News and Insights on Connecticut Real Estate Law


Thursday, March 15, 2012

The Unfortunate Demise of the Leaking Underground Tank Fund


In 1989 the Federal EPA required all tank owners to get an insurance policy to cover leaks and spills, the thought being that if insurance were covering the bill, station owners would be less likely to hide a leak. Private insurance wouldn't write policies at the time because they couldn't calculate the risk pool. In response, the State of Connecticut increased the gross receipts tax and started a clean up fund. The EPA certified and recognized this as an umbrella insurance for all tank owners in the state. The fund had a ceiling of $18 million and a floor of $2 million, so there was always money in it. Tank owners could apply for clean up funds and they were granted in a somewhat timely manner. $15-16 million a year was paid out for claims and the remaining money went to the DEP for administrative costs. 

Fast forward to 2011. The gross receipts tax is a percentage based tax, so income increases as gas prices increase. In 2011 the State took in $365 million in tax revenue from fuel. Their pay out for tank clean ups? $250,000. Not a typo. And the DEP still is getting $2,000,000 and a staff of 18 to administer the clean up program. They have over $80 million in clean up applications that they have not paid out. 

So, the Federal EPA has been informed. And EPA has notified the state that after the current legislative session ends the EPA will decertify them as the insurer and station owners will be forced to get private insurance. Private insurance companies will not write a policy if you have known environmental issues. Thus stations will have to close. 

There are estimates that 600-800 stations around Connecticut will have to shut their doors for some amount of time. The state doesn’t seem to care, as reported in this article in the Waterbury Republican:

“The state's chief environmental official said Wednesday he supports ending a taxpayer-funded program that reimburses gas stations for cleaning up leaks from underground fuel storage tanks. He recommends paying just a fraction of the remaining claims, which currently could total $98.6 million.

Advocates for the state's gas station owners, however, say eliminating the program would cause as many as 650 of the state's 1,480 gas stations to close, putting up to 4,000 people out of work and resulting in gas prices of more than $6 per gallon.

State Department of Energy and Environmental Protection Commissioner Daniel C. Esty issued a news release Wednesday supporting Senate Bill 375, which is pending before the Environment Committee. The bill proposes to set aside just $5 million toward phasing out the tank reimbursement program by October 2014.”

So why wasn’t the money used for cleaning up the environment?  What will this do to gasoline prices in Connecticut, which are already the highest in the nation?

Those are the questions.

The Law Office of Thomas J. Dufour, LLC assist clients throughout Connecticut including New Haven, Milford, Waterbury, Bridgeport, Shelton, Branford and Hartford.

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