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PA Bulletin, Doc. No. 96-141



[25 PA. CODE CH. 971]

Fees of the Underground Storage Tank Indemnification Fund

[26 Pa.B. 491]

   The Underground Storage Tank Indemnification Board (Board) proposes to amend § 971.2 (relating to fees) as set forth in Annex A. This revision is proposed under the authority of the Storage Tank and Spill Prevention Act (act) (36 P. S. §§ 6021.101--6021.2104), as amended by the act of December 18, 1992 (P. L. 1660, No. 184) (Act 184) and by the act of June 26, 1995 (P. L. 79, No. 16) (Act 16).

   The purpose of this proposal is to amend § 971.2 which governs the fees of the Underground Storage Tank Indemnification Fund (Fund). The proposed amendment comports with the recent changes made to the act. Specifically, the Board seeks to amend the existing fee structure and to change the administration of those underground storage tanks (USTs) that store regulated substances as defined by the act and regulations promulgated thereunder.


   The Board has studied carefully the numerous amendments to the act to determine the effect new provisions will have on Fund liabilities and the resulting Fund fees. The most significant amendment eliminates commercial heating oil tanks (CHOTs), defined as USTs that equal or exceed 3,000 gallons in capacity storing heating oil for consumptive use on the premises where stored, from the definition of regulated USTs. However, the amendments to the act allow owners or operators of CHOTs to participate in the Fund voluntarily. CHOTs represent approximately 20% of all USTs registered with the Department of Environmental Protection (Department). However, the Fund estimates that CHOT liabilities will constitute approximately 60% of the Fund's total liabilities for the period January 1995, to December 2004.

   A second provision requires the Board to assess the per-gallon and per-tank fee on diesel fuel USTs located at farms in lieu of the current capacity fee assessment.

   On February 15, 1992, the Board promulgated a dual-component fee structure consisting of a 2¢ per gallon fee on regulated substances entering USTs and an annual $100 per tank per year fee. On December 18, 1992, Act 184 required the Board to establish a capacity fee on USTs that store heating oil and diesel fuel products. The Board amended its fee section to comport with Act 184 mandates. The amendment was published in final form on December 17, 1993.

   On June 26, 1995, the Legislature passed Act 16, which once again amended the fee structure. Consequently, the revisions contained herein are being promulgated to ensure that the Board's fee structure complies with the mandates of Act 16. Under the Board's proposed rulemaking, the per gallon and per tank fees will be changed as indicated in Annex A. The capacity fee will also be changed as indicated in Annex A.

Summary of the Proposed Amendment

Section 971.2(1) and (3)

   The Board is adding language to these paragraphs to clarify the product types upon which the tank fee, gallon/fee and capacity fee will be assessed. The additional language is provided to address concerns raised by Fund participants during routine telephone and written correspondence with the Fund. The Department registers regulated USTs based on information supplied by the UST owners or operators and provides this information to the Fund. The proposed clarifying language provides UST owners and operators with the link between the registration information they provide to the Department and the type of fee assessed on their UST by the Fund.

Section 971.2(1)(i) and (ii)

   Section 705 of the act, as amended, authorizes the Board to set fees to be assessed on regulated USTs within this Commonwealth. These fees shall then be established by regulation. A statutory requirement imposed upon the Board at section 705(d) of the act ensures that the fees are set on an actuarially sound basis.

   To ensure that the fees proposed under this amendment are established on an actuarially sound basis, the Board contracted with William M. Mercer, Inc. (Mercer), an actuarial consulting firm, to provide revenue projections and recommended fees. Mercer estimated the liability of the regulated USTs under the recently-amended act and estimated the liability associated with voluntary participation of owners or operators of CHOTs at various levels of participation in 25% increments ranging from 0% to 100% participation. Mercer also studied the revenue impact of diesel fuel tanks located at farms which will revert to the per tank and per gallon fee from the currently-assessed capacity fee.

   The Board estimated that 25% of CHOTs would eventually participate in the Fund through the voluntary Opt-In program. At this level of participation, required revenue for the Fund for the period January 1995, through December 2004, is estimated to be $700.08 million. This level represents a 35.5% reduction from the Board's previous analysis dated December 1994.

   The overriding cause for the reduction in required revenue is the expected decrease in the number of CHOTs that elect to participate in the Fund.

   At a special meeting of the Board on July 18, 1995, the Board eliminated the current $100 per tank per year fee and decreased the gallon fee to 1¢ from its current level of 2¢ per gallon. Moreover, the Board increased the capacity fee from 15¢ to 24¢ per gallon of tank capacity. These proposed amended fees are set forth in Annex A.

