1-1010-6105-2
STATE OF MINNESOTA
OFFICE OF ADMINISTRATIVE HEARINGS
FOR THE MINNESOTA PETROLEUM TANK RELEASE COMPENSATION BOARD
In the Matter of the Applications of
Q Petroleum (Leak Nos: 375, 404,
455, 521, 522, 523) FINDINGS OF FACT,
George Kucera (Leak No. 81) CONCLUSIONS AND
Johnson Auto Repair (Leak No. 1015) RECOMMENDATION
Jack's Standard - Watkins (Leak No. 224)
SuperStore, Inc. (Leak No. 441)
Elmer Anderson (Leak No. 242)
Edwards Oil, Inc. (Leak No. 58)
Severson Oil Co. (Leak No. 1172)
H & L Oil Co. (Leak No. 729)
Gehl Oil Company (Leak No. 721)
Jack's Standard Eden Valley
(Leak No. 225)
Crown CoCo, Inc. Prior Lake
(Leak No. 180)
Corey Oil Co. (Leak No. 190)
Crown CoCo, Inc. - Smith E-Z Stop
(Leak No. 158)
Hassett Oil Co., Inc. (Leak No. 567)
Wally's Oil Company (Leak No. 89)
Hanson Oil Company (Leak No. 29)
Brownton Oil (Leak No. 27)
Solheim Oil Company (Leak No. 56)
Staples Oil Company (Leak No. 33)
Shaver & McCarthy (Leak No. 269)
Bill Clark Oil Co. (Leak No. 374)
Big Lake Direct Services, Inc.
(Leak No. 604)
James Robertson (Leak No. 311)
North Shore Oil, Inc. (Leak No. 1281)
Sigfrinious (Leak No. 71)
Hegstad Oil Company (Leak No. 394)
Harland's Tire & Auto Center
(Leak No. 369)
Moberg's Inc. (Leak No. 773)
Dostal & Oleson Oil Company
(Leak No. 2220)
St. Michael Oil Co. (Leak No. 397)
Local Oil Company - Hastings
(Leak No. 1388)
Matheny Oil Co. (Leak No. 1162)
Crown CoCo - Royalton (Leak No. 157)
New Auburn Oil (Leak No. 429)
Matson Distributing (Leak No. 46)
Rau Corporation (Leak No. 680)
Inter-City Oil (Leak Nos. 1032. 1370,
840, 1235)
The above-entitled matter came on for consideration before Administrative
Law Judge George A. Beck based upon written stipulations and arguments filed
by the parties. The record in this matter closed on June 19, 1992 upon
receipt of the final written memorandum filed by a party.
Gregory E. Koestad, Esquire of the firm of Larkin, Hoffman, Daly and
Lindgren, Limited, 1500 Norwest Financial Center, 7900 Xerxes Avenue South,
Bloomington, Minnesota 55431 represented Q Petroleum. Laura J. Hanson,
Esquire of the firm of Meagher & Gear, 4200 Multifoods Tower, 33 South Sixth
Street, Minneapolis, Minnesota 55402 represented the remaining applicants.
Kenneth Raschke, Jr., Assistant Attorney General, 525 Park Street, Suite 200,
St. Paul Minnesota 55103 represented the staff of the Petroleum Tank Release
Compensation Board ("Petrofund Board").
This Report is a recommendation, not a final decision. The Board will
make the final decision after a review of the record which may adopt, reject
or modify the Findings of Fact, Conclusions, and Recommendations contained
herein. Pursuant to Minn Stat. 14.61, the final decision of the Board
shall not be made until this Report has been made available to the parties to
the proceeding for at least ten days. An opportunity must be afforded to each
party adversely affected by this Report to file exceptions and present
argument to the Board. Parties should contact Virginia. K. Hogan, Executive
Director, Petroleum Tank Release Compensation Board, Department of Commerce,
133 East Seventh Street, St. Paul, Minnesota 55103 to ascertain the procedure
for filing exceptions or presenting argument.
STATEMENT OF ISSUE
The issue in this contested case proceeding is whether or not the
applicants are entitled to reimbursement of the costs incurred in cleaning up
releases from underground storage tanks where the costs were covered by
insurance.
Based upon the record in this matter, the Administrative Law Judge makes
the following:
FINDINGS QF_FACT
1. The Minnesota Petroleum Tank Release Clean-up Act (the "Act"),
Minnesota Statutes, sec. 115C.01, et. seqq., was passed by the 1987 Minnesota
Legislature effective June 4, 1987. Minn. Laws 1987 Ch . 389.
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I John P. Brendel, Esquire of the firm of James F. Dunn and Associates, P. A.,
1510 Minnesota World Trade Center, 30 East 7th Street, St. Paul, Minnesota
55101-4901 represented applicant Kent Olson who was insured by Aetna
Insurance Company. By letter dated February 28, 1992 he stated that Aetna
was no longer interested in pursuing reimbursement in this matter.
2 The parties submitted 116 stipulated Findings of Fact which have been
incorporated into this report.
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2 That Act inter alia provided for state action to prevent or correct
health and environmental damage resulting from releases from petroleum storage
tanks
3 The Act created a Petroleum Tank Release Clean-Up Fund ("Petrofund")
and the Petroleum Tank Release Compensation Board ("Petrofund Board" or
"Board") Minn. StAt. 115C.07 and 115C.08 (Supp. 1987):
4. The Petrofund is funded by a fee imposed on the use of tanks which
contain petroleum products and which are subject to inspection fees pursuant
to Minn. Stat. 239.78.
5. The Petrofund was established to provide partial reimbursement to
"responsible persons" of reasonable costs actually incurred in taking
corrective actions in response to releases of petroleum'products.
6. In 1988 (Minn. Laws 1988 Ch. 683 6), the legislature authorized
reimbursement to certain persons who are not "responsible persons" for
reasonable costs actually incurred by them in response to an order or request
by the PCA Commissioner made pursuant to Minn. Stat. Ch. 115C.
7. In 1989 (Minn. Laws 1989 Ch. 226 3), the legislature authorized
partial reimbursement for reimbursable costs incurred in taking corrective
action after May 23, 1989 to persons other than responsible persons who hold
legal or equitable title to the property where the release occurred.
8. No reimbursement could be made from the Petrofund unless the Board
determined that the costs for which reimbursement was sought were actually
incurred and were reasonable.
9. The Act also authorized the Petrofund Board to promulgate rules
regarding its practices and procedures, the form and procedure for
applications for compensation from the fund, and the costs eligible for
reimbursement from the fund. Minn. Stat. 115C.07, subd. 3(a) (1988).
10. From 1980 to 1986, Federated Mutual Insurance Company ("Federated")
sold numerous general liability policies with an endorsement for coverage of
pollution clean-up expenses to tank owners in Minnesota. From 1986 to 1990,
Federated sold pollution liability policies to tank owners in Minnesota.
11. From its inception until September 1990, the Board did not knowingly
approve any reimbursements to applicants for corrective action costs which
were paid for by insurance.
12. At its meeting on August 29, 1988, the Board formally advised that it
would not approve any reimbursements for costs paid for by insurance.
13. Prior to September 19, 1990, the Board did not formally propose or
adopt rules stating that it would not approve reimbursement of costs paid by
insurance.
14. On January 3, 1990, Federated notified policyholders that it would
not renew pollution coverage for petroleum storage tanks.
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15. Since April 1, 1990, Federated has not sold insurance policies in
Minnesota covering releases from petroleum storage tanks.
16. In October of 1989, a Federated insured, Crown CoCo, Inc., applied
for reimbursement for costs incurred in the clean-up-of a gasoline leak from
one of its service stations. By Resolution dated December 15, 1989, the
Petrofund Board denied Crown's application on the grounds that Crown's costs-
were covered by insurance.
17. Crown appealed the Board's decision to the Minnesota Court of
Appeals. By decision dated July 10, 1990, the Court of Appeals reversed the
Board's decision which denied Crown reimbursement. In the Matter of the
Application of Crown, CoCo., Inc., 458 N.W.2d 132 (Minn. App. 1990). Ex A.
