EQSC Presentation onPetroleum Program

October 20, 2009

Bruce PalinAssistant Commissioner

Office of Land QualityIndiana Department of Environmental Management

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Excess Liability Trust FundELTF

Fund Income• Half of tank registration fees ($90/tank/year)• $0.01 for every gallon of gas and diesel soldFund Expenses• Cleanup expenses for eligible tank owners• Fund administration and some inspections

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Protection of the Fund• ELTF provides federally required financial assurance

for tank owners which replaces the need for private environmental insurance

• Protection of the fund to maintain financial assurance is paramount

• Fund balance dropped to just over $5 million prior to the inspection fee increase of 2005

• Priority payment implemented to protect financial assurance function of the fund

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Protection of the Fund• Tank fees paid by owners $750,000/year• Inspection fees passed on to consumers -

$.01/gallon ~ $50 million/year• Cleanup claims averaging $35 million/year• Administrative costs ~ $5 million/year• Average site reimbursement ~ $260,000

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ELTF Income / Expensesin $ Million

0

10

20

30

40

50

60

2005 2006 2007 2008 2009

Income

Claim Expense

AdminExpense

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Leaking Tank Review and Claim Process

• Leak Discovery and Release Notices Sent• Site Characterization– Determines the extent of the impact

• Corrective Action Plan • Implementation of Remediation• No Further Action Letter

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Magnitude of Underground Tanks

• 4,025 active underground storage tank sites• 8,824 leaking underground storage tank sites• 6,768 leaking sites addressed (77%)• 200 new releases per year• 17 project managers plus 17 technical staff

(geology, chemistry, etc.)

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FY 09 Processed and Denied Claims

• 3,342 Claims processed• Total amount submitted - $63,308,795• Total amount reimbursed - $32,939,214 • Denials– Inappropriate claims - $4,300 Sales Pitch to win bid

for cleanup (Deliverable: Powerpoint presentation)– Exceedence of costs allowed in rule

• 70 to 80 claim appeals open at anytime8

Revisions for Consideration

• Underground Petroleum Storage Tank Excess Liability Trust Fund (ELTF) Deductible

• Definition of Owner• Revised cap on annual claim amounts• Clarify cost recovery by IDEM• Use of ELTF to address non-ELFT eligible

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ELTF Deductible• Did not upgrade tanks before 12/22/98– $35,000 Deductible

• Did upgrade tanks before 12/22/98– $25,000 Deductible (Change back to $30,000)

• Upgraded tanks and has double walled piping– $25,000 Deductible

• Upgraded tanks and has double walled tanks– $25,000 Deductible

• Upgraded tanks and has double walled tanks & piping– $20,000 Deductible

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Definition of Owner

• Need clarification that the owner of the property that contains, or contained, a tank is considered the owner of the tank and any contamination resulting from the tank

• ALJ decision that if the current property owner never operated the tank then they don’t own the tank. Leaves the agency with contaminated site and no one responsible for cleaning it up

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Definition of OwnerExample

• Widow inherits property that her husband leased to his brother to operate a gas station that went out of business

• A Superstore purchases a site where a tank was removed but did not go through proper closure and verification of no contamination was not done

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Proposal: Owner Definition

• Revise definition to clarify that ownership of property makes you legally liable for complying with tank closure and leaking tank requirements

• Put state in same position as a third party suing a responsible party and property owner for damages

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Cap on Annual Claim Amounts

• ELTF statute establishes an annual cap of $3 million for reimbursed claims per owner

• One gasoline distributor has accumulated over $16 million worth of claims since 2004, in excess of the $3M annual cap

• In FY 2009 they submitted $6.3 million worth of claims. They have averaged $5 million per year

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Cap on Annual Claim Amounts• Agency would like to clear the books of hidden

liability as it makes ELTF appear to have a higher balance than it does

• Left unaddressed the hidden liability could grow to equal the “apparent” balance of the fund

• ELTF Balance as of 6/30/09 - $52,668,163• Subtracting hidden liability - $36,276,129

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Good Question

• Why has one distributor spent so much money on cleanups?

• They own the stations that sell their product• They have 16% of the sites in ELTF but only 14% of

the dollar claims• Average cleanup cost is $32,000 per site less than all

others• Take responsibility for both new sites and ones they

have sold

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Proposal: Annual Cap

• Raise the cap to reduce the growing liability• Tie the increased cap amount to a minimum

required fund balance to protect the fund

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Cost Recovery• Leaking underground storage tanks that are not

covered by ELTF are also regulated by IDEM• Both Federal and State funds used to address these

sites• EPA expects states to do cost recovery to keep

cleanup funds viable• Recent challenges to IDEM authority to do cost

recovery for plan review and approval have identified the need to clarify that authority

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Proposal: Potential Loss• Estimated value of agency oversight for these

remediations $850,000/year• $1.4M Federal grant matched by Petroleum

Trust fund is used to fund portion of personnel in leaking tank program

• Grant recipients expected to recover costs from responsible parties

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Expanded Use of ELTF• Currently Petroleum Trust Fund is only source to

address abandoned sites• Receives ≈$750,000 per year tank fees• Expends ≈$700,000 per year on staff salary and

contractor review for low and medium priority sites• Combining ELTF and Petroleum Trust with 10% cap

would severely reduce agency resources• Petroleum Trust balance decreasing $.5 million/year

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Expanded use of ELTF

Three categories of sites needing remediation• Abandoned tank sites which are not currently

eligible for ELTF (≈200 to250)• Sites not fully ELTF eligible due to lapsed tank

fee payments• Sites fully eligible for ELTF

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Expanded Use of ELTF• Allow use of ELTF by currently ineligible sites

with higher deductible• Allow agency to hire contractors to address

abandoned sites and submit claims

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Proposal: Expanded Use of ELTF• Important to protect the viability of the ELTF to continue

financial assurance• Based on numbers there is room to utilize a portion of the

ELTF to address abandoned leaking tanks and expand environmental protection

• Caps or percentage limits could be put in place to assure viability of the fund

• Structure the expanded use to reduce eligibility litigation costs

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Operator TrainingUpdate

• Last session proposal to give Homeland Security / Fire Marshall’s Office authority to set up federally required Operator Training

• IDEM is working with industry representatives to recognize a National Training program to satisfy this federal requirement

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Questions?

Brad BaughnLegislative Liaison

317-234-3386bbaughn@idem.in.gov

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