UST and LUST Program Challenges in a Changing Transportation Sector


UST and LUST Program Challenges in a
Changing	Transportat

U.S. Environmental Protection Agency
Office of Underground Storage Tanks
EPA 510-R-24-001
December 2024

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Background

This paper from the U.S. Environmental Protection Agency is intended to respond to the
Association of State and Territorial Solid Waste Management Officials' February 2023 paper
entitled, Sustainability of State Financial Assurance Funds for the Underground Storage Tank
Programs.1 The EPA hopes this paper will help state Underground Storage Tank and Leaking
Underground Storage Tank programs understand and consider the potential impacts of several
converging issues, including concerns with an aging UST infrastructure nationally and an evolving
transportation sector, with particular emphasis on how these trends may present challenges to
their UST and LUST program operations. This paper can help inform efforts to investigate,
develop, and implement potential solutions, and is written in such a manner to allow state UST
and LUST programs, if they so choose, to use it to articulate these issues and ideas to key
stakeholders outside their immediate programs.

Introduction

The transportation universe is changing rapidly in the United States. The next two decades will
see significant growth in the number of electric vehicles across the country and significant
reductions in total liquid fuel usage by vehicles.2 Yet, even as electric vehicles and infrastructure
expand rapidly, and the nation's fleet of non-electric vehicles becomes much more fuel efficient,
new, state-of-the-art liquid fueling facilities open every month. These facilities are often larger
than existing fueling locations, and many of them are adding to the small but growing percentage
of locations offering higher blends of biofuels alongside the typical blends of gasoline and diesel.

Meanwhile, many other regulated UST systems are much older. The EPA estimates that around
three-quarters of the approximately 530,000 regulated petroleum UST systems at 190,000
facilities in the United States - just under 400,000 - will have reached or exceeded 30 years of
age by 2032.3 There is no requirement under the federal regulation to remove USTs based on
age, but 30 years is a common warranty period for tanks, and some states have requirements to
remove USTs around that age.

1 Association of State and Territorial Solid Waste Management Officials Tanks Subcommittee and State Fund
Financial Responsibility Task Force: 2023 Sustainability of State Financial Assurance Funds for the Underground
Storage Tank Programs. February 2023. httpsi//astswmo,org/2023-sustainability-of~state-financial~assurance-
funds-for-the-undergrou n d-sto rage-ta nk-prog rams/.

2 Davis, Austin. Modeling the Demand for Electric Vehicles and the Supply of Charging Stations in the United States:
Working Paper 2023-06. Congressional Budget Office. Publication 58964. September 7, 2023.

httpsi//www. cbo.gov/publication/58964.

3 Estimates derived from EPA calculations based on a combination of state data provided to EPA for regular
reporting, and during the development of the EPA UST Finder application. httpsi//www.epa.gov/ust/ust-finder.

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Some of these aging UST systems will be replaced with newer systems, but many may be removed
without replacement or simply abandoned in the coming decades as newly built facilities slowly
capture additional portions of a shrinking fuel market and fewer motor fuel dispensing facilities
eventually become necessary.4

ASTSWMO's Tanks Subcommittee and State Fund - Financial Responsibility Task Force prepared
a report documenting their concerns about how these converging trends will result in challenges
for UST and LUST programs across the country.5 Some of their concerns included:

•	Decreased revenues: Reductions in fuel sales may strain normal UST and LUST program
operations as most are funded by volumetric fuel taxes or fees or annual fees on
operating UST systems. (Reductions in fuel sales are one factor that may influence the
number of UST systems remaining in operation).

•	Increases in confirmed releases: States and territories may see an increase in the typical
rate of releases to which they must respond.6 A significant number of aging UST systems
will be closed and replaced, or simply closed, and removing USTs for closures often
reveals older fuel releases that were previously unknown and must be cleaned up. Thirty-
five states have state financial assurance funds (hereafter referred to as "state fund" or
"state funds") intended to provide funding for the required cleanups. Yet, even in states
that do not have state funds, releases at abandoned sites will likely require public funding
and state agency management to be cleaned up. Regardless of who ultimately pays to
clean up releases, it appears likely that the increased rate of UST closures and of newly
discovered releases will increase the workload and financial stress on LUST programs.

If cleanup expenditures increase at the same time that many state funds see decreases in
revenues, this may lead state funds to face financial constraints that can slow their ability to
support cleanup activities. Under some scenarios, state funds could even become insolvent.7 The
EPA believes these and the other programmatic concerns for UST and LUST programs identified
by ASTSWMO are valid and urges implementing agencies to start addressing them soon, if they
have not already.

States will need to investigate, develop, and implement potential solutions to these evolving
challenges to their UST and LUST program operations. States may need to modify program

4	See the EPA's web page at the following links for more detailed information about Aging UST Systems, and
Considering Transitions for Aging UST Systems, respectively: https://www.epa.gov/ust/resources-ust-owners-and~
operatorstfaging and https://www.epa,gov/ust/resources-ust-owners-and~operators#transitions.

5	Association of State and Territorial Solid Waste Management Officials Tanks Subcommittee and State Fund
Financial Responsibility Task Force: 2023 Sustainability of State Financial Assurance Funds for the Underground
Storage Tank Programs. February 2023. https://astswmo.org/2023-sustajnabilitv-of-state-financial-assurance-
funds-for-the-undergrou n d-sto rage-ta nk-prog rams/.