18. Following the Crown decision, the Board suspended its policy of
denying reimbursement for costs paid by insurance.
19. On September 19, 1990 the Petrofund Board published its Notice of
Intent to adopt a rule without a public hearing. The proposed Rule provided:
2890.0080 INELIGIBLE COSTS
. . . Other ineligible costs include corrective action
costs which are covered under an insurance or other
contract for initial and supplemental applications
received by the Board after December 31, 1990.
20. In excess of 30 persons requested a hearing with respect to this
Rule and accordingly, pursuant to the Minnesota Administrative Procedure Act,
the Board published notice of and held a hearing on Friday, February 22, 1991.
21. On April 4, 1991 the Honorable George A. Beck issued his Report
concluding that the Petrofund Board demonstrated the need for and
reasonableness of the proposed Rule. Ex. B.
22. At its August 22, 1991 meeting, the Board passed a Resolution
Adopting Rules which adopted the amendment to Rule 2890.0O80 pursuant to the
Administrative Law Judge's decision. By notice dated October 14, 1991, the
amendment to Rule 2890.0080 was published and became effective on October 19,
1991.
23 . Meanwhile, during the 1991 legislative session, legislation was
proposed to amend Minn. Stat. Ch. 115C to prohibit Petrofund reimbursement for
corrective action costs which are payable under an insurance policy.
24. Both Houses of the Legislature approved the following legislation,
Minn. Laws 1991 Ch. 294, and submitted it to the Governor on May 28, 1991.
Section 2 provides, in part:
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(c) A reimbursement may not be made from the account
under this subdivision in response to either an
initial or supplemental application 'For costs
incurred after June 4, 1987, that are -payable under
an applicable insurance policy, except that if the
Board finds that the responsible person- has made
reasonable efforts to collect from an insurer and
failed, the Board shall reimburse the responsible
person-under this subdivision.
Section 4 provides:
Sections n 2, and 3 are effective the day following
final enactment and apply to applications pending on or
filed after that day.
25. Minn. Laws 1991 Ch. 294 was signed by the Governor on June 1, 1991.
26. At the June 12, 1991 Board meeting, the applications including costs
covered by insurance were tabled pending an opinion from Board counsel. The
Board requested an opinion regarding whether denial of insured costs was
appropriate in light of the effective date of Chapter 294.
27. On July 2, 1991 Board counsel Ken Raschke directed a memorandum to
the Board concluding that Minn. Stat. 115C.09, subd. 3, as amended by Minn.
Laws 1 991 , Ch . 294 applies to all applications which had not been finally
acted upon by the Board by June 2, 1991. He presented this opinion at the
July 11, 1991 Board meeting. Ex. C.
28. At the July 11, 1991 meeting, and subsequent meetings, pursuant to
Board counsel's opinion, reimbursement for costs which had been covered by
insurance were denied by the Board.
The Applications
A. Federated Applicants
29. The following applications involve costs paid in whole or in part by
Federated Mutual Insurance Company ("Federated"). This contested case appeal
involves- only those costs paid by -insurance. All of the following
applications were denied insofar as the costs for which the applicant sought
reimbursement were paid by insurance.
30. Applicant George Kucera, d/b/a Texaco Bulk Storage (Leak No. 81)
submitted his application for reimbursement which was received by Board staff
on September 27, 1990. The application was considered incomplete due to lack
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of MPCA approval of a Corrective Action Design "CAD" A formal MPCA CAD
approval letter dated December 7, 1990 was received by Board staff on December
17, 1990. By letter dated March 25, 1991 the. Board staff outlined
deficiencies in Kucera's application. On April 12, 1991 the applicant
indicated that Federated had requested a copy of tie deficiency letter and
would respond. Federated's response on behalf of the applicant was received
by Board staff on April 26, 1991 . The application was scheduled for the -May -
30, 1991 Board meeting. Board staff recommended reimbursement in the amount
of $68,174.87. The application was tabled until the June 12 meeting. At that
meeting it was again tabled until the July 11 , 1991 meeting, when it was
denied. Applicant George Kucera's supplemental application for reimbursement
for $11 732 . 53 was received by Board staff on April 10, 1991. It was
considered at the August 22, 1991 meeting and denied.
31. Applicant: Jack's Standard - Watkins (Leak-No. 224) submitted an
application for reimbursement of $40,418.08 which was received by Board staff
on September 24, 1990. The applicant was notified on October 24, 1990 that
the application was incomplete due to lack of formal MPCA approval of a CAD.
A supplemental application which included an additional reimbursement request
of $6,864.10, and formal MPCA approval dated December 21, 1990 was received by
Board staff on December 28, 1990. The application was scheduled for the May
30, 1991 Board meeting. Board staff recommended reimbursement in the amount
of $47,282.18. The application was tabled until the June 12 meeting. At that
meeting it was again tabled until the July 11, 1991 meeting, when it was
denied. Applicant Jack's Standard - Watkins' further supplemental
applications for reimbursement for $6,971.56 was received by Board staff on
March 27, 1991. It was considered at the August 22, 1991 meeting and denied.
32. Applicant Johnson Auto Repair (Leak No. 1015) submitted its
application for reimbursement of $47,798.22 which was received by Board staff
on January 16, 1991. The application was scheduled for the May 30, 1991 Board
meeting. Board staff recommended reimbursement in the amount of $35,344.92.
The application was tabled until the June 12 meeting. At that meeting it was
again tabled until the July 11, 1991 meeting, when reimbursement was approved
for $9,000 which equaled 90 percent of the insurance deductible amount.
Reimbursement of insured costs was denied. Applicant Johnson Auto Repair's
supplemental application for reimbursement for $18,165.94 was received by
Board staff on March 25, 1991. It was considered -it the August 22, 1991
meeting and denied.
33. Applicant SuperStore, Inc. (Leak No. 441) submitted its application
for reimbursement of $174,311.82 which was received by Board staff on
September 19, 1990. On October 4, 1990 the applicant was informed that the
application was considered incomplete due to lack of formal MPCA approval of a
CAD. Formal MPCA approval dated January 30, 1991 was received by Board staff
on February 6, 1991. The application was considered at the July 11, 1991
meeting and denied. Applicant SuperStore, Inc.'s supplemental application for
reimbursement for $5,438.50 was received by the Board on March 27, 1991. It
was considered at the August 22, 1991 meeting and denied.
34. Applicant Elmer Anderson, d/b/a/ Anderson's 66 (Leak No. 242)
submitted his application for reimbursement for $31,409.56 which was received
by Board staff on September 24, 1990. On October 4, 1990 the applicant was
informed that the application was considered incomplete due to lack of formal
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MPCA approval of a CAD. Formal MPCA approval dated February 5. 1991 was
received by Board staff on February 8, 1991. The application was considered
at the July 11, 1991 meeting and denied.
35. Applicant Edwards Oil Co. (Leak No. 2304) submitted its application
for reimbursement for $212,831.42 which was received by Board staff on
February 20, 1991. -The application was considered at the July H. 1991 Board
meeting and denied. Applicant Edwards Oil's supplemental application for
reimbursement for $13,267.43 was approved, but a portion of that reimbursement
may be attributable to costs covered by Federated, and thus approved in error.
36. Applicant Severson Oil Co. (Leak No. 1172) submitted its application
for reimbursement for $23,691.93 which was received by Board staff on March
28, 1991. The application was considered at the August 22, 1991 meeting and
reimbursement of the insured costs of' $14,691.93 was denied. $9,000 of
uninsured costs (90% of the deductible) were awarded.
37. Applicant H&L Oil Company (Leak No. 729) submitted its supplemental
applications for reimbursement for amounts totaling $105,247.83 which were
received by Board staff on March 11 and April 10, 1991. (The applicant's
original application was approved for reimbursement of $43,888.01 of insured
costs at the December 20, 1991 meeting.) The supplemental applications were
considered at the August 22, 1991 Board meeting and $13,799 of uninsured costs
were awarded. Reimbursement of the remaining insured costs was denied.
