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Kentucky Resources Council, PO Box 1070, Frankfort, KY 40602 Phone [502] 875-2428

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PO Box 1070, Frankfort, KY 40602  Phone 502.875.2428, Fax 502.875.2845

CUTS TO UNDERGROUND STORAGE TANK AND OIL AND GAS WELL PLUGGING FUNDS THREATEN GROUNDWATER & ECONOMIC PROGRESS  Posted: March 28, 2004
Please call 1-800-372-7181 next week, from Monday - Friday 7 a.m. - 11 p.m. and leave a message for the House and Senate Appropriations and Revenue Committee Members and Chairs, Senator Richie Sanders and Representative Harry Moberly, and ask them to:

(1) restore adequate funding to the petroleum storage tank environmental assurance fund by restoring fund proposed to be cut in the House Budget;

(2) restore the $1.5 million in funds transferred each year from the abandoned oil and gas well plugging program; and

(3) include budget language commissioning an LRC study of the degree to which permit and license fees capture the actual costs for environmental, public health and safety and workplace safety permits and licenses.

Background:

Both Governor Fletcher's and the House-passed budget for 2004-06 propose to transfer to the general fund, monies from “dedicated” accounts. The House budget proposes to transfer from the Petroleum Storage Tank Environmental Assurance Fund an additional $17.5 million each year above the $37.8 million transfer proposed by Governor Fletcher in 06. The additional loss of money from the fund, which is funded by a gasoline tax, will mean that the fund will not be able to timely pay its bills. The result will be that reimbursements to contractors for removing tanks and cleaning up contamination will be significantly slowed, and contractors will be less likely to undertake removal and remediation of these sites since reimbursement will be delayed and the promise of eventual reimbursement will be years off. Groundwater, still the source of drinking water for around 28% of the state’s population, will remain contaminated and that contamination will spread unchecked. Abandoned Brownfields properties with old underground storage tanks will be less likely to be returned to productive use.

Those who will suffer most will not be the savvy oil companies or current gas station owners, who have replaced their tanks and for the most part have been reimbursed. It will be those small independent owners getting out of the business. It will be those who discover an unknown old tank on a property they purchase or inherit. Some 84% of the claims are coming from individuals and businesses who are most in need of the help; those for whom the fund was designed and who were intended to be protected by this “dedicated fund.”

Diverting this dedicated money is unwise, and will create greater costs for future cleanups, and in loss of revenue from properties that otherwise would have been rehabilitated and returned to productive use. The fund must have the money necessary to finish in a timely manner its important work of funding the removal and reclamation of these old leaking underground storage tanks. Join KRC in urging the budget committees to restore the funding levels to those in the Governor’s budget in order to meet the reimbursement demand and to end delays in reimbursements for cleaning up the legacy of leaking underground tanks.

The second concern is the reprogramming of 1.5 million from a restricted fund generated from forfeited performance bonds and interest from cash bonds posted by oil and gas operators, that is used to plug abandoned oil and gas wells. The removal of these funds will slow the progress that has been achieved by the Division of Oil and Gas Conservation in plugging orphan and abandoned oil and gas wells. The presence of those wells poses a real threat to public safety (through migration of methane gas) and public health (through groundwater and land contamination with brine and oil discharges). These funds have allowed the Division to handle the plugging and abandonment of these wells without utilizing state funds, and removal of this amount will delay proper closure and abatement of pollution and safety problems from these wells.

Finally, in these times we can ill-afford to subsidize private sector compliance with health and safety laws by setting permit and license fees at a fraction of the real costs to the state in processing permits. Yet only the state air pollution program sets fees based on capturing 100% of program costs through a variable fee set on tons of emissions, with other regulatory programs creating a pollution subsidy by failing to fully cost regulatory compliance. A study into the percentage of actual capture of permit and license costs, including costs of compliance sampling inspections, for workplace, human services and environmental programs should be commissioned of LRC, in order to provide the 2005 General Assembly a sound basis on which to consider whether to adjust permit and licensure fees to provide more complete capture of governmental and societal costs of regulation.

Please call toll free from Monday to Friday, or send a fax to Senators Sanders, Rep. Moberly, and your state Senator and Representative, at 502-564-6543. Thank you!



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