Leaking Underground Storage Tank Trust Fund (LUST)1

Leaking Underground Storage Tank Trust Fund (LUST)1

97-472 E
Updated August 28, 1997
CRS Report for Congress
Received through the CRS Web
Leaking Underground Storage Tank Trust Fund
(LUST)1
Nonna A. Noto
Specialist in Public Finance
Louis Alan Talley
Research Analyst in Taxation
Economics Division
Summary
The Leaking Underground Storage Tank (LUST) Trust Fund provides money
under Environmental Protection Agency (EPA)-state cooperative agreements to pay
cleanup and related costs involving leaking petroleum tanks if no financially solvent
owners can be found, or if the owner or operator refuses or is unable to comply with an
urgent corrective order. Both EPA and the states use trust fund monies to oversee and
enforce LUST corrective actions.
Primary financing for the trust fund comes from a 0.1 cent per gallon tax on motor
fuels. The tax expired December 31, 1995, but was reinstated by the Taxpayer Relief Act
of 1997 (P.L. 105-34) for the period October 1, 1997, through March 31, 2005.
On April 23, 1997, the House passed H.R. 688, a bill to broaden the range of
cleanup and enforcement purposes for which LUST monies may be spent. The bill also
requires that at least 85% of the annually appropriated monies from the trust fund be
distributed by EPA to states. Companion legislation, S. 555, was introduced in the
Senate on April 10, but no further legislative action has occurred.
The fund currently holds approximately $1 billion. Since the fund’s inception,
Congress has appropriated about one-third of the total monies available from the fund.
The House has approved FY1998 appropriations of $60 million (H.R. 2158) and the
Senate, $65 million (S. 1034). With the fund already earning about $50 million in
interest each year and the reinstated tax expected to generate about $130 million a year,
the balance in the trust fund can be expected to continue to grow.
1 This report is not intended to track particular bills through the legislative process. For
information about current legislation and its status, please consult the Bill Summary and Status
file of the Legislative Information System (http://www.congress.gov). CRS Issue Brief 97020,
Environmental Protection Legislation in the 105th Congress, tracks LUST bills.
Congressional Research Service ˜ The Library of Congress

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Background
In response to concerns for environmental cleanup costs associated with leaking
underground storage tanks containing petroleum products, Congress established the
Leaking Underground Storage Tank (LUST) Trust Fund through the Superfund Revenue
Act of 1986, Title V of P.L. 99–499. From 1987 through 1995, the fund received revenues
from a tax of 0.1 cent a gallon on several categories of motor fuels: gasoline, diesel fuel
(including train diesel fuels), special motor fuels (other than liquefied petroleum gas),
fuels used in aviation, and fuels used in commercial transportation on the inland
waterways, plus a 0.05 cent per gallon tax on methanol.
First effective January 1, 1987, the tax was scheduled to expire on the earlier of
December 31, 1991, or the last day of the month in which the Secretary of the Treasury
estimated that net revenues in the fund were at least $500 million. The tax terminated on
August 31, 1990, because the trust fund had reached its net revenue target.2 Under the
Revenue Reconciliation Act of 1990 (P.L. 101–508), the tax was reinstated at the same 0.1
cent per gallon rate, without a revenue ceiling, but with a termination date of December
31, 1995. Also to be deposited in the trust fund are any monies recovered from parties
found responsible for leaking storage tanks, under provisions of the Solid Waste Disposal
Act as amended by the Superfund Amendments and Reauthorization Act of 1986 (P.L.
99–499).
The balance in the LUST fund has continued to grow past the $500 million target met
in 1990. The fund currently holds approximately $1 billion. Interest earnings are
approximately $50 million per year. While the 0.1 cent tax was in effect, it generated
about $150 million per year. Thus, total annual receipts were roughly $200 million.
Outlays made available from the fund were lower: $73 million in 1994; $70 million in
1995 (FY1995 was the last full year of excise tax revenues); and $68 million in 1996.
Only about one-third of the monies available in the fund since its inception have been
appropriated.
LUST Trust Fund Amendments Act (H.R. 688, S. 555)
H.R. 688, the Leaking Underground Storage Tank Trust Fund Amendments Act of
1997, was unanimously approved by the House Commerce Committee on April 16, 1997
(H.Rept 105-58). It was approved by the full House by voice vote on April 23, 1997.3 The
companion bill in the Senate, S. 555, was introduced on April 10, 1997, and referred to
the Committee on Environment and Public Works.4
Under the existing Underground Storage Tank (UST) statute, UST owners and
operators are required to meet certain leak detection and prevention standards by
December 1998. These standards are a safeguard against future UST leaks. Currently,
LUST fund monies cannot be used by the states to monitor compliance with these
2 Internal Revenue Service Announcement 90–82, released June 27, 1990.
3 Congressional Record, Daily Edition, v. 143, no. 49, April 23, 1997. pp. H1750-H1753.
4 H.R. 688 is similar to H.R. 3391, which passed the House in the 104th Congress by a voice
vote on September 25, 1996, but received no action in the Senate.