6	"States and territories" are hereafter collectively referred to as "states".

7	See the EPA's web page at the following link for more detailed information about State Financial Assurance
Funds: https://www.epa.gov/ust/state-financial-assurance-funds.

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funding structure, modify how their state funds operate, obtain additional authorities, or take
other actions that will work for their unique situation to ensure long-term program sustainability.
For example, some states may wish to provide incentives to upgrade or remove aging tanks to
reduce risks of catastrophic releases, or to spread remediation costs associated with removals
over longer time horizons.

This report is broken into two sections:

1. Converging Trends - An Uncertain Future for UST and LUST Programs.

2. Considering Solutions That Work for Your State.

Section 1: Converging Trends - An Uncertain Future for UST and LUST Programs.

This section explains in more detail the key challenges states should prepare for in the coming
years. Each of the following concerns is likely to impact states to varying degrees, across
drastically varying time periods. This is because each state has a unique combination of
environmental statutes and regulations, transportation markets and infrastructure, vehicle fleet
composition, and installed UST infrastructure. Regardless, all states will likely face at least some
of these challenges in the coming decades. See Section 2 on state-specific planning for more
information about the varying rates of electric vehicle adoption across the country.

Efficiency and electrification will reduce future U.S. fuel needs, but USTs, and UST and LUST
program operations, will be essential for decades.

U.S. fuel demand may decrease over the coming decades, due primarily to increasing gasoline
and diesel vehicle efficiency and the increased deployment of alternative vehicle technologies.8
However, this will happen gradually, and fuel storage in USTs will remain essential.

Approximately 16.5 million new light-duty vehicles are sold each year in the United States, and
their projected lifespan today is more than 15 years.9 The EPA projects traditional internal-
combustion engine vehicles combined with hybrid-electric and plug-in hybrid electric vehicles,
which contain internal-combustion engines, could together still represent approximately 75
percent to 85 percent of the light-duty and medium-duty fleet in the United States in 2035, and

8 U.S. Environmental Protection Agency. Multi-Pollutant Emissions Standards for Model Years 2027 and Later Light-
Duty and Medium-Duty Vehicles - Final Rule (March 2024). Section VIII., Part C., Fueling Impacts, p. 28111.
https://www.govinfo.gov/content/pkg/FR-2024-04-18/pdf/2024-06214.pdf.

9 Transportation Energy Institute. Decarbonizing Combustion Vehicles-A Portfolio Approach to GHG Reductions.
July 2023. httpsi//www,transportationenergv,ore/research/reports/decarbonizing-combustion-vehicles-a-

portfolio-approach-to-ehg-reductions/.

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between approximately 60 percent and 75 percent in 2055.10 But internal-combustion engines
entering the market today use significantly less fuel than those in older vehicles aging out of use.
Increasing fuel efficiency will have a significant impact on fuel demand.

Alternative vehicle technologies require even less liquid fuel than the newest internal-
combustion engine vehicles. The U.S. Department of Energy estimates battery electric vehicles
represented around one percent of registered light-duty vehicles in the fifty states and the
District of Columbia in 2023.11 However, the EPA projects battery electric vehicles could
represent approximately 15 percent to 25 percent of the U.S. light-duty and medium-duty fleet
by 2035, and approximately 25 percent to 40 percent of the same by 2055.12 Along with hydrogen
fuel cell electric vehicles, and the previously mentioned hybrid electric vehicles and plug-in hybrid
electric vehicles, these alternative technologies can collectively be referred to as EVs, and we
primarily use that terminology throughout the rest of the document. Industry advancements in
the production and sales of these zero- and low- emission vehicles are already occurring both
domestically and globally, due to significant investments from automakers, greatly increased
acceptance by consumers, and added support from Congress, state governments, the European
Union, and other countries.

Declining fuel sales will impact UST and LUST programs that receive funding from fuel sales
taxes or fees.

States may experience funding challenges for UST and LUST programs if they do not take action
to adjust how they fund their program operations and cleanup programs. Most of the 35 states
with state funds currently accepting new releases rely significantly on taxes or fees on fuel sales
to pay for cleanups.13 Some also use fuel taxes or fees to pay for other program activities. While
EVs will likely impact the onroad usage of gasoline much more than the onroad usage of diesel in
the near term, that may change in the future. See Section 2, Considerations that Work for Your
State, for more discussion about state-specific planning.

10 U.S. Environmental Protection Agency. Multi-Pollutant Emissions Standards for Model Years 2027 and Later
Light-Duty and Medium-Duty Vehicles - Regulatory Impact Analysis (EPA-420-R-24-004, March 2024). Figures 8-4
and 8-5. https://nepis.epa.gov/Exe/ZyPDF.cgi?Dockey=P1019VPM.pdf.

11 U.S. Department of Energy Alternative Fuels Data Center. 2023 Light-Duty Vehicle Registration Counts by State
and Fuel Type, https://afdc.energv.goy/yehicle-registration.

12 U.S. Environmental Protection Agency. Multi-Pollutant Emissions Standards for Model Years 2027 and Later
Light-Duty and Medium-Duty Vehicles - Regulatory Impact Analysis (EPA-420-R-24-004, March 2024). Figures 8-4
and 8-5. https://nepis,epa.gov/Exe/ZyPDF,cgi?Pockey=P1019¥PM,pdf.

