State leaders pledge fixes for leaky fuel tanks fund after audit finds cash diversions

LITTLE HELP?: Michigan’s effort to deal with leaking underground fuel tanks such as this one have been hamstrung by the diversion of more than $200 million in state money that was collected to address the problem. In the wake of a critical state audit, policy-makers are pledging reforms to the program to accelerate the cleanup of about 9,000 such tanks in Michigan. (courtesy photo)

Michigan’s fund for cleaning up leaking underground fuel tanks – a chronically underfunded effort is headed for an overhaul after a recent audit found that state officials diverted $216 million in designated cleanup funds to unrelated programs.

The diverted money was used, over the last decade, to plug holes in the state budget, even while Michigan struggled to deal with the nation’s second largest inventory of leaking underground gas tanks. Michigan has 9,200 leaky fuel tanks, all of which have the potential to poison groundwater and drinking water wells.

The number of leaky fuel tanks increased over the past decade, even though the state’s cleanup fund received more than $381 million to clean up those sites. That’s because less than half of the money -- $164 million -- was spent on tank cleanups and associated administrative costs, according to the state audit.

Cash diversion has bipartisan fingerprints

The Department of Environmental Quality, which oversees fuel tank cleanups, used $32 million of cleanup money instead for such things as monitoring air quality, fish contaminants and drinking water.

The state Treasury Department used $157 million in fuel tank cleanup funds to pay off Clean Michigan Initiative and Quality of Life bonds the state sold in the 1990s, while the Department of Agriculture and Rural Development spent $27 million on gasoline inspection programs.

Raids on the tank cleanup fund, known as the Refined Petroleum Fund, began when former Gov. Jennifer Granholm was in office. The Legislature approved the diversions, which helped offset Michigan’s budget crisis. The practice has continued under Gov. Rick Snyder, but to a lesser extent.

“The environmental community has strenuously objected to the misuse of the Refined Petroleum Fund by members of both parties for the past decade,” said James Clift, policy director at the Michigan Environmental Council. “The failure to use this money to protect the drinking water of Michigan residents is a problem that needs immediate attention … The Snyder administration needs to redirect these funds back to their intended purpose.”

DEQ spokesman Brad Wurfel said diverting cleanup funds was necessary during the state’s budget crisis.

“It was done at a time when stark budget shortfalls required some tough calls to be made throughout state government,” Wurfel said. “Any inference that the DEQ independently ran off and just started spending this fund inappropriately is just plain wrong.”

In 2014, the Snyder Administration will reduce the amount of money diverted from the tank cleanup fund to $12.7 million. The remaining $38 million would be used to clean up leaky fuel tanks, according to state records.

Cleanup program has surged, stalled

Michigan’s fuel tank cleanup program began in the late 1980s, in response to a federal mandate to replace old fuel tanks. At the time, Michigan had more than 100,000 registered underground fuel tanks; that figure has since been reduced to 18,777 tanks.

The state created the Michigan Underground Storage Tank Financial Assistance Fund in 1988 to help gas station owners pay for tank cleanups. Revenue came from a 7/8-cent fee that gas station owners paid on each gallon of gas sold, which generated about $50 million annually.

The MUSTFA program was eliminated in 1995, when heavy demand for cleanup grants made the fund insolvent. The state continued to collect the 7/8-cent fee on each gallon of gas sold, even though gas station owners could no longer access cleanup funds.

That fee pumped roughly $1 billion into state coffers between 1995 and 2012, but $850 million of that was used for purposes other than cleaning up leaky fuel tanks, according to a 2013 report by the state’s Underground Storage Tank System Cleanup Advisory Board.

That advisory board, which was appointed by the Snyder administration, has recommended a sweeping overhaul of the tank cleanup program. Among the recommendations:

--Ensure that all revenue generated by the 7/8-cent fee on gas sales, about $50 million annually, be used only on fuel tank cleanups.

--Eliminate the sunset on the 7/8-cent fee that funds the tank cleanup program. Currently the fee expires every three years and must be renewed by the Legislature.

--Create a quasi-public agency, a sort of non-for-profit insurance agency, to administer the cleanup fund and protect it from future diversions.

--Allow gas station owners to tap into the fund to pay for cleanups, provided they meet certain financial and insurance requirements and are willing to pay a deductible.

--Use the fund to clean up so-called orphan sites, where leaky fuel tanks have been abandoned and no one can be charged with cleaning up the mess.

The proposed changes would require approval from the Legislature and Snyder, but that won’t be an issue, according to DEQ senior policy adviser Anne Couture.

Couture, who last year supervised an overhaul of Michigan’s fuel tank cleanup standards, said the governor and legislative leaders are aware of proposed changes to the cleanup fund and are supportive.

“We’ve really developed a consensus around the idea that this fund was set up for a purpose and we need to get back to using it for that purpose,” Couture said. “We need to get this money to (fuel tank) owners and operators as well as using it to clean up orphan sites.”

Revamping the cleanup fund would be the final step in a total overhaul of Michigan’s underground tank cleanup program. Cleanup standards were revised last year after industry officials complained that the previous rules lacked clarity, which prolonged cleanups and drove the average cost of tank cleanups to $400,000  — highest in the nation.

Mark A. Griffin, who served with Couture and Clift on the tank cleanup advisory board, said the panel believes Michigan’s cleanup program should be modeled after the Ohio Financial Assurance Fund. The Ohio program helps tank owners with cleanup costs, provided they have adequate liability insurance, significant net worth and are willing to pay deductibles of up to $55,000 before accessing the fund.

“The Ohio program is best suited to Michigan’s needs,” said Griffin, who is president of Michigan Petroleum Association and Michigan Association of Convenience Stores.  “It would create a program that provides financial responsibility for owners and operators to clean up sites, offer a reimbursement program, and help with cleanups at orphan sites.”

Griffin said changes to Michigan’s fuel tank cleanup standards in 2012 already have spurred more cleanups. He said re-tooling the cleanup fund and halting diversions to other state programs would accelerate the pace of cleanups even more.

“In Ohio, they provide financial assurance and they help owner operators do cleanups for 23,000 sites, and they do it for  $15 million per year.” Griffin said. “We have 18,000 (active) tanks in Michigan, and we would certainly hope we could accomplish the same thing that they do in Ohio for a similar amount of money.”

Clift, of the Michigan Environmental Council, said his group is willing to explore new funding models for fuel tank cleanups, provided there is a process that forces businesses to get rid of old tanks.

“One-third of the tanks in the ground today are considered high risk due to their age or type,” Clift said. “We need a process that removes them from service before they become the leaking tanks of tomorrow.”