AN ACT Relating to storage tanks; adding a new chapter to Title 70 RCW; adding a new chapter to Title 43 RCW; adding a new chapter to Title 82 RCW; creating new sections; and making appropriations.

BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF WASHINGTON:

NEW SECTION. Sec. 1. The legislature finds that leaking storage tanks, particularly underground tanks containing petroleum or petroleum products, represent a serious threat to the water resources of this state, and that there is a need to determine what, if any, new regulations are appropriate to deal with this threat. The legislature further finds that, as a result of financial responsibility provisions in federal law regulating the owners and operators of underground storage tanks many small businesses within this state, particularly independent gasoline service station operators, are faced with the serious threat of having to go out of business; that this threat is attributable in good part to the inability of the owners of these small businesses to obtain liability insurance to cover the risks presented by leaking underground storage tanks; and that it is essential that this state take action to mitigate the financial responsibility requirements imposed under the federal law and to prevent the severe economic hardship that would otherwise result.

PART 1

STORAGE TANK REGULATIONS

NEW SECTION. Sec. 2. The department of ecology shall study the possible methods of implementing a storage tank program in Washington state that meets or exceeds federal law requirements. The study must include: (1) A determination of what the minimum federal requirements are; (2) a recommendation as to how the minimum requirements could best be implemented here; and (3) an identification of areas where there may be needs to go above federal standards and recommendations as to how those higher standards might be implemented.

The department shall report its findings to the legislature by December 1988. In addition to such other information as the department may deem appropriate, the report shall include draft language of possible rules which could be used to implement any recommendations made under this section.

NEW SECTION. Sec. 3. (1) A registration fee shall be paid initially by July 1 of each year by each person who owns an underground storage tank, as defined in 42 U.S.C. Sec. 6991, and who is required to provide or who has provided notification to the department pursuant to 42 U.S.C. Sec. 6991a. By April 1 of each year, the department shall establish by rule the amount of the registration fees required to be paid pursuant to this section. The amount shall be set at a level sufficient to pay the reasonable and necessary costs incurred in administering the study required by section 2 of this act and for such other related uses as the legislature may direct. The rates established by the department shall not exceed seventy-five dollars per tank per year.

(2) For the purpose of establishing the level of registration fees required to be paid under this section, the department shall adjust the level so that the fund balance will never exceed five million dollars.

(3) Fees collected by the department under this section shall be deposited in the fund established pursuant to section 5 of this act.

(4) No registration fees may be levied by any political subdivision on the ownership or operation of an underground storage tank.

NEW SECTION. Sec. 4. (1) The director of the department of ecology shall establish an underground storage tank advisory group to advise the department in its study conducted pursuant to section 2 of this act. The group may also render advice to the department of general administration with respect to the underground storage tank risk prevention group program administered by that agency.

(2) The advisory group shall consist of eleven members, including a chairperson representing the department, and ten at-large members. The advisory group shall consist of persons from the following areas of interest:

(a) One member representing environmental protection and conservation organizations;

(b) One member representing major petroleum companies;

(d) One member representing gasoline retailers;

(e) One member representing fuel oil retailers;

(f) One member who is an insurance underwriter;

(g) One member who is a certified hydrogeologist;

(h) One member representing the general business community;

(i) One member representing the public; and

(j) One member representing local government.

(3) The members shall be appointed by the director. Each member shall be, by professional training or experience and attainment, qualified to analyze and interpret matters pertaining to underground storage tanks and the various issues associated with underground storage tanks.

(4) The members shall serve for staggered terms of from three to four years and without compensation for their services as members of the advisory group. Members shall be reimbursed for travel expenses as provided under RCW 43.03.050 and 43.03.060.

(5) The advisory group shall have the power, duty, and responsibility to:

(a) Serve as a working forum for the exchange of views, concerns, ideas, information, and recommendations relating to the development of rules for underground storage tanks; and

(b) Advise the department on the establishment of the state's underground storage tank program and any rules necessary to carry out the provisions of this chapter.

