Is a per-gallon fee on petroleum that pays for underground tank leak cleanup a highway tax Texas must spend on roads?

Texas AG Opinion JM-963: Is a Petroleum Cleanup Fee a Road Tax?

Plain-English summary

Texas earmarks its gasoline taxes. Under the state constitution, most of the money the state collects in taxes on motor fuels has to go to building and maintaining highways, with a quarter set aside for public schools. So whenever the legislature puts a new charge on fuel, a fair question is whether that charge is really a "tax" that gets swept into the highway fund, or something else the state can spend more freely. This opinion answered that question for a proposed fee tied to cleaning up leaking underground storage tanks.

The backstory is federal. Leaking gas-station tanks are a serious source of groundwater pollution, and federal law tells the Environmental Protection Agency to regulate them, including making tank owners prove they can pay for cleanup and for damage to neighbors, up to a million dollars per incident. Texas built its own program to match the federal one, run by the Texas Water Commission. The trouble was that many tank owners, especially small operators, simply could not buy a million dollars of pollution insurance. Petroleum marketers proposed a fix: a state cleanup fund financed by a small "delivery fee," six tenths of a cent per gallon, charged when fuel leaves the refinery and enters the distribution system. A chairman of the House tax committee asked the Attorney General two things.

First, is that delivery fee a fuel tax that the constitution forces into the highway fund? The Attorney General said no, and the reasoning turns on a distinction Texas courts have used for decades: you tell a tax from a license fee by looking at the charge's main purpose. If the point is to raise revenue for the general treasury, it is a tax. If the point is to regulate an activity, it is a license fee, even if it happens to bring in money. Here the whole apparatus, chapter 26 of the Water Code, exists to regulate tanks and prevent leaks; the Water Commission has broad authority to set standards, require corrective action, and police the operators. The fee would be part of that regulatory scheme, enacted under the state's police power to comply with the federal tank program. That makes it a regulatory license fee, not a fuel tax, so article VIII, section 7-a, does not reach it and the money need not go to highways.

The opinion took care to distinguish two cases the questioner worried about, Conlen and Rouw, where Texas courts struck down charges on grain and citrus producers as unconstitutional occupation taxes. The difference was purpose: those charges were mainly about raising money to promote an industry, not about regulating it, and they were not paired with real regulatory authority. The tank fee is the opposite. Texas courts have consistently called a charge a license fee when it comes bundled with genuine regulatory power, and a tax when it does not.

Second, can the legislature dedicate the fee to a Water Commission fund used to pay cleanup costs and compensate people harmed by leaks? The worry was article III, section 51, which forbids the state from making gifts of public money to individuals. If the fund pays costs that tank owners would otherwise bear themselves, is that a forbidden gift? The Attorney General said no, drawing on Friedman v. American Surety Co., which upheld the state's unemployment compensation fund. There, the court reasoned that the money was not really a state gift because the state held it as a trustee for the people it was meant to benefit. The cleanup fund works the same way: the state would be a trustee, and the beneficiaries would be the people and local governments damaged by tank leaks. Dedicated trust funds like this are a familiar and legitimate tool, so section 51 was no obstacle.

One note on the shape of the opinion: the Attorney General was answering a general question about a type of statute, not blessing any specific bill or its exact wording. The analysis tells you how the constitution treats a regulatory fee of this kind, not that any particular draft would pass in every detail.

Currency note

This opinion was issued in 1988. Subsequent statutory amendments, court decisions, or later AG opinions may have changed the analysis. Treat this page as historical context, not current legal advice. Verify current law before relying on any specific rule, deadline, or remedy mentioned here.

Texas did enact a petroleum delivery fee and a Petroleum Storage Tank Remediation program after this opinion, and both the fee and the underground storage tank program have been amended and, in parts, phased out or restructured over the decades since. The Water Commission's tank duties were later moved to successor agencies (the tank program is now administered under the Texas Commission on Environmental Quality). The constitutional framework the opinion describes, the tax-versus-license-fee test under article VIII, section 7-a, and the trustee analysis under article III, section 51, remains the general approach Texas courts use, but the specific statutes, fee rates, and program details have all changed. Anyone dealing with underground storage tank fees or cleanup funding today should consult the current statutes and rules rather than the 1988 provisions cited here.

