Gasoline & Automotive Service Dealers of America

Diversion of state gas tax funds puts gas station owners in jeopardy!

Published: Saturday, February 18, 2012
By Luther Turmelle, North Bureau Chief / Twitter: @lutherturmelle

Connecticut lawmakers have until the end of the current legislative session to fix a problem with the state’s underground fuel tank cleanup program, or risk having federal environmental regulators cease recognizing it as a viable alternative to self-insurance for service station owners.

If the federal Environmental Protection Agency withdraws its approval of the state’s Underground Storage Tank Petroleum Clean-Up program, Connecticut gas stations owners would be forced to get their own insurance. And industry officials say if that happens, hundreds of gas stations could go out of business in a relatively short time, a move that could ultimately drive up already high gasoline prices in the state.

“Over 650 stations would go out of business if the state program goes away and the owners are forced to self-insure,” said Michael J. Fox of the Stamford-based trade group Gasoline & Automotive Service Dealers of America. “The remaining stations are going to have to jack up their prices to cover the cost of self-insurance.”

The problem with the program is two-fold: State lawmakers’ continual raiding of the funding source to pay station owners reimbursement for the cleanup of leaking tanks and the resulting backlog in paying those claims.

The Underground Storage Tank Petroleum Clean-Up program board, which is in charge of administering reimbursement payments, has already approved $17 million in reimbursements, said Dennis Schain, a spokesman for the Connecticut Department of Energy and Environmental Protection. The state agency provides support for the cleanup reimbursement program.

But those reimbursements haven’t been paid, because out of $344 million collected last year in gross receipts taxes that motorists paid on gasoline last year, only $250,000 went into the fund, Schain said.

It’s unclear in talking to state lawmakers where the money that was supposed to have gone into the fund last year and in previous years has gone. But Schain said the fund has no reserves to meet the reimbursements already approved or another $81 million in claims that gas station owners have been submitted, but that the board has not yet approved for reimbursement.

The state’s cleanup reimbursement fund is supposed to get its revenue from the gross receipts tax that motorists pay every time they fill up their cars with gasoline. The gross receipts tax places a 7.53 percent levy on wholesale gas prices.

But Fox said money from the tax has been diverted for years.

“There’s money there,” Fox said. “They just need to stop stealing it.”
The funding mechanism for the cleanup reimbursement was created at a time when many of the nation’s largest petroleum companies still owned some of the gas stations around Connecticut, Fox said.

“But the majors have gotten out of retail ownership,” he said. “There’s no deep pockets left here anymore.”

Getting private insurers to issue policies to cover potential fuel leaks at service stations isn’t realistic, he said.

Any station that has experienced a tank leak in the past might not qualify for a policy because the insurer would likely view it as a “pre-existing condition,” Fox said. And if they do qualify for a policy, it will likely be a costly one, he said.

“Our people will lose their businesses,” Fox said.

Schain said DEEP officials are sympathetic to the predicament facing gas station owners.

“There’s an awareness of the complexity of all of this,” he said.

In fact, DEEP officials have known since the summer that EPA is prepared to stop recognizing the reimbursement fund.

James Owens III, director of the Office of Site Remediation and Restoration in the EPA’s Boston office, described the condition of the state’s reimbursement fund as “dire” in a letter he sent to DEEP officials in July 2011.

For now, the strategy state officials have in addressing the EPA’s concerns appears to be a one-year stop gap measure to buy state lawmakers more time to develop a permanent solution in terms of a funding source.
The stop-gap measure has Gov. Dannel P. Malloy calling for the allocation of $5 million in his proposed budget to begin to pay for some of the backlog in cleanup reimbursements. That allocation must be approved by the General Assembly and the state’s Bond Commission.

Schain said that while federal EPA officials haven’t signed off on the state’s strategy, “conversations we have had lead us to believe they will be okay with that.”

Fox acknowledged it is unlikely that state lawmakers will agree not to keep diverting at least some of the gasoline gross receipts money for purposes other than what it was originally intended.

“I’m willing to sit down and work with anybody to reach a mutually agreeable resolution to this, although this is not something that is going to be resolved overnight,” Fox said. “What we will not do is stand for this program going away because a lot of our people will lose their businesses if it does.”

Fox said if the state eliminates the reimbursement fund, his organization will go to court immediately and sue the state.

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