The purpose of the Environmental Assurance Program (EAP) is to ensure that Petroleum Storage Tanks (PSTs) are managed in accordance with federal and State laws and regulations. Leaking PSTs (LPSTs) can contaminate soil and groundwater, and groundwater accounts for about 96 percent of Utah’s drinking water. In addition, toxic and potentially explosive petroleum vapors can get into subsurface utilities, basements, homes, schools, and workplaces.
Federal and state laws require that all PST owners/operators have the financial ability to pay for the investigation and cleanup of petroleum releases (leaks) from PSTs. The amount of financial assurance required depends on the type of business using the PSTs. Petroleum non-marketers must have $500,000 and marketers must have $1 million in coverage.
In 1989, the Utah State Legislature created the Petroleum Storage Tank Fund (PST Fund) to provide PST owner/operators with a cost-effective way to meet the federal financial assurance requirements. Other ways of meeting this requirement include private insurance and self-insurance (see Demonstrating Financial Responsibility. For releases from PSTs that occur after July 1, 1994, the PST owner/operator must pay a $10,000 deductible. After the deductible is paid, the EAP will cover eligible expenses (for releases reported on or after May 11, 2010) up to $990,000 (non-marketer) or $1,990,000 (marketer); twice the amount of coverage required by federal regulations.
Coverage under the EAP is similar to an insurance policy and is essentially funded by both mandatory and voluntary petroleum storage tank fees. One of these fees is the legislated 13/20 cent surcharge per gallon of fuel either sold or passed through a dispenser (for non-marketers). For releases (tank leaks) covered by the EAP, the responsible party pays the first $10,000 (the “deductible”) and cleanup coverage by the EAP extends to up to $2 million. To date, approximately $135 million has been expended from the EAP. Based upon the FY2021 Actuarial Report, approximately $27.4 million is needed to complete the remaining known cleanups.
To qualify for coverage by the EAP, owners/operators must submit an eligibility application to the DERR. The potential EAP claimant must declare whether they have other insurance coverage. If they do, the EAP would be subrogated to any other insurance coverage, i.e., the “other insurance” would be primary and the EAP would be secondary. For example, if an EAP claimant received money from both private insurance and the EAP, the claimant would be required to pay back the EAP.
Fraudulent Use of State PST Fund
It is believed that State funds have been paying for cleanups for which there has been insurance and/or for which major oil companies have recovered insurance settlements. The Utah Attorney General and the Division of Environmental Response and Remediation entered into a Professional Services Contract in February 2011 to join with outside counsel in further researching and potentially litigating this issue to recover monies expended by the PST Fund for which insurance payments and/or settlements were also disbursed to the owner/operators.
- Settlement Agreement and Release
(12/14/12)—Terms of agreement.
- Chevron Pays State $1.8 Million in Petroleum Fund Claims
(12/13/12)—DEQ press release.
- Utah Seeks $1.5 Million in Unlawful Insurance Claims from BP Amoco
(12/04/12)—DEQ press release.
- Full Court Document
(07/09/12)—Summons Case Number: 120904553.
The Utah Attorney General’s Office, on behalf of the Division of Environmental Response and Remediation—the Division overseeing the fund—filed legal claims against ConocoPhillips and BP Amoco, alleging that the oil companies unlawfully received a number of payments for the State PST Fund even though they had their own private insurance.
Most recently, the State reached a settlement agreement with Chevron, in which the company agreed to pay $1.8 million in a separate PST Cleanup Fund. Other states have filed similar claims.