Leaking Underground Storage Tanks: EPA Should Take Steps to
Better Ensure the Effective Use of Public Funding for Cleanups
(08-FEB-07, GAO-07-152).
Underground storage tanks that leak hazardous substances can
contaminate nearby groundwater and soil. Under the Resource
Conservation and Recovery Act (RCRA), tank owners and operators
are primarily responsible for paying to clean up releases from
their tanks. They can demonstrate their financial responsibility
by using, among other options, publicly funded state financial
assurance funds. Such funds function like insurance and are
intended to ensure timely cleanup. These funds also pay to clean
up releases from tanks without a viable owner, as does the
federal Leaking Underground Storage Tank (LUST) Trust Fund. GAO
was asked to report on (1) states' estimates of the public costs
to clean up known releases, (2) states' primary sources of
cleanups funding and their viability, and (3) federal sources to
address these releases. GAO surveyed all states and discussed key
issues with EPA and selected state officials.
-------------------------Indexing Terms-------------------------
REPORTNUM: GAO-07-152
ACCNO: A65704
TITLE: Leaking Underground Storage Tanks: EPA Should Take Steps
to Better Ensure the Effective Use of Public Funding for Cleanups
DATE: 02/08/2007
SUBJECT: Environmental cleanups
Environmental monitoring
Federal aid to states
Federal/state relations
Funds management
Future budget projections
Grant monitoring
Groundwater
Groundwater contamination
Hazardous substances
Pollution control
Program evaluation
State-administered programs
Tanks (containers)
Cost estimates
EPA Leaking Underground Storage Tank
Program
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GAO-07-152
* [1]Report to Congressional Requesters
* [2]February 2007
* [3]LEAKING UNDERGROUND STORAGE TANKS
* [4]EPA Should Take Steps to Better Ensure the Effective Use of
Public Funding for Cleanups
* [5]Contents
* [6]Results in Brief
* [7]Background
* [8]Future Public Costs for Cleaning Up Leaking Underground
Storage Tanks May Be Substantial
* [9]States Reported That They Expect to Spend an Estimated
$12 Billion in Public Funds to Complete the Cleanup of about
54,000 Known Releases
* [10]The Number of Releases from Tanks without a Viable Owner
and the Public Cost of Such Releases Are Not Fully Known
* [11]States Anticipate Spending Additional Public Funds on
Newly Identified Releases
* [12]States Primarily Rely on Financial Assurance Funds to Clean
Up Releases and Limit Cleanup Based on Funding Availability
* [13]States Clean Up Releases from Leaking Underground
Storage Tanks Primarily Using Financial Assurance Funds
* [14]Some State Funds Do Not Have Sufficient Resources to
Ensure Timely Cleanups
* [15]EPA's Method of Ensuring the Adequacy of Financial
Assurance Funds Has Limitations
* [16]Federal Funding Provided to Clean Up Releases from
Underground Storage Tanks Is Limited
* [17]Appropriations from the LUST Trust Fund Have Been
Relatively Stable
* [18]LUST Trust Fund Money Is a Relatively Small Part of Many
States' Programs
* [19]States Use LUST Trust Fund Money in a Variety of Ways to
Support Their Programs
* [20]Conclusions
* [21]Recommendations for Executive Action
* [22]Agency Comments
* [23]Objectives, Scope, and Methodology
* [24]Selected Data Relating to Underground Storage Tanks Reported by
States
* [25]GAO Survey of the 50 States and the District of Columbia
* [26]Comments from the Environmental Protection Agency
* [27]GAO Contact and Staff Acknowledgments
United States Government Accountability Office
Report to Congressional Requesters
GAO
February 2007
LEAKING UNDERGROUND STORAGE TANKS
EPA Should Take Steps to Better Ensure the Effective Use of Public Funding for
Cleanups
a
[28]GAO-07-152
LEAKING UNDERGROUND STORAGE TANKS
EPA Should Take Steps to Better Ensure the Effective Use of Public Funding
for Cleanups
What GAO Found
States estimated that fully cleaning up about 54,000 of the approximately
117,000 releases (leaks) known to them as of September 30, 2005, will cost
about $12 billion in public funds. The Environmental Protection Agency
(EPA) estimates that it costs an average of about $125,000 to fully clean
up a release. State officials said that tank owners or operators will pay
to clean up most of the remaining 63,000 releases. However, an unknown
number of releases lack a viable owner, and the full extent of the cost to
clean them up is unknown. A tank owner may not be viable because the owner
fails to maintain adequate financial responsibility coverage, which is
intended to provide some assurance that the owner has access to funds to
pay for cleanups. While 16 states require annual proof of coverage, 25
states check owners' coverage less often or not at all. Furthermore, 43
states expect to confirm about 16,700 new releases in the next 5 years
that will require at least some public funds for cleanup.
States reported that they primarily use financial assurance funds to pay
the costs of cleaning up leaks. States reported that they spent an
estimated $1.032 billion from financial assurance funds to clean up tank
releases in 2005. Overall, fund revenues totaled about $1.4 billion in
2005, of which about $1.3 billion came from state gasoline taxes. The
assurance funds in the 39 states for which GAO has information held an
estimated $1.3 billion as of September 30, 2005, according to state
officials. However, many states also use these funds to clean up releases
from sources other than underground tanks. Several state assurance funds
may lack sufficient resources to ensure timely cleanups. While EPA
monitors the status of state funds, its method of monitoring the soundness
of these funds has limitations. Furthermore, there are concerns that, by
paying the bulk of the cleanup costs, state financial assurance funds may
provide disincentives for tank owners--who pay only a relatively small
deductible--to prevent releases.
In addition to their own funds, states employ resources from the LUST
Trust Fund, the primary federal source of funds for cleaning up releases
from underground storage tanks. As of September 30, 2005, the fund balance
was about $2.5 billion. For fiscal year 2005, the Congress appropriated
about $70 million from the fund to help EPA and the states clean up
releases and to oversee cleanup activities. EPA distributed about $58
million of this amount to the states to investigate and clean up releases
and conduct enforcement efforts, among other actions. To distribute LUST
Trust Fund money among the states, EPA uses a formula that includes a base
amount for each state and factors to recognize states' needs and past
cleanup performance. However, although the LUST Trust Fund provides funds
to states to assist in addressing releases from tanks without a viable
owner, EPA has not incorporated this factor into its formula. Furthermore,
EPA's information on states' performance comes from state reports;
however, GAO found that some of the information in these reports is
inaccurate and inconsistent.
United States Government Accountability Office
Contents
[29]Letter 1
[30]Results in Brief 4
[31]Background 7
[32]Future Public Costs for Cleaning Up Leaking Underground Storage
Tanks May Be Substantial 10
[33]States Primarily Rely on Financial Assurance Funds to Clean Up
Releases and Limit Cleanup Based on Funding Availability 22
[34]Federal Funding Provided to Clean Up Releases from Underground
Storage Tanks Is Limited 34
[35]Conclusions 43
[36]Recommendations for Executive Action 45
[37]Agency Comments 45
[38]Appendixes
Appendix I: Objectives, Scope, and Methodology 47
[39]Appendix II: Selected Data Relating to Underground Storage Tanks
[40]Reported by States 53
[41]Appendix III: GAO Survey of the 50
States and the District of Columbia 72
[42]Appendix IV: Comments from the Environmental Protection
Agency 103
[43]Appendix V: GAO Contact and Staff Acknowledgments 106
[44]Table 1: Key Data on Underground Storage Tanks in the 50 States
Tables
[45]and the District of Columbia, as of September 30, 2005 9
[46]Table 2: Summary of Reported State Approaches to Ensuring That
Tank Cleanups Are Completed, by Status of State Financial
Assurance Fund 26
[47]Table 3: LUST Trust Fund Revenue, Fiscal Years 1987-
2005 37
[48]Table 4: Selected State-Reported Underground Storage Tank
Performance Measures, as of September 30, 2005 54
[49]Table 5: State-Reported Estimates of the Number of Releases in the
State's Cleanup Backlog That Will Be Cleaned Up Using
Funding from Responsible Parties and from Public
Sources, as of September 30, 2005 56
[50]Table 6: State-Reported Numbers of Releases in the State's Cleanup
Backlog from Tanks without a Viable Owner, as of September 30, 2005 58
Table 7: [51]State-Reported Frequency of Checking Financial
[52]Responsibility Coverage 60
Table 8: [53]State-Reported Expenditures of Public Funding to Clean
[54]Up Underground Storage Tank Sites by Source, 2005 62
Table 9: [55]State-Reported Balance of State Financial Assurance
[56]Funds, as of September 30, 2005 65
[57]Table 10: State-Reported Revenues to State Financial Assurance
[58]Funds, 2005 67
[59]Table 11: State-Reported Diversions from State Financial Assurance
Funds for Purposes Other Than Those Related to the
Underground Storage Tank Program, 2001-2005 70
[61]Figure 1: States' Estimates of Expected Future Public Costs to
Fully Clean Up Known Releases 12
Figure 2: States' Estimates of the Percentage of Known Releases
That Would Be Cleaned Up Using Public Funds 14
Figure 3: Number of States That Use Each Source of Funding to
Clean Up Releases from Tanks without a Viable Owner 17
Figure 4: State-Reported Frequency of Checking Whether Financial
Responsibility Coverage Is Current 19
Figure 5: States' Estimates of the Percentage of Releases in Their
Current Backlogs and To Be Identified in the Next 5 Years
That Will Be Cleaned Up Using Public Funds 21
Figure 6: State-Reported Expenditures from State Sources, 2005 23
Figure 7: Status of Financial Responsibility Coverage of State
Financial Assurance Funds, as of September 30, 2005 24
Figure 8: Top Ten States by Size of Reported Balance of Financial
Assurance Fund, as of September 30, 2005 27
Figure 9: Number of States Reporting Diversions from State
Financial Assurance Funds, 2001-2005 31
Figure 10: Appropriations from the LUST Trust Fund, Fiscal Years
1987-2005 35
Figure 11: LUST Trust Fund Balance, Fiscal Years, 1987-2005 36
[72]Figure 12: States' Use of LUST Trust Fund Money by Spending
Category, Fiscal Year 2005 42
Abbreviations
DCI data collection instrument
EPA Environmental Protection Agency
LUST Leaking Underground Storage Tank
MTBE methyl tertiary-butyl ether
RCRA Resource Conservation and Recovery Act
UST Underground Storage Tank
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United States Government Accountability Office Washington, D.C. 20548
February 8, 2007
The Honorable John D. Dingell
Chairman
Committee on Energy and Commerce
House of Representatives
The Honorable Hilda L. Solis
House of Representatives
Underground storage tanks that leak petroleum or other hazardous
substances can contaminate nearby soil and groundwater, which serves as
the source of drinking water for nearly half of all Americans. Individuals
coming into contact with this contamination, which can contain known
carcinogens, could experience health problems ranging from nausea to
kidney or liver damage. According to the Environmental Protection Agency
(EPA), about 450,000 releases from underground storage tanks had been
confirmed in the 50 states and the District of Columbia between 1985 and
September 30, 2005--the most recent year for which comprehensive data were
available.^1 In the past 20 years, EPA and states have spent over $10
billion in public funds to clean up these releases. Despite these efforts,
as of September 30, 2005, over 100,000 releases had not yet been fully
cleaned up.
In 1984, the Congress amended the Resource Conservation and Recovery Act
(RCRA) to require EPA to develop release detection, prevention, and
cleanup regulations that apply to owners and operators of underground
storage tanks. In response, EPA began developing the Underground Storage
Tank (UST) program in 1985 to prevent releases of petroleum and hazardous
substances into the environment, detect releases when they occur, and
clean up any contamination from a release. Under RCRA, tank owners and
operators must register with a designated state or local agency
underground tanks that store petroleum or hazardous substances. EPA and
the states then track and regulate these tanks. EPA's UST Program is
primarily implemented by the states; EPA maintains responsibility for
program implementation on lands owned by Indian tribes and in Idaho
because that state does not have the necessary laws in place. EPA also
maintains responsibility for taking enforcement actions in New York
because the state lacks the necessary laws. EPA's primary role has been to
provide national guidance, assistance, and leadership to aid the states in
implementing their programs.
^1EPA defines a confirmed release as an incident where a release has been
identified and reported to the state (or other designated implementing
agency), which has in turn verified the release.
Under RCRA, owners and operators of tank systems are primarily responsible
for funding the cleanup of releases from underground storage tanks.
However, under some circumstances, such as where an emergency exists, EPA
or a state may pay for the cleanup and then seek reimbursement from the
responsible private party. In order to operate, owners and operators must
demonstrate that they have access to resources to meet their financial
responsibility to cover cleanup costs. Owners and operators may use a
variety of assets to meet this financial responsibility, including letters
of credit, commercial insurance, and other options.
Some states have established EPA-approved state assurance funds that, like
commercial insurance, are another means by which owners and operators can
demonstrate their financial responsibility coverage. While the
circumstances vary under which states use these funds to clean up
releases, state financial assurance funds--like commercial insurance--
typically pay cleanup costs either directly to cleanup contractors or by
reimbursing tank owners and operators for some or all of the expenses of
cleaning up leaking tank sites in return for the payment of a deductible
amount. In addition to assisting known, solvent owners and operators with
cleanup costs in this manner, some state financial assurance funds also
pay the costs to clean up releases from tanks for which the owners or
operators are not "viable"--that is, they are unknown, unwilling, or
unable to perform the cleanup. States typically raise money for the funds
through gasoline taxes paid by the public and tank registration fees paid
by tank owners or operators.
Finally, the federal government--through the Leaking Underground Storage
Tank (LUST) Trust Fund, which was established in 1986 amendments to
RCRA--also provides public funding to ensure that releases from tanks are
cleaned up. The LUST Trust Fund provides money to states for (1)
overseeing and enforcing cleanup actions taken by a tank owner or operator
and (2) cleaning up leaks at tank sites, including those without a viable
owner, or at sites that require emergency action. The fund is capitalized
through a $0.001/gallon excise tax on gasoline and other motor fuels and
the interest that accrues to the fund balance annually. The Congress
annually appropriates amounts from the LUST Trust Fund to EPA, which in
turn distributes the majority of the funds to help states that have
entered into cooperative agreements with the agency to implement their
cleanup programs.
In this context, you asked us to determine (1) states' estimates of the
cost in public funding from state and federal sources to clean up known
releases from underground storage tanks, (2) states' primary sources of
funding for addressing these releases and the sources' future viability,
and (3) the funding available from federal sources to address these
releases. For the purposes of this report we defined public funding as
including any funding controlled and/or provided by state and federal
agencies, such as funds from the federal LUST Trust Fund, state financial
assurance funds, and other funds appropriated by states to pay for cleanup
that would not otherwise occur.
To obtain estimates of the cost to the public to clean up known releases,
we surveyed state officials responsible for underground storage tank
programs or, where applicable, managers of state cleanup funds, in the 50
states and the District of Columbia. Only one state, South Dakota, did not
respond to our survey. Through the survey, we gathered state officials'
estimates as of September 30, 2005, of the current number of known
releases that have not yet been cleaned up, the number of releases that
will require public funding to clean up, and the amount of public funding
these cleanups will require. We also relied on our survey to gather
information about state sources of funding used to address releases, the
status of these sources, and their future viability. Because of
differences in the time frames used by states to answer certain survey
questions, we refer to data from such questions as 2005 data in this
report. We asked a series of questions in the survey to allow us to assess
the reliability of the information provided by states. We determined that
the survey data are sufficiently reliable as they are used in the body of
the report (i.e., to be presented in aggregate, as testimonial evidence).
