Braun: Programs available to fund costs of protecting environment

Braun

By Christopher J. Braun

For the State of Indiana to remain competitive in the 21st century and to attract and retain businesses and an educated workforce, it is vitally important that the quality of life for its citizens include clean air, soil and water. The Indiana General Assembly should be commended for establishing two highly successful programs that provide funding to address petroleum contamination resulting from leaking underground storage tanks (UST). This article highlights these regulatory programs that since their inception have funded more than $1 billion in first-party and third-party expenses resulting in the successful investigation and remediation of more than 8,600 sites throughout the State of Indiana, thereby substantially enhancing the environment and quality of life for all Hoosiers.

I. ELTF funding for first-party and third-party environmental expenses

In 1988, the Indiana Legislature created a financial assurance program managed by the Indiana Department of Environmental Management known as the Indiana Underground Storage Tank Excess Liability Trust Fund (ELTF). The ELTF was created to help UST owners meet federal requirements that require them to possess $1 million of financial assurance to cover costs arising from leaking USTs. A wide array of UST owners in Indiana can qualify for this funding, ranging from the typical owners and operators of gasoline stations to numerous businesses, municipalities and schools that own USTs for fueling their fleets of trucks, cars and buses. If a UST owner takes the steps necessary to establish and maintain eligibility, the ELTF is a powerful tool the UST owner may rely on to reimburse expenses reasonably incurred for the investigation and remediation of environmental liabilities arising from leaking USTs and any related third-party claims. For releases reported to IDEM after July 1, 2017, the ELTF will pay up to a maximum of $2.5 million per claim, with the UST owner responsible for a $15,000 deductible.

The ELTF is funded in two ways: (1) UST owners pay an annual tank registration fee of $90 per tank, which is used to fund the Petroleum Trust Fund; and (2) the state’s collection of an oil inspection fee of 1 cent per gallon of gasoline and diesel sold in Indiana. For fiscal year 2017, the ELTF collected more than $53 million in revenue.

Depending on the extent of the petroleum contamination in the soil and groundwater, the cost to investigate and remediate a UST site may range from less than $100,000 for a modestly impacted site with only soil impacts to more than $2 million for a site with extensive soil and groundwater contamination and considerable off-site impacts. For fiscal year 2017, the ELTF paid more than $51 million in claims for environmental expenses.

IDEM and the UST and ELTF programs are led by the talented and highly experienced trio of Commissioner Bruno Pigott, Assistant Commissioner for the Office of Land Quality Peggy Dorsey, and Deputy Assistant Commissioner Amy Smith. To put the overall ELTF program into financial perspective, just since 2005, the ELTF has received claims totaling roughly $690 million, with the ELTF approving more than $540 million in reimbursable costs during this 12-year period. IDEM reports that since the ELTF program began, 8,611 leaking UST sites have been satisfactorily cleaned up in Indiana, with 1,467 UST sites currently in the ELTF program being investigated and cleaned up.

II. Indiana Brownfield Program’s cleanup of blighted sites with petroleum impacts

While Indiana has a long and proud development and manufacturing history, there are times when circumstances result in abandoned, blighted properties, including former gas stations, with various environmental impacts. For those brownfield properties with petroleum contamination resulting from leaking USTs that cannot be funded by the responsible party due to an inability to pay, bankruptcy or other factors, there is a potential solution.

In 2014, the Indiana Brownfields Program began administering the Petroleum Trust Fund and its Petroleum Orphan Site Initiative (“Orphan Tank Fund”) to address these sites. To date, the Brownfields Program has received approximately $9 million from the ELTF to fund the work necessary to complete site assessment, UST removal and remediation of these orphan tank fund sites. Meredith Gramelspacher is the Director and General Counsel for this program. Under her excellent leadership in the last five years, the Orphan Tank Fund has approved for funding for 50 sites in 40 communities across Indiana, with 14 of those sites already achieving regulatory closure via a No Further Action letter from IDEM, and two more await NFA approval. Of particular note, the Brownfield Program is achieving these NFA closures at a very cost-effective average budget cost of $196,653 per site.

III. Environmental challenges ahead

Without these vital ELTF and Brownfields programs, many UST owners and former UST sites would have lacked the funding needed to perform cleanups. Indiana would have been saddled with countless abandoned “brownfield” sites, thwarting economic development and causing environmentally impacted sites to worsen and impact off-site properties. In turn, the environmental condition of the state’s air, water and soil would have worsened.

While the ELTF currently has a balance of more than $80 million, for all stakeholders to continue to achieve these environmental successes, two principal challenges must be met. First, on the funding side, the ELTF revenues are expected to be trending downward in light of reduced gallonage of gasoline and diesel being sold in Indiana based on: (a) Indiana’s legislative increase in gasoline taxes beginning in July 2017 to fund infrastructure improvements but which made Indiana less cost-competitive than the surrounding states (thereby making Indiana a drive-through state for many drivers); (b) more fuel-efficient vehicles on the road; and (c) the growing number of electric vehicles in Indiana. Second, on the expense side, the principal challenge for IDEM, UST owners and the environmental consulting community will be to substantially reduce the time and expense associated with these environmental investigations and cleanups so that they are more cost-effective, thereby bringing these metrics in line with the averages of the surrounding states and the national averages.

As demonstrated above, for sites impaired by leaking USTs, there are options currently available to private and public entities to address these first-party and third-party liabilities. For the state of Indiana to remain competitive in the 21st century in attracting top talent and businesses, it is critical that we continue to provide cost-effective options to address these environmental impacts in a timely, well-funded manner, thereby enhancing the quality of life in Indiana for everyone.•

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• Christopher J. Braun is a partner at Plews Shadley Racher & Braun LLP and general counsel for the Indiana Petroleum Marketers and Convenience Store Association. Opinions expressed are those of the author.