Who this opinion affected (as of 1988)

The Texas Legislature: The opinion told lawmakers they could create a petroleum-based cleanup fund without triggering the constitutional highway earmark or the ban on gifts of public money.

Underground storage tank owners and operators: The opinion supported a mechanism to help operators who could not buy the required pollution insurance meet federal financial-responsibility standards through a shared fund.

The Texas Water Commission: The opinion confirmed the agency could administer a dedicated cleanup fund as trustee for those harmed by tank leaks.

Common questions

Was the proposed petroleum fee a tax that had to be spent on roads?
No. The Attorney General concluded it was a regulatory license fee, not a fuel tax, so article VIII, section 7-a, of the Texas Constitution did not require the money to go to highways or the school fund.

How do you tell a tax from a license fee in Texas?
By the charge's primary purpose. If the main goal is raising revenue, it is a tax; if the main goal is regulating an activity, it is a license fee, even if it also produces revenue. Courts look especially at whether the charge comes with real regulatory authority.

Could the legislature set aside the fee for a special cleanup fund?
Yes. The Attorney General concluded that dedicating the fee to a Water Commission cleanup fund did not violate article III, section 51, because the state would hold the money as a trustee for the people and subdivisions harmed by tank leaks, not give it away as a gift.

Did this opinion approve a specific bill?
No. The questioner asked about a type of statute in general, and the opinion expressly declined to put its imprimatur on any specific proposed statute or language.

Background and statutory framework

Subchapter IX of title 42 of the United States Code governs the regulation of underground storage tanks containing regulated substances, principally petroleum and other hazardous substances (42 U.S.C. sections 6991-6991i). It authorizes the EPA administrator to issue rules on release detection, prevention, and corrective action, and to approve state programs that are enforced in lieu of the federal program, with primary enforcement falling on the state (42 U.S.C. section 6991c). Texas implemented the program in subchapter I of chapter 26 of the Water Code; section 26.346 requires registration of underground storage tanks with the Texas Water Commission, and section 26.352 directs the commission to adopt requirements for maintaining evidence of financial responsibility for corrective action and for compensating third parties for injury and property damage from accidental releases. Under EPA rules published at 52 Fed. Reg. 12,786 and 48,638 (to be codified at 40 C.F.R. section 280), owners and operators must demonstrate financial responsibility, with coverage of one million dollars per occurrence. Because most operators could not secure that coverage, petroleum marketers promoted legislation to create a cleanup fund, administered by the Water Commission and financed by a delivery fee of six tenths of a cent ($0.006) per gallon on regulated substances drawn from the refinery into the distribution system, dedicated to a back-up fund for cleanup costs over the $10,000 of coverage each owner or operator would assume per site.

The first question was whether the fee falls within article VIII, section 7-a, of the Texas Constitution, which provides that net revenues from motor vehicle registration fees and from taxes on motor fuels and lubricants used to propel motor vehicles on public roadways (except gross production and ad valorem taxes) shall be used for acquiring rights-of-way, constructing and maintaining public roadways, and related purposes, with one-fourth of the net revenue from the motor fuel tax allocated to the Available School Fund. The dispositive issue was whether the delivery fee is a "tax." Texas courts uniformly hold that whether a statutorily created charge is a tax or a license fee turns on purpose: if the primary purpose is to raise revenue, it is a tax; if the primary purpose is regulation, it is a license fee (Robinson v. Hill, 507 S.W.2d 521 (Tex. 1974); County of Harris v. Shepperd, 291 S.W.2d 721 (Tex. 1956); Hurt v. Cooper, 110 S.W.2d 896 (Tex. 1937), after certified questions, 113 S.W.2d 929 (Tex. Civ. App. - Dallas 1938, no writ); City of Fort Worth v. Gulf Refining Co., 83 S.W.2d 610 (Tex. 1935)). Hurt v. Cooper stated the principle this way: when the primary purpose of the fees is raising revenue they are occupation taxes regardless of their name, but if the primary purpose is regulation the charges are license fees.

