House Bill 2751 started out as a motherhood-and-apple-pie measure. It was intended to help the mom-and-pop gas stations comply with imminent federal requirements by setting up a fund to provide them with below-market-rate loans for retrofitting their underground storage tanks and for cleaning up leaks. We go into its history in rather gruesome detail, since we feel it provides some indication of how a bill that appears benign can turn into a monster.
By the time the bill, sponsored by Mark Andrews, got out of its first committee (Andrews’ Committee on Planning, Energy and Environmental Protection), it was transformed. No longer was it a tax on every sale of a gallon of petroleum, it was a tax mainly on wholesalers, or “distributors.” And, at the suggestion of the Department of Health – a suggestion it surely must regret in hindsight – the bill was amended to distinguish the “financial responsibility guarantee fund” (essentially an insurance fund) from the low-interest loan fund.
The changes in the bill were foreshadowed in testimony provided by Wallace Amioka, a lobbyist representing the Western States Petroleum Association (including Chevron, Shell, Texaco and Unocal). Speaking to the provision for financial responsibility made in H.B. 2751, Amioka stated: “We submit that from an equity standpoint, those eligible to draw on the fund should not be limited to ‘small businesses’. All owners or operators of petroleum UST’s should be allowed to seek assistance from the fund.”
Amioka also suggested that the fund be financed not through the cent-a-gallon tax, but by an annual maintenance fee for each permitted underground storage tank. Andrews’ didn’t take the bait, although that did make its way into the bill when it was in the Senate.
The bill’s next stop was in Rep. Joe Souki’s Committee on Finance. The Health Department “fully supports” passage of the bill, it told Souki, while the Department of Business and Economic Development, which was charged with administering the funds, just as strongly opposed it. The Department of Taxation objected, too, on grounds the bill “would contribute toward an increasingly complex Fuel Tax Law” and, by establishing an earmarked fund, circumvents the fiscal power and authority of the Legislature.
The bill passed from Souki’s committee with airline fuel exempted from the tax, but otherwise essentially unchanged. The exemption for airline fuel makes sense, inasmuch as it is almost always stored in above-ground tanks.
When the bill was heard March 20 in Sen. Donna Ikeda’s Agriculture Committee, the urgent need for passing it this session had vanished. On March 15, the Environmental Protection Agency announced that it extending by a year the deadline for owners of 12 or fewer underground storage tanks to comply with financial responsibility requirements.
Both DBED and DOH testified that the extra time should be used to take a closer look at what is involved in setting up the financial guarantee fund. DOH backed away from its early support for the bill. If the Legislature wanted to help owners retrofit tanks or clean up their sites, DOH suggested, add another $1 million or so to DBED’s existing loan fund.
But DOH cautioned against setting up the financial responsibility fund. The fund “as presented is opened to all businesses, and this could potentially draw owners and operators from their coverage under other financial mechanisms such as full coverage insurance policiesÉ
“In addition, the proposed financial responsibility guarantee program does not appear to provide assistance to the businesses who are in the most financial need…”
What both DBED and DOH proposed at Ikeda’s hearing was a feasibility study, by the Legislative Auditor, of the proposed financial guarantee fund.
To no avail. Ikeda passed the bill out, with amendments that: provided for the “maintenance fee” suggested by Amioka ($200 per year per tank for big and small tank owners alike); make DOH the administrative authority for the financial responsibility fund (DBED said it was totally unqualified to run such a program); and reduced the “deductible” from $75,000 to $50,000. The loan program for small businesses was separately addressed by making an appropriation for the Capital Loan Revolving Fund, administered by DBED – although unless the mom-and-pop stores meet DBED’s credit standards, they wouldn’t be helped significantly by this.
Ikeda’s committee report shows some of the problems that the DOH has had in its relations with the Legislature. Mentioning DOH’s suggestion for a study by the Legislative Auditor, the report states that the “committee has decided not to authorize the actuarial analysis for the following reasons: (1) the existing law on regulating underground storage tanks has been in the Hawaii Revised Statutes for three years and to this date, no rules and regulations have been promulgated by the Department of Health, (2) Although the EPA has stated that they are prepared to extend their financial responsibility program for an additional year, as of yet there is no definite commitment; and (3) In the past, the Department of Health has a history of reacting slowly in addressing the needs and concerns of the State.” None of these points, whatever their merit, speaks to the specific suggestions DOH was making.
By the time the bill was heard in Sen. Mamoru Yamasaki’s Committee on Ways and Means, DOH testimony was almost pleading. The bill “is deficient in four critical areas,” DOH said: “(1) the proposed establishment of the guarantee fund is not based on sound actuarial analysis… (2) private insurance is available – thus negating the need for the state fund; (3) the fund is not targeted to specifically assist small ‘Mom and Pop’ businesses; and (4) even if this bill were to pass, it does not provide the Department of Health with the necessary personnel and administrative resources to effectively implement such a state fund in a timely manner.” But the pleas went unheard. The bill emerged from conference and was passed with the financial responsibility intact, to be administered by DOH.
The bill does nothing to enhance environmental protection. In fact, since it undermines one of the best mechanisms for ensuring responsible behavior by industry – the private insurance market – it actually could encourage lax management practices. Last, but not least, it provides no special help for the mom-and-pop operations.
Volume 1, Number 1 July 1990