13 Three additional states have state funds that have closed and are not accepting new releases but may be
similarly impacted.

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A reduction in the number of operating UST systems will impact UST and LUST programs that
receive funding from per tank fees.

As more USTs close than open from one year to the next, states that generate funding based on
a recurring fee tied to each registered UST could see funding reductions for their UST and LUST
programs. Since future declines in U.S. fuel demand suggest UST facilities may eventually begin
closing at faster rates than in recent decades in much of the country, states with funding obtained
through tank fees should consider how they will make up for the lost fees or how they will
operate with less revenue. This is a similar challenge to those states where funding is tied to taxes
or fees on the volume of fuel sold. Switching from one funding source to the other is unlikely to
solve the issue.

Several challenges make it difficult to calculate the amount and impact of future fuel declines
in the U.S. transportation sector on state UST and LUST programs.

• Many variables are involved in fuel decline calculations: Increased vehicle efficiency and
vehicle electrification will certainly result in a net decrease in liquid fuel usage. But other
changes in the transportation industry may increase demand for fuel, offsetting demand
reductions in other areas. All variables have uncertainty over the rate of impact on fuel
demand, even if the direction of the impact is clear. But the impact of some changes is
unknown, including uncertainties around future changes with driver preferences,
commuting patterns, and fleet operations. These may impact the future size of the
national vehicle fleet and the future averages of total U.S. miles driven annually.

• Most data is national, but states need to understand state level impacts: Many
projections about changes in the transportation industry use national level data, while
state UST and LUST programs need to make policy and funding determinations at the
state level. The EPA has created a modeling tool as a companion to this paper for states
to use to better understand how adjusting the numerous variables related to the concerns
in this paper might impact state operations and state fund solvency. See "States with state
funds: Consider using the EPA's UST Futures Forecasting Tool to project challenges and
test potential solutions to state fund solvency" in Section 2 for more information.

• EVs will grow in number everywhere, but the transition toward a mostly electrified
national fleet will not be uniform across the country:

o New regulations: On March 20, 2024, the EPA issued a final rulemaking for Multi-
Pollutant Emissions Standards for Model Years 2027 and Later Light-Duty and
Medium Duty Vehicles. The final standards are projected to accelerate the
transition to alternative vehicle technologies. The EPA projects that from MYs
2030-2032 manufacturers may choose to produce battery electric vehicles for
about 30 percent to 56 percent of new light-duty vehicle sales and about 20

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percent to 32 percent of new medium-duty vehicle sales.14 The EPA also projects
that consumers will see an increase in the availability of hybrid electric vehicles
and plug-in hybrid electric vehicles, as well as cleaner gasoline vehicles.15

o Different state policies: In 2022, California finalized the Advanced Clean Cars II
rule that specifies, by 2035, all new light-duty vehicles sold in the state are to be
zero-emission vehicles.16,17 Twelve additional states have adopted all or most of
the zero-emission vehicle phase-in requirements under ACC II, while the rest of
the states have not.18 This and other factors may play a significant role in a large
initial disparity in the rate of EV adoption between states in the next decade or
two before EVs become widespread in the light-duty sector. See Section 2,
Considerations that Work for Your State, for more information about state
policies.

o Sectoral differences: The U.S. National Blueprint for Transportation
Decarbonization sees electrification being the best pathway to significantly reduce
emissions from light-duty vehicles, while decarbonizing the traditionally diesel
sectors will likely require some broader mix of liquid fuels, batteries, and
hydrogen.19 EVs may eventually be the primary power source for both gasoline
and diesel, but the sectors will probably adopt EVs at vastly different rates.
Differences in the rate of rise of electrification between the gasoline and diesel
sectors will be an important issue for the EPA and states to monitor.

14 The paper earlier noted that battery electric vehicles, fuel cell electric vehicles, hybrid electric vehicles, and plug-
in hybrid electric vehicles could collectively be referred to as EVs, and the EPA would primarily use the term EVs
throughout the rest of the document. However, this projection refers specifically only to battery electric vehicles.

15 U.S. Environmental Protection Agency. Fact Sheet: Multi-Pollutant Emissions Standards for Model Years 2027
and Later Light-Duty and Medium-Duty Vehicles. March 2024.

https://nepis. epa.gov/Exe/Zy PDF, cgi?Pockey=P1019VP5.pdf.

16 EPA has not at the time of publication approved the waiver that would allow California to follow the ACC II
program.

17 California Air Resources Board, "California moves to accelerate to 100% new zero-emission vehicle sales by
2035," Press Release, August 25, 2022. https://ww2,arb,ca,gov/news/califomia-moves-accelerate-100-new-zero-
emission-vehicle-sales-2035.

18 See page 27988 of the EPA's Multi-Pollutant Emissions Standards for Model Years 2027 and Later Light-Duty and
Medium-Duty Vehicles - Final Rule (March 2024) for information for each state, at
https://www.govinfo.gov/content/pkg/FR-2024-04-18/pdf/2024-06214.pdf.

