ENGROSSED SUBSTITUTE HOUSE BILL 1175

ByHouse Appropriations (originally sponsored by Representatives Doglio, Dye, and Leavitt; by request of Pollution Liability Insurance Agency)

AN ACT Relating to creating a state financial assurance program for petroleum underground storage tanks; amending RCW 82.23A.020; reenacting and amending RCW 70A.325.020 and 43.79A.040; adding a new chapter to Title 70A RCW; prescribing penalties; providing an effective date; and providing expiration dates.

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

(1) "Agency" means the pollution liability insurance agency.

(2) "Annual aggregate" means the maximum amount of money the program will pay for all of an owner's or operator's eligible costs associated with a petroleum underground storage tank in one year.

(3) "Bodily injury" means actual medically documented costs and medically documentable future costs of adverse health effects that have resulted from exposure to a release from a petroleum underground storage tank. The term does not include pain and suffering.

(4) "Director" means the director or designee of the state pollution liability insurance agency.

(5) "Loss declaration form" means a request for payment from the state financial assurance program filed by the owner or operator.

(6) "Loss reserve" means the amount set aside by the agency for cost and expenses related to requests that have been made by an owner or operator.

(7) "Occurrence" means an accident, including continuous or repeated exposure to conditions, that results in a release from a petroleum underground storage tank.

(8) "Operator" means a person in control of, or having responsibility for, the daily operation of a petroleum underground storage tank.

(9) "Owner" means a person who owns a petroleum underground storage tank.

(10) "Per occurrence" means the period of time from identification through remediation of a release from a petroleum underground storage tank.

(11) "Petroleum" means any petroleum-based substance, including crude oil or any fraction that is liquid at standard conditions of temperature and pressure. "Petroleum" includes, but is not limited to, petroleum and petroleum-based substances comprised of a complex blend of hydrocarbons, such as motor fuels, jet fuels, distillate fuel oils, residual fuel oils, lubricants, petroleum solvents, used oils, and heating oils. The term does not include propane, asphalt, or any other petroleum product that is not liquid at standard conditions of temperature and pressure. Standard conditions of temperature and pressure are at 60 degrees Fahrenheit and 14.7 pounds per square inch absolute.

(12) "Petroleum underground storage tank" means an underground storage tank system regulated under chapter 70A.355 RCW or subtitle I of the solid waste disposal act (42 U.S.C. chapter 82, subchapter IX) that is used for storing petroleum.

(13) "Petroleum underground storage tank facility" means the location where the petroleum underground storage tank is located. The term encompasses all real property under common ownership associated with the operation of the petroleum underground storage tank.

(14) "Program" means the state financial assurance program created in this chapter.

(15) "Property damage" means a documented adverse physical impact to structures or property as a result of a release from a petroleum underground storage tank.

(16) "Release" has the same meaning as defined in RCW 70A.305.020.

(17) "Remedial action" has the same meaning as defined in RCW 70A.305.020.

(18) "Surplus reserve" means the amount set aside by the agency to provide financial protection from unexpected losses.

(19) "Third-party claim" means a civil action brought or asserted by an injured party against an owner or operator of a petroleum underground storage tank for bodily injury or property damages resulting from a release from a petroleum underground storage tank. The following entities are not considered a third party: A petroleum underground storage tank owner or operator; the owner of the property where the petroleum underground storage tank is located; a person to whom properties are transferred in anticipation of damage due to a release; employees or agents of an owner or operator; or employees or agents of the property owner.

(2) To participate in the program, an owner or operator must register a petroleum underground storage tank in accordance with procedures established by the agency and maintain compliance with the program eligibility requirements established by the agency. The agency may remove from the program any owner or operator who fails to maintain compliance with the program eligibility requirements.

(3) The agency may conduct an assessment of a registered petroleum underground storage tank facility and any release from the petroleum underground storage tank to determine program or cost eligibility. If an owner or operator does not allow an assessment, the agency may remove the owner or operator from the program or deny requests for payment under the program.