The opinion distinguished Conlen Grain and Mercantile, Inc. v. Texas Grain Sorghum Producers Board, 519 S.W.2d 620 (Tex. 1975), which held an assessment on grain sorghum producers to be an unconstitutional occupation tax on an agricultural pursuit because its primary purpose was to raise revenue, and H. Rouw v. Texas Citrus Commission, 247 S.W.2d 231 (Tex. 1952), which reached the same result for a citrus charge whose primary purpose was to promote the industry rather than regulate it. Both are consistent with decisions that look to the actual conferral of regulatory authority: Texas courts characterize as license fees those charges imposed together with real regulatory authority (Robinson v. Hill; House of Tobacco, Inc. v. Calvert, 394 S.W.2d 654 (Tex. 1965); Kadane v. Clark, 143 S.W.2d 197 (Tex. 1940); City of Fort Worth v. Gulf Refining Co.; Beckendorff v. Harris-Galveston Coastal Subsidence District, 558 S.W.2d 75 (Tex. Civ. App. - Houston [14th Dist.] 1977), aff'd per curiam, 563 S.W.2d 239 (Tex. 1978); Reed v. City of Waco, 223 S.W.2d 247 (Tex. Civ. App. - Waco 1949, err. ref'd); see also Prudential Health Care Plan v. Commissioner of Insurance, 626 S.W.2d 822 (Tex. App. - Austin 1982, writ ref'd n.r.e.)), and as taxes those imposed without such authority (Harris County v. Shepperd; Payne v. Massey, 196 S.W.2d 493 (Tex. 1946); Hurt v. Cooper; Ex parte Dreibelbis, 109 S.W.2d 476 (Tex. Crim. App. 1937); Taylor v. State, 513 S.W.2d 549 (Tex. Crim. App. 1974)). Because chapter 26 confers broad regulatory authority on the commission over tank operations (Water Code sections 26.345-26.357), and the fee would be enacted under the police power to comply with federal rules, the opinion concluded the charge is more closely related to a license fee than a tax and does not fall within article VIII, section 7-a. Section 26.341 states the legislative policy to protect groundwater quality from substances in underground tanks.

The second question was whether the legislature may dedicate the fee to a Water Commission cleanup fund. Generally the legislature may enact any law not in conflict with the state or federal constitutions (Jordan v. Crudgington, 231 S.W.2d 641 (Tex. 1950); DeShazo v. Webb, 113 S.W.2d 519 (Tex. 1938)). The concern was article III, section 51, which forbids the state from making grants of public money to persons or political subdivisions, because the fund would pay cleanup costs and compensate third parties, costs the owners and operators would otherwise bear. In Friedman v. American Surety Co. of New York, 151 S.W.2d 570 (Tex. 1941), the supreme court upheld the Unemployment Compensation Act against a section 51 challenge, refusing to treat the plan as a gratuity because the funds were not state funds; rather, the state acted merely as a trustee. Analogously, in the proposed system the state would act as trustee of the cleanup fund, and the beneficiaries would be the persons or political subdivisions damaged by leakage from underground storage tanks. The device of a dedicated or trust fund has repeatedly been used to effectuate a proper public purpose, both with private persons and with political subdivisions as beneficiaries. The opinion concluded that article III, section 51, imposes no impediment to the creation and disbursement of money from the proposed fund.

