July 23, 2002
UNDERGROUND STORAGE TANK REMOVAL PROGRAMS
By: Paul Frisman, Associate Analyst
You asked for an outline of oil tank or underground storage tank (UST) removal programs and for the programs' funding status. We have identified the funding sources for these programs and referred to the Office of Fiscal Analysis your request for fund balances.
Connecticut has separate programs, with different funding sources, for the replacement and removal of commercial and residential USTs. The commercial program is funded by a portion of the petroleum products gross earnings tax. The residential program, which ended last year, was funded through Department of Environmental Protection (DEP) grants provided from bond funds. DEP also oversees federally-regulated USTs under, the federal Leaking Underground Storage Tank (LUST) Trust program. LUST is funded by a 0. 1 cent tax on each gallon of motor fuel sold nationwide.
COMMERCIAL UST PROGRAM
Connecticut began enforcing underground storage tank regulations in 1985. Tank systems are considered to be "underground" if 10% or more of their total volume (including piping) is below ground (CGS § 22a-449a(4)).
In 1989, it created the Underground Storage Tank Petroleum Clean-up Fund (CGS § 22a-449c) to fund the clean-up of leaks from commercial tanks that contain diesel fuel, gasoline, heating oil, waste oil, or hazardous chemicals listed under the federal Comprehensive Environmental Response, Compensation and Liability Act (CERCLA). The program's goal is to protect human health and the environment by preventing releases before they occur, and cleaning up those that have occurred.
Untreated, steel USTs corrode easily, leaking petroleum and other hazardous substances into the soil and groundwater. Federal and state governments began regulating USTs when those installed in the 1950s and 1960s reached the end of their life expectancy.
The law has required USTs to be corrosion resistant since November 1985. They either must (1) be made of fiberglass-reinforced plastic, or (2) have a manufacturer-applied anti-corrosive coating and "cathodic protection" (Conn. Agencies Regs. 22a-449(d)-1). (Cathodic protection is a process that changes the chemical potential of steel to make it more inert. )
In 1985, state law set a 20-year limit from the date of installation on the use of USTs that did not meet the new standards. The latest that any bare steel or concrete heating fuel tanks can be used is November 2005 (20 years from the last date on which they could be legally installed). In addition, steel or concrete UST tanks used for heating oil or fuel consumed on site can be used for up to 20 years if they were tested 12 years after installation and annually thereafter, and the system has not leaked.
The use of bare steel or concrete USTs for gasoline, waste oil, diesel fuel or hazardous chemicals has been illegal since December 22, 1998 (Conn. Agencies Regs. § 22a-449(d)-110(b)). Such tanks had to be closed out, replaced or upgraded by that date.
Tank owners can close older tanks by removing them or abandoning them in place and filling them with an inert substance, such as dry sand or concrete. Owners who close tanks must send DEP a closure report, including soil samples, to verify that no leaks have taken place. If contamination has occurred, the releases must be reported immediately to DEP and appropriate remediation conducted.
Owners of commercial USTs (except for those containing heating oil, or fuel used on site) must conduct daily inventories and reconcile those readings weekly. They must investigate abnormal losses (daily losses of more than one-half of one percent of total capacity) and report them as potential leaks. These owners also must conduct annual failure determination tests to comply with state and federal requirements. Owners must report all tests results, closures, new installations and general changes in UST status to DEP.
DEP reports there are 42,721 commercial USTs in Connecticut, located on 11,700 sites. Of that number, 17,740 tanks are active and 24,981 are permanently closed (either removed or abandoned in place).
Underground Storage Tank Petroleum Clean-up Account
The Underground Storage Tank Petroleum Clean-up Account reimburses responsible parties for remediation costs they incur because of leaking commercial USTs, primarily those containing motor fuel, such as diesel fuel and gasoline. The account does not reimburse costs incurred because of leaks at USTs containing waste products or hazardous chemicals. Eligible costs include those incurred as a result of releases; suspected releases; release-related investigations; and third-party claims for bodily injury, property damage, and damage to natural resources. By law, a responsible party is any person or entity, including the state or a municipality, that owns or operates a UST or tank system that leaks. The responsible party must pay the first $ 10,000 of costs incurred.
The account (1) reimburses responsible parties for expenses greater than $ 10,000 but less than $ 1 million related to cleaning up leaking nonresidential underground storage tanks and (2) pays administrative costs for the program.
The law (CGS § 22a-449c(2)) had allowed UST owners who met certain requirements to be reimbursed for clean-up expenses up to $ 3 million dollars. To be eligible, a responsible party must have (1) reported the leak to DEP before December 31, 1987 and (2) spent more than $ 500,000 to remediate it by June 19, 1991. However, PA 02-80 increased the account's reimbursement limit from $ 3 million to $ 5 million, effective July 1, 2002. It allows the DEP commissioner to pay any part of the reimbursement that exceeds $ 3 million in annual payments over a maximum of five years.
Funding of the Commercial Program
The commercial program is funded by a portion of the petroleum products gross earnings tax (CGS § 22a-449b). Currently, one-third of the quarterly total of the gross earnings tax is earmarked for the Underground Storage Tank Clean-Up Account. But, beginning October 1, 2002, the share of the tax revenue earmarked for this purpose will be a flat $ 3 million per quarter (PA 02-80). The act also eliminated a requirement that the comptroller stop crediting revenue to the account when its balance exceeds $ 15 million and resume when it falls below $ 5 million. (But, § 75 of PA 02-1 of the May Special Session prohibits transfers of the tax payments due in FY 2002-03 to the Account. )
RESIDENTIAL UST PROGRAM
PA 99-269 (as amended by PA 00-201 and by PA 01-9 (JSS)) created an amnesty program for homeowners who removed their heating oil tanks between July 1, 1999 and January 1, 2002. The program encouraged people who owned four or fewer residential units to remove failing tanks by exempting them from civil liability to the state for costs related to an oil spill. Amnesty could be transferred to new homeowners with the sale of the property (CGS § 22a-449j). The program ended last year, although claims remain outstanding.