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standards. The trust fund now provides money for EPA or states, under cooperative
agreements, to pay cleanup and related costs involving leaking tanks if no financially
solvent owners can be found, or if the owner or operator refuses or is unable to comply
with an urgent corrective order. States use these funds primarily for overseeing and
enforcing LUST cleanups performed by responsible parties.
H.R. 688 and S. 555 would broaden the range of enforcement purposes for which
states may expend LUST fund money. The bill also permits states to use LUST monies
for state financial assurance programs in cases where a tank owner’s ability to remain in
business after paying cleanup costs would be significantly impaired. (Unlike the federal
LUST fund, state assurance funds are often used to reimburse financially solvent owners
and operators for some or all of the cost of remediating leaking UST sites.) The bill also
allows states to use LUST funds to administer their assurance funds. However, states are
prohibited from using monies to help individual owners and operators with 1998 UST
compliance requirements so as not to place those that have already complied at a
competitive disadvantage.
Because of rising enforcement needs and the possibility of increased funding, many
in Congress wish to be assured that future appropriated monies will be used for
environmental protection and cleanup, and not on administrative overhead. EPA has
expressed concern over the requirement in the pending bills that EPA award at least 85%
of appropriated amounts to the states each year. On average over the past years, the EPA
has met the 85% requirement. However, EPA is concerned about having some flexibility
to adjust to changes in appropriations levels on a year-to-year basis. The EPA would also
like Congress to make additional appropriations from the trust fund if new uses of the
LUST fund monies are approved.5
The President’s FY 1998 Budget Proposal
The President’s FY1998 budget stated that legislation would be proposed to extend
the 0.1 cent LUST fund excise tax for 10 years, through September 30, 2007. The budget
indicated that the Administration would propose legislation to expand the use of the fund
to include other EPA (Environmental Protection Agency) programs that also address
protecting groundwater from contamination. (Such legislation was not introduced.
6
)
However, the priority of the fund would remain the cleanup of leaking underground
storage tanks. The EPA requested an FY1998 appropriation of $71.2 million for the
LUST Trust Fund. Of that, $67.9 million would have been for currently authorized LUST
response activities primarily at the state level; the remaining $3.3 million would be used
for management, enforcement, as well as research and development, etc.
The balance in the LUST trust fund would have continued to grow under the
Administration’s budget proposal for FY1998, which would have increased both outlays
and revenues. The President’s proposal would have added $53 million in outlays for other
groundwater protection programs to the approximately $65 million in projected outlays
5 For additional information see CRS Report 97-471 ENR, Leaking Underground Storage
Tank Cleanup Issues, by Mary Tiemann.
6 U.S. Office of Management and Budget. Budget of the United States Government,
Appendix, Fiscal Year 1998. February 6, 1997. pp. 944-945.