Citations

Constitutional and statutory authority:

• Article 8, section 7-a, Texas Constitution (dedication of motor fuel tax revenue to highways and the school fund)
• Article 8, section 1, Texas Constitution (prohibition on occupation taxes on agricultural pursuits, as applied in Conlen)
• Article 3, section 51, Texas Constitution (prohibition on grants of public money)
• Section 26.341, Water Code (legislative policy on groundwater protection)
• Section 26.352, Water Code (financial responsibility requirements for tank operators)
• Section 26.357, Water Code (state program must be no less stringent than federal)
• 42 U.S.C. section 6991c (EPA approval and enforcement of state tank programs)

Cases:

• Robinson v. Hill, 507 S.W.2d 521 (Tex. 1974) (tax versus license fee turns on primary purpose)
• County of Harris v. Shepperd, 291 S.W.2d 721 (Tex. 1956) (charge without regulatory authority is a tax)
• Hurt v. Cooper, 110 S.W.2d 896 (Tex. 1937) (primary-purpose test for occupation tax versus license fee)
• City of Fort Worth v. Gulf Refining Co., 83 S.W.2d 610 (Tex. 1935) (regulatory charge is a license fee)
• Conlen Grain and Mercantile, Inc. v. Texas Grain Sorghum Producers Board, 519 S.W.2d 620 (Tex. 1975) (producer assessment held an occupation tax)
• H. Rouw v. Texas Citrus Commission, 247 S.W.2d 231 (Tex. 1952) (citrus promotion charge held an occupation tax)
• House of Tobacco, Inc. v. Calvert, 394 S.W.2d 654 (Tex. 1965) (charge for both regulation and revenue is a license fee if primarily regulatory)
• Payne v. Massey, 196 S.W.2d 493 (Tex. 1946) (license fee analysis)
• Friedman v. American Surety Co. of New York, 151 S.W.2d 570 (Tex. 1941) (state as trustee; unemployment fund did not violate article III, section 51)

Prior Attorney General opinions referenced: none.

Source

• Landing page: https://www.texasattorneygeneral.gov/opinions/jim-mattox/jm-963
• Original PDF: https://www.texasattorneygeneral.gov/sites/default/files/opinion-files/opinion/1988/jm0963.pdf

Original opinion text

Best-effort transcription from a scanned PDF. Minor OCR errors may remain; the linked PDF is authoritative.

THE ATTORNEY GENERAL OF TEXAS

October 5, 1988

Honorable Stan Schlueter
Chairman
Ways and Means Committee
Texas House of Representatives
P.O. Box 2910
Austin, Texas 78769

Opinion No. JM-963

Re: Whether a proposed delivery fee on petroleum products, used to create a state clean-up fund to comply with federal standards, would be subject to the provisions of article VIII, section 7-a, of the Texas Constitution (RQ-1449)

Dear Representative Schlueter:

Subchapter IX of title 42 of the United States Code governs the regulation of underground storage tanks containing "regulated substances" as defined in the code, principally petroleum and other substances defined as "hazardous." See 42 U.S.C. sections 6991-6991i. The subchapter authorizes the administrator of the Environmental Protection Agency to promulgate rules regarding, among other things, "release detection and release prevention" of such substances arising from the operation of such tanks, as well as corrective action to be taken by owners or operators. It further confers on the administrator authority to approve state programs that are intended to comply with the federal statutes and rules. When the state program is approved, it is to be enforced in lieu of the federal program, with primary enforcement responsibility falling upon the state. See 42 U.S.C. section 6991c. [In order to comply with the federal provisions, Texas has enacted laws governing underground storage tanks, set forth in subchapter I of chapter 26 of the Water Code. Section 26.346 of the Water Code provides that, except as specifically provided, all underground storage tanks must be registered with the Texas Water Commission. Pursuant to rule-making authority conferred by that section, the commission has imposed a registration fee of $25 for every underground storage tank. Section 26.352 of the code confers authority on the commission to adopt requirements regarding financial responsibility arising from the operation of such tanks: "The commission shall adopt requirements for maintaining evidence of financial responsibility for taking corrective action and compensating third parties for bodily injury and property damage caused by sudden and nonsudden accidental releases arising from operating an underground storage tank." Section 26.352 was included in Senate Bill No. 779 when subchapter I was added by amendment in 1987. Acts 1987, 70th Leg., ch. 277, section 1. The commission has not yet adopted any rules regarding financial responsibility.]