The survey data presented in appendix II are not reliable for state level
comparisons but are presented to illustrate the range of state responses
and associated reliability issues. We also interviewed officials from
eight states--Florida, Iowa, New Jersey, Ohio, Texas, Pennsylvania, South
Carolina, and Utah--to gather additional information regarding their
sources of cleanup money, among other issues. To obtain information about
the funding available from federal sources, we interviewed Department of
the Treasury officials responsible for managing the LUST Trust Fund and
gathered documentation regarding the balance of the fund, annual revenues
and expenditures, and appropriations of money to EPA. We also interviewed
EPA officials to learn how money from this fund flows from EPA to
individual states. To gather additional information about state and
federal funding available to address releases, we conducted interviews
with regional program officials from EPA's UST program in six EPA
regions--those regions based in Boston, Philadelphia, Atlanta, Chicago,
Dallas, and Denver. We selected these regions primarily because survey
responses from one or more states in these regions raised questions about
similar data they had reported to EPA. A more detailed description of our
scope and methodology is presented in appendix I; selected data on
underground storage tanks reported by states are summarized in appendix
II; and a copy of our survey instrument is included as appendix III. We
conducted our work from June 2005 to December 2006 in accordance with
generally accepted government auditing standards.
Results in Brief
The cleanup of known releases from leaking underground storage tanks
could take years to complete, and states reported that it would cost
around $12 billion in public funds from state and federal sources. This
amount reflects states' estimates of public cleanup costs for about 54,000
of the approximately 117,000 known releases that states reported had not
yet been fully cleaned up as of September 30, 2005. Tank owners or
operators will pay to clean up the majority of the remaining 63,000 known
releases, according to state officials. However, an unknown number of
releases lack a viable owner to pay cleanup costs. Some of these releases
may lack a viable owner because the tank owner or operator failed to
maintain adequate financial responsibility coverage. While 16 states
require annual proof that tank owners or operators are maintaining the
required coverage, the remaining states generally reported that they check
this coverage less often or not at all, even though coverage may change on
an annual basis. Without regular monitoring that tank owners or operators
are maintaining their required coverage, this coverage may lapse,
potentially making the owner or operator nonviable and, in the event of a
release, may result in the need to use public funds to ensure timely
cleanup. For example, according to Florida officials, the state has
cleaned up about 350 sites annually in past years using public funding. Of
this number, approximately three or four sites per year involve
responsible parties that did not maintain adequate financial
responsibility coverage. Finally, in addition to the costs associated with
currently known releases, states expect to spend public funds in the
future to clean up substantial numbers of releases that are not yet known
but which states project they will identify within the next 5 years. State
officials from 43 states reported--primarily based on historical trends--
that they expected to identify an estimated 16,700 new releases in the
next 5 years requiring at least some public funds for cleanup. However,
states expect that, overall, the proportion of releases cleaned up using
public funds will decline in the future, indicating that they expect a
higher proportion of owners or operators to use private sources of
financial responsibility coverage to pay for cleanups.
States reported that they primarily use state financial assurance funds to
pay the costs of cleaning up leaks from underground storage tanks, but
they said that several of these funds may not have sufficient resources to
ensure timely cleanups. State officials reported that $1.032 billion--or
96 percent of the estimated $1.076 billion from all state sources used to
clean up tank releases in 2005--came from state financial assurance funds.
Overall, states reported that revenues for these funds totaled about $1.4
billion in 2005, of which approximately $1.3 billion came from some form
of state gasoline taxes paid by consumers. State financial assurance funds
in the 39 states for which we have information collectively held an
estimated $1.3 billion as of federal fiscal year-end 2005, according to
state officials. Because many state assurance funds also pay to clean up
releases from other types of tanks--such as aboveground storage tanks--the
entire $1.3 billion balance may not be available for cleaning up releases
from underground storage tanks. While state financial assurance funds can
provide large amounts of money for cleaning up these releases, several
states reported that their financial assurance funds do not have
sufficient resources to ensure that these cleanups are performed in a
timely manner. This is a concern because the longer pollution from
releases is left in place, the greater the potential for it to spread,
further putting human health and the environment at risk. While EPA
monitors whether state financial assurance funds can continue to pay for
cleanups in a timely manner, its recently developed monitoring tool has
had limited usefulness to date, according to agency officials. A more
effective system for monitoring the soundness of state funds could give
EPA greater assurances that these funds are able to pay for or support
timely cleanups of releases. Furthermore, by allowing owners and operators
to pay only a small portion of the cleanup costs as their deductible,
state financial assurance funds might provide a disincentive for tank
owners to prevent releases from their tanks, thereby increasing the burden
on already inadequate balances in some states' funds.
The LUST Trust Fund is the primary federal source of funds for cleaning up
releases from underground storage tanks. From its inception in 1986
through September 30, 2005, the fund balance had grown to $2.5 billion.
For fiscal year 2005, the Congress appropriated about $70 million from the
fund. EPA distributes most of the annual appropriations to support the
states' cleanup programs and retains the balance to cover its own
management expenses. States use LUST Trust Fund money for a variety of
purposes, including investigating releases, conducting enforcement actions
directed at responsible parties, cleaning up the releases, and paying
administrative and planning expenses directly related to these activities.
In fiscal year 2005, EPA distributed about $58 million from the LUST Trust
Fund to the states, an average of $1.2 million each. The annual trust fund
distributions generally represent a relatively small part of many states'
cleanup program revenue. In fiscal year 2005, the states spent about 42
percent of their LUST Trust Fund money on administrative activities, 34
percent on site cleanups, and 24 percent on enforcement, according to EPA.
In distributing the annual appropriation, EPA uses a formula that includes
a base amount for each state and factors designed to recognize states'
needs and past performance in cleaning up releases. Although one purpose
of the LUST Trust Fund is to help fund cleanups of releases from tanks
without a viable owner, the EPA formula for distributing the annual
appropriations does not include this factor. The states do not provide EPA
with separate data on tanks without a viable owner as an input to this
formula. Furthermore, EPA develops information on states' needs and
performance from states' semiannual activity reports on their tank numbers
and cleanup activities. However, we found that some of the information in
these reports is inaccurate: for example, reports of two states included
estimated rather than actual data; some states are unsure of how EPA
defines the categories of information to be reported, and thus they are
unsure they are reporting the correct information; and at least one state
reports release data covering both tanks included in EPA's UST program as
well as other types of tanks. Unless EPA obtains accurate information from
states on tank numbers and cleanup activities--in particular, data on
releases from tanks without a viable owner--and uses this information in
its formula for allocating funds, it cannot ensure that LUST Trust funds
are distributed to states with the most pressing cleanup needs that
require timely cleanups to protect human health and the environment.
We are recommending that EPA take steps to (1) ensure that states verify
tank owners' financial responsibility coverage on a regular basis, (2)
improve the agency's oversight of the solvency of state assurance funds,
(3) assess the relative effectiveness of options for financial
responsibility coverage, and (4) better focus how EPA distributes LUST
Trust Fund money to the states. In commenting on a draft of this report,
EPA agreed with our recommendations and provided information on the
agency's plans and activities to address each of them.
Background
The 1986 amendments to RCRA established the LUST Trust Fund to, among
other things, finance the cleanup of petroleum releases from underground
storage tanks. Until recently, states could use these funds only for
cleanup and related administrative and enforcement activities. Within this
restriction, trust fund money could be used for the following general
categories of activities:
o testing tanks for leaks when one is suspected;
o investigating a site to evaluate the source and extent of petroleum
contamination;
o assessing the number of individuals that may have been exposed to
petroleum contaminants and the seriousness of exposure, and estimating
resulting health risks;
o cleaning up contaminated soil and water;
o providing safe drinking water to residents at the site of a tank leak;
o providing for temporary or permanent relocation of residents; and
o providing reasonable and necessary administrative and planning
expenses directly related to these activities.
The Energy Policy Act of 2005 (the 2005 Act), enacted in August 2005,
expanded the permitted uses of the LUST Trust Fund. It authorizes states
to use a portion of their LUST Trust Fund money for inspections and other
leak prevention purposes. Furthermore, the 2005 Act authorizes
appropriations from the LUST Trust Fund through fiscal year 2011 of $555
million per year for a variety of activities--including release prevention
and inspections--in addition to previously authorized purposes. This
annual amount includes $200 million for cleanups of releases from leaking
underground storage tanks; $200 million for the cleanup of releases of
oxygenated fuel additives from such tanks; $100 million for activities
including onsite inspections, groundwater protection, and enforcement; and
$55 million for delivery prohibition, operator training, and release
prevention and compliance. An additional $50 million per year is
authorized from the general fund to cover administrative expenses and
other activities. Net revenue to the LUST Trust Fund from taxes on
petroleum products totaled approximately $190 million in fiscal year 2005.
The 2005 Act also included several other provisions regarding inspections,
operator training, and financial responsibility, among other things. Some
of these provisions impose ongoing requirements on states. For example,
the inspection provision requires each state receiving federal funding to
inspect all of its regulated underground storage tanks at least once every
3 years, beginning after the state has inspected tanks that have not been
inspected since December 1998.
Effective February 2007, the 2005 Act directs EPA to require that each
state receiving federal funds either (1) require additional, or secondary,
structures that would help contain a release (secondary containment) for
new and replaced underground storage tanks located near sources of
drinking water or (2) require evidence of financial responsibility for
tank manufacturers' and installers' certification. This coverage would
provide for the costs of cleanup directly related to releases caused by
improper tank manufacture or installation. The 2005 Act also extended
until 2011 the tax on petroleum products that capitalizes the federal LUST
Trust Fund.
Under EPA policy, except in rare circumstances and in Indian Country,
states will address underground storage tank releases that are financed by
the LUST Trust Fund under an appropriate cooperative agreement with EPA.
EPA will undertake a cleanup only when (1) there is a major public health
or environmental emergency, (2) the state is unable to respond, and
(3) no responsible party is able or willing to provide an adequate and
timely response. In these circumstances, EPA's involvement is to be
limited to stabilizing the immediate situation, with the expectation that
further cleanup will be conducted by the state under its cooperative
agreement with the agency. States are responsible for overseeing cleanup
work performed by the party responsible for the contamination and for
performing the cleanup at sites where no responsible party can be found.
In addition to the LUST Trust Fund, federal money from EPA's Brownfields
program can be used to clean up sites contaminated by petroleum under
certain circumstances. In general, Brownfields grants are limited to sites
whose "expansion, redevelopment, or reuse of which may be complicated by
the presence or potential presence of a hazardous substance, pollutant, or
contaminant." Only certain governmental organizations, nonprofit
organizations, and nonprofit educational institutions are eligible for
Brownfields cleanup grants. In fiscal year 2005, EPA provided eligible
entities with about $22.3 million in Brownfields grants for cleaning up
sites contaminated with petroleum. About $4.0 million of these grants were
awarded for direct cleanup work, $13.3 million for site assessments, and
$5.0 million for revolving loan fund programs.
According to data collected from the states and reported by EPA, EPA and
states have made progress in cleaning up releases from underground storage
tanks. These data show that of the almost 450,000 releases confirmed as of
fiscal year-end 2005, cleanups had been initiated for about 93 percent and
completed for about 74 percent. Table 1 shows key tankrelated data
elements reported by EPA as of September 30, 2005, and provides
definitions for those data elements.
Table 1: Key Data on Underground Storage Tanks in the 50 States and the District
of Columbia, as of September 30, 2005
Tank-related data element Definition Number
Tanks
Active tanks Active, federally regulated 645,990
underground storage tank systems
registered with the state.
Closed tanks Federally regulated underground 1,607,462
storage tanks that have been
reported to the state as being closed
permanently.
Releases
Confirmed releases Incidents where a release has been 449,779
identified and reported to the
state/local or other designated
implementing agency, which has in
turn verified the release.
Cleanups
Cleanups initiated Confirmed releases at which the state 419,919
or responsible party has
evaluated the site and initiated
cleanup activity, or determined that
no
cleanup action is necessary.
Cleanups completed Confirmed releases where cleanup has 331,562
been initiated and where the
state has determined that no further
actions are currently necessary
to protect human health and the
environment.
Status of cleanup backlog
Cleanups ongoing Confirmed releases where cleanup has 88,357
been initiated but not yet
completed.
Cleanups not yet started Confirmed releases where cleanup has 29,860
not yet been initiated.
Source: GAO analysis of EPA data.
As cleanups have progressed, methyl tertiary-butyl ether (MTBE)--a
gasoline additive designed to reduce emissions and raise octane--has
continued to be detected in groundwater used for drinking water supplies.
In some cases, MTBE was added to gasoline to fulfill requirements set in
the 1990 Clean Air Act Amendments to reduce certain types of emissions.
However, because MTBE dissolves easily in water and does not cling to soil
very well, it migrates faster and farther through the ground than other
gasoline components, thus making it more likely to contaminate public
water systems and private drinking water wells. MTBE's health effects have
not been conclusively established, but the federal government has
determined it to be a potential human carcinogen. The effects of exposure
to MTBE include headaches; eye, nose, and throat irritation; coughs;
nausea; dizziness; and disorientation. Low levels of MTBE can make
drinking water supplies undrinkable due to its offensive taste and odor.
Because of uncertainties about MTBE's health effects, EPA has not set a
national standard for MTBE in drinking water. Some states have set their
own limits on allowable levels of MTBE in drinking water, and some have
banned its use in gasoline sold in the state. The Congress also took
action through the 2005 Act to reduce the use of MTBE in gasoline by
eliminating the requirement from the 1990 Clean Air Act Amendments that
led to the use of MTBE to reduce emissions.
Future Public Costs for Cleaning Up Leaking Underground Storage Tanks May Be
Substantial
States reported that completing the cleanup of approximately 54,000 known
releases from leaking underground storage tanks would likely require
substantial amounts of public funds from state and federal resources. The
public cost of cleaning up releases from tanks without a viable owner, as
well as the number of releases in states' cleanup backlogs that lack a
viable owner, is not fully known. In addition to the costs associated with
known releases, states expect that they will use public funds to clean up
a substantial number of releases that they identify within the next 5
years.
States Reported That They Expect to Spend an Estimated $12 Billion in Public
Funds to Complete the Cleanup of about 54,000 Known Releases
States reported that cleaning up known releases from leaking underground
storage tanks would cost an estimated $12 billion in public funds from
state and federal sources.^2 This estimate reflects the amount of public
funds that states expected it would cost to clean up approximately 54,000
known releases. States were unable to estimate the cost of cleaning up
more than another 8,000 releases whose cleanup will require at least some
public funds.^3 We asked states to exclude from their estimates any money
spent prior to September 30, 2005, to clean up these releases. As figure 1
illustrates, states reported that a substantial amount of the public costs
to clean up these releases had not yet been incurred.
^2To calculate the estimated cost to complete the cleanup of known
releases that require at least some public funds, we first provided states
with four cost ranges ($0 - $99,999, $100,000 - $499,999,
$500,000-$999,999, $1,000,000 or more). Second, we asked them to divide
the number of releases in their state for which cleanup costs will be paid
with some amount of public funds among these four cost ranges. Third, we
multiplied the total number of releases in each range by the midpoint of
the range in order to get a total cost for releases in each range. For the
top range, we used $1,000,000 as the midpoint. Finally, we summed the
total costs for each range.
^3Additionally, officials in New York reported 375 releases that would be
cleaned up using public funding, but they did not respond to the question
about the cost of cleaning up these releases.
