Wednesday, June 3, 2015 12:00 AM

Michigan Banker (Cover Story May 2015) - Michigan's New Underground Storage Tank Cleanup Fund


By: J. Berlin, PE, CP, R. Spehar, PE, EP
Tags: None


 

“Learn from history or you’re doomed to repeat it.” Jesse Ventura (former Minnesota Governor)

“We keep repeating history even though its flaws are so inherently obvious.” Berlin’s corollary

 

As most that deal in the retail fuel sales and convenience store market already know,  Michigan now has a new cleanup fund (Fund) as of the end of last year (2014).   The Fund serves as a new means to meet Financial Responsibility Requirements (FRR) for operation of underground storage tanks (USTs), which for the past 20 years in Michigan has generally been met through obtaining private environmental liability insurance.  This is not the first time Michigan has had such a fund. From 1989 to June 1995 we had the Michigan Underground Storage Tank Financial Assurance (MUSTFA) fund. Some details of the good and bad (lots) of MUSTFA can prove insightful as we assess how a UST operator and their lender can assess how the new Fund affects their business. Here are some details on MUSTFA:

 

·       Provided reimbursement for investigation and cleanup for UST releases reported from July 18, 1989 through June 29, 1995.

·       Claims disbursements began as of February 15, 1990

·       There was no prioritization or allocation of claims process

·       Many claims were rejected in full simply for missing a reporting deadline

·       The initial Approved Consultant list was developed in 1991

·       MUSTFA was deemed insolvent on at least two occasions (1992 and 1995)

·       To keep MUSTFA solvent bonds were issued in 1993 totaling $215 million

·       Ceased reimbursing for expenses incurred after June 29, 1995

·       Reimbursed approximately $625 million to owners/operators of USTs during its operation

o   During MUSTFA the 7/8 cent tax averaged $68.3 million annually versus $20 million allocated under the new Fund

·       MUSTFA was well-known for its waste and abuse. The most cited cause of waste and abuse were unqualified and unscrupulous consultants and contractors (C/C). There were few controls on the C/C most notably no mechanism for complaints or enforcements, such as for licensed engineers or accountants (http://www.michigan.gov/documents/lara/LCE-992_474650_7.pdf ).

 

One other state (Arizona) is at about the same point as Michigan in implementing a new Fund. One big difference between Arizona and Michigan is that Arizona conducted a detailed actuarial study of various fund scenarios prior to implementing their Fund. In so doing, the market (e.g. owners, lenders, insurers) could understand the Fund details, including Fund longevity and solvency. 

 

Without addressing the shortcomings of MUSTFA, the new Fund will be a poster child of insolvency.  In follow up pieces we will discuss the details, or lack thereof, of the new Michigan Fund and its current status for stakeholders.

 

Please feel free to contact Joe Berlin, PE, QC, CP, Rich Spehar, PE, QC, EP or Marty Janowiak at BLDI’s Grand Rapids main office (616-459-3737) with any questions.

   

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