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under the current LUST program for FY1998, for a total cash outgo of $118 million. The
Budget projected $45 million from interest earnings plus $162 million from a reinstated
tax of 0.1 cent per gallon, for total receipts of $207 million in FY1998. Thus, under the
Administration’s proposal, the projected net surplus for FY1998 was $89 million — or
55% of the $162 million in reinstated tax revenues. The Administration projected that the
balance in the fund would rise from $998 million at the end of FY1997 to $1,081 million
at the end of FY1998.
The presence of the large balance in the LUST fund has motivated representatives of
the motor fuels industry that pays the tax to ask for higher appropriations for the LUST
program and expanded uses of the trust fund. The Congressional Budget Office observed
that enactment of H.R. 688 could lead to an increase in discretionary spending because of
the new uses of LUST fund monies established by the bill, but that additional funding
would still depend upon the appropriations process.7
In evaluating H.R. 688, the House Ways and Means Committee considered the
balance of $1 billion adequate to finance the type of spending currently authorized from
the LUST fund, as well as the expanded uses approved in H.R. 688, without reimposing
the tax. The Joint Committee on Taxation (JCT), in an April 16, 1997 committee print,
8
noted that the authorizing committees of Congress had not communicated with either the
House Ways and Means or Senate Finance Committees regarding a shortfall in amounts
needed to authorize expenditures, or of any plans to expand or extend authorizations. The
JCT print also noted that opponents feel that, if the tax is reimposed, it should be in
conjunction with legislation authorizing expanded or extended spending from the LUST
trust fund.9
Taxpayer Relief Act of 1997 (P.L. 105-34)
The revenue reconciliation bill approved by the House on June 26, 1997 (H.R. 2014)
provided for the reinstatement of the LUST excise tax on transportation fuels of 0.1 cent
per gallon for approximately 5 years — from the date of enactment until September 30,
2002. Unlike the House, but like the President’s budget proposal, the version of the
reconciliation proposal approved by the Senate on June 27 (S. 949) would have restored
the LUST tax for 10 years — from October 1, 1997, through September 30, 2007.
In both the House and Senate tax bills, the extension of the LUST tax was used as a
revenue raiser. Nonetheless, both the House Ways and Means and the Senate Finance
committee reports accompanying their bill stated that the reason for reinstating the tax was
7 U.S. Congress. House. Committee on Commerce. Leaking Underground Storage Tank
Trust Fund Amendments Act of 1997. Report to Accompany H.R. 688. H.Rept. 105-58, Part 1,
105th Cong., 1 Sess., April 17, 1997. Washington, U.S. Govt. Print. Off., 1997. pp. 3, 4.
st
8 Ibid. p. 8.
9 U.S. Congress. Joint Committee on Taxation. Description and Analysis of Certain
Revenue-Raising Provisions Contained in the President’s Fiscal Year 1998 Budget Proposal.
JCS-10-97. Washington, U.S. Govt. Print. Off., April 16, 1997. pp. 88-89.

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“to ensure the availability of funds to pay cleanup costs of leaking underground storage
tanks.”10
The conference agreement on the Taxpayer Relief Act of 1997 (P.L. 105-34)
compromised on reinstating the LUST tax for 7 1/2 years — from October 1, 1997,
through March 31, 2005. The Joint Committee on Taxation estimated that the tax will
raise approximately $645 million over the 5 fiscal years 1998-2002, and $983 million over
the full 7 1/2 year period of its reinstatement.
FY1998 Appropriations
The House has approved FY1998 appropriations of $60 million and the Senate $65
million (H.R. 2158/S. 1034), as part of the VA-HUD-Independent Agencies
appropriation. A September 1997 conference is scheduled. The President’s Februar
11
y
1997 budget had requested $71.2 million to continue the currently authorized activities of
the LUST Trust Fund. The President also requested an additional $53 million in funding
for expanded programmatic uses of the LUST fund monies (which would have required
authorizing legislation). The Congress’s recommended appropriation for FY1998 is closer
to the $59.4 million that was appropriated for the current fiscal year, 1997.
With the fund already earning about $50 million in interest each year and the
reinstated tax expected to generate about $130 million a year, the balance in the trust fund
can be expected to continue to grow even more rapidly than under the President’s proposal
which would have increased outlays substantially along with reinstating the tax.
H.R. 688, the LUST Fund Amendments Act passed by the House, would require that
at least 85% of the appropriated amount be awarded to the states, leaving at most 15% for
federal administrative purposes. The House Appropriations Committee recommended a
limit on administrative expenditures of $9.1 million, equivalent to 15.2% of their
recommended $60 million appropriation, leaving approximately 85% to be used by the
states. The Senate Appropriations Committee recommended an additional $5 million
appropriation to help the states meet the December 1998 deadline for storage tank upgrade
compliance and a limit of $7.5 million on administrative expenses. The Senate Committee
also expressed opposition to EPA’s suggestions that LUST fund monies be used for other
EPA programs, unless there is prior congressional authorization for such use.12
1 0 See both the House and Senate Reports. Committee on Ways and Means. Report on
Reconciliation Tax Bill Approved by Committee June 13, 1997. p. 235 and Committee on
Finance. Revenue Reconciliation Act of 1997 (as reported by the Committee on Finance), S. 949.
, June 20, 1997. p. 163.
11 See CRS Issue Brief 97019, Environmental Protection Agency: FY1998 Budget. During
Senate passage, the provisions of S. 1034 were substituted for H.R. 2158.
12 See both the House and Senate Committees on Appropriations Reports. Departments of
Veterans Affairs and Housing and Urban Development, and Independent Agencies
Appropriations Bill, 1998. H.Rpt. 105-175 on H.R. 2158, July 11, 1997. P. 69-70 and S.Rpt. 105-
53 on S. 1034, July 17, 1997. p. 67-68.

