1. EQSC Presentation on Petroleum Program October 20, 2009 Bruce Palin Assistant Commissioner Office of Land Quality Indiana Department of Environmental Management 1

2. Excess Liability Trust Fund ELTF Fund Income Half of tank registration fees ($90/tank/year) $0.01 for every gallon of gas and diesel sold Fund Expenses Cleanup expenses for eligible tank owners Fund administration and some inspections 2

3. Protection of the Fund ELTF provides federally required financial assurance for tank owners which replaces the need for private environmental insurance Protection of the fund to maintain financial assurance is paramount Fund balance dropped to just over $5 million prior to the inspection fee increase of 2005 Priority payment implemented to protect financial assurance function of the fund 3

4. Protection of the Fund Tank fees paid by owners $750,000/year Inspection fees passed on to consumers - $.01/gallon ~ $50 million/year Cleanup claims averaging $35 million/year Administrative costs ~ $5 million/year Average site reimbursement ~ $260,000 4

5. ELTF Income / Expenses in $ Million 5

6. Leaking Tank Review and Claim Process Leak Discovery and Release Notices Sent Site Characterization – Determines the extent of the impact Corrective Action Plan Implementation of Remediation No Further Action Letter 6

7. Magnitude of Underground Tanks 4,025 active underground storage tank sites 8,824 leaking underground storage tank sites 6,768 leaking sites addressed (77%) 200 new releases per year 17 project managers plus 17 technical staff (geology, chemistry, etc.) 7

8. FY 09 Processed and Denied Claims 3,342 Claims processed Total amount submitted - $63,308,795 Total amount reimbursed - $32,939,214 Denials – Inappropriate claims - $4,300 Sales Pitch to win bid for cleanup (Deliverable: Powerpoint presentation) – Exceedence of costs allowed in rule 70 to 80 claim appeals open at anytime 8

9. Revisions for Consideration Underground Petroleum Storage Tank Excess Liability Trust Fund (ELTF) Deductible Definition of Owner Revised cap on annual claim amounts Clarify cost recovery by IDEM Use of ELTF to address non-ELFT eligible releases 9

10. ELTF Deductible Did not upgrade tanks before 12/22/98 – $35,000 Deductible Did upgrade tanks before 12/22/98 – $25,000 Deductible (Change back to $30,000) Upgraded tanks and has double walled piping – $25,000 Deductible Upgraded tanks and has double walled tanks – $25,000 Deductible Upgraded tanks and has double walled tanks & piping – $20,000 Deductible 10

11. Definition of Owner Need clarification that the owner of the property that contains, or contained, a tank is considered the owner of the tank and any contamination resulting from the tank ALJ decision that if the current property owner never operated the tank then they don’t own the tank. Leaves the agency with contaminated site and no one responsible for cleaning it up 11

12. Definition of Owner Example Widow inherits property that her husband leased to his brother to operate a gas station that went out of business A Superstore purchases a site where a tank was removed but did not go through proper closure and verification of no contamination was not done 12

13. Proposal: Owner Definition Revise definition to clarify that ownership of property makes you legally liable for complying with tank closure and leaking tank requirements Put state in same position as a third party suing a responsible party and property owner for damages 13

14. Cap on Annual Claim Amounts ELTF statute establishes an annual cap of $3 million for reimbursed claims per owner One gasoline distributor has accumulated over $16 million worth of claims since 2004, in excess of the $3M annual cap In FY 2009 they submitted $6.3 million worth of claims. They have averaged $5 million per year 14

15. Cap on Annual Claim Amounts Agency would like to clear the books of hidden liability as it makes ELTF appear to have a higher balance than it does Left unaddressed the hidden liability could grow to equal the “apparent” balance of the fund ELTF Balance as of 6/30/09 - $52,668,163 Subtracting hidden liability - $36,276,129 15

16. Good Question Why has one distributor spent so much money on cleanups? They own the stations that sell their product They have 16% of the sites in ELTF but only 14% of the dollar claims Average cleanup cost is $32,000 per site less than all others Take responsibility for both new sites and ones they have sold 16

17. Proposal: Annual Cap Raise the cap to reduce the growing liability Tie the increased cap amount to a minimum required fund balance to protect the fund 17

18. Cost Recovery Leaking underground storage tanks that are not covered by ELTF are also regulated by IDEM Both Federal and State funds used to address these sites EPA expects states to do cost recovery to keep cleanup funds viable Recent challenges to IDEM authority to do cost recovery for plan review and approval have identified the need to clarify that authority 18

19. Proposal: Potential Loss Estimated value of agency oversight for these remediations $850,000/year $1.4M Federal grant matched by Petroleum Trust fund is used to fund portion of personnel in leaking tank program Grant recipients expected to recover costs from responsible parties 19

20. Expanded Use of ELTF Currently Petroleum Trust Fund is only source to address abandoned sites Receives ≈$750,000 per year tank fees Expends ≈$700,000 per year on staff salary and contractor review for low and medium priority sites Combining ELTF and Petroleum Trust with 10% cap would severely reduce agency resources Petroleum Trust balance decreasing $.5 million/year 20

21. Expanded use of ELTF Three categories of sites needing remediation Abandoned tank sites which are not currently eligible for ELTF (≈200 to250) Sites not fully ELTF eligible due to lapsed tank fee payments Sites fully eligible for ELTF 21

22. Expanded Use of ELTF Allow use of ELTF by currently ineligible sites with higher deductible Allow agency to hire contractors to address abandoned sites and submit claims 22

23. Proposal: Expanded Use of ELTF Important to protect the viability of the ELTF to continue financial assurance Based on numbers there is room to utilize a portion of the ELTF to address abandoned leaking tanks and expand environmental protection Caps or percentage limits could be put in place to assure viability of the fund Structure the expanded use to reduce eligibility litigation costs 23

24. Operator Training Update Last session proposal to give Homeland Security / Fire Marshall’s Office authority to set up federally required Operator Training IDEM is working with industry representatives to recognize a National Training program to satisfy this federal requirement 24

25. Questions? Brad Baughn Legislative Liaison 317-234-3386 bbaughn@idem.in.gov 25