Pursuant to subsections 9003(c) and (d) of the Resource Conservation and Recovery Act, as amended by the Hazardous and Solid Waste Amendments of 1984 and the Superfund Amendments and Reauthorization Act of 1986 (codified at 42 U.S.C. sections 6991b(c), (d)), the Environmental Protection Agency has published proposed rules that impose financial responsibility standards upon the owners and operators of underground storage tanks containing petroleum. See 52 Fed. Reg. 12,786 and 48,638 (to be codified at 40 C.F.R. section 280). The rules establish requirements to be met by owners or operators of underground storage tanks for demonstrating their financial responsibility, and giving proof of their ability to take corrective action and to compensate third parties for bodily injury and property damage caused by both sudden and gradual accidental releases arising from the operation of such tanks. The proposed rule requires coverage in the amount of one million dollars per occurrence. You claim that owners and operators of these underground storage tanks, for the most part, are unable to secure insurance coverages in this amount for pollution clean-up. You indicate in your request letter that petroleum marketers in Texas are promoting legislation that would create, in effect, a clean-up fund that is intended to satisfy the financial responsibility standards set forth in the federal rules.

The statute that you propose would provide that funds for the program would be administered by the Texas Water Commission. The funds would derive from a proposed "delivery fee" of six tenths of a cent ($0.006) per gallon on "regulated substances," as defined in the federal provisions, when they are drawn from the refinery and pass into the marketing or distribution system. The proposed fee would be treated by the marketers and distributors as a "cost of product," similar to a transportation charge, that would not be recovered as a tax on consumer use. The revenues thus generated would be dedicated to establishing a back-up fund for pollution clean-up costs over and above the $10,000 of liability coverage to be assumed by the owner/operator for each site. You do not ask whether the proposed legislation would satisfy the proposed federal rule; rather, you ask two questions regarding Texas law and the proposed statute:

1. Would the fee, as described above, fall within the purview of Texas Constitution Article 8, Sec. 7-a, and require use of the funds in highway construction after the one-fourth allocation to the Available School Fund?

2. If the answer to No. 1 is "No," then is the Legislature authorized to make a statutory dedication of the fees to the Texas Water Commission for the regulation of the clean-up fund?

We answer your first question in the negative: such funds would not fall within the ambit of article VIII, section 7-a, of the Texas Constitution. We answer your second question in the affirmative; the legislature is empowered to dedicate by statute the funds derived from such a fee as you propose for the purpose of securing pollution clean-up.

You first ask whether the proposed fee falls within the ambit of article VIII, section 7-a, of the Texas Constitution, which provides:

Subject to legislative appropriation, allocation and direction, all net revenues remaining after payment of all refunds allowed by law and expenses of collection derived from motor vehicle registration fees, and all taxes, except gross production and ad valorem taxes, on motor fuels and lubricants used to propel motor vehicles over public roadways, shall be used for the sole purpose of acquiring rights-of-way, constructing, maintaining, and policing such public roadways, and for the administration of such laws as may be prescribed by the Legislature pertaining to the supervision of traffic and safety on such roads; and for the payment of the principal and interest on county and road district bonds or warrants voted or issued prior to January 2, 1939, and declared eligible prior to January 2, 1945, for payment out of the County and Road District Highway Fund under existing law; provided, however, that one-fourth (1/4) of such net revenue from the motor fuel tax shall be allocated to the Available School Fund; and, provided, however, that the net revenue derived from counties from motor vehicle registration fees shall never be less than the maximum amounts allowed to be retained by each County and the percentage allowed to be retained by each County under the laws in effect on January 1, 1945. Nothing contained herein shall be construed as authorizing the pledging of the State's credit for any purpose.

Tex. Const. art. VIII, section 7-a; see Tax Code, ch. 153.

The issue is whether the proposed "delivery fee" is a "tax" for purposes of article VIII, section 7-a, of the Texas Constitution. If it is, then the funds derived therefrom may be expended only pursuant to that section of the constitution.