19 U.S. Environmental Protection Agency and U.S. Departments of Energy, Transportation, and Housing and Urban
Development. Fact Sheet: The U.S. National Blueprint for Transportation Decarbonization. January 2023.
https://www.energy,gov/sites/default/files/2023-Ol/EERE TranspoDecarb factsheet-508 O.pdf

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Most states have thousands of aging USTs, and their owners have additional considerations
beyond those of owners and operators of younger UST systems, including the following:

•	An aging UST population suggests more owners may have increasing difficulty accessing
private insurance. In the 21 states that do not have a state fund, UST owners and
operators generally rely on private insurance.20 Some owners and operators have
difficulty accessing affordable insurance to meet the financial responsibility requirement
once their tanks reach 30 years of age. Some have found challenges in finding companies
to insure them, and others have found their premiums to be exceedingly costly or the
insurers are issuing high deductible policies that require owners to fund a larger portion
of cleanups for aging UST systems. If owners and operators cannot provide proof of
financial responsibility, they cannot legally operate their UST system. In some situations,
this would likely lead to closure or abandonment of the UST system and the potential for
the discovery of more releases with no one to pay for the cleanup.

One reason some states have seen a reduction in private insurers is because companies
see increased claims as UST systems are removed. As the UST system population has aged,
some states have seen a reduction in private insurers to only a few operating in the state.
If all private insurers exit the state in a state where no state fund is present, the UST
industry would have significant problems meeting the financial responsibility
requirements; even a reduction to very few insurers could pose challenges.

•	Owners of aging UST systems will typically see an older UST system requiring more
frequent repairs than a newly installed UST system. Additionally, some states are
requiring additional testing for systems to remain operational once they exceed a certain
age threshold. Owners of many retail facilities will have to consider the likely future
reductions in fuel demand as they evaluate their operations. Many owners and operators
may decide to cease operations and close their USTs as they advance in age, especially
those whose facilities offer fewer streams of alternative income relative to retail fuel sales
margins.

A large number of UST systems will likely be closed in the next two decades.

The national UST population has been shrinking for decades due to facility closures, upgrades,
and a general trend this century of seeing multi-compartmented tanks at a new installation
becoming more common than having several single-compartment tanks. This reduction in the

20 State funds do not cover all owners and operators, so some owners and operators in those states may also use
private insurance. In both types of states, a small percentage of owners and operators may use another form of
financial responsibility, such as letter of credit or surety bond.

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UST population will likely continue, and potentially, accelerate. Using data from UST Finder, the
EPA estimates that approximately 275,000 operating USTs are currently 30 years of age or older.
The EPA estimates based on past closure data reported by states to the EPA, that over 100,000
tanks will likely be removed or replaced by 2034.21 The EPA anticipates that a greater proportion
of the future reduction is likely to be driven by facility closures than facilities moving to more
multi-compartmented tanks.

All states may experience significant numbers of UST closures or abandonments. States with
more efficient vehicles and higher rates of transition to EVs, and which also rely on private
insurance, may experience increases in the rate of closures happening sooner than in similar
states where owners have access to a state fund. This differentiation would likely be larger in
states with higher percentages of older UST systems.

States may also see an increase in the number of abandoned UST systems in the coming
decades at service stations sites that have limited value other than as service stations.

As the demand for motor fuels decline, owners and operators may be more inclined to abandon
facilities iftheyface economic hardship and cannot find a willing purchaserforthe fueling facility.
This may be an issue even in states with state funds because many state funds do not cover
abandoned LUST sites.

The need for public funding to pay for cleanups when the owner and operator are unknown,
unwilling, or unable to pay for corrective action will increase if owners abandon their sites or are
unable to afford to close their UST systems in states without a mechanism to finance cleanups in
these situations.

The rate of discovery of releases to which states must respond may increase.

States may see greater demand for cleanups in the next decade compared to their recent annual
baselines. In recent years, state programs have reported a national annual release rate of
approximately 1% of the total number of operating USTs.22 But increases in the number of UST
closures in the coming years will also likely increase the annual rate of discovered releases,

21 The EPA has calculated this estimate based on UST system closure data reported in the EPA's Semiannual UST
Performance Measures https://www.epa,gov/ust/ust-performance-measures. Reported total closures averaged
over 12,000 per year for the previous ten years. The EPA does not have data on the age of the UST systems at the
time of their closures but understands most UST systems being removed are typically older systems. Thus, the EPA
believes this estimate is a conservative estimate of the future trend (based primarily on past data about annual
closures when the average age of UST systems was younger), and that the next ten years will probably see more UST
system removals than the previous ten years.

22 U.S. Environmental Protection Agency. Semiannual UST Performance Measures, https://www.epa.gov/ust/ust-
performance-measures.

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because the most common time to identify a release is when an UST system is closed.23 National
data are limited, but recent data from closures in California between January 2017 and December
2022 found releases were discovered at 29.7% of the 546 facilities that had single-wall UST
systems closures or upgrades, and at 6.7% of the 1,042 facilities with double-wall UST system
closures or upgrades.24,25

State funds may experience solvency concerns if they don't change their operations.

Continued solvency of state funds is a serious concern for the 35 states that currently have them.
Increases in the number of cleanups to be completed due to increases in the number of UST
closures will increase expenditures for state funds. And reductions in demand for fuel and fewer
operating UST systems will lead to less revenue to perform those cleanups. While most of the
state funds rely primarily on the volume of fuel sold for revenue, some rely exclusively on
recurring fees from the number of registered USTs. The increasing number of cleanups and
decreasing state fund revenue are expected to add to the solvency concerns of state funds that
are already experiencing significant inflationary pressures.