(6) The advisory group shall receive staff support from the department and deliver a written report to the appropriate standing committees of the legislature on an annual basis.

(7) This section shall expire on January 1, 1998.

NEW SECTION. Sec. 5. There is created the Washington petroleum underground storage tank fund which shall contain the fees collected under section 3 of this act and any other funds the legislature has required be deposited into the fund. Money in the fund may only be spent, in accordance with legislative appropriation, for the purposes of conducting the study as provided under section 2 of this act and for other purposes related to storage tanks.

PART 2

RISK PREVENTION GROUP

NEW SECTION. Sec. 6. Unless the context clearly requires otherwise, the definitions in this section apply throughout this chapter.

(1) "Department" means the department of general administration.

(2) "Director" means the director of the department.

(3) "Petroleum" or "petroleum product" means petroleum, including crude oil or any fraction thereof.

NEW SECTION. Sec. 7. (1) The director shall adopt and implement a plan to provide for the establishment, operation, and maintenance of a risk retention group to provide liability insurance coverage for damages, including but not limited to the costs of remedial action, caused by sudden and nonsudden accidental releases arising from the operation of an underground storage tank containing petroleum or a petroleum product.

(2) The plan shall specify:

(a) The coverage to be offered by the group, including a deductible of five thousand dollars for each tank; and any exclusion, limitation, or condition of coverage considered appropriate by the department; and the premium for such coverage;

(b) The method for determining the amount of reserves to be maintained for payment of claims;

(c) The method for providing funds to pay for claims in the event the assets in the group's account are insufficient to cover liabilities;

(d) The frequency of studies or other evaluations to establish the premiums that must be paid by those covered by the group and the reserves to be maintained;

(e) The responsibilities of those covered by the group, including procedures for cancellation or nonrenewal of coverage; and

(f) The regular collection of such information as the insurance commissioner deems necessary to determine the financial viability of the group.

(3) The director shall submit the plan to the insurance commissioner for review and the group may not provide any insurance coverage without first obtaining the commissioner's approval of the plan. The commissioner shall approve the plan only if the commissioner finds that the group will be operated in an actuarially sound manner, that any conditions, limitations, or exclusions of such coverage are clear and unambiguous, and that the group will provide adequate notice to persons covered under the group in the event that coverage is canceled or nonrenewed by the group.

(4) Any change to an approved plan is ineffective unless the change also is approved by the commissioner. In reviewing any proposed change, the commissioner shall apply the standards contained in subsection (3) of this section.

(5) The director shall have broad powers to determine the coverage and other provisions of any insurance policy issued under this chapter.

(6) The director may contract with public or private agencies for the management and operation of the group including claims administration.

(7) The activities and operations of the risk retention group under this chapter are exempt from the provisions and requirements of Title 48 RCW, except as provided in this chapter.

NEW SECTION. Sec. 8. Any owner or operator of an underground storage tank containing petroleum or a petroleum product may apply for and receive coverage from the group if the group's plan is in effect and if:

(a) The owner or operator is in compliance with all applicable requirements regarding underground storage tanks containing petroleum or a petroleum product;

(b) The owner or operator's underground storage tanks are not known to be leaking on the date of application; and

NEW SECTION. Sec. 9. There is created the underground tank risk retention account which shall be a separate account in the general fund. Subject to legislative appropriation, funds in the account may be used by the department to pay for all costs of establishing and administering the risk retention group, including the payment of claims. The earnings on any balance in the group account shall be credited to the account, notwithstanding RCW 43.84.090.

NEW SECTION. Sec. 10. Participants in the risk retention group shall pay to the department an annual premium. The department shall set the premium amount at a level which has been approved by the insurance commissioner and which is the appropriate amount to pay for expenses and losses of the risk retention program. However, the premium may not exceed four hundred dollars for each tank. All funds collected under this section shall be deposited in the underground tank risk retention account.

