Drop in fuel consumption caused applications to outpace income

February 7, 2009

 

It may not grab headlines like a school bond measures or a tax hike, but consumers are feeling the affects of a recent funding shortfall every time they go to the pumps.

The Underground Storage Tank Fund was set up in the early 90s to help gas station owners, and anyone else who operates an underground fuel storage tank, pay for environmental cleanup costs associated with tank leaks. To pay for the fund, a 1.4-cent fee is tacked onto every gallon of gasoline and diesel fuel pumped from any underground storage tank in California.

Late last year, tank owners received a letter from the State Water Resources Control Board, which controls the fund. Reimbursements would be cancelled or delayed, it said, because there wasn’t enough money to pay for them.

“It’s not like I have a pot of money for environmental cleanup,” said David Atwater, general manager of Van De Pol Enterprises in Stockton. “That’s why this (underground storage tank) law was passed.”

Atwater’s company owns several filling stations throughout the Central Valley, and he worries that, despite funding hiatus, environmental organizations will continue to push for sites with leaky tanks to be cleaned up. Companies that would normally be able to apply for reimbursement from the fund would have to pay for the cleanup out of pocket.

“Fund payment activity was higher than expected last year – in claim numbers and payment amounts,” said water board spokeswoman Judie Panneton.

She said recent legislation is partly to blame for the shortfall, because it has saddled the storage tank fund with the burden of paying for environmental cleanup of “orphan sites” (tanks with no financially responsible owner).

In addition, there has been a reduction in revenues due to lower consumption from gas fees that provide money for the fund.

While slightly more than one penny per gallon may not sound like a high price to pay, with California drivers consuming 15 billion gallons of gasoline a year, the fee amounts to more than $246 million annually, according to the water board. The amount of money available in the fund as of late January had fallen to $5 million, according to Panneton.

According to the letter sent to owners of underground storage tanks back in October, fund payments for cleanup projects in the last fiscal year were significantly higher than fund managers expected. The fund processed 4,964 payments, an increase of 7 percent over the previous year. The value of those payments was nearly $240 million, which was 18 percent higher than the previous year.

The letter went on to say that obligations such as program administration and “special account costs” have also taken a bite out of the fund.

“We’re not sure where it is all going to end,” said Atwater.

According to Atwater, the average cleanup cost for a contaminated site can reach more than $100,000 and take several years to finish. His company currently has three sites that aren’t being reimbursed.

“There are going to be some huge claims as the fund plays catch-up,” he said.

Panneton said that when the tank fund law was passed by the legislature, it was designed to help owners with some of the costs associated with certain environmental regulations – not as an insurance fund that guarantees payouts.

“It was never meant to fund all the cleanup costs,” she said. “The ultimate responsibility lies with the owner.”

The shortfall in the tank fund has had a ripple effect in the environmental engineering industry, according to Robert Marty, vice president of Advanced GeoEnvironmental, Inc. in Stockton. Tank owners pay his company to cleanup underground tank spills by injecting ozone into the ground and siphoning off hazardous chemicals.

“It’s hurting me because my clients either can’t pay me, they pay me slow or they stop work,” Marty said.

He said that 15 percent to 20 percent of his projects are on hold as tank owners wait to receive reimbursements that may never come. He said the purpose of the fund was to encourage the tank owners to do more work faster, but by asking for more time, the water board has undermined the original purpose of the law.

“The cost of environmental work doesn’t vary because there is a bad economy,” Marty said.

Underground Storage Tank Cleanup Fund Act was passed in 1989 to help gas station owners pay expenses associated with the cleanup of contaminated soil and groundwater caused by leaking petroleum tanks. The fund also covers third-party liability due to unauthorized releases of petroleum from underground tanks.

Determining which companies actually do receive reimbursement will be done on a case by case basis, according to Panneton, and companies with 500 or fewer employees will be the greatest affected by the funding shortfall.

“We’re paying into this with every gallon of gas,” Marty said. “This shouldn’t have happened.”

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