Solvency concerns may force state funds to make structural adjustments to fund an increasing
number of cleanups in an era of declining revenues. These adjustments may be needed much
sooner in states with the fastest rates of EV adoption. Increased fuel efficiency from internal-
combustion engine vehicles and UST removals will occur in all states, but any rate of increases of
UST removals and associated increases in cleanup costs are likely to be further accelerated in
states where sales of new internal-combustion engine vehicles at some point will be restricted.
State funds in states anticipating slower EV adoption probably will not face this cash crunch as
soon as states with faster EV adoption rates, but eventually will have the same need to adjust
their programs to remain solvent. The EPA encourages states to begin acting now to assess and
address future solvency risks even if states believe UST removals and cleanup costs will be spread
over a longer time horizon than other states.

If a state fund becomes insolvent it would no longer meet the requirements of having sufficient
resources to address covered LUST sites in a timely manner, at which point it could no longer

23 UST closures occur when an UST is replaced and when an UST is closed without replacement.

24 California UST Leak Prevention: January-December 2022 Annual Report.

httpsi//www,waterboards,ca.gov/ust/leak prevention/docs/epa-evaluations/2022-ian-dec-leak-prevention-
reportpdf. Note: California has complete data for the January - December 2023 reporting period showing slightly
lower release percentages, but at the time of publication, that report was not yet finalized. The 2023 data show
releases were discovered at 25.4% of the 693 facilities that had single-wall UST system closures or upgrades, and at
6.0% of the 1,229 facilities with double-wall UST system closures or upgrades.

25 California has a deadline to close all single-wall UST systems by December 31, 2025. The state is specifically
tracking and reporting data about the different rates of releases identified at closures between single-wall and
double-wall UST systems in their UST Leak Prevention Reports. The EPA understands this type of information is
currently available from few, if any, other states.

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serve as a financial responsibility mechanism. This would force owners and operators in those
states to find a different form of financial responsibility. It is not clear that commercial insurance,
which is the second most common financial responsibility mechanism for USTs after state funds,
will be available to fill the gap as the market for UST financial responsibility insurance has been
contracting in recent years. Other FR mechanisms besides state funds or insurance currently
exist, but are far less common, and may not be accessible to all owners or operators now, or in
the future.

Section 2: Considering Solutions That Work for Your State.

State-specific planning is critical because the internal and external operating environment for
each state's UST and LUST program is unique. 26 This section describes general opportunities
states might consider as they develop options for reducing risks to their programs associated
with the issues described in Section 1.

This is not a comprehensive list of activities. There is no one solution for states to address the
concerns discussed in Section 1, because the challenges will affect states in different ways, over
different timeframes, and at different scales. States should tailor solutions to fit their unique
challenges to future UST and LUST operations. States should also recognize that some changes
may have tradeoffs or unintended impacts within or beyond their programs, and carefully weigh
any benefits and drawbacks before undertaking any changes.

Identify key players and ensure open communication channels exist.

States should identify all programs, agencies, or departments in the government with equities in
UST and LUST operations, and ensure they are aware of these concerns. States should maintain
effective communication among the organizations to ensure all interested government
organizations understand the authorities and responsibilities for others working in this area.

States should also consider how and how often each of these parties interact with different parts
of the regulated community, to enhance two-way communication between government parties
and the regulated community wherever possible.

26 There are numerous aspects that differ across states. See the section below titled "State with state funds:
Consider using the EPA's UST Futures Forecasting Tool to project challenges and test potential solutions to state
fund solvency" for more discussion about some of the variables affecting states.

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Consider information about your state's transportation environment that may have impacts
on your regulated community and UST and LUST programs.

States may face significant changes in their transportation environment that will have important
impacts for their UST and LUST programs. States should attempt to monitor important
information or trends that may affect their jurisdictions and identify partners within the state
who may be willing to keep UST and LUST programs up to date when important changes occur.
Some areas to consider tracking include:

• The state's pace of transition to electrification, including any state legislation relating to
the transition of the transportation sector and turnover of the vehicle fleet.

o EV adoption rates will vary widely across states, and additionally, they are only
one piece of information affecting the situation for a state.

o For example, Colorado, Delaware, Maryland, Massachusetts, New Jersey, New
Mexico, New York, Oregon, Rhode Island, Vermont, Virginia, and Washington have
passed legislation adopting all or most of the zero-emission vehicle phase-in
requirements under California's ACC II rule.27 These 13 states may see
electrification of their light-duty vehicles fleet happen much more quickly than
most other states.

o California has also passed similar zero-emissions requirements for the diesel
sector through the Advanced Clean Trucks rule, and Colorado, Massachusetts,
New Jersey, New Mexico, New York, Oregon, Vermont, Washington, Maryland,
and Rhode Island have adopted those requirements.

• Status of current and future fleet composition.

o Age and rate of fleet turnover.

o Share of light duty, medium, and heavy-duty vehicles.

o Share of privately owned and fleet-owned vehicles.

• Changes in fuel sales. As discussed above, many variables affect fuel sales. Tracking trends
in fuel sales will help the state prepare for revenue declines and UST removals.