NEW SECTION. Sec. 11. The director shall provide for periodic examinations of the financial condition of the risk prevention group. Whenever the director determines that the full premium amount permitted under section 10 of this act is insufficient to pay for the claims and other costs of the risk retention group, then the director shall immediately raise the premium amount to the extent permitted under section 10 of this act, if it is not already at that level, and shall provide written notice of the shortfall to the director of the department of revenue who shall impose the tax as provided in sections 17 through 21 of this act. All revenues from such tax shall be deposited in the underground tank risk retention account.

NEW SECTION. Sec. 12. (1) Whenever the director of the department of revenue receives notice from the director of the department of general administration that the present or projected premium income in the risk retention group account has been determined by the director to be inadequate, the director of the department of revenue shall impose the tax provided in chapter 82.-- RCW (sections 17 through 21 of this act). The tax shall take effect at the earliest convenient and practical date as determined by the director of the department of revenue, but no later than two calendar months after the month in which the notice is provided.

(2) The tax shall be effective only until the end of the second calendar month after the month in which the director of the department of general administration notifies the director of the department of revenue that the director of the department of general administration believes that a premium shortfall no longer exists and that it will not exist within the next two years if the tax were removed.

NEW SECTION. Sec. 13. Any owner or operator of an underground storage tank who knowingly submits false information to the department in an application for insurance under this chapter shall be subject to a civil penalty not to exceed ten thousand dollars for each tank for which false information is submitted. Except as otherwise provided in this chapter, all statutory law and common law with respect to the validity and enforcement of insurance policies apply to insurance policies issued under this chapter.

NEW SECTION. Sec. 14. The insurance commissioner and the director of the department of ecology shall consult with and assist the department of general administration in the administration of this chapter.

NEW SECTION. Sec. 15. The department shall annually prepare and submit to the appropriate standing committees of the legislature a report showing the financial condition of the risk prevention group.

NEW SECTION. Sec. 16. All hearings on and review of contested matters, orders, and any other actions taken under this chapter shall be conducted in accordance with the administrative procedure act, chapter 34.04 RCW. PART 3

PETROLEUM TAX

NEW SECTION. Sec. 17. It is the intent of this chapter to impose a tax on the first possession of all petroleum products, so that revenues may be generated for the risk retention group plan created under section 7 of this act.

NEW SECTION. Sec. 18. Unless the context clearly requires otherwise, the definitions in this section apply throughout this chapter.

(1) "Petroleum product" means plant condensate, lubricating oil, gasoline, aviation fuel, kerosene, diesel motor fuel, benzol, fuel oil, residual oil, liquefied or liquefiable gases such as butane, ethane, and propane, and every other product derived from the refining of crude oil, but the term does not include crude oil.

(2) "Possession" means the control of a petroleum product located within this state and includes both actual and constructive possession. "Actual possession" occurs when the person with control has physical possession. "Constructive possession" occurs when the person with control does not have physical possession. "Control" means the power to sell or use a petroleum product or to authorize the sale or use by another.

(3) "Previously taxed petroleum product" means a petroleum product in respect to which a tax has been paid under this chapter and which has not been remanufactured or reprocessed in any manner (other than mere repackaging or recycling for beneficial reuse) since the tax was paid.

(4) "Wholesale value" means the price paid by a wholesaler or retailer to a manufacturer or the price paid by a retailer to a wholesaler when the price represents the value at the time of first possession in Washington state. In cases where no sales transaction has occurred, "wholesale value" means the fair market wholesale value, determined as nearly as possible according to the wholesale selling price at the place of use of similar substances of like quality and character, in accordance with rules of the department.

(5) Except for terms defined in this section, the definitions in chapters 82.04, 82.08, and 82.12 RCW apply to this chapter.

NEW SECTION. Sec. 19. (1) A tax is imposed on the privilege of possession of a petroleum product in this state. The rate of the tax shall be two-tenths of one percent multiplied by the wholesale value of the product.

(2) Moneys collected under this chapter shall be deposited in the underground tank risk retention account created under section 9 of this act.

