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*Heating Oil Rule Changes

*Public Hearing Notice

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Last Oil Heat Advisory Commitee Mtg. Minutes
*9/18/07

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Background

In October 1988 the Environmental Protection Agency (EPA) published technical standards and requirements for petroleum USTs in response to serious long-standing environmental problems. These requirements addressed the construction, replacement, and upgrading of USTs, as well as on-going maintenance such as leak detection, testing, record keeping and other tank management processes. Owners and operators of USTs were also required to demonstrate financial responsibility for corrective action and for compensating third parties for bodily injury and/or property damage, in case of an accidental release of petroleum. EPA estimated at least 40 percent of all petroleum USTs were either leaking or had leaked in the past.

EPA regulations defined a variety of mechanisms for demonstrating financial responsibility. However, for most small businesses and local government entities, the purchase of pollution liability insurance was the only practical alternative. Unfortunately, the pollution liability insurance market had limited acceptance among commercial insurers because of the unknown risk. The result was excessively high premiums for pollution liability insurance and for most small businesses the cost was prohibitive.

In 1988, in response to the possible widespread closure of petroleum USTs throughout Washington State, the Legislature created the Joint Select Committee on Underground Storage Tanks. The committee’s task was to study and recommend legislation to assist owners and operators of USTs in complying with federal financial responsibility regulations. The remedy selected and approved by the Legislature was to provide available and affordable insurance through a state administered reinsurance program. Reinsurance by the State would enable an insurance company to provide less coverage, therefore, lower premiums, while the UST owner would still have the required coverage.

In September 1989 PLIA began operations with a mandate from the Legislature to provide a plan for implementation of the reinsurance program. The Legislature approved that plan during the 1990 legislative session.

In 1991 the Legislature responded to a serious dilemma facing many rural communities in the state; the community had a single source, or perhaps two, of petroleum. Commerce, emergency vehicles, school buses and similar services depended greatly on these one or two sources. These rural gas stations, however, did not generate the profit necessary to upgrade or replace the UST system as required by federal and state statutes. In response to this problem, PLIA was directed to establish the UST Community Assistance Program (USTCAP), a one time grant program to fund upgrades and cover some cleanup costs.

In 1995 the Legislature added pollution liability coverage for heating oil tanks to PLIA’s responsibilities (heating oil tanks are not covered under the UST reinsurance program). The program was created in response to the rising number of heating oil tank releases and the significant impact contamination had on property values, as well as the environment.

In 1997 Governor Locke signed into law legislation authorizing PLIA to implement a program to provide technical assistance to owners of heating oil tanks not covered under the heating oil insurance program.

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Programs

PLIA is responsible for implementing programs in the following areas:

Commercial Underground Storage Tanks

Heating Oil

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Funding

PLIA and its programs are funded from the Pollution Liability Insurance Program Trust Account (Trust Account) and the Heating Oil Pollution Liability Trust Account. Neither PLIA nor any of its programs receive any State General Fund revenue. The main source of revenue for PLIA and its programs is the Petroleum Products Tax (Acrobat Reader required to view - see link above), an excise tax of 0.5 percent (fifty one-hundredths of one percent) on the wholesale value of petroleum on the first introduction into the state.

RCW 82.23A.020 requires the Petroleum Product Tax to be reinstated when the unrestricted account balance is less than $7,500,000. When the balance reaches $15,000,000 the tax is suspended.

The Heating Oil Pollution Liability Trust Account is established through a fee of 1.2 cents per gallon paid yearly by heating oil dealers.

It is important to stress that the PLIA model has operated in a remarkably low cost and efficient manner. In the early 1990s, most states adopted a petroleum tax to address UST issues, and those taxes have remained constantly imposed. Not only has the PLIA model saved businesses millions of dollars on insurance premiums, it has saved them even more by not having the Petroleum Product Tax constantly in effect.

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Awards

The success of the PLIA program was confirmed and formally recognized on June 7, 1999 with an award to Washington as the best and most successful underground storage tank program in the nation. The award was presented by the EPA and the Association of State & Territorial Solid Waste Management Officials at the annual EPA State Fund Administrator's Conference. Criteria for the award include financial management, success in working with stakeholders, and innovation in contamination cleanup techniques.

In July 1999 PLIA was the recipient of the Governor's Service and Quality Award. This is only the second time out of 60 awards that a small state agency was recognized for its achievements.

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