Leaking Underground Storage Tank Cleanup Issues

Mary Tiemann
Specialist in Environmental Policy
Resources, Science, and Industry Division

Updated February 17, 1999

97-471

Federal Underground Storage Tank Program Overview

In the 1980s, the states and EPA estimated that many of the several million underground storage tanks (USTs) in the United States that contained petroleum or hazardous chemicals were leaking. Many more tanks were approaching the end of their useful life expectancy and were expected to leak in the near future. States continue to report that leaking USTs are the leading source of groundwater contamination, and that petroleum products are the most prevalent contaminants.

To address this nationwide problem of leaking underground storage tanks, Congress established a leak prevention and detection program through the 1984 amendments to the Solid Waste Disposal Act (42 U.S.C. 6901, et seq.), often referred to as the Resource Conservation and Recovery Act (RCRA). The law directed EPA to set operating requirements and technical standards for tank design and installation, leak detection, spill and overfill control, corrective action, and tank closure (RCRA, Subtitle I). Regulations have been phased in since 1988, and the last of these regulations (which requires that all tanks be upgraded, replaced, or closed) entered into effect on December 22, 1998.

In 1986, Congress created a response program for cleaning up releases from leaking petroleum USTs through the Superfund Amendments and Reauthorization Act (SARA, P.L. 99-499) which amended RCRA Subtitle I. These provisions authorized EPA to respond to petroleum spills and leaks, and created the Leaking Underground Storage Tank (LUST) Trust Fund to fund the cleanup of leaks from petroleum USTs in cases where the UST owner or operator does not clean up a site. The LUST Trust Fund money is used primarily by EPA, and states that have entered into cooperative agreements with EPA, to oversee and enforce corrective actions performed by responsible parties. EPA and states also use Trust Fund monies to conduct corrective actions where no responsible party has been identified, where a responsible party fails to comply with a cleanup order, or in the event of an emergency, and to take cost recovery actions against parties.

The 1986 amendments also directed EPA to establish financial responsibility requirements to ensure that UST owners and operators are able (through insurance or other means) to cover the costs of taking corrective action and compensating third parties for injuries and property damage caused by leaking tanks. As mandated, EPA issued regulations requiring most tank owners and operators selling petroleum products to demonstrate minimum financial responsibility of $1 million; non-marketers with monthly throughputs of less than 10,000 gallons per tank must maintain $500,000 worth of per-occurrence coverage. Alternatively, owners and operators may rely on state assurance funds to demonstrate financial responsibility, saving them the cost of purchasing private insurance; 47 states have established such funds. Unlike the federal Trust Fund, state assurance funds are often used to reimburse financially solvent tank owners and operators for the costs of cleanups.

LUST Trust Fund Appropriations

The money in the LUST Trust Fund has been derived primarily from a 0.1 cent-per-gallon motor fuels tax which commenced in 1987. The tax generated approximately $150 million per year, and more than $1.6 billion was collected for the Trust Fund before the taxing authority expired in December 1995. Congress reinstated the LUST tax in the Taxpayer Relief Act of 1997 (P.L. 105-34) for the period October 1, 1997, through March 31, 2005.⁽¹⁾ As of December 31, 1998, the Trust Fund balance was $1.25 billion.

Congress has appropriated about 38% (approximately $788 million) of the total amount available from the Fund for states and EPA to oversee and enforce the LUST program and to undertake corrective actions when necessary. For each of FY1997 and FY1998, the Administration requested $71.2 million for the program, and Congress provided $60 million and $65 million, respectively. For FY1999, EPA again requested $71.2 million, while Congress approved $72.5 million.

EPA uses a portion of the LUST Trust Fund appropriation to oversee cooperative agreements with states, to develop program policies and guidance, and to provide training. EPA also uses the funds to implement the LUST corrective action program on Indian lands. Currently, EPA priorities in the LUST program include: implementing Risk-Based Corrective Action (RBCA) to reduce the backlog of confirmed releases and to help states use their resources more efficiently; providing assistance to Indian Tribes; evaluating the risks and identifying cleanup techniques for methyl tertiary butyl ether (MTBE); promoting alternative site investigation and remediation technologies; and supporting state programs with targeted training and technical assistance.

Fifty states have entered into cooperative agreements with EPA and receive grants under these agreements to help cover the cost of administering the LUST program. States generally use the LUST program grants to hire staff for technical oversight of corrective actions performed by responsible parties, and also for undertaking emergency responses and cleaning up abandoned tank sites.

EPA has allocated an average of 85% (with a range of 81%-89%) of the Trust Fund appropriation to the states and has used the remainder for its program responsibilities. An issue for EPA in recent appropriations bills has been the requirement that states must receive at least 85% of the amounts appropriated from the Fund. EPA has argued for continued flexibility in granting awards, particularly because the Agency has had primary responsibility for implementing the LUST corrective action program in Indian country. As requested by the Administration, Congress included language in EPA's FY1999 appropriations (P.L. 105-276, H.R. 4194) authorizing EPA to enter into assistance agreements with Indian tribes to support the development and implementation of underground storage tank programs in Indian country. In addition, conferees directed that at least 85% of the appropriated level be provided to the states and tribal governments (H.Rept. 105-769).

