THE ATTORNEY GENERAL 

OF TEXAS 

October 5, 1988 

Honorable Stan Schlueter Opinion No. JM- 963 

Chairman 

Nays and Means Committee Re: Whether a proposed delivery 

Texas House of fee on petroleum products, used 

Representatives to create a state clean-up fund 

P. 0. Box 2910 to comply with federal stanAustin, Texas 78769 dards, would be subject to the 

provisions of article VIII, 

section 7-a, of the Texas 

Constitution (RQ-1449) 

Dear Representative Schlueter: 

Subchapter IX of title 42 of the United States Code 

governs the regulation of underground storage tanks 

containing "regulated substances" as defined in the code, 

principally petroleum and other substances defined as 

'*hazardous.1' See 42 U.S.C. §§ 6991-6991i. The subchapter 

authorizes the administrator of the Environmental Protection 

Agency to promulgate rules regarding, inter alia, "release 

detection and release prevention" of such substances arising 

from the operation of such tanks, as well as corrective 

action to be taken by owners or operators. It further 

confers on the administrator authority to approve state 

programs that are intended to comply with the federal 

statutes and rules. 

is to be enforced 

when the state program is approved, it 

in lieu of the federal program, with 

primary enforcement responsibility falling upon the state. 

See 42 U.S.C. 5 6991c.l 

1. In order to comply with the federal provisions, 

Texas has enacted laws governing underground storage tanks, 

set forth in subchapter I of chapter 26 of the Water Code. 

Section 26.346 of the Water Code provides that, except as 

specifically provided, all underground storage tanks must be 

registered with the Texas Water Commission. Pursuant to 

rule-making authority conferred by that section, the 

(Footnote Continued) 

P. 4895 
Honorable Stan Schlueter - Page 2 (JM-963) 

Pursuant to subsections 9003(c) and (d) of the Resource 

Conservation and Recovery Act, as amended by the Hazardous 

and Solid Waste Amendments of 1984 and the Superfund 

Amendments and Reauthorization Act of 1986 (codified at 42 

U.S.C. §§ 6991b (c), (a)),2 the Environmental Protection 

Agency has published proposed rules that impose financial 

responsibility standards upon the owners and operators of 

underground storage tanks containing petroleum. See 52 Fed. 

Reg. 12,786 and 48,638 (to be codified at 40 C.F.R. 5 280). 

The rules establish requirements to be met by owners or 

operators of underground storage tanks for demonstrating 

(Footnote Continued) 

commission has imposed a registration fee of $25 for every 

underground storage tank. Section 26.352 of the code 

confers authority on the commission to adopt requirements 

regarding financial responsibility arising from the 

operation of such tanks: 

The commission shall adopt requirements 

for maintaining evidence of financial 

responsibility for taking corrective action 

and compensating third parties for bodily 

injury and property damage caused by sudden 

and nonsudden accidental releases arising 

from operating an underground storage tank. 

Section 26.352 was included in Senate Bill No. 779 when 

subchapter I was added by amendment in 1987. Acts 1987, 

70th., ch. 277, § 1 [hereinafter Senate Bill No. 7791. The 

commission has not yet adopted any rules regarding financial 

responsibility. 

2. Subsection (d)(l) of section 6991b provides: 

Financial responsibility required by this. 

subsection may be established in accordance 

with regulations promulgated by the 

Administrator by any one, or any combination, 

of the following: insurance, guarantee, 

surety bond, letter of credit, qualification 

as a self-insurer or any other method 

satisfactory to the Administrator. In 

promulgating requirements under this 

subsection, the Administrator is authorized 

(Footnote Continued) 

P. 4896 
P 

Honorable Stan Schlueter - Page 3 (JM-963) 

their financial responsibility, and giving proof of their 

ability to take corrective action and to compensate third 

parties for bodily injury and property damage caused by both 

sudden and gradual accidental releases arising from the 

operation of such tanks. The proposed rule requires coverage in the amount of one million dollars per occurrence. 

You claim that owners and operators of these underground 

storage tanks, for the most part, are unable to secure 

insurance coverages in this amount for pollution clean-up. 

