Minnesota Commerce Department Settles with Fourth Oil Company to Return Money Back to the State
June 09, 2014
SAINT PAUL, MN – Commerce Commissioner Mike Rothman today finalized the fourth settlement agreement as part of an investigation of improper insurance claims made by oil companies to clean up contaminated sites. The $100,000 settlement with Sunoco and the previous settlements Chevron, Exxon Mobil, and ConocoPhillips total $7.525 million to be returned to Minnesota’s Petroleum Tank Release Cleanup Fund (Petrofund). In addition to the settlements that resulted from the investigation, Commissioner Rothman in conjunction with Minnesota’s Petrofund Board filed a $25 million lawsuit against British Petroleum (BP) earlier this year to recover money for claims paid to the company to clean up contamination from leaking petroleum storage tanks at service stations across the state.
The settlement agreement with Sunoco is the conclusion of a comprehensive investigation looking into the company’s dealings with the state’s Petrofund, which is used for the clean-up of contaminated property at petroleum storage tank sites. The State claims that the company sought and obtained reimbursement from the Petrofund for cleaning up polluted property associated with leaking petroleum storage tanks at service stations. The investigation was initiated to determine whether or not any of the costs reimbursed to the oil companies by the Petrofund were also payable under applicable insurance policies.
“Once again, Commerce’s investigation indicated that an oil company double-dipped by obtaining a Petrofund reimbursement and also received insurance proceed money for the same clean-up costs,” said Commerce Commissioner Mike Rothman. “The Petrofund was created to provide a financial resource to help clean up contaminated sites to protect Minnesota’s groundwater when insurance is not available to help cover the cost.”
The Department’s investigation included requesting and analyzing numerous documents from Sunoco, which the company responded to the requests fully. The investigation revealed alleged misrepresentations related to the insurance coverage on the applications to the Minnesota Petrofund. The Petrofund requires applicants to disclose whether insurance policies exist, and to what extent the policy can cover environmental damages involving underground storage tank sites before seeking state funds. In certain situations, the investigation alleged that the companies had obtained insurance payments from settlements with carriers for the costs to clean up the same sites for which the Petrofund Board had provided reimbursement. The Petrofund provides reimbursement to eligible applicants to help cover a portion of their costs to investigate and clean up contamination from leaking petroleum storage tanks. In this case, the State asserted that Sunoco failed to disclose the fact they had insurance policies to cover the clean-up. The company voluntarily engaged in negotiations with the Department resulting in the settlement agreement.
“The Commerce Department and the Petrofund have worked hand-in-hand over the past year to reach strong settlements to return the state’s money back for its rightful purpose and to ensure that people's money is spent fairly, according to the rules,” said Petrofund Board Chair Vern Kelley.
The Petrofund has two important functions: to protect the environment and public health by encouraging rapid and thorough cleanup of petroleum leaks; and to reduce the cost of compliance to federal regulations that require tank owners to promptly clean-up contamination. The Petrofund is funded through an intermittent fee of $.02 per gallon on petroleum products assessed to distributors. This fee, although assessed directly to distributors, is also absorbed by consumers.
Leaks from petroleum storage tanks are one of the leading causes of groundwater pollution and an issue that affects the safety of all Minnesotans. Since 1987, Minnesota’s Petrofund has helped petroleum retailers, business owners, school districts, local governments and homeowners pay for investigating and cleaning up over 13,000 petroleum-contaminated leaksites and removing over 300 abandoned underground petroleum storage tanks from across the state to keep Minnesota’s soil and groundwater clean.
What we do: Petrofund
The Petrofund is overseen by the five-member Petroleum Tank Release Compensation Board, which is made up of a public member, a member with experience in claims adjustment, a petroleum industry member, the Commissioner of the Pollution Control Agency, and the Commissioner of Commerce. The Fund was created by the Minnesota State Legislature in 1987 in response to federal legislation requiring all owners and operators of regulated underground petroleum storage tanks to show that they have up to $1 million immediately available to respond to a petroleum tank leak or liability to a third party. To help tank owners and operators fulfill these requirements, and to address historical petroleum contamination throughout the state, the Legislature made financial assistance available through the Petrofund.