Section 971.2(3)

   Section 705(d)(2) of the act, as amended, provides the Board with a formula to use in determining the capacity fee. The Board must ''determine the total revenue a uniform per tank, per gallon insurance fee for all underground storage tanks would generate if it were applied to heating oil and diesel fuel tanks and divide that number by the total tank storage capacity of heating oil and diesel fuel tanks registered with the Department at the beginning of the policy period.'' The recommended change in fee structure is revenue neutral in that the same gross amount will be collected from all diesel fuel and heating oil product UST owners or operators under the new capacity fee schedule as would have been collected under the proposed per gallon fee schedule.

   Mercer recommended that a capacity fee of 24¢ per gallon of capacity be adopted. Mercer based this recommendation on an actuarial analysis of heating oil and diesel fuel product UST capacity information maintained by the Department as part of their tank registration program. Mercer's analysis indicated that a 24¢ per gallon of capacity fee would generate the same total revenues from diesel fuel and heating oil product UST owners or operators as would have been collected under the proposed gallon fee schedule.

   The Board, at a public meeting on July 18, 1995, discussed its findings and voted to adopt formally the fee schedule shown at § 971.2(3) in Annex A.

Fiscal Impact

State Government

   The Commonwealth will not experience a direct fiscal impact because the expenses of the Fund will come from the fees paid by the UST owner or operator. However, the Commonwealth may bear the cost of defending legal actions initiated against the Fund.

General Public

   Costs to the general public may decrease due to the likelihood that the costs of goods and services supplied by the UST owners or operators to the general public will decrease. However, heating oil and diesel fuel UST fees will increase based on the capacity of the UST.

Political Subdivisions

   Costs to political subdivisions may decrease based on the number of USTs owned, and the amount of regulated substances entering the USTs. However, heating oil and diesel fuel UST fees will increase based on the capacity of the UST.


   The adoption of this amendment will not immediately require additional paperwork by the regulated community. In fact, the elimination of the tank fee as proposed may reduce paperwork requirements for owners and operators to which the tank fee applies.

Contact Person

   Questions or comments concerning this proposal should be addressed in writing to Ronald A. Gallagher, Jr., P.E., Executive Director, Underground Storage Tank Indemnification Fund, 901 North 7th Street, Harrisburg, PA 17102, within 30 days of the publication of this proposal in the Pennsylvania Bulletin.

Regulatory Review

   Under section 5(a) of the Regulatory Review Act (71 P. S. § 745.5(a)) , the Board submitted a copy of this proposed amendment on January 18, 1996, to the Independent Regulatory Review Commission (IRRC) and to the Chairpersons of the Senate Environmental Resources and Energy Committee and the House Environmental Resources and Energy Committee. In addition to submitting the proposed amendment, the Board has provided IRRC and the Committees with a copy of a detailed regulatory analysis form prepared by the Board in compliance with Executive Order 1982-2, ''Improving Government Regulations.'' A copy of this material is available to the public upon request.

   If IRRC has any objections to any portion of the proposed amendment, it will notify the Board within 30 days after the close of the public comment period, specifying the regulatory review criteria which have not been met by that portion. The Regulatory Review Act specifies detailed procedures for review prior to final publication of the regulation by the Board, the General Assembly and the Governor of objections raised.

Executive Director

   Fiscal Note:  11-129. No fiscal impact; (8) recommends adoption.

Annex A




§ 971.2.  Fees.

   The fees in this section are assessed to finance the Fund by tank category as follows:

   (1)  USTs [which] that store regulated substances other than heating oil and diesel fuel products. For purposes of this section, ''regulated substances other than heating oil and diesel fuel products'' include, but are not limited to, gasoline, gasohol, aviation fuel, hazardous substances, new motor oil and other products registered with the Department of Environmental Protection under the substance codes ''other'' and ''mixture.'' In addition, USTs storing diesel fuel and located at farms shall be assessed fees under this section.

   [(i)  A per tank fee on USTs set at $100 per regulated UST per year.

   (ii)]  A per gallon fee imposed on all gallons of regulated substances entering regulated USTs set at []per gallon.

   (2)  USTs [which] that are used for nonretail bulk storage or wholesale distribution of gasoline. Total fees paid by owners or operators of nonretail bulk storage or wholesale distribution USTs storing gasoline are calculated using the method described in paragraph (1) and are capped at $5,000 per UST per year in accordance with section 705(d)(3) of the act (35 P. S. § 6021.705(d)(3)).

   (3)  USTs [which] that store regulated substances limited to heating oil products and diesel fuel products. A per-gallon-of-capacity fee on regulated USTs storing heating oil or diesel fuel products set at [15¢] 24¢ per gallon of capacity, which amount is calculated in accordance with section 705(d)(2) of the act.

[Pa.B. Doc. No. 96-141. Filed for public inspection February 2, 1996, 9:00 a.m.]

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