Leaking Underground Storage Tanks: EPA Should Take Steps to Better Ensure the Effective Use of Public Funding for Cleanups
Published: 2007-02-08T00:00:00

Fast Facts:

Highlights:
section_title: Why GAO Did This Study
paragraphs: 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.
section_title: What GAO Found
paragraphs: 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.

section_title: Letter
paragraphs: 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. 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.
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.
subsections: section_title: Background
paragraphs: 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:  testing tanks for leaks when one is suspected;   investigating a site to evaluate the source and extent of petroleum   assessing the number of individuals that may have been exposed to  petroleum contaminants and the seriousness of exposure, and  estimating resulting health risks;   cleaning up contaminated soil and water;   providing safe drinking water to residents at the site of a tank leak;  providing for temporary or permanent relocation of residents; and  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 tank- related data elements reported by EPA as of September 30, 2005, and  provides definitions for those data elements.
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.
section_title: Future Public Costs for Cleaning Up Leaking Underground Storage Tanks May Be Substantial
paragraphs: 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.
subsections: section_title: States Reported That They Expect to Spend an Estimated $12 Billion in Public Funds to Complete the Cleanup of about 54,000 Known Releases
paragraphs: 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. 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. 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.
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.
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. 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.
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.
section_title: The Number of Releases from Tanks without a Viable Owner and the Public Cost of Such Releases Are Not Fully Known
paragraphs: 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. 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.
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.
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).
Do not check (7)
Other (9)
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.
section_title: States Anticipate Spending Additional Public Funds on Newly Identified Releases
paragraphs: 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. 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.
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.
section_title: States Primarily Rely on Financial Assurance Funds to Clean Up Releases and Limit Cleanup Based on Funding Availability
paragraphs: 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. 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.
subsections: section_title: States Clean Up Releases from Leaking Underground Storage Tanks Primarily Using Financial Assurance Funds
paragraphs: 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.
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).
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.
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.
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.
section_title: Some State Funds Do Not Have Sufficient Resources to Ensure Timely Cleanups
paragraphs: 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:  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 high- risk sites. As of February 2006, the state was only authorizing cleanup  work that the fund could pay for within 90 days.
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.
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:  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.
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.
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. 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 lead- based 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.
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.
section_title: EPA’s Method of Ensuring the Adequacy of Financial Assurance Funds Has Limitations
paragraphs: 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.
section_title: Federal Funding Provided to Clean Up Releases from Underground Storage Tanks Is Limited
paragraphs: 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.
subsections: section_title: Appropriations from the LUST Trust Fund Have Been Relatively Stable
paragraphs: 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.
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.
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).
section_title: LUST Trust Fund Money Is a Relatively Small Part of Many States’ Programs
paragraphs: 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:  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  releases. Because EPA reports call for data on releases rather than sites,  Wyoming provides its best estimate of release data.
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.
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.
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.
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.
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.  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.
section_title: States Use LUST Trust Fund Money in a Variety of Ways to Support Their Programs
paragraphs: 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.
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. 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.
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.
section_title: Conclusions
paragraphs: 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. 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.
section_title: Recommendations for Executive Action
paragraphs: We recommend that the Administrator, EPA, take the following four  actions:  Ensure that states verify, on a regular basis, that tank owners and  operators are maintaining adequate financial responsibility coverage, as  required by RCRA;   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;   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  ensuring that states are reporting information in their semiannual  activity reports that is consistent with EPA’s definitions;   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   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.
section_title: Agency Comments
paragraphs: 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 state- reported 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 stephensonj@gao.gov. 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.
section_title: Objectives, Scope, and Methodology
paragraphs: 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. 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:  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  regarding the most appropriate contact to officials named on lists of  state contacts from two other professional organizations that also  conduct surveys about underground storage tanks—the New England  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.
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.
We sent an announcement on November 18, 2005, of the upcoming  survey to state contacts (including the District of Columbia) and then e- mailed 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.
We sent e-mail reminders and conducted follow-up telephone calls with  nonrespondents.
To minimize nonsampling error in the data analysis stage, we took the  following steps:    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.