You indicate in your request letter that petroleum marketers 

in Texas are promoting legislation that would create, in 

effect, a clean-up fund that is intended to satisfy the 

financial responsibility standards set forth in the federal 

rules. 3 

The statute that you propose would provide that funds 

for the pro ram 

Commission. % 

would be administered by the Texas Water 

The funds would derive from a proposed 

"delivery fee" of six tenths of a cent ($0.006) per gallon 

on "regulated substances,l' as defined in the federal 

provisions, when they are drawn from the refinery 

g 

recess 

and pass into the marketing or distribution system. The 

(Footnote Continued) 

to specify policy or other contractual terms, 

conditions, or defenses which are necessary 

or are unacceptable in establishing such 

evidence or financial responsibility in order 

to effectuate the purposes of this chapter. 

3. We note that section 6991c of title 42 permits~the 

administrator of the Environmental Protection Agency to 

approve a state program only if the requirements of that 

program are no less stringent than the corresponding 

requirements under the federal program. See Water Code, g 

26.357. 

4. You have not asked us to construe any specific 

proposed statute: rather, you ask in general about a statute 

that would create a dedicated clean-up fund. Accordingly, 

we do not place our imprimatur upon any specific proposed 

statute or any specific proposed language. 

5. We note that the fact that the charge is measured 

by the amount of "regulated substances," including 

petroleum, does not mean that the charge is a tax on 

(Footnote Continued) 

P. 4897 
Honorable Stan Schlueter - Page 4 (JM-963) 

proposed fee would be treated by the marketers and 

distributors as a "Cost of product," similar to 

transportation charge, that would not be recovered as a taZ 

on consumer use. The revenues thus generated would be 

dedicated to establishing a back-up fund for pollution 

clean-up costs over and above the $10,000 of liability 

coverage to be assumed by the owner/operator for each site. 

You do not ask whether then proposed legislation would 

satisfy the proposed federal rule: rather, YOU ask two 

questions regarding Texas law and the proposed statute: 

1. Would the fee, as described above, 

fall within the purview of Texas Constitution 

Article 8, Sec. 7-a, and require use of the 

funds in highway construction after the 

one-fourth allocation to the Available School 

Fund? 

2. If the answer to No. 1 is *'No," then 

is the Legislature authorized to make a 

statutory dedication of the fees to the Texas 

Water Commission for regulation of the 

clean-up fund? 

We answer your first question in the negative: such 

funds would not fall within the ambit of article VIII, 

section 7-a, of the Texas Constitution. We answer your 

second question in the affirmative; the legislature is 

empowered to dedicate by statute the funds derived from such 

a fee as you propose for the purpose of securing pollution 

clean-up. 

You first ask whether the proposed fee falls within the 

ambit of article VIII, section 7-a, of the Texas Constitution, which provides: 

Subject to legislative appropriation, 

allocation and direction, all net revenues 

remaining after payment of all refunds 

allowed by law and expenses of collection 

derived from motor vehicle registration fees, 

and all taxes, eXCeDt cross production and ad 

(Footnote Continued) 

petroleum. Because we conclude that the charge is not a tax 

in the first instance, we need not determine the incident 

upon which the charge is imposed. 

P. 4898 
Honorable Stan Schlueter - Page 5 (JM-963) 

valorem taxes, on motor fuels and lubricants 

used to nr Del motor vehicles DUbliC 

roadwavs. shOal1 be used for the szy: nurnose 

of accuirinu riahts-of-wav, constructina, * . 

g aintai ' such U ic 

roadwavs. and for the administration of such 

laws as mav be nrescribed bv the Lecislature 

pertainina to the sunervision of traffic and 

safetv on such roads; and for the payment of 

the principal and interest on county and road 

district bonds or warrants voted or issued 

prior to January 2, 1939, and declared 

eligible prior to January 2, 1945, for 

payment out of the County and Road District 

Highway Fund under existing law: provided, 

however, that one-fourth (l/4) of such net 

revenue from the motor fuel tax shall be 

allocated to the Available School Fund: and, 

provided, however, that the net revenue 

derived from counties from motor vehicle 

registration fees shall never be less than 

the maximum amounts allowed to be retained by 

each County and the percentage allowed to be 

retained by each County under the laws in 

effect on January 1, 1945. Nothing contained 

herein shall be construed as authorizing the 

pledging of the State's credit for any 

purpose. (Emphasis added.) 

Tex. Const. art. VIII, § 7-a; see Tax Code, ch. 153. 

The issue is whether the proposed "delivery fee" is a 

*'tax*' for purposes of article VIII, section 7-a, of the 

Texas Constitution. If it is, then the funds derived 

therefrom may be expended only pursuant to that section of 

the constitution. 

