When drivers put gas in their tanks, they might not think about exactly how much of the per-gallon cost of fuel goes toward taxes, or that those charges are often made of several components. But in most states, federal and state gas taxes are accompanied by an underground storage tank fee. And in Ohio, the use of those fees is at the heart of a case the state filed last week against BP.
Underground storage tank fees are a small part of the gas tax-and-fee equation. Many times they are in the neighborhood of $0.01 or $0.02 per gallon of fuel purchased, and serve a very different function from gas taxes. Gas taxes are generally used to pay for transportation infrastructure maintenance and expansion, while underground storage tank fees go into a fund that can help pay for environmental cleanup when a storage tank leaks and contaminates the earth around it—or nearby aquifers upon which people depend for drinking water.
Regulated tanks are common, such as at gas stations. Leaks can also be common, too. In Hawaii, the state has about 1,000 facilities with underground storage tanks, and actively monitors 130 for leakage, according to a story by KITV.
In Ohio, underground storage tank fees came into the spotlight last week when Ohio Attorney General Mike DeWine (R) sued BP for wrongfully claiming and collecting underground storage fund money from the state to the tune of more than $33 million, to help the company clean up storage tank leaks. Additional claims by BP for a total of more than $22 million are pending review and settlement, according to the complaint. BP maintains that the company acted in good faith and plans to fight the complaint, Cleveland.com reported.
While this case makes its way through the court system, what does this mean for business taxpayers? For any business in the energy industry that has underground storage tanks, the case is a reminder that a business needs to know the rules of when it can and cannot seek money from the state fund to help pay for underground storage tank leak cleanup efforts, or when its insurance coverage will preclude it from seeking reimbursement for leak cleanups.
For example, in Ohio, the state fund does not pay or reimburse storage tank remediation costs when the applicant has insurance that may cover underground storage tank releases or where the reimbursement of remediation costs are recoverable from any other party, according to the AG’s complaint. The AG’s complaint also asserts that “BP did not fully disclose its complex insurance program, which included hundreds of insurance policies through commercial, mutual and captive insurers, to the Board in its applications for eligibility or in many of its claims for reimbursement,” among other alleged disclosure failures.
Continue the discussion on our Bloomberg BNA State Tax Linkedin group: Has your company dealt with an audit related to underground storage tank fees?
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