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NEW YORK STATES OIL SPILL FUND

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NEW YORK STATES OIL SPILL FUND Powered By Docstoc
					       NEW YORK STATE’S
         OIL SPILL FUND


     More Than Two Decades of Success



March 2001




H. Carl McCall
State Comptroller
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                               TABLE OF CONTENTS



EXECUTIVE SUMMARY……………………………………………………….. i

INTRODUCTION…………………………………………………………………. 1

   ORIGIN OF THE OIL SPILL FUND……………………………………….……. 1

   OPERATION OF THE OIL SPILL FUND………………………………………... 1


FINANCING OF THE OIL SPILL FUND……………………………………….. 4

ACCOMPLISHMENTS OF THE OIL SPILL FUND……………………………. 5

CHALLENGES FACING THE OIL SPILL FUND………………………………. 7

   FUNDING………………………………………………………………….… 7

   PROGRAM EFFFICIENCY……………………………………………………. 8

   MTBE ………………………………………………………………….……. 9

   NEED FOR ENVIRONMENTAL INSURANCE………………………………….. 9


CONCLUSION…………………………………………………………………… 10
                                                               EXECUTIVE SUMMARY

         The history of the New York Environmental Protection and Spill Compensation Fund – known as
the Oil Spill Fund – offers invaluable lessons, not only for the future of the program itself, but also for other
environmental cleanup programs. Proposed changes to the Fund must be considered in the context of its
legacy of providing economic and environmental assistance, and its ability to maintain that assistance,
particularly as spills continue to occur with greater frequency.

        For over 20 years, the Office of the State Comptroller has been responsible for administration of
the Oil Spill Fund. Program operation also involves oversight of spill cleanups by the Department of
Environmental Conservation and recovery of cleanup costs from responsible parties by the Office of the
State Attorney General. Working together, these State entities ensure that the program meets its
environmental goals in a cost-effective manner while helping spill victims and protecting the fiscal integrity of
the Fund.

        The Comptroller’s administration of the program is rooted in the belief that sound fiscal practices
and consistent environmental protection can be applied together to protect the health, safety and finances of
New Yorkers. The fundamental tenet of the program is strict liability requiring both spillers and the Fund to
undertake and pay for oil spill cleanups and related spill costs. This approach allows oil spills to be handled
quickly and effectively, limiting the environmental damage and the financial impact on New Yorkers.

         The Fund also handles claims by those who suffer economic damages related to an oil spill, offering
relocation assistance to New Yorkers displaced from their residence or place of businesses until it is safe to
return. In addition, the Fund may pay property owners for loss of value related to spill damage. In most
cases, the Fund resolves complaints by negotiating a settlement where the spiller compensates the victim
directly. Conservative estimates indicate that because of the Fund’s leverage, an average of $1 million is
paid annually to claimants directly, while the State’s net payout on damage claims averages approximately
$100,000 a year.

        Existence of the Fund in no way limits the ultimate responsibility of the spiller; instead, it provides a
vehicle for rapid intervention to help victims and to ensure effective cleanups. The Comptroller’s
management of the program guarantees that spills are cleaned up, costs are kept under control and cost
recovery is stringent. Since its inception, the Fund has recovered over $60 million from responsible parties.

        The Oil Spill Fund faces several challenges. The first is financial. When petroleum is spilled, it is
expensive to clean up; costs are even higher for spills of gasoline with the additive MTBE. As the number
of reported oil spills has increased, the need for more funding has emerged. The Fund derives nearly all its
revenue from per-barrel license and tank registration fees and cost recovery from responsible parties.
Revenues for the Fund are used solely to administer the oil spill program. The current Administration
proposes to divert revenue now dedicated exclusively to petroleum cleanups to the investigation and
                                                     his
remediation of other types of contamination. T proposal would jeopardize the speed with which
                                                        i
petroleum can be removed from the environment and the ability of the State to offer relocation services to
those whose health is threatened by oil spills. In addition, it would reduce the measure of justice the Fund
provides those who have suffered economic losses due to oil spills for which they are not responsible.