38. Applicant Jack's Standard - Eden Valley (Leak No. 225) submitted its
supplemental application for reimbursement for $5,081.41 which was received by
Board staff on March 27, 1991. (The applicant's original application was
approved for reimbursement of $57,384.86 of insured costs at the May 30, 1991
Board meeting.) The supplemental application was considered at the August 22,
1991 Board meeting and denied.
39. Applicant Crown CoCo, Inc. - Prior Lake (Leak No. 180) submitted its
supplemental application for reimbursement for $15,506.62 which was received
by Board staff on April 1, 1991. (The applicant's original application was
approved for reimbursement of $105,824.49 of insured costs at -the January 24,
1991 Board meeting.) The supplemental application was considered at the
August 22, 1991 Board meeting and denied.
40. Applicant Corey (Oil Co. (Leak No. 190) submitted its supplemental
application for reimbursement for $13,221.69 which was received by Board staff
on April n 1991. (The applicant's original application was approved for
reimbursement of $73,890.89 of insured costs at the March 7, 1991 Board
meeting.) The supplemental application was considered at the August 22, 1991
Board meeting and denied.
41. Applicant Crown CoCo, Inc. - Smith E-Z Stop (Leak No. 158) submitted
its second supplemental application for reimbursement for $24,265.41 which was
received by Board staff on March 25, 1991. (The applicant's original and
first supplemental applications for reimbursement were approved in a total
amount of $65,698.77 of insured costs at meetings on September 24, 1990 and
March 7, 1991.) The second supplemental application was considered at the
August 22, 1991 Board meeting and denied.
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42 Applicant Hassett Oil Company (Leak NO. 567) submitted its
supplemental application for reimbursement for $22,725.95 which was received
by Board staff on March 25, 1991. (The applicant's original application was
approved for reimbursement of $58,363.12 of insured costs at the March 7, 1991
meeting.) The supplemental application was considered at the August 22, 1991
Board meeting and denied.
43. Applicant Wally's oil Company (Leak No. 89) submitted its
supplemental application for reimbursement for $15,742.19 which was received
by Board staff on March 25, 1991 (The applicant's original application was
approved for reimbursement of $84,976.49 of insured costs at the September 24,
1990 meeting.) The supplemental application was considered at the August 22,
1991 Board meeting and denied.
44. Applicant Hanson oil Compaly (Leak Nn. 29) submitted its
supplemental application for reimbursement for $6,423,97 which was received by
Board staff on April 8, 1 991 . (The applicant's original application was
approved for reimbursement of $64,731.87 of insured costs at the November 1,
1990 meeting.) The supplemental application was considered at the August 22,
1991 Board meeting and denied.
45. Applicant Brownton oil (Leak No. 27) submitted its supplemental
application for reimbursement for $4,818.36 which was received by Board staff
on April 8, 1991. (The applicant's original application was approved for
reimbursement of $46,406.50 of insured costs at the March 7, 1991 meeting.)
The supplemental application was considered at the August 22, 1991 Board
meeting and denied.
46. Applicant Solheim oil Company (Leak No. 56) submitted its
supplemental application for reimbursement for $19,906.03 *Mich was received
by Board staff on April 4, 1991. (The applicant's original application was
approved for reimbursement of $117,311.47 of insured costs at the September
24, 1990 meeting.) The supplemental application was considered at the August
22, 1991 Board meeting and denied.
47. Applicant 'Staples Oil Company (Leak No. 33) submitted its
supplemental application for reimbursement for $11,066.77 which was received
by Board staff on April 4, 1991. (The applicant's original application was
approved for reimbursement of $94,809.16 of insured costs at the January 24,
1991 meeting.) The supplemental application was considered at the August 22,
1991 Board meeting and denied.
48. Applicant Shaver & McCarthy (Leak No. 269) submitted its application
for reimbursement for $20,134.21 (only $19,382.26 was covered by insurance)
which was received by Board staff on April 22, 1991. The application was
considered and denied at the August 22, 1991 Board meeting. The applicant
requested reconsideration of the decision, requesting reimbursement of its
uninsured costs of $751.95, which were awarded at the October 3, 1991 meeting.
49. Applicant Bill Clark Oil Company (Leak No. 374) submitted its
application for reimbursement for $11,552.85 on December 31, 1990. The Board
issued a deficiency letter dated April 23, 1991. The applicant responded on
July 1, 1991 correcting the deficiencies. The application was considered at
the August 22, 1991 meeting and denied.
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50. Applicant Big Lake Direct Services, Inc. (Leak No. 604) submitted
its supplemental application for reimbursement for $30,909.99 which was
received by Board staff on April 12, 1991. (The applicant's original
application was approved for reimbursement of $101,149.32 of Insured costs at
the September 24, 1990 meeting.) The supplemental application was considered
at the August 22, 1991 Board meeting and denied.
51. Applicant James Robertson, d/b/a/ Home Oil Co. (Leak No. 311)
submitted its application for reimbursement for $13,745.69 which was received
by Board staff on -February 15, 1991. The application was considered
incomplete due to lack of CAD approval. A closure letter was issued by the
MPCA on April 17, 1991, which was received by Board staff on April 18, 1991.
The application was considered and denied at the August 22, 1991 meeting.
52. Applicant North Shore Oil, inc. (Leak No. 1281) submitted its
supplemental application for reimbursement for $13,129.25 which was received
by Board staff on April 25, 1991. (The applicant's original application was
approved for reimbursement of $76,290.42 of insured costs at the November 20,
1990 meeting.) The supplemental application was considered at the August 22,
1991 Board meeting and denied.
53. Applicant Sigfrinious (Leak No. 71) submitted its supplemental
application for reimbursement for $1,111.50 which was received by Board staff
on April 23, 1991 (The applicant's original application was approved for
reimbursement of $12,123.05 of insured costs at the January 24, 1991
meeting.) The supplemental application was considered at the August 22, 1991.
Board meeting and denied.
54. Applicant Hegstad Oil Company (Leak No. 394) submitted its
supplemental application for reimbursement for $14,916.16 *Mich was received
by Board staff on May 1, 1991. (The applicant's original application was
approved for reimbursement of $80,063.23 of insured costs at the November 1,
1990 meeting.) The supplemental application was considered at the August 22,
1991 Board meeting and denied.
55. Applicant Harland's Tire & Auto Center (Leak NO. 369) submitted its
supplemental application for reimbursement for $1,986.88 which was received by
Board staff on May 3, 1991. (The applicant's original application was
approved for reimbursement of $84,907.68 of insured costs at the January 24,
1991 meeting.) The supplemental application was considered at the August 22,
1991 Board meeting and denied.
56. Applicant Moberg's Inc. (Leak No. 773) submitted its second
supplemental application for reimbursement for $20,897.40 which was received
by Board staff on May 1, 1991. (The applicant's original and supplemental
applications were approved for reimbursement of $116,508.58 of insured costs
at the November 20, 1990 meeting.) the second supplemental application was
considered at the August 22, 1991 Board meeting and denied.
57. Applicant St. Michael Oil Co. (Leak No. 397) submitted its
application for, reimbursement for $105,974.10 which was received by Board
staff on September 26, 1990. The application was considered incomplete due to
lack of formal MPCA approval of a CAD. A formal MPCA approval letter dated
April 1, 1991 was received by Board staff on April 29, 1991. Additional tank
registration information was requested and received by Board staff on June 11,
1991. The application was considered at the August 22, 1991 meeting, and was
denied.
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58. Applicant: Local Oil Co. - Hastigs (Leak No. 1138) submitted its
application for reimbursement for $41,244.84, which. was received by Board
staff on May 29, 1991. The application was considered at the Board's August
22, 1991 meeting, and reimbursement of the insured costs of $32,244.84 was
denied. $9,000 of uninsured costs (90% of the deductible) were awarded.
59. Applicant Matheny Oil Co. Inc. (Leak No. 1162) submitted its
application for reimbursement for $58,174.07 which was received by Board staff
on May 30, 1991. The application was considered at the August 22, 1991
meeting, and was denied.