Courts in Texas uniformly have held that, in determining whether a statutorily created charge is a tax or a 

license fee, the test is that of purpose. If the overall 

primary purpose of the charge is to raise revenues, then it 

is a tax; if its primary purpose is regulation, then it is a 

license fee. Robinson v. Hill, 507 S.W.2d 521 (Tex. 1974); 

Countv of Harris v. Shennard, 291 S.W.2d 721 (Tex. 1956); 

Hurt v. Cooner, 110 S.W.2d 896 (Tex. 1937), after certified 

cuestions, 113 S.W.2d 929 (Tex. Civ. App. - Dallas 1938, no 

P- 4899 
Honorable Stan Schlueter - Page 6 (JM-963) 

writ); Citv of Fort Worth v. Gulf Refinina Co., 83 S.W.2d 

610 (Tex. 1935).6 The Texas Supreme Court has declared: 

It is sometimes difficult to determine 

whether a given statute should be classed as 

a regulatory measure or as a tax measure. 

The principle of distinction generally 

recognized is that when, from a consideration 

of the statute as a whole, the primary 

purpose of the fees provided therein is the 

raising of revenue, then such fees are in 

fact occupation taxes, and this regardless of 

the name by which they are designated. On 

the other hand, if its primary purpose 

appears to be that of regulation, then the 

fees levied are license fees and not taxes. 

Hurt v. Coovey, suvra, at 899. 

It is suggested that, under the authority of Conlen 

Grain and Mercantile. Inc. v. Texas Grain Sorahum Producers 

Board, 519 S.W.2d 620 (Tex. 1975) [hereinafter Conlen], the 

charge that you propose should be denominated an occupation 

tax rather then a license fee. We disagree. In Conlen, the 

Texas Supreme Court held unconstitutional a charge imposed 

upon grain sorghum producers: the court held that the charge 

was an occupation tax on an agricultural pursuit, a tax that 

article VIII, section 1, of the Texas Constitution explicitly forbids. 

The statute in Conlen authorized a nonprofit organization representing the producers of a particular agricultural 

6. We note that, because the test is purpose and not 

effect, a charge may have the effect of raising revenue and 

not be a tax., Beckendorff v. Harris-Galveston Coastal 

Subsidence District, 558 S.W.2d 75 (Tex. Civ. App. - Houston 

[14th Dist.] 1977), aff'd per curiam, 563 S.W.2d 239 (Tex. 

1987); Citv of Fort Worth v. Gulf Refinina co., m. 

Indeed, a license fee imoosed on the orivilese of ooeratina 

a certain type of business may be imposed fo; both 

regulation and revenue purposes; if the purpose of the act, 

taken as a whole, is primarily regulatory, the charge is 

denominated a license fee. House of Tobacco. Inc. v. 

Calvert, 394 S.W.Zd 654 (Tex. 1965): Pavne v. Massey, 196 

S.W.2d 493 (Tex. 1946). ---. 

P. 4900 
Honorable Stan Schlueter - Page 7 (JM-963) 

commodity to petition the Commissioner of Agriculture for 

authority to conduct a referendum, 

statewide basis, to'determine 

on either a regional or a 

whether the producers of the 

commodity would "levy an assessment upon themselves to 

finance programs authorized by this Act." 519 S.W.Zd 620, 

at 621. If the referendum passed, then an election was held 

to determine the members of a commodity producers board. 

The board was charged with formulating and administering 

programs for the purposes stated in the act. The board was 

permitted to expend the money collected as an assessment for 

the purposes of 

developing, carrying out, and participating 

in programs of research, disease and insect 

control, predator control, education, and 

promotion, designed ~' to encourage the 

production, marketing, and use of the 

commodity upon which the assessment is 

levied. 

P 

519 S.W.2d 620, at 621-622. In rejecting the claim of the 

board that the charge imposed was not a tax, the court 

stated, inter alia, that: "It also appears that the primary 

purpose of the assessment is to raise revenue." 

The court in Conlen relied in part upon its prior 

decision of H. Rouw v. Texas Citrus Commission, 247 S.W.2d 

231 (Tex. 1952) [hereinafter -1, which involved a 

similar to the one in Conlen. 

charge 

The charge, however, in Rouw 

was nonrefundable and was imposed on those who packed and 

marketed or processed and sold citrus fruit grown in the 

state. The court in Rouw concluded that the purpose of ~the 

charge was not regulatory, but rather it simply was to 

promote the citrus industry: 

Applying the above rule to the Act under 

consideration we find the tax levied to be an 

occupation tax. A readina of the Act clearlv 

demonstrates that its nrimarv ournose is to 

raise revenue, and not a reaulation of the 

citrus fruit industrv under the volice vower. 