Figure 1: States' Estimates of Expected Future Public Costs to Fully Clean
Up Known Releases
$0-$99,999 (24,940)
2%
$1,000,000 or more (956)
3%
$500,000-$999,999 (2,172)
Costs cannot be estimated (8,206)
$100,000-$499,999 (25,924)
Source: Responses to GAO'ssurvey of tank program and/or state fund
managers.
Note: This figure includes only releases that states indicated would be
cleaned up using some public funds. New York officials did not respond to
this question. South Dakota officials did not respond to our survey.
States reported that nearly half of these releases will require $100,000
or more to fully clean up, with about 5 percent requiring $500,000 or
more. Just over half of the approximately 117,000 releases that states
reported in our survey had not yet been fully cleaned up will be cleaned
up using at least some public funds. Tank owners or operators will pay the
entire costs to clean up another 34 percent of these 117,000 releases,
according to state officials. States reported that they did not know
whether any public funds would be used to clean up most of the remaining
13 percent of these releases or whether tank owners or operators alone
would pay for their cleanup.
The percentage of releases that states reported would be cleaned up using
at least some public funds varied widely by state, as illustrated in
figure 2. Some states expected all releases in their backlogs to be
cleaned up using at least some public funds, while other states did not
expect public funds to be used to clean up any releases in their current
backlog.
Figure 2: States' Estimates of the Percentage of Known Releases That Would Be
Cleaned Up Using Public Funds
Sources: Responses to GAO'ssurvey of tank program and/or state fund
managers, Map Resources (map).
Notes: New Hampshire officials did not provide a response to this
question. California officials were unable to determine the percentage of
known releases that would be cleaned up using public funds. South Dakota
officials did not respond to our survey.
The approach that different states use regarding who pays for the cleanup
of leaking underground storage tanks can affect the percentage of releases
in a state that are cleaned up using at least some public funding. One
such approach is whether a state has chosen to set up a financial
assurance fund that provides financial responsibility coverage for tank
owners. For example, in North Dakota, where nearly all tanks are covered
by the state's fund, the state expects that more than 95 percent of
releases in its current backlog will be cleaned up using at least some
public funding. Similarly, state laws addressing when a specific owner or
operator is considered to be responsible for a release can affect who pays
for cleanups. For example, Michigan program officials previously told us
that the state's causation standard exacerbates the funding problem for
tanks without a viable owner because it requires that the state prove that
the present owner/operator is responsible for a site's contamination
before it can be held responsible for cleanup.^4 Proving responsibility
becomes difficult in cases where releases have occurred in the past and
ownership of the property has changed. If responsibility cannot be
established, the state must then fund any cleanup of the site.
Although EPA estimates that a release costs about $125,000 on average to
clean up, the cost can vary based on several factors, including the extent
of contamination, the cleanup method selected, and the presence of MTBE or
groundwater contamination. In our survey, we asked states about the
average cost in public funds to clean up both releases with MTBE
contamination and releases that have contaminated groundwater. We also
asked for the average cost in public funds to clean up all releases. With
regard to releases involving MTBE, EPA has reported that the additional
cost for cleaning up these releases varies widely, from no additional cost
to a substantial increase, depending on the history of the release.
States' survey responses generally corresponded with this reported
variation. Twenty-nine states reported estimates of average public costs
for cleaning up releases with MTBE contamination and for all releases.
Most of these states reported that cleaning up releases with MTBE
contamination costs the same or more than cleaning up an average release
in the state. However, estimates of the cost difference varied widely
among states.
^4GAO, Environmental Protection: More Complete Data and Continued Emphasis
on Leak Prevention Could Improve EPA's Underground Storage Tank Program,
[73]GAO-06-45 (Washington, D.C.: Nov. 30, 2005).
Page 15 GAO-07-152 Leaking Underground Storage Tanks
EPA has stated that releases that have contaminated groundwater are
generally more complicated and more expensive to clean up than releases
that have not. In our survey, 34 states provided us with estimates for the
average public cost to clean up all releases as well as the average public
cost to clean up releases that have contaminated groundwater. States'
estimates varied widely: about 60 percent of these states reported that it
was more expensive to clean up releases involving groundwater
contamination, while about 40 percent reported that it cost the same.
The Number of Releases from Tanks without a Viable Owner and the Public Cost
of Such Releases Are Not Fully Known
The full extent of releases from tanks without a viable owner is unknown.
While states reported that about 11 percent of the approximately 117,000
releases that have not yet been fully cleaned up came from such tanks, the
actual number could be much higher for two reasons. First, 11 states
reported that they did not know how many of the releases in their backlogs
were from tanks without a viable owner. Second, 17 states reported that
there were approximately 4,000 releases from tanks for which they had not
yet determined whether a viable owner exists.
The public cost of cleaning up releases from tanks without a viable owner
is also not fully known. While 26 states and the District of Columbia
estimated that it would cost a total of $2.7 billion to complete the
cleanups of known releases from tanks without a viable owner, 21 states
responded that they did not know the cost, and 2 states did not respond to
the question.^5 Because most states reported that they clean up such
releases using public funding, it is likely that many of the known
releases from tanks without a viable owner will be cleaned up using at
least some public money.
Nearly all states reported to us in our survey that they use public
funding to clean up releases from tanks without a viable owner. Six states
reported that they had a state fund dedicated to tanks without a viable
owner, and other states without such dedicated funds primarily reported
that they use resources from other types of state funds, such as financial
assurance funds, or from the federal LUST Trust Fund, as illustrated in
figure 3. However, four states reported that they may wait until the
property on which the leaking tank is located is purchased and rely on the
new owner to clean the site up.
^5Michigan accounted for $1.7 billion of the $2.7 billion estimated cost.
Figure 3: Number of States That Use Each Source of Funding to Clean Up
Releases from Tanks without a Viable Owner
Number of states (among those that do not have a fund dedicated to tanks
without a viable owner) 35
[s]ite
t Fund/
s
ederal fund
a
w
[S]T
tate financiald/d
y on ne
tate fun
urance fun
Federal LUwner of
u
Rel
s
Tr
other
o
ss
other f
S
a
Source of funding
Source: Reponses to GAO'ssurvey of tank program and/or state fund
managers.
Note: Some states provided more than one response. New York and New
Hampshire officials did not provide a response to the question. South
Dakota officials did not respond to our survey.
^aIncludes the District of Columbia.
States may have releases from tanks without a viable owner in their
backlog because the owner or operator responsible for the tank failed to
maintain adequate financial responsibility coverage. Maintaining adequate
financial responsibility coverage ensures that money will be available to
clean up releases from underground storage tanks. This money, in turn,
contributes to timely completion of cleanup and thus reduces the risk to
human health and the environment posed by releases that are not cleaned up
in a timely manner. We asked states about the number of cases they had
encountered in the past 5 years in which tank owners did not have adequate
financial responsibility coverage. In responding, states used somewhat
different definitions of what constituted inadequate financial
responsibility coverage. In general, states that we talked with more
in-depth about financial responsibility said they counted cases as having
inadequate coverage when an owner or operator either (1) had not
maintained financial responsibility coverage or (2) had maintained
coverage but did not have proof of coverage at the time the state
requested it. Twenty-three states reported cases of inadequate coverage in
the past 5 years, while only 7 states and the District of Columbia
reported no cases; 19 other states reported that they did not know the
number of cases involving inadequate coverage.
The number of cases involving inadequate financial responsibility coverage
may indicate that at least some public funds will be used to clean up a
release that otherwise would have been paid for by a responsible party.
For example, according to Florida officials, the state has cleaned up
about 350 sites annually in past years using public funding. Of these
sites, approximately three to four sites per year involved responsible
parties that did not maintain adequate financial responsibility coverage.
In our survey, Florida estimated an average cost of $380,000 in public
funds to fully address each release requiring public funds. Consequently,
Florida may have spent more than $1 million per year on such sites in the
past. Florida officials noted that the state attempts to recover these
funds from the tank owners but indicated that such efforts have not always
been successful in the past. Officials in three additional states--New
Jersey, Texas, and Utah--also told us that public funds could be used in
cases involving inadequate financial responsibility coverage, although
they did not know the number of times public funds had been used in these
types of situations in the past.
Checking financial responsibility coverage--for example, verifying during
a site inspection that an owner or operator has the required paperwork to
demonstrate coverage--helps to ensure that owners or operators maintain
adequate coverage as required by federal law. Some options that owners or
operators can choose for coverage either require annual updates or are
often renewed annually. For instance, owners or operators that
self-insure, or choose to demonstrate that they have sufficient assets to
cover costs resulting from a release, must prepare an annual letter with
financial information supporting their ability to pay. Similarly, owners
or operators that choose private insurance for financial responsibility
coverage must pay annual premiums to maintain coverage. However, EPA does
not provide states specific guidance on whether or how frequently states
should engage in routine verification of financial responsibility
coverage.^6
Most states reported to us that they attempted to check financial
responsibility coverage on a regular basis, but only about one-third of
the states reported that they required annual proof that tank owners or
operators were maintaining coverage. The remaining states generally
reported that they checked this coverage less often or not at all (see
fig. 4).
Figure 4: State-Reported Frequency of Checking Whether Financial
Responsibility Coverage Is Current
At least annually
(16) Every 1 to 2 years
(3)
Every 3 years or longer^a
(15)
Do not check
(7) Other
(9)
Source: Responses to GAO'ssurvey of tank program and/or state fund
managers.
^6EPA regulations require owners to report current evidence of financial
responsibility in certain specific situations, such as after a release has
occurred. EPA guidance notes that states may review financial
responsibility submissions (1) when owners or operators submit them or (2)
as part of an inspection or compliance assurance program. However, the
guidance does not elaborate on how frequently states should carry out such
reviews.
Notes: The "other" category includes responses such as "as events
warrant," and "annual permit applications contain financial responsibility
information that may be checked," among other responses. Among the seven
states that do not check whether financial responsibility coverage is
current, four states reported that their financial assurance funds provide
such coverage for all tanks in the state. South Dakota officials did not
respond to our survey.
^aIncludes the District of Columbia.
States that do not check financial responsibility coverage on an annual
basis may not know if owners or operators are maintaining required
coverage. For example, nearly half of the states that do not annually
check financial responsibility coverage did not know the number of cases
of inadequate coverage that had occurred in their state in the past 5
years.
States Anticipate Spending Additional Public Funds on Newly Identified
Releases
Forty-seven states and the District of Columbia reported that they
anticipate identifying about 37,000 releases over the next 5 years. Of
these 48 respondents, 43 reported that they expect to spend public funds
to clean up a total of about 16,700 of these releases, 2 reported no
expected use of public funds, and 3 were uncertain. Thirty-nine of the 43
respondents that expected to spend public funds to clean up future
releases also provided estimates of the average public cost to clean up
releases in their state. Using these estimates, we determined that the
total cost to clean up releases projected to be identified in the next
five years in these states could be around $2.5 billion. States also
reported that, overall, the proportion of releases cleaned up using public
funds is likely to decline in the future. That is, together they
anticipate using public funds to clean up a higher percentage of releases
in their current backlog than of releases they expect to identify in the
next 5 years (see fig. 5). Some states that do not use their financial
assurance funds to provide financial responsibility coverage for newly
identified releases, such as Florida and Arizona, expect particularly
sizable declines.^7 These states expect that owners or operators will use
private sources of financial responsibility coverage to pay for the
cleanup of most releases identified in the next 5 years.
^7Arizona's financial assurance fund stopped providing financial
responsibility coverage after June 30, 2006.
Figure 5: States' Estimates of the Percentage of Releases in Their Current
Backlogs and To Be Identified in the Next 5 Years That Will Be Cleaned Up
Using Public Funds
Releases in current backlogReleases projected to be identified in
the next 5 years
Exclusively by Exclusively by
Source: Responses to GAO'ssurvey of tank program and/or state fund
managers.
Notes: Only 43 states and the District of Columbia, whose officials
responded to both questions, were included in this analysis. California,
Michigan, Nevada, New Hampshire, New Jersey, and Oregon are not included.
South Dakota officials did not respond to our survey.
States' responses also indicate that, together, they expect to identify
somewhat fewer releases per year in the next 5 years, on average, than in
2005. Forty-seven states and the District of Columbia provided responses
in our survey to questions about releases they identified in 2005 and
about new releases they project they will identify in the next 5 years. In
2005, these states confirmed a combined 8,000 releases, compared with
their projections of an average of about 7,400 releases per year for the
next 5 years. In general, state officials told us that they based their
projections on recent trends, although officials in a few states
specifically noted that they expected to identify fewer releases in the
future in part because of tank and equipment upgrade requirements or other
prevention measures.
States Primarily Rely on Financial Assurance Funds to Clean Up Releases and
Limit Cleanup Based on Funding Availability
Most states use financial assurance funds to pay for cleaning up releases
from underground storage tanks, with most of the revenues coming from
state gasoline taxes.^8 In several of these states, financial assurance
funds limit the number of cleanups they perform based on funding
availability. Under EPA guidance, EPA officials are responsible for
determining whether a financial assurance fund is financially sound, that
is, if it provides reasonable assurance that funds are available to pay
for cleanup costs. The agency recently began collecting information from
states to determine the soundness of their financial assurance funds, but
this effort has had limited usefulness. Lack of timely cleanup is a
concern because the longer pollution from releases is left in place, the
greater the potential for it to spread, further placing human health and
the environment at risk.
States Clean Up Releases from Leaking Underground Storage Tanks Primarily
Using Financial Assurance Funds
States reported that they primarily use financial assurance funds to pay
the costs of cleaning up leaks from underground storage tanks. These funds
accounted for $1.032 billion, or 96 percent, of the estimated $1.076
billion from all state sources to clean up tank releases in 2005,
according to our survey results. State financial assurance funds generally
pay for cleaning up releases from tanks whose owners participate in the
assurance funds to satisfy federal financial responsibility requirements.
Figure 6 shows the state sources of expenditures for cleanup costs in
2005.
^8In this report we use the phrase "state gasoline taxes" to refer to any
fees or taxes assessed on a per-unit basis on fuels which are made
available to state financial assurance funds under state law.
Figure 6: State-Reported Expenditures from State Sources, 2005
4%
Other state sources($44 million)
Financial assurance funds formerly providing financial responsibility
coverage ($231 million)
Financial assurance funds currently providing financial responsibilty
coverage ($800 million)
Source: Responses to GAO'ssurvey of tank program and/or state fund
managers.
Note: Other state sources include funds dedicated to tanks without a
viable owner and other state funds.
As shown in figure 6, financial assurance funds can be divided into two
types: those that currently provide financial responsibility coverage, and
those that used to but no longer do so. Most states have, or have had,
financial assurance funds. As of September 30, 2005, 37 states had funds
that met federal requirements for financial responsibility, according to
EPA; an additional 6 states had such funds in the past but these funds no
longer provided coverage for new releases; and 7 states and the District
of Columbia have never had financial assurance funds that were approved by
EPA to provide financial responsibility coverage (see fig.7).
Figure 7: Status of Financial Responsibility Coverage of State Financial
Assurance Funds, as of September 30, 2005
Sources: GAO analysis of EPA data, Map Resources (map).
Note: Arizona's fund stopped providing financial responsibility coverage
after June 30, 2006.
The funds in each of the six states that stopped providing financial
responsibility coverage for new releases did so after a certain deadline.
