Summary of Report 01-020

February 2001

Report Number 01-020

Although state law requires the State to reimburse for costs associated with the cleanup of leaking petroleum storage tanks reported to the Natural Resource Conservation Commission (Commission) prior to December 23, 1998, the Commission does not have adequate resources to pay for all remaining eligible claims. The Commission needs an estimated $189 million in additional funds to pay for reported claims. Under current Texas Water Code statutes, the Petroleum Storage Tank Remediation (PSTR) Fund will expire on September 1, 2003, and payments for eligible tank cleanups will cease after that time. Because the Commission also uses the PSTR Fund to finance most cleanups associated with the State-Lead Program, the Commission must develop a methodology for predicting future costs associated with that program.

• The Commission should take steps to improve its PSTR Fund expenditure projection process. The Commission will need to adjust current projections after it determines the status of nearly 27 percent of reported cases (1,845 of 6,947) for which no activity has occurred within the past 18 months. In addition, the Commission should consider historical payment amounts for unresolved reimbursement protest claims. Historical payment rates indicate that the Commission encumbers more than is eventually paid for such claims. Although the Commission's encumbrance process is appropriate for accounting purposes, encumbrance amounts should be adjusted for projection purposes to give a more accurate picture of available funds.

• Heavy caseloads and high employee turnover in the Responsible Party Remediation (RPR) Section limit the Commission's ability to actively monitor and review cases and expedite site closures. Average monthly closure rates have dropped by 42 percent since 1998. In addition, the Commission does not perform regular inspections and monitoring at sites being cleaned up or closed. Site inspection and monitoring are the Commission's strongest safeguards against fraud, but they appear to be a low priority because program resources are needed elsewhere.

• The Commission must improve its financial assurance compliance and enforcement efforts to ensure that the State will not be liable for future tank cleanup costs. The Commission's new strategy for limiting liability to the State for these future costs requires tank owner/operators to choose among certain financial responsibility options. While some large owner/operators are financially able to self-insure, most are turning to commercial environmental liability insurance. The Commission should work with the regulated community to ensure that tank owners are able to find suitable insurance to meet Commission requirements.

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