BEFORE THE CORPORATION COMMISSION OF OKLAHOMA ROBYN STRICKLAND, DIRECTOR PETROLEUM STORAGE TANK DIVISION, OKLAHOMA CORPORATION COMMISSION

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1 BEFORE THE CORPORATION COMMISSION OF OKLAHOMA APPLICANT: ROBYN STRICKLAND, DIRECTOR PETROLEUM STORAGE TANK DIVISION, OKLAHOMA CORPORATION COMMISSION RESPONDENT: INTERNATIONAL BANK OF COMMERCE dba IBC BANK, a subsidiary of IBC SUBSIDIARY CORPORATION, a subsidiary of INTERNATIONAL BANCSHARES CORPORATION CAUSE NO. EN RELIEF SOUGHT: Facility Address: Former Phillips 66 Self Serve 1020 N. Lynn Riggs Claremore, OK CONTEMPT Facility No: Case No APR COURT CLERKS OFFICE - 01<0 CORPORATION COMMISSION OF OKLAHOMA SUBJECT HEARING January 25, 2017, Jim Thorpe Building, Courtroom 'C', 2101 North Lincoln Blvd., Oklahoma City, OK Before David Leavitt, Administrative Law Judge APPEARANCES: Jeffrey P. Southwick, Deputy General Counsel, Travis N. Weedn, Senior Attorney, and Zach D. Duvall, Assistant General Counsel, representing Applicant William H. Huffman, representing Respondent

2 REPORT OF THE ADMINISTRATIVE LAW JUDGE This cause comes before the Oklahoma Corporation Commission on the recommendations of the Administrative Law Judge ("AU") for a Final Order. SUMMARY OF ALLEGATIONS Applicant Robyn Strickland, Director of the Petroleum Storage Tank Division ("PSTD"), Oklahoma Corporation Commission ("Commission") made a determination that International Bank of Commerce dba IBC Bank, a subsidiary of IBC Subsidiary Corporation, a subsidiary of International Bancshares Corporation (hereafter "Respondent") made application to the Indemnity Fund as an Impacted Party for a release of Commission regulated substances at the captioned property. Respondent is not the tank owner, and never operated a tank system on the premises. The Commission became aware of the release based upon a complaint by the City of Claremore ("City"). On November 19, 2015, the City provided Commission staff a copy of a phase II environmental investigation report prepared by PSI Engineering ("PSI") of San Antonio, Texas. The PSI report was prepared for Respondent. The PSI report was submitted to Respondent in December, The report noted Commission regulated substance contamination above action levels and recommended Respondent notify the Commission of the contamination. Respondent did not notify the Commission of the contamination. Part of the Indemnity Fund application process is a substantial compliance review. The substantial compliance review determined that Respondent was made aware of Commission regulated substances above Commission action levels back in 2010 and never reported the same. As a result of this inaction by Respondent, this Cause was filed. SUMMARY OF PARTIES' EVIDENCE Applicant David Poulsen, Project Environmental Analyst for the Petroleum Storage Tank Division ("PSTD") of the Corporation Commission ("Commission") advised the ALJ of his familiarity with the facts and circumstances surrounding this Cause. Mr. Poulsen sponsored Exhibit 1 consisting of 60 pages. Mr. Poulsen directed the AL's attention to Pages 1 through 3 of Exhibit 1. Mr. Poulsen explained that these were station inspection reports noting that the facility operated as a Phillips 66 station from January of 1965 through September, Mr. Poulsen pointed out to the ALJ that the facility was denoted as closed on October 19, Mr. Poulsen introduced Page 4 of Exhibit 1 as a Commission rule (OAC 165: ) requiring any person to report a release, which in Mr. Poulsen's opinion, was I EN