Tank owners and operators in these states now demonstrate financial
responsibility coverage primarily through private insurance, according to
state officials. However, as recently as fiscal year 2005, some of these
state funds were still paying out large amounts to clean up releases. In
fact, over one-fifth of states' public spending to clean up releases from
underground storage tanks in 2005 came from these financial assurance
funds. For example, although Florida's fund last provided financial
responsibility coverage for new releases on December 31, 1998, it is still
responsible for cleaning up approximately 12,000 sites, and it spent
almost $150 million on cleanups in 2005. Michigan's fund, however, no
longer provided financial responsibility coverage after June 1995 because
it had insufficient funds to pay existing and future claims. Michigan
state officials reported that several other funds provided cleanup money
for underground storage tanks in 2005, including the Clean Michigan
Initiative Bond Fund. This fund can be used to pay for many activities,
such as waterfront improvements and cleanup of contaminated lake and river
sediments.
Seven states and the District of Columbia have never had funds that
provided financial responsibility coverage. In these states, tank owners
and operators use other ways of demonstrating financial responsibility
coverage, primarily private insurance and self-insurance, according to our
survey. While they never had financial assurance funds, some of these
states have provided cleanup funds to address releases from underground
storage tanks. In fact, four of these states reported paying for such
cleanups from state sources in 2005. Delaware, for example, reported
spending $1 million in 2005 from a reimbursement fund for 240 sites. Other
states assist or have assisted owners and operators with cleanup by
operating insurance-type mechanisms. In the state of Washington, for
example, the state's reinsurance program helps owners and operators of
underground storage tanks obtain affordable pollution liability insurance
by assuming part of the risk for each loss and insulating the primary
insurer from losses greater than a certain amount. In the case of a
$1,000,000 policy, for example, Washington's reinsurance program is
responsible for settlements over $75,000. Table 2 summarizes some of the
key distinctions among state approaches to ensuring that tanks are cleaned
up.
Table 2: Summary of Reported State Approaches to Ensuring That Tank
Cleanups Are Completed, by Status of State Financial Assurance Fund
Number of states
whose financial
Number of states with owner/operators assurance fund
that use each method to demonstrate received
funding
financial responsibility coverage from each
source
Number of states
that spent public
funds from state Financial Other State
private
Status of state sources assurance Private form of gasoline Tank
financial assurance on
fund as of cleanup fund insurance coverage taxes fees
September 30, 2005 in 2005
State has a
financial assurance
fund
that provides
financial
responsibility
coverage (37 35 29 13 19 31 18
states)
State financial
assurance fund no
longer
provides financial
responsibility
coverage (six 6 N/A 6 6 3 1
states)
State never had a
financial assurance
fund that provided
financial
responsibility
coverage (seven
states
and the District of 4 N/A 7a 7a N/A N/A
Columbia)
Source: Responses to GAO's survey of tank program and/or state fund
managers.
Note: Certain states did not provide data for certain questions, so the
information in this table may be incomplete.
^aIncludes the District of Columbia.
At federal fiscal year-end 2005, state financial assurance funds in 39
states held unexpended balances of approximately $1.3 billion, according
to estimates reported by state officials. Four states did not have or did
not report a fund balance. As shown in figure 8, individual states' fund
balances ranged as high as about $207 million. The top five
states--Pennsylvania, Florida, Texas, New Jersey, and
California--accounted for more than half of the total balance in these
funds. Because many state assurance funds also pay to clean up releases
from other types of tanks--such as aboveground storage tanks--the entire
balance of any one state's financial assurance fund may not be available
for cleaning up underground storage tanks.
Figure8: Top Ten States by Size of Reported Balance of Financial Assurance
Fund, as of September 30, 2005
U.S. dollars (in millions)
250
PA FL TX NJ CAMOGAKY AZ WI
State
Source: Reponses to GAO'ssurvey of tank program and/or state fund
managers.
Notes: Given limitations in the reliability of the information reported by
some states, data presented in this table should not be used to compare
state programs. Financial assurance funds in Florida, Texas, New Jersey,
and Wisconsin no longer provided financial responsibility coverage as of
September 30, 2005.
Overall, states reported in our survey that financial assurance funds
accrued revenues of about $1.4 billion in 2005 from a variety of sources.
State taxes on gasoline and other fuels accounted for about $1.3 billion
(92 percent) of this income to state funds. Such taxes are generally
considered to be paid by the consumer. States reported that financial
assurance funds also received revenues totaling about $42 million (3
percent) from fees paid by tank owners and operators. Only four states'
financial assurance funds collected tank fees but not gasoline taxes in
2005, and tank fees were the primary source of revenues for only three of
these funds, according to our survey. In addition to gasoline taxes and
fees on tanks, states also reported small amounts of revenues from sources
such as interest and cost recovery.
Whether a state financial assurance fund collects revenue from various
sources in a given year can depend on its balance. Many states have
maximum limits on the overall balance of their funds. Generally, if a
state's maximum limit is reached, its fund ceases collecting revenues from
one or
more of its revenue sources until the fund balance drops below a minimum
threshold. For example, Idaho has not collected certain fees for its fund
since 1998 when the balance of its fund exceeded $30 million, according to
a state official. The fund will again begin collecting revenue from these
fees once its balance drops to $15 million.
Some State Funds Do Not Have Sufficient Resources to Ensure Timely
Cleanups
While state financial assurance funds can provide substantial amounts of
funding for cleaning up releases, funds in some states may not have
sufficient resources to ensure that these cleanups are performed in a
timely manner. Specifically, officials in nine states reported in our
survey that their funds limit the amount of cleanup work they finance
based on funding availability. The situation of three such funds, as
described by state officials, follows:
o North Carolina. The revenues to the state's financial assurance fund
have not been sufficient in recent years to address all of the fund's
highrisk sites. As of February 2006, the state was only authorizing
cleanup work that the fund could pay for within 90 days.
o South Carolina. Officials generally preapprove cleanup work only at
the sites where contamination is most severe. After an initial
assessment of each site's contamination, the state categorizes
releases into one of four categories. The most urgent category
includes releases deemed emergencies, all of which were being actively
cleaned up as of August 2006. The remaining categories are ranked
based on how soon the release is likely to affect human health and the
environment, as well as its impact on groundwater. As of August 2006,
less than 40 percent of the releases in these categories were being
actively cleaned up.
o Florida. Although the state's financial assurance fund stopped
providing financial responsibility coverage for new releases in 1998,
it is having difficulty paying for all of its cleanups. The state fund
is only able to actively conduct cleanup work at about one-third of
the 12,000 remaining sites. The approximately 8,000 other sites in the
fund's backlog await cleanup. These cleanups will not occur until
money becomes available for them, or, potentially, the risk posed by
the sites increases so much that they require more urgent cleanup.
The timeliness of cleanups of releases from underground storage tanks is
especially important because the longer contamination from these releases
is left in place, the greater the potential becomes for the contamination
to spread. The farther these contaminants are allowed to spread, the
greater the chance becomes that they will contaminate drinking water and
other sensitive resources, potentially putting human health and the
environment at risk. In addition, when state financial assurance funds do
not pay cleanup claims on a timely basis, tank owners and operators may
delay cleanups. For example, tank owners may be less likely to voluntarily
report releases if they know that reporting a release could lead to a
mandatory cleanup and believe that they will not be reimbursed by the
state financial assurance fund for performing that cleanup for an extended
period, according to an EPA regional official.
To ensure that funds are available to clean up releases in a timely and
appropriate manner, state financial assurance funds must be financially
sound. According to EPA guidance on the subject issued in 1993, a state
assurance fund is financially sound if it provides reasonable assurance
that money is available to pay for cleanup costs and other liabilities.
"Reasonable assurance," according to EPA, would be evident, for instance,
if the fund assets are greater than liabilities or there are sufficient
resources to meet current demands, that is, the normal timing of payment
of claims is not significantly delaying cleanups. If funding levels or
claim processing time has a negative impact on the cleanup of releases
from underground storage tanks (i.e., causing undue delays in cleaning up
releases that therefore harm human health and the environment), then EPA
would be concerned about the financial soundness of the fund.
State financial assurance funds may face additional challenges to
remaining financially sound in coming years for the following reasons:
o Financial assurance funds may take on additional liability from tank
installers and manufacturers. Effective February 2007, the 2005 Act
directs EPA to require that each state receiving federal funds either
implement "secondary containment" for new and replaced underground
storage tanks located near sources of drinking water or to require
evidence of financial responsibility for tank manufacturers and
installers. In selecting the second option, states must require that
any manufacturer or installer of an underground storage tank maintain
evidence of financial responsibility coverage. In some cases, tank
installers and manufacturers may turn to state financial assurance
funds for financial responsibility coverage. While a few state funds
already provide such coverage to installers, this additional liability
could strain the resources of some states' funds, according to a
senior official in EPA's Office of Underground Storage Tanks.
o Some states may discover more releases in the coming years than in
past years. The 2005 Act requires each state receiving federal funding
to inspect all of their underground storage tanks on a 3-year cycle,
beginning after the state inspects tanks that have not been inspected
since December 1998. For those states that currently inspect sites
less frequently, the additional inspections, while intended to prevent
leaks in the long term, could lead to a spike in the number of
releases discovered. For example, officials in Texas told us that
underground storage tank facilities in their state are inspected about
every 10 years, on average. Releases in this state that may not have
otherwise been found for as long as 10 years may be discovered much
sooner, leading to an increase in confirmed releases over the next few
years. Finding these releases sooner may mean that the contamination
would be less extensive, however, and therefore any cleanup required
would be less costly.
o State financial assurance funds may also be affected by future natural
disasters, such as hurricanes Katrina and Rita in 2005. As late as
June 2006, the impact of the flooding caused by these hurricanes on
Louisiana's financial assurance fund was not yet fully known,
according to a state official. If all underground storage tanks that
could have been affected by the flooding turn out to have had
releases, the workload of the state assurance fund would increase by
25 percent. Payouts from the state assurance fund would increase by
approximately $4 million per year, according to this official.
Diversions from state financial assurance funds may also limit some
states' ability to pay for cleanups under certain circumstances. States
may sometimes decide to withdraw or withhold money from state financial
assurance funds. Of the 43 states that have had financial assurance funds,
16 reported in our survey that they had diverted a total of nearly $435
million from their funds between 2001 and 2005.^9 Officials in most of
these states reported that the diverted amounts went to the state's
general fund or to offset state budget shortfalls. A few states reported
using diverted funds for specific programs, such as Brownfields grants and
loans, a leadbased paint removal program, and cleanup of groundwater
contamination caused by sources other than leaking storage tanks.
Officials we interviewed in two states where diversions occurred--Florida
and South
Carolina--reported a negative impact on the state program's ability to
clean up sites. In Florida, for example, $20 million was diverted in 2002.
As a result, financial assurance fund managers had to adjust the threshold
for cleanup, meaning that the cleanup of less urgent releases, which
otherwise would have been addressed, was delayed, according to state
officials. Officials we interviewed in two other states--Pennsylvania and
New Jersey--did not believe that diversions had caused a significant
negative impact, if any. In the largest case of a diversion reported to
us, for example, the Pennsylvania financial assurance fund loaned the
legislature $100 million in 2002 to balance the state's budget, according
to state officials. State officials reported that this diversion did not
impact the fund's operations, however, because the fund still had more
than enough money to meet its current expenses. Figure 9 shows the number
of states with financial assurance funds that reported to us that they had
experienced a diversion between 2001 and 2005.
^9Of the total amount diverted among these 16 states, only about $18
million had been reimbursed to the state funds as of September 30, 2005.
Figure 9: Number of States Reporting Diversions from State Financial
Assurance Funds, 2001-2005
Number of states12
2001 2002 20032004 2005 Year
Source: Reponses to GAO'ssurvey of tank program and/or state fund
managers.
Notes: Forty-three states have had financial assurance funds that provided
financial responsibility coverage. As of September 30, 2005, two states'
funds had been reimbursed for portions of the original diversion.
The 2005 Act included language providing that, if a state diverts
resources from its financial assurance fund, EPA may not distribute a
certain portion of LUST appropriations to that state for enforcement
purposes. This provision affects only the 37 states whose financial
assurance funds still provide financial responsibility coverage for new
releases. Officials we interviewed in Pennsylvania and South Carolina
regarding this issue were uncertain about the 2005 Act's impact on future
diversions in those states. A South Carolina official, for example,
believed that the provisions could discourage the state from making
relatively small diversions from the financial assurance fund because the
loss of federal funding would more than offset the gain from the
diversion. If the state needed to divert a large amount of money, even
relative to the $1.3 million overall distribution it received from EPA in
2005, the disincentive would not be as significant. Two states even
commented in their responses to our survey that they anticipated
diversions in 2006. EPA had not developed guidance to implement these
provisions of the 2005 Act as of December 2006.
Concerns have been raised about whether tank owners have incentives to
prevent releases from their tanks when they can rely on state financial
assurance funds to pay the bulk of the cleanup costs. Although EPA
estimates that releases cost about $125,000 to clean up, on average, most
state financial assurance funds charge a deductible of $25,000 or less,
according to our survey. Twelve states described the circumstances under
which penalties could be imposed on tank owners for multiple, or repeated,
releases, in their survey responses. Officials in several states indicated
that penalties were not usually imposed simply if multiple releases
occurred. Rather, most states imposed penalties on the basis of evidence
that the tank owner did not comply with applicable regulations or failed
to report a release. For example, New Hampshire officials indicated that,
while the state has authority for administrative fines and civil penalties
in cases involving multiple releases, such actions are not automatically
imposed. Instead, fines and penalties may be assessed if a second release
results from a tank owner's recalcitrance in achieving and maintaining
compliance with operational regulations. Of the 20 states that provided
comments in response to our survey question regarding multiple releases,
none indicated that increased penalties were imposed simply based on the
occurrence of a second release.
EPA's Method of Ensuring the Adequacy of Financial Assurance Funds Has
Limitations
EPA approves state financial assurance funds to provide financial
responsibility coverage. According to EPA guidance, the agency can
withdraw this approval if a fund no longer provides coverage that ensures
timely and adequate cleanup of releases. As discussed earlier, EPA would
be concerned about the soundness of a state financial assurance fund if
the funding levels or claim processing time caused undue delays in
cleaning up releases, thereby potentially harming human health and the
environment. In Texas, for example, claims substantially exceeded revenues
during the early years of the state's financial assurance fund. By 1992,
the fund had a backlog of unpaid bills totaling about $170 million. This
amount exceeded the fund's annual income by approximately 300 percent, and
new claims arriving daily added to the backlog. In order to catch up, the
fund temporarily slowed down some cleanup work. Even though the fund
stopped accepting new releases after December 22, 1998, state officials
expect it to remain in place at least until 2008.
EPA monitors the soundness of state financial assurance funds; this task
is carried out by EPA regions, according to the agency's 1993 guidance on
the subject. This guidance suggested several steps that regions could use
to adequately monitor fund soundness, including (1) collecting baseline
data on relevant fund soundness measures from each state, (2) evaluating
the baseline soundness of each state fund, and (3) monitoring these fund
soundness measures over time to check for developing problems. The
guidance also specified that monitoring state funds should be accomplished
as part of regions' routine oversight of state programs. Officials in four
of the six EPA regions we interviewed conducted fund soundness oversight
primarily by discussing the financial position of the state assurance fund
with relevant state officials.
In 2005, EPA's Office of Underground Storage Tanks began collecting
information from states on various aspects of their financial assurance
funds. The goals of this effort included providing a better tool to
monitor state financial assurance funds' soundness and helping EPA work
with states to resolve any soundness issues. According to some EPA
officials, however, the data collected were of limited usefulness. One
region's program manager did not expect that the agency's effort would
provide any new information, except data to document what he already knew.
