January 2003 minutes

January 2003 Meeting Minutes

MINUTES

DRYCLEANER ENVIRONMENTAL RESPONSE TRUST FUND
COUNCIL of ILLINOIS

HOLIDAY INN
BOLINGBROOK, ILLINOIS

JANUARY 21, 2003

John Polak, Chairperson, called the Drycleaner Environmental Response Trust Fund Council of Illinois meeting to order at 9:38 a.m. A quorum was present. Roll call was taken with the following members present:

John Bredenkamp
Andrew Chweh
Augustine Chung (joined via telephone at 9:41 a.m.)
David Gibson
Young B. Kim
Jerry Lewicki
John Polak

Also present were:
H. Patrick Eriksen, Program Administrator's Office
John J. McCarthy, Program Counsel
C. Michael Perkins, Program Administrator's Office
Juho So, Program Administrator's Office

PRELIMINARY BUSINESS

The minutes from the December 13, 2002 Council meeting were reviewed. On a motion by Mr. Bredenkamp and a second by Mr. Gibson, the minutes were approved by a vote of 6-0.

OPERATIONAL ISSUES

A. Presentation by David VanWy of JULIE on the Utility Locate Process:

Mr. David VanWy of JULIE, conducted a PowerPoint presentation, which provided background information regarding the operations of JULIE, including how excavators are responsible to call JULIE in advance of any excavation. JULIE is a not-for-profit company, which passes the utility locate request on to the various utility companies. Mr. VanWy indicated that the member utility companies, not JULIE, physically locate the various utility lines at the property.

He stated that the utility companies will only locate the utilities that they own and maintain. Private service lines are usually not covered by the locate.

Mr. Gibson inquired at length whose responsibility is it if there are damages, including physical damage, loss of profits, etc., that occur at a facility when the utility company fails to properly mark and identify all the utilities at the facility. Mr. VanWy stated that in most cases, the utility company will pay for actual physical loss incurred at the property. For example, if a drill rig hits a power line and the drill bit is destroyed, the utility company, if they are at fault for improperly marking the power line, would pay for the replacement cost of the drill bit. They will not pay for the loss of time incurred by the consultant or the loss of business the owner/operator may have incurred. He noted that this is based on a court decision called the "Moormon Act" where a ruling was made that the utility will not be liable to pay for a financial loss such as lost business.

Mr. Bredenkamp raised the issue does the Council incur liability if they do not inform drycleaners of these liability issues that they learned today regarding the locate process? He suggested the Council provide a handout of issues the drycleaners should consider when entering into contracts with environmental consultants such as "hold harmless" agreements. Several other Council members concurred Mr. Bredenkamp had raised a good point. Mr. McCarthy responded that he had a concern of creating liability for the Fund if the Council tries to put together a checklist of things that should be included in a contract between the drycleaner and environmental consultant. His fear is if some item is omitted, that the Fund would be held liable for that omission.

The Council discussed this issue at length. Mr. Chung indicated that he feels it would be better to communicate today's discussion through the various drycleaner associations and not have the Fund directly communicate the information to individual drycleaners. This would provide liability protection to the Fund.

After additional discussion by the Council, Mr. Gibson made a motion that the Council provide drycleaner associations general information to disseminate to all their members about obtaining a "hold harmless" agreement in their contract with an environmental consultant. He also wished to include the recommendation in the Council's upcoming newsletter. The motion was seconded by Mr. Lewicki. On a roll call vote, the motion passed by a vote of 6-1, with Mr. Chung voting in opposition to the motion.

Mr. Polak stated that due to time constraints of the environmental consultants that would be doing the update on the innovative technology project of United Cleaners in Lemont, IL, he wished to switch the agenda order for Operational Items C and B.

C. Update on Innovative Technology Project-United Cleaners, Lemont, IL - Claim #50145

Mr. Dan Kaplan of K-Plus Environmental provided a brief PowerPoint presentation to the Council regarding the status of the project. He reviewed with the Council that there were two (2) "hot spots" on the property in which the perc contamination at the facility exceeded the soil saturation limits. An over- excavation would have been extremely expensive at this facility, as they would have been required to relocate at least five (5) utility lines. Instead, a heated soil vapor extraction project was determined to be the most feasible remediation method and began operation in early September 2002.

