Entitled to Reimbursement from the Pennsylvania Underground Storage Tank Indemnification Fund?

Frank Kosir, Jr.
fk@muslaw.com

Transportation Services, Inc. v. Underground Storage Tank Indemnification Board, 2013 Pa. Commw. LEXIS 122 (2013)

This matter addressed the issue of whether a property owner was entitled to reimbursement from the Pennsylvania Underground Storage Tank Indemnification Fund for costs incurred in remediating environmental contamination.  Transportation Services, Inc. (TSI) was a commercial trucking business that operated in several states and was based at a facility erected on real property (“Property”) titled in Joseph Benacci and Berit Benacci and located at 3025 West 17th Street, Erie, Pennsylvania.  In 1977, the Benaccis installed four separate underground storage tanks at the Property for the storage of diesel, gasoline and new motor oil and, from 1982 to 1992, leased the Property to Ryder Truck Rental, which completed satisfactory remediation when certain leaks were discovered in the tanks.  Transportation Services used the Property for its trucking operations from 1992 through 1997, and the Pennsylvania Underground Storage Tank Indemnification Fund (“Fund”) charged it a capacity fee from 1994 through 1998.  In late 1997, the Property was conveyed to Transportation Investment Group (TIG), a partnership comprised of the Benaccis' five children, which proceeded to lease the Property to Fed-Ex for the construction of a new facility. During the course of construction, the storage tanks were emptied of approximately one inch of residue, all pumps removed, and the tanks rendered inoperable by late 1997.  However, due to their proximity to the new Fed-Ex facility, the tanks could not be removed and were permanently closed on site in accordance with Federal regulations.  Nonetheless, TSI continued to remit the requisite fees to the Fund through the middle of 1998.

Following the sealing of the tanks, the Pennsylvania Department of Environmental Protection (“DEP”) ordered TSI to install 3 monitoring wells and, in June of 2002, one of these wells detected a release of an unacceptable level of phase liquid. TSI completed the necessary remediation, and submitted a request for reimbursement to the Fund.  In response, the Fund’s  third-party administrator denied the claim on grounds that TSI’s fee obligations were delinquent at the time that the contamination was discovered.  TSI appealed to the Pennsylvania Insurance Department's Bureau of Special Funds which affirmed concluding that, since the capacity fees for the second half of 1998 remained unpaid, TSI was not entitled to reimbursement.  TSI then appealed to the Administrative Hearings Division of the Insurance Department, which affirmed, concluding that capacity fees must be paid until a permanent closure report is filed with the DEP, which report TSI did not file until December of 1998.  TSI then filed exceptions with the Fund’s Board, which exceptions were denied.

On appeal, our Commonwealth Court reversed.  In issuing its ruling, the court noted that, in rendering its decision, the Board had erroneously relied upon the 2002 version of the fee regulation (25 Pa. Code §971.2(3) rev.) (which permitted the assessment of fees for the storage of “regulated substances” including unknown substances) rather than the 1993 version (25 Pa. Code §971.2(3)) (which limited the imposition of capacity fees to the storage of “heating oil products and diesel fuel products”).  As the fees at issue were allegedly owed for the second half of 1998, they were subject to the 1993 version of the fee regulation and, since there was no dispute that only residue remained in the storage tanks at that time, TSI had no obligation to pay any further capacity fees.  The court also noted that there was no language in either the 1993 or 2002 version of the fee regulation providing for the assessment of capacity fees against empty storage tanks and, pursuant to 25 Pa. Code §245.451(a), a storage tank is considered empty even if it contains one inch of residue.  As such, the Fund lacked the authority to assess a capacity fee against TSI after the storage tanks were emptied in 1997, TSI was current on its capacity fees, and its claim for remediation costs was improperly denied.