An EPA headquarters official, who is closely involved with the effort,
agreed that the agency's information collection, at most, helped confirm
what regions already saw as problem states. Moreover, states provided data
with gaps or further clarifications needed in key areas, such as the
number of release sites awaiting funding and the estimated total
liabilities for underground storage tanks. EPA regional officials
described this first effort as a collection of baseline information, and
the agency decided to collect data again in 2006 without changing its
method. Results for 2006 were not available as of December 2006.
The 2005 Act also included language providing that EPA may withdraw
approval of a state fund for financial responsibility coverage without
withdrawing approval of the overall state underground storage tank
program. In response, EPA has formed a workgroup to examine the issue of
how to assess the soundness of state financial assurance funds and to
develop criteria for guidance on the conditions under which it might
withdraw fund approval, including what would constitute a lack of
financial soundness. The guidance had not been made final as of December
2006.
Federal Funding Provided to Clean Up Releases from Underground Storage Tanks
Is Limited
Annual appropriations from the LUST Trust Fund have averaged about $71
million in recent years. Typically, about 80 percent of the money is
distributed to the states to support their cleanup programs. LUST Trust
Fund money provided to states generally represents a small portion of the
individual states' cleanup program budgets. In fiscal year 2005, the
states used about two-thirds of their distributions to fund program
administration and enforcement activities and one-third to fund the
cleanup of sites.
Appropriations from the LUST Trust Fund Have Been Relatively Stable
Appropriations from the LUST Trust Fund have been relatively stable since
fiscal year 1998. Between fiscal years 1998 and 2005, annual
appropriations from the trust fund have ranged from about $65 million to
$76 million per year, averaging about $71 million per year. Over this
period, EPA distributed an average of about 80 percent of the annual
appropriations to states to support their cleanup programs. EPA uses the
balance of the annual appropriations to support cleanup activities on
Indian lands and its own cleanup-related activities. Forty-eight states
reported spending about $15 million in LUST Trust Fund money on site
cleanup activities in 2005, by far the largest single source of federal
money for this purpose reported in our survey. Figure 10 shows the level
of appropriations from the LUST Trust Fund since it began operations. As
the figure shows, annual appropriations from the trust fund varied
considerably in the first 10 years of the program.
Figure 10: Appropriations from the LUST Trust Fund, Fiscal Years 1987-2005
U.S. dollars (in millions) 80 70
60
50
40
30
20
10
0
Year
Source: GAO analysis of EPA data.
Financed by a $0.001/gallon excise tax on gasoline and other motor fuels
and the interest that accrues to the fund balance annually, the balance of
the LUST Trust Fund had grown to about $2.5 billion by fiscal year-end
2005. The tax has been in effect continuously since 1987, except for a
short period in 1990 and the period between December 31, 1995, and October
1, 1997, when the tax had expired. Since 1987, the fund balance has been
growing at an average rate of about $129 million per year. By fiscal
year-end 2005, the LUST Trust Fund had collected about $3.7 billion in
revenue while appropriations totaled about $1.2 billion, leaving a fund
balance of approximately $2.5 billion. Figure 11 shows the changes in the
trust fund balance from 1987 through 2005.
1992 1991 1990 1989 1988 1987
2002 2001 2000 1999 1998 1997 1996 1995 1994 1993
2005 2004 2003
Fig ure 11: LUST T r u st Fund Balance, Fiscal Y ears, 1987-2005
U.S. dollars (in millions) 3,000
1992 1991 1990 1989 1988 1987
199^3
2002 2001 2000 1999 1998 1997 1996 1995 1994
200^3
2005 2004
Year
Source: GAO analysis of EPA data.
From the inception of the fund through fiscal year 2005, net tax revenue
to the LUST Trust Fund has averaged about $144 million per year, with
interest from investments adding an average of $49 million. Net revenues
in fiscal years 2001 and 2005 also included relatively small amounts
expended from the fund by EPA and subsequently recovered from the parties
responsible for the contamination and redeposited to the fund (see table
3).
Table 3: LUST Trust Fund Revenue, Fiscal Years 1987- 2005
Dollars in millions
Fiscal year Net tax revenuea Interest income Total net revenue
1987 $73 $1 $74
1988 125 10 135
1989 168 23 191
1990 122 34 156
1991 123 35 158
1992 157 31 188
1993 153 24 177
1994 152 29 180
1995 165 52 217
1996 48 60 108
1997 (2) 58 57
1998 136 61 197
1999 216 58 273
2000 181 79 260
2001 182 95 276b
2002 181 68 249
2003 184 64 249
2004 189 67 256
2005 190 78 269b
Total $2,743 $927 $3,671b
Source: GAO analysis of EPA data.
Note: Figures may not add to total due to rounding.
^aNet tax revenue includes income from taxes, less refunds and credits.
^bThe total also includes $40,000 in cost recoveries in fiscal year 2001
and $1,455,000 in cost recoveries in fiscal year 2005.
LUST Trust Fund Money Is a Relatively Small Part of Many States' Programs
States' revenues from the LUST Trust Fund's annual appropriations
represent a relatively small part of many states' cleanup program revenue
in any given year. In fiscal year 2005, EPA distributed about $58 million
of LUST Trust Fund money to the states, or about $1.2 million per state.
State programs spent much more than this on the cleanup portion of their
programs alone. In fact, 45 states each reported spending an average of
$24 million in 2005 to clean up contamination from leaking tanks. LUST
Trust Fund money used for cleanup work is generally intended to pay for
cleaning up releases from tanks without a viable owner. Even when
examining only this aspect of the cleanup effort, nine states reported
spending amounts that far exceeded their LUST Trust Fund distribution--
more than $2 million each in 2005 alone to clean up contamination from
leaking tanks without a viable owner. As discussed earlier in this report,
the cleanup work from such tanks that remains to be done is significant.
Distributing the annual LUST Trust Fund appropriation among the states is
a two-step process. First, EPA headquarters uses a formula to determine
the amount each state should receive and then divides the money among the
regions based on the total for the states within each region. Second, EPA
regional officials consider the components of the state formulas, along
with additional factors, to determine the actual amount to be distributed
to each of the states in their region. Additional factors that may be
considered, according to EPA regional officials, include states' actual
need for money in light of such things as funding carryovers from prior
years, states' work plans, or any special projects. For the most part, the
EPA regional officials whom we interviewed stated that deviations from the
formula distributions, when they occur, are usually relatively minor.
The formula EPA headquarters uses to distribute LUST Trust Fund money to
the regions incorporates three components: (1) a minimum distribution of
$300,000 per state; (2) a need-based amount that considers the numbers of
underground storage tanks and releases in the state, as well as the
percentage of the population relying on groundwater for potable water; and
(3) a performance-based bonus to states that meet or exceed the national
averages for the numbers of cleanups initiated and completed. The
distribution formula does not consider the number of releases from tanks
without a viable owner in various states, nor does it consider the risk
that specific releases may pose to human health and the environment. EPA
develops information on states' needs and performance from states'
semiannual activity reports on their tank numbers and cleanup activities.
However, our survey disclosed several concerns regarding the accuracy of
these reports, including the following:
o According to officials in two states, the information they report
in the semiannual activity reports is based on estimates rather
than actual performance. For example, a Maine official told us that
the data the state reports is generated by canvassing their
regional staff, and the state has found errors in the data reported
in the past. A Wyoming official told us that the state tracks
contaminated sites rather than
o releases. Because EPA reports call for data on releases rather than
sites, Wyoming provides its best estimate of release data.
o Some of the reporting problems disclosed in our survey are related to
the definitions of the reporting elements. An Arizona program official
told us, for example, that the program was uncertain of EPA's
definition of the cleanups initiated performance measure. The state
official expressed concern that the state's definition of cleanups
initiated may not agree with the EPA definition. The state reports a
site as "cleanup initiated" when the release has been confirmed and a
case number assigned. According to the EPA definition, however,
cleanup initiated requires that the state or responsible party has
evaluated the site and initiated physical activity (e.g., removal or
treatment of the contamination, removal of the contaminated soil, or
monitoring of the groundwater or soil being remediated). Cleanup
initiated should also be reported in situations where the state has
evaluated the site and determined that no physical activity is
necessary to protect human health and the environment.
o A Louisiana Underground Storage Tank Program official told us that a
review of its files disclosed that the program had been reporting
duplicate entries and releases that did not meet EPA's definition.
o An Oregon Underground Storage Tank Program Coordinator told us that,
in the process of cleaning up its database information, program
officials found many sites being reported that were duplicates or
involved releases that did not come from regulated tanks.
o A Maryland Department of the Environment official acknowledged that it
has been reporting semiannual performance data incorrectly, and as a
result, some of the state's performance activities have been double
counted.
o An Oklahoma Petroleum Storage Tank Division official told us that the
division had been reporting performance data on all tanks regulated by
the state, including the aboveground storage tanks, and also
undercounting the number of "active tanks" by excluding tanks that
were only temporarily out of service.
To help ensure the accuracy of the states' semiannual activities reports,
EPA recommends that the regions review each state's data submission for
reasonableness based on the state's prior reports and the regional program
manager's knowledge of the state's program. When any of the states' data
appear questionable, the regions are asked to follow up with the states to
obtain an explanation or corrected data. Our interviews with EPA regional
officials indicated that they were generally following this headquarters
guidance. Nevertheless, in some cases regional officials were not aware of
reporting problems with the states in their regions that our survey
disclosed. To ensure that states properly understand EPA's definition of
the data reporting elements, at least one EPA region reminds its states of
the EPA definitions each time a semiannual activity report is due. Other
regions we interviewed were less proactive, essentially relying on
informal discussions, the experience of the state officials, or the
posting of the definitions on the EPA Web site.
EPA also aggregates elements of the states' semiannual activity reports to
measure program performance against the national goals it establishes in
accordance with the Government Performance and Results Act. For fiscal
year 2005, EPA's goals for the underground storage tank program included
(1) completing 14,500 cleanups, (2) completing 30 cleanups in Indian
Country, and (3) decreasing newly reported confirmed releases to fewer
than 10,000. On the basis of the states' reports for fiscal year 2005, EPA
reported that all the goals were met.
Money from the LUST Trust Fund is meant, in part, to address releases from
tanks without a viable owner. In a November 2005 report, we recommended
that EPA collect available information from states, in their reports to
the agency, regarding the number and cleanup status of all known abandoned
underground storage tanks within their boundaries.^10 This information
would improve EPA's ability to determine how to most efficiently and
effectively distribute LUST Trust Fund dollars to the states. Although 37
states and the District of Columbia reported numbers of releases that came
from tanks without a viable owner in our survey, as of December 2006, EPA
Office of Underground Storage Tanks officials stated that EPA had not yet
required states to report this information because of concerns regarding
the burden this might place on some states.
^10 [74]GAO-06-45 .
States Use LUST Trust Fund Money in a Variety of Ways to Support Their
Programs
Under cooperative agreements with EPA, states receive distributions from
the LUST Trust Fund to help cover the cost of administering their LUST
cleanup programs. According to EPA regional officials, the states'
programs are all set up differently and, under EPA guidelines, the states
can decide how they will best use the LUST Trust Fund money to fit their
particular program. According to EPA, over the past 10 years, on average,
states have used roughly one-third of their LUST Trust Fund money for each
of the following categories: (1) administrative activities, including LUST
Trust Fund program management, general management and administrative
support, program guidance and implementation, and training; (2)
enforcement activities, including all actions necessary to identify a
leaking underground storage tank site's potentially responsible party;
issuance of letters, notices, and orders to the responsible parties;
oversight of the cleanups; and activities associated with cost recovery
actions; and (3) cleanup activities consisting largely of emergency
responses, site investigations, exposure assessments, and corrective
actions.
In fiscal year 2005, most of the states reported spending at least some of
their LUST Trust Fund money in all three categories. However, some states
focused their spending on just one or two categories. For example, 10
states reported they did not spend any of their LUST Trust Fund money on
cleanup activities in fiscal year 2005. Figure 12 shows the states' use of
LUST Trust Fund money by spending category.
Figure 12: States' Use of LUST Trust Fund Money by Spending Category, Fiscal
Year
Enforcement
Cleanup
Administration
Source: EPA data.
Regional officials told us that many states prefer to use their LUST Trust
Fund money to fund staff positions rather than cleanups. For example,
according to an EPA Region 5 official, although states in their region
initially used their LUST Trust Fund money to perform cleanups, they soon
decided that funding staff positions was more cost effective than
performing the cleanup and pursuing cost recovery, which can be an
expensive and time-consuming process. By funding additional staff
positions rather than cleanup activities, states were often able to
identify the responsible parties and force them to do the cleanups,
thereby avoiding the time and expense of pursuing cost-recovery actions. A
Region 6 official told us that some states view the cost recovery process
as a deterrent to using the federal money for cleanup activities.^11
Because they have state money available for cleanup efforts, states can
use the federal money for staff salaries. Region 8 officials noted that
some states actually require the use of state money for cleanup, and thus
the federal money is used for administrative or enforcement activities,
particularly salaries.
^11EPA guidance generally provides that states entering into cooperative
agreements with EPA must make reasonable efforts to recover costs.
Page 42 GAO-07-152 Leaking Underground Storage Tanks
An EPA official in Region 4, however, took issue with states that do not
use LUST Trust Fund money for cleanups. The EPA official stated that, in
some cases, cleanups that could have been performed with the LUST Trust
Fund money are not being undertaken because the money is being used for
salaries. The official told us that Region 4 encourages states to fund
salaries with state money so that LUST Trust Fund money can be used for
cleanups; however, the official acknowledged that ultimately it is up to
the states to decide how to use these federal funds, within the permitted
parameters.
Conclusions
EPA generally relies on states to ensure that tank owners and operators
comply with federal financial responsibility regulations, but it does not
provide specific guidance to the states as to whether or how frequently
they should verify financial responsibility coverage. As a result, states
verify coverage according to differing schedules or not at all. Therefore,
EPA lacks assurance that states are adequately overseeing and enforcing
financial responsibility provisions. We found that only about one-third of
states check coverage on an annual basis, while the remaining states
generally reported they check less frequently or not at all. Additionally,
many states could not provide information on the extent of inadequate
financial responsibility in their states for the past 5 years. If states
do not verify coverage on a routine basis, it may be difficult for them to
know whether owners or operators will have the required coverage in the
event of a release. If the required coverage is not in place when a
release occurs, funds may not be available to pay for cleanup in a timely
manner, thus increasing the potential for contamination to spread and
damage the environment and human health. Additionally, a lack of available
funds may result in taxpayers paying more of the cleanup costs than they
would have otherwise paid.
In addition, EPA's method of monitoring whether state financial assurance
funds provide adequate financial responsibility coverage has limitations.
Unless EPA improves how it monitors the soundness of state financial
assurance funds, it will not be aware of deficiencies in coverage before
they occur or in sufficient time to take action to avoid funding
shortages, which could delay the cleanup of releases and potentially
threaten human health and the environment.
Under the principle of "the polluter pays," tank owners and operators are
primarily responsible for the costs of cleaning up contamination from
their leaking tanks. RCRA requires these owners and operators to obtain
some form of financial responsibility coverage to demonstrate that they
have access to resources to cover cleanup costs. In response, many states
developed financial assurance funds, at least in part to ensure that
releases are cleaned up in a timely manner. In the event of a release,
tank owners covered by these funds usually pay a relatively small
deductible, while the funds provide sometimes large sums of public funding
to complete the required cleanup. Because these deductibles are often
small, they may not provide an incentive for tank owners to prevent
releases from occurring. In addition, in many states, tank owners are
using financial responsibility mechanisms other than state assurance
funds. While some state funds are currently encountering difficulties
paying for cleanups in a timely manner, tank owners in many states will
increasingly rely on other means of financial responsibility coverage,
making it important to know whether state funds or private forms of
coverage are more effective in ensuring timely cleanups. EPA is ideally
situated, through its existing relationship with state program officials
throughout the country, to shed light on this issue.