        Another challenge confronting the Fund is the Administration’s proposal to expand liability
exemptions and to permit higher amounts of contamination to remain in the ground when cleanup activities
are suspended. This is shortsighted. If polluters are allowed to avoid liability, then the lion’s share of
cleanup costs must shift from the private sector to the Fund. The financial choices for the State then would
be to raise the per-barrel fee on petroleum (a direct tax), or to take the needed amounts from the State’s
General Fund. In either case, the principle that the polluter pays would be substantially eroded.

         Given the fiscal and environmental success of the oil spill program, the notion that it is satisfactory to
leave greater amounts of contamination in the environment is far too risky. Current cleanup standards are
not onerous, nor difficult to understand. The clear solution to expensive cleanups is not to compromise the
health and safety of New Yorkers by promoting higher levels of contamination. Rather, it is better to search
for financial solutions that keep Fund expenditures as low as possible, yet help responsible parties pay to
clean up their spills. For homeowners and small business operators in particular, it is extremely important
that additional sources of insurance be found.

         The future of oil spills in the State is very clear: they will continue to occur. The future of the Oil
Spill Fund, for more than twenty years a model environmental program, is clouded by the threat of
significant weakening.




                                                        ii
                                                                              INTRODUCTION
         For more than twenty years, the Comptroller’s New York Environmental Protection and Spill
Compensation Fund, known as the Oil Spill Fund, has maintained responsibility for the administration of the
State’s oil spill program. The oil spill program is an important part of the State’s protection of its resources.
 Gasoline, diesel and heating oil spills, which impact nearly every community in the State, are on the rise.
Last year, there were more than 15,000 reported oil spills in the State and the Oil Spill Fund spent more
than 19 million dollars to remediate spills when responsible parties failed to do so. The Oil Spill Fund helps
to ensure economic accountability for stakeholders and a cleaner environment for the people of the State.

ORIGIN OF THE OIL SPILL FUND

         In 1977, the State Legislature enacted Article 12 of the New York Navigation Law (Chapter 845,
Laws of 1977). Article 12, which became effective on April 1, 1978, articulates three purposes. First, it
establishes the authority and responsibilities of the New York Environmental Protection and Spill
Compensation Fund and makes it part of the Office of the State Comptroller. Under Article 12, the Fund
must pay for cleanups, collect license fees and surcharges from the petroleum industry, obtain
reimbursement of its cleanup costs, and handle claims from citizens who suffer financial injury from
petroleum spills. Second, Article 12 protects the State’s groundwater and surface waters by prohibiting the
un-permitted discharge of petroleum and by making the Fund and polluters strictly liable for petroleum spills
that do occur. This provision means that the Fund must conduct cleanups when the polluter cannot or will
not. Third, Article 12 provides for the licensing of major oil storage facilities with a total capacity of more
than 400,000 gallons and mandates collection of license fees on petroleum imported for sale in the State.

OPERATION OF THE OIL SPILL FUND

         The Oil Spill Fund must assure compliance with Article 12 of the New York Navigation Law and
must account for all oil spill-related revenues and expenditures. The Fund is strictly liable to undertake and
pay for oil spill cleanups. In addition, the Fund is charged with reviewing third-party claims by those who
allege injury from oil spills, and paying eligible claims, when the responsible party fails to do so. The law
also requires the Fund to seek reimbursement for its expenditures. Lastly, the Fund is responsible for
investing its assets and accounting for its assets and liabilities. The Comptroller accomplishes all this with a
modest budget and a small Fund staff consisting of an Executive Director, a lawyer, a secretary, three clerks
and a senior accountant.

        To accomplish its statutory purposes, the Oil Spill Fund works most often with the Department of
Environmental Conservation (DEC) and the Office of the Attorney General. The Fund also works with the
Department of Health (DOH), the federal Environmental Protection Agency and United States Coast
Guard, on a more limited basis. The Administrator of the Oil Spill Fund acts as liaison between members of
the regulated community, responsible parties, spill victims, local governments, DEC, environmental groups
and members of the Legislature.


