January 2017 Bar Bulletin
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January 2017 Bar Bulletin

Washington Creates New Funding Mechanism for Updating and Cleaning up Underground Storage Tanks

By Sarah Wightman

 

In April 2016, the Washington Legislature established the Underground Storage Tank Revolving Loan and Grant Program.1 This program, jointly administered by the Washington State Pollution Liability Insurance Agency and the Washington State Department of Health, provides funding to current underground storage tank (“UST”) owners and operators to clean up contamination caused by underground storage tanks, and replace or upgrade tank infrastructure, with a special emphasis on installing new alternative fuel infrastructure.

Many landowners affected by legacy or migrating contamination are not eligible for this program, as only current UST owners or operators are eligible for funding. This program, although small in scope, may mark a trend of shifting some responsibility for cleaning up historical contamination away from the Washington State Department of Ecology (“Ecology”) to other agencies.

Overview

Program Administration

The Underground Storage Tank Revolving Loan and Grand Program (“UST Loan Program”) is jointly administered by the Pollution Liability Insurance Agency (“PLIA”) and the Washington Department of Health (“DOH”) (collectively “Agencies”), with PLIA providing technical expertise and project management, and DOH bringing its expertise in program administration and financial lending.2

PLIA was established in 1989 with a mandate of implementing a reinsurance program that would allow UST owners and operators to obtain affordable UST insurance.3 PLIA also implemented the UST Community Assistance Program in the early 1990s, which gave grants to UST owners in rural areas to fund upgrade and cleanup costs.4 In the mid-1990s, PLIA began offering pollution liability coverage and technical assistance for heating oil tanks, which are not covered under the UST insurance program.5 PLIA brings its experience with UST insurance and cleanup to the administration of the new UST Loan Program.

DOH is a large agency that handles a wide range of public health programs, including: emergency preparedness and response to bioterrorism, infectious disease, and natural disasters; management of public records such as births, deaths, marriages, and hospitalizations; food and drinking water safety; and disease prevention.6 DOH’s experience with loan programs such as the Drinking Water State Revolving Loan Program7 and program administration will be helpful in implementing the new UST Loan Program.

The UST Loan Program took effect July 1, and the Legislature has allocated $2.5 million for start-up activities and $10 million for the operation of the program in fiscal year 2017.8 The money is allocated from the Pollution Liability Insurance Program Trust Account, which is funded by the petroleum products tax. With the administration of this program in mind, PLIA has hired three new personnel, including a hydrogeologist, fiscal analyst and community involvement coordinator.9

The UST Loan Program will be governed by PLIA rules; however, official rulemaking is forthcoming with an estimated completion date of spring 2017.10 In the interim, the UST Loan Program rules have been established by a non-binding guidance document.11

Program Goals and
Project Eligibility

The UST Loan Program’s goal is to provide UST owners and operators with access to capital to: 1) replace, remove or upgrade aging USTs; 2) clean up historical or ongoing contamination caused by a UST release; and 3) transform old gas stations into the “gas stations of the future” by replacing old infrastructure with new infrastructure that can dispense renewable fuels or alternative energy sources for motor vehicles, including electric vehicle charging stations.12

Grants and loans are only available to current owners and operators of petroleum USTs. A facility is not eligible if it is under a Model Toxics Control Act (“MTCA”) order or decree.13 Any asset acquired with program funding must have a useful life of 13 years.14 Costs of developing the application package, legal costs, costs incurred before admittance into the program, costs outside the PLIA-approved scope of work, and advance payments for services or equipment that have not been received are ineligible for funding.15

PLIA considers certain criteria when awarding grants and loans, including (in order of importance): age of the tanks; threat to drinking water, surface water and groundwater; extent of contamination; insurance need; financial need; whether the current insurance policy is exceeded; environmental justice factors; and the need of and benefit to the surrounding community.16 Projects that include electric vehicle charging stations may be awarded an interest rate reduction in the final loan.17

Process

1. Eligible UST owners and operators apply to PLIA for preliminary planning assessment (“PPA”) funds.


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