EPA's distribution of LUST Trust Fund money to states depends on data that
may not be accurate. In addition, states are not required to report data
to EPA on the number of releases from tanks without a viable owner.
Although one of the purposes of the fund is to help states clean up
releases from tanks without a viable owner, EPA currently allocates
resources to the states without taking into account the number of such
releases in each state. In our November 2005 report, we recommended that
EPA collect available data from the states regarding the number of tanks
in each state that had no viable owners.^12 In commenting on this
recommendation, EPA expressed concern about placing an undue burden on
states. In our response, we explained that we were not suggesting that
states should try to identify new sites that they were not currently aware
of, but merely report on sites without viable owners separately from the
aggregated data that they already provided to EPA. We continue to believe
that such reporting would be worthwhile and would not present an undue
burden to most states. In our survey, 37 states and the District of
Columbia reported data on the number of tanks without viable owners that
had known releases. Taking this information into account in distributing
LUST Trust Fund money could encourage the remaining states to gather such
information as well. In addition, developing national data on the extent
to which releases remaining to be cleaned up are attributed to tanks
without
viable owners would be useful to both EPA and the Congress in assessing
the future public funding needs for EPA's UST program.
^12 [75]GAO-06-45 , p. 29.
Recommendations for Executive Action
We recommend that the Administrator, EPA, take the following four
actions:
o Ensure that states verify, on a regular basis, that tank owners and
operators are maintaining adequate financial responsibility coverage,
as required by RCRA;
o Improve the agency's oversight of the solvency of state assurance
funds to ensure that they continue to provide reliable financial
responsibility coverage for tank owners;
o Assess, in coordination with the states, the relative effectiveness of
public and private options for financial responsibility coverage to
ensure that they provide timely funding for the cleanup of releases;
and
* Better focus how EPA distributes program resources to states,
including LUST Trust Fund money, by
o ensuring that states are reporting information in their
semiannual activity reports that is consistent with EPA's
definitions;
o encouraging states to review their databases to ensure that
only data on the appropriate universe of underground storage
tanks are being reported in their semiannual activity
reports; and
o gathering available information from states on releases
attributed to tanks without a viable owner and taking this
information into account in distributing LUST Trust Fund
money to states.
Agency Comments
We provided EPA with a draft of this report for its review and comment.
EPA agreed with our recommendations and provided information on the
agency's plans and activities to address each of them. Regarding our
recommendation that EPA ensure that states verify that tank owners and
operators maintain adequate financial responsibility coverage, the agency
indicated that it has issued draft guidelines that would require
inspections of underground storage tanks to assess compliance with
financial responsibility requirements. Regarding our recommendation that
EPA improve its oversight of the solvency of state assurance funds, the
agency indicated that it would strengthen its oversight by improving a
recently developed monitoring tool and by developing guidance for its
oversight process. Regarding our recommendation that EPA assess the
relative effectiveness of public and private options for financial
responsibility coverage, the agency indicated that it would consider
conducting such a study in conjunction with the states. Finally, regarding
our recommendation to better focus how EPA distributes program resources
to states, the agency stated that it would work toward ensuring that
statereported data are consistent with existing EPA definitions and are
limited to federally regulated underground storage tanks. Also, EPA stated
that it would consider changes to improve the distribution of future LUST
Trust Fund money. EPA's letter commenting on our report is included as
appendix IV.
As agreed with your offices, unless you publicly announce the contents of
this report earlier, we plan no further distribution until 30 days from
the report date. At that time, we will send copies to the EPA
Administrator and other interested parties. We will also make copies
available to others upon request. In addition, the report will be
available at no charge on the GAO Web site at http://www.gao.gov.
If you or your staff have any questions about this report, please contact
me at (202) 512-3841 or [email protected]. Contact points for our
Offices of Congressional Relations and Public Affairs may be found on the
last page of this report. Key contributors to this report are listed in
appendix V.
John B. Stephenson Director, Natural Resources and Environment
Appendix I
Objectives, Scope, and Methodology
The objectives of this review were to provide information on (1) states'
estimates of the cost in public funding from state and federal sources to
clean up known releases from underground storage tanks, (2) states'
primary sources of funding for addressing these releases and their future
viability, and (3) the funding available from federal sources to address
these releases.
For the purposes of this review, we defined public funding as including
any money controlled and/or provided by state and federal agencies--for
example, money from the federal Leaking Underground Storage Tank (LUST)
Trust Fund, state financial assurance funds, other state funds that have
not been approved by the Environmental Protection Agency (EPA) to provide
financial responsibility coverage, or money appropriated by the state to
pay for cleanup that would not otherwise occur. Our definition excluded
money spent by federal, state, and local government agencies to clean up
releases from tanks they either own or operate--this money would be
considered to be provided by the responsible party.
To address our objectives, we developed and administered a survey to state
officials responsible for underground storage tank programs or, where
applicable, for state cleanup funds, in the 50 states and the District of
Columbia.^1 Specifically, we prepared and e-mailed a Word Electronic
Questionnaire to obtain data, whether estimated or actual, from states on
underground storage tanks, including the number of tanks, releases, and
cleanups, and financial responsibility and funding sources for cleanups.
The practical difficulties of conducting any survey may introduce
nonsampling error. For example, differences in how a particular question
is interpreted, the sources of information available to respondents, or
the types of people who do not respond can introduce unwanted variability
into the survey results. We included steps in both the data collection and
data analysis stages to minimize such nonsampling errors. For example, in
the research design and data collection stages, we took the following
steps:
o We obtained from EPA its list of state contacts. We then attempted to
contact all listed state officials via e-mail and asked them to tell us
whether they or someone else in their state would be the most appropriate
contact. Upon receiving this e-mail, a few officials identified more
appropriate survey respondents. In states where we were not able to
contact the officials on EPA's list via e-mail, we sent the e-mail
[79]regarding the most appropriate contact to officials named on lists of
[80]state contacts from two other professional organizations that also
conduct surveys about underground storage tanks--the New England
[81]Interstate Water Pollution Control Commission and the Association of
State and Territorial Solid Waste Management Officials--and, in some
cases, to officials listed on states' underground storage tank-related Web
sites.^2
^1See appendix III for a copy of the survey.
o We pretested the survey with officials from four states between
October 28, 2005, and December 21, 2005, and used their feedback to
refine the survey. States were selected for the pretests to ensure
variation in size of workload and status of the state financial
assurance fund. For these pretests, we sent agency officials a draft
of the survey. We then interviewed the officials to ensure that the
(1) questions were clear and unambiguous; (2) terms used were precise,
including our definition of public funding; and (3) data needed to
respond to the questions was available to the state officials. As a
result of our pretests, we made changes to some of the survey
questions.
o We sent an announcement on November 18, 2005, of the upcoming survey
to state contacts (including the District of Columbia) and then
emailed the survey as an attachment on January 19, 2006. We asked
respondents to return the survey by e-mail, fax, or mail by February
3, 2006. We accepted responses to the survey through mid-October 2006.
o We sent e-mail reminders and conducted follow-up telephone calls
with nonrespondents.
o To minimize nonsampling error in the data analysis stage, we took
the following steps:
o For selected survey questions, where we were able to, we independently
corroborated survey data by comparing these data with EPA data. We
then followed up with states and EPA as needed about discrepancies.
o We included a series of data reliability questions in the survey to
assess the accuracy of the information provided to us by the
respondents.
^2The Association of State and Territorial Solid Waste Management
Officials' survey is sponsored by that organization and conducted by the
Vermont Department of Environmental Conservation.
Specifically, we collected information about (1) the databases states used
to provide survey data; (2) the internal controls on those databases
(e.g., whether it had been reviewed for quality, the procedures to ensure
accurate data entry, and known limitations); (3) whether the data provided
were actual or estimates; and (4) the assumptions, data, and calculations
used to provide the actual or estimated data for selected questions. We
also requested supporting documentation if states noted their database(s)
had been reviewed for quality.
o We used a data collection instrument (DCI) to systematically and
consistently record all available data reliability information (from
survey responses, published reports, or interviews) in order to make
assessments of the reliability of the survey data provided by each
state. The DCI was then reviewed by an independent person who assessed
the accuracy of DCI data entries and the reasonableness of the
judgments on the reliability of states' survey data. As expected,
there was wide variability in the level of oversight of the databases
states use to track underground storage tank information. There was
similar variability in the ways state officials described how they
arrived at responses to certain questions--whether it was based on
states' "actual" data, derived estimates, or some other source.
Specifically, some states provided explanations for their responses
that were precise and grounded in reasonable mathematical or trend
based assumptions, while others noted that their responses were
educated guesses. Given the limitations in the information reported
from some states, we determined that the survey data are not
comparable by state, nor should they be reported using such terms as
"actual" sums, budgets, or outlays. Consequently, the data are
presented in the body of the report as aggregate information on what
states estimate their underground storage tank and leaking underground
storage tank numbers and funding to be. We report all states'
responses to selected questions only in appendix II, because of the
known limitations in the reliability of state level comparisons. Such
data are included in appendix II because of congressional request and
in order to illustrate the range of responses states provided to
selected questions and the wide variance in the reliability of those
responses. With these provisos, the survey data are sufficiently
reliable as they are used in the body of the report (i.e., to be
presented in aggregate, as testimonial evidence). The survey data
presented in appendix II are not reliable for state level comparisons.
o We conducted interviews regarding data reliability with a
nonprobability sample of seven states (see next page for a further
discussion of this
sample of states).^3 These interviews included in-depth questions
focusing on topics such as the states' database reviews and database
limitations identified in their survey responses.
o We contacted state officials to clarify survey responses when
necessary and used a centralized tracking document to record all
changes. Changes made in the tracking document were verified against
the keypunched data to ensure all changes and updates were recorded.
When changes took place after a survey was keypunched, the updates
were made in the computer program used to generate survey results.
o We edit-checked all surveys before they were keypunched, verified all
keypunched survey data against hard copies of the surveys, and
verified the computer programs used to generate survey results.
From the population of 51 state contacts who were asked to participate in
our survey, we received 50 questionnaires for an overall response rate of
98 percent. We did not receive a questionnaire from South Dakota. We do
not know if responses for South Dakota would have differed materially from
those of the states that completed the survey.
From the responses we received, we gathered information about (1) state
databases used to track underground storage tank information; (2) states'
data for underground storage tank management, including data regarding
active and closed tanks, confirmed releases, and cleanups initiated and
completed; (3) states' sources of money for cleanup, including state
financial assurance funds; (4) states' use of federal money to clean up
leaking underground storage tanks; and (5) financial responsibility. We
provided states with the definition of public funding described previously
in this section, and we asked them to respond to all survey questions
about such funding according to this definition. The survey was focused
specifically on federally regulated underground storage tanks, as defined
by EPA. A few states reported they were not able to provide us with data
specific to federally regulated underground storage tanks for selected
questions, and instead, they generally provided us with either data
including a different universe of tanks or data prorated based on the
number of federally regulated underground storage tanks in the state for
these questions. Additionally, most survey questions that asked for data
for a specific year referred to the federal fiscal year. If states were
unable to provide data for the federal fiscal year, we asked them to
provide us with the starting date of their alternative reporting year. As
a result, we present such data in the report as 2005 data.
^3Results from nonprobability samples cannot be used to make inferences
about a population because in a nonprobability sample, some elements of
the population being studied have no chance or an unknown chance of being
selected as part of the sample.
In addition to conducting a survey to address our three objectives, we
also interviewed agency officials in a nonprobability sample of eight
states-- Florida, Iowa, New Jersey, Ohio, Pennsylvania, South Carolina,
Texas, and Utah--to gather additional information regarding selected
survey topics. Specifically, we talked with this group of states about
topics such as their use of LUST Trust Fund money, restrictions within
their state financial assurance fund on accepting claims, diversions from
their state financial assurance funds, the process of phasing out their
state financial assurance funds, and cases of inadequate financial
responsibility coverage in their state.^4 We selected this sample of
states in order to discuss as many of our topics of interest as possible
within a limited number of interviews. To select the states, we first
reviewed all states' responses to survey questions related to the relevant
topics to determine which states would be able to discuss each topic of
interest. We then calculated a score for each state based on the number of
relevant topics they could discuss, as indicated by their survey
responses. We interviewed all states that had scores at or above a
threshold score that we determined, based on how many states we would need
to discuss the relevant topics with to obtain sufficient information for
the purposes of this report.
We also conducted interviews with regional program officials from EPA's
Underground Storage Tank Program in six EPA regions to gather additional
information about (1) states' primary sources of money for addressing
releases from leaking underground storage tanks, (2) these sources' future
viability, and (3) the federal funding available to address these
releases.^5 We selected these regions primarily because survey responses
from one or more states in these regions raised questions about similar
data they had reported to EPA. We spoke with regional officials about
these apparent discrepancies, as well as about the regions' processes for
distributing
money from the LUST Trust Fund, states' use of LUST Trust Fund money, and
the solvency of states' financial assurance funds.
^4As indicated previously, we also discussed data reliability with seven
of these states. We did not discuss data reliability with officials in
Utah.
^5Regions 1, 3, 4, 5, 6, 8, based in Boston, Philadelphia, Atlanta,
Chicago, Dallas, and Denver, respectively.
To obtain further information about the federal funding to address these
releases, we interviewed Department of the Treasury officials responsible
for managing the LUST Trust Fund, interviewed EPA headquarters and
regional officials to determine the process by which EPA distributes LUST
Trust Fund money, and gathered documentation regarding appropriations of
money from the fund to EPA, states' expenditure of fund money, and the
balance of the fund and its annual revenues. The documentation we gathered
included (1) annual apportionment letters, which we used to track
appropriations of LUST Trust Fund money to EPA; (2) EPA Spending Reports,
which we used to track state expenditures of LUST Trust Fund money; and
(3) Treasury's LUST Trust Fund Financial Statements, which we used to
track the fund balance and revenues collected into the fund. We selected
these sources based on EPA officials' indications that they were the most
appropriate sources for the purposes of this report. For Treasury's LUST
Trust Fund Financial Statements, we obtained and reviewed relevant
documentation on their reliability, including copies of audits of
Treasury's financial statements and internal controls. These audits were
conducted in accordance with generally accepted government auditing
standards. We also discussed the reliability of Treasury's LUST Trust Fund
data with knowledgeable EPA and Treasury officials. We found the data
elements that we used in this report from Treasury's financial statements
sufficiently reliable for the purposes of this review.
We conducted our work from June 2005 to December 2006 in accordance with
generally accepted government auditing standards.
Appendix II
Selected Data Relating to Underground Storage Tanks Reported by States
As described in appendix I, our assessment of the reliability of the data
provided by states in their surveys found wide variability in the level of
oversight of the databases that states use to track underground storage
tank information, and similar variability in the ways state officials
described how they arrived at responses to certain questions. For the
purposes of this report, we have divided states into three relative
categories, according to our assessment of the reliability of their survey
responses: (1) 17 states generally reported having fairly recent data
quality reviews, several internal controls on the data, no significant
data quality problems, and provided fairly precise and mathematically
grounded explanations for their calculations; (2) 26 states and the
District of Columbia generally reported having some internal controls on
the data, and/or some data quality problems, and/or provided a mix of
"guesses" and fairly precise explanations of their calculations; and (3) 6
states generally reported having few, if any internal controls on the
data, and/or significant data quality problems, and/or didn't provide
explanations for their calculations or reported that they were guesses. In
tables 5, 6, 8, 9, and 10 in this appendix, we have identified the states
that fall into each category. Overall, given the limitations in the
information reported from some states, data reported by states and
presented in this appendix should not be used to compare state programs.