27 See page 27988 of the EPA's Multi-Pollutant Emissions Standards for Model Years 2027 and Later Light-Duty and
Medium-Duty Vehicles - Final Rule (March 2024) for more information for each state:

https://www,govinfo,gov/content/pkg/FR-2024-Q4-18/pdf/2024-06214,pdf.

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Consider opportunities to increase funding available to state UST and LUST programs.

Some states have attempted to alleviate concerns about future funding reductions (e.g., from
decreases in taxes or fees based on the volume of fuel sold, or from reductions in revenue from
per tank fees) by making changes to their program operations, identifying alternative funding
sources, or making fee adjustments.

• Offset revenue reductions associated with volumetric gallon reductions by modifying
fuel sales taxes or fees.

o Fuel sales taxes or fees. In many states, at least some of the funding for
cleanups is generated from fuel taxes or fees charged on gallons of fuel sold.
Should a state implement an increase, they could consider allocating some of
the increased revenues to UST or LUST program needs,
o Vehicle-miles traveled tax or fee. States may be considering whether to
decouple funding from volumetric-based taxes or fees on fuel sales because
both the gasoline and diesel sectors will see fuel reductions from efficiency
gains and EVs. Some states have considered implementing VMT taxes or fees
to share the burdens of road maintenance more equally across all types of
vehicles. Similar to other tax or fee increases, if states choose to implement
VMTs, they could consider allocating some of the increased revenue to UST
and LUST program concerns.

• Increase revenues through non-volumetric fee adjustments.

o Vehicle registration fees. Some states have instituted higher vehicle
registration fees for electric or hybrid vehicles. This difference is intended not
as a deterrent to purchasing these vehicles, but to help share the burden of
state expenses related to highway maintenance usually paid for at least
partially by taxes or fees on liquid fuels that EVs will not incur, or in the case
of hybrids, likely pay in smaller amounts. If states choose to institute these
fees, they could consider if these fees can assist with state fund challenges,
o Tire taxes and fees. Some states have considered generating income for road
building and maintenance by increasing taxes and fees for purchase of new
tires. This change is intended not as a deterrent to purchasing new tires, but
to help share the burden of state expenses related to highway maintenance
usually paid for at least partially by taxes or fees on liquid fuels that EVs will
not incur, or in the case of hybrids, likely pay in smaller amounts. If states
choose to institute these fees, they could consider whether these fees can
assist with state fund challenges.

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States where owners are primarily reliant on private insurance: Consider options to protect
access to financial responsibility mechanisms if commercial insurers withdraw from the UST
financial responsibility market or dramatically increase premiums.

States where owners and operators are generally reliant on private insurance for financial
responsibility may wish to closely monitor insurance availability and consider actions they can
take to ensure continued access to financial responsibility mechanisms for their owners and
operators. For example, some states may wish to consider:

• Instituting re-insurance programs for commercial insurance companies.

• Encouraging the formation of risk retention and risk purchasing groups.

• Creating a state fund.

States with state funds: Consider using the EPA's UST Futures Forecasting Tool to project
challenges and test potential solutions to state fund solvency.

• The EPA has developed a financial assurance forecasting tool to assist states in examining
the effects of declining fuel use on cleanups, state fund solvency, and facility closures.

• The tool is designed to help states estimate the number of release discoveries, state fund
and program funding levels, and the potential number of abandoned sites in potential
future scenarios.

• The tool will allow states to project the impact of different combinations of potential
solutions. The transportation universe will continue to evolve, so states should plan to
reevaluate their situation and forecasts on a regular basis.

• Where data is not available, the tool can be run under a range of assumptions to examine
the range of likely outcomes. The EPA recognizes that specific data projections are not
available for many variables related to the changing transportation sector, especially at
the state level, so EPA has designed the tool to easily change assumptions to examine
different ranges of likely outcomes.

• The tool structure is easily modified so states can adapt it to fit their unique structures.

• The tool includes graphics that can help explain the results to management, legislators,
and stakeholders.

• States that perform periodic actuarial reviews of their state funds may want to
incorporate the forecast tool into their future projections.

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States with state funds: Consider modifying state fund activities.

States are responsible for any release covered by the state fund. If revenues are insufficient it
may lead to long wait times before the state fund is able to address some releases. The state
fund may even become insolvent. If states calculate they might have an inability to support timely
remediations or to remain solvent while supporting cleanup activities for the releases for which
they are obligated to respond, states should consider how they can modify their activities to
reduce cost outlays or increase funds available to them. The following are some activities states
could consider:

• Attempt to decrease future liabilities for cleanups.

Most of the releases anticipated to need clean up in the next twenty years will be
identified at existing UST systems already active in the state funds. If states choose to
modify the rules for their state fund operation to decrease future cost liabilities, states
could consider some of the following modifications going forward:

o Choose to cover only a subset of owners and operators.

o Tier coverages in different ways or reduce the percentages of covered costs of
cleanups.

o Modify deductible structure to require some owners and operators to pay smaller
or larger portions of the cleanup costs.

o Consider opportunities for regulatory changes for increased inspection and
enforcement to prevent more releases from occurring.

o Review remediation guidance and examine cleanup endpoints given current
understanding of LNAPL and the potential for exposure and impacts to
receptors.28

• Reduce the average cost per cleanup.