Mr. Kaplan noted that the project did not reduce the contamination to the defined cleanup objectives as of December 31, 2002. Mr. Oster, of United Cleaners, exercised his option to allow for a 60-day extension to further reduce the plume of contamination to levels that would be acceptable by the Illinois Environmental Protection Agency (IEPA) to get a No Further Remediation (NFR) letter. He indicated that it is a possibility that there is a short circuit on one of the soil vapor extraction points closest to the area with remaining significant contamination. They plan to further evaluate that point in the near future.

Several Council members had questions about the technology, one involving whether there was a concern about releasing the volatized contaminate into the atmosphere. The consultant assured the Council that the omissions from the soil vapor extraction system were well within the allowable ranges per the guidelines provided by the IEPA. Another Council member expressed concern that it might be possible to drive the perc deeper when heating the soil. It was the consensus of those who have been actively involved in the project, including Jay Jaktar, who holds the patent on the technology, that the project should be successful by the end of February.

Mr. Eriksen inquired what the next step would be if they deem it not to be successful as of February 28, 2003. Matt Cohen of the Jeff Diver Group, representing Mr. Oster, stated that they are confident the goal should be achieved but they would review their options at the end of February if the project is not successful.

B. Intrusive Testing Protocol for Fund Insured Drycleaning Facilities:

Mr. Eriksen reviewed with the Council that there has been considerable discussion over the last five (5) months regarding the intrusive testing protocol for Fund insured drycleaning facilities. He stated the Administrator has listened carefully to the comments and is proposing revisions to the initial site investigation scope of work guidelines. He noted these revisions were based on concerns expressed at recent Council meetings, including comments that the initial site investigation was too expensive for facilities that test clean and recent information that a facility owner whose site tested clean had to pay for unnecessary services. Mr. Eriksen asked Mr. Perkins to provide the Council with more detail on the revised scope of work guidelines. Mr. Perkins noted that the main change is that the Administrator is looking at quantifying the basic testing based on dates that the facility began operations and these are broken out in four (4) phases, the first being the current date through July 1, 1999, in which most facilities would only need to complete a modified Phase I environmental site assessment and no intrusive testing. Secondly, for the period of June 30, 1999 to July 1, 1992, a focused Phase I ESA, 3 to 5 borings, 16-25 ft. below ground surface, 1 to 3 monitoring wells if groundwater is present, 2 soil contaminations of concerns (COC) analysis per boring would be performed. Third, for the period of June 30, 1992 to July 1, 1987, focus Phase I ESA, 5 to 6 soil borings, 16-25 ft. below ground surface, and 2 to 3 monitoring wells if groundwater is present, plus 2 soil COC analysis per boring will be performed. Fourth, facilities beginning drycleaning operations prior to June 30, 1987 would need a focused Phase 1 ESA, 6 to 8 soil borings, 16-25 ft. below ground surface, and 3 to 4 monitoring wells (if groundwater is present) and 2 soil COC analysis per boring. He indicated that the Fund would not have the second COC analysis performed unless it was confirmed that the site was contaminated. This would save the drycleaner money if his site tested clean.

Mr. Perkins commented that instead of a full-blown site investigation report that included a remedial objectives report, a brief site investigation report (SIR) would be submitted to the Fund for review. The content of the SIR should be included with a modified Phase I ESA report and contain a site map with soil borings and monitoring well locations, copies of the analytical results and analytical summary table for soil boring and monitoring wells, soil boring logs, well diagrams, etc.

Mr. Eriksen noted that the revised procedures would not necessarily save the Fund monies if the site was determined to be contaminated, as a remobilization would probably be necessary, but he noted that most contaminated sites to date have had to incur remobilization costs to completely define the contamination. The benefit would be for those drycleaners whose facilities test clean with the saving being anywhere in the neighborhood of $4,000-$5,000, which consists of reduced lab analysis and consulting time and not having to prepare a remedial objectives report and a detailed environmental site assessment report.