Appendix II Selected Data Relating to Underground Storage Tanks Reported
by States
Table 4: Selected State-Reported Underground Storage Tank Performance Measures,
as of September 30, 2005
Page 54 GAO-07-152 Leaking Underground Storage Tanks
Confirmed Cleanups Cleanups Cleanup
State Active Closed releases initiated completed backlog
tanks tanks
Alabama 18,021 28,631 10,884 10,755 9,317 1,567
Alaska 1,065 6,269 2,278 2,206 1,545 733
Arizona 8,194 20,064 8,191 5,682 5,942 2,249
Arkansas 9,749 19,909 1,294 988 948 346
California 38,753 121,352 44,190 44,190 29,572 14,618
Colorado 8,165 20,770 6,541 6,373 5,602 939
Connecticut 11,871 19,868 2,465 2,415 1,596 869
Delaware 1,598 6,423 2,284 2,228 2,010 274
District of Columbia 732 3,050 815 815 572 243
Florida 31,109 94,240 23,990 14,618 8,761 15,229
Georgia 30,320 44,369 11,023 10,654 8,373 2,650
Hawaii 1,783 5,013 1,840 1,741 1,504 336
Idaho 3,498 9,541 1,345 1,314 1,184 161
Illinois 23,062 62,074 22,410 21,211 14,540 7,870
Indiana 14,049 35,332 8,275 7,457 4,994 3,281
Iowa 7,716 22,092 5,791 5,529 3,948 1,843
Kansas 7,236 19,529 4,616 4,379 2,632 1,984
Kentucky 13,098 35,212 13,151 13,100 10,696 2,455
Louisiana 13,953 31,128 2,719 2,719 1,674 1,045
Maine 3,359 12,222 2,215 2,156 2,075 140
Maryland 9,439 27,647 10,201 9,944 9,282 919
Massachusetts 11,368 22,141 6,103 5,890 5,026 1,077
Michigan 20,730 65,137 20,822 20,314 11,740 9,082
Minnesota 14,328 28,051 9,555 9,064 8,490 1,065
Mississippi 8,713 21,758 6,540 6,355 6,224 316
Missouri 10,305 28,432 6,184 5,803 4,798 1,386
Montana 3,311 12,158 2,898 2,123 1,785 1,113
Nebraska 6,999 14,084 5,951 4,089 3,776 2,175
Nevada 3,688 6,715 2,416 2,408 2,166 250
New Hampshire 2,935 10,856 2,218 2,218 1,389 829
New Jersey 17,931 54,794 9,669 8,812 5,734 3,935
New Mexico 4,098 12,232 2,471 1,786 1,633 838
New York 29,925 81,216 20,442 20,022 18,442 2,000
North Carolina 30,271 63,104 23,520 22,438 16,942 6,578
(Continued From Previous Page)
Confirmed Cleanups Cleanups Cleanup
State Active Closed releases initiated completed backlog
tanks tanks
North Dakota 2,185 6,941 812 803 779 33
Ohio 24,025 42,427 23,559 23,028 20,300 3,259
Oklahoma 11,582 24,265 4,036 4,036 3,537 499
Oregon 6,375 25,123 6,861 6,613 5,472 1,389
Pennsylvania 25,545 59,824 13,861 13,440 9,798 4,063
Rhode Island 1,691 7,111 1,238 1,238 978 260
South Carolina 12,137 31,521 8,698 8,239 5,325 3,373
South Dakota 2,980 6,761 2,347 2,344 2,147 200
Tennessee 16,147 32,429 12,842 12,914 11,892 950
Texas 57,219 109,535 24,301 21,689 20,120 4,181
Utah 4,051 12,635 4,120 4,032 3,681 439
Vermont 3,011 5,196 1,930 1,918 1,136 794
Virginia 25,464 52,174 10,474 10,204 9,662 812
Washington 10,397 34,959 6,142 5,779 4,115 2,027
West Virginia 6,033 18,618 2,909 2,706 1,751 1,158
Wisconsin 13,721 64,759 18,353 17,650 15,033 3,320
Wyoming 2,055 7,771 1,989 1,490 924 1,065
Total 645,990 1,607,462 449,779 419,919 331,562 118,217
Source: EPA.
Note: For definitions of performance measures in this table see table 1 of
this report.
Table 5: State-Reported Estimates of the Number of Releases in the State's
Cleanup Backlog That Will Be Cleaned Up Using Funding from Responsible
Parties and from Public Sources, as of September 30, 2005
Estimated number of releases to be cleaned up with funding from each source
State Responsible party only At least some public funding
The following states generally (1) reported having fairly recent data
quality reviews (2) reported having several internal controls on the,
data, (3) reported having no significant data quality problems, and (4)
provided fairly precise and mathematically grounded explanations for their
calculations.
Alabama 166 1,448
Colorado 310 629
Florida 2,604 12,625
Georgia 877 1,778
Illinois 1,968 5,903
Indiana 1,642 1,642
Kansas 6 1,978
Missouri 364 1,022
Montana 78 1,035
a
Nevada 254^b
New Jersey 3,517 420
Pennsylvania 2,334 1,744
South Carolina 120 3,258
Texas 1,769 2,192
Utah 175 314
Virginia 609 203
Wyoming 0 1,065
The following states generally (1) reported having some internal controls
on the data, and/or (2) reported some data quality problems, and/or (3)
provided a mix of "guesses" and fairly precise explanations of their
calculations.
Arizona 268 1,500
Arkansas 17 329
Connecticut 10 859
Delaware 192 73
District of Columbia 245 0
Hawaii 336 0
Idaho 100 60
Iowa 514 1,324
Kentucky 246 2,209
Louisiana 0 1,254
Maine 17 80
Maryland 0 927
(Continued From Previous Page)
Estimated number of releases to be cleaned up with funding from each source
State Responsible party only At least some public funding
Massachusetts 476 601
Minnesota 0 1,090
Mississippi 68 250
aa
New Hampshire
New Mexico 48 790
New York 1,625 375
North Carolina 4,604 1,974
North Dakota 1 32
Ohio 2,362 1,282
Oregon 1,370 21
Rhode Island 67 200
Tennessee 354 655
Vermont 278 516
Washington 1,630
Wisconsin 1,097 2,300
These states generally (1) reported having few, if any internal controls
on the data, and/or (2) reported having significant data quality problems,
and/or (3) didn't provide explanations for their calculations or reported
that they were guesses.
Alaska 708 25
cc
California
Michigan 4,800 4,200
Nebraska 652 1,523
Oklahoma 5 494
West Virginia 1,042 116
This state did not respond to the survey
South Dakota
Source: Responses to GAO's survey of tank program and/or state fund
managers.
^aState officials did not respond.
^bFor this question, Nevada officials provided us with the combined number
of underground storage tanks, aboveground storage tanks, and heating oil
tanks that will be cleaned up using funding from the state's financial
assurance fund.
^cNumber of releases to be cleaned up with (1) funding from responsible
parties only and (2) at least some public funding is unknown.
Table 6: State-Reported Numbers of Releases in the State's Cleanup Backlog
from Tanks without a Viable Owner, as of September 30, 2005
State Number of releases
The following states generally (1) reported having fairly recent data
quality reviews,
(2) reported having several internal controls on the data, (3) reported
having no significant data quality problems, and (4) provided fairly
precise and mathematically grounded explanations for their calculations.
Alabama 363
Colorado 188^a
Florida ^b
Georgia 448
Illinois ^b
Indiana 500^a
Kansas 100^a
Missouri 212^a
Montana 31^a
Nevada ^b
New Jersey ^b
Pennsylvania 2,334^a
South Carolina
Texas 200^a
Utah 57
Virginia 86^a
Wyoming ^b
The following states generally (1) reported having some internal controls
on the data, and/or (2) reported some data quality problems, and/or (3)
provided a mix of "guesses" and fairly precise explanations of their
calculations.
Arizona 100^a
Arkansas 34^a
Connecticut 100^a
Delaware 32^a
District of Columbia
Hawaii
Idaho 31^a
Iowa ^b
Kentucky
Louisiana 24^a
Maine
Maryland 30^a
(Continued From Previous Page)
State Number of releases
Massachusetts 50^a
Minnesota 43^a
Mississippi
New Hampshire
New Mexico 100^a
New York 336^a
North Carolina 994
North Dakota
Ohio 600^a
Oregon 33^a
Rhode Island ^b
Tennessee
Vermont 90^a
Washington ^b
Wisconsin ^b
These states generally (1) reported having few, if any internal controls
on the data, and/or (2) reported having significant data quality problems,
and/or (3) didn't provide explanations for their calculations or reported
that they were guesses.
Alaska ^b
California 50^a
Michigan 4,200^a
Nebraska 699^a
Oklahoma
West Virginia ^b
This state did not respond to the survey
South Dakota
Source: Responses to GAO's survey of tank program and/or state fund
managers ^aEstimated numbers of releases. ^bNumber of releases unknown.
^cNew Hampshire officials did not respond to this survey question.
]
Table 7: State-Reported Frequency of Checking Financial Responsibility Coverage
Every 3 years or State At least annually Every 1 to 2 years longer Do not
check Other
Alabama X
Alaska X
Arizona X
Arkansas X
California X
Colorado X
Connecticut^a X
Delaware X
District of Columbia X
Florida X
Georgia X
Hawaii X
Idaho X
Illinois X
Indiana X
Iowa X
Kansas X
Kentucky X
Louisiana X
Maine^a X
Maryland X
Massachusetts X
Michigan X
Minnesota^a X
Mississippi X
Missouri X
Montana X
Nebraska^a X
Nevada X
New Hampshire X
New Jersey X
New Mexico X
New York X
North Carolina X
Appendix IISelected Data Relating to Underground Storage Tanks Reported by
States
(Continued From Previous Page)
Every 3 years or State At least annually Every 1 to 2 years longer Do not
check Other
North Dakota X
Ohio X
Oklahoma X
Oregon X
Pennsylvania X
Rhode Island X
South Carolina X
South Dakota^b
Tennessee X
Texas X
Utah X
Vermont X
Virginia X
Washington X
West Virginia X
Wisconsin X
Wyoming X
Source: Responses to GAO's survey of tank program and/or state fund
managers.
Note: The "other" category includes responses such as "as events warrant,"
and "annual permit applications contain financial responsibility
information that may be checked," among other responses.
^aConnecticut, Maine, Minnesota, and Nebraska, which reported they do not
check whether financial responsibility coverage is current, also reported
that their financial assurance funds provide such coverage for all tanks
in the state.
^bSouth Dakota officials did not respond to the survey.
Table8: State-Reported Expenditures of Public Funding to Clean Up Underground
Storage Tank Sites by Source, 2005
Dollars in thousands
Reported source of funding for expenditures
Federal LUST State financial State Trust Fund Other federal sources^a
assurance fund Other state sources^b
The following states generally (1) reported having fairly recent data
quality reviews, (2) reported having several internal controls on the
data, (3) reported having no significant data quality problems, and (4)
provided fairly precise and mathematically grounded explanations for their
calculations.
Alabama $0 $0 $27,566 $0
Colorado 226 81 23,979
Florida 0 0 148,110
Georgia 599 0 23,809
Illinois 0 0 52,193^c 0
Indiana 835 0 45,000^c 1,050^c
Kansas 284 0 13,287
e
Missouri 837 ^d 11,270
e,f
Montana^f 186^f 0^f 3,820^c,f
Nevada 10^c 0 6,760^c
New Jersey 212^c 0 1,227 3,433
Pennsylvania 0 0 71,725^c 0^c
South Carolina 594 28 18,505
Texas 1,100^c 0 54,039^c 5,530^c
Utah 9 0 5,403
Virginia 515 0 16,957^c
Wyoming 77 0 7,517 0
The following states generally (1) reported having some internal controls
on the data, and/or (2) reported some data quality problems, and/or (3)
provided a mix of "guesses" and fairly precise explanations of their
calculations.
Arizona 883 0 11,389 1,390^c
Arkansas^f 220^f 0^f 4,069^f 0^f
Connecticut 400^c 0 6,969
dg
Delaware 30^c 1,050^c,e
g
District of Columbia 0 0
g
Hawaii 00 0
[0]d
Idaho 2,000^c
Iowa 0 0 0 15,036
e
Kentucky 3 0 21,500
Louisiana 0 0 18,436
Maine^h 0 0 1,151
(Continued From Previous Page)
Dollars in thousands
Reported source of funding for expenditures
Federal LUST State financial State Trust Fund Other federal sources^a
assurance fund Other state sources^b
g
Maryland 445^c 0 327^c
cd
Massachusetts 30,989 250^c,e
e,f
Minnesota^f 914^f 0^f 15,000^c, f
Mississippi 441^c 0 8,382^c
New Hampshire 451 0 13,345
New Mexico 0 0 13,621
New York^i
North Carolina 1,196 0 46,966
North Dakota 91 0 498
[0]d
Ohio 8,818
g
Oregon 4 4
Rhode Island 548 0 2,251
Tennessee 690 0 31,045
Vermont 0 0 3,105
g [0]c
Washington 165 0
Wisconsin 0 0 28,000
These states generally (1) reported having few, if any internal controls
on the data, and/or (2) reported having significant data quality problems,
and/or (3) didn't provide explanations for their calculations or reported
that they were guesses.
g
Alaska 307^c 0
California^f 0^f 0^f 207,505^f 800^f
Michigan 0^c 0 0 13,296^c
Nebraska^f 811^c,f 0^f 10,610^c,f 0^f
Oklahoma 765 0 15,047
g
West Virginia 173^c 0 130^c
This state did not respond to the survey
South Dakota
Source: Responses to GAO's survey of tank program and/or state fund
managers.
Note: Our survey asked states to base their responses on federal fiscal
year 2005 (Oct. 1, 2004 to Sept. 30, 2005) if possible; some states,
however, reported responses as of other time frames, such as July 1, 2004
to June 30, 2005.
^aThe other federal sources category includes sources such as Brownfields
grants.
^bThe other state sources category includes sources such as funds
dedicated to tanks without a viable owner and other state funds.
^cEstimated amount.
^dAmount unknown.
^eOfficials indicated they did not
know one or more aspects of the "other state sources" category.
^fOfficials in Arkansas, California, Minnesota, Montana, and Nebraska
indicated that the amounts they
reported included expenditures on sites in addition to federally-regulated
underground storage tanks. ^gAlaska, Delaware, the District of Columbia,
Hawaii, Maryland, Oregon, Washington, and West Virginia never had state
financial assurance funds.
^hMaine officials based their response to this question on calendar year
2004. New York officials did not respond to these survey questions.
Table 9: State-Reported Balance of State Financial Assurance Funds, as of
September 30, 2005
Dollars in thousands
State Amount
The following states generally (1) reported having fairly recent data
quality reviews,
(2) reported having several internal controls on the data, (3) reported
having no significant data quality problems, and (4) provided fairly
precise and mathematically grounded explanations for their calculations.
