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A Helping Hand for PECFA Funding: DNR’s New Site Closure Policies

Spring 1996

Wisconsin’s Petroleum Environmental Cleanup Fund Award ("PECFA") program is once again on the verge of insolvency. PECFA, which reimburses owners for certain investigation and cleanup costs associated with petroleum tanks, continues to see more claims than revenue. In response, both the Department of Natural Resources ("DNR") and the Department of Industry, Labor and Human Relations ("DILHR") have recently initiated noteworthy cost-savings proposals.

Out of the $100 million generated annually from the three-cent per gallon petroleum inspection fee, $84 million per year is appropriated for PECFA awards. $1.8 million annually is used by the agencies for administration and 30 positions. At the current rate of expenditures of $10.5 million per month, the Legislative Fiscal Bureau estimates that the 1995-97 PECFA awards appropriation will be depleted by approximately October 1996. This could in effect shut down the PECFA program eight months before the next fiscal year, which begins July 1, 1997. DILHR’s response, starting in May 1996, is to pay out on claims only that amount collected from the inspection fee, which is about $7 million per month. Of course, this approach will significantly increase the claims backlog. (Currently it takes about eight months from the time of a claim submittal to receive an award payment.) In addition, later this year DILHR hopes to obtain legislative approval for up to $30 million in additional inspection fees to be used for PECFA awards.

Over the long term, DILHR and other proponents of the PECFA program hope that new site closure policies being advanced by DNR will help relieve pressures on the fund. The general concept reflected in the DNR’s "closure flexibility" proposal that went to hearing in April 1996 is that no further action will be required by DNR at sites with groundwater exceedances above NR 140 standards if further remediation would prove ineffective and unwarranted. Conditions to be met to take advantage of this closure flexibility are the acceptance of a water use restriction for the site, proof that exceedances will not go beyond the site boundary, and quantification that "natural attenuation" will eventually result in the groundwater meeting applicable standards. Natural attenuation is the reduction of concentration due to the naturally occurring physical, chemical, or biological processes, including dispersion and biodegradation. DNR estimated that this new approach will save over $860 million in treatment, monitoring and related cleanup costs.

To assure that closure flexibility cost savings benefit the PECFA program as soon as possible, DNR has proposed to dedicate 12 positions to review the 3,500 systems that may be candidates for early closure. The focus of the evaluation will be engineered systems within the Department’s leaking petroleum tank program that "pump and treat" contaminated groundwater or extract vapors from soils ("vapor extraction"). A joint DNR/DILHR staff review has estimated the potential savings to the PECFA program to exceed $30 million per year. On April 16, 1996, the Legislative Joint Finance Committee approved the funding necessary for DNR to implement this program beginning May 1, 1996.

DILHR has also proposed legislative and regulatory changes to help alleviate the financial pressures on PECFA. AB 1089 was introduced March 28, 1996, with several key hearings held in April. Among other things, this bill would delay the decrease in the maximum allowable PECFA award for most storage tanks that otherwise would have occurred on July 1, 1998, through December 22, 2002. DILHR hopes that extending this deadline will lessen the surge of PECFA claims, which averaged over $13 million per month during the last six months. (Recall that at $84 million per year, PECFA can pay on average only $7 million per month.) AB 1089 will also assure that parties are compensated if they modify site remedies to new, more effective approaches. It also would allow DILHR to "bundle" sites and put out to bid operation and maintenance components of engineered systems to reduce per-site costs. To optimize PECFA coverage, site owners would be requested to use these DILHR-selected "service providers." DILHR has also proposed to go forward with emergency rule-making to provide additional levels of cost-control and remediation effectiveness. Changes to current ILHR 47 would include prior approval of engineered systems, establishing site and performance criteria for engineered systems and the consideration of site specific close-out levels for cleanups expected to cost over $80,000.

The pressures on DNR and DILHR to find ways to more cost effectively close-out PECFA sites are also helping non-PECFA sites, particularly those in "brownfield" locations. For example, the new closure flexibility rules can for the most part be implemented now, prior to the effective date of the rule.

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