Eligibility for Reimbursement from the Underground Storage Tank Indemnification Fund Cannot Be Determined on a Per Tank Basis

by Schnader Harrison Segal & Lewis LLP
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On June 17, 2013, the Pennsylvania Supreme Court in Young’s Sales and Service v. Underground Storage Tank Indemnification Board, reversed a decision of the Commonwealth Court and held that eligibility for indemnification for cleanup costs from the Underground Storage Tank Indemnification Fund (“Fund”) cannot be determined on a per tank basis. The Court found that Section 706(2) of the Act, which states that “[t]he current fee required under Section 705 has been paid” is ambiguous requiring the Court to apply the rules of statutory construction to ascertain legislative intent. In doing so, the Court concluded that adopting the Commonwealth Court’s decision, which would have allowed eligibility for indemnification to be determined on a per tank basis would pose, “a threat to the Fund’s long-term solvency.” This case is of particular importance to both owners and prospective purchasers of sites with multiple underground storage tanks. Unless such owners or purchasers make certain that all required indemnification fund fees on all tanks including newer tanks upon which the manufacturer’s warranty may not yet have expired, are current, such owners or purchasers could find themselves without recourse against the Fund. Needless to say, an audit of the status of payment of indemnification fund fees on all tanks should be added to the due diligence checklist of the prospective purchaser of such a site.

- I. Facts and Background -

A. Facts -

Young’s Sales and Service (“Young’s”) purchased property which had formerly been used as a gas station (the “Property”). There were four underground storage tanks on the Property. Three had been used to store gasoline and the fourth had been used to store kerosene. Prior to the sale of the Property, the former owner ceased operation of the gasoline station and emptied the contents of the tanks except for a hardened residual product which remained at the base of each tank. Shortly after Young’s purchased the Property, Young’s registered the tanks with the Pennsylvania Department of Environmental Protection (“PaDEP” or “Department”) for removal. Young’s then removed the tanks. During removal, Young’s discovered contamination in the soils surrounding each of the four tanks. Young’s cleaned up the contamination and filed a claim for indemnification with the Fund for the clean-up costs it had incurred in cleaning up the soils around each of the four tanks. The Fund denied Young’s claim because Young’s was not able to demonstrate that required fees had been paid on all four tanks. Young’s appealed from the Fund’s decision to the Indemnification Board.

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