25 May 2009

It Takes Money to Make Money

via DW, we find that Goliath is doing pretty well from a fund dedicated to cleaning up underground fuel tanks:
big firms have taken $490 million from the fund since it was created in 1989... the program has been extended repeatedly amid lobbying by the big, politically powerful corporations. Those companies are now positioned to collect up to $900 million more.


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 Assn., which helped craft the most recent legislation to extend the program.
This is hysterically funny to me. People pay the tax when they buy gas. The companies collect that tax and pass it to the State ("ultimately responsible"? "paid into the fund"?). Those companies then ask for that money to clean up leaks that THEY are responsible for.

Seems like the Twilight Zone has arrived in California!

So what do our leaders say?
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."
Right. I'd say that this program is about drivers paying to clean up messes made by gas stations.

I'd also say that this funding mechanism creates ZERO incentive for oil companies to prevent spills. Yuck.

Bottom Line: This Baptists and Bootleggers scenario (the oil companies are "saving" the environment that they despoil with OUR money -- and taking a bit on the side) is a typical example of politicians and businesses conspiring to rip off citizens. I'd hate to see what else they will stuff into the next budget. (And I am not surprised that voters decided to cap legislators' salaries when the State is in deficit; that's the right response to incompetence!)


Chris Brooks said...

Just goes to show you - there's no such thing as a temporary tax. Before passing judgment on the entire program I'd be interested to see how much is being spent by oil companies and station owners that isn't being reimbursed by this fund and how that breaks down among the big guys and the little guys. If you look at the data on what type of firms are collecting from the fund (http://www.latimes.com/news/local/la-me-bigoilbox10-2009may10,0,2403012.story) it appears that most of the money is going to smaller firms (less than 500 employees). What I find amazing is that there is still so much clean-up going on. This was big business for consultants (like me) in the early-mid-90s, but there was a deadline a few years back when all stations had to upgrade their equipment, so locations with operational tanks pretty much had to pull old tanks and remove tainted soil when that occurred. What is remaining should only be the tanks on properties that are no longer gas stations or have been abandoned (brownfield properties). As for incentives to prevent spills - the regulations mandating switchover to dual-lined tanks and spill monitoring systems pretty well dealt with that - and knocked a lot of smaller operators out of the gas station business because they could not afford the upgrades.

KC-Blogger said...

I actually work for a laboratory that is directly affected by this program.

The tax which is 0.117% is not charged to those who buy gas. It isn't even a tax. It is a fee that gas station owners pay into based off of their total amount of gas sold per month.

It is a fund that is paid for by them for them. The fund is also 17 million short from last year due to a decrease in gas use (among other factors).

In addition the fund itself is broken down into 4 levels. Level 1 being any residental owners who have possibly inherited properties with contamination. This level receives 100% reimbursement for any repairs that are done to clean up contamination so the property can be used or sold. Level 2 is for companies that employee less than 500 employees. This is your average gas station that is usually privately owned and is NOT run by the oil companies. They receive a certain max amount of reimbursement per year. The 3rd level is any company that employs less than 1000 employees and the 4th level is the large oil companies. The 3rd and 4th levels do not get ANY money from the fund. they have been cut off from receiving funding. All other levels must first pay a min of $10,000 before they can receive any money from the fund. And the money they do receive is now being paid back within 6-18 months. So, while I undertand that you may feel that is the oil company getting a good deal and you are fotting the bill. You are not. It i sthe small privately owned gas stations that are paying this small fee in the hopes that when their older tanks start to leak and possibly risk conatminating YOUR drinking water & neighborhood, they have a chance to fix it before it gets too bad.

David Zetland said...

@KC blogger -- thanks for the info! 1) What you say contradicts the article (majors ARE getting $), so perhaps you can clarify with a data source.
2) When the "station pays" based on gas sales, it's a cost of doing business that is passed onto consumers, so you are incorrect there. (It's the same mistake that people make when they say that employees and employers pay equal shares for social security -- 7.65%/each -- when, in fact, it's ALL the employee's money.) Some may claim that the "tax incidence" IS divided between the station and customers (based on elasticity), but that makes no sense when ALL stations pay into the fund...

KC-Blogger said...

While I don't have links to any articles and honestly, the media can easily misinform on many issues, here is a link to the Fund itself. If you click on the March 9th link it will give you the most recent info on the state of the fund.



Thanks for Reading!

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