‘Capitol Connection’ – Looming Crisis for Gas Stations

July 12, 2012

Believe it or not, there is a looming crisis for hundreds of gasoline stations throughout our state. These suppliers of gasoline and other fuels make our daily lives possible. Whether commuting to work or simply picking up groceries, we all require access to gasoline so that our cars and trucks can get us to wherever we need to be. However, recent changes to state law will now require gas stations to obtain private insurance for their underground storage tanks. Without insurance, they cannot legally operate and some are concerned that they may be forced to close.

During the June special session, the General Assembly voted to eliminate the Underground Storage Tank Petroleum Clean-Up Review Board and designate the commissioner of the state Department of Energy and Environmental Protection (DEEP) to oversee the program. The law will also require gas stations to obtain their own private insurance for underground storage tanks by October 1, 2012. As part of the budget legislation, this provision was one of over a hundred additional concepts included in the 474 page bill that I voted against.

In recent years, unpaid cleanup expenses have soared to nearly $100 million through this state program. Initially, it was designed to help gas stations clean up underground leaks. Over the course of their operation, most gas stations will eventually need to clean up any underground contamination. The fund has averaged about $142,000 per cleanup. The gross receipts tax, which was recently capped in an effort to slow the impact of high gas prices, was first put in place to provide funding for this program. However, in recent years, the legislature has often raided the $382 million that is collected annually.

According to Connecticut General Statutes, an underground storage tank is “a tank or combination of tanks, including underground pipes connected thereto, used to contain an accumulation of petroleum, whose volume is ten per cent or more beneath the surface of the ground, including the volume of underground pipes connected thereto.” Gas stations typically feature one or more of these tanks to hold enough gasoline for consumers before needing to be refilled by distributors.

Many small or independent gas stations have said that they may not be able to obtain insurance coverage and will have to either raise prices or consider closing. Larger stations, such as Mobil or Sunoco, have the resources to privately fund cleanups. To complicate these matters, Zurich American Insurance, the largest commercial insurance provider for underground storage tanks in the United States, recently decided to leave the market and will no longer be offering coverage to tank owners. If other insurance is not available, some have estimated between 250 and 400 stations could be forced to close.

In response, DEEP representatives say they are confident that other insurers will be able to provide this needed coverage. They have also said that small businesses will be protected by allowing five years to obtain coverage and submit final claims. With $36 million left in the program, most claims will only be covered by a little more than one-third, or about 35 cents per dollar.

While I am hopeful that these stations will be able to remain open, the state should encourage gas stations to find the necessary coverage that will help clean up the environment when leaks or spills occur. If we are going to mandate that these stations obtain insurance, we must also make sure that small businesses and independent gas stations have access to the marketplace so that they can continue to operate and provide our towns and cities with this essential fuel.