60. Applicant Crown CoCo, Inc. - Royalton (Leak No. 157) submitted its
supplemental application for reimbursement for $56,131.19 which was received
by Board staff on May 2, 1991. (The applicant's original application was
approved for reimbursement of $80,703.03 of insured costs at the January 24,
1991 meeting.) The supplemental application was considered at the August 22,
1991 Board meeting and denied.
61. Applicant New Auburn Oil (Leak No. 429) submitted its supplemental
application for reimbursement for $7,517.71 which was received by Board staff
on Apr i 1 5, 1991. (The applicant's original application was approved for
reimbursement of $47,783.12 of insured costs at the November 20, 1990
meeting.) The supplemental application was considered at the August 22, 1991
Board meeting and denied.
62. Applicant Matson Distributing (Leak No. 46) submitted its
supplemental application for reimbursement for $39,672.688 which was received
by Board staff on May 7, 1991. The applicant's original application was
approved for reimbursement of $55,011.72 of insured costs at the January 24,
1991 meeting.) The supplemental application was considered at the October 3,
1991 Board meeting and denied.
63. Applicant Rau Corporation (Leak No. 680) submitted its supplemental
application for reimbursement for $25,447.82 which was received by Board staff
on May 8, 1991. (The applicant's original application was approved for
reimbursement of $117,790.34 of insured costs at the November 20, 1990
meeting.) The supplemental application was considered at the October 3, 1991
Board meeting and denied.
64. Application Inter-City Oil (Leak No. 1032) submitted its two
supplemental applications for reimbursement for $127,606.32 and $4,929.25,
respectively, which were received by Board staff on May 21, 1991. (the
applicant's original application was approved for reimbursement of $22,356.54
based upon uninsured costs at the March 7, 1991 meeting.) The supplemental
applications were considered at the Board's October 3, 1991 meeting and denied.
65. Applicant Inter-City Oil (Leak No. 1370) submitted its supplemental
application for reimbursement for $26,673.71 which was received by Board staff
on May 21, 1991. The applicant's original application was approved for
reimbursement of $24,190.36 of insured costs at the April 18, 1991 meeting. A
deficiency letter was sent to the applicant on September 6 1991. No response
has been received by Board staff and the supplemental application has not been
considered by the Board.
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66 Applicant Inter-City Oil (Leak No. 8407 submitted its application
for reimbursement for $13,289.25 which was received by Board staff on May 30,
1991 The application was considered at the Board's.October 3, 1991 meeting
and tabled to obtain more information regarding uninsured costs. That
information has not been received by Board staff and-the application has not
been considered by the Board.
67. Applicant Inter-City Oil (Leak No. 1235) submitted its initial
application for reimbursement of $61,364.50 which was received by Board staff
on March 28, 1990. The application did not indicate that any of the costs
were paid by insurance. Reimbursement of $61,364.50 was approved at the April
12, 1990 Board meeting. Applicant submitted its supplemental application for
reimbursement for $1,174.05 which was received by the Board staff on June 11,
1991. The supplemental application was considered at the October 3, 1991
Board meeting and the $1,174.05 based upon uninsured costs was awarded.
68. Applicant Gehl Oil Co. (Leak No. 721) submitted its supplemental
application for reimbursement for $4,285.65 which was received by the Board
staff on March 28, 1991. (The applicant's original application was approved
for reimbursement of $52,998.26 of insured costs at the November 20, 1990
Board meeting . ) The supplemental application was approved in error at the
August 22, 1991 Board meeting. The applicant has returned the reimbursement
of $4,285.64 to the Petrofund and the August 22, 1991 approval is to be
reconsidered by the Board. For the purposes of this appeal it may be assumed
that, upon reconsideration, the supplemental application will be denied.
B. Q Petroleum Applications.
69. The following applications involve costs paid in whole or in part by
Petroleum's insurance coverage. This contested case appeal involves only
those costs paid by insurance. All of the following applications were denied
insofar as the costs for which this applicant sought reimbursement were paid
for by insurance.
LEAK SITE 375
70. Leak Site 375 is located at 2525 West 7th, St. Paul, Minnesota. In
May, 1988, Applicant Q Petroleum submitted its initial application for
reimbursement for $44,820 in response costs. On August 29, 1988 the Board
approved-$19,820 in reimbursement of uninsured costs and denied reimbursement
for insured costs.
71. On November 6, 1990 a supplemental application was received by Board
staff advising that the applicant had incurred $44,820 in costs for which
$19,820 of reimbursement had previously been paid, and an additional
$46,181.71 for which reimbursement had not been previously requested. on
December 14, 1990 a second supplemental application was submitted seeking
reimbursement for an additional $1,764.10 in expenses not previously submitted.
72. On March 5, 1991 a legal assistant to counsel for Q Petroleum wrote
to the Board staff concerning the confusion which had arisen over applications
for sites 375, 404, 455, 517, 521, 522, and 523, and requested copies of the
applications for sites 375 and 404. (Ex. E)
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73. On March 28, 1991 a letter was sent to Marlin Besler advising him
that review of the second supplemental -application was, complete and would
appear on the April 18, 1991 Board agenda.
74. On April 18, 1991 the Board approved reimbursement of $1,612.03 of
additional reimbursement from the second supplemental application.
75. On July 19, 1991 Board staff met with counsel for the applicant in
an effort to address confusion and deficiencies in the first supplemental
application. (Ex. F)-
76. On August 22, 1991 the Board considered the first supplemental
application for reimbursement and awarded $1,067.97 in reimbursement
constituting 90% of the uninsured additional eligible costs. Reimbursement of
insured costs was denied.
LEAK SITE 455
77. The applicant's application for reimbursement for Leak Site 455
located in Fridley, Minnesota was initially submitted March 30, 1989
reflecting costs in the amount of $64,059.76.
78. At its July 11, 1989 meeting the Board approved reimbursement of
$25,250, which was based upon the insurance deductible and total out-of-pocket
expense paid by Q Petroleum, to date. Reimbursement of insured costs was
denied.
79. On November 14, 1990 the Board staff received a supplemental
application seeking the reimbursement based upon insured expenses previously
submitted and an additional $13,300.03 in supplemental costs.
80. On February 19, 1991 the supplemental application was returned by
Board staff. (Ex. D, E, and F) The application was revised and re-submitted
April 15, 1991.
81. The Board approved reimbursement of $11,970-03 based upon additional
expenses on June 12, 1991. None of the previously submitted insured expenses
were reimbursed.
LEAK SITE 404
82. Leak Site 404 is located at 1529 White Bear Avenue, St. Paul. For
this site the initial application was received by Board staff on April 14,
1988. The application sought reimbursement for the maximum of $100,000 in
expenses.
83. At its meeting on July 19, 1988 the Board denied reimbursement due
to the applicant's failure to notify the State of the release and failure to
exercise due care in operation of the tank.
84. Counsel for the applicant inquired about the process for appeal and
was informed by Board counsel on September 13, 1988 that appeal was to the
Court of Appeals. No appeal was pursued.
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85. On June 7, 1989 applicant sought reconsideration of its original
application in light of a statutory increase in the maximum reimbursement.
86. At the August It 1989 meeting the Board approved reimbursement of
$12,625 *Mich reflected $25,250 in uninsured costs with a 50% reduction for
violations mentioned in paragraph 83.
87. On November 6, 1990 a supplemental application was submitted for the
reimbursement of $345,784.41 in previously incurred costs (including the
$100,000 submitted in-April 1988) plus $59,802.24 in new expenses.
88. This application was returned by Board staff on February 19, 1991.
(Ex. D, E, and F)
89. On August 9, 1991 in response lo the request from Board staff, the
application was revised and invoices supporting the additional expense were
submitted. On October 3, 1991 the Bond denied reimbursement to Q Petroleum
for insured costs related to this site.
LEAK SITE 521
go. Q Petroleum submitted its initial application for reimbursement in
connection with the costs incurred for Leak Site 521 located at 4501 Lyndale
Avenue, Minneapolis, on July 10, 1989. The initial application sought
reimbursement for $70,277.89 in cleanup expenses.
91. On January 16, 1990 a supplemental application was submitted for
additional costs of $10,552.10.
92. On March 1, 1990 the Board approved reimbursement of $25,250 for Q
Petroleum constituting only its uninsured out-of-pocket expense in connection
with this site. Reimbursement for insured expenses was denied.
