Monday, December 29, 2014 12:00 AM

New Michigan Cleanup Fund for 2015


By: Joe Berlin and Rich Spehar
Tags: None


Legislature Approves Bill to Establish New UST Cleanup Program

 

by Joseph Berlin, PE, CP(OH) and Rich Spehar, PE

Senate Bill 791 passed awaits Governor signature.

 

Yesterday (12/17/14) the Michigan Legislature passed Senate Bill 791, amending multiple sections of the Natural Resources and Environmental Protection Act (NREPA). The Governor is expected to sign the Bill in the next few days. Specifically, the bill changes the title of Part 215 of NREPA from “Refined Petroleum Fund” to “Underground Storage Tank Corrective Action Funding” and revises the State's program for funding cleanup to address releases from refined petroleum underground storage tank (UST) systems. Under the new program, a portion of the current 7/8 cent fuel tax will be used to establish and maintain the new UST Cleanup Fund (Fund). The Fund should replace private UST insurance. The Senate Bill Analysis provides further detail.

 

The Bill provides for a new Authority (think Mackinac Bridge Authority) to administer the Fund. Based on BLDI’s work on the MPA Environmental Committee, the Authority will likely issue bonds to cover the first few years of potentially high claims and then borrow against the stream of future income so that Fund shortages do not occur, particularly in the early years of the Fund.

 

The Fund will utilize a portion of the current 7/8 cent gas tax for its intended purpose - to provide funds to meet the financial assurance (FA) requirements for UST owners. Since the demise of the original Michigan Underground Storage Tank Financial Assurance (MUSTFA) fund in 1995, most owners have used private insurance to meet the FA requirements. For owners with older USTs, this insurance has continued to increase in cost and has become more and more difficult to obtain, in turn, contributing to fraudulent practices within the industry. In fact, two Michigan insurance brokers recently pled guilty to selling fake UST insurance certificates (see: Grand Rapids Business Journal 12/3/14).  

 

Although the changes are effective immediately, the Fund likely will begin to accept claims in mid-2015. Until that time, UST owners must keep their private insurance in place.  Renewals may be problematic during this transition. BLDI has been in contact with at least one insurer that plans to continue to write UST insurance going forward.

 

Some specific Fund attributes:

  • Allows a refined petroleum UST owner or operator (O/O) to receive money from the Authority for a release that is discovered and reported after the bill's effective date.
  • Provides for a standard deductible amount of $50,000 per claims.

  • Allows an O/O of eight or fewer USTs to obtain a lower deductible of $15,000 per claim if the O/O pays an annual fee of $500 per tank. (Note: each compartment of a multi-compartment tank is considered a tank for fee purposes).

  • Requires approved claims to be paid within 45 days after the proper determinations. That being said, there is a specific process requiring the Authority to prioritize payments, should there be insufficient money available to pay all approved claims. The Bill provides that the Authority and the State will not be liable for work invoices or indemnification requests if revenue is insufficient.

  • Allows an O/O whose claim or request was denied to request review by the Authority's board of directors, and allows the administrator to attempt to negotiate a resolution before the board's review.

  • Allows an O/O who was denied approval after the board's review to appeal the decision to the circuit court.

  • Caps the amount that can be used for the reasonable administrative cost of implementing the program to a maximum of 7% of the Fund's projected revenue in any year.

  • Provides funding to Michigan Department of Environmental Quality (MDEQ) for the cleanup of orphan sites. 

 

The Fund will be designated to pay the following three expenses:

  • Principal and interest for any bonds or notes issued by the Authority;
  • Administration costs (not to exceed 7% of fund revenue); and
  • Approved cleanup claims from an O/O.

The Authority will develop a schedule of costs. It is believed that this schedule will look similar to the one used under Ohio’s Cleanup Fund (PUSTRCB). The schedule may vary throughout Michigan based on regional price differences.

 

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

   

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