Large energy firms get the money from cleanup funding

by Evan Halper

Some of the country's wealthiest oil companies and gas station chains have collected hundreds of millions of dollars from a cleanup fund conceived to help smaller, financially struggling entities.
Environmentalists and former lawmakers who pushed to establish the fund, which motorists pay into whenever they buy gasoline in California, say they never intended it for large energy companies with the means to repair environmental damage from their own operations. Yet big firms have taken $ 490 mm from the fund since it was created in 1989. Although the number of small businesses tapping the fund has dropped sharply, the program has been extended repeatedly amid lobbying by the big, politically powerful corporations. Those companies are now positioned to collect up to $ 900 mm more. Among the beneficiaries of the fund is ExxonMobil, which earned a record $ 45.2-bn profit last year.

The logic behind the fund was that "mom-and-pop service stations wouldn't have the money for this," said V. John White, a veteran environmental lobbyist, referring to the cost of removing leaky underground storage tanks and cleansing contaminated soil. Where petroleum was leaking into soil, it was fouling water supplies. Some small businesses in rural areas had been bankrupted by the cleanup costs. Some were abandoning their properties.
Former state Sen. Barry Keene, the North Coast Democrat after whom the tank cleanup fund is named, said the legislation he drafted to create it was intended, in particular, to help small businesses and individuals in his rural district. He recalled being moved by one Californian who inherited property requiring cleanup that would have cost significantly more than the land was worth.
"We had cases like that," he said, so the fund was aimed "toward the shallow pockets."

Lt. Gov. John Garamendi, also a Democrat, worked with Keene on the legislation as a state senator.
"We felt the big oil companies could take care of themselves," he said.
Big oil companies were to fund most of the cleanup kitty through a fee levied by the state. They pass the fee on to drivers at the pump. The large companies successfully lobbied for access to the fund at its inception and secured a provision guaranteeing them at least 14 % of the money, according to company officials and legislative staff. Since that time, state records show, the companies have received nearly 20 % of the approximately $ 2.4 bn in payouts.
Lawmakers renewed the program for eight more years in 2008, "even after most of the mom-and-pops had finished their cleanups," White said.

Motorists today pay a 14-cent levy for the fund on every 10 gallons of gasoline they buy. Representatives of the large companies note that smaller businesses get first access to the money. And even though it is drivers who actually foot the bill, the corporations say that because they are ultimately responsible for the fees, they should not be barred from making claims on a substantial share of the fund.
"The oil industry has paid millions into this fund, it has always supported the fund, it has supported increases in the fees when appropriate," said Tupper Hull, a spokesman for the Western States Petroleum Association, which helped craft the most recent legislation to extend the program. "The industry has accepted the reality that they are at the very end of a list of priorities for being reimbursed."

The fee has been increased several times. The last hike, of 14 %, occurred in 2004. A state Senate committee analysis asked then whether, "at a time of extreme budget cuts and scarce resources for environmental and public-health protection," Californians should be paying more to a fund "that primarily benefits large corporations and others."
But lawmakers approved an extension then and again in 2008. It was one of the few measures Gov. Arnold Schwarzenegger signed last year, when he made a point of vetoing almost everything lawmakers sent his way. The program, originally set to expire in 2005, will live until at least 2016.

Schwarzenegger spokeswoman Lisa Page said the extensions have been "about continuing an environmental program that removes dirty underground oil tanks that are leaking." She said the governor also backs a separate proposal to make the fund available to small gas station businesses struggling to pay for costly fuel nozzle upgrades required by new state air pollution rules.
The extension the governor signed last year, a bill by Sen. Alan Lowenthal (D-Long Beach), irked some early champions of the cleanup fund because it promises to be particularly beneficial to large companies and retail chains. Those companies have fought gasoline taxes for transportation projects and other purposes.

Legislative staff members involved in drafting the extension bill, introduced at the request of the 7-Eleven convenience store and service station company, say it is geared to keep the fund solvent until the state can clear out all pending claims, 4,400 of them from companies with more than 500 employees.
Major oil companies and gas retailers, including ExxonMobil, Shell, ConocoPhillips and 7-Eleven, account for most of the claims by big companies. They are seeking a total of $ 900 mm in reimbursements; 7-Eleven has 205 pending claims totalling $ 36.5 mm, according to state records.

Large companies lobbied heavily for the latest extensions, playing key roles in a state-sponsored stakeholder committee, testifying at hearings and lobbying lawmakers individually, records show.
Lowenthal said that although he doesn't necessarily support the oil companies passing their fees on to drivers, he believes the program was always intended for the cleanup of all storage tanks. And he noted that his extension legislation also initiated a program to divert $ 10 mm from the fund annually to pay for cleanup of abandoned storage tanks.

The oil companies and gas station chains are among California's largest campaign contributors year after year and wield considerable influence in the Capitol. 7-Eleven, for example,donated $ 80,000 to state politicians last year, including a $ 10,000 contribution to the governor two months before he signed the Lowenthal bill.
Oil companies gave $ 1.4 mm to California politicians and ballot measures they supported between passage of the Lowenthal bill in August and the Nov. 4 election.

The recent decline in gasoline consumption has reduced the fund's revenue, causing the state to temporarily suspend a number of payments to companies big and small. But as a result of the 2008 legislation, the big firms are the ones positioned to cash in when the economy rebounds, energy use rises and more money flows to the fund.
By 2016, state statistics suggest, most of the remaining claims filed by small businesses and individuals will have been paid.