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The Use of Dedicated Excise Taxes13
Typically the revenues from each of the federal excise taxes on motor fuels are
allocated to a particular trust fund depending upon the type of engine or vehicle for which
the fuel was purchased.14 In contrast, the LUST fund for environmental cleanup is
financed by a small tax on all motor fuels, regardless of use.
The dedicated excise taxes on motor fuels serve two quite different roles. The excise
taxes financing the nature-conservation-and-recreation and the transportation categories
of trust funds can be described as “user taxes.” They reflect the “benefits principle” of
taxation and are intended to tax the current or potential beneficiaries of the government
program. In contrast, the excise taxes financing the environmental cleanup funds — such
as the LUST fund — and health damage compensation trust funds can be described as
“liability taxes” or “damage taxes.”
The main reason for governmental intervention with liability taxes is the difficulty
in holding responsible private parties accountable. LUST Trust Fund monies are spent by
the EPA and the states largely to oversee and enforce cleanups of leaking petroleum
underground storage tank sites by responsible parties and, to a lesser extent, to undertake
the cleanup a orphan sites or a sites that present an imminent threat to public health or the
environment.
The inability to collect the full cost of addressing damages from those directly
responsible means that others will have to bear some of the costs. The liability taxes
typically cannot be levied specifically on the parties directly responsible for the damages
or in accurate proportion to the damage they caused. Indeed, some of the companies
responsible for causing the damage may no longer be in business. Instead, liability taxes
are commonly levied on a product closely associated with causes of the damage.
Politically, it may be preferable for the burden to fall on the associated industry and its
customers rather than taxpayers at large.
To foster the link between a tax and its programmatic intent, liability excise tax
revenues are dedicated to a trust fund whose purpose is spelled out in authorizing
legislation. Over time, especially if a trust fund is growing, there are suggestions to
expand the use of trust fund monies for additional new purposes — such as the proposed
use of LUST fund monies to pay for other groundwater protection programs. Producers
and consumers in the taxed industry may object to being asked to pay for expanded
purposes beyond the original intent of the trust fund. Furthermore, those paying taxes into
the LUST fund, as well as other trust funds with large balances, may question the recent
budgetary practice of using the unspent revenues of there trust funds to cover tax cuts or
spending in other parts of the U.S. budget.
13 For further discussion of the role of dedicated excise taxes, see Excise Tax Financing of
Federal Trust Funds. CRS Report 93-6 E, by Nonna A. Noto and Louis Alan Talley.
1 4 The trust funds and their corresponding motor fuels are as follows: Highway (gasoline,
diesel fuel, and special motor fuels); Airport and Airway (aviation and jet fuel used in
noncommercial aviation); Inland Waterways (fuels used in vessels operating on a designated
inland waterway system); Aquatic Resources and Land-and-Water-Conservation (gasoline used
in motorboats); and National Recreation Trails (fuel consumed in recreational trail vehicles).