Law360: Pennsylvania Justices Clarify Reimbursement Rule For Fuel-Tank Fees

Pa. Justices Clarify Reimbursement Rule For Fuel-Tank Fees
By Dan Packel

Law360, Philadelphia (June 18, 2013, 2:29 PM ET) -- Indemnification fees paid into a state fund used to compensate property owners for the removal of underground fuel storage tanks must be current for the entire site before a reimbursement claim can be processed, the Pennsylvania Supreme Court ruled on Monday.

The unanimous decision overturns a Commonwealth Court ruling which found that fees, which are charged per tank, need only be current on the tanks for which a property owner is seeking reimbursement.

The court ruled that, in light of the unclear language of the state’s Storage Tank and Spill Prevention Act, the Commonwealth Court’s ruling posed negative public policy implications.

“As appellants point out, if [the statute] is construed to apply per tank, owners could decide not to pay the fees they owe on newer tanks and rely on manufacturer warranties for said tanks, should leaks occur, knowing they will be remain eligible for at least some recovery from the fund on their older tanks that fail,” said Justice Debra Todd in the opinion. “As a result, payouts from the fund could exceed its funding and impact the fund’s financial security.”

The case stems from a decision in 2000 by the state’s Underground Storage Tank Indemnification Board to not reimburse a Pennsylvania gas station, Young’s Sales and Service, for costs incurred while removing four storage tanks on its site and cleaning up associated soil contamination.

The board determined that the property owner prior to Young’s did not fully pay the fees for the four tanks and rejected the claim.

Following several internal appeals, which were likewise rejected, Young’s then appealed the decision to the state’s Commonwealth Court, arguing that it was current on the fees for three of the tanks, which held gasoline, and even if it owed fees for the fourth tank, which held kerosene, this did not impede its recovery for the other three tanks.

In a published, unanimous decision, a Commonwealth Court panel in 2009 ruled in favor of Young’s, concluding that the Spill Act “does not state that the fees on all tanks on all properties owned by a claimant must be current before any claim may be presented.”

The board then appealed the case to the Supreme Court, arguing that the Commonwealth Court disregarded the language of the Spill Act. It emphasized that the statute’s references to the term “tank” also encompassed multitank sites, and, consequently, there could be no recovery on a per tank basis.

In response, the high court concluded that because the definition of the statute was uncertain, it was justified in examining the implications of each interpretation.

As a result, the justices determined that the per-tank construction of the statute threatened the remediation fund’s long-term solvency.

They also noted that the per-tank interpretation of the law opened up the possibility that, for a given claim, some tanks will be covered and some tanks will not, which would open up the question of apportionment of costs.

“In point of fact, the Spill Act has no provisions for allocating the costs of cleanup between or among different tanks, or assigning the burden of proving such allocations — it simply does not contemplate such an effort,” Justice Todd concluded in her opinion.

A spokeswoman for the Underground Storage Tank Indemnification Fund celebrated the ruling on Tuesday.

"USTIF and its Board had sought allocatur in the matter because the Commonwealth Court’s decision had some potentially far-reaching ramifications," it said in a statement. "So we are very pleased the state’s Supreme Court has re-instated the USTIF Board’s original decision regarding the claim denial."

The Underground Storage Tank Indemnification Board is represented by John McMeekin, Carl Buchholz, Angela Heim and Kimberly Lapworth of Rawle & Henderson LLP.

Young’s is represented by David Lanza.

The case is Young's Sales and Service v. Underground Storage Tank Indemnification Board et al, case number 6 MAP 2011 in the Supreme Court of Pennsylvania.

--Editing by Rebecca Flanagan.