Laudable as the purpose of the Act may be: 

viz. to advertise and enlarge the markets for 

Texas citrus fruit and its by-products, and 

for research beneficial to the citrus 

industry, the primary purpose being the 

raising of revenues in excess of the amount 

needed for regulation of the industry to 

carry out the above provisions, under the 

P- 4901 
Honorable Stan Schlueter - Page 8 (JM-963) 

well-established rule of law, the tax must of 

necessity be classed as a occupation tax. 

(Emphasis added.) 

519 S.W.2d 620, at 624. 

Both Conlen and Rouw are consistent with Texas court 

decisions that looked to the actual conferral of regulatory 

authority in determining whether a charge imposed is 

intended primarily for the raising of revenue. Texas courts 

consistently have characterized as license fees, rather than 

as taxes, those charges that were imposed concomitantly with 

the actual conferral of regulatory authority. See. e.a 

Robinson v. Hill, suvra; House of Tobacco Inc., v. Calvert: 

suvra: Kadane v. Clark, 143 S.W.2d 197 (Tex. 1940): Citv of 

Fort Worth v. Gulf Refinina co., yuvra ; Beckendorff v. 

Harris-Galveston Coastal Subsidence District, suDra; Reed v. 

Citv of Waco, 223 S.W.2d~247 (Tex. Civ. APP. - Waco 1949, 

err. ref'd). See also, Prudential Health Care. Plan v. 

Commissioners of Insurance, 626 S.W.2d 822 (Tex. APP. 

Austin 1982, writ ref'd n.r.e.) (distinguishing Conlen). ; 

Texas courts consistently have characterized as taxes, 

rather than as license fees, those charges that were imposed 

without the concomitant conferral of actual regulatory 

authority. See, e.q., Harris Countv v. SheDDard, suDra: 

Pavne v. Massey, suvra: Hurt v. Coover, suDraL; Ex varte 

Dreibelbis, 109 S.W.2d 476 (Tex. Crim. App. 1937): Tavlor v. 

State, 513 S.W.2d 549 (Tex. Crim. App. 1974). 

There can be little doubt that, by enacting subchapter 

I of chapter 26 of the Water Code, the legislature intended 

primarily to set up a system to regulate the operations of 

7. The court of appeals declared: 

We believe, however, we would need a more 

specific declaration of the Supreme Court, 

overruling the traditional distinctions drawn 

between an occupation tax and a regulatory 

fee, before we would be justified in holding 

the charge assessed by subdivision (a) [under 

article 20A.33 of the Insurance Code] to be a 

Vax@* subject to the "equal and uniform** 

limitations of the Constitution. 

--. 

--. 

626 S.W.2d 822, at 830. 

P. 4902 
Honorable Stan Schlueter - Page 9 (JM-963) 

underground storage tanks that contain hazardous materials 

rather than a system to raise revenue. The "Bill Analysis" 

prepared by the Senate Committee on Natural Resources for 

Senate Bill No. 779 sets forth the background of the bill: 

In 1986 the Texas Water Commission 

surveyed relevant businesses and concluded 

that there are at least 120,000 underground 

storage tanks that would come under commission purview for regulatory authority. Tanks 

underneath gasoline stations account for 

80-85% of that total. A recent amendment to 

the Federal Resource Conservation and 

Recoverv Act mandates the imvlementation of a 

national underaround storaae tank nroaram. 

which is intended to be administered at the 

state and local levels. Texas does not 

currentlv have a reculatorv vroaram to 

monitor and nrevent leaks in undersround 

storaae tanks which contain vetroleum and 

toxic chemical vroducts. (Emphasis added.) 

The "Bill Analysis" also sets forth the purpose of the bill: 

"This bill would provide for the resulation of underground 

storage tanks by the Texas Water Commission." (Emphasis 

added.) Section 26.341 of the Water Code states the purpose 

of the subchapter: 

The legislature finds that leaking 

underground tanks storing certain hazardous, 

toxic, or otherwise harmful substances have 

caused and continue to pose serious groundwater contamination problems in Texas. The 

legislature declares that it is the volicv of 

this state and the vurvose of this subchanter 

to maintain and vrotect the crualitv f 

aroundwater resources in the state frZm 

substances in underaround tanks that mav 

pollute aroundwater resources and to require 

the use of all reasonable methods to 

implement this policy. (Emphasis added.) 