We included a series of data reliability questions in the survey to assess  the accuracy of the information provided to us by the respondents.
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.
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.
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). These interviews included in-depth questions  focusing on topics such as the states’ database reviews and database  limitations identified in their survey responses.
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.
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.
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. 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. 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.
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.
section_title: Selected Data Relating to Underground Storage Tanks Reported by States
paragraphs: 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.
section_title: GAO Survey of the 50 States and the District of Columbia
paragraphs: GAO SURVEY OF THE 50 STATES: FINANCING CLEANUPS OF  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.
This questionnaire can be filled out using MS-Word and returned via e-mail to  USTSurvey@gao.gov.  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  10 Causeway Street, Suite 575  Fax: (617) 788-0505  Please use your mouse to navigate by clicking on the field or check box   you wish to answer.
To select a check box or button, simply click on the center of the box.
To change or deselect a check box response, simply click on the check box and the ‘X’ will  disappear.
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.
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.
Phone: (617) 788-0543  e-mail: SlossN@gao.gov. e-mail: LaudermilkG@gao.gov .
Have there been any reviews of the  recent review? [Enter quality of the data?
UST management?
4 digit year.] a.
Yes.......
No ........ b.
Yes.......
No ........ c.
Yes.......
No ........ d.
Yes.......
No ........ 2. Which of the following types of information does each of the databases you listed above  contain? (e.g. location) a. .......................................................... b. ........................................................... c. ........................................................... d. ........................................................... 3. What procedures are used to ensure all data contained in the databases you listed  above are accurately recorded?  a. ................................. b. ................................. c. ................................. d. ................................. 4. What are the known limitations of the current data (e.g., data elements that are known to be incomplete, incorrect, or out-of-date) for each of the databases you listed above? a.... ........................... None b. .. ........................... None c. ........................... None d. ........................... None 5.
Is there any additional information about the way your states’ data for UST  management is collected, entered, stored, and quality reviewed that would help inform  our interpretation of these data?
Federally regulated USTs: In this survey we are concerned with federally regulated USTs, as  defined by EPA. These tanks include “any one or combination of tanks (including underground  pipes connected thereto) that is used to contain an accumulation of regulated substances, and the  volume of which (including the volume of underground pipes connected thereto) is 10 percent or  more beneath the surface of the ground. This term does not include any: (a) farm or residential  tank of 1,100 gallons or less capacity used for storing motor fuel for noncommercial purposes;  (b) tank used for storing heating oil for consumptive use on the premises where stored; (c) septic  tank; (d) certain pipeline facilities; (e) surface impoundment, pit, pond, or lagoon; (f) storm- water or wastewater collection system; (g) flow-through process tank; (h) liquid trap or  associated gathering lines directly related to oil or gas production and gathering operations; or (i)  storage tank situated in an underground area if the storage tank is situated upon or above the  surface of the floor.” 6. What are the cumulative data for the number of federally regulated USTs for your  state, first as of September 30, 2004, and then as of September 30, 2005?  Are these  numbers exact or estimated?
Cumulative data, as of estimate? estimate? a. Active tanks ................. b. Closed tanks ................. c. Confirmed releases....... d. Cleanups initiated......... e. Cleanups completed ..... f. Emergency responses... 7. How many new releases from federally regulated USTs did your state confirm in each  of the last five federal fiscal years?
Is this an exact number or an estimate? a. 2001 ............................ b. 2002 ............................ c. 2003 ............................ d. 2004 ............................ e. 2005 ............................ f. How did you calculate the number of new releases from USTs your state confirmed in  each of the last five years? 8. How many new releases from federally regulated USTs do you estimate that your state  will confirm over the next five years?
Estimated number of new releases your state will confirm over the next five years a. How did you estimate the number of new releases from federally regulated USTs that  your state will confirm over the next five years? b. How many of these new releases over the next five years do you estimate will require at  least some amount of public funding to clean up?
