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Tank Owner and Operator Financial Responsibility Information

Questions and Answers

It is important for tank owners and operators to understand what submission of the State Oil Spill Fund as a financial responsibility mechanism means. The following pages are dedicated to the subject of financial assurance.

The Spill Fund - The New York Environmental Protection and Spill Compensation Fund (the "Oil Spill Fund") was established in 1977 by Article 12 of the State Navigation Law. This Fund is a non-lapsing, revolving fund that is financed by an eight cent per barrel fee on the first transfer of petroleum to a major petroleum facility in New York State, as well as recoveries and penalties from responsible parties. The Fund is not limited to releases from underground storage tanks, as it covers releases from any source such as vessels, vehicles, pipelines and aboveground tanks, both to surface and ground waters. Currently, the Oil Spill Fund is used to remediate approximately 5% of all reported petroleum discharges, with responsible parties paying the cost of the other 95%.

Following are typical questions asked by tank owners:

What is "financial responsibility" and does it apply to you?

Federal law1 and the Federal Underground Storage Tank (UST) Regulations (40 CFR 280.90 - 280.112) require that owners and operators of certain underground tanks have the financial means to help pay for the costs of corrective action and third party damages caused by a release from their underground tank. These costs could include cleaning up leaked petroleum, correcting environmental damage, supplying drinking water, and compensating injured parties for personal injury or property damage.

1Subtitle I of the Resource Conservation and Recovery Act

What kinds of underground tanks are covered by the federal law?

Underground petroleum tanks, including the connecting pipes, which have a capacity of more than 110 gallons are covered. Certain tanks have been exempted from the law including heating oil tanks used for on-premises consumption, farm or residential tanks with a capacity of 1,100 gallons or less which store motor fuel for noncommercial purposes, field constructed tanks and others.2

2 See 40 CFR 280.12

Which tank owners and operators are covered by the Governor's submission of the Oil Spill Fund as a financial assurance mechanism?

The State Oil Spill Fund has been submitted as a financial responsibility mechanism for tank owners who fall into categories 3 and 4 below.

The EPA regulations categorize tank owners as follows:

Category 1. All petroleum marketing firms owning 1,000 or more UST's, and all other UST owners that report a tangible net worth of $20 million or more;

Category 2. All petroleum marketing firms owning 100 - 999 UST's;

Category 3. All petroleum marketing firms owning 13 - 99 tanks at more than one facility; and

Category 4. All petroleum UST owners not described in 1 - 3 above, including all local government entities.

"Petroleum marketing firms" are firms owning petroleum marketing facilities.

"Petroleum marketing facilities" are facilities at which petroleum is produced or refined and facilities from which petroleum is sold or transferred to other petroleum marketers or the public.

Does the Oil Spill Fund provide insurance to tank owners?

No. The Oil Spill Fund is not an insurance fund. One mechanism allowed under the federal regulations for showing evidence of financial responsibility is inclusion in a state "assurance" fund. In an assurance fund, such as the State Oil Spill Fund, the State assures that monies will be made available, in the State's discretion, to remediate releases from underground storage tanks to protect the public health and the environment should the tank owner or operator not take appropriate action.

If my tank leaks, will the Oil Spill Fund pay cleanup costs?

No. The tank owner is still responsible for the cost of cleanup. The Oil Spill Fund is a fund used by the State to protect the environment and public health when the spiller is unknown, unwilling or unable to clean up a spill in a timely manner. If the Oil Spill Fund pays for the cost of your tank cleanup, the Fund Administrator will make every attempt to recoup the amount of money spent from you, plus interest and penalties where warranted, including putting a lien on your property.

With the Governor's submittal of the Oil Spill Fund, does this mean I am now in compliance with federal financial responsibility requirements?

By submitting the State's Spill Fund, category 3 and 4 owners and operators are considered to be immediately in compliance with the federal financial responsibility requirements for corrective action and third party property damage, pending EPA approval of the Fund.

The Fund is not liable for claims for third party bodily injury. Therefore, owners and operators are still responsible for obtaining coverage for this aspect of the financial responsibility requirements.

What is third party liability?

EPA requires that owners or operators demonstrate that they are able to compensate other parties for bodily injury and property damage caused by accidental releases resulting from the operation of an underground petroleum storage tank.

If someone suffers health problems because of fumes from a leaking tank, will the Spill Fund cover damages?

The Spill Fund will not cover such damages. The tank owner remains responsible to meet this portion of the Federal Financial responsibility requirements through private insurance or other mechanisms.

If the Spill Fund won't pay the costs for cleanup, should I purchase insurance to cover the cost of a tank leak?

This is an individual business decision that you should make. Because cleanup can be expensive, many tank owners purchase insurance for financial protection. Keep in mind when making this decision, that the submission of the Spill Fund is viewed by the State as an interim solution designed to give facilities time to come into compliance on their own with the financial responsibility requirements. Contact your local insurance carrier to discuss coverage. In addition, you can contact the State Insurance Department for information about obtaining insurance of this kind.

Do I need to do anything in order to meet the financial responsibilities by using the Oil Spill Fund?

No. At this point, owners and operators of 99 or fewer tanks, local governments and non-petroleum marketers with a net worth of less than $20 million are deemed in compliance with the federal financial responsibility requirements for corrective action and third party property damage. When EPA approved the Fund, the State sent notices to those tank owners/operators who were effected.

As a reminder, the Oil Spill Fund does not provide insurance nor does it pay for the cleanup costs. Please see questions above: "Does the Oil Spill Fund provide insurance to tank owners?" and "If my tank leaks, will the Oil Spill Fund pay cleanup costs?"

If you have further questions about what coverage the State Oil Spill Fund provides to petroleum UST owners/operators, please call the DEC Bulk Storage Help Line - (518) 402-9543.

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