One-third to half of all Connecticut gasoline stations face closure if the state can’t plug a $98 million deficit in an environmental cleanup fund.
The U.S. Environmental Protection Agency gave the state until the end of the General Assembly’s legislative session on May 9 to fix the funding for the Underground Storage Tank Clean-up Program. Otherwise, EPA no longer will recognize the fund’s ability to guarantee cleanups, and Connecticut’s gas stations must find other means to insure against spills, a costly proposition.
“Private insurance is available,” said Chris Herb, vice president for the Independent Connecticut Petroleum Association. “But it is expensive, and not every gas station can get it.”
Of the 1,200 Connecticut gas stations, ICPA estimates 400-600 will be unable to obtain the insurance if the state fund goes belly-up and EPA will force the stations to close if they can’t guarantee cleanups.
“Right now, we are sort of in purgatory,” Herb said.
The Underground Storage Tank fund provides reimbursements for gas stations and other owners of underground petroleum storage tanks to clean up their facilities in case of a spill. The fund was established in 1991 after the private insurance market for these cleanups dried up and the state gas stations needed to fulfill EPA requirements for a cost guarantees for spills.
When the program launched, it was funded using one-third of the gross receipts tax, which is one of two taxes Connecticut places on the sale of vehicle fuel. In the early years, the tax provided a surplus above the $10 million in claims the fund received annually.
Over the past decade, the state legislature gradually decreased the portion of the gross receipts tax slated for the fund, diverting the money to the general fund. Even though the tax generates nearly $350 million annually, the underground storage tank fund receives less than 1 percent of that money.
“Over the years, we’ve robbed from this fund to pay into our general fund to pay our bills because we mismanaged our money so poorly,” said House Minority Leader Larry Cafero, R-Norwalk.
The fund has $17 million in unpaid approved claims going back to August 2009 and another $81 million in claims yet to be processed. The program’s current level of funding for 2012 is $250,000.
EPA recognizes the fund, with its large deficit, can no longer adequately assure environmental cleanups. In its letter to the state last July, EPA said the underfunding puts 60 percent of Connecticut’s population at environmental risk, since that portion relies solely on groundwater as their drinking water source.
The state Department of Energy & Environmental Protection, which administers the fund, launched a stakeholder workgroup to address these issues. The agency must decide on legislative recommendations to either seek more funding for the program; retire the program and help gas stations find other cleanup guarantees, or a hybrid of the two.
“EPA understands to resolve this issue, we need legislative action,” said Dennis Schain, spokesman for the state Department of Energy & Environmental Protection, which administers the fund.
In its latest letter to the state on Jan. 26, EPA said if Connecticut chooses to retire the program, the state still is on the hook for the $17 million in approved claims and whatever portion of the $81 million in submitted claims is approved.
Gov. Dannel Malloy offered $5 million in bonding to replenish the program partially.
“The $5 million isn’t the total solution, but it does get the fund going again,” Schain said.
Cafero said the state shouldn’t seek bonding for the tank fund because that is once again borrowing to pay for operating costs, something Malloy has said he would avoid since taking office last year.
If Malloy is serious about wanting to keep the fund viable, Connecticut needs to look at dedicated sources of funding from its operating revenue, such as a greater portion of the gross receipts tax, Cafero said.
“We don’t believe $5 million is going to be enough for the EPA,” Cafero said.
Herb said he talked to legislators about a rough draft proposal to pay down the tank fund deficit over a number of years, but ICPA prefers the state government address the deficit now.
“They passed laws in the past providing funding that they haven’t honored,” Herb said.
The problems with the tank fund extend beyond its revenue stream, said Eric Brown, associate counsel for the Connecticut Business & Industry Association.
The tank fund is run by an independent 11-person board of government appointees and administered by DEEP staff. Because the program received a surplus of funding in the early years, this administration developed inefficiently, Brown said.
In the state budget, the tank fund will receive $1.25 million, but $1 million is devoured by staffing and administrative costs.
“Our concern is if it is not resolved, what we understand from the gas station folks is it will have quite the sweeping impact on the industry,” Brown said.
If the worst happens, Herb said, Connecticut will lose up to 50 percent of its fuel stations. This permanently creates a problem that existed temporarily following the widespread power outages in August and October: lack of available stations.
“People will have to drive further and wait longer for their gas,” Herb said.
Â