Estimated number of new releases over the next five years that will require at least  some amount of public funding to clean up  c. How did you estimate the number of new releases over the next five years that will require at least some amount of public funding to clean up?  9. EPA computes your state’s “cleanup backlog” by subtracting the cumulative number  of cleanups completed from the cumulative number of confirmed releases.  Based on  the numbers you provided above, your state’s cleanup backlog, as of September 30,  2005 is: 0. Is this number correct?
Yes ....................
No...................... a. What is the correct number?
Please refer to this number when answering questions about your state’s cleanup backlog in  completing the remainder of this survey.  10. Considering the number of releases in your state’s cleanup backlog as of September 30,  2005, how many involve MtBE at levels requiring cleanup?
Is this an exact number or an estimate?
Number of releases with MtBE ...... a. How did you calculate the number of releases in your state’s cleanup backlog that  involve the release of MtBE at levels requiring cleanup? 11. Considering the number of releases in your state’s cleanup backlog as of September 30,  2005, how many have affected groundwater at levels requiring cleanup?
Is this an exact number or an estimate? groundwater .................................... a. How did you calculate the number of releases in your state’s cleanup backlog that have  affected groundwater at levels requiring cleanup?  12. Is there any additional information about your state’s data for UST management that  would help inform our interpretation of your responses to questions about the scope and type of UST cleanups in your state?
Sources of Funding for Cleanup 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  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.” 13. Considering the number of releases in your state’s cleanup backlog as of September 30,  2005, what is your estimate of the number of these releases for which EPA-defined site  cleanup costs will be paid for exclusively by responsible parties and the number of  these releases for which some amount of public funding will be required? [Please provide your best estimate.] a. number of releases for which cleanup costs will be paid exclusively by a  b. number of releases for which cleanup costs will be paid with some amount of  c. How did you estimate the number of releases for which EPA-defined site cleanup  costs will be paid for exclusively by responsible parties and the number of these  releases for which some amount of public funding will be required?  14. Among those releases in the current cleanup backlog that will require at least some amount of public funding after September 30, 2005, excluding funds already spent on  these cleanups, how many would you estimate will require public funding amounts in  the following ranges? a. $0 - $99,999 ............................................... b. $100,000-$499,999 .................................... c. $500,000-$999,999 .................................... d. $1,000,000 or more ....................................
Number for which costs cannot be  e. estimated.................................................... f. How did you estimate the number of releases that fall into each category of funding? 15. Based on your experience with cleanups of leaking federally regulated USTs that require some amount of public funding, what do you estimate is the average cost in  public funds to fully address each release?
Estimated average cost in public funds to fully address each release a. What do you estimate is the average cost in public funds to fully address each  release that involves MtBE at levels requiring cleanup?
Estimated cost in public funds to fully address each release that involves MtBE at  b. What do you estimate is the average cost in public funds to fully address each  release that impacts groundwater at levels requiring cleanup?
Estimated cost in public funds to fully address each release that impacts  groundwater at levels requiring cleanup  c. How did you estimate these average costs in public funding?  16. In the past year, what was the total amount spent (in actual outlays) to pay for the public funding portion of cleanups at federally regulated UST sites? [If possible, provide this amount for the latest federal fiscal year (10/1/04 to 9/30/05).] Is this an exact number or an estimate?
Total outlays................................... a. Are these amounts for the latest federal fiscal year (10/1/04 to 9/30/05)?
Yes ....................
No...................... b. On what date does the year for which you are reporting start?
Is this an exact number or an estimate? a. Federal LUST Trust Fund .............. b. Other federal sources  .............................................. c. State financial assurance fund ........ d. State fund dedicated to tanks without  a viable owner ................................ .............................................. g. Are these amounts for the latest federal fiscal year (10/1/04 to 9/30/05)?
Yes ....................
No...................... h. On what date does the year for which you are reporting start?  18. Is there any additional information about the amounts of public funding listed above that would help inform our interpretation of your responses to these questions? 19. What additional sources of public funding for LUST cleanups, if any, do you believe  have a high probability of becoming available in the next 5 years? a. What were the primary factors you considered in making an assessment of the  probability that additional sources of public funding for LUST cleanups will become  available in the next 5 years? 20. Among the current sources of public funding for LUST cleanups, which sources, if any,  do you believe have a high probability of no longer being available in the next 5 years, and why not? a. What were the primary factors you considered in making an assessment of the  probability that any of the current sources of public funding for LUST cleanups will no longer be available in the next 5 years?
