States Reported That They Expect to Spend an Estimated $12 Billion in Public Funds to Complete the Cleanup of about 54,000 Known Releases

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. We asked states to exclude from their estimates any money spent  prior to September 30, 2005, to clean up these releases. Tank owners or operators will pay the entire costs  to clean up another 34 percent of these 117,000 releases, according to state  officials. The Number of Releases from Tanks without a Viable Owner and the Public Cost of Such Releases Are Not Fully Known

The full extent of releases from tanks without a viable owner is unknown. The remaining states generally  reported that they checked this coverage less often or not at all (see fig. 4). 5). States Primarily Rely on Financial Assurance Funds to Clean Up Releases and Limit Cleanup Based on Funding Availability

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. States Clean Up Releases from Leaking Underground Storage Tanks Primarily Using Financial Assurance Funds

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. Some State Funds Do Not Have Sufficient Resources to Ensure Timely Cleanups

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. 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. In fiscal year 2005, EPA distributed about $58 million of  LUST Trust Fund money to the states, or about $1.2 million per state. Recommendations for Executive Action

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. Key contributors to this report are listed in appendix V.

Objectives, Scope, and Methodology

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. 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. 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? groundwater .................................... a. 16. What was the overall balance of your state’s financial assurance fund as of September  30, 2005? What was the status of your state’s fund dedicated to tanks without a viable owner as  of September 30, 2005? . $ 43.
Why GAO Did This Study

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.

What GAO Found

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.