Commonwealth Court of PA Enlightens USTIF Board on its Own Regulations

The Storage Tank and Spill Prevention Act (the “Act”) created the Underground Storage Tank Indemnification Fund (the “Fund”) to provide clean-up and third party liability coverage for owners and operators of underground storage tanks (USTs).  The claimant must meet certain requirements to recover remediation costs from the Fund.  Specifically, the claimant must be current on all required fees under the Act.

 

The required fees under the Act are: tank fees, gallon fees, and capacity fees.  A claimant must be current on all of these fees to be eligible to claim remediation costs from the Fund.  In a recently decided case, the Commonwealth Court of Pennsylvania held that the Fund does not have authority to charge these fees once a tank is legally established to be empty. In Transportation Services, Inc., the petitioners had an inch of residue left in the subject tank and this qualified the tank as empty.  As such, the Fund lacked authority to impose a capacity fee on the claimant.  Consequently, the Fund could not deny a claim for remediation costs based on the failure of the respondents to pay a capacity fee.  The Commonwealth Court also stated that the Board could not circumvent such an obvious application of its own regulations through interpretive rules or policy statements. The court concluded that the Fund can only charge fees as outlined in the regulations.

 

The Court further admonished the Board in Transportation Services, Inc. for denying the remediation claim by retroactively applying new regulations - which were not even adopted until four years after the disputed capacity fee was assessed in 1998.   The Court concluded that the Board had incorrectly imposed the new broader version of the fee regulation applicable to substances, including unknown substances, that were not in effect when the leak occurred.  Regulation in place at the time of the leak only imposed a capacity fee on USTs that stored regulated substances limited to heating oil and diesel fuel products which the inch of residue in the petitioner’s USTs was not.  The Court concluded that “[e]ven if it were so inclined, the Court cannot make the 2002 regulation applicable in 1998…[t]he law is the law.”

 

According to HMS attorney Christopher Knight, who formerly served as Counsel to the Pennsylvania Insurance Department, the state agency which is responsible for administering the Fund, the Transportation Services, Inc. decision could have a significant impact on the Fund’s ability to deny claims based on alleged non-payment of capacity fees for older tanks which are no longer in service.  “Failure to pay a capacity fee is one of the most common reasons for the denial of claims.  This decision will make all the difference in the ability for some tank owners to successfully argue that when a tank is no longer in service, the failure to pay a capacity fee should not necessarily preclude the owner from eligibility for Fund reimbursement for remediation expenses, which can be very costly,” Mr. Knight said.  “Depending on the facts of each situation, this decision is going to require the Fund to pay, when it might have otherwise denied a claim,” he added.

 

The Court reversed the Board’s denial of the claim for reimbursement of the remediation expenses and ordered the Fund to calculate those costs so they can be reimbursed.

 

Transportation Services, Inc. v. Underground Storage Tank Indemnification Board (Pa. Commw. Ct. 2013)

 

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