Connecticut's environmental regulators proposed Wednesday to pay only a fraction of what it owes most gas stations for cleaning up environmental spills, closing a reimbursement fund whose deficit climbed to $98.6 million as the state government eroded funding.
The Department of Energy & Environmental Protection had said it wanted to close the Underground Storage Tank Fund that reimburses gas stations and their neighbors to clean up spills from leaks of their underground petroleum tanks.
The U.S. Environmental Protection agency also threatened to no longer recognize the viability of the fund because of its large deficit.
Without a viable state cleanup fund, station owners say would be forced to foot insurance to cover spills. Due to the cost, one-third to half of Connecticut's 1,480 gas stations would be forced to close, according to the Independent Connecticut Petroleum Association (ICPA).
This appears precisely what DEEP is proposing, calling on the stations to get private insurance, surety bonds, letters or credit or self insurance.
"It is unacceptable, said ICPA President Gene Guilford. "The state has an obligation, as uncomfortable as that is. That obligation needs to be paid."
The UST fund was established in 1991 using the gross receipts tax, which is one of two taxes Connecticut places on the sale of vehicle fuel.
In early years, the fund received $10 million annually, a sume that exceeded claims paid, resulting in a surplus. Since then, collections have dwindled to $250,000 annually as the state government using the gross receipts tax for other areas of its budget.
Because of the lack of funding and the rising cost of administration and staffing, the UST fund could no longer cover all the claims received. It currently has $17 million in unpaid approved claims and $81.6 million in pending claims. The amount owed in pending claims usually is reduced during the approval process, said DEEP spokesman Dennis Schain.
Through Senate Bill 375, the DEEP is proposing to phase out the fund by 2014, paying only a portion of what is owed to the claimants.
Under the DEEP proposal, business that own more than four gas stations - making up 97 percent of all claimants - will receive 20 cents on the dollar or less for their approved or pending claims.
The state will stop accepting new applications for large businesses with more than 100 stations this Oct. 1, and stop accepting new applications for businesses operating between four and 99 stations on Oct. 1, 2013.
Small business with less than four stations and any property owners near gas stations -- making up 3 percent of the claims -- receive 100 percent reimbursement. They can submit new applications through Oct. 1, 2014.
In the proposal, DEEP Commissioner Dan Esty said the state government can't afford to keep making these payments, especially since much of it goes to large businesses.