(4) Under the program, the agency may provide an eligible owner or operator of a registered petroleum underground storage tank the following financial assurances:

(a) For releases occurring after tank registration, up to $2,000,000 per occurrence for taking remedial action and for compensating third parties for bodily injury and property damage caused by the release during the time the tank is registered by the owner or operator; and

(b) For releases occurring prior to tank registration, up to $1,000,000 per occurrence for taking remedial action.

(5) Under the program, the agency may not expend more than $3,000,000 per state fiscal year for multiple occurrences involving a single petroleum underground storage tank.

(6) The agency may prioritize funding for a release under the program based on the following factors:

(a) The threats posed by the release to human health and the environment;

(b) Whether the population threatened by the release may include a vulnerable population or an overburdened community as defined in RCW 70A.02.010; and

(c) Other factors specified by the agency.

(7) Claims for remedial action costs will receive priority over payment of a third-party claim. Before funding any third-party claim resulting from a release under the program, the agency must reserve the estimated cost of any remedial actions necessary to address the release, and if funding is remaining then payment may be made on an eligible third-party claim.

(8) Funding for remedial actions and third-party claims under the program is limited to the reasonable and necessary eligible costs established by the agency.

(a) For remedial actions, the agency may establish a range of eligible costs or base payment of eligible costs on criteria to be met by persons who contract to perform remedial actions.

(b) The agency is not liable for any costs for remedial actions or third-party claims under the program where no owner or operator exists.

(9) The agency may require an agency representative to be present during the removal of a registered petroleum underground storage tank. If an owner or operator does not allow an agency representative to be present during the removal or does not comply with procedures established by the agency, the agency may deny requests for payment of tank removal costs under the program.

(a) The agency may file a lien on the petroleum underground storage tank facility or other property owned by the owner or operator under section 8 of this act to recover the cost overpayment; and

(b) The attorney general, at the request of the agency, may commence a civil action against the owner or operator in superior court to recover the cost overpayment and the agency's administrative and legal expenses to recover the cost overpayment.

(2) The agency may require an owner or operator to return any cost payment made by the agency under this chapter if the owner or operator misrepresents or omits a fact relevant to a determination made by the agency under this chapter or if the owner or operator fails to complete the remedial action that the agency determined at the time of the cost payment to be necessary to adequately address the release. If the cost payment is not returned as required by the agency:

(a) The agency may file a lien on the petroleum underground storage tank facility or other property owned by the owner or operator under section 8 of this act to recover the cost payment; and

(b) The attorney general, at the request of the agency, may commence a civil action against the owner or operator in superior court to recover:

(i) The cost payment;

(ii) A civil penalty as determined by the court up to the full amount of the cost payment, if the agency's repayment request is based on willful actions of the owner or operator; and

(iii) The agency's administrative and legal expenses to recover the cost payment.

(3) If a person, with intent to defraud, submits a loss declaration form, or issues an invoice or other demand for payment under this chapter with knowledge that it is false in whole or in part, and with knowledge that it is being submitted to the agency for cost payment, the agency may require that the person return any cost payment received based on the false loss declaration form, invoice, or other demand for payment. If the cost payment is not returned as required by the agency:

(a) The agency may file a lien on the petroleum underground storage tank facility or other property owned by the owner or operator under section 8 of this act to recover the cost payment; and

(b) The attorney general, at the request of the agency, may commence a civil action against the person in superior court to recover:

(i) The cost payment;

(ii) A civil penalty as determined by the court up to the full amount of the cost payment; and

(iii) The agency's administrative and legal expenses to recover the cost payment.

(a) The owner or operator has received, or is eligible to receive, funding for remedial actions under the program; and

(b) The owner or operator provides consent for the agency to:

(i) Conduct the remedial actions; and

(ii) Enter upon the real property to conduct the remedial actions.

(2) The agency may not expend more per occurrence to take remedial action under this section than the financial assurance limits specified in section 3 of this act.