Program Status

EPA estimates that since the federal underground storage tank program began, nearly 1.2 million of the roughly 2.1 million petroleum tanks subject to regulation have been closed. As of June 1998, more than 358,000 releases had been identified, nearly 302,000 cleanups had been initiated, and 192,000 cleanups had been completed.⁽²⁾ EPA expects that many more UST releases will be identified as owners and operators act to comply with leak prevention and detection regulations that took effect in December 1998. Discovery of more releases seems likely, given that, in October 1998, EPA estimated that roughly 40% of 919,000 active tanks had yet to be upgraded, replaced, or closed.⁽³⁾

In about 95% of cases, EPA or states have been successful in getting responsible parties to perform the cleanup.⁽⁴⁾ In these cases, the cleanup costs have been typically paid for by the responsible party, a state fund, and/or private insurance. As mentioned, states and EPA use LUST Trust Fund money primarily to oversee cleanups by responsible parties and to take enforcement actions at leaking UST sites. In those cases where Fund monies are used directly for cleanup, the law requires responsible parties to be held liable in cost recovery actions for such expenditures.

State Funds and Programs

Forty-seven states have established financial assurance funds, which usually satisfy the financial responsibility requirements for tank owners and operators. Revenues for these funds are typically generated through gas taxes and tank fees. For 1997, the total balance for state funds reached approximately $1.34 billion, annual revenues were $1.31 billion, and outstanding claims against the funds reached $2.31 billion.⁽⁵⁾ Unlike the federal LUST Trust Fund, many state funds may be used to reimburse financially solvent businesses for some or all of the costs of remediating leaking UST sites. Reimbursements often have benefitted small businesses that faced financial hardship when paying cleanup costs.

In addition to state assurance funds, some states have established financial assistance programs primarily to assist small business and local government entities. EPA reported in 1995 that 14 states had established loan or grant programs to assist businesses or municipalities with remediating sites and/or upgrading, replacing and closing tanks. Several of these state programs specifically target small, remote businesses in an effort to maintain an effective fuel supply and distribution network in rural areas.⁽⁶⁾

Along with these compliance assistance programs, states have adopted a range of enforcement initiatives, many of which specifically target the December deadline. At least nine states have laws prohibiting fuel delivery to tanks that fail to comply with UST regulations. Many other states have enforcement policies that prohibit noncompliant tanks from being filled, and others will issue annual operating permits only to facilities that demonstrate compliance with the 1998 regulations. (Similarly, several major fuel suppliers have stated that they will not deliver fuel to tanks that have not been upgraded.)

Program Issues and Legislation in the 105^th Congress

States have been facing increased oversight and enforcement workloads in their UST and LUST programs with the phase in of federal regulations, and particularly the 1998 deadline. Concurrently, many state assurance funds (which help tank owners pay for cleanups) have claims that exceed balances at a time when the number of claims is rising. States have urged Congress to increase appropriations from the LUST Trust Fund and to ensure that states receive the bulk of the appropriations. Additionally, states and industry have urged Congress to broaden the uses of the Fund to give states flexibility to determine how best to allocate resources among UST and LUST program activities.

Another issue noted by state regulators and market observers is that the UST regulatory program may be a significant contributing factor in many business closures, but they add that a range of economic and market factors are often at work. States and EPA expect that the December 1998 deadline for complying with UST technical standards could lead to a substantial number of tank closures and an unknown number of small business closures. This issue may be of particular concern in rural areas that have few gas stations. Nonetheless, many in the industry note that EPA has given tank owners 10 years to upgrade or replace old tanks, and they support a strong enforcement policy.

The 105th Congress acted on two bills modifying uses of the LUST Trust Fund: H.R. 688 which the House passed, unamended, and S. 555 which the Senate Committee on Environment and Public Works reported, amended. These broadly similar bills proposed to amend RCRA and the Internal Revenue Code of 1986.

H.R. 688 would have required EPA to distribute at least 85% of the LUST Trust Fund appropriation to states for undertaking corrective actions and enforcing the UST program. H.R. 688 and S. 555, as reported, would have broadened the allowable uses of Trust Fund monies to permit states to use funds for the following new purposes: 1) to compensate tank owners for cleanup costs where the state determines that the financial resources of the owner (excluding resources provided by state assurance funds) are not adequate to pay for the cost of a corrective action without significantly impairing the ability of the UST owner to continue in business; 2) to enforce federal, state or local leak detection, prevention and other UST requirements; and 3) to pay for administrative expenses related to state corrective action and compensation programs. H.R. 688 proposed to prohibit using funds to provide financial assistance to tank owners and operators for upgrading tank systems (i.e., for meeting the 1998 deadline).

