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"North Carolina General Assembly will Consider Fate of Cleanup Trust Funds" by Jeri Gray, More UST information on the web
In the 2004 appropriations act, the N.C. General Assembly increased the amount of gasoline taxes diverted from the Highway Fund and Highway Trust Fund to two funds that pay for cleanup of contamination from leaking underground storage tanks and provide financial assurance for owners and operators of commercial underground storage tanks (USTs). The increase is limited to one year and is expected to amount to a onetime infusion of $32 million for the N.C. Commercial and Noncommercial Leaking Petroleum Underground Storage Tanks Trust Funds. The extra funding will allow the State to pay off most of a $38 million backlog of claims for cleanup work against the funds. It will also assure-at least for a time-that businesses that own and operate USTs can continue to rely on the commercial fund to fulfill their financial responsibility obligations under federal law. Provision of extra money for the leaking underground storage tank (LUST) trust funds is the latest in a long string of efforts - including increasing tax revenue to the fund and relaxing cleanup standards -to shore up a program that has been in financial trouble almost since its beginning (see History of the Funds). The General Assembly has signaled that its patience with the demands of this program is wearing thin. The appropriations act directs the Environmental Review Commission and the Joint Legislative Transportation Oversight Committee to jointly study the desirability and feasibility of altering or eliminating the role of the State in providing funding for cleanup of contamination from leaking petroleum tanks and in assisting owners and operators of USTs in meeting federal financial responsibility requirements. The joint study is to be presented to the General Assembly no later than January 31, 2005. Background Over the next few years, states came under intense pressure from retail commercial tank owners-principally owners of service stations and convenience stores-to set up such funds, and almost every state did, using a combination of fees paid by tank owners and public taxes (usually on motor fuels). At the inception of the UST program tank owners were required to register tanks. At that time there were more than 2 million regulated tanks nationwide. Since then, about 1.5 million tanks have been permanently closed, leaving about 693,000 tanks subject to requirements of the UST program. Since the beginning of the program, about 427,000 incidents of contamination from petroleum releases have been reported nationwide with 67% of them cleaned up. According to the Association of State and Territorial Solid Waste Management Officials, as of 2002, state funds had paid out nearly $10 billion for cleanups. N.C. LUST funds status "If a half-million dollar cleanup can be his for $20,000 (the usual deductible under the commercial fund rules), a tank owner has no incentive to look for a less expensive cleanup," says Nicholson. He adds that as lending institutions and the general public have become more aware of the liabilities associated with contaminated properties, the incentive to get sites super clean has strengthened. As the drain on the state commercial LUST fund became evident, lawmakers and regulators instituted Risk-Based Corrective Action (RBCA), which customizes cleanups based on the degree of risk to human and environmental health, and Pay-for Performance cleanups, in which companies agree to accomplish specified cleanup levels at a set cost and on a specified time-frame. RBCA has allowed the state to close out a significant number of sites with little or no remediation (55% of all contaminated sites closed out have been completed since RBCA was adopted in 1995), but few tank owners have opted for the voluntary Pay-for-Performance contracts, and claims have continued to flow in, along with complaints about delays in reimbursement. After an expedited claims review process was put into place in 2001, the backlog of claims that had been reviewed but could not be paid because of insufficient funds in the commercial fund ballooned. At the same time, the noncommercial fund, which had been able to pay all its claims to that point, began to see claims exceed revenue and the fund balance shrink. In 2003, the General Assembly mandated that cleanup costs be pre-approved by DENR as a way to finally eliminate unnecessarily expensive cleanups. With claims against both the commercial and noncommercial funds exceeding fund balances by about 32 million at the end of fiscal 2003, the General Assembly again took action. In addition to providing extra money to pay off the backlog of claims in the 2004 appropriations act, the legislature prohibited DENR from pre-approving cleanup costs unless there will be enough money in the funds to pay the costs within 90 days of the time a claim is approved (except in the case of emergencies or if the owner agrees to wait for payment). This so called "check-book" policy is aimed at preventing another backlog of claims. However, the latest legislation raises troubling questions: Tank and property owners have not been relieved of the responsibility for cleaning up contaminated sites and meeting financial responsibility requirements. But, with reimbursement uncertain, will tank owners refuse to initiate cleanup? Will new contamination go unreported? If the state commercial LUST fund cannot assure reimbursement of cleanup costs, how long can it still provide financial responsibility assurance for tank owners? These questions will have to be addressed when the joint legislative committee tasked with studying the state LUST funds begins deliberation. Funds in trouble nationwide
