Environmental Protection: Selected Issues Related to EPA's Fiscal Year
1997 Appropriation (Testimony, 05/01/96, GAO/T-RCED-96-164).

Pursuant to a congressional request, GAO discussed the the Environmental
Protection Agency's (EPA) leaking underground storage tank program. GAO
noted that: (1) about 20 percent of over 2 million tanks nationwide have
leaks or are leaking; (2) releases have been confirmed in 303,000
leaking tanks, and EPA expects this number to rise as owners and
operators upgrade their tanks to current standards; (3) cleanups are
complete for approximately 43 percent of the tanks with confirmed
releases; (4) since 1987, EPA has distributed about $500 million in
program funds to states to assist tank owners with cleanup costs; (5) 44
states have established financial assurance funds for owners and
operators of underground storage tanks; (6) over the next several years,
EPA plans to reduce its role in the tank storage program because it
believes that releases will largely be cleaned up, states will be more
capable of assisting tank owners and operators, and older tanks will be
upgraded to current standards; (7) from 1994-1995, EPA recovered $330
million in excess funds obligated for inactive Superfund contracts and
made them available for other Superfund projects; and (8) EPA could
recover an additional $164 million in Superfund contract funds because
the funds for these projects either were unused or have expired.

--------------------------- Indexing Terms -----------------------------

 REPORTNUM:  T-RCED-96-164
     TITLE:  Environmental Protection: Selected Issues Related to EPA's 
             Fiscal Year 1997 Appropriation
      DATE:  05/01/96
   SUBJECT:  Expired appropriations
             Tanks (containers)
             State-administered programs
             Nuclear waste storage
             Environmental monitoring
             Trust funds
             Reprogramming of appropriated funds
             Hazardous substances
             Federal/state relations
             Nuclear waste management
IDENTIFIER:  Leaking Underground Storage Tank Fund
             EPA Leaking Underground Storage Tank Program
             Superfund Program
             
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Cover
================================================================ COVER


Before the Subcommittee on VA, HUD, and Independent
Agencies, Committee on Appropriations
House of Representatives

Hearing Held on
April 17, 1996
Statement Submitted
May 1, 1996

ENVIRONMENTAL PROTECTION -
SELECTED ISSUES RELATED TO EPA'S
FISCAL YEAR 1997 APPROPRIATION

Statement for the Record by
Stanley J.  Czerwinski, Associate Director,
Environmental Protection Issues,
Resources, Community, and Economic Development
Division

GAO/T-RCED-96-164

GAO/RCED-96-164T


(160308)


Abbreviations
=============================================================== ABBREV

  EPA -
  GAO -

============================================================ Chapter 0

Mr.  Chairman and Members of the Subcommittee: 

We appreciate the opportunity to participate in the Subcommittee's
hearing on the Environmental Protection Agency's (EPA) fiscal year
1997 appropriation.  As you requested, GAO has reviewed certain
aspects of EPA's Leaking Underground Storage Tank program. 
Specifically, we are providing information on (1) the extent of the
leaking underground storage tank problem, (2) federal and state
funding for the program, and (3) EPA's plans for future involvement
in the program.  In addition, at your request, this statement
provides our views on the potential for EPA to recover excess funds
currently obligated for inactive Superfund cleanup contracts. 

In summary, we found the following: 

  -- Releases from underground storage tanks are occurring
     nationwide.  EPA estimates that about 400,000, or 20 percent, of
     the over 2 million tanks regulated by the agency have leaked or
     are leaking. 

  -- Since the leaking underground storage tank program began in
     1987, EPA has distributed about $500 million to the states.  In
     addition, the legislatures of 44 states have created state
     programs to help owners pay for cleaning up leaking tanks. 

  -- EPA plans to reduce its future involvement in regulating tanks
     and cleaning up releases because it believes that (1) releases
     will largely be cleaned up, (2) fewer tanks will leak as older
     tanks are brought up to current design standards and new tanks
     that meet the current standards are installed, and (3) the
     states have developed regulatory programs and established
     cleanup funds. 

  -- Under the Superfund program, during fiscal years 1994 and 1995,
     EPA recovered $330 million in excess funds obligated for
     inactive Superfund projects and made these funds available for
     other Superfund projects.  We have identified an additional $164
     million that may be recoverable. 


   BACKGROUND
---------------------------------------------------------- Chapter 0:1

Releases from leaking underground storage tanks can contaminate
groundwater, streams, and soil.  EPA estimates that about half of the
confirmed releases have reached groundwater, the source of drinking
water for about half of the U.S.  population.  Petroleum fuels--the
most prevalent contaminant--usually contain harmful chemicals, such
as benzene, a carcinogen.  Releases can also cause fires or
explosions that threaten human safety. 