Alabama $7,719
Colorado 2,931
Florida 186,380
Georgia 63,939
Illinois 5,200^a
Indiana 9,714
Kansas 2,226
Missouri 71,623
Montana 1,760
Nevada 11,300
New Jersey 95,142
Pennsylvania 206,800
South Carolina 21,712
Texas 168,000^a
Utah 8,818
Virginia 943
Wyoming 17,688
The following states generally (1) reported having some internal controls
on the data, and/or (2) reported some data quality problems, and/or (3)
provided a mix of "guesses" and fairly precise explanations of their
calculations.
Arizona 40,000^a
Arkansas 13,563
Connecticut 5,200^a
Delaware ^b
District of Columbia ^b
Hawaii ^b
Idaho 34,688
Iowa
Kentucky 54,700
Louisiana 19,186
Maine 5,573
(Continued From Previous Page)
Dollars in thousands
State Amount
Maryland ^b
Massachusetts 13,651
Minnesota 22,000^a
Mississippi 4,458
New Hampshire 4,035
New Mexico 19,044
New York ^d
North Carolina 2,834
North Dakota 8,378
Ohio 27,337
Oregon ^b
Rhode Island 2,100^a
Tennessee 10,085
Vermont 5,828
Washington ^b
Wisconsin 35,798
These states generally (1) reported having few, if any internal controls
on the data; and/or (2) reported having significant data quality problems;
and/or (3) didn't provide explanations for their calculations or reported
that they were guesses.
Alaska ^b
California 92,425
e
Michigan
Nebraska 16,169
Oklahoma 13,556
West Virginia ^b
This state did not respond to the survey
South Dakota
Source: Responses to GAO's survey of tank program and/or state fund
managers.
^aEstimated amount.
^bAlaska, Delaware, the District of Columbia, Hawaii, Maryland, Oregon,
Washington, and West Virginia never had state financial assurance funds.
^cIowa used to operate an insurance-type fund that provided financial
responsibility coverage, but the
fund has been privatized.
^dNew York officials did not respond to this
survey question.
^eMichigan's state financial assurance fund is no longer
active.
Table 10: State-Reported Revenues to State Financial Assurance Funds, 2005
Dollars in thousands
State Tank fees State gasoline taxes Interest Other^a
The following states generally (1) reported having fairly recent data
quality reviews, (2) reported having several internal controls on the
data, (3) reported having no significant data quality problems, and (4)
provided fairly precise and mathematically grounded explanations for their
calculations.
Alabama $0 $35,022 $167 $0
Colorado 527 26,451 121
Florida 1,200 211,900 4,900 3,284^b
Georgia 0 22,096 0 0
Illinois 0 72,284 0 0
Indiana 616^c 28,875^c 225
Kansas 0 10,920 125
Missouri 1,297 23,665 1,138 87
Montana 0 6,700^c 35^c 10^c
Nevada 450 0 130^c
New Jersey 0 0 2,284 24,787
Pennsylvania 7,100 53,800 192 13,136
South Carolina 1,203 17,500 799
Texas 0 72,000^c 0 0
Utah 437 5,682 184
Virginia 0 37,897 37
Wyoming 490 11,593 0 0
The following states generally (1) reported having some internal controls
on the data, and/or (2) reported some data quality problems, and/or (3)
provided a mix of "guesses" and fairly precise explanations of their
calculations.
Arizona 0 29,431^c 390^c 30^c
Arkansas 0 4,906 189
Connecticut 0 12,000 0 0
Delaware ^d d d d
District of Columbia ^d d d d
dddd
Idaho 99^c 0 1,541
eeee
Iowa
Kentucky 0 45,100 277
Louisiana 25^c 21,359 0 41
Maine^f 126^c 14,234^c 74^c 443^c
(Continued From Previous Page)
Dollars in thousands
State Tank fees State gasoline taxes Interest Other^a
Maryland ^d d d d
gb
Massachusetts 2,382^c 76,813
Minnesota 0 26,000^c 1,000^c 115^c
Mississippi 0 9,977^c 173^c
New Hampshire 0 11,366 90
New Mexico 0 18,191 0 0
New York^h
North Carolina 7,987 41,942 50 197
North Dakota 290 0 63^c
Ohio 13,568 0 380
dddd
g [0]c,i
Rhode Island 0 4,200^c
Tennessee 3,060 17,785 258 5,475
Vermont 365 5,243 125
Washington ^d d d d
Wisconsin 0 68,000 0 0
These states generally (1) reported having few, if any internal controls
on the data, and/or (2) reported having significant data quality problems,
and/or (3) didn't provide explanations for their calculations or reported
that they were guesses.
dddd
California 0 218,195 1,611 2,935
j
Michigan
Nebraska 534 10,413 696
Oklahoma 0 21,324 307
West Virginia ^d d d d
This state did not respond to the survey
South Dakota
Source: Responses to GAO's survey of tank program and/or state fund
managers.
Note: Our survey asked states to base their responses on federal fiscal
year 2005 (Oct. 1, 2004 to Sept. 30, 2005) if possible; some states,
however, reported responses as of other time frames, such as July 1, 2004
to June 30, 2005.
^aOther category includes: cost recovery, other state sources such as
fines, and other sources such as loan repayments. Revenues from federal
sources are not included.
^bOfficials indicated they did not know one or more aspects of the "other"
category.
^cEstimated amounts.
^dAlaska, Delaware, the District of Columbia, Hawaii, Maryland, Oregon,
Washington, and West Virginia never had state financial assurance funds.
^eIowa used to operate an insurance-type fund that provided financial
responsibility coverage, but the fund has been privatized.
^fMaine
officials based their response to this question on calendar year 2004.
^gAmount of interest revenues unknown.
^hNew York officials did not respond to this survey question. Rhode Island
officials estimated their
state fund collected $300 from other sources in 2005.
^iRhode Island officials estimated their state fund collected $300 from other sources in 2005.
jMichigan�s state financial assurance fund is no longer active.
^jMichigan's state
financial assurance fund is no longer active.
Table 11: State-Reported Diversions from State Financial Assurance Funds
for Purposes Other Than Those Related to the Underground Storage Tank
Program, 2001-2005
State Dollars in thousands 2001 2002 2003 2004 2005
Alabama $0 $0 $0 $0 $0
Alaskaa
Arizona 0 0 0 0 0
Arkansas 0 0 0 0 46
California 0 0 0 0 0
Colorado 0 4,000 0 0 0
Delawarea
District of Columbiaa
Florida 12,000b 20,000b 0 0 0
Georgia 0 0 0 0 0
Hawaiia
Idaho 0 0 0 0 0
Illinois 0 12,029b 12,100 500 0
Indiana 0 5,000 4,500 0 0
Page 70 GAO-07-152 Leaking Underground Storage Tanks
Kansas Iowac 0 10,000 0 0 0
Kentucky 8,000 58,400 74,100 27,100 291
Louisiana 0 0 0 0 0
Maine 0 0 0 0 142
Marylanda
Michigand
Mississippi 0 0 833 1,529 3,100
Missouri 0 0 0 0 0
Montana 0 0 0 0 0
Nebraska 0 10,250 300 3,000 1,800
Nevada 900b 900b 900b 900b 1,100
New Hampshire 0 0 0 0 0
New Jersey 0 0 0 45,812 0
New Mexico 1,900b 1,500b 900b 2,600b 5,400b
North Carolina 0 0 0 0 0
North Dakota 0 0 0 0 0
Ohio 0 0 0 0 0
(Continued From Previous Page)
Dollars in thousands
State 2001 2002 2003 2004 2005
Oklahoma 0 0 0 0 0
Oregon a
Pennsylvaniae 0 100,000e 0 0 0
Rhode Island 0 0 0 0 0
South Carolina 0 0 1,096 76 0
South Dakotaf
Tennessee 0 0 0 0 0
Texas 0 0 0 0 0
Utah 0 0 0 0 0
Vermontg 0 1,776g 0 0 0
Virginia 0 0 0 0 0
Washingtona
West Virginiaa
Wisconsin 0 0 0 0 0
Wyoming 0 0 0 0 0
Source: Responses to GAO's survey of tank program and/or state fund
managers.
^aAlaska, Delaware, the District of Columbia, Hawaii, Maryland, Oregon,
Washington, and West Virginia never had state financial assurance funds.
^bEstimated amount.
^cIowa used to operate an insurance-type fund that
provided financial responsibility coverage, but the fund has been
privatized.
^dMichigan's state financial assurance fund is no longer active.
^ePennsylvania officials reported that $17,500,000 of the diverted funds
had been reimbursed to the state fund as of September 30, 2005.
^fSouth Dakota officials did not respond to the survey.
^gVermont officials reported that $530,000 of the diverted funds had
been reimbursed to the state fund as of September 30, 2005.
Appendix III
GAO Survey of the 50 States and the District of Columbia
United States Government Accountability Office
GAO SURVEY OF THE 50 STATES:FINANCING CLEANUPS OF LEAKING UNDERGROUND
STORAGE TANKS
Introduction
The U.S. Government Accountability Office (GAO) is an agency of the
legislative branch that reviews federal programs on behalf of the U.S.
Congress. To aid in our continuing reviews of the Environmental Protection
Agency's (EPA) Underground Storage Tank program, we are currently
surveying the 50 states as part of a study of how states finance the
cleanup of leaking underground storage tank (LUST) sites. We will use the
information gathered in this survey to provide the Congress with
information about the magnitude of LUST cleanup costs across all 50 states
and the resources available to state programs to address these cleanups.
We are aware of similar survey efforts conducted in the past year by the
Vermont Department of Environmental Conservation and by EPA's Office of
Underground Storage Tanks. We have discussed our survey with these parties
and eliminated overlap where feasible.
Your prompt response to this survey is very important. Without your
state's response, we will not be able to accurately report to the Congress
on the magnitude of LUST cleanup costs across all 50 states, how states
are financing these cleanups, and the resources the states have to fund
these cleanups. Your prompt participation will help us avoid costly
follow-ups.
To answer some of our questions, you may need to coordinate your responses
with other state agencies responsible for certain aspects of the program.
Instructions
This questionnaire can be filled out using MS-Word and returned via e-mail
to [email protected]. If you prefer, you may print copies of the
questionnaire and complete them by hand. If you choose to print the
questionnaire, please mail or fax it to:
Nico Sloss, Senior Analyst
U.S. Government Accountability Office 10 Causeway Street, Suite 575
Boston, MA 02222
Fax: (617) 788-0505
Please use your mouse to navigate by clicking on the field or check box
you wish to answer.
x To select a check box or button, simply click on the center of the box.
x To change or deselect a check box response, simply click on the check
box and the `X' will disappear.
x To answer a question that requires that you write a comment, click on
the answer box ____ and begin typing. The box will expand to accommodate
your answer.
Definitions
To help ensure consistency in survey responses from the various states, we
provide definitions for terms in this survey at or near the point at which
the term appears. Please consider these definitions when responding to
survey questions.
If you have any questions about the contents of this questionnaire, please
contact
Nico Sloss Gerald Laudermilk
Phone: (617) 788-0516 OR Phone: (617) 788-0543
e-mail: [email protected]. e-mail: [email protected] .
Thank you in advance for your cooperation.
Sources of Funding for Cleanup
Definitions:
Public funding: Includes any funding controlled and/or provided by state
and federal agencies-- for example, funds from the federal LUST Trust
Fund, state financial assurance funds, other state funds that have not
been approved by EPA to serve as financial responsibility mechanisms, or
funds appropriated by the state to pay for cleanup that would not
otherwise occur. Do not include funds spent by federal, state, and local
governmental agencies to clean up releases from tanks they either own or
operate--these funds would be considered to be provided by the responsible
party.
State financial assurance fund: Any state fund used to pay for cleanups of
releases from federally regulated USTs. We do not make a distinction
between funds that EPA has approved as a financial responsibility
mechanism and those that EPA has not approved. We recognize that in some
cases a state's fund may cover tanks without a viable responsible party as
well as other types of tanks. In those cases where a state fund is
dedicated solely to coverage of tanks without a viable responsible party,
the survey provides a separate space to answer questions about such a
fund.
Responsible party funding: Includes both direct expenditures by
responsible parties (for example, a tank owner paying out-of-pocket for
all or a portion of the costs of cleanup) and indirect expenditures (for
example, a tank owner's insurance company paying for all or a portion of
the costs of cleanup). Note: In this survey, we request the known or
estimated number of cleanups funded by responsible parties, not specific
cost data.
EPA-defined site cleanup costs: "All costs associated with site response
concerning prevention or mitigation of threats to public health, welfare,
or the environment that may occur by a release (or suspected release) of
petroleum from an underground storage tank. These costs include emergency
responses, site investigations, exposure assessments, the planning and
design of corrective action, and the conduct, management and oversight of
long-term remedial corrective actions."
31. What was the overall balance of your state's financial assurance fund
as of September 30, 2005? [Enter amount in whole dollars.]
Is this an exact number
or an estimate? Don't
None Amount Exact Estimate know
T T T T T
Balance ...........................................
$
a. Of this balance, how much had been obligated as of September 30, 2005?
[Enter amount in whole dollars.]
Is this an exact number
or an estimate? Don't
None Amount Exact Estimate know
T T T T T
Obligated........................................
$
32. What was the amount of the outstanding claims (claims received by the
state program for which funds have not yet been obligated) on your state's
financial assurance fund as of September 30, 2005? [Enter amount in whole
dollars.]
Is this an exact number
or an estimate? Don't
None Amount Exact Estimate know
T T T T T
Outstanding claims .........................
$
53. Which of the following describe your state's procedures for
determining whether a tank owner's financial responsibility is current?
[Check all that apply.]
a.
Attempt to check financial responsibility on a regular basis (e.g.
during regular inspections)
...................................................................................
b.
Target inspections (e.g. to USTs deemed likely to not be current
on financial responsibility)
.............................................................................
c.
As events warrant (e.g. upon tank installation or upgrade, upon a
release)..
d.
State does not check financial responsibility
................................................
e.
Other [Please specify.]
.......................................................................
54. How frequently, if at all, does your state check whether a tank
owner's financial responsibility is current? [Check one.]
At least annually
................................................................................................
Every 1 to 2 years
..............................................................................................
Every 3 years or
longer......................................................................................
State does not check financial
responsibility..................................................... Other
[Please specify.]
...........................................................................
55. Over the past 5 years, how many cases has your state encountered in
which tank owners did not have adequate financial responsibility?
Is this an exact number
or an estimate? Don't
None Number Exact Estimate know
T T T T T
Number of cases
............................
a. How did you calculate the number of cases that your state has encountered
over the past 5 years in which tank owners did not have adequate financial
responsibility?
Appendix IV
Comments from the Environmental Protection Agency
Appendix V
GAO Contact and Staff Acknowledgments
GAO Contact
John B. Stephenson, (202) 512-3841 or [email protected]
Staff Acknowledgments
In addition to the individual named above, Vincent P. Price, Assistant
Director; Krista Breen Anderson; Jenny Chanley; Richard P. Johnson; Jerry
Laudermilk; Jennifer Lutzy McDonald; Anne McDonough-Hughes; Rebecca Shea;
Carol Herrnstadt Shulman; Dominique Sasson; and Nico Sloss made key
contributions to this report.
GAO's Mission
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References
Visible links
28. http://www.gao.gov/cgi-bin/getrpt?GAO-07-152
73. http://www.gao.gov/cgi-bin/getrpt?GAO-06-45
74. http://www.gao.gov/cgi-bin/getrpt?GAO-06-45
75. http://www.gao.gov/cgi-bin/getrpt?GAO-06-45
79. http://www.neiwpcc.org/
80. http://www.neiwpcc.org/
81. http://www.neiwpcc.org/
*** End of document. ***