HISTORY OF THE UNDERGROUND STORAGE TANK POLICY–DESIGNATED TANKS

(November 2022)

INTRODUCTION

In the 1980s, the U.S. Government began addressing a large environmental threat: leaks from underground storage tanks contaminating drinking water. The tanks at both active and abandoned gas station/convenience store operations located throughout the country were the primary sources of such leaking. Most of the tanks were metal and, as they aged, were prone to leaks and no provisions to monitor or periodically test them existed.

Many service stations that, for various reasons, had gone out of business, resulted in numerous vacant and/or abandoned properties. The underground gasoline storage tanks at these locations had to be removed or sealed and previous leakage damage cleaned up before they could be used for other purposes. All too often, the owners were unknown, could not be located, or were unable or unwilling to pay the cleanup costs.

A massive effort was needed to identify those tanks, test them, retrofit or abandon them, and clean up the damage to underground sources of drinking water. Because the environmental and economic problems existed in all 50 states, the action needed to address and resolve the problem had to take place at the federal level. That action occurred in 1984 with the enaction of the Hazardous and Solid Waste Amendment to the Resource Conservation and Recovery Act (RCRA).

WHAT IS THE RCRA?

The RCRA empowered the federal Environmental Protection Agency (EPA) to regulate storage of hazardous materials in all 50 states to protect human health and the environment. The Hazardous and Solid Waste Amendment was directed primarily at the serious problem of leaking underground petroleum storage tanks. The regulations further allowed a state to create an agency to oversee implementation of the various Acts and their amendments, subject to EPA approval.

The Hazardous and Solid Waste Amendment is Subchapter One of the RCRA consisting of eight categories of regulations. Owners or operators of underground storage tanks were required to:

Notify the EPA or a cooperating state agency (known as the implementing agency) of the existence of any tank that qualified under the Act.
Take all steps necessary to detect leaks.
Keep records of regular maintenance performed on tanks.
Report any accidental release of material from a tank.
Take specific corrective action in case of problems.
Close, remove from service, and disassemble tanks that were unfit.
Prove financial responsibility for the damage that may occur and the corrective action required if a tank leaks. Note: This point involved regulations that provided performance and other standards for new tanks.

Comply with the regulations and performance standards for new tanks.

This Act originally allowed a limited number of options and a few state trust funds were added later. Tank owners or operators must do one of the following:

Provide a Letter of Credit from a qualifying financial institution.
Find an acceptable guarantor.
Purchase a bond from a surety the Treasury Department recognizes.
Qualify as a self-insurer.
Purchase an insurance policy.

The guarantor or self-insurer must have at least $10,000,000 in net worth. The insurance industry was slow to respond to this need at first. A few states established State Funds and/or allowed groups such as the Petroleum Marketers to set up captives or risk retention groups and these entities filled much of the void. This article addresses only the insurance alternative. Most states have phased out their underground storage tank-related funds since 1998 and have transferred the burden to the private sector. However, captives are still major competitors for private insurance.

The Insurance Services Office (ISO) developed the first version of the Underground Storage Tank Policy–Designated Tanks in 1991. It worked closely with the EPA to be certain that it met EPA financial responsibility requirements. Much of the policy language came directly from the applicable EPA regulations. In turn, the EPA thoroughly reviewed the policy and determined that it complied with all government and EPA regulations. Its release was temporarily suspended when it appeared that the government would delay the effective date and perhaps change some of the regulatory conditions. ISO finalized and released the policy when the EPA finally clarified and announced the dates, regulations, and conditions of compliance.

When the Hazardous and Solid Waste Amendment to the RCRA was announced in 1984, it was estimated that 5,000,000 underground tanks containing petroleum products were scattered across the country. The overwhelming task of simply identifying the tank locations began. Corrective action costs due to the need to retrofit, replace, or seal existing tanks and to clean up the ground around the ones that had leaked petroleum products were overwhelming. The RCRA was amended again in 1986 to create the Leaking UST Trust Fund (LUST). Its purpose was to pay corrective action costs in cases where the owner and/or operator was unknown, could not be located, was unable or was unwilling to pay the cleanup costs.

Congress enacted the legislation known as the Comprehensive Environmental Response, Compensation, and Liability Act (also known as Superfund) in 1980. While “Superfund” operates independently from the RCRA, it influences the regulations EPA publishes in the Code of Federal Regulations (CFR) (40 CFR 280 UST). CFR is the publication established for federal agencies to use to distribute up-to-date regulations developed in response to federal legislation.