(a) The release occurs in an area of risk for drinking water impacts or where addressing the release is necessary to equitably protect human health and the environment in communities that have been marginalized, overburdened, and underserved;

(b) The owner or operator, or owner of the property where the petroleum underground storage tank is located, provides consent for the agency to:

(i) Conduct the remedial actions;

(ii) Enter upon the real property to conduct the remedial actions; and

(iii) Recover the costs of the remedial actions from the owner or operator or potentially liable persons; and

(c) The owner of the petroleum underground storage tank facility consents to the agency filing a lien on the facility under section 8 of this act to recover the agency's remedial action costs.

(2) The agency may seek recovery of any remedial action costs incurred by the agency under this section from any liable person. The agency may file a lien on the petroleum underground storage tank facility under section 8 of this act to recover the agency's remedial action costs. The attorney general, at the request of the agency, may commence a civil action against any liable person to recover the agency's remedial action costs.

(a) A lien filed under this section may not exceed the remedial action costs incurred or repayments demanded by the agency.

(b) A lien filed under this section has priority in rank over all other privileges, liens, monetary encumbrances, or other security interests affecting the real property, whenever incurred, filed, or recorded, except for local and special district property tax assessments.

(2) Before filing a lien under this section, the agency shall give notice of its intent to file a lien to the owner of the petroleum underground storage tank facility on which the lien is to be filed, mortgagees, and lienholders of record.

(a) The agency shall send the notice by certified mail to the petroleum underground storage tank facility owner and mortgagees of record at the addresses listed in the recorded documents. If the petroleum underground storage tank facility owner is unknown or if a mailed notice is returned as undeliverable, the agency shall provide notice by posting a legal notice in the newspaper of largest circulation in the county in which the site is located. The notice must provide:

(i) A statement of the purpose of the lien;

(ii) A brief description of the real property to be affected by the lien; and

(iii) A statement of the remedial action costs incurred or repayments demanded by the agency.

(b) If the agency has reason to believe that exigent circumstances require the filing of a lien prior to giving notice under this subsection, the agency may file the lien immediately. Exigent circumstances include, but are not limited to, an imminent bankruptcy filing by the petroleum underground storage tank facility owner or the imminent transfer or sale of the real property subject to lien by the petroleum underground storage tank facility owner, or both.

(3) A lien filed under this section is effective when a statement of lien is filed with the county auditor in the county where the petroleum underground storage tank is located. The statement of lien must include a description of the real property subject to lien and the amount of the lien.

(4) Unless the agency determines it is in the public interest to remove the lien, the lien continues until the liabilities for the remedial action costs incurred or repayments demanded by the agency have been satisfied through sale of the real property, foreclosure, or other means agreed to by the agency. Any action for foreclosure of the lien must be brought by the attorney general in a civil action in the court having jurisdiction and in the manner prescribed for judicial foreclosure of a mortgage under chapter 61.24 RCW.

(5) The agency may not file a lien under this section against a petroleum underground storage tank owned by a local government.

(a) All moneys appropriated by the legislature to pay for the agency's operating costs to carry out the purposes of this chapter;

(b) All fees or contributions collected from owners or operators under section 4 of this act;

(c) Any recovery of remedial action costs incurred by the agency under this act; and

(d) Any payments recovered or civil penalties collected by the agency under section 5 of this act.

(2) Moneys in the pollution liability insurance program trust account created in RCW 70A.325.020 may be used by the agency to carry out the purposes of this chapter.

(2) For each calendar quarter, the agency must determine the loss and surplus reserves required for the state financial assurance program. The agency must notify the department of revenue of this amount by the 15th day of each calendar quarter.

(2) The department of ecology must adopt rules under chapter 34.05 RCW to enable use of the program authorized under this chapter to meet the financial responsibility requirements of chapter 70A.355 RCW. The rules must be consistent with and no less stringent than the federal regulations.

(a) A denial of program eligibility;

(b) A denial of eligibility for payment under the program;

(c) Amount of payment allowed for remedial actions;

(d) Amount of payment allowed for a third-party claim; and

(e) An agency request for cost repayment under section 5 of this act.

(2) A person has 45 days after the decision to file a written request for review with the director. If the written request for review is received within 45 days, the director shall conduct an adjudicative hearing under chapter 34.05 RCW.

(2) The agency and the state as administrators of the program have no liability or responsibility to make payments for remedial action costs or third-party claims if the moneys in the account are insufficient.