Dr. Chweh questioned Mr. Perkins at length as to why the borings are installed at a depth of 16-25 ft., why couldn't they be at 8 ft. or less? Mr. Perkins stated that in many cases, the contamination has migrated to deeper levels and without doing borings in the 16-25 ft. range there is a reasonable likelihood that existing soil contamination may go undiscovered. He also noted that in many cases, a depth of 16+ ft. is needed to reach groundwater. Dr. Chweh asked why not drill to at least 50 ft. to make certain that all contamination is discovered? Mr. Perkins stated that in some cases that is necessary but it is substantially more costly to go to 50 ft. then to go from 10 ft. to 25 ft. Mr. Eriksen commented the drilling depth in most cases, although guidelines are recommended by the Administrator, is left to the determination of the environmental consulting project manager who is on site, who utilizes their best professional judgment in determining the appropriate drilling depth. Dr. Chweh commented that there should be some scientific evidence to determine and justify that a typical boring should range in the area of 16-25 ft. Mr. Eriksen replied that the Administrator would prepare an analysis of test results that they received on a representative sample of facilities that have contamination and provide Dr. Chweh, at the next meeting, at what depths the contamination was discovered.

Mr. Polak recessed the meeting at 12:00 noon and reconvened the meeting at 1:03 p.m.

D. Legislative Initiative:

Mr. Eriksen noted that included in the Council packet was a summary of the Council approved technical corrections and the wording that would be submitted as part of a bill to amend the Drycleaner Trust Fund Act. The summary also included an extension of the sunset date of the Fund by 10 years, from January 1, 2010 to January 1, 2020.

He reported since the last Council meeting, he has had discussions with representatives of various drycleaning organizations that were discussing the possibility of drafting joint legislation to amend the Act during the current legislative session. Indications are that it is unlikely that joint legislation will be drafted or sponsored by the various drycleaning organizations. Mr. Polak reviewed with the Council that the solvency of the overall Fund must be addressed. He is aware that for many drycleaners, any increase in cost would be their last choice and therefore, wants to discuss any viable alternatives to help improve the Fund's solvency.

Mr. Polak stated he just recently asked the Administrator to work with a large reinsurance broker to see if it is feasible that drycleaners could purchase an insurance fund policy that would cover or provide some additional cleanup benefits above and beyond the Fund caps that currently exist on the remedial program. He reiterated that he feels the Council has the fiduciary responsibility to look at every possible alternative to provide necessary funding for the cleanup costs. He stated that a contingency plan is necessary and the ultimate issue is how can we equitably raise the cost to all drycleaners. He noted that a motion was tabled at the last meeting to increase the petroleum solvent tax and so he had asked the Administrator to look at what type of a flat rate tax would be necessary to fund the current projected deficit. Mr. Eriksen stated that based upon Mr. Polak's request, there would need to be an annual solvent tax of approximately $30.27 to eliminate the projected deficit if 950 claims were filed and $17.24 if 600 claims were filed. This is assuming that the tax on a gallon of perc would be the same as a gallon of petroleum solvent. At the request of the Chairman, he also calculated what the solvent taxes would need to be to eliminate the projected deficit assuming the current ratio of 10-1 between petroleum and perc remains the same. Assuming 950 claims, the perc tax would need to be increased to $45 per gallon and the petroleum to $4.50. If only 600 claims were filed the perc tax would be $24 and the petroleum tax would be $2.40. Mr. Chung stated that assuming the claims come in somewhere in between 600 and 950 claims projected, a e tax of roughly $34-$35 on perc may be necessary to eliminate the projected deficit.

Mr. Gibson asked if there was any more data on what the ratio between the petroleum tax and perc tax should be. Mr. Eriksen stated it varies by state. Some use the 10 to 1 ratio that Illinois does, some are as low as a 5 to 1 ratio. Mr. Bredenkamp noted that the petroleum industry has not worked under the same mandate as the perc industry in moving towards more efficient machines. For his customers, the ratio in terms of the pounds of clothes that can be cleaned with a gallon of petroleum versus a gallon of perc is in excess of 10 to 1. Mr. Chung reviewed several "what if" scenarios regarding possible financial impact to drycleaners with the Council if the perc solvent tax were increased to $35 per gallon.

