Oklahoma State Senate
Senator Kevin Easley
Energy, Environment and Communications Committee Chairman
2300 N. Lincoln Blvd., Room 429
Oklahoma City, OK 73105
(405) 521-5590

June 17, 2003

Commissioner Denise Bode
Commissioner Bob Anthony
Commissioner Jeff Cloud
Oklahoma Corporation Commission
2101 North Lincoln Boulevard
Oklahoma City, Oklahoma 73152

Dear Commissioners:

As you know, Senator Cal Hobson and I were the Senate authors of Senate Bill 322, which sought to transfer management of Petroleum Storage Tank Program, including the Petroleum Storage Tank Indemnity Fund, from your oversight. The legislation passed in the State Senate but was not voted on in the House–effectively giving the Commission’s Petroleum Storage Tank Division a reprieve. You should not, however, consider this reprieve an endorsement of business as usual with regard to expenditures from the Indemnity Fund.

As chairman of the Senate Energy, Environment and Communications Committee, I will be keeping a watchful eye on expenditures from the fund in the coming months. I am sure the State Auditor and Inspector and others will do so as well. The Committee and, in fact, the entire Legislature expects the Commission to fully comply with the law as it administers the Fund.

The Indemnity Fund was established to reimburse petroleum storage tank owner/operators for the cleanup of leaking petroleum storage tanks sites. It was not created to pay salaries of non-Indemnity Fund employees within the Commission’s Petroleum Storage Tank Division or other divisions of the Commission. It was not created to put remediation contractors in business by buying equipment so they can enter into contracts with the Indemnity Fund. It was not created to establish a clique of favored consultants and tank owner/operators. It was not created to funnel money to cities and towns without statutory authority. It was not created so the Commission could buy private property and donate it to schools.

The Commission has admitted that it is using monies from the Indemnity Fund to pay for non-Indemnity Fund expenses. This must cease immediately. It is undeniable that the Commission is not following the clear intent of the law by spending more than $1 million annually to operate the Indemnity Fund. Further, it appears that the Commission is not properly documenting the costs that it is paying from the Fund. The audit identifies other problems such as the waiver of deductibles for certain persons, failure to determine proper eligibility before making payments, etc.

The Commission has violated both the spirit and the letter of the law in its use of pay for performance contracts and purchase orders. The Commission has clearly ignored the bidding requirements for all corrective action work in excess of $2,500. The Commission has purchased equipment for companies so they could receive large contracts from the Commission to remediate sites. The Commission has given these contracts to a relatively small group of contractors without allowing anyone else to bid upon these contracts. The Commission has paid contractors for new equipment when used equipment was actually provided. The Commission has entered into remediation contracts without adequate safeguards that sites are being cleaned up before payments are made. The Commission does not even have rules in place for the implementation of the pay for performance program.

Auditors also found that the Petroleum Storage Tank Division had calculated the available Indemnity Fund balance inconsistent with the statutory direction in state law, effectively denying ODOT and DEQ millions of dollars due them. It is clear that the former management of the Fund devised numerous schemes to keep the money from being properly used as intended by state law.

These are all proceedings that have been part of business as usual in the past at the Commission as revealed by a Legislative-mandated investigative audit of the Petroleum Storage Tank Division completed earlier this year. In fact, the legislature has twice before reformed the petroleum storage tank program and the Indemnity Fund to stop the abuses which have been ongoing for years.

The Commission should take immediate steps to insure that all expenditures made to operate the Indemnity Fund are actual costs that have been properly documented before being reimbursed to the Commission by the Indemnity Fund. The Commission should immediately cease using the Indemnity Fund to pay for other costs of the Petroleum Storage Tank Division and other divisions of the Commission. Any monies which have been inappropriately expended from the Indemnity Fund during the current fiscal year to fund the Petroleum Storage Tank Division or other Commission divisions should be paid back before the end of the fiscal year. In addition the Commission should identify and pay back any such monies wrongfully spent on other parts of the Commission from prior fiscal years.

In regard to the pay-for-performance contract program, the Commission should suspend this program until rules are put into place to properly implement it. Further, it would be prudent to suspend payment under the existing pay-for-performance contracts until it can be independently determined that they were properly bid and that the contracts and associated purchase orders are in compliance with state law. In addition, it should be independently determined that the contracts contain adequate protection to ensure sites are being cleaned up before payments are made. This program and the existing contracts should be independently evaluated before any contracts are entered into or additional payments made under the existing contract.

Complying with the law means—in no uncertain terms—that these practices and the misappropriation of state funds must cease. Money from the Fund should be spent to clean up leaking petroleum storage tank sites and nothing else.

I trust that as public officials you will be diligent in ensuring that the Commission’s Petroleum Storage Tank Division avoids repeating past transgressions by fully complying with the law.

Sincerely,

Kevin A. Easley, Sr.

KAE:cr