facilities.
Recommendation Upon consideration of the foregoing, it is RECOMMENDED: That respondent abandon its notice of proposed assessment, as revised. DONE and ENTERED this 10th day of January, 1978, in Tallahassee, Florida. ROBERT T. BENTON, II Hearing Officer Division of Administrative Hearings Room 530, Carlton Building Tallahassee, Florida 32304 (904) 488-9675 COPIES FURNISHED: Mr. James P. LaRussa, Esquire Flagship Bank Building, Suite 416 315 East Madison Street Tampa, Florida 33602 Mr. Cecil L. Davis, Jr., Esquire Assistant Attorney General The Capitol Tallahassee, Florida 32304