Tanks without a Viable Owner For purposes of this survey, consider tanks among your state’s cleanup backlog without a viable  owner to be those tanks where, as of September 30, 2005, the responsible party was unknown,  unwilling, or unable to perform the needed cleanup (for example, “orphaned” or abandoned tanks). 21. How many releases in your state’s cleanup backlog, identified above, come from tanks  without a viable owner?
Is this an exact number or an estimate?
Number of releases ......................... a. How did you calculate the number of releases in your state’s cleanup backlog that  come from tanks without a viable owner? 22. For how many releases in your state’s cleanup backlog has the state not yet determined  whether a responsible party is known, willing, and able to perform the cleanup?
Is this an exact number or an estimate?
Number of releases .......................... a. How did you calculate the number of releases in your state’s cleanup backlog for  which the state has not yet determined whether a responsible party is known, willing, and able to perform the cleanup? 23. In the past year, how much public funding from all sources was spent (in actual  outlays) on cleaning up releases from USTs, both WITH and WITHOUT a viable  owner? [If possible, provide these amounts for the latest federal fiscal year, 10/1/04 to  Is this an exact number or an estimate? a. Public funding spent to clean up  tanks WITH a viable owner ....... b. Public funding spent to clean up  owner........................................... c. Is this the total amount ($0) spent (in actual outlays) in the past year for the public  funding portion of cleanups at federally regulated UST sites?
Yes ....................
No...................... d. Why is this amount different? e. Is this amount for the latest federal fiscal year (10/1/04 to 9/30/05)?
Yes ....................
No...................... f. On what date does your reporting year begin?
Beginning date of reporting year  g. How did you calculate the amount of public funding spent to clean up releases from USTs with and without a viable owner?  24. Based on the backlog of releases from USTs without a viable owner as of September 30, 2005, identified above [ ], how much do you estimate it will cost to complete the  remainder of the cleanups for all of these releases?
None ................. Go to Q25. Don’t know....... Go to Q25. a. How did you estimate the cost to complete the remainder of the cleanups for the  backlog of releases from USTs without a viable owner?
For the purposes of the following questions, please consider two types of state cleanup funds: (1) state financial assurance funds that cover the cleanup of contamination from federally  regulated USTs, which may or may not include tanks without a viable owner, and (2) funds that are devoted solely to the cleanup of contamination from tanks without a viable  owner.
In this survey we ask about both types of funds as applicable to your state. 25. Has your state EVER had a state financial assurance fund, as defined in (1) above?
Yes .......................
No......................... Skip to Q37.
26. What was the status of your state’s financial assurance fund as of September  30, 2005?
Not applicable, never had this type of fund....................... Skip to Q37.
Fund is no longer active ....................................................... Skip to Q37.
Accepting and paying all valid claims without restriction Go to Q27  Accepting and paying claims with some restrictions ....... a. Is your state fund limiting the number of claims it accepts based on the amount of  funds it has available to pay for those claims?
Yes .......................
No......................... b. Is your state fund setting priorities for paying claims to conserve funds?
Yes .......................
No......................... c. Is your state’s financial assurance fund ONLY accepting claims for releases that occurred before or after a certain date (e.g., an eligibility sunset date)?
No .......................
Yes...................... d. What are the eligibility dates for releases? [Fill in either or both  dates as applicable.]  [Enter mm/dd/yy.]  [Enter mm/dd/yy.] e. Are there other restrictions on accepting and paying claims? 27. Please describe the deductible amount(s) paid by responsible parties and any  maximum amount the state financial assurance fund will pay for each release from a  federally regulated UST.  28. How much was deposited into your state’s financial assurance fund in the past year?
Is this an exact number or an estimate?
Amount deposited........................... a. Is this amount for the latest federal fiscal year (10/1/04 to 9/30/05)?
Yes.........................
