Pa. Gov. Rendell Kills Gas Tax for Underground Tank Insurance Fund

November 29, 2007

Pennsylvania Gov. Ed Rendell this week said his administration would withdraw a request that could have added a penny onto the cost of a gallon of gas in Pennsylvania to help clean up damage from leaking underground fuel tanks.

The state Department of Insurance sought regulatory approval for the higher fee after the board of the Underground Storage Tank Indemnification Fund voted for it as a way to keep the fund solvent. The board voted in September, prompted by a state consultant’s projection that the fund would run out of cash in 2015 and reach a deficit of $1 billion shortly after that.

But Rendell said in a statement that he had only just learned about the proposed fee increase from news accounts, and called the price of gas high enough right now.

“While I appreciate the board’s intent to ensure the solvency of the fund, given the cost of gas at the pump and the fact that there is no insolvency issue confronting the fund in the short term, I think the action was ill-advised,” Rendell wrote in the statement.

In an earlier story, The Associated Press reported on the pending request to nearly double the fee to 2 cents a gallon. The proposal by the fund’s board called for boosting the fee from the current rate of 1.1 cents per gallon.

Adding to the fund’s financial uncertainty is the fact that, in 2002, legislators and then-Gov. Mark S. Schweiker borrowed $100 million from the fund to plug a hole in the state budget. Less than a third of that amount has been repaid.

Insurance department officials, who administer the fund and made the original motion to the board for the fee increase, had defended the move. They called it bad policy to let a projected deficit get bigger– it is currently estimated at $374 million– even though there is still cash in the account right now. The department estimated that the increase would have worked out to about $9 a year for the average household and brought in about $45 million for the fund annually.

Owners and operators of the underground tanks– which store fuel until it is pumped– pay the fee and normally pass it on to consumers.

Some members of the oil and gas industry expressed concern that the increase would widen the gap between gas prices at Pennsylvania’s service stations and the lower prices at stations in neighboring states, including Maryland, New Jersey and Ohio.

Senate Republicans, who had opposed the request for the higher fee, said the obscure regulatory process smacked of a stealth tax increase by the Democratic governor. And the severity of the fund’s financial problems was not completely clear or imminent enough to warrant the increase, they said.

“The potential deficit is something that could occur many years in the future,” Sen. Don White, chairman of the Banking and Insurance Committee, said in a statement.

One of the fund’s board members said he regretted voting for the fee increase.

Rolf Hanson, who heads a trade association of oil and gas producers and suppliers doing business in Pennsylvania, said he changed his mind in the weeks after the vote as he watched gas prices rise and heard from his association’s members that serve gas stations near Pennsylvania’s borders.

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