Courts in Texas uniformly have held that, in determining whether a statutorily created charge is a tax or a license fee, the test is that of purpose. If the overall primary purpose of the charge is to raise revenues, then it is a tax; if its primary purpose is regulation, then it is a license fee. Robinson v. Hill, 507 S.W.2d 521 (Tex. 1974); County of Harris v. Shepperd, 291 S.W.2d 721 (Tex. 1956); Hurt v. Cooper, 110 S.W.2d 896 (Tex. 1937), after certified questions, 113 S.W.2d 929 (Tex. Civ. App. - Dallas 1938, no writ); City of Fort Worth v. Gulf Refining Co., 83 S.W.2d 610 (Tex. 1935). The Texas Supreme Court has declared:

It is sometimes difficult to determine whether a given statute should be classed as a regulatory measure or as a tax measure. The principle of distinction generally recognized is that when, from a consideration of the statute as a whole, the primary purpose of the fees provided therein is the raising of revenue, then such fees are in fact occupation taxes, and this regardless of the name by which they are designated. On the other hand, if its primary purpose appears to be that of regulation, then the fees levied are license fees and not taxes.

Hurt v. Cooper, supra, at 899.

It is suggested that, under the authority of Conlen Grain and Mercantile, Inc. v. Texas Grain Sorghum Producers Board, 519 S.W.2d 620 (Tex. 1975) [hereinafter Conlen], the charge that you propose should be denominated an occupation tax rather than a license fee. We disagree. In Conlen, the Texas Supreme Court held unconstitutional a charge imposed upon grain sorghum producers; the court held that the charge was an occupation tax on an agricultural pursuit, a tax that article VIII, section 1, of the Texas Constitution explicitly forbids.

The statute in Conlen authorized a nonprofit organization representing the producers of a particular agricultural commodity to petition the Commissioner of Agriculture for authority to conduct a referendum, on either a regional or a statewide basis, to determine whether the producers of the commodity would "levy an assessment upon themselves to finance programs authorized by this Act." 519 S.W.2d 620, at 621. If the referendum passed, then an election was held to determine the members of a commodity producers board. The board was charged with formulating and administering programs for the purposes stated in the act. The board was permitted to expend the money collected as an assessment for the purposes of

developing, carrying out, and participating in programs of research, disease and insect control, predator control, education, and promotion, designed to encourage the production, marketing, and use of the commodity upon which the assessment is levied.

519 S.W.2d 620, at 621-622. In rejecting the claim of the board that the charge imposed was not a tax, the court stated, among other things, that: "It also appears that the primary purpose of the assessment is to raise revenue."

The court in Conlen relied in part upon its prior decision of H. Rouw v. Texas Citrus Commission, 247 S.W.2d 231 (Tex. 1952) [hereinafter Rouw], which involved a charge similar to the one in Conlen. The charge, however, in Rouw was nonrefundable and was imposed on those who packed and marketed or processed and sold citrus fruit grown in the state. The court in Rouw concluded that the purpose of the charge was not regulatory, but rather it simply was to promote the citrus industry:

Applying the above rule to the Act under consideration we find the tax levied to be an occupation tax. A reading of the Act clearly demonstrates that its primary purpose is to raise revenue, and not a regulation of the citrus fruit industry under the police power. Laudable as the purpose of the Act may be; viz. to advertise and enlarge the markets for Texas citrus fruit and its by-products, and for research beneficial to the citrus industry, the primary purpose being the raising of revenues in excess of the amount needed for regulation of the industry to carry out the above provisions, under the well-established rule of law, the tax must of necessity be classed as an occupation tax. (Emphasis added.)

