Federal environmental officials have warned Connecticut they will begin to de-certify a crucial pollution abatement program the day after the General Assembly session ends in  May — unless state policy-makers craft a solution first.

At issue is a more than $80 million backlog in applications for assistance through Connecticut’s Underground Storage Tank Petroleum Cleanup Program — and hundreds of gasoline stations that fuel industry representatives say are at risk of going out of business.

The warning letter, issued Jan. 26 by the U.S. Environmental Protection Agency’s regional office in Boston, confirms the expectations of state legislators and environmental protection officials, as well as those of industry representatives — all of whom predicted that the state would be allowed through the legislative session to solve this problem.

“Given the dire condition of the fund, it is critical that this issue be addressed in a timely fashion,” James T. Owens III, director of the EPA’s Office of Site Remediation and Restoration, wrote to the state Department of Energy and Environmental Protection. “EPA will begin the process of withdrawing approval of the CT DEEP program state fund … should a solution not be achieved by the end of the legislative session on May 9, 2012.”

Plagued by backlogs stretching back nearly a decade, the program owes $17 million in aid already approved for Connecticut businesses — primarily gasoline stations — that faced leaking underground tanks. The program also has $81.6 million worth of backlogged applications that haven’t been processed yet, according to DEEP.

Typically, about 70 percent of the applications have been approved. If that ratio were to hold with the backlogged cases worth $81.6 million, the state would likely have to pay another $57 million in aid.

Since Congress toughened regulation of leaking underground tanks in 1984, state cleanup programs became a crucial alternative nationwide for gasoline stations often unable to get private insurance to cover their liabilities.

For more than two decades, Connecticut funded its cleanup assistance program by dedicating a portion of receipts from its wholesale fuel tax. Between 1990 and 2009 the state’s transfer averaged $9.7 million per year, according to budget records.

As the last recession hit and state officials raided a host of programs to avoid deficits, the annual transfer was canceled. In its place, legislators and former Gov. M. Jodi Rell allocated $4.7 million for the program in 2010 and $3.2 million in 2011.

This past spring, Gov. Dannel P. Malloy and the legislature approved just $1.3 million for the program, both for the current year and for 2012-13. And of that $1.3 million, only $250,000 is available to help businesses, with the remainder to cover administrative costs.

But federal officials warned Connecticut last July that it might stop recognizing the Connecticut program as an alternative to insurance, given the huge discrepancy between pending awards and applications, and available assistance funds.

Without federal endorsement of the state program, most stations — particularly those with any history of tank leakage — would be forced to self-insure, according to industry officials, who have said that cost might force as many as half of Connecticut’s roughly 1,200 gasoline stations to close.

“We remain concerned about EPA’s recent letter and the dire consequences that may result if the state’s plan does not address EPA’s concerns,” Eugene Guilford, director of the Independent Connecticut Petroleum Association, said Wednesday. “At the same time, we are hopeful about a positive outcome as the Malloy administration is the first one since the inception of the tank program that is willing to address the issues and fix what is broken.”

DEEP spokesman Dennis Schain said earlier this month that the department began last summer to mobilize industry representatives, state legislators and federal environmental officials to help craft a long-term solution by early May.

“All parties involved in addressing this issue are aware of EPA’s concerns and work actively continues on a solution that will meet the needs of our state and be satisfactory to EPA,” Schain said Thursday.

Keith has spent most of his 31 years as a reporter specializing in state government finances, analyzing such topics as income tax equity, waste in government and the complex funding systems behind Connecticut’s transportation and social services networks. He has been the state finances reporter at CT Mirror since it launched in 2010. Prior to joining CT Mirror Keith was State Capitol bureau chief for The Journal Inquirer of Manchester, a reporter for the Day of New London, and a former contributing writer to The New York Times. Keith is a graduate of and a former journalism instructor at the University of Connecticut.

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