93. On November 14, 1990 a second supplemental application was submitted
again seeking reimbursement for the previously submitted $70,277.89 plus an
additional $36,606.82 in subsequently incurred costs.
94. On December 5, 1990 Board staff received a third supplemental
application for reimbursement of the original $70,277.89 plus additional
amounts of $55,750.08 and $18,997.28.
95. On December 14, 1990 Board staff received a fourth supplemental
application for reimbursement of $38,500.10 in previously submitted costs plus
an additional $55,750.08 and $18,997.28 and $11,348.16 in non-previously
considered costs.
96. By letter dated February 19, 1991 Board staff returned applicant's
second and third applications. (Ex. D, E, and F)
97. On April 18, 1991 the Board considered the fourth supplemental
application and reimbursed $10,213.34 of insured costs (90% of the $11,348.16
submitted in the fourth supplemental application supported by invoices.)
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98. Applicant submitted an amended application on May 6, 1991 which
included supporting invoices for $56,470.59 in costs.
99. On August 1, 1991 applicant supplied further invoices in support of
the second and third supplemental applications. (Ex. F)
100. Reimbursement for insured costs submitted in the second and third-
supplemental applications was denied at the August 22, 1991 meeting.
LEAK SITE 522
101. Q Petroleum submitted its original application for reimbursement for
Leak Site 522 (2057 Marshall Avenue, St. Paul) on June 20, 1989. The initial
application sought reimbursement for $87,143.16 in costs. The initial
application was approved in the amount of $25,250 on August 3, 1989. This
amount was the uninsured out-of-pocket expense paid by Q Petroleum.
Reimbursement of insured expenses of Q Petroleum was denied.
102. On January 16, 1990 Board staff received a supplemental application
for $87,143.16 in original costs and an additional $21,348.47 in subsequent
expenses. Since applicant indicated that Insurance would not cover certain of
these costs, processing of this application was stayed pending receipt of a
no-coverage letter. No such letter has been received and the application has
not been further processed or considered by the Board.
103. On November 14, 1990 a second supplemental application was submitted
seeking reimbursement for previously submitted costs and an additional
$38,252.42 in additional expenses.
104. On December 5, 1990 Board staff received a third supplemental
application for the original $87,143.16 and additional amounts of $73,683.84
for which no invoices were submitted and invoiced costs of $17,462.29.
105. On December 14, 1990 a fourth supplemental application was received
reflecting costs of $53,678.84, $73,683.84, $17,462.29, and $2.335.23.
Invoices were submitted for only $2,335.23.
106. At its April 18, 1991 meeting the Board approved reimbursement of
$2,101.71 reflecting 90% of the $2,335.23 of insured costs supported by
invoices-in the December 14, 1990 supplemental application.
107. On February 19, 1991 the other supplemental applications were
returned. (Ex. D, E, and F)
108. On July 19, 1991 Board staff met with a representative of counsel
for the applicant to help sort out documentation needed on the November 14 and
December 5 1991 applications. The applicant responded on August 1 , 1 991 .
(Ex. F)
109. On August 22, 1991 the Board denied further reimbursement for Q
Petroleum for insured costs incurred at this site.
LEAK SITE 523
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110. Leak Site 523 is located at 1351 Randolph Avenue in St. Paul. The
initial application for reimbursement was submitted for expenses of
$66,373.86, On October 26, 1989 the Board approved reimbursement of
$41,623.86 (Q Petroleum's out-of-pocket, uninsured expense). Reimbursement of
insured expenses was denied.
111. On November 14, 1990 a supplemental application-was received seeking-
reimbursement of the originally submitted costs of $66,373.86 and an
additional $39,640.23.
112. On December 5, 1990 a second supplemental application was submitted
for the original $66,373.86 and additional amounts of $55,191.92 and
$15,153.28.
113. On February 19, 1991 Board staff returned these applications. (Ex.
D, E, and F)
114. On July 19, 1991 Board staff met with a representative of counsel
for the applicant to assist in determining needed documentation. The
applicant responded on August 1, 1991. (Ex. F)
115. On December 14, 1990 a third supplemental application was submitted
for previously submitted costs and an additional $592.73 of insured costs was
supported by invoices. Of the third supplemental application amounts
submitted, $533.45 was reimbursed by the Board at its April 18, 1991 meeting.
116. At the August 22, 1991 meeting further reimbursement for insured
costs was denied.
Q Petroleum's Contacts with Board Staff
117. In October 1990, Elaine P. Magnan, a legal assistant working for Q
Petroleum, began gathering information for reimbursement applications to the
Petrofund for Q Petroleum sites where petroleum leaks had occurred.
118. Commencing in October 1990 and continuing through June 1991, she had
numerous telephone conversations and correspondence with Robin Hanson, the
Consumer Liaison employed by the Petrofund. The purpose of these contacts was
to make sure the Petrofund had the information needed to consider
reimbursement for costs associated with clean-up activities at the Q Petroleum
sites. Rs. Hanson was specifically told-by his. Magnan that she represented Q
Petroleum's insurer.
119. At no time during Ms. Magnan's contacts with Ms. Hanson did she
suggest that the insurer's reimbursement claims were barred or ineligible.
Ms. Hanson did not tell her that any deadline had passed; in fact, she
represented that she considered the original claims' filing dates in November
1990, as the submission dates for the claims. She encouraged Ms. Magnan
continue her efforts to complete the application.
120. During June, July and August of 1991, Robert White assisted Elaine
P. Magnan with completing reimbursement applications for eligible expenditures
for Q Petroleum sites where petroleum leaks had occurred.
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121 . During this time he had numerous telephone conversations,
correspondence and a meeting with Robin Hanson.
122. At no time during his contacts with Ms. Hanson did she suggest that
the insurer's reimbursement claims were barred or ineligible. She encouraged
fir. White to continue what she knew to be considerable efforts to track down
the backup invoices-needed to complete the applications.
123. During a meeting on July 19, 1991, Ms. Hanson and Mr. White
painstakingly reviewed the applications in order to finalized them for
presentation to the Board.
Board Staff Actions
124. Between July 1, 1990 and March 31, 1991, the staff of the Petrofund
Board consisted of one part-time executive director, one analyst and one
clerk-typist.
125. Between July of 1990 and June of 1991, the number of initial
applications received by Board staff for processing each month generally
increased from 31 to 89. the staff also processed supplemental applications
not included in these amounts.
126. Board staff were able to process approximately 80 applications in
each six-week interval between regularly scheduled Board meetings.
127. From July 1, 1990 until October 31, 1990, the average time between
submission of a completed application to the Board staff and Board
consideration of the application at a meeting was approximately one month. In
November 1990, it was two months; in December 1990, three months; in January
1991, 3.5 months; in March 1991, four months; in April 1991, five months; and
in May 1991, six months.
128. Since its inception, a substantial portion of all applications
received by -the Board staff have been returned to the applicants because they
lacked information or documentation needed for Board consideration. In
particular, applications were normally considered incomplete which had not
received a Minnesota Pollution Control Agency (MPCA) approval of a corrective
action design (CAD) or a closure letter indicating completion of corrective
action. The Board has not normally considered reimbursement on applications
which do not have CAD approval or a closure letter from MPCA.
129. From July 1990 through July 1991 and thereafter, applications for
reimbursement which contained costs covered by insurance were processed by
Board staff in the same manner as other applications were processed.
130. The increase in the number of applications from July 1990 through
June of 1991 resulted in increasing delays in staff processing of
applications.
131. Between July 1 , 1990 and June 1, 1991 the staff presented for Board
action approximately 40 applications for reimbursement which included costs
covered by insurance, and the Board approved reimbursement of approximately
$2,647,000 for such costs.
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132. From June 2, 1991 the Board has not knowingly approved reimbursement
for any costs which were covered or paid for by insurance.
133. When it has totally denied reimbursement. for costs covered by
insurance, -the Board has not formally considered whether, or to what extent,
reimbursement for such costs hypothetically would have been reduced pursuant
to Minn. Stat. -115C.09, subd. 3(f) (Supp. 1991) and Minn. Rules pt. -
2890.0065 (Supp. 1991), if they were otherwise eligible for reimbursement.
