Albion Monitor /News
For background on this story, see "State Loosens Gasoline Spill Cleanup Rules" in our last issue.

Winners, Losers in Underground Tank Cleanup

by Jeff Elliott

"I'm not sure property owners understand what the implications might be"

The new, looser requirements on leaking underground tank cleanup is likely to be good news for the state and large industrial polluters such as oil refineries, but cause legal and financial nightmares for small businesses and homeowners, analysts say.

Under the recommendations made by the state water board,"low-risk" sites --locations where the gasoline or fuel oil contamination is at least 250 feet from a well and does not extend more than 50 feet below the surface -- will be evaluated in upcoming months and many of the cases will be closed, with no further cleanup required.

Although the state keeps no statistics, consultants and water board employees who oversee contaminated sites confirm that the majority of such cases are on land owned by individuals or small businesses. These parties currently have first dibs on state cleanup money, which will reimburse them up to $1 million for cleanup and legal costs.

But once the site is deemed closed, the owner of the property is no longer eligible for state funds. This means that if they need to remove the contamination in order to sell the property or obtain a bank loan, the homeowners or small businesses will have to pay themselves.

"I'm not sure property owners understand what the implications might be," says Arnold Peters, consultant for the state Senate Toxic and Public Safety Committee. "It could leave property owners holding the bag. The assumption is that the contamination will go away on its own.

"But if the state is not liable for reimbursements and [the contamination] crosses property lines, the property owner has to pay all costs without reimbursement -- and they would be subject to third-party lawsuits from their neighbors."

Leaving property owners with toxic soil and groundwater presents a variety of problems that have not yet begun to be addressed, even though the first closures are expected later this month.

James Giannopoulos, manager of the underground storage tank program for the State Water Board, suggests that deed restrictions might be necessary if a contaminated site is declared closed. To let others know about the pollution, Giannopoulos speculates, "maybe we'll have a database of sites for agencies connected to building and well drilling."

"This is the reality of it: the driving force in this is money"

In many cases, the homeowners and small businesses faced with paying cleanup bills that average $37,000 are simply unlucky, and not responsible for the original contamination.

"[Private underground gas] tanks were a normal thing to have at one time," explains North Coast Water Board program manager Luis Rivera. "Many commercial businesses had a tank for their trucks. There is also lots of property where there may have been a gas station, and a fair number just where a garage used to be.

"But now that we're funding cleanups, we're finding there is not enough money to go around."

The state money comes from a per-gallon fee paid by all owners and operators of underground fuel tanks. That fee is currently $.009 per gallon, rising to $.012 next year. But current estimates show that the fund will be $1.5 billion short of the $3 billion required to clean up all 20,573 sites within the next ten years, when the fee ends.

"Lots of money is coming in, but incredible amounts are going out," says Dave Deaner, manager of the cleanup fund. "For example, amendments to existing claims have the highest priority -- we don't want to leave someone high and dry when cleanup has been approved.

"In fiscal year 1994-95, we had $28 million in amendments. For FY 1995-96, we thought it was safe to budget $50 million. But $52 million in amendments have come in during the last six months, and the year is only half over. We're approaching gridlock; we have to do something.

"This is the reality of it: the driving force in this is money."

"We're concerned that big oil is driving this"

The state of California has a complex system for paying back property owners for cleanup costs. Cases are first assigned as belonging to one of four classes:

  • Class A: homeowners
  • Class B: small or minority businesses
  • Class C: California-based businesses with less than 500 employees and independently owned/operated
  • Class D: other

    The "other" classification includes sites such as refineries, large corporations with trucking fleets, and state or federally-owned sites, such as former military bases.

    The state fund will pay up to $1 million for cleanup and lawsuits against the property owner. Although homeowners have no deductible, class B and C parties must pay the first $5,000, and class D claimants are responsible for the first $10,000.

    Claims for class A cases are paid first, followed by the others in alphabetical order. All of the homeowners with approved claims have received some payment, but only about 18 percent of the class D cases have been paid. Similarly, a much larger percentage of class A cases have been cleaned up and closed.

    Class Total
    State Payments
    (in millions)
    A (homeowners)14535$3.4145
    B (small business)2,400164$118.62,012
    C (midsize business)2,00036$57.1764
    D (other)4,23517$118.1241

    But if many "low-risk" sites are closed in the A and B classes, millions of dollars from the state fund will be available for class C and D cleanup -- sites owned by larger companies, such as petroleum refineries.

    "We're concerned that big oil is driving this. They've been working for years to reduce the scope of the program," says Bonnie Holmes, the Sierra Club's state legislative director. "There's been a general movement by them to get the state to shut down toxic sites." Holmes is concerned that 80 to 90 percent of all sites could be closed as a result of the new guidelines.

  • Shell Oil contributed about $30,000 to the costs of producing the controversial Lawrence Livermore report

    In related news, it has been learned that Shell Oil contributed about $30,000 to the costs of producing the controversial Lawrence Livermore report, described in our last issue. This report was the basis for the new state guidelines.

    The Albion Monitor has obtained new documents critical of the report. One of them, from the director of a southern California environmental health department, blasted the report for its conclusions that "...are clearly opinions of individuals with vested interests."

    This document also says that Lawrence Livermore removed critical sections between an April draft of the report and the final October version. Eliminating these sections, the memo states, "...suggests a bias and a willingness to exclude consideration of certain approaches on the part of the report's authors."

    While the Lawrence Livermore report was criticized because it was not evaluated by agencies such as the California EPA, a spokesman for the state agency says, "we think the state's [water board recommendations are] prudent, based on the strength of the scientific findings in the Lawrence Livermore report. They did the right thing."

    The CAL-EPA spokesman, however, admits that they rely upon the state water board for scientific analysis, and the agency has no hydrologists of its own.

    Albion Monitor January 12, 1996 (

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