                                                       1
Strict Liability for Cleanups

        Oil spills present unique environmental and public health hazards that justify the State’s strict liability
standard. Petroleum is a pervasive and dangerous substance. Oil spills are far more numerous than
hazardous waste spills, move very quickly in the environment and can have enormous economic,
environmental and public health impacts. For these reasons, the Oil Spill Fund is strictly liable, by statute,
for cleanups and third-party claims.

          To protect New York’s public health and environment, Article 12 imposes upon the Fund strict
liability for the remediation of petroleum spills. This requires that the Fund react quickly to reports of spills
and initiate immediate cleanup activities. To accomplish this, the Fund relies on the technical staffing and
expertise of DEC. On behalf of the Oil Spill Fund, DEC investigates reported oil spills and coordinates
cleanup of those spills by responsible parties, State and local agencies and/or private contractors. DEC
also registers and inspects petroleum bulk storage facilities.

         It is important to note here that strict liability of a public fund for cleanups and third-party claims is
not unique. For example, the federal Oil Pollution Act of 1990 mirrors our statute, with strict liability for
cleanups and third-party claims provisions. The National Pollution Funds Center handles oil spill claims,
                                           nd
signs off on cleanups by the EPA a Coast Guard and refers cost recovery cases to the Justice
Department. In addition, there are many state programs that require, by statute, the sign-off of another state
agency (e.g., DOH’s spill-relocation expense program and DEC’s environmental protection program/land-
acquisition program). This statutory structure mandates that the Fund act as a safeguard, assuring equitable
handling of cleanups, claims and licensing.

Fiscal Oversight

         The Comptroller’s role as administrator of the Fund is essential in another way. As a practical
matter, under the Comptroller’s general audit function, there would not be sufficient review of cleanup
vouchers. The number and complexity of oil spill cleanups and payments justify the extra layer of oversight
created in Article 12. Indeed, the Comptroller’s oversight has created a presumption, found in case law
interpreting Article 12, that the State’s cleanup costs are reasonable. This presumption is extremely useful in
dealing with recalcitrant spillers who refuse to reimburse the Fund. Spillers unwilling to repay their cleanup
debt may not, after the fact, quibble about the amount spent, in an effort to avoid or reduce their obligation.
 The Comptroller’s oversight also promotes efficiency in hiring cleanup contractors and in keeping cleanup
costs under control.

Damage Claims

        The Office of the State Comptroller adopted rules and regulations to administer the handling of
damage-claim applications. To date, nearly four hundred claims have been filed with the Fund by those
alleging economic injury from an oil spill. For most eligible claims, the Fund has been successful in
negotiating a settlement between the responsible party and the claimant. The Fund must receive a claim
within three years of discovery of damage or within ten years of the discharge, whichever is shorter. The
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Fund’s obligation to pay eligible, timely filed claims is restricted to compensatory damages for permanent,
rather than temporary, economic injury. In accordance with Article 12 and with the ‘polluter pays’
doctrine, the Fund does not reimburse spillers for costs associated with their own petroleum spills. The
Fund also may not reimburse legal fees. The Fund can pay a property owner for loss of value under certain
circumstances.

Cost Recovery

         Article 12 requires the Comptroller to recover cleanup costs and penalties recommended by DEC,
and to approve or reject settlements with spillers. For oil spills where the Fund has incurred cleanup costs,
DEC sends the Fund a privileged pre-litigation report indicating the results of its investigation of the identity
of the responsible party and the circumstances of the spill. After review of that report, the Oil Spill Fund
either refers the matter to the Office of the Attorney General for collection or handles the matter internally.
Accordingly, the Comptroller works closely with the Office of the Attorney General while collection efforts
are underway, taking part in settlement negotiations and litigation. The Fund also obtains reimbursement of
costs directly from spillers or their insurers, and from federal sources.