The Council discussed the use and taxing of new solvents including some of the new petroleum solvents and green solvents, noting that consideration should be given to providing drycleaners some incentive to change to a more environmentally friendly solvent. Mr. Bredenkamp noted many of these new solvents are being used at facilities that have been perc plants for over 20 years and any reduced rate would only work financially for the Fund if the green solvent was used at a "virgin" site that had never been exposed to drycleaning solvents. Mr. Polak indicated that it is clear that some increase is necessary in the fees but the question is how much and the need to make it equitable. Mr. Lewicki suggested consideration be given for raising the license fee, as it is based on the volume done at the facility and may be more equitable. Mr. Eriksen commented the Council can adjust the solvent taxes or the license fees to generate additional revenue. Mr. Polak asked the Council if there was a consensus to increase the solvent tax or license fee. Mr. Chung stated that he would prefer the legislature change to address the revenue issue but that the Council should discuss a fallback position if the legislature does not address the issue. Mr. Polak asked what changes in revenue the Council should ask from the legislature? There was no immediate consensus but everyone did agree that the longer there was a delay in increasing the revenue for the Fund, the greater the revenue increases needed to be.

Dr. Chweh commented that since a majority of the drycleaners in the state are Korean, he would like the Council to delay any formal action until after the Korean American Drycleaners Association has a meeting on Thursday, January 30, 2003, to discuss with their members what they would like to see in terms of alternatives to alleviate the funding shortfall. Mr. Polak acknowledged his position and stated the Council needs to keep moving forward in obtaining as much information as they can so they know what the industry feels are acceptable revenue modifications.

Discussion focused on the mileage that people were getting from their solvents. Mr. Kim stated that most drycleaners using 100 gallons of perc per year should be cleaning at least 70,000 lbs of clothes with their current machine. With a fourth generation machine, it should be over 100,000 lbs of clothes. Therefore, an increase in the solvent tax may not be as beneficial if we continue to see reduced solvent usage due to more efficient drycleaning machines.

Mr. Polak believes that if there is any break given to petroleum or green solvents, that it should be: a) if a facility is a pristine or clean site at the time the machine is installed; or b) the facility has received a No Further Remediation letter from the Illinois EPA.

Mr. Polak stated that he wishes to direct the Administrator to review various financial scenarios, looking at increased license fees and solvent taxes, with an extension of the sunset date for 20 years. Mr. Gibson stated he would also like the Administrator to recast the lost revenue that the Council would have received over the past two (2) years, had SB1069 passed.

After additional discussion by the Council, it was their consensus that the next Council meeting focuses primarily on one (1) issue, which is a legislative agenda. Mr. Polak commented he would like the various associations' leadership to participate in a discussion of what they feel they can support or would like to see in legislation that would increase revenue to the Fund.

Mr. Jim Rusciolelli, president of the Illinois State Fabricare Association (ISFA), noted that if the Council waits until the third week of February to address this issue, it may be too late to get legislation introduced. Mr. McCarthy noted that we have a sponsor for a shell bill and that it would probably be filed sometime prior to the next meeting. Mr. Rusciolelli noted that in the southwestern part of the country, groundwater contamination from perc has become a big issue. A number of these contaminations were caused by the U.S. Defense Department and hopefully, in the next 5-10 years we will see additional technologies developed that will assist in more cost effective cleanups.

A brief general discussion ensued regarding some of the initial provisions of SB1069, which included the licensing of drop stores, the increasing of the benefit cap and the associated cost with those programs. It was also noted that anytime a bill is introduced, it could open the Act to changes that are not wanted by the Council and the industry.

Mr. Polak thanked everyone for their input and said he looks forward to a continued discussion at the next Council meeting in February.

E. Prioritization Matrix:

Mr. Eriksen noted that they have not received any comments from the industry and IEPA stated that they did not have any comments on the proposed matrix. He stated originally he had been looking at bringing the matrix to the Council in the form of an administrative rule at the February or March meeting but recommended the issue should be tabled until the Council determines their position on a legislative package.

F. Policy Issue On License Transfers:

Mr. Eriksen noted recently the Administrator has come across an instance in which an original license was issued in 2001 (and expired as of December 31, 2001) and the new operator wished to transfer the license effective November 2001. The Administrator did not become aware of the ownership change until 2002, when we requested completion of the appropriate transfer forms and return of the original license. The original license could not be found and in keeping with the Council's current policies and procedures, it required that the additional license fees be paid for calendar year 2001 by the new drycleaner operator.

Mr. Eriksen stated the issue for Council review is does the Council still wish to require the return of the original license when an ownership transfer takes place, if at such time the Council becomes aware of the transfer, the license being transferred has already expired?