519 S.W.2d 620, at 624.

Both Conlen and Rouw are consistent with Texas court decisions that looked to the actual conferral of regulatory authority in determining whether a charge imposed is intended primarily for the raising of revenue. Texas courts consistently have characterized as license fees, rather than as taxes, those charges that were imposed concomitantly with the actual conferral of regulatory authority. See, e.g., Robinson v. Hill, supra; House of Tobacco, Inc. v. Calvert, supra; Kadane v. Clark, 143 S.W.2d 197 (Tex. 1940); City of Fort Worth v. Gulf Refining Co., supra; Beckendorff v. Harris-Galveston Coastal Subsidence District, supra; Reed v. City of Waco, 223 S.W.2d 247 (Tex. Civ. App. - Waco 1949, err. ref'd). See also Prudential Health Care Plan v. Commissioner of Insurance, 626 S.W.2d 822 (Tex. App. - Austin 1982, writ ref'd n.r.e.) (distinguishing Conlen). Texas courts consistently have characterized as taxes, rather than as license fees, those charges that were imposed without the concomitant conferral of actual regulatory authority. See, e.g., Harris County v. Shepperd, supra; Payne v. Massey, supra; Hurt v. Cooper, supra; Ex parte Dreibelbis, 109 S.W.2d 476 (Tex. Crim. App. 1937); Taylor v. State, 513 S.W.2d 549 (Tex. Crim. App. 1974).

There can be little doubt that, by enacting subchapter I of chapter 26 of the Water Code, the legislature intended primarily to set up a system to regulate the operations of underground storage tanks that contain hazardous materials rather than a system to raise revenue. The "Bill Analysis" prepared by the Senate Committee on Natural Resources for Senate Bill No. 779 sets forth the background of the bill:

In 1986 the Texas Water Commission surveyed relevant businesses and concluded that there are at least 120,000 underground storage tanks that would come under commission purview for regulatory authority. Tanks underneath gasoline stations account for 80-85% of that total. A recent amendment to the Federal Resource Conservation and Recovery Act mandates the implementation of a national underground storage tank program, which is intended to be administered at the state and local levels. Texas does not currently have a regulatory program to monitor and prevent leaks in underground storage tanks which contain petroleum and toxic chemical products. (Emphasis added.)

The "Bill Analysis" also sets forth the purpose of the bill: "This bill would provide for the regulation of underground storage tanks by the Texas Water Commission." (Emphasis added.) Section 26.341 of the Water Code states the purpose of the subchapter:

The legislature finds that leaking underground tanks storing certain hazardous, toxic, or otherwise harmful substances have caused and continue to pose serious groundwater contamination problems in Texas. The legislature declares that it is the policy of this state and the purpose of this subchapter to maintain and protect the quality of groundwater resources in the state from substances in underground tanks that may pollute groundwater resources and to require the use of all reasonable methods to implement this policy. (Emphasis added.)

Moreover, it is clear even from a cursory reading of chapter 26 itself that the legislature has conferred broad regulatory authority on the commission regarding the permissible operation of underground storage tanks. See, e.g., Water Code, sections 26.345-26.357. Because the fee that you propose would be enacted pursuant to the state's police power and in order to comply with federal statutes and rules regarding the regulation of underground storage tanks, we conclude that it is more closely related to a license fee than it is to a tax and that any money derived therefrom would not fall within the ambit of article VIII, section 7-a, of the Texas Constitution.

You next ask whether the legislature is authorized to make such a statutory dedication, creating a fund to be administered by the Texas Water Commission for the purpose of regulating pollution clean-up. Generally, the legislature is authorized to enact any law not in conflict with either the state or the federal constitutions. Jordan v. Crudgington, 231 S.W.2d 641 (Tex. 1950); DeShazo v. Webb, 113 S.W.2d 519 (Tex. 1938). We understand you to ask whether the creation of such a dedicated statutory fund would be constitutional; however, you do not specify which constitutional provisions concern you. We assume that you fear that article III, section 51, of the Texas Constitution, which forbids the state from making grants of public money to persons or political subdivisions, may be violated by the fact that money in such a fund would be expended both for the costs of pollution clean-up and for compensating third parties damaged by any such accidental leakage, costs which, absent the fund, would be borne by the owners/operators themselves. We conclude that article III, section 51, of the Texas Constitution would not be violated by permitting the expenditure of such money for such purposes.