        The Comptroller’s scrutiny and authority, as well as the detailed financial records maintained by the
Fund, significantly enhance the ability of the Fund to prevail in cost-recovery suits against spillers. The
Comptroller’s obligation under Article 12 to preserve the integrity of the Fund assures that cost recovery is
handled with prudence, persistence and fairness. The Comptroller’s success in obtaining reimbursement of
cleanup costs aids in keeping the license fee paid by the petroleum industry low.

Emergency Relocation

        Article 12 also empowers the Fund to pay relocation costs for victims of petroleum spills whose
home or work place is made dangerous by a spill. Working with the Department of Health, the Fund
provides spill victims with alternate quarters until their home or work place is made safe by remediation.
When a responsible party refuses to relocate people, and the Fund must pay to do so, the Fund may seek
additional penalties under Article 12. Working with DEC and the Department of Health, the Comptroller
has enforced the strength of the statute, thus keeping the number of emergency relocations quite small.




                                                       3
                                  FINANCING OF THE OIL SPILL FUND

        The Fund is a non-lapsing, revolving fund, set up in the Office of the State Comptroller, in part,
because of the Comptroller’s role as chief fiscal officer of the State. The Fund’s major source of revenue is
a license fee charged on each barrel of petroleum to be sold in New York State. Originally, this license fee
was set at one cent per barrel; in 1988, the fee was raised by statute to four cents per barrel. In 1999, after
more than a decade without an increase, the Legislature raised the fee to a maximum of eight cents per
barrel. The Fund has collected 231 million dollars in license fees since its inception. The Fund is
accountable to the petroleum industry and to the Legislature for the use of those fees. This accountability
ensures that fees are used prudently and exclusively for oil spill costs, as mandated by statute.

        Section 187 of the Navigation Law requires that the Comptroller recover from responsible parties
all amounts spent by the Oil Spill Fund for cleanup and removal activities and for payment of damage
claims. This is a difficult task because responsible parties very often are unknown, unwilling or unable to
undertake the necessary remediation or to reimburse the Fund. Generally, cases are referred to the Office
of the Attorney General or are handled internally either by collecting from a responsible party (e.g., an
insurance company) directly or by submitting a claim to the National Pollution Funds Center under the
federal Oil Pollution Act of 1990. When the Oil Spill Fund refers a case to the Office of the Attorney
General, it includes in the referral package all vouchers documenting the Fund’s costs and a summary
showing a reconciled accounting history of the cleanup project. At present, the Office of the Attorney
General has collection cases valued at 108 million dollars and there are more than eight million dollars in
claims pending before the National Pollution Funds Center.

         To enhance its ability to recover costs from responsible parties, Article 12 allows the Fund to file an
environmental lien on property that is the site of a spill when the responsible party fails to reimburse the
Fund for cleanup costs. Liens are filed upon the recommendation of the Office of the Attorney General and
only after requisite notice to the property owner has been provided and appropriate title research has been
conducted. Last year, the Fund processed 56 lien requests, valued at more than 11 million dollars. These
environmental liens protect the Fund’s claims during cost-recovery actions and encourage responsible
parties to settle with the Fund. Liens are released upon settlement of the debt or by court order.




                                                       4
               ACCOMPLISHMENTS OF THE OIL SPILL FUND
          In the twenty-two years since its creation, the Fund consistently has protected the State’s interests,
working to ensure that oil spills are remediated in a timely and competent way. It also has guaranteed that
spill victims are compensated appropriately. Prior to creation of the Fund, homeowners, municipalities and
others harmed by oil spills were left to their own devices to combat spillers who refused to clean up
contamination or to reimburse related economic losses.

