Insuring Underground Petroleum Tanks

RCED-88-39: Published: Jan 15, 1988. Publicly Released: Jan 15, 1988.

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Pursuant to a legislative requirement, GAO determined the availability of pollution liability insurance for owners and operators of petroleum storage and distribution facilities, focusing on: (1) the current and projected availability of tank insurance; (2) tank owners' and operators' ability to maintain financial responsibility through methods other than insurance; (3) the experience of marine vessel owners and operators in getting insurance for similar liabilities; and (4) available options to assist tank owners and operators in demonstrating financial responsibility.

GAO found that: (1) there was only one substantial provider of tank insurance as of July 1987; (2) at least six other firms have dropped out of this insurance market over the last several years; and (3) some other firms have expressed interest in expanding into the market, but are generally months away from offering insurance policies. GAO also found that: (1) the Environmental Protection Agency (EPA) allows tank owners and operators methods other than insurance for demonstrating financial responsibility, including self-insurance, letters of credit, and surety bonds; (2) major oil companies and other large corporations were most likely to use these other methods; (3) marine pollution liability insurance was generally more available and affordable because of reduced risks resulting from heavy regulation and monitoring; (4) many tank owners and operators will experience difficulty in demonstrating financial responsibility; and (5) one approach to help tank owners and operators demonstrate financial responsibility would involve gradual EPA implementation of incentives for technical improvements, development of state regulatory and enforcement programs, and tank upgrading and replacement regulations.

Recommendations for Executive Action

  1. Status: Closed - Implemented

    Comments: Final rule issued on October 26, 1988 included phase-in compliance. The rule took effect on January 24, 1989.

    Recommendation: The Administrator, EPA, should implement financial responsibility requirements over a timetable that: (1) is realistic in terms of availability of insurance and other financial assurance methods; (2) provides incentives for prompt and appropriate technical improvements by tank owners and operators; and (3) allows for the development of appropriate state regulatory and enforcement programs.

    Agency Affected: Environmental Protection Agency

  2. Status: Closed - Implemented

    Comments: Final rule issued September 23, 1988 on tank upgrade included a requirement that older tanks be replaced or upgraded first.

    Recommendation: The Administrator, EPA, should modify the timetable for tank upgrading or replacement by establishing a staggered schedule under which older tanks will be upgraded or replaced first.

    Agency Affected: Environmental Protection Agency

  3. Status: Closed - Not Implemented

    Comments: EPA contends that it could not change level of insurance because the amount is set in the law. Also, there have been no complaints about self-insurance tests in the October 1988 rule. No one has sued EPA, which further supports EPA contention that the level is appropriate.

    Recommendation: The Administrator, EPA, should continue to investigate the appropriate levels of liability for tank owners and proper requirements for self-insurance.

    Agency Affected: Environmental Protection Agency


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