Last week, the California State Water Resources Control Board (State Water Board) announced that it permanently banned 100 of Shell Oil Company’s underground storage tank (UST) claims from the California UST Cleanup Fund (Fund) for allegedly claiming reimbursement through false or misleading statements on its claim forms.  The State Board estimates that disqualifying Shell from pursuing these claims could save the Fund up to $150 million.

The Fund was created by the Barry Keene Underground Storage Tank Cleanup Fund Trust Act of 1989 and is administered by the State Water Board. Among other things, the Fund provides reimbursement of up to $1.5 million for expenses related to the cleanup of leaking underground storage tanks (USTs) that impact the soil and groundwater.  However, the Fund prohibits claimants from obtaining “double recovery.”  Double recovery occurs when a claimant seeks reimbursement of costs that it already has been reimbursed through other sources such as through insurance claims, litigation and settlements.  Claimants must disclose all payments from other sources on a Non-Recovery from Other Sources Disclosure Certification.

According to the State Water Board, in 2010 a whistleblower filed a complaint against Shell alleging fraud under the California False Claims Act. The complaint alleged that Shell failed to disclose it previously had received reimbursement from other sources when it sought reimbursement of costs associated with UST sites.  The State Water Board joined in settlement negotiations based on its independent administrative and litigation claims that it could pursue against Shell.  The parties settled the action earlier this year.  The settlement requires Shell to pay a total of $20 million (including $11 million to the State Water Board) and permanently bans 100 of Shell’s UST claims, which could result in a savings to the UST Fund of up to $150 million ($1.5 million per claim).

This case highlights the importance of being forthright in all UST claims and ensuring the veracity of the information provided to the Fund. The State Water Board actively brings enforcement actions against parties that fraudulently obtain funding.