The Hazardous and Solid Waste Amendments of 1984 amended the Resource
Conservation and Recovery Act to regulate underground tanks for
storing petroleum and hazardous chemicals.  The Superfund Amendments
and Reauthorization Act of 1986 created the Leaking Underground
Storage Tank trust fund, to be financed by a tax of 0.1 cent on
certain motor fuels, as well as cleanup costs recovered from
responsible parties.  (The authorization for this tax expired in
December 1995.) EPA may use the fund to pay for the costs of tank
cleanup in the event of an emergency, where no responsible party has
been identified, or where a responsible party is failing to comply
with a cleanup order.  EPA may also use the fund for enforcement
activities, and may pursue cost recovery actions against responsible
parties.  States may exercise similar cleanup and enforcement
authority if they have entered into cooperative agreements with EPA. 
EPA may provide money from the fund for reasonable state costs under
such a cooperative agreement. 

Under the Hazardous and Solid Waste Amendment provisions governing
underground storage tanks, EPA has issued regulations to establish
technical standards and operating requirements for tank owners and
operators in three areas:  (1) tank design and installation, (2)
release detection, and (3) spill and overfill control.  New tank
systems, those installed after December 22, 1988, must meet the tank
design and installation requirements.  Owners of existing tanks are
required to upgrade their systems by December 22, 1998.  Release
detection requirements for existing tanks were phased in between 1989
and 1993.  All tanks are subject to spill and overfill controls. 


   EXTENT OF THE LEAKING TANK
   PROBLEM
---------------------------------------------------------- Chapter 0:2

Over 2 million tanks are regulated by EPA under the Resource
Conservation and Recovery Act, and the agency estimates that about 20
percent have leaked or are leaking.\1 Of these 400,000 tanks,
releases have already been confirmed for over 303,000, and EPA
anticipates that 100,000 additional releases will be identified as
owners and operators replace or upgrade their tanks to meet the
current standards.  States are reporting about 600 additional
releases each week. 

Cleanups have been completed for approximately 131,000, or about 43
percent, of the 303,000 confirmed releases.  Cleanups are in process
for another approximately 107,000, or 35 percent.  Although this
effort indicates that EPA, the states, and tank owners and operators
have made considerable progress in cleaning up releases, the
remaining 65,000 confirmed releases and the 100,000 additional
releases anticipated by EPA are more extensive than the cleanups that
been completed since the beginning of the program. 

Revenues of about $1.6 billion were collected for the Leaking
Underground Storage Tank trust fund before the authority for the tax
expired in December 1995.  Annual appropriations to EPA for the
program have been substantially less than the tax revenues collected,
leaving a balance of about $1 billion in the trust fund.  The
appropriations totaled about $591 million through fiscal year 1996. 
The current trust fund balance would finance appropriations for the
program at their historical level for about 15 years. 

Through fiscal year 1995, EPA has allocated to the states about $466
million, or over 85 percent of the funds appropriated for the
program, retaining the balance (about $80 million) for its own
administration of the program.  The states have used their
allocations principally to pay for about 1,500 state and local staff
to oversee cleanups of contaminated sites by tank owners and
operators (37 percent) and to take enforcement actions to get owners
and operators to clean up releases or pay for cleanups (35 percent). 
The remaining 28 percent of the federal funds was used to pay for the
cleanup of sites needing emergency attention or for which no viable
responsible party could be found. 

In addition to receiving federal funds, 44 states have established
financial assurance funds for the owners and operators of underground
storage tanks.  These state funds are generally used to reimburse the
owners or operators of tanks for the costs of cleanups.  In total,
the states collect over $1 billion a year in fees for these funds. 
Although the funds collected are substantial, EPA has reported that,
in total, the outstanding claims by the owners and operators exceed
the approximate current balance of these funds by about $400 million. 


--------------------
\1 Exempted from EPA's regulations are an estimated 3.9 million
tanks, such as farm and residential tanks with a capacity of 1,100
gallons or less that hold motor fuel used for noncommercial purposes
and tanks that store heating oil used on the premises where it is
stored. 


   EPA'S PLANS FOR FUTURE
   INVOLVEMENT IN THE PROGRAM
---------------------------------------------------------- Chapter 0:3

EPA officials told us that the agency plans to substantially reduce
its role in the Leaking Underground Storage Tank program over the
next several years.  The agency's rationale is that (1) the states
have developed regulatory programs for underground storage tanks and
generally have established funds to assist tank owners and operators
with cleanup costs, (2) most contaminated sites will be cleaned up,
and (3) substantially fewer new releases are anticipated as the old
tanks are either closed or upgraded to meet the current standards. 
Nonetheless, EPA recognizes that before it reduces its role, the
states must first develop effective programs that give priority to
controlling the leaks from the tanks that pose the greatest threats
to human health and the environment. 

Even though states have developed regulatory programs and tank
cleanup and enforcement capabilities, EPA has approved only 22 state
underground storage tank regulatory programs to operate in lieu of
the federal program.  Furthermore, several state officials told us
that they anticipate that many tank owners, especially small
businesses, will have difficulty upgrading their tanks by 1998, as
EPA's regulations require.  These officials said that many tank
owners subject to the 1993 deadline for leak detection have not met
it.  For example, an Alabama program official surveyed the eight
states in EPA's Region IV in April 1996 and found that, according to
these states' estimates, about 12 percent to 75 percent of the tanks
did not meet leak detection requirements.  Each of the eight states
anticipated that tank owners and operators would have difficulty
complying with the requirements for upgrades. 

