Purpose

To determine if the Department of Environmental Conservation (Department) is collecting all fees due the New York Environmental Protection and Spill Compensation Fund (Oil Spill Fund or Fund) in compliance with applicable laws and if all expenditures from the Fund are reasonable, appropriate, and associated with spill remediation projects. The audit covers the period April 1, 2012 through April 8, 2015.

Background

Chapter 845 of the Laws of 1977 established the Oil Spill Fund to pay for the cleanup and removal of petroleum spills. The statute assigns the State Comptroller administrative and operational responsibility for the Fund as well as the duty to review and process all cleanup bills submitted for payment. The Department is responsible for providing technical assistance and oversight for spill remediation efforts and for ensuring that only allowable costs are charged to the Fund. The Department is also responsible for licensing, registering, and collecting appropriate fees from petroleum storage facilities. Facilities with a total petroleum storage capacity of less than 400,000 gallons are registered as Petroleum Bulk Storage (PBS) facilities, and must pay the Department a five-year registration fee of up to $500. Facilities with a capacity of 400,000 gallons or more are licensed as Major Oil Storage Facilities (MOSF), and generally must pay monthly licensing fees and surcharges based on the reported volume of petroleum products they transfer.

The Fund’s major sources of revenue are the license fees and surcharges charged to MOSFs for each barrel of petroleum imported for use in the State. The Fund also collects fees from PBS facilities and reimbursements of cleanup costs from spillers. During the two fiscal years ended March 31, 2014, the Fund collected about $96 million, including about $61 million from MOSFs, $22 million from parties responsible for spills, $8 million from PBS facilities, and $5 million in federal disaster relief funding. For the same period, the Department spent about $60 million for spill-related expenses and administrative costs, and transferred about $30 million to the State’s Hazardous Waste Remedial Fund. As of March 31, 2014, the balance in the Fund was approximately $28 million.

Key Findings

• Our tests showed the Department generally collected all fees due the Fund for the facilities we tested. However, of 11 sampled MOSFs, we identified eight that inaccurately reported the number of barrels of petroleum products received, subject to fees and surcharges, and/or transshipped. For the sampled facilities, these inaccuracies did not materially affect the revenue collected by the Department.
• We identified four facilities that may be incorrectly registered as PBS operations instead of larger MOSFs, thereby potentially avoiding appropriate oversight and reporting as well as higher amounts of fees and surcharges.
• The Department should be able to promptly detect and correct many of the discrepancies we identified by periodically analyzing the facility data that it already collects.
• The Department’s internal controls over payment of cleanup, administrative, and indirect costs provide reasonable assurance that only appropriate expenses were charged to the Fund.

Key Recommendations

• Improve monitoring activities to verify the accuracy of information reported by facilities and the licensing status of facilities, including analysis of available facility data, to identify those most at risk of inaccurate reporting.
• Follow up on the licensing status of the PBS facilities identified as potentially misclassified.

Other Related Audit/Report of Interest

Department of Environmental Conservation: Selected Aspects of Inactive Hazardous Waste Site Remediation Cost Recovery (2014-S-14)