States could consider the following activities which may reduce the average cost per
cleanup and help state funds expend less as they try to avoid insolvency:

o Regulatory. Consider adopting alternative cleanup approaches. For example:

o Consider adopting risk-based corrective action, also referred to as risk-
based decision making.29

28ITRC. 2018. LNAPL Site Management: LCSM Evolution, Decision Process, and Remedial Technologies" [LNAPL-3],
Interstate Technology & Regulatory Council, Washington, D.C. https://lnapl-3,itrcweb.org/.

29 U.S. Environmental Protection Agency. Memorandum: OSWER Directive 9610.17: Use of Risk-Based Decision-
Making in UST Corrective Action Process. March 1995. https://www.epa.gov/sites/default/files/2014-
02/documents/d9610.17.pdf.

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o Carefully explore innovative new standards, such as the upcoming ASTM

Moving Sites to Closure standard.30
o Operations. Consider adopting practices to keep cleanup costs down, such as

more targeted monitoring strategies,
o Technical. Approve new lower-cost cleanup technologies or techniques in your
state such as using nature based cleanup solutions or closing cleanup projects
when they no longer pose a threat.

• Attempt to close as many sites as possible, as quickly as possible.

o Another strategy a state could adopt would be to do more work now to assess and
permanently close abandoned USTs, to close as many existing corrective action
projects as possible, and to engage in efforts to find potential releases. The goal
would be to complete cleanups and close sites now while the state still has a
strong revenue stream. (Many state funds end the year with a surplus and states
might be able to spend more money and get more sites closed.)
o States may wish to consider procedural modifications or new technologies to
streamline or minimize administrative workloads related to the cleanup process.

• Increase money available to state funds.

Some states are considering modifications in the following areas to preserve or increase
funding specifically for state funds. Each potential modification comes with benefits and
drawbacks.

o Raise the reserve cap.

¦ Currently, some state funds stop collecting new revenue when the
state fund surplus reserve reaches a pre-determined ceiling, or
"reserve cap."

¦ States could consider raising the allowable ceiling to build larger
reserves that can then be used to continue cleanups in later years
when the state fund income stream is reduced. Building a larger "rainy
day fund" now may give the state funds more financial flexibility in
later years.

¦ States should be aware that larger balances may become subject to
diverting state fund reserves to other purposes outside of state fund
programs and consider how they might prevent future diversions.
Some states project the full cost of a cleanup and encumber the money
needed for future work at their existing sites. This signals that while a

30 At the time of publication, work is ongoing on ASTM's draft of the Moving Sites to Closure standard.

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state fund may appear to have a large balance, some portion of that
balance is already spoken for.
o Adjust state fund deductibles and cost shares.

¦ States could increase deductibles or cost shares to reduce the state
fund's share of cleanup costs.

¦ Note: Unless a state fund provides first dollar coverage, owners would
have to show a separate form of financial responsibility for the state
fund deductible.

o Adjust the annual fee for covered parties.

¦ States could increase revenue by adjusting the annual fees charged to
UST owners and operators covered by the state fund.

¦ For example, some states may use differential registration rates on a
sliding scale related to the age or compliance of the UST systems in
their regulated universe.

Consider creating funding mechanisms to address cleanups at abandoned sites.

States may wish to prepare for the possibility of an influx of abandoned gas stations or LUST sites.
A few possibilities to consider include the following:

• Modify state statutes or regulations to allow state regulators to take responsibility for
corrective action at abandoned sites and dedicate funds to address abandoned LUST sites.

• Institute a program to generate revenue to clean up abandoned sites from the interest
earned on the balance in the state fund.

Consider if incentives or required upgrades or removals of aging UST systems may be beneficial.

The challenges discussed in Section 1 suggest the possibility of significant numbers of UST
removals happening in a state over a short time period at some point in the future. More
removals generally mean more newly identified releases to clean up.

The following are examples of state-sponsored incentives or requirements to help reduce release
risks or to spread closures (and thus increases in newly identified releases), cleanup costs, and
workload demands over as great a time period as possible. Incentives or requirements both may
help to reduce the risk of program insolvency and reduce the number of abandoned sites if
properly implemented. If states project that they will face a wave of closures and cleanups
happening in a manner or timeframe that will present challenges to their UST or LUST program

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operations in the future, they could consider adopting some of the following program incentives
or requirements.31

• UST Upgrade or Removal Incentive Programs.

At least seven states have implemented funding programs to help owners upgrade,
remove, or replace UST equipment. There is no funding available from the EPA to remove
UST systems based solely on the age of an UST system. (However, other federal grants
may help with this - see later in this section.)

• UST Upgrade or Removal Requirements.

Some states have paired their incentive programs with removal requirements, while
other states have instituted removal requirements for USTs meeting certain criteria
without incentive programs. For example, they have required removing UST systems with
single-walled equipment or replacing tanks that have reached a certain age. Whether
paired with incentive programs or not, upgrade or removal requirements have generally
reduced the number of older UST systems or systems potentially more likely to have
releases, since double-wall systems show less propensity to have a release.

• Leverage Funding Programs Targeting Other Goals for UST and LUST Program Benefit.