134. Reimbursement for costs covered by insurance which are at issue in
this contested case, if they were otherwise eligible for reimbursement, may be
subject to reduction. For example, a number of the staff summaries and site
reports of the Pollution Control Agency contain recommendations for reductions
or information which would be relevant- to reduction determinations by the
Board.
135. At the May 30, 1991 meeting, the Petrofund Board approved
reimbursement requests for 66 applications. Thirteen applications were tabled
by the Board. In regard to eight of the tabled applications, the Board
minutes state the following:
Mr. Ettesvold moved to table the following applications
until the next meeting pending more information on each one:
Leak tabled
81 George Kucera
271 Cattoor Oil Company
36 Orton Oil Company
527 Jon McKinney
224 Jack's Standard - Watkins
2807 Joanne Grimes
1854 Jeffrey Scott Leech
307 D.I.D.D., Inc. Sauk Centre
Mr. Ettesvold stated that some of the applications were
incomplete and some costs contained in the applications were
unreasonable. Mr. Svanda seconded the motion. Jeanne
Hankerson of Federated Insurance asked if staff would send
letters to the applicants explaining why the applications were
tabled. Mr. Ettesvold amended his motion to read that staff
would send a letter to the applicants and that he (Mr.
Ettesvold) would provide a description of the problems or
incomplete- information in question. Mr. Svanda seconded the
amended motion. Donna Struzinski, representing Orton Oil
Company, objected to the tabling of this application. She
asked the Board to consider only those costs that did not
include third party liability. Mr. Troutwine called for the
question. Motion passed without opposition.
(Ex. 4.) The Board staff sent written explanations of the tabling to the
applicants in letters dated June 5, 1991. (Ex. 8)
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136. Prior to September of 1990 the Board staff recommended reimbursement
for applicants who had conceptual CAD approval but no formal letter from the
PCA and several Federated insureds received reimbursement without a CAD
approval letter or closure letter. (Ex. 4, 9) Beginning in September of 1990
the Board staff began rejecting applications which lacked formal PCA
approval. (Ex. 10, Finding of Fact No. 33
Based upon the foregoing Findings of Fact, the Administrative Law Judge
makes the following:
CONCLUSIONS
1. That the Petroleum Tank Release Compensation Board and the
Administrative Law Judge have jurisdiction in this matter pursuant to Minn.
Stat. 115C.09 (Supp. 1991) and 14.50, and Minn. Rules pt. 2890.01110.
2. That the Petrofund Board has fulfilled all relevant, substantive and
procedural requirements of law or rule.
3. That the Petrofund Board has given proper notice of the hearing in
this matter.
4. That the burden of proof in this proceeding is upon the applicants.
5. Minn. Laws 1991 Ch. 294 2, codified as Minn. Stat. 115C.09,
subd. 3(c), was effective June 2, 1991. It provides as follows:
(c) A reimbursement may not be made from the account
under this subdivision in response to either an
initial or supplemental application for costs
incurred after June 4, 1987, that are payable under
an applicable insurance policy, except that if the
board finds that the responsible person has made
reasonable efforts to collect from an insurer and
failed, the board shall reimburse the responsible
person under this subdivision.
6. Minn. Laws 1991 Ch. 294 4 provides as follows:
Sections n 2, and 3 are effective the day following
final enactment and apply to applications pending on or
filed after that date.
7. That the Petrofund Board is not estopped from denying reimbursement
to the applicants.
8. That the applications in question in this contested case proceeding
were pending on June 2, 1991.
9 That the Board's denial of reimbursement for the applications in
question was done on the grounds that costs incurred were payable under an
applicable insurance policy.
10. That the Board's denial of reimbursement to the applicants was
required by Minn. Stat. 115C.09, subd. 3(c) (Supp. 1991).
11. That neither the Administrative Law Judge nor the Petrofund Board
has jurisdiction to consider the applicants' arguments that Minn. Laws 1991
Ch. 294 is unconstitutional.
12. Minn. Rules 2890.0110 (1991) provides that:
If a request is denied, the responsible person may appeal
the decision as a contested case hearing under Ch. 14.
This language grants an applicant a trial-type contested case hearing under
Ch. 14 of Minnesota Statutes.
13. That if any of the foregoing Findings of Fact are deemed to be
Conclusions they are adopted as such.
14. That the above Conclusions are arrived at for the reasons set out in
the Memorandum which follows and which is incorporated into these Conclusions.
Based upon the foregoing Conclusions, the Administrative Law Judge makes
the following:
RECOMMENDATION
IT IS RESPECTFULLY RECOMMENDED that the Petroleum Tank Release
Compensation Board issue an order affirming its denial of the request by the
Applicants for reimbursement of insured costs.
Dated: July 7, 1992.
GEORGE A. BECK
Administrative Law Judge
NOTICE
Pursuant to Minn. Stat. 14.62, subd. 1,
the Agency is required to serve its final decision upon each party and the
Administrative Law Judge by first class mail.
Reported: no hearing
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MEMORANDUM
Introduction
The applicants in this contested case proceeding are seeking
reimbursement for costs incurred in the clean-up of ]leaks from underground
storage tanks. The costs in question In this proceeding were covered by-
insurance and the Board's denial of the applications in question was done on
the grounds that insured costs are not to be reimbursed by the Board. This
policy of not reimbursing insured costs was adopted by the Board outside of
the Administrative Procedure Act (APA) rulemaking process, during 1988.
(Finding of Fact No. 12) In at decision filed July 10, 1990 the Court of
Appeals held that the Board's policy was a "rule" that had to be adopted
pursuant to the APA. In re Crown CoCo Inc 458 N. W. 2 d 1 32 (Minn. Ct. App.
1990). The Court stated that:
Because the Board's action does not come within any
exception to APA rulemaking requirements, its decision cannot
be upheld absent compliance with APA rulemaking procedures.
The Petrofund Board had the authority to promulgate rules
denying reimbursement to responsible persons for eligible
costs covered by insurance. In the absence of properly
promulgated rules, however, the Board erred by refusing to
reimburse Crown for its eligible costs.
458 N.W.2d at 138-139
Following the Court of Appeals' decision in Crown CoCo, the Board suspended
its policy of denying reimbursement for costs covered by insurance.
Consequently, between September of 1990 and June of 1991 numerous applicants
were granted reimbursement for insured costs. Several parties to this
proceeding were reimbursed for insured costs during that time period.
(Findings of Fact Nos. 37-47, 50, 52-56, 60-62, 131).
The Board did proceed to adopt a rule incorporating its prior policy,
however, the rule was not effective until October 19, 1991. In the meantime,
the legislature passed legislation which became effective June 2, 1991. Minn.
Laws 1991, Ch. 294. The new statute adopted the Board's policy and prohibited
reimbursement "for costs incurred after June 4 1987, that are payable under an
applicable insurance policy, . " The law also provided that it was
"effective the day following final enactment" and would "apply to applications
pending on or filed after that day."
The Nature of this Proceeding
The applicants other than Q Petroleum (those insured by Federated) argue
that this proceeding is properly viewed strictly as an appeal of the Board
decision and that the correct standard of review is that set out in Minn.
Stat. 14.69 which describes the standards for judicial review of an
administrative agency decision by the Court of Appeals or Supreme Court. Q
Petroleum has not joined in this argument.
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The use of the word "appeal" in Minn. Rule 2890.0110 does not convert
this proceeding into an "anomalous procedure" as the applicants suggest.
Similar language has been construed to provide a trial-type contested case
proceeding under Chapter 14. For example, Minn. Stat. 13.04, subd. 4
provides that a data practices determination by a government body "may be
appealed pursuant 'to the provisions of the administrative procedure act-
relating to contested cases." The language has been construed to provide a
trial-type contested case proceeding. Hennepin County v. Hale, 470 N.W.2d 159
(Minn. C.t. App. 1991) The applicants are entitled to a de novo evidentiary
hearing and are entitled to argue the appropriate interpretation of the
statute, rules, and case law. They are also entitled to a report and
recommendation by an Administrative Law Judge prior to a final decision by the
Petrofund Board. In this case the parties agreed that a hearing was not
necessary since the facts could be stipulated. Nonetheless, the appellate
standard of review is not appropriate. The appellate review standards do not
correlate with an agency proceeding. For example, only the judicial branch,
as explained below, can determine that legislatiom is unconstitutional. The
substantial evidence test is appropriate for appellate judicial review rather
than a trial-type proceeding which is measured by the standard of a fair
preponderance of the evidence. Additionally, the Administrative Law Judge has
no authority to apply the "arbitrary or capricious" standard to agency actions
except insofar as this might equate with the legally incorrect interpretation
of a rule or statute.
