Impact of state and federal gas tax holidays on UST cleanups
As the price of gasoline at the pump has soared, gas tax holidays and rebates are being introduced by many states to temporarily mitigate the economic effects of rising gas prices for consumers.
While it’s not always easy to ascertain if these measures provide lower gas prices at the pump, underground storage tank (UST) owners and contractors are left to question what their future might hold in terms of ongoing cleanup projects.
Many leaking UST cleanups are being funded through state insurance programs that derive some portion of their revenue from these types of taxes, leaving many questioning if there will be short or long-term cash flow issues that might eventually slow down cleanups that prevent the spread of harmful contaminants in groundwater.
Gas prices have soared to over $4.20/per gallon on average in March 2022.
A great number of contractors are financing remediation projects themselves; therefore, cash flow is a significant concern to keep these cleanups moving towards closure goals and mitigating risks.
This certainly isn’t the first time since the inception of UST programs and funds faced the real threat of lower revenues due to rising gas prices (which typically causes drivers to drive less). In fact, following Hurricane Katrina in 2005, gas prices in the US started a rapid incline, with some stations seeing increases of 45 cents per gallon over six days. Then, in 2008, gas prices soared to $4.14/per gallon on average nationwide. When adjusted for inflation, a gallon of gas from 2008 would be over $5.30 in today’s dollars.
While some state UST cleanup funds have been impacted by reduced revenue during the pandemic as drivers were not consuming as much gasoline (if gas taxes and surcharges were the sources of funding), most have bounced back fairly quickly as drivers have been enthusiastically back on the road traveling again, despite the increasing prices at the pump. And with the summer months coming, all indicators show (or predict) that families are looking forward to summer vacations, even with rising gas prices.
All that said, it’s possible that the higher fuel prices go, tax holidays or not, drivers may begin to conserve and curtail those plans, and should that occur, it may have an impact on revenues collected by these funds.
In California, Gov. Gavin Newsome proposed an $11 billion relief package to ease the effects of higher gas prices on California drivers; however, the source of that funding is not proposed to come from the Storage Maintenance Fee that currently funds the California UST Cleanup Fund responsible for reimbursing eligible tank owners currently remediating projects.
However, other states, such as Georgia, have already acted on the rising costs at the pump and imposed temporary gas tax holidays to cut the prices at the pump until May 31, 2022. Currently, Georgia collects a state excise tax of 28.7 cents per gallon, according to a 2022 January report from the American Petroleum Institute. In total, Georgians pay 55.95 cents per gallon, accounting for all state and federal taxes and fees, which includes a gas surcharge of 0.0075 cents per gallon that supplies revenue to the Georgia UST Trust Fund.
While government officials may continue to utilize gas tax holidays or rebates to lessen the impacts on consumer pocketbooks while fuel prices remain high, that fact alone does not necessarily always impact the funding available to continue cleanup projects for state programs.
It’s critically important for anyone involved in these projects to be aware of which gas taxes specifically fund these programs, the authority state regulators have to reallocate revenue to other uses even if the taxes used to provide the fund revenues don’t decline and keep apprised of the current demand on the fund for new cleanups.
If you are concerned about your state’s leaking UST cleanup fund, please contact Pinnacle Environmental Management Support to speak with your state’s fund expert.
Pinnacle Environmental Management Support, founded in 1995, is an independent environmental claims management firm headquartered in Pompano Beach, Fla., and serves underground storage tank (UST) owners, operators, environmental consultants and others with accessing insurance mechanisms to assist with UST cleanup. Pinnacle has three separate office locations in Florida, Massachusetts and North Carolina. The company employs over 60 team members and works with Fortune 100 companies across the United States.