2. PAY-FOR-PERFORMANCE The Oklahoma Experience Dave Kelley Petroleum Storage Tank Division Oklahoma Corporation Commission

3. ACCOUNTABILITY n We have a fiduciary responsibility n We knew legislators would ask were the money went n We knew the State Auditor would ask n The public would ask

4. We discovered a problem n The Football Field n Paying out money with little or no environmental results n Major disallowances and bad consultant relations n We looked at Pay-For- Performance

5. What is Pay-for-Performance n Payment is made when a measurable environmental goal is reached n Or when a task integral to the clean up is satisfactorily completed n A guaranty is given to complete the task of achieving the environmental goal

6. How did Oklahoma Implement PFP?

7. Stakeholder Involvement n Auditors look at dollars being spent and PFP n Consultants did not like the idea n Tank owners loved the idea

8. Meetings with petroleum marketers and consultants n Closing site meant closing the cash flow n Taking same risks: contractor and tank owner

9. Invited tank owners to learn the benefits of PFP n Paperwork is reduced n Time to pay is shortened to a few days n Our emphasis turned from documentation to environmental results n Disallowances are reduced to zero n Collaboration between the tank owner, consultant, regulatory and the fund n Funds are encumbered at the signing.

10. We began to sign contracts n The tank owners tried to change the law, but failed n A voluntary approach to PFP n We were accused of playing favorites n Non-participating consultants.

11. Results of PFP (Pre-approval) n 65 PFP contracts, total of $30 million n Paperwork has been reduced n Time to pay is a few days n Disallowances near zero n Cooperation between parties n Difficult sites are being cleaned

12. Other benefits of Oklahoma PFP(Pre-approval) program n Tank Owner benefits are: – they get a guaranteed cleanup – they have zero disallowances. n Consultants have less paperwork n The Fund remains solvent n Promotes innovative technology n Improved relationships between parties n Questionable consultants went out of business

13. Problems encountered in PFP program. n Improper sampling techniques n How do you measure free product reduction n Change of lab causes inconsistencies n New regulations i.e.. MTBE n Timing of baseline sampling

14. SUCCESS AT LAST !!!! n Rules implemented 5-29-98 n Makes the pre-approval process mandatory n SB027 unanimously approved 6-9-98. n The regulatory and fund divisions have been combined. n Let me show you some results.