Even though applicants other than Q Petroleum have argued the incorrect
standard of review in their brief, all of their arguments have been considered
nonetheless, along with those of Q Petroleum and the Board staff, in arriving
at a recommended determination in this matter. For example, applicants
argument that Mr. Ettesvold's motion to table and the Board's action was
arbitrary, was considered as an argument that this action was contrary to law
as set out in rule, statute and case law.
Substantive Argument
Both Q Petroleum and the other applicants in this case argue that the
applications which they submitted were not processed in a timely manner as
required by law. They point out that Minn. Rule 2890.0100 provides that the
staff shall "promptly" advise the applicant of any incompleteness or
deficiency in an application. Minn. Rule 2890.0090 also provides that an
application and all accompanying documentation must be received by the Board
30 days before a Board meeting in order for reimbursement to be considered at
that meeting. Q Petroleum points out that most of its supplemental
applications were submitted in mid-November of 1990 while the first
communication from the Board staff about that application was February 19,
1991 at which time the staff pointed out a duplication of invoices in the
applications. Q Petroleum argues that this delay by the staff was not
"prompt" and moved the applications into the "pending" category since they
were not acted upon until the July 19, 1991 meeting. Q Petroleum also asserts
that some applications could have been acted upon before June 1, 1991 since
the missing backup documentation was de minimus and involved very small dollar
amounts in claims.
The applicants other than Q Petroleum argue that the 30-day requirement
in Minn. Rule 2890.0090 means that applications can only be "pending" for 30
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days prior to each board meeting. They therefore argue that the only
applications which can be "pending" under the 1991 legislation are those
applications which were filed within 30 days of the last board meeting before
the effective date of the legislation. However, the rule in question does not
require that the Board act upon any application *within 30 days. It merely
requires that an application be submitted a minimum of 30 days prior to Board
consideration. Furthermore, the common definition of "pending" does not seem-
to comport with the applicants' argument. Weber's Third New International
Dictionary (defines "pending" as "not yet decided". Black's Law Dictionary,
Revised 4th Edition, defines it as "begun but not yet completed" or "prior to
the completion of" or "pending until a final judgment". Minnesota case law
generally holds that new statutes which apply to cases ''pending'' on the
effective date of the legislation apply to cases which have not been "finally
concluded". Leiser v. Sexton, 441 N.W.2d 805 (Minn. 1989); Olson v, Special
School District No. 1, 427 N.W.2d 707 (Minn. Ct. App. 1988)
Minn. Rule 2890.0090 does not impact the definition of "pending" since it
imposed no requirements upon the Board. Likewise, Minn. Rule 2890.0100
provides direction to the staff to act "promptly" but does not impose any
mandatory deadline. Sullivan v. Credit River Township,, 290 Minn. 1 70, 217
N.W.2d 502 (1974); Benedictine Sisters Benevolent Ass'n v. Pettersen, 299
N.W.2d 738, 740 (Minn. 1980) Nor does the record indicate that Q Petroleum
made any request to the staff to proceed with Board consideration of its
applications without undocumented claims. Applying the common definitions of
"pending" cited above to the facts of this case compels a conclusion that all
of the applications were pending on the effective date of the legislation
since no final Board action had been taken on any of them. It is noteworthy
that the legislature was specifically advised that staffing problems had
resulted in backlogs of applications of 90 days or more. The legislature
therefore could not have assumed that applications were being acted upon
within 30 days and it also would have been aware that applications pending for
up to 90 days might be affected by the new statute.
The applicants other than Q Petroleum also argue that the Board staff
acted improperly by requiring a formal- MPCA approval letter. Six of the
applications which lacked a formal approval letter were submitted between
September of 1990 and February of 1991 which amounted to the sum of $434,000
in claims. The applicants suggest that the Board adopted a new policy in
October of 1990 requiring a formal approval letter and that this requirement
is not mandated by State law and constitutes a new policy amounting to an
illegal rule.
The Board staff argues that its actions were required by statute and
rule. Minn. Stat. 115C.09, subd. 2(b) (1990) provided:
(b) A reimbursement may not be made unless the board
determines that the commissioner has determined that the
corrective action has, or when completed will have,
adequately addressed the release in terms of public
health, welfare, and the environment.
Minn. Rule 2890.0090, subpt. 1.C. also requires that the application contain
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"a copy of the corrective action plan and the commissioner's approval of the
plan. " The staff therefore argues that corrective action design (CAD) or
closure approval is an express legal requirement. The Board staff notes that
the requirement of a CAD approval was considered and rioted by the Board as
early as August 3, 1989. Federated Ex. 4.
The applicants-assert that what changed was the Board's requirement as to
the form the CAD approval had to take. They believe that the Board began to
enforce the use of particular language required in a CAD approval letter while
earlier applications- were acted upon when they contained only letters
indicating conceptual CAD approval. As the Board staff points out, however,
even if there were a shift in emphasis as to exactly what was required this
would not amount to any dramatic new policy. The statute and rules plainly
require the Board to determine that the PCA has approved a corrective action
plan. The Board staff's actions in this regard were consistent with a plain
meaning of -the statute -and rule and therefore do not constitute improper
rulemaking. Cable Communications Board v. Norwest Cable Communications
Partnership, 356 N.W.2d 658, 668 (Minn. 1984); In Re Mapleton Community Home
Inc. , 391 N. W. 2d 798, 801 (Minn . 1986) - It is therefore determined that the
Board staff's action in requiring a formal PCA approval letter before
submission of the application to the Board for action was not contrary to, but
rather consistent with statute and rule.
The applicants other than Q Petroleum also focus on three applications
which were tabled by the Board on May 30, 1991. They were George Kucera,
submitted on September 27, 1990; Jack's Standard - Watkins, submitted on
September 24, 1990 and Johnson Auto Repair, submitted on January 16, 1991.
The three applications totalled $150,801.97 in claims. (Findings of Fact Nos.
30-32.) The applicants argue that the tabling of these three applications was
not reasonable, that the reasons given for tabling were inadequate and that
the real reason that they were tabled was the new legislation, which would
have made these insured costs not reimbursable if acted upon after the May 30,
1991 meeting. The Board staff points out and the record indicates that the
tabling of applications for further inquiry was a common occurrence both
before and after the May 30, 1991 meeting. It notes that 13 applications were
tabled at the May 30, 1991 meeting of which only six contained insured costs.
(Finding of Fact No. 135) The reason given for the tabling was that the
applications were incomplete and some costs were not reasonable. The fact
that three applications containing insured costs were among those tabled at
the May 30, 1991 meeting does not establish any improper action. A large
number of applications containing insured costs had been approved in the prior
eight months (Finding of Fact No. 131) and a large number of applications were
tabled at various meetings for the same reasons given for the tabling of the
three applications in questions. The applicants have not sustained their
burden of proof to demonstrate that the Board or the Board staff acted
contrary to law in tabling the three applications in question.
Q Petroleum also asserts that the Board's denial of reimbursement of
insured costs on six applications amounting to approximately $180,000 in
claims was contrary to law. (Finding of Fact Nos. 70-116) These claims were
first submitted from May of 1988 to June of 1989 and were denied by the Board
pursuant to its policy of denying reimbursement of insured costs. These
denials occurred prior to the holding of the Court of Appeals in Crown Coco,
These denied costs were apparently resubmitted to the Board after the
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Crown CoCo decision. The Board staff points out that Q Petroleum never
appealed the denial of the insured costs in 1988 and 1989 and that at the time
of the crown CoCo decision the appeal period for those denials had expired.