(3) If the moneys in the account are insufficient to make the payments at the time the loss declaration form is filed, these requests must be paid in the order of filing at such time as moneys accrue in the account, except for releases from a petroleum underground storage tank that present an imminent threat to human health and the environment must receive first priority for receiving moneys to eliminate the imminent threat.

(2) Nothing in this chapter affects or modifies the obligations or liability of any person under any other state or federal law.

(3) The agency is authorized to recover the costs of remedial actions conducted by the agency under this act, including the use of cost recovery options in the model toxics control act, chapter 70A.305 RCW, or other applicable state or federal laws.

Sec. 17. RCW 82.23A.020 and 2020 c 20 s 1484 are each amended to read as follows:

(1) A tax is imposed on the privilege of possession of petroleum products in this state. The rate of the tax shall be thirty one-hundredths of one percent multiplied by the wholesale value of the petroleum product. ((After July 1, 2021, the rate of tax is fifteen one-hundredths of one percent multiplied by the wholesale value of the petroleum product.)) For purposes of determining the tax imposed under this section for petroleum products introduced at the rack, the wholesale value is determined when the petroleum product is removed at the rack unless the removal is to an exporter licensed under chapter 82.38 RCW for direct delivery to a destination outside of the state. For all other cases, the wholesale value is determined upon the first nonbulk possession in the state.

(2) Except as identified in RCW 70A.345.130, moneys collected under this chapter shall be deposited in the pollution liability insurance program trust account under RCW 70A.325.020.

(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.

(4) Within ((thirty))30 days after the end of each calendar quarter the department shall determine the "quarterly balance," which shall be the cash balance in the pollution liability insurance program trust account as of the last day of that calendar quarter, after excluding the reserves determined for that quarter under RCW 70A.325.020(2) and chapter 70A.--- RCW (the new chapter created in section 22 of this act). Balance determinations by the department under this section are final and shall not be used to challenge the validity of any tax imposed under this section. For each subsequent calendar quarter, tax shall be imposed under this section during the entire calendar quarter unless:

(a) Tax was imposed under this section during the immediately preceding calendar quarter, and the most recent quarterly balance is more than ((fifteen million dollars))$30,000,000; or

(b) Tax was not imposed under this section during the immediately preceding calendar quarter, and the most recent quarterly balance is more than ((seven million five hundred thousand dollars))$15,000,000.

Sec. 18. RCW 70A.325.020 and 2020 c 156 s 4 and 2020 c 20 s 1383 are each reenacted and amended to read as follows:

(1) The pollution liability insurance program trust account is established in the custody of the state treasurer. ((All funds appropriated for this chapter and all premiums collected for reinsurance shall be deposited in the account. Except as provided in chapter 70A.345 RCW, expenditures from the account shall be used exclusively for the purposes of this chapter including payment of costs of administering the pollution liability insurance program and emergency program.))

(c) Expenditures for payment of administrative and operating costs of the agency are subject to the allotment procedures under chapter 43.88 RCW and may be made only after appropriation by statute. No appropriation is required for other expenditures from the account.

(2) Each calendar quarter, the director shall report to the insurance commissioner the loss and surplus reserves required for the calendar quarter. The director shall notify the department of revenue of this amount by the ((fifteenth))15th day of each calendar quarter.

(((3) During the 2019-2021 fiscal biennium, the legislature may make appropriations from the pollution liability insurance program trust account for the leaking tank model remedies activity.))

Sec. 19. RCW 43.79A.040 and 2022 c 244 s 3, 2022 c 206 s 8, 2022 c 183 s 16, and 2022 c 162 s 6 are each reenacted and amended to read as follows:

(1) Money in the treasurer's trust fund may be deposited, invested, and reinvested by the state treasurer in accordance with RCW 43.84.080 in the same manner and to the same extent as if the money were in the state treasury, and may be commingled with moneys in the state treasury for cash management and cash balance purposes.

(2) All income received from investment of the treasurer's trust fund must be set aside in an account in the treasury trust fund to be known as the investment income account.