Moreover, it is clear even from a cursory reading of chapter 

26 itself that the legislature has conferred broad 

regulatory authority on the commission regarding the 

permissible operation of underground storage tanks. See. 

-, Water Code, 55 26.345 - 26.357. Because the fee that 

you propose would be enacted pursuant to the state's police 

power and in order to comply with federal statutes and rules 

P. 4903 
Honorable Stan Schlueter - Page 10 (JM-963) 

regarding the regulation of underground 

conclude that it is 

storage tanks, we 

more closely related to a license fee 

than it is to a tax and that any money derived therefrom 

would not fall within the ambit of article VIII, section 

7-a, of the Texas Constitution. 

You next ask whether the legislature is authorized to 

make such a statutory dedication, creating a fund to be 

administered by the Texas 

of regulating pollution 

Water Commission for the purpose 

clean-up. Generally, the legislature is authorized to enact any law not in conflict with 

either the state or the federal constitutions. Jordan v. 

Crudsinston, 231 S.W.2d 641 (Tex. 1950); DeShazo v. Webb, 

113 S.W.2d 519 (Tex. 1938). We understand you to ask 

whether the creation of such a dedicated 

would be constitutional: however, 

statutory fund 

you do not specify which 

constitutional provisions concern you. 

fear that article III, section 51, 

We assume that you 

of the Texas Constitution, which forbids the state from making grants of public 

money to persons or political subdivisions, may be violated 

by the fact that money in such a fund would be expended both 

for the costs of pollution clean-up and for compensating 

third parties damaged by any such accidental leakage, costs 

which, absent the fund, would be borne by the owners/operators themselves. We conclude that article III, section 51, 

of the Texas Constitution would not be violated by 

permitting the expenditure of such money for such purposes. 

In Friedman v. American Suretv Co. of New York, 151 

S.W.2d 570 (Tex. 1941), the Texas Supreme Court upheld the 

Unemployment Compensation Act, declaring, inter alia, that 

article III, section 51, 

codified at 

was not violated thereby. The act, 

articles 5221b-1 through 5221b-21, V.T.C.S., 

created a fund comprising "contributions" or taxes imposed 

upon employers for the benefit of employees. The court 

refused to characterize the plan as providing a gratuity, 

asserting that the funds were not state funds. Rather, the 

state acted merely as a trustee. 

Analogously, in the system that you propose, the state 

would be acting as trustee with 

administration of the 

respect to the 

clean-up fund. The beneficiaries of 

the trust would be those persons or political subdivisions 

that are damaged by the sudden or gradual leakage or spill 

from underground storage tanks of regulated substances 

covered by the act. The device of creating a dedicated fund 

or a trust fund is one that repeatedly has been used by the 

legislature to effectuate a proper public purpose, both with 

private persons as beneficiaries, see. e.a., V.T.C.S. art. 

-_ 

P. 4904 
, 

rHonorable Stan Schlueter - Page 11 (JM-963) 

~:~~; (W or k er's Compensation and Crime Victims' Compensation 

; Agric. Code, 

and with political 

55 103.00-.013 (Produce Recovery Fund), 

subdivisions as beneficiaries. See. 

-, V.T.C.S. art. 1066~ (Local Sales and Use Tax), 1118x 

(Metropolitan Transit Authorities), 1118~ (Regional Transit 

Authorities), 179d (Bingo Enabling Act), 4366e (Local 

Government Corporate Banking Franchise Tax Fund): Alto. Bev. 

Code, §§ 202.00-.16. We conclude that article III, section 

51, of the Texas Constitution imposes no impediment to the 

creation and eventual disbursement of the money from the 

fund that you propose. 

SUMMARY 

The creation of a proposed pollution 

clean-up fund by the imposition of a fee on 

the owners/operators of underground storage 

tanks containing certain regulated substances 

for the purpose of complying with federal 

statutes and administrative regulations would 

not constitute a **taxi' for purposes of 

article VIII, section 7-a, of the Texas 

Constitution. Article III, section. 51, of 

the Texas Constitution imposes no impediment 

to the creation and eventual disbursement of 

the money from such a fund. 

It-l- m 

JIM MATTOX :- 

Attorney General of Texas 

MARY KELLER 

First Assistant Attorney General 

MU MCCREARY 

Executive Assistant Attorney General 

JUDGE ZOLLIE STEAKLEY 

Special Assistant Attorney General 

RICK GILPIN 

Chairman, Opinion Committee 

Prepared by Jim Moellinger 

Assistant Attorney General 

P. 4905