The program covered systems located underground, aboveground or inside a house, apartment, condominium, duplex or mobile home. A registered contractor must have performed the removal and remediation work.
The residential program was effectively two programs, depending on whether work began before July 1, 2001, or on or after that date. The primary difference between the two programs involved reimbursement for clean-up costs. For projects begun before July 1, 2001, the state reimbursed registered contractors (after the owner had paid the contractor a $ 500 deductible). For projects begun on or after July 1, 2001, the state reimbursed UST owners.
Residential Projects Begun Before July 1, 2001
Under this program, the contractor applied to the Underground Storage Tank Petroleum Clean-up Account Review Board for reimbursement. The review board met monthly to review reimbursement applications, and sent its decisions to the contractor and the homeowner. PA 01-9 required contractors to submit bids by December 1, 2001 for projects begun before July 1, 2001 and barred both the board and DEP from accepting applications after that.
The board could not award more than $ 50,000 unless the DEP commissioner found, before remediation took place, that such costs were necessary to protect public health and the environment. Contractors aggrieved by review board decisions had 20 days from issuance to request a hearing before the board (CGS § 22a-449l(c)(3)).
Residential Projects Begun On or After July 1, 2001
Under PA 01-9 JSS, the UST owner paid all remediation costs for projects begun on or after July 1, 2001, and applied to the board for reimbursement of all costs beyond a deductible, which varied by the owner's adjusted gross income (AGI) for the year 2000.
For owners with an AGI up to $ 50,000, the deductible was $ 500. For those with an AGI between $ 50,000 and $ 500,000, the deductible ranged from $ 2,000 to $ 10,000. Owners with incomes above $ 500,000 were ineligible for reimbursement. All reimbursements were capped at $ 157 per ton of contaminated soil removed. The law specified that reimbursement was contingent on program funding.
To be eligible, a homeowner must have applied to DEP before contracting for removal, notified it of his plan to replace or remove the UST, and provided his name, Social Security number, AGI and the name of the registered contractor who was to do the work. He must have submitted proof that the UST served his primary home.
A contractor could not accept payment from the owner for reimbursable costs until he had provided the owner with information the owner needed to apply for reimbursement. To be eligible, a project begun on or after July 1, 2001 must have been completed by December 1, 2001 and the owner must have filed all necessary documents by December 31, 2001.
Within 30 days of getting an application, DEP had to have informed the owner of his eligibility for the program and of available funds. (According to DEP this was not a guarantee of reimbursement. Reimbursement depended upon the owner completing several other forms, and on funding availability. )
PA 01-9 requires a contractor to immediately notify DEP if he found evidence that a UST had leaked. DEP can revoke a contractor's registration for failing to do so. (The original program required him to notify DEP only if he estimated that clean-up costs resulting from a leak would exceed $ 5,000, and the board could only deny reimbursement for failing to notify it. )
The earlier program, but not the later one, required DEP or a DEP-licensed environmental professional to inspect a site when its estimated remediation costs exceeded $ 10,000.
The Review Board considers eligible costs for residential programs to include removal, transportation, treatment and disposal of contaminated soil and groundwater; clean soil placement, including topsoil and seeding, sample collection and analysis; site security and safety; remediation plan preparation; monitoring and a "reasonable mark-up" of up to 15%.
Ineligible costs included tank excavation and removal, draining and cleaning the tank, tank disposal, installation of a new tank, landscaping, and private well treatment or providing alterative public or private water supply.
By law, only registered contractors can remove or replace USTs, if removal or replacement will involve cleaning up the soil or groundwater, the costs of which are reimbursable from the residential underground heating oil storage tank system clean-up subaccount. To register, contractors must have evidence of insurance, a surety bond or assets of at least $ 250,000, appropriate training, and experience removing at least three residential USTs. It costs $ 500 to register and $ 250 to renew a registration annually (CGS § 22a-449k).
Residential Underground Heating Oil Storage Tank System Clean-up Subaccount
CGS § 22a-449c(b) creates a subaccount within the underground storage tank petroleum clean-up account to be used solely to reimburse homeowners or contractors for remediation of contamination caused by residential USTs. The subaccount was funded by a DEP grant-in-aid through bonding authorized by PA 00-167, § 51. That act authorized funding of $ 2 million for the first year of the program and $ 4 million for the second year.
PA 00-201 requires the DEP commissioner to adopt regulations setting out the criteria for design, installation, operation, maintenance, and monitoring; life expectancy after which USTs may be removed; and new tank installation standards. The regulations must also establish procedures for granting a waiver for installation of new systems or replacement of existing systems.
Congress created the Leaking Underground Storage Tank (LUST) Trust Fund in 1986. Money from the fund, which is financed by a 0. 1 cent tax on each gallon of motor fuel sold, is distributed among state programs for administration, oversight and clean up work. EPA reports that approximately one-third of the money is spent on administration, cleanup and enforcement action. The average cleanup cost is $ 125,000, while corrective action for leaks affecting groundwater can cost between $ 100,000 to more than $ 1 million.
According to DEP, 2,727 residential heating fuel tanks, 135 commercial heating fuel tanks, 77 commercial motor fuel tanks and 13 waste oil or hazardous chemical tanks were reported to have leaked in 2001.
The LUST program covers only federally-regulated USTs, and does not cover heating oil tanks, which are regulated by the states.