(3) Chapter 82.32 RCW applies to the tax imposed in this chapter. The tax due dates, reporting periods, and return requirements applicable to chapter 82.04 RCW apply equally to the tax imposed in this chapter. The department may adopt rules to ensure that taxes imposed on retailers are imposed equally as a tax imposed on first possessors who are not retailers. The rules may provide that the tax be imposed based on a percentage of sales for any class of retailer.

(4) The tax shall be effective until the end of the second calendar month after the month in which the director of the department of general administration notifies the director of the department of revenue that the premium shortfall no longer exists.

NEW SECTION. Sec. 20. The following are exempt from the tax imposed in this chapter:

(1) Any successive possession of a previously taxed petroleum product. If tax due under this chapter has not been paid with respect to a petroleum product, the department may collect the tax from any person who has had possession of the product. If the tax is paid by any person other than the first person having taxable possession of a petroleum product, the amount of tax paid constitutes a debt owed by the first person having taxable possession to the person who paid the tax;

(2) Any possession of a petroleum product by a natural person under circumstances where the product is used, or is to be used, for a personal or domestic purpose (and not for any business purpose) by that person or a relative of, or person residing in the same dwelling as, that person;

(3) Any possession of (a) natural gas, (b) petroleum coke, (c) liquid fuel or fuel gas used in petroleum processing, or (d) petroleum products that are exported for use or sale outside this state as fuel;

(4) Persons or activities that the state is prohibited from taxing under the United States Constitution;

(5) Any possession of a petroleum product where the possession first occurred before the effective date of this tax.

NEW SECTION. Sec. 21. (1) Credit shall be allowed in accordance with rules of the department of revenue for taxes paid under this chapter with respect to fuel carried from this state in the fuel tank of any airplane, ship, truck, or other vehicle.

(2) Credit shall be allowed, in accordance with rules of the department, against the taxes imposed in this chapter for any petroleum product tax paid to another state with respect to the same petroleum product. The amount of the credit shall not exceed the tax liability arising under this chapter with respect to that product. For the purpose of this subsection:

(a) "Petroleum product tax" means a tax:

(i) That is imposed on the act or privilege of possessing a petroleum product, and that is not generally imposed on other activities or privileges; and

(ii) That is measured by the value of the petroleum product, in terms of wholesale value or other terms, and in the determination of which the deductions allowed would not constitute the tax on income tax or value added tax.

(b) "State" means (i) the state of Washington, (ii) a state of the United States other than Washington, or any political subdivision of such other state, (iii) the District of Columbia, and (iv) any foreign country or political subdivision thereof. PART 4

MISCELLANEOUS

NEW SECTION. Sec. 22. The sum of two hundred thousand dollars, or as much thereof as may be necessary, is appropriated for the biennium ending June 30, 1989, from the general fund to the department of ecology for the purposes of carrying out sections 2 through 5 of this act. The amount of this appropriation shall be paid back. When fee revenues equal to the amount of this appropriation are deposited into the petroleum underground storage tank fund, the treasurer shall withdraw the amount of such revenues and deposit the amount in the general fund.

NEW SECTION. Sec. 23. The sum of one hundred fifty thousand dollars, or as much thereof as may be necessary, is appropriated for the biennium ending June 30, 1989, from the general fund to the department of general administration for initial administrative costs and expenses associated with the risk retention group plan. The amount of this appropriation shall be paid back. When premium revenues equal to the amount of this appropriation are deposited into the fund, the treasurer shall withdraw the amount of such revenues and deposit the amount in the general fund.

NEW SECTION. Sec. 24. Sections 3 through 5 of this act shall constitute a new chapter in Title 70 RCW.

NEW SECTION. Sec. 25. Sections 6 through 16 of this act shall constitute a new chapter in Title 43 RCW.

NEW SECTION. Sec. 26. Sections 17 through 21 of this act shall constitute a new chapter in Title 82 RCW.

NEW SECTION. Sec. 27. If any provision of this act or its application to any person or circumstance is held invalid, the remainder of the act or the application of the provision to other persons or circumstances is not affected. If any provision of this act is found to be an alternative to Initiative 97, then such provision shall be null and void.