In March 1997, the Finance and Hazardous Materials Subcommittee of the House Commerce Committee held a hearing and markup, and unanimously approved H.R. 688, unamended. The full Committee approved H.R. 688 unanimously and without amendment on April 16, 1997, and reported the bill on April 17 (H.Rept. 105-58). The House passed H.R. 688, unamended, under suspension of the rules on April 23, 1997.

In testifying before the Subcommittee, EPA expressed concern that: 1) the legislation's compensation provisions were excessively broad (because determination of financial hardship excluded the availability of resources from a state assurance fund), and 2) using the Trust Fund to compensate solvent owners could significantly reduce the number of cleanups that would be accomplished under the current arrangement in which funds are used primarily for overseeing and enforcing cleanups performed by tank owners and operators. EPA urged Congress to ensure that adequate appropriations would be provided to support the proposed new uses. EPA also expressed concern over the 85% allotment requirement, noting that while the Agency, on average, has distributed 85% of the appropriation to states, it required some flexibility to adjust to changes in funding levels, particularly with its responsibility for the LUST program on Indian lands.

The Association of State and Territorial Solid Waste Management Officials (ASTSWMO) and representatives from the petroleum marketing industry endorsed the measure and testified in support of using the LUST Trust Fund monies to achieve both the leak prevention and cleanup goals of the federal underground storage tank program, particularly as demands on states and businesses increase with the approaching 1998 regulatory deadline. According to ASTSWMO, some states have a backlog of corrective actions to complete, while others are ready to allocate more resources to enforcing leak prevention and detection regulations. Some states also want flexibility to use federal funds to assist small, rural gas stations and other facilities to keep services available in communities. In this view, increasing states' flexibility in using Trust Fund monies would enable states to meet their particular needs and to achieve the federal program goals in the manner each state finds most effective. ASTSWMO noted, however, that at recent LUST Trust Fund appropriations levels, states probably would not have the option to make extensive use of the proposed new authorities.⁽⁷⁾ This is because states find that available LUST resources often are insufficient to support the existing program.

S. 555, as introduced and referred to the Senate Committee on Environment and Public Works, was very similar to H.R. 688. On October 1, 1998, the Committee reported S. 555, amended (S.Rept. 105-360). The reported bill responded to concerns raised by EPA and others and differed from H.R. 688 in several ways. As reported, S. 555 would have required EPA to distribute at least 80% of the Trust Fund appropriation to the states (rather than 85% as required in the original bill and in H.R. 688). It would have directed EPA, in coordination with Indian tribes, to develop and implement a strategy to take corrective actions on Indian lands and to implement and enforce UST requirements. Also, the Senate bill would have prohibited the use of funds to provide assistance to tank owners and operators for meeting UST regulations in general (not just the 1998 upgrade requirements as in H.R. 688). Among other differences from the House bill, S. 555 would have authorized EPA to use LUST funds for enforcing LUST and UST regulations under Subtitle I, and would have required EPA to study the corrosive effects of MTBE on underground storage tanks.⁽⁸⁾

No further action occurred on these bills before the 105^th Congress adjourned. It is uncertain whether the 106^th Congress will revisit this issue.

Footnotes

1. ^(back)Congress reinstated the tax to fund the LUST Trust Fund and to help offset tax cutting provisions in the Taxpayer Relief Act of 1997. For a discussion of this tax and its reinstatement, see CRS Report 97-472 E, Leaking Underground Storage Tank Trust Fund (LUST).

2. ^(back)See Internet web site http://www.epa.gov/swerust1/cat/cam0698.htm for more details on the status of state program activities. Also, see http://www.epa.gov/swerust1/states for state and tribal program contacts and web sites.

3. ^(back)Tanks that fail to meet the deadline may be closed temporarily while compliance work is being done. Upgrades must be completed by December 22, 1999, or tanks must be permanently closed.

4. ^(back)Statement of Michael Shapiro, U.S. Environmental Protection Agency, before the Subcommittee on Finance and Hazardous Materials of the Committee on Commerce, U.S. House of Representatives. Hearing on H.R. 688, the Leaking Underground Storage Tank Trust Fund Amendments Act of 1997. Mar. 20, 1997. p. 9.

5. ^(back)Vermont Department of Environmental Conservation, Waste Management Division. Summary of State Fund Survey Results. June 1997.

6. ^(back)EPA. Financial Assistance Programs for UST Owners and Operators: Federal and State Funding Programs. July 26, 1995. p. 2.35-2.39.

7. ^(back)Statement of Mary Jean Yon on behalf of the Association of State and Territorial Solid Waste Management Officials before the House Committee on Commerce, Subcommittee on Finance and Hazardous Materials. Hearing on H.R. 688. March 20, 1997. p. 6.

8. ^(back)For a discussion of MTBE issues, see CRS Report 98-290, MTBE in Gasoline: Clean Air and Drinking Water Issues.