It was therefore determined by the Board that the denied claims could not be
revived and resubmitted as part of a subsequent "supplemental" application
since by rule "subsequent applications" can be made only for "additional or
continuing eligible costs". Minn. Rule' 2890.0090, subpt. 3. Q Petroleum-
argues that the previously denied costs are "continuing eligible costs" within
the meaning of the rule. However, the phrase "additional or continuing
eligible costs" seems to refer to costs which arose since the prior
application.
There's nothing in the Crown CoCo decision to indicate that the court
intended it to have any retroactive application whereby claims denied by the
Board would be revived and reconsidered. Generally, an appellate decision has
a prospective effect only unless the court specifically indicates to the,
contrary. Roemer, 457 N.W.2d 716, 722 (Minn. 1990)
In the case of the applicants here, it cannot be said that the Court of
Appeals, decision in Crown CoCo was clearly foreshadowed so as to justify
retroactive application. Additionally, such an application would cause a
hardship to the State of Minnesota by requiring the reconsideration of
numerous denied applications at a time when funding for reimbursement is
scarce. Prospective application of Crown CoCo is especially appropriate where
the Court of Appeals acknowledged that the agency had authority to adopt its
policy by rule and the legislature subsequently agreed that the policy should
be implemented in statute. It is therefore concluded that the denial of the
insured costs in question was not contrary to law.
The Board staff has acknowledged that due to under-staffing there were
substantial delays in the processing of applications. (Finding of Fact Nos.
124-130) Until October 31, 1990, the average time for submission of a
completed application to the Board was approximately one month; however, by
May of 1991 it was six months. (Finding of Fact No. 127.) While the lack of
staffing impacted prompt consideration of applications, the failure of
applicants to submit all documents required to complete an application also
created delay. However, despite these delays, the Board is still faced with
implementing Minn. Laws 1991, Chapter 294 which prohibits it from reimbursing
insured costs in applications that were pending on or submitted after June 2,
1991. Absent an estoppel situation, or a demonstration of intentional delay
for improper purposes, the fact that some applications were not acted upon
"promptly does not mean that the Board is free to now pay those claims. The
legislature was aware of a backlog of applications at the Board. The Board is
required to implement the statute. Questions of constitutionality of the
statute are, of course, a matter for the judicial branch.
Equitable Estoppel
The applicants argue that the Board should be estopped from denying
reimbursement because the actions of the Board staff implied that the
applications would receive favorable action. Specifically, both before and
after the effective date of Minn. Laws 1991, Ch. 294 the Board staff solicited
detailed documentation from the applicants to cure deficiencies in the
submissions, but did not say anything about claims covered by insurance not
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being eligible for reimbursement. The applicant's argue that they incurred
costs in reliance upon a reasonable expectation of being reimbursed. The
costs include the time of insurance company claims personnel as well as legal
fees incurred in preparation and presentation of the applications.
The leading Minnesota case equitable estoppel of government is Brown v,
Minnesota Department of Public Welfare, 368 N.W.2d 906 '(Minn. 1985). Under'
the party asserting estoppel must show that the agency made
representations or inducements which involve fault or wrongful conduct by the
agency, that the party reasonably relied on the representations, that the
party will be harmed if estoppel is not allowed, and that the equities of the
case outweigh any public interest frustrated by the application of estoppel.
368 N.W.2d at 910. A party seeking to estop a government agency has a heavy
burden of proof. Ridgewood Development Co. v. State, 294 N.W.2d 288, 292-93
(Minn. 1980) the Supreme Court has also stated that it does not "envision
that estoppel will be freely applied against the government." Mesaba Aviation
v. County of Itasca, 258 N.W.2d 877, 880 (Minn. 1977)
In this case the applicants have failed to make the showing required
under Brown. There is no evidence in the record that arty Board staff member
engaged in any wrongful conduct or affirmative misrepresentations as to
whether insured costs were reimbursable. Applicants argue that the staff
implied that insured costs were eligible by continuing to solicit background
information prior to and after the effective date of Minn. Laws 1991, Ch.
294. From October 1990 to June of 1991, the Board staff was in fact
processing and the Board was approving reimbursements for costs covered by
insurance. (Finding of Fact No. 131) The staff would not have been wrong to
have implied that insured costs were eligible for reimbursement during that
time period. Nonetheless, the case law does not authorize the application of
estoppel based upon an implied misrepresentation. It requires -a specific
misrepresentation which invites reliance. Mesaba Aviation, supra 258 N.W..2d
at 880-81; In re Residential Alternatives, Inc. v. Minnesota Department of
Human Services, 387 N.W.2d 885, 890-91 (Minn. Ct. App. 1986) It also requires
wrongful conduct on the part of the government. Ridgewood Development supra,
294 N.W.2d at 293.
A failure to specifically advise an applicant of the policy on
reimbursing insured costs does not constitute either at misrepresentation or
wrongful conduct especially where the controversy over this policy was a
matter of public record. The Court of Appeals had invalidated the policy in
July of _1990. The Board had initiated rulemaking to adopt the policy on
September 19, 1990. The Board began paying insured costs in October 1990.
Legislation adopting the former policy was introduced during the 1991
legislative session, passed, and was submitted to the Governor on May 28,
1991. The applicants have not suggested they were unaware of the existence of
the rulemaking or the lawmaking. They were as knowledgable as the Board staff
concerning potential changes in policy or interpretation. The situation in
this case is quite similar to Ridgewood Development, supra. In that case
agency officials applied new legislation to Ridgewood which excluded its
housing development from using municipal industrial development bonds.
Despite substantial expeditures by Ridgewood in reliance upon the prior law,
the Supreme Court found no estoppel. It stated that:
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Here there is no wrongful governmental conduct; no governmental
offical has given improper advice. Instead, what is being
challenged is merely a clarification of governmental policy toward
the use of tax-exempt bond financing of housing developments. The
actions of elected representatives taken to. ensure that legislation
is applied in conformity with its underlying purpose can hardly be
characterized as "wrongful conduct." Thus,- the most important-
element of equitable estoppel is missing.
294 N.W.2d at 293. The applicants have not demonstrated that the application
of equitable estoppel is appropriate in this case.
Constitutional Arguments
The applicants have also advanced several constitutional arguments. They
argue that Minn. Stat. 115C.09, subd. 3(c) (Supp. 1991) violates the federal
and state equal protection clauses since it treats insured applicants
differently from uninsured applicants. They also assert that the statute is
void for vagueness because the term "pending" was not defined. Finally, it is
claimed that the statute violates the due process clause in that it
constitutes retroactive legislation which impairs the applicants' vested
property rights. The Board staff answers these arguments in its post-hearing
brief.
Generally, neither an administrative agency nor an Administrative Law
Judge has the subject matter jurisdiction to declare a statute
unconstitutional in -a contested case proceeding. Sñarkweather v. Blair, 245
Minn. 371, 394-95, 71 N.W.2d 869, 884 (1955); Neeland v.. Clearwater Memorial
Hospital, 257 N.W.2d 366, 368 (Minn. 1977); Ouam v. State 391 N.W.2d 803, 809
(Minn. 1986); Holt v. State Board of Medical Examiners, 431 N.W.2d 905, 906
(Minn. App. 1988). It has been held, however, that an agency may interpret a
statute taking into account relevant judicial decisions dealing with
constitutional issues . Jackson Co. Education Association v. Grass Lake
Community Schools Board of Education, 95- Mich. App. 635, 641, 291 N.W.2d 53,
56 (1980) In the case under consideration, the applicants attack the statue
on its face. No judicial interpretations exist to guide the agency. Such a
challenge must be determined in the judicial branch. Nonetheless,
administrative litigants are often permitted to raise constitutional issues in
the agency proceeding in order to permit the development of a record of
evidence necessary to decide the constitutional questions and to thereby avoid
a remand Johnson v. Elkin, 263 N.W.2d 123, 127 (N.D. 1978) In this case the
parties agreed that no evidentiary hearing was necessary because they were
able to stiputlate to the relevent facts. It is appropriate, however, that
the constitutional argument by the parties remain in the record for
consideration by the Court of Appeals should that be necessary.
GAB
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