Environmental Protection

         The oil spill program’s environmental protections are critical. From its inception, the Fund has spent
214 million dollars to remediate spills when responsible parties have failed to do so. Most reported oil spills
involve commercial and industrial properties where underground storage tank systems have failed. In
addition, each year, there are a number of residential tank failures and tank truck spills. The number of
reported spills increases every year due to a variety of factors, including: a growing awareness of the
existence of the Oil Spill Fund, stricter federal storage tank requirements, an increase in the number of
gallons of petroleum consumed in the State, and the advanced age of some petroleum bulk storage systems
in use around the state. In addition, because of use of the additive MTBE, spills can have a greater impact
on water resources and be costlier to remediate.

        Surface spills are relatively easy to clean up; however, subsurface spills are more problematic.
Generally, they are harder and costlier to remediate, require greater monitoring and can greatly impact
drinking water supplies. Dissolved components and fumes can permeate homes and businesses, sometimes
to such a degree that evacuation and/or relocation becomes necessary. It can be technically complex and
expensive to determine the source of an underground spill and to pursue remediation.
          As fiduciary of the Fund, the Administrator signs off on cleanups. This has protected the Fund from
exposure to many third-party damage claims and assured that license fees have been used appropriately.
The Fund Administrator requires thorough investigations and cleanups and signs off based on factual,
technical information from DEC program staff. In addition, when contacted by claimants or other
stakeholders about an unremediated spill, the Fund may ask DEC to revisit an investigation or cleanup. This
process has protected individual victims, industry members, public health and the environment. The Fund’s
strict liability for remediation of oil spills and payment of damage claims ensures that cleanups are timely and
reasonable, rather than nonexistent, excessive or unjustified.

Cost Recovery and Economic Fairness

          The legal framework under which the Fund operates also assures that the petroleum industry and
spillers, rather than taxpayers or spill victims, bear the financial burden of oil spills. The Fund’s strict liability
requires that the Comptroller operate the Fund with independence of judgment and permits him to exercise
his authority, as a separately elected official, to protect the fiscal interests of the public.



                                                          5
          The Navigation Law mandates that the Fund seek reimbursement from polluters for cleanup costs
and damage-claim payments. To do so, the Fund asks DEC to investigate the identity and circumstances of
all spills for which the Fund has incurred costs. Based upon these findings, the Fund refers cases for cost
recovery. With each referral, the Fund supplies financial justification for the State’s claim. These records
have a presumption of reasonableness because of the detailed review and reconciliation of vouchers
performed by Fund staff. To date, the Fund has recovered 62 million dollars from responsible parties, their
insurers or the National Pollution Funds Center.

         Article 12's damage-claim provisions have helped spill victims while keeping the Fund’s financial
exposure small. Many claims are from victims who suffer damages of $15,000 to $20,000. Often, claims
are from small business owners, homeowners, or elderly or disabled individuals. For these spill victims,
hiring lawyers to sue companies with large resources is simply not feasible.

         The Fund’s strict liability looms large behind each claim, bringing pressure to bear on spillers. Thus,
the Fund resolves most claims by negotiating a settlement wherein the spiller compensates the victim
directly. Fund staff estimates, conservatively, that an average of 1 million dollars is paid annually to
claimants directly by spillers. Without the Fund’s statutory strict liability, spillers would have far less
incentive to address the claims of spill victims.

        The cost of this part of the oil spill program is minimal in relation to the substantial public benefit it
provides. The State’s net payout on damage claims averages only $100,000 year. That figure is unlikely to
increase unless legislation was enacted that diminished spillers’ liability for victims’ losses or for full on-site
and off-site cleanups. In such an event, the Fund would expect a jump in the amount of its damage-claim
payments.

         Finally, the Fund has begun to use the federal Oil Pollution Act of 1990 as another funding source.
There are two ways to obtain federal funding for oil spill cleanups. First, the Fund can apply for funding
authorization before it begins a cleanup. If authorization is received, the federal government, rather than the
Fund, will pay for the remediation. Second, for post-incident approval, the Fund can submit claims to the
National Pollution Funds Center. Presently, there are potential claims worth several million dollars that
could be submitted to the National Pollution Funds Center for reimbursement. The Fund now is able to
identify and document spills that are eligible for such treatment, and has started to negotiate the lengthy
federal claims process successfully. We anticipate that this process will become a larger portion of the
Fund’s cost-recovery amounts.