No .......................... b. On what date does your reporting year begin?
Beginning date of reporting year  29. How much of the amount deposited into your state’s financial assurance fund in the  past year was from each of the following sources?
Is this an exact number or an estimate? a. Flat rate fees assessed on tanks.. b. Fees/taxes assessed on a per-unit  basis on fuel(s)........................... c. Interest ....................................... d. Cost recovery ............................. . . .
30. What do you anticipate will happen to revenues to your state's financial  assurance fund over the next 5 years, compared with the annual revenues accrued to the fund in the past year?
Large increase................
Moderate increase.........
Stay about the same......
Moderate decrease........
Large decrease............... a. What were the primary factors you considered in making this assessment? 31. What was the overall balance of your state’s financial assurance fund as of September  30, 2005?
Is this an exact number or an estimate?
Is this an exact number or an estimate?
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?
Is this an exact number or an estimate?
Outstanding claims ......................... $ 33. During the past 5 years, what amount of funding, if any, did your state divert from its  financial assurance fund for purposes other than those related to the UST program?
Is this an exact number or an estimate?
Is this an exact number or an estimate?
Reimbursed ................................. g. If applicable, for what purposes did your state divert UST financial assurance  funds? 34. As of September 30, 2005, had your state decided to stop accepting new claims against  the state financial assurance fund after a certain date?
Date after which claims will no longer be accepted No decision made to stop accepting claims......... 35. As of September 30, 2005, had your state decided to stop collecting revenues for the  state financial assurance fund after a certain date?
Date after which revenues will no longer be collected No decision made to stop collecting claims ........ 36. How capable is your state’s financial assurance fund of meeting future demands upon  it? .
Able to meet all.........................................................................
Able to meet most ....................................................................
Able to meet some ...................................................................
Not able to meet any................................................................ a. What were the primary factors you considered in making this assessment?
State Fund Dedicated to Tanks without a Viable Owner 37. What was the status of your state’s fund dedicated to tanks without a viable owner as  of September 30, 2005? .
Not applicable, never had this type of fund.......................... Skip to Q47.
Fund is no longer active .......................................................... Skip to Q47.
Accepting and paying all valid claims without restriction.. Go to Q38  Accepting and paying claims with some restrictions .......... a. Is your state fund limiting the number of claims it accepts based on the amount of  funds it has available to pay for those claims?
Yes .......................
No......................... b. Is your state fund setting priorities for paying claims to conserve funds?
Yes .......................
No......................... c. Is your state’s fund dedicated to tanks without a viable owner ONLY accepting claims for releases that occurred before or after a certain date (e.g., an eligibility sunset date)?
No......................
Yes .................... d. What are the eligibility dates for releases? [Fill in either or both  dates as applicable.]  [Enter mm/dd/yy.]  [Enter mm/dd/yy.] e. Are there other restrictions on accepting and paying claims? 38. How much was deposited into your state’s fund dedicated to tanks without a viable owner in the past year?
Is this an exact number or an estimate?
Amount deposited........................... a. Is this amount for the latest federal fiscal year (10/1/04 to 9/30/05)?
Yes ....................
No...................... b. On what date does your reporting year begin?
Beginning date of reporting year  39. Approximately how much of the amount deposited into your state’s fund dedicated to  tanks without a viable owner in the past year was from each of the following sources?
Is this an exact number or an estimate? a. Flat rate fees assessed on tanks....... b. Fees/taxes assessed on a per-unit  basis on fuel(s)................................ c. Interest ............................................ d. Cost recovery .................................. ...... ...... ......
40. What do you anticipate will happen to revenues to your state's fund  dedicated to tanks without a viable owner over the next 5 years, compared  with the annual revenues accrued to the fund in the past year?
Large increase................
Moderate increase.........
Stay about the same......
Moderate decrease........
Large decrease............... a. What were the primary factors you considered in making this assessment? 41. What was the overall balance of your state’s fund dedicated to tanks without a viable  owner as of September 30, 2005?
Is this an exact number or an estimate?
Is this an exact number or an estimate?
Obligated ...................................... 42. 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 fund dedicated to tanks without a viable owner as of September 30, 2005?