EPA believes that a fundamental challenge in state programs for
leaking underground storage tanks is the need to focus limited
resources on high risk sites, while ensuring that all sites move
toward cleanup.  Accordingly, in March 1996, EPA announced an
initiative to create a partnership with the states and industry to
focus resources on cleaning up releases that pose the greatest risks. 
According to EPA, many state agencies have followed cleanup standards
adopted from other programs, such as the Superfund program, and
applied them uniformly to remediating releases from underground
storage tanks.  EPA stated that many of these cleanup requirements
are based on generic numerical standards, and it has become apparent
that applying these standards without considering the actual and
potential risk that a release may pose is neither (1) an effective
way to protect human health and the environment nor (2) an efficient
way to manage and oversee underground storage tank cleanups. 

Under its initiative, EPA, state governments, the American Society
for Testing and Materials, and six major oil companies signed a
memorandum of understanding to reduce risk by targeting resources for
cleanup on those releases that pose the greatest risk.  Under the
agreement, EPA and each of the industry partners contributed $100,000
toward developing and delivering a series of training sessions to be
provided to interested states to teach the new risk-based approaches
to cleanup.  The industry partners also agreed to provide technical
expertise and resources, such as demonstration sites and peer review
assistance. 

As of April 1996, 43 states had indicated an interest in receiving
training in the new risk-based cleanup approach.  Thirty- seven
states had completed at least one of the three training modules. 
Twenty-one states had completed the training and were modifying their
programs to incorporate risk-based approaches. 


   STATUS OF EPA'S EFFORTS TO
   IDENTIFY SUPERFUND CONTRACTS
   WITH EXCESS FUNDS
---------------------------------------------------------- Chapter 0:4

During fiscal years 1990 through 1995, EPA obligated about $3.9
billion for Superfund contracts, according to the agency's Office of
Acquisition Management.  As the work is performed, the contractors
are paid and the obligations are liquidated.  The amount of funds
obligated for a particular contract often exceeds the amount
eventually paid to the contractor for various reasons.  For example,
the cost of the work completed may be less than the amount obligated. 
The unspent funds should be deobligated and used for other Superfund
activities, once the original contracts are closed. 

In July 1994, EPA's Office of Inspector General reported that as of
March 1993, contracts awarded under the Superfund cleanup program had
balances of over $100 million in unspent obligated funds that were no
longer needed for their original purposes.  The Superfund program
accounts for about $3.9 billion, or approximately 54 percent of the
$7.2 billion that EPA obligated for contracts during fiscal years
1990 through 1995.  The Superfund program has received appropriations
that remain available for use until expended.  Thus, the Inspector
General reported that the unspent obligated funds could be
deobligated and used for ongoing or new Superfund projects. 

In early 1994, EPA initiated an agencywide effort to place a high
priority on the timely recovery of Superfund contract funds that
remain obligated but are no longer needed for the purposes of the
original obligation.  As part of this effort, EPA created the
Superfund Deobligation Task Force to develop guidance on and pursue
the recovery of excess funds.  The task force, composed of members
from several headquarters offices and all of EPA's regions, attempted
to identify unspent funds remaining on completed projects.  In fiscal
year 1994, the task force identified about $160 million in excess
funds that was subsequently recovered and used to fund other
Superfund cleanup work.  In fiscal year 1995, the task force
recovered an additional $170 million, for a total of $330 million
that the agency has made available to support additional cleanup
work. 

The task force reported that about $230 million of the $330 million
recovered was associated with projects on which all work had been
completed.  The remaining $100 million was recovered through EPA's
success in requiring parties responsible for contamination at
Superfund sites to take financial responsibility for the cleanups. 

Our review of the funds obligated for EPA's Superfund contracts
indicates that substantial amounts remain obligated for completed
projects.  We used EPA's data systems to identify unspent obligations
for current contracts whose (1) work has been completed or (2)
specified performance period has expired.  On this basis, we
identified $164 million in potential recoveries.\2

In addition, other recoveries are possible during the year to the
extent that EPA is successful in requiring cleanups to be performed
by responsible parties. 

EPA officials told us that the agency will continue to take timely
deobligation actions to recover funds.  EPA's ability to do this will
depend largely on the agency's success in first identifying and
closing completed contracts.  Indeed, the Inspector General's July
1994 report pointed out that by not taking aggressive action in
identifying and closing such contracts, the agency contributed
greatly to its failure to recover unneeded funds.  The Inspector
General said that, in some cases, contracts had not been closed for
many years after work had been completed. 

--------------------
\2 We did not verify the accuracy or reliability of these data
systems. 


*** End of document. ***