Policy and Case-Law Advancements

        The Comptroller also has worked to develop policy and case law to advance the cause of the Fund.
For example, the Comptroller testified at legislative hearings last year regarding the financial impact on the
Fund of the gasoline additive MTBE. Over the course of more than 20 years, with the assistance of the
Office of the Attorney General, the Comptroller has won significant legal victories for the Fund. The
Comptroller is working with the Office of the Attorney General now to preserve and enhance the Fund’s

                                                        6
right to collect from property owners where leaking underground storage tanks have contaminated the
environment.




                                                7
                   CHALLENGES FACING THE OIL SPILL FUND

         Despite its record of success, the Oil Spill Fund faces several challenges that could compromise the
State’s ability to continue to promote rapid, effective response to spills in a way that limits the negative
impact on the environment and the health of New Yorkers.

FUNDING

          Due to an increase in the number of reported spills, the low license fee and the increasing failure of
spillers to undertake their own cleanups, the Fund often operates in the red and has, to varying degrees, for
the past ten years. The Comptroller has asked the Legislature and the Governor to resolve the funding
problem. Some initiatives that are intended to solve the problem have been offered in past legislative
sessions.

         At least one of those initiatives would place an undue financial burden on the Fund. The
Administration’s proposed legislation to revise and refinance the State’s Superfund program bundles the oil
spill program with the hazardous waste program. The Administration proposes to limit liability exemptions
and to relax cleanup standards, thus shifting responsibility for cleanups from the polluter to the taxpayer.
The Administration’s proposed scheme would undermine the strength of the current oil spill law, result in
significantly higher cleanup costs for the Fund, severely limit the Fund’s ability to recover costs from spillers
and expose the Fund to an increase in damage compensation claims.

        In 1998, the Governor formed the Superfund Working Group and invited the Comptroller to
participate. The group’s primary charge was to recommend ways to finance the State’s environmental
cleanup programs, including the oil spill program. However, the group devoted the majority of its time to
discussing cleanup standards and liability provisions, and came to the issue of funding at the eleventh hour.
Ultimately, the group failed to reach consensus on funding issues (as on most other issues).

        Concepts subsequently introduced in the Administration’s legislation did not win approval from the
group as a whole, despite the fact that the Administration determined membership in the group and set the
group’s agenda. The majority of the documentation considered by the group was supplied by DEC and
supported the Administration’s position.

         Group members did agree, as a general principle, that pay-as-you-go financing was preferable to
additional bonding for the State’s environmental cleanup programs. When the time came to address the
details, however, participants were unable to agree on sources of funding for the Superfund program or for
the oil spill program. The Working Group did recommend that petroleum license fees be increased.




                                                       8
         In its legislation, proposed after the meetings of the Superfund Working Group, the Administration
included many new liability exemptions. If these were enacted, there would be fewer responsible parties
that would be legally obligated to perform oil spill cleanups. This would impact the Fund financially in three
ways: First, the Fund would have to undertake more cleanups; second, the Fund would be barred from
seeking reimbursement from many polluters; and third, the Fund would receive more damage claims that
would be eligible for payment. The Administration also proposed to change certain cleanup standards. The
relaxation of cleanup standards would result in more petroleum left in the environment and a greater
incidence of property damage and loss in property value. This would have a negative financial impact on the
Fund, which would be liable for more damage claim payments, but would have a smaller universe of spillers
from whom to collect.

        The Fund’s existing program emphasizes innovative approaches to cleanups that protect the
environment, the citizens of the State and the petroleum industry. The Administration’s proposed legislation
works against this. It is difficult to quantify the exact financial impact on the Fund unless and until any
changes are enacted. Nevertheless, it is reasonable to predict that the current cap on license fees will not
allow adequate funding to cover the cost of the Administration’s proposed changes.