There are several programs that may be able to fund UST upgrades, site assessments,
removals, or cleanups and help UST and LUST program efforts.

o The EPA's Brownfields Program provides grants and technical assistance to
communities, states, tribes, and others to assess, safely cleanup, and sustainably
reuse contaminated properties.32 Operating gas stations and many responsible
party-lead cleanups would not be good candidates for Brownfields program
assistance. However, there are many potentially eligible UST or LUST sites that
would be a great fit, including lower priority abandoned LUST sites as well as
abandoned USTs and UST facilities. State UST and LUST programs are encouraged
to build strong relationships with Brownfields programs at the federal and state
level and work together to achieve mutual goals between the programs.33 States
or other stakeholders may contact state Brownfields representatives for more
information.34

31 States interested in learning more about the types of programs discussed in this section should see: Association
of State and Territorial Solid Waste Management Officials Tanks Subcommittee - Financial Responsibility Task
Force: Pay for Prevention Program Resource Document. August 23, 2024. https://astswmo,org/pay-for-prevention-
program-resource-document/.

32 See the EPA's webpage entitled "About" to learn more about Brownfields, at:

https://www.epa.gov/brownfields/aboiit.

33 U.S. Environmental Protection Agency, Region 6. Underground Storage Tanks and Brownfields: Opportunities for
Partnership and Success. June 2023. https://www,epa,gov/svstem/files/documents/2023-07/QUST~

QBLR%20Piscussion%20Paper %20June%202023,pdf.

34 See the EPA's webpage entitled Brownfields Near You: https://www.epa,gov/brownfields/brownfields-near-you.

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o At least seven states have or have had grant funding or tax incentives related to
installing compatible infrastructure for higher blends of biofuels. Some states may
see a secondary benefit to their programs because such funding efforts also
update aging UST infrastructure,
o Additionally, there are federal and private opportunities that may allow recipients
to upgrade or remove their UST systems while adding biofuels capabilities to UST
systems or when adding capabilities for zero or low emission vehicle technologies.
The EPA published three short documents about federal grants that may be of
interest to UST owners and operators.35

Caveats regarding incentive programs, removal requirements, and funding programs:

• Implementation considerations. Any increase in UST removals increases the chances of
finding newly identified releases. States implementing these types of incentives may
discover many new releases sooner than if they did not have the incentive programs.
States should be prepared to address these additional releases as they are discovered.

• Measuring impact. Although evaluating the impact of these programs on UST and LUST
programs quantitatively, beyond the number of USTs removed or replaced, is difficult,
they generally are seen to provide two major benefits:

1. Spreading discovery of releases at closure to which the state must respond over a
longer timeframe by encouraging the earlier removal of some older UST systems.
This has the benefit of smoothing funding expenditures.

2. Fewer potential total releases. It is safe to assume that a non-existent UST system
is not going to leak, and a newly upgraded or replaced system installed to today's
requirements and materials is probably less likely to release than an older system.
Encouraging removal and replacement helps prevent older UST systems from
having new releases.

• Capital constraints. States should keep in mind that funding programs to assist with
removals, absent cleanup costs, will be far less expensive on a per-facility basis than
programs to replace UST infrastructure. New UST system infrastructure and the skilled
labor required to install it can be very expensive. However, states may wish to use funding
for UST system infrastructure replacement programs despite high cost. For example,
ensuring fuel availability for emergency response efforts in rural areas might be a priority
for a state and lead them to consider assisting with upgrades to ensure facility viability.
States considering assistance programs should consider the full range of their needs,
priorities, and capital constraints and attempt to find the right balance that works for
them.

35 See the EPA's web page entitled Federal Grants of Interest to UST Owners and Operators:
https://www.epa,gov/ust/federal-grants-interest-ust-owners-and-operators.

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Consider analyzing and expanding available data to better identify release trends and UST
universe characteristics to improve accuracy in state forecasting models.

• Data analysis will help prepare states for the coming impacts of changes to the
transportation sector. In-depth data analysis can help states identify trends specific to
their regulated universe, including potential increases in confirmed releases and the
characteristics of UST systems associated with releases at closure. Further consideration
of this data, along with the status of existing cleanups in the state, and state-specific
requirements (such as closure of aging USTs, USTs beyond a warranty period, or USTs with
single-wall components) will assist with forecasting impacts to the state funds.

• Although available data has expanded over the years with improved databases, states
may find the need to track additional data elements to effectively analyze these trends.
One approach to evaluate data needs is to develop specific questions that align with
trends and determine what data is needed to answer the questions. States can then
determine how to collect missing data and to incorporate it in their program evaluations.

• The EPA will continue to explore opportunities to support better data analysis and data
sharing about USTs and releases from USTs that can benefit state UST and LUST programs
and the regulated community. This may include future internal analysis efforts or
partnerships with external parties, such as ASTSWMO.

Conclusion

The EPA understands the challenges states are facing in a rapidly changing transportation sector.
While all states will likely need to make some changes to avoid difficult situations as these trends
continue converging, not all will face them in the same way. It is critical that states take action
early to evaluate and, as needed, mitigate risks to their programs, especially the risk of financial
constraints impacting state funds' ability to support cleanup activities.

Early engagement on these issues with state leadership is key. Many of these changes will take
years to develop and implement, sometimes requiring action beyond what is possible by
environmental agencies.

The EPA stands by to assist states now, and in the future, as they evaluate their situations and
implement solutions that they believe will work best for them during this dynamic time for the
UST system and transportation industries. The EPA will continue working with ASTSWMO and
partnering with states to understand the evolving needs of state UST and LUST programs over
the coming years.

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