3 the crux of this matter. Mr. Poulsen then directed the AL's attention to Pages 5 and 6 of exhibit 1, the reporting requirement rule (OAC 165:25-3-8) referenced in OAC 165: Mr. Poulsen noted pages 5 and 6 indicated how and why a release is reported. Mr. Poulsen testified that Page 7 of Exhibit us a letter dated March 29, 2016, to Tina (Trina) Grob with IBC Bank reminding Respondent that required reports due in January of 2016 need to be submitted. Mr. Poulsen testified that Page 9 of Exhibit 1 is an Initial Release Report dated December 14, 2015, authored by Mr. Poulsen. Mr. Poulsen stated the important information on the release report was the release discovery date of December, 2010, and the fact that the release was reported to the Commission by the City of Claremore, not Respondent. Mr. Poulsen further stated that the release at Respondent's property exceeded Commission action levels for BTEX as reflected on Page 10 of Exhibit 1. Mr. Poulsen then spoke to Page 11 of Exhibit 1, an dated January 25, 2011, from PSI to the City of Claremore regarding Respondent's permission to report the release to the Commission. Mr. Poulsen testified that pages 12 through 60 are the Phase II environmental report dated December 6, 2010, prepared by PSI and submitted to Respondent IBC Bank. Mr. Poulsen testified that from the voluminous report there were two items of interest, Page 16, noting the site was a former service station, and Page 22 of Exhibit 1 entitled "Conclusions and Recommendations". Mr. Poulsen noted that PSI recommended that the Commission be notified of above-action levels of contamination and consultation with legal counsel. Mr. Poulsen testified that this was an enforcement action and an administrative penalty of $5, was being sought. Mr. Poulsen stated that the penalty computation could be made in different ways, namely, no report of the release for 5 years at $1, per year; the former deductible amount of $5, paid by eligible persons. Mr. Poulsen stated that Indemnity Fund applicants had to be in substantial compliance or paid a penalty assessment to in effect, buy their way into compliance. Mr. Poulsen recommended that if a penalty assessment is not imposed, that the Respondent be found ineligible for Indemnity Fund reimbursement. On cross-examination by Mr. Huffman, Mr. Poulsen addressed other possible sources of offsite contamination, including a Kum N Go station across the street. Mr. Poulsen testified that he reviewed the release case file for Kum N Go and determined that the Kum N Go facility did not contribute to the contamination present on Respondent's property. Mr. Huffman offered Exhibit 2 consisting of 18 pages and directed the AL's attention to the properties in the surrounding area that experienced confirmed or suspicion of releases. Mr. Huffman inquired of Mr. Poulsen how Respondent knowingly knew of the release. Mr. Poulsen admitted that although the Respondent is not involved in retail fuel sales, the report spoke for itself. Mr. Huffman inquired of the witness whether a change of ownership transferring the property to the subsequent owner or IBC Bank, to which Mr. Poulsen admitted the EN

4 records of the Commission, did not reflect a transfer of ownership. Mr. Huffman inquired of the witness why Phillips 66 was named as a Respondent to which Mr. Poulsen replied that the trigger for ownership was ownership when the release was discovered. Mr. Poulsen admitted that Commission staff determined that IBC Bank was Indemnity Fund eligible as an impacted party. Respondent Trina Grob testified on behalf of Respondent. Ms. Grob advised that she has worked at IBC Bank for 10 years as a facilities manager. Ms. Grob testified that IBC Bank came into possession of the property when advised by the FDIC that the property was available as a failed savings and loan (Local Federal Savings and Loan). Ms. Grob stated that when IBC acquired the property there was no visible evidence of a service station on the property. Ms. Grob testified as to her knowledge of the vapor incidents and PSI was retained to investigate the same. Ms. Grob testified that she was advised by PSI that there were 2 petroleum substance releases on both sides of the property. Ms. Grob testified that PSI installed or recommended the installation of a vent cover to alleviate vapor intrusion in the building. The vent cover was installed. Ms. Grob testified that she was contacted by the City of Claremore and that she and the City worked together to resolve the problem. Ms. Grob testified that once she and the City of Claremore resolved the issues she had done everything that had been asked of her. Ms. Grob stated that she first came into contact with the Commission when she received the December, 2015 letter. Ms. Grob stated that Seneca, a Commission licensed Environmental consultant was retained by IBC Bank to perform the corrective action work required. Ms. Grob testified that IBC Bank owned no service stations, was not in the petroleum marketing business, and not conversant with statutes and rules regulating storage tanks or storage tank releases. Ms. Grob testified that IBC Bank did not receive any notice from FDIC that the property once was a service station or that storage tanks were ever on the property. Ms. Grob testified that the PSI report indicated offsite releases of regulated substances that might be the source of contamination on the bank property. Ms. Grob stated that it was not fair to be assessed an administrative penalty to IBC Bank, and asked that the relief sought in this cause be denied. The AU inquired of Ms. Grob if she had read the report, and Ms. Grob admitted that she hadn't. The AU asked Ms. Grob if she visited with legal counsel concerning the report, and Ms. Grob admitted she didn't. AU's Recommendations The ALJ admitted both Exhibits, took the matter under advisement and closed the record. Based upon the testimony and evidence presented, the ALJ has determined I EN