         As noted above, in 1999, the Legislature raised the limit on the license fee to no more than eight
cents per barrel of petroleum imported for sale within the State. The increase, which raised the price of
gasoline at the pump by .001 cent per gallon, was only enough to finance the oil spill program in the near
term and for the program as we know it today. The present limit on the license fees is unlikely to be
sufficient to cover for the long-term costs of the oil spill program. If the Administration’s proposals were to
be enacted, the shortfall will be even greater. The most basic challenge, then, is to be certain that adequate
program funding is provided.

PROGRAM EFFICIENCY

        The Administration also proposes to combine the oil spill program with the hazardous waste
program. Confusing these two programs will result in greater cost to the taxpayers and in poorer cleanups.
The environmental dangers posed are different for petroleum and hazardous wastes. To date, the regulatory
structures have been separate, although both share the concept of strict liability. Importantly, the Oil Spill
Fund benefits from the Comptroller’s independent review and judgment, thereby protecting all stakeholders
in a way that the current Superfund program does not.

        The Administration’s proposed legislative changes would weaken the Fund’s effectiveness. The
Administration looks to relieve many responsible parties of liability for full remediation of on-site and off-site
contamination. Moving substantially away from the ‘polluter pays’ concept, the Administration would make
the Fund responsible for costs for which it could not seek reimbursement. This impact is of even greater
concern at present because spillers increasingly are seeking to delay or avoid cleanups altogether, and
actively work to avoid reimbursing the Fund fully. The Administration’s proposal would codify such
avoidance.


                                                        9
          Treating the oil spill program and the hazardous waste program as identical will diminish protections
now afforded stakeholders in the oil spill program and will result in a net economic and environmental loss to
the State. The programs should remain separate. Indeed, the State’s Superfund program might look to the
oil spill program as a model. Some of the oil spill program’s components could be applied very effectively
to the hazardous waste program.

MTBE

        Another important challenge faced by the Fund is the problem of MTBE. MTBE is a gasoline
additive that moves faster and farther in groundwater and surface water than other components of gasoline.
MTBE is proving to be a costly problem, particularly on Long Island. Cleanup costs increase rather
dramatically when an MTBE plume must be remediated. Presently, the Fund faces the prospect of not
having sufficient funding to complete MTBE cleanups or pay victims of MTBE spills.

NEED FOR ENVIRONMENTAL INSURANCE

         The economic and environmental significance of the State’s water resources makes it imperative that
both the Fund and spillers be strictly liable for the remediation of oil spills. In certain areas of the State,
cleanups are complicated by circumstances such as population density or complex geologic conditions. The
limited number of DEC personnel charged with responding to the State’s thousands of reported oil spills can
result in an occasional gap in supervision of cleanup contractors. All of these factors can increase cleanup
costs.

        Property owners who have failed to perform necessary environmental inspections or who have not
maintained storage tank systems in good repair may be in a financially difficult situation when contemplating
the cost of a cleanup. These difficulties might be lessened with increased staff throughout the oil spill
program. Another solution to be investigated is the availability of affordable, adequate environmental
insurance protection, particularly for homeowners and small business owners.




                                                      10
                                                                                CONCLUSION

         The oil spill program is a model environmental program. For more than twenty years, it has met its
obligation to protect the environment and to compensate victims of oil spills, while keeping cleanup costs
relatively low and working to increase cost recoveries steadily. Efficient operation of the oil spill program
has resulted in extremely low license fees. The Comptroller has been an essential intermediary among the
many stakeholders impacted by the program. This program has accomplished great good for the
environment, has kept economic costs in check, has aided victims of oil spills, and has demonstrated
consistent administrative efficiency. The program faces challenges, as every program does. These
challenges can be overcome with balanced thinking. The Comptroller’s Oil Spill Fund should continue to be
supported as an independent program; it demonstrates how a quietly and consistently reliable program can
protect the environment, the petroleum industry and the citizens of our State.




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