WHAT IS AN UNDERGROUND STORAGE TANK UNDER RCRA?

An underground storage tank is any tank that has 10% or more of its volume below ground or grade level. This includes any machinery, equipment, or piping below ground used with the tank. For this reason, even a tank completely above the surface that has considerable underground pipes and equipment may qualify as an underground storage tank. The term may be a bit misleading because it includes these types of tanks in addition to those completely below the surface of the ground. In any event, they are all subject to rules for financial responsibility compliance.

The RCRA does not apply to hazardous waste incidents subject to other legislation. It includes a detailed list of specific tanks that RCRA and subsequent legislation and regulation do not apply to. This includes:

Farm or residential tanks with a capacity of 1,100 gallons or less and used to store motor vehicle fuel, as long as they are not used for commercial purposes other than farming. For example, dairy and horse training operations are considered farming but the regulations apply if they engage in even incidental contracting, trucking, or other related commercial activities to any extent.
Tanks that contain heating fuel or oil and used to heat the premises where the tanks are located. If the heating product is used to heat any other location, the tank is subject to the regulations and must comply with their requirements.
Underground storage tanks with a capacity of less than 110 gallons and tanks that hold only minimal concentrations of regulated substances
Surface impoundments, pits, ponds, or lagoons
Airport hydrant fueling systems
Flow-through processing tanks that are temporary storage components of larger systems
Liquid traps or associated gathering lines used in oil or natural gas industry operations

WHO IS AFFECTED?

Every owner or operator of underground storage tanks that contain petroleum products is required to prove financial responsibility in connection with them. The only exemptions to the regulations are the small tanks that serve farms and homes. The regulations even include government entities, Indian tribes, and small owners/operators that own or operate even one small tank and they are not exempt. This results in a great need for an insurance product that complies with the regulations.

The legislation applies to property owners and operators that have retail or wholesale sales or distribution of gasoline, fuel oil, or other petroleum products. It also applies to many other operations that have underground petroleum storage tanks.

WHAT IS THE CURRENT SITUATION?

The program appears to be effective. According to the EPA Office of Underground Storage Tanks (OUST), almost 1,800,000 old and unsafe tanks have been either updated or closed and sealed. In addition, more than 457,000 petroleum leak sites have been cleaned up. Underground water sources are safer and many sites that used to have underground storage tanks have been cleaned up and are now being used for other commercial purposes. Beginning in 2015, the EPA has implemented additional regulations. It has also called for additional inspections of existing tanks and the installation of back-up systems to contain possible leaks.

1998 was a benchmark year in the history of underground storage tanks and the regulations that apply to them. EPA regulations required that any tank still being used for petroleum products storage at that time had to be equipped with spill protection, overfill protection, and corrosion protection. As a result, many tanks that did not conform to these requirements were closed and sealed that year.

Besides all states having established implementing agencies, many also either established state run trust funds to charge premiums and cover corrective action costs, or approved using Certificates of Deposit, Captive Mutual Insurance Companies, Risk Retention Groups, and similar financial instruments or entities. Many state funds have been phased out. For example, Iowa set up a state insurance program in 1989 but established procedures to transfer its funds and responsibilities to a captive established by the Petroleum Marketers Association in 1998. West Virginia, Arizona, Texas, and other states also established state owned and operated insurance trusts.

HOW DO I COMPLY?

Newer and properly manufactured and installed underground storage tanks should not leak. The required ongoing testing and monitoring should eliminate the serious consequences of petroleum leaching into surrounding ground and water over long periods of time. As a result of these initiatives, the insurance needed to prove financial responsibility is now much more affordable and easier to obtain than in the past. While alternative ways to provide financial responsibility are still valid and available, most owners and operators choose a trust, a captive insurance company, or coverage from a standard specialty lines insurer. At the present time, applications can be filled out and quotes obtained over the Internet often in a matter of minutes.

The Insurance Marketplace, a publication of The Rough Notes Company, Inc., has names and contact information for a number of markets that offer this coverage in the section titled “Underground Storage Tank (UST) Pollution Liability.” In addition, the EPA and many state agencies publish and update a list of markets on their websites, including many of the best-known names that provide specialty insurance coverages.