Moreover, thousands more releases are being reported every year. Although trust funds were originally established to clean up leaks that occurred before regulatory programs were put into place, recent evidence indicates that tank technical and operating standards have been only partially successful in preventing new leaks. According to a 2001 survey by the U.S. General Accounting Office, discharges are probably occurring from a significant number of tanks installed or updated according to 1998 requirements. And, what's worse, MTBE - a fuel oxygenate that is nearly impossible to remove from soil and groundwater - is turning up in many newly reported contamination incidents. Responses Texas has 173,000 registered tanks, with one in four known to have leaked. The Texas Natural Resource Conservation Commission estimated in 1995 that it would cost $1.3 billion-in addition to the $280 million already spent-to clean up all known contamination. By 1995, the Texas legislature had had to bail out the state cleanup fund twice with special appropriations and that year ordered an end to the reimbursement program. Since 1998, Texas has required that tank owners and operators utilize a financial mechanism other than the state fund (principally private insurance) to demonstrate financial responsibility to clean up contamination. The reimbursement program is being phased out and cannot expend funds after September 1, 2006. Because of its high groundwater tables and heavy reliance on groundwater, Florida made a major commitment to cleanup of UST contamination in 1986. The state first committed to cleaning up all existing contamination reported by a specific date. Many more contamination incidents were reported than had been expected and it became evident that the UST problem was ongoing and would need to be addressed into the future. Florida then set up a fund to provide insurance for cleanup for future contamination, with tank owners responsible for insurance for third-party claims. The state also set up two smaller specialized programs to deal with abandoned tanks and sites not covered by other programs. The programs were generous, all inclusive, and favorable to cleanup companies, and the state's cleanup standards were high. By the early 1990s, the state had amassed liabilities of nearly a billion dollars from all its corrective action programs. In 1992, the Florida legislature passed legislation to increase revenue to the main cleanup fund to handle backlogged claims but to phase out the program. The legislature acted on the belief that as tank owners upgraded or replaced tanks and as insurance became more affordable and available, the state could get out of the cleanup business without adversely affecting the environment. The state cleanup program was phased out with decreasing coverage for new incidents over the next 5 years; however, the reimbursement program was converted to a pre-approval program in 1996 in an effort to contain costs in the interim. Appeal to Washington UST regulatory programs
falling short Only physical inspections can confirm whether tanks have been upgraded and are being properly operated and maintained. However, only 19 states physically inspect all of their tanks at least once every 3 years-the minimum EPA considers necessary for effective tank monitoring. Another 10 state inspect all tanks, but less frequently. The remaining 22 states do not inspect all tanks but instead generally target inspections to potentially problematic tanks, such as those close to drinking water sources. GAO recommends that Congress consider appropriating more money from the federal LUST fund and allowing states to use a portion of state allocations for inspection and enforcement as well as for training of tank operators. Grover Nicholson says that state UST program managers support larger allocation of federal trust fund money for state regulatory programs. Nicholson says that to assure proper maintenance and operation of commercial tank systems, each facility needs to be inspected once a year, but with 12,000 facilities (with more than 30,000 tanks) and 11 inspectors (out of a staff of 99), the best his staff can do is inspect each facility every four to five years. Nicholson says that while his staff does a lot of training for tank owners and operators in proper maintenance and operation of tank systems, they need to do even more because turnover in tank operators is so high. Most legislation proposed in Washington to break loose money from the federal LUST fund has included provisions that EPA allocate more money to states for UST program enforcement and training. However, PMAA, NACS and other industry groups insist that legislation also provide funding for cleanup of MTBE contamination, and-in the case of the 2003 energy bill-product liability immunity for producers of gasoline with MTBE, and these provisions are strongly opposed by a number of groups, including public water supply providers. Therefore, the prospect of additional financial assistance to states from EPA appears to be dim, and many states-including North Carolina-face the situation of having to spend more on administration of trust funds than on regulatory programs. Possible solutions
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