The Administrator offered the following options for the Council's review and action:
1. Continue with the existing policy in which the original license must be returned or the new drycleaner owner will have to pay the appropriate license fee for the year in which the transfer took place; or
2. If at the time that the Fund is notified of the ownership change, if the license has expired and no longer requests the original license but allow the transfer to take place and assume that the old operator did not take it to a new facility.

Mr. Eriksen stated that the Administrator did not have a recommendation on how the Council should proceed with this issue.

Council discussion initially focused on whether the license should stay with the facility or move with the new owner. Mr. Eriksen stated that the statute requires the Council license the drycleaner operator so if the drycleaner operator moves to a new facility, he has the right to transfer the license to the new facility. He also has the ability to transfer his existing license for a facility to the new owner and that is what happens in a majority of the cases.

The Council inquired if option #2 was detrimental to the program. Mr. Eriksen said it would reduce revenue because we have the new operator purchase a partial year license when the original license could not be found.

After discussion by the Council, on a motion by Mr. Bredenkamp and a second by Mr. Chung, the Council, by a vote of 7-0, agreed to stay with the current policy in which the original license must be returned or the new drycleaner owner/ operator will have to pay the appropriate license fee for the year in which the transfer took place.

G. Presentation of Remedial Technologies:

Mr. Polak noted that Dr. Juho So was scheduled to provide the Council a presentation on remedial technologies but due to the lateness of the hour, requested that it be deferred to a future meeting. On a motion by Mr. Polak and a second by Mr. Gibson, the Council, on a vote of 7-0, agreed to defer Dr. So's presentation to a future meeting.

APPROVAL OF PROGRAM BILLINGS

Mr. Eriksen noted that there were three (3) bills requiring the Council's review and approval for payment:

1. Williams & Company Consulting, Inc $ 57,349.00
Standard flat fee billing for December 2002, licensing, underwriting and claims adjudication.

2. John J. McCarthy $ 1,965.00
Professional legal services to the Council for the period of November 28, 2002 through January 10, 2003.

3. Milliman, USA $5,260.00
Professional actuarial services for November 2002.

There was a question raised if this was the final bill on Milliman's services. Mr. Eriksen indicated no, that there would be time that they had spent in December 2002 on the project and it was estimated that the total bill for their services will be close to the contract amount of $15,000.

On a motion by Mr. Lewicki and a second by Mr. Chung, the Council approved the bills as presented by a vote of 7-0.

MONTHLY ACTIVITY REPORT AND FINANCIALS REVIEWED

Mr. Eriksen reviewed with the Council the December 2002 activity report, noting that as of Monday, January 13, 2003, that 889 license renewal applications had been received, 578 had been renewed with 129 pending additional information and 182 that had just come in and had not yet been reviewed. He stated that this renewal rate is ahead of last year's renewal rate. He also referenced the current status of the appeals, noting that there are two (2) to be heard by the Administrative Hearing Officer and that the Administrative Hearing Officer on the two (2) late payment appeals that were heard in August 2002, had ruled substantially in favor of the drycleaner operators. Mr. McCarthy commented that he was concerned with the rulings and felt that it may be appropriate to look at other administrative hearing officers to hear our cases. Mr. Chung stated that he would like the opportunity in the future, to meet the Administrative Hearing Officer, prior to a new one being selected.

Mr. Eriksen reviewed the financial statements as of December 31, 2002, noting that the Fund balance as of that date was $6,614,000.

OTHER ISSUES AS PRESENTED

Mr. Eriksen noted that he was in the process of beginning the compliance audits and would be conducting them over the next 30-45 days. In addition, the fiscal 2004 appropriation request had been sent to the state. The Administrator had asked for an additional $3 million new appropriation to cover the anticipated additional site testing in 2004. It is uncertain at this time if that would be approved by the legislature in lieu of all the other budget issues the state is currently facing.

Mr. Eriksen noted that in early February, his staff would be holding a meeting with Illinois EPA staff to discuss various issues and mutual interest regarding remediation technologies, etc.

Mr. Polak commented he would like to hold the next meeting on the third Tuesday of February, which would be February 18, 2003. It was the consensus of the Council members that the Holiday Inn in Naperville was a good location for the next meeting.

PUBLIC COMMENT PERIOD

Mr. Polak asked if there were any comments from the public. There were none.

There being no further business for discussion, on a motion by Mr. Lewicki and a second by Mr. Bredenkamp, on a vote of 7-0, the Council meeting adjourned at 3:09 p.m.

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