5 that at the very least, the PSI report of December 6, 2010, placed Respondent on inquiry notice to report the contamination to the Commission. As a result of this failure to report the contamination to the Commission by Respondent, the AU recommends that Respondent IBC Bank be assessed the $5, penalty assessment recommended by staff. FINDINGS OF FACT 1. Any finding of fact stated herein which should properly be included as a conclusion of law is so included. 2. Respondent by and through its ownership of the real property, is an impacted party. The tank system was not in use after November 8, As a result, IBC Bank as the property owner in title at the time of release discovery qualifies for Indemnity Fund reimbursement for corrective action costs incurred as an eligible person. 3. Petroleum vapors were present at the Bank property located at 1020 N. Lynn Riggs, in Claremore, Oklahoma on at least 5 separate occasions. 4. Respondent worked with the City of Claremore to investigate and resolve the vapor problem. Part of the investigation included a Phase II investigation of the property. The Phase II investigation was performed by PSI. PSI issued a report on December 6, Pertinent parts of the report indicated that the property formerly housed a Phillips 66 service station. The environmental investigation revealed regulated substance contamination in excess of Commission action levels. The environmental consultant recommended Respondent contact the Commission and report the elevated concentrations of contamination. Respondent did not report. 5. The Commission has a statutory and regulatory duty to address regulated substance releases from storage tanks whether the tanks are present or not, that might pose a threat to human health, safety the environment and the state economy. Any party seeking Indemnity Fund reimbursement must be in substantial compliance with Commission rules. 6. Respondents as well as the former property owners did not register the tank system. 7. Sufficient evidence regarding the perils of underground storage tank systems have been in the public domain for over 30 years, and the Respondent as well as prior owners should have been on inquiry notice of the problems associated with underground storage tank system releases. EN

6 8. The Respondents have absolutely no past experience in the fuel storage/sales business. Respondents did not store or sell fuel at this facility. Respondents did not cause the release. 9. Respondents should have 30 days from order date to remit the penalty assessment. CONCLUSIONS OF LAW 1. Any conclusion of law stated herein which should properly be included as a finding of fact is so included. 2. The Oklahoma Corporation Commission has subject matter jurisdiction of this cause. 17 Okla. Stat. % 305, 356(F). 3. Notice is proper and in conformance with statutory requirements. 17 Okla. Stat. 31 0(C)(1). 4. The Commission may promulgate and enforce rules to implement the Act. 17 Okla. Stat. 306(12), Respondents have a regulatory duty to notify the Commission of a release. OAC 165:25-3-1, OAC 165: The Commission has authority to determine timely release reporting. 17 Okla. Stat. 356(F) 7. Indemnity Fund applicants may be assessed a penalty for not being in substantial compliance with Commission enabling statutes and rules. 17 Okla. Stat. 356(F). 8. Based upon the testimony and evidence presented, the ALJ has determined that at the very least, the PSI report of December 6, 2010, placed Respondent on inquiry notice to report the contamination to the Commission. As a result of this failure to report the contamination to the Commission by Respondent, the ALJ recommends that Respondent IBC Bank be assessed the $5, penalty assessment recommended by staff. RESPECTFULLY SUBMITTED this 13TH day of April, 2017 DAVID LEAVITT ADMINISTRATIVE LAW JUDGE EN

7 DL xc: Jeffrey P. Southwick Travis N. Weedn Zach D. Duvall William H. Huffman Michael L. Decker, OAP Director Oil Law Records Court Clerics Commission Files EN