TESTIMONY OF ROGER BRUNNER, VICE PRESIDENT,

ZURICH NORTH AMERICA

Before the Senate Environment and Public Works

Subcommittee on Superfund, Toxics, Risk, and Waste Management

Wednesday, May 8, 2002

Chairman Boxer, ranking Member Chafee, members of the subcommittee, my name is Roger Brunner and I serve as a vice president with Zurich North America's Specialties business unit. Zurich North America is a unit of the Zurich Financial Services Group, the third largest provider of property and casualty insurance in the United States. My role in the organization is the management of our business that provides environmental insurance for petroleum storage tanks.

Today, Zurich North America is the leading provider of storage tank environmental insurance in the United States, insuring tens of thousands of petroleum storage tanks, which is significantly more than any other private insurer. We have been insuring petroleum insurance tanks for leakage for approximately 10 years, and we have paid to cleanup thousands of leaking underground and above ground storage tanks. Therefore, legislation that impacts the operations and risk management practices of petroleum storage tanks significantly impacts our business.

I am here this afternoon to voice support for the passage of the Underground Storage Tank Compliance Act of 2001 (S. 1850). The highly efficient localized storage and delivery of petroleum is currently a fundamental component of our American lifestyle and economy, and we expect localized petroleum storage to continue for the foreseeable future. Because the delivery of petroleum as a fuel source is such a highly efficient, low margin business for petroleum distributors (and represents such a low cost product for businesses, public entities and consumers), we sometimes lack respect for the extreme complexity required for safely operating our petroleum storage and delivery system. In short, we take it for granted.

It is truly amazing that this volatile and potentially dangerous liquid can be extracted from deep beneath the surface of our planet, transported across that planet, processed in highly technical refineries, then transported, blended and stored locally. Even more amazingly, this vital product is then sold to organizations and individuals for comparatively less than a comparable amount of your favorite fountain soft drink.

The combination of the low cost storage and delivery of petroleum and the potentially significant damage by petroleum releases to human health and the environment create the need for S. 1850. This legislation is important. We believe that it will improve the environmental safety of the local storage and delivery of petroleum.

Unfortunately, our experiences demonstrate the need for S. 1850. Too often, inadequate training procedures or technical appreciation for complex monitoring devices leads to otherwise avoidable petroleum leaks. For example, last week I reviewed a case in the mid-Atlantic with my claims department that involved a petroleum retail location that had not appropriately tracked their inventory and did not know that they were missing over 10,000 gallons of fuel. Imagine if this operator really understood and executed the requirements expected of him and had stopped the release at 100 gallons instead of 10,000; the environmental contamination would have been limited, and thousands of dollars in cleanup costs would have been saved.

Or, in a classic example of the need for enhanced training, I would highlight the case in the mid-west where a local operator taped up the mis-calibrated electronic release detection system that kept flashing and making noises. Apparently, this complex electronic system had issued earlier false warnings, and was viewed somewhat like the boy that cried, “wolf” one too many times. Unfortunately, when the piping joint came apart and there was a real release, no one paid attention until it was too late.

The last personal observation I'll cite is a hospital in the southeast that was not sure who was responsible for keeping track of the compliance obligations for its generator's diesel tanks. Because the hospital's mission is patient care, their priority was naturally to make sure that the tank was full in case the fuel was needed in event of a power outage. This important and quite expected priority on patient care, and the resulting lack of focus on storage tank compliance, missed the fact that a long, slow petroleum leak was occurring, thus causing significant environmental damage.

These examples are real-life claims submitted to Zurich North America. Each was the result of poor training and compliance programs. And a significant amount of damage caused by each was avoidable.

This is why we believe that S. 1850, if enacted, will have a significant impact on the risk management practices of petroleum tank operators in the United States. By requiring and funding storage tank system compliance inspections at least every two years, and improving the training of regulated facility operators, S. 1850 will go a long way toward ensuring a better prepared and more technically proficient operator base. As a significant stakeholder, we believe that this is an appropriate utilization of the LUST Trust Fund.

Zurich North America urges immediate passage of this legislation. We believe that as long as local storage and delivery of petroleum are part of the fabric of our lives, environmental problems will occur. However, we believe that over several years the implementation S. 1850 will help reduce the number of underground storage tank related environmental and human health problems, and that it will be even more effective in reducing the severity of these problems that do occur in the future.

I applaud you for introducing such legislation, and look forward to working with you in the weeks and months to come.

For Further Information:

Francis Bouchard, Senior Vice President & Director,

Government Affairs Zurich Financial Services Group

1201 F Street, NW Suite 250 Washington, DC 20004

Phone: 202-585-3150

Fax: 202-628-2658