(3) The investment income account may be utilized for the payment of purchased banking services on behalf of treasurer's trust funds including, but not limited to, depository, safekeeping, and disbursement functions for the state treasurer or affected state agencies. The investment income account is subject in all respects to chapter 43.88 RCW, but no appropriation is required for payments to financial institutions. Payments must occur prior to distribution of earnings set forth in subsection (4) of this section.

(4)(a) Monthly, the state treasurer must distribute the earnings credited to the investment income account to the state general fund except under (b), (c), and (d) of this subsection.

(b) The following accounts and funds must receive their proportionate share of earnings based upon each account's or fund's average daily balance for the period: The 24/7 sobriety account, the Washington promise scholarship account, the Gina Grant Bull memorial legislative page scholarship account, the Rosa Franklin legislative internship program scholarship account, the Washington advanced college tuition payment program account, the Washington college savings program account, the accessible communities account, the Washington achieving a better life experience program account, the Washington career and college pathways innovation challenge program account, the community and technical college innovation account, the agricultural local fund, the American Indian scholarship endowment fund, the behavioral health loan repayment program account, the foster care scholarship endowment fund, the foster care endowed scholarship trust fund, the contract harvesting revolving account, the Washington state combined fund drive account, the commemorative works account, the county enhanced 911 excise tax account, the county road administration board emergency loan account, the toll collection account, the developmental disabilities endowment trust fund, the energy account, the energy facility site evaluation council account, the fair fund, the family and medical leave insurance account, the fish and wildlife federal lands revolving account, the natural resources federal lands revolving account, the food animal veterinarian conditional scholarship account, the forest health revolving account, the fruit and vegetable inspection account, the educator conditional scholarship account, the game farm alternative account, the GET ready for math and science scholarship account, the Washington global health technologies and product development account, the grain inspection revolving fund, the Washington history day account, the industrial insurance rainy day fund, the juvenile accountability incentive account, the law enforcement officers' and firefighters' plan 2 expense fund, the local tourism promotion account, the low-income home rehabilitation revolving loan program account, the multiagency permitting team account, the northeast Washington wolf-livestock management account, the pollution liability insurance program trust account, the produce railcar pool account, the public use general aviation airport loan revolving account, the regional transportation investment district account, the rural rehabilitation account, the Washington sexual assault kit account, the stadium and exhibition center account, the youth athletic facility account, the self-insurance revolving fund, the children's trust fund, the Washington horse racing commission Washington bred owners' bonus fund and breeder awards account, the Washington horse racing commission class C purse fund account, the individual development account program account, the Washington horse racing commission operating account, the life sciences discovery fund, the Washington state library-archives building account, the reduced cigarette ignition propensity account, the center for deaf and hard of hearing youth account, the school for the blind account, the Millersylvania park trust fund, the public employees' and retirees' insurance reserve fund, the school employees' benefits board insurance reserve fund, the public employees' and retirees' insurance account, the school employees' insurance account, the long-term services and supports trust account, the radiation perpetual maintenance fund, the Indian health improvement reinvestment account, the department of licensing tuition recovery trust fund, the student achievement council tuition recovery trust fund, the tuition recovery trust fund, the Washington student loan account, the industrial insurance premium refund account, the mobile home park relocation fund, the natural resources deposit fund, the Washington state health insurance pool account, the federal forest revolving account, and the library operations account.

(c) The following accounts and funds must receive 80 percent of their proportionate share of earnings based upon each account's or fund's average daily balance for the period: The advance right-of-way revolving fund, the advanced environmental mitigation revolving account, the federal narcotics asset forfeitures account, the high occupancy vehicle account, the local rail service assistance account, and the miscellaneous transportation programs account.

(d) Any state agency that has independent authority over accounts or funds not statutorily required to be held in the custody of the state treasurer that deposits funds into a fund or account in the custody of the state treasurer pursuant to an agreement with the office of the state treasurer shall receive its proportionate share of earnings based upon each account's or fund's average daily balance for the period.

(5) In conformance with Article II, section 37 of the state Constitution, no trust accounts or funds shall be allocated earnings without the specific affirmative directive of this section.

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