Is this an exact number or an estimate? $ 43. During the past 5 years, what amount of funding, if any, did your state divert from its  fund dedicated to tanks without a viable owner for purposes other than those related to  the UST program?
Is this an exact number or an estimate? a. 2001.......................................... b. 2002.......................................... c. 2003.......................................... d. 2004.......................................... e. 2005.......................................... f. How much, if any, of the total amount diverted over the past 5 years had been  reimbursed to the state fund dedicated to tanks without a viable owner as of  September 30, 2005?
Is this an exact number or an estimate?
Reimbursed ................................. g. If applicable, for what purposes did your state divert funds from the fund dedicated  to tanks without a viable owner? 44. As of September 30, 2005, had your state decided to stop accepting new claims against  the state fund dedicated to tanks without a viable owner after a certain date?
Date after which claims will no longer be accepted No decision made to stop accepting claims......... 45. As of September 30, 2005, had your state decided to stop collecting revenues for the  state fund dedicated to tanks without a viable owner after a certain date?
Date after which revenues will no longer be collected No decision made to stop collecting claims ........ 46. How capable is your state’s fund dedicated to tanks without a viable owner of meeting future demands upon it? .
Able to meet all.........................................................................
Able to meet most ....................................................................
Able to meet some ...................................................................
Not able to meet any................................................................
Is this an exact number or an estimate? b. Enforcement costs .................... c. Site cleanup costs ..................... d. Total costs ................................ e. Are these amounts for the latest federal fiscal year (10/1/04 to 9/30/05)?
Yes ....................
No...................... f. On what date does your reporting year begin?
Beginning date of reporting year  49. According to EPA, states may sometimes not spend a given year’s entire LUST Trust  Fund award in the year the funds are provided. As of September 30, 2005, what was the state’s unobligated balance of federal LUST Trust Funds, if any?
Is this an exact number or an estimate?
State’s unobligated balance of  federal LUST Trust Funds .............. 50. Is there any additional information about the LUST Trust Fund amounts listed above that would help inform our interpretation of your responses to these questions?  51. How do responsible parties who have active federally regulated USTs in your state  demonstrate financial responsibility? Please list the number of tanks covered by the  various available financial responsibility mechanisms below.
Is this an exact number or an estimate? a. State financial assurance fund......... b. Financial test of self-insurance ....... c. Corporate guarantee ........................ d. Insurance coverage.......................... e. Surety bond ..................................... f. Letter of credit................................. g. Trust fund set up by owner or  operator ........................................ h. Bond rating test (local government only) ............................................. i. Financial test (local government only) ............................................. j. Guarantee from another local  government or the state (local  government only) ......................... k. A dedicated fund (local government only) ............................................. l. ................ 52. Is there any additional information about how you calculated the number of tanks covered by the various financial responsibility mechanisms that would help inform our  interpretation of your responses?  53. Which of the following describe your state’s procedures for determining whether a  tank owner’s financial responsibility is current?  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 ................................................ ....................................................................... 54. How frequently, if at all, does your state check whether a tank owner’s financial responsibility is current?
At least annually ................................................................................................
Every 1 to 2 years ..............................................................................................
Every 3 years or longer......................................................................................
State does not check financial responsibility..................................................... ........................................................................... 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?
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? 56. Does your state ever impose penalties on responsible parties for multiple releases from  federally regulated USTs?
Yes .......................
No......................... Go to next question. a. What are the penalties and the circumstances under which they would be imposed?  57. Are there any issues that have not been covered in this survey that you anticipate  affecting the availability of public finding for cleanups in the next 5 years?  58. Are there any additional comments you wish to make regarding the issues in this survey or other matters related to USTs?
Thank you for completing the survey!
Please save this file now and send an e-mail with your saved questionnaire file and  supporting documentation as an attachment to: USTSurvey@gao.gov.
section_title: Comments from the Environmental Protection Agency
section_title: GAO Contact and Staff Acknowledgments
subsections: section_title: GAO Contact
section_title: Staff Acknowledgments
paragraphs: 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.