“Healey’s first law of politics: When you’re in a hole, stop digging.”
New legislation provides owners and operators of underground storage tanks (USTs) an opportunity to take advantage of a state of Michigan fund in the event of a release from their systems. Those who own or operate eight or fewer USTs can reduce their exposure significantly in 2016. Going forward, owners and operators of UST systems may find it easier to meet their regulatory requirements.
Whenever you fill the tank of your car with gasoline, you take fuel from another much larger tank, most likely buried underground. USTs have stored fuel and chemicals for decades. For a very long time USTs were essentially metal, single-walled tubes buried in soils, often sitting in groundwater. As a result, many USTs rusted and leaked over time, released their contents into soil and groundwater — more than 21,800 in Michigan from petroleum USTs since 1986. Digging them up and cleaning the mess represents a very expensive proposition.
In 1984, Congress passed the Resource Conservation and Recovery Act (RCRA), which regulates the transportation, storage and disposal of hazardous materials. RCRA also required the Environmental Protection Agency (EPA) to promulgate regulations for USTs. In 1988, EPA issued regulations for USTs, which have subsequently been updated. States, like Michigan, followed suit and wrote their own statutes and regulations.
RCRA required that USTs be better built and installed, made with materials that didn’t corrode, routinely tested for tightness and accompanied by warning systems in the event of an unintended release from the UST. In addition, RCRA regulations required that the owners and operators of UST systems demonstrate that they had the wherewithal to respond in the event of a release from their USTs, as they are strictly liable for such releases. These requirements are known as “financial assurance.”
An owner or operator may demonstrate financial assurance in a number of ways. Most commonly, owners and operators used private liability insurance, which could be expensive and difficult to get. Other ways an owner or operator could meet financial assurance requirements is through self-insurance, establishment of a surety bond or letter of credit or corporate guarantees.
Given that not all the owners and operators of UST systems are large corporations (although many are), the financial assurance requirements had the potential of imposing significant costs to what were essentially “mom and pop” stores. So, EPA regulations also allowed for owners and operators to demonstrate their financial assurance requirements through the use of state trust funds. Michigan established such a fund in 1988, called the Michigan Underground Storage Tank Financial Assurance (MUSTFA) Fund. It was repealed in 1995 after it started running out of money to pay all the claims that it was receiving.
For a time, another fund continued to pay for some UST cleanups. However, this fund was not used to assist owners and operators in demonstrating financial assurance. In 2012, the Michigan Legislature passed legislation that created an advisory board to recommend a new UST program. Based on those recommendations, new legislation established the UST Authority and the Michigan UST Cleanup Fund (MUSTA).
MUSTA is now active and has begun accepting claims. Retail sellers of fuel can use the fund for new releases from USTs that are discovered and reported after Dec. 30, 2014. An owner or operator can use MUSTA to demonstrate the required financial assurance.
An owner or operator may submit a Request for Determination of Eligibility to sign up for the fund. There is a $50,000 deductible and those who wish to qualify must show proof of financial responsibility for the deductible amount. However, owners or operators of eight or fewer USTs may “buy down” their deductible to $15,000 (and show financial assurance for that lower amount) for a payment of $500 per covered UST. Until an owner or operator gets their determination letter approving them for inclusion in the fund, they must continue to maintain their current financial assurance mechanism.
In order to buy down for the next calendar year, an owner or operator must obtain a determination letter between Nov. 1 and Dec. 31. For 2016, the UST Authority extended that deadline to March 31. Those smaller owners or operators that want to obtain the benefit of the lower deductible amount must submit their Claim Deductible Buy-Down Application, although it is too late for this year.
In the event of a release, owners and operators may submit a claim to MUSTA. There are specific costs that are eligible for recovery and a list of ineligible costs. Reimbursement also requires demonstration of competitive bidding for services.
The new MUSTA program has many more requirements and subtleties thank listed here. It is important for owners and operators who wish to take advantage of the program do so now, especially if they want to take advantage of the deductible buy-down. As this program takes hold, realize that EPA established new UST system testing requirements, which may result in the discovery of new releases, so delay may be potentially very expensive.
- Senior Attorney
A senior attorney in Plunkett Cooney’s Bloomfield Hills office, Saulius K. Mikalonis leads the firm's Environment, Energy and Resources Law and Cannabis Law industry groups.
Mr. Mikalonis focuses his practice on all aspects of ...
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