In Friedman v. American Surety Co. of New York, 151 S.W.2d 570 (Tex. 1941), the Texas Supreme Court upheld the Unemployment Compensation Act, declaring, among other things, that article III, section 51, was not violated thereby. The act, codified at articles 5221b-1 through 5221b-21, V.T.C.S., created a fund comprising "contributions" or taxes imposed upon employers for the benefit of employees. The court refused to characterize the plan as providing a gratuity, asserting that the funds were not state funds. Rather, the state acted merely as a trustee.

Analogously, in the system that you propose, the state would be acting as trustee with respect to the administration of the clean-up fund. The beneficiaries of the trust would be those persons or political subdivisions that are damaged by the sudden or gradual leakage or spill from underground storage tanks of regulated substances covered by the act. The device of creating a dedicated fund or a trust fund is one that repeatedly has been used by the legislature to effectuate a proper public purpose, both with private persons as beneficiaries, see, e.g., V.T.C.S. art. 8309h (Worker's Compensation and Crime Victims' Compensation); Agric. Code, sections 103.001-.013 (Produce Recovery Fund), and with political subdivisions as beneficiaries, see, e.g., V.T.C.S. art. 1066c (Local Sales and Use Tax), 1118x (Metropolitan Transit Authorities), 1118y (Regional Transit Authorities), 179d (Bingo Enabling Act), 4366e (Local Government Corporate Banking Franchise Tax Fund); Alco. Bev. Code, sections 202.01-.16. We conclude that article III, section 51, of the Texas Constitution imposes no impediment to the creation and eventual disbursement of the money from the fund that you propose.

Footnotes

3. We note that section 6991c of title 42 permits the administrator of the Environmental Protection Agency to approve a state program only if the requirements of that program are no less stringent than the corresponding requirements under the federal program. See Water Code, section 26.357.

4. You have not asked us to construe any specific proposed statute; rather, you ask in general about a statute that would create a dedicated clean-up fund. Accordingly, we do not place our imprimatur upon any specific proposed statute or any specific proposed language.

5. We note that the fact that the charge is measured by the amount of "regulated substances," including petroleum, does not mean that the charge is a tax on petroleum. Because we conclude that the charge is not a tax in the first instance, we need not determine the incident upon which the charge is imposed.

6. We note that, because the test is purpose and not effect, a charge may have the effect of raising revenue and not be a tax. Beckendorff v. Harris-Galveston Coastal Subsidence District, 558 S.W.2d 75 (Tex. Civ. App. - Houston [14th Dist.] 1977), aff'd per curiam, 563 S.W.2d 239 (Tex. 1978); City of Fort Worth v. Gulf Refining Co., supra. Indeed, a license fee imposed on the privilege of operating a certain type of business may be imposed for both regulation and revenue purposes; if the purpose of the act, taken as a whole, is primarily regulatory, the charge is denominated a license fee. House of Tobacco, Inc. v. Calvert, 394 S.W.2d 654 (Tex. 1965); Payne v. Massey, 196 S.W.2d 493 (Tex. 1946).

7. The court of appeals declared: "We believe, however, we would need a more specific declaration of the Supreme Court, overruling the traditional distinctions drawn between an occupation tax and a regulatory fee, before we would be justified in holding the charge assessed by subdivision (a) [under article 20A.33 of the Insurance Code] to be a 'tax' subject to the 'equal and uniform' limitations of the Constitution." 626 S.W.2d 822, at 830.

SUMMARY

The creation of a proposed pollution clean-up fund by the imposition of a fee on the owners/operators of underground storage tanks containing certain regulated substances for the purpose of complying with federal statutes and administrative regulations would not constitute a "tax" for purposes of article VIII, section 7-a, of the Texas Constitution. Article III, section 51, of the Texas Constitution imposes no impediment to the creation and eventual disbursement of the money from such a fund.

JIM MATTOX
Attorney General of Texas

MARY KELLER
First Assistant Attorney General

LOU MCCREARY
Executive Assistant Attorney General

JUDGE ZOLLIE STEAKLEY
Special Assistant Attorney General

RICK GILPIN
Chairman, Opinion Committee

Prepared by Jim Moellinger
Assistant Attorney General