Hundreds of Connecticut gasoline retailers could be in jeopardy of having to close this fall because state officials recently passed legislation on underground fuel tanks at a time when one of the major tank insurers is leaving the market.
According to the Connecticut Post, the Independent Connecticut Petroleum Association confirmed that insurance is virtually unavailable, and at the same time, the state of Connecticut's Commercial Tank Fund has accumulated $100 million in unpaid clean-up expenses.
Industry experts say that if gas stations cannot buy insurance then under federal law they cannot legally operate and will need to close. They also say that funds that were supposed to have been earmarked for cleaning up leaks around underground tanks have been spent elsewhere... and that Connecticut politicians have raided the annual $340 million in revenue generated by one of the state's gasoline taxes. (CT has several gas taxes and it's the highest in the country at 71.4 cents per gallon.)
In a recent interview with GasBuddy, Michael Fox, executive director of the Gasoline and Automotive Service Dealers of America, explains what's going on in Connecticut:
"It's a disaster. My estimate is that about 630 gas station owners are not going to be able to get the insurance or be able to provide self-funding, in other words to be able to be self-insured because of the amounts that are required by the federal government.
The problem that we have is that our illustrious Dept. of Energy and Environmental Protection (DEP) commissioner here keeps telling everybody in the legislature that what we would refer to as 'primary' or underground tank insurance is available in the market.
And what they don't understand is that, yes, underground tank insurance is available in the market. But it's like health insurance; yes, you can get tank insurance but the new insurance carrier is not going to cover the "pre-existing conditions" you have.
We've got stations that have been in business, 15, 18, 20 years and none of their pre-existing conditions will be covered. And realistically, there isn't a gasoline service station that's been operating that doesn't have some type of contamination on it. Could it be $5,000 and it's nothing to worry about? Sure, but until you go out and actually have every single site tested and figure out what the contamination level is, we're figuring that it's going to be somewhere between $90,000 and $130,000 per site and you're never going to be able to recover the cost of that cleanup.
The other issue is that the tax that they use called the 'gross receipts tax' to generate revenue for this program raised $344 million dollars last year. It's not that we don't have the money. It's just that they're stealing it all.
They're not doing away with the tax and lowering the price of gas 27 cents a gallon and helping everybody pump more gas and make more money; they're just doing away with the fund, leaving the tax on gasoline and they're going to spend the money any way they want. That's the real problem."
How will CT retailers fight it?
"We can go after it with litigation. They can't do this because it's like the taking of your land. Obviously what the state is doing is they're devaluing my property without proper compensation. The other thing is this bill never really had a proper public discussion. So in the legal side of it, they just kind of rammed this through in the budget process.
They raised the bill in legislation and there was a public hearing, but the bill never came out of committee. They never voted on it; it was never approved and it was never shot down.
This is one of these things where maybe you look at it like it's good intentions, but you have one person who is stuck on the idea that it's the major oil companies that are getting these funds and they can afford it (to pay for their own cleanup).
Yes, the majors like Exxon, Mobil, Shell do the cleanups but you want them doing the cleanups because they have the expertise and can do them more cost-effectively.
It's the mom and pops that are going to pay for this. Yes the big companies do the cleanups -- so what? They're not making a profit on it. When I first went on the board (that administered the tank fund) the average cost for a cleanup in Connecticut was over $200,000. We got that down to $147,000 and we weren't satisfied. We think we can get them to under $90,000.
Here the state has a fund that raises $344 million --you're not talking about chicken feed-- and basically they're saying 'we cannot afford to give you guys $25 or $30 million a year?' It's insane."
Where is this going?
"We don't have a choice. We're hoping the federal government is on our side and it's encouraging the state to do the right thing.
There is a little loophole in the law where anyone with less than five stations is still technically covered. Right now we're still in the evaluation process but we're going to have to make a decision quickly on what to do because the Oct. 1 deadline is going to roll around quickly.
I'm going to advise every one of our member stations to go out, get your property tested immediately within the next 30 to 45 days and submit a claim. That way the state is on the hook for anything that we'd call 'known contamination'.
The problem if we do that is you may end up with about $250 million worth of claims and in a state with our debt what do you think that will do to our bond rating? So we're damned if we do and damned if we don't."