USTS in Transactions Part 2: Purchasing Existing USTS

Friday, September 2, 2016

This is the second article in a series about Underground Storage Tanks in Transactions. See Part 1.

Purchasing properties with existing underground storage tanks (USTs) can be a challenge unless compliance issues and tank configurations are understood.  Regulations specify precisely what is necessary for a UST system to be in compliance.  Prior non-compliance or incomplete records can create a significant liability for a new UST owner if the records cannot demonstrate compliance.  Therefore, ensuring that the proper documentation is available before closing is crucial to a smooth property transfer and continued operation of existing USTs.

As with all commercial property transactions, an initial inspection of the property should be performed to identify potential problems.  The inspection can be a complete Phase I environmental site assessment (ESA), or the inspection can be modified to fit the needs of the purchaser.  Regardless, if USTs exist on the property, a thorough inspection of the UST system should occur to prevent assumption of existing problems and to identify issues that require correction prior to purchase.  The UST system inspection should include all the aspects of a compliance inspection that the state regulatory agency would perform.  Documentation of compliance (or areas of non-compliance) is critical so that a sound decision can be made regarding purchase of a property with USTs.

There are four basic components to a UST system: tanks, product lines, dispenser systems, and product gauging systems.  All systems must meet the requirements of the respective state or federal regulations in the areas of leak detection, overfill protection, corrosion protection, and recordkeeping.    

Tanks are generally constructed of steel, fiberglass, or a combination of both.  They can be single-walled or double-walled.  For every UST system, monthly leak detection is required.  Monthly leak detection can be monthly testing with an automatic tank gauge (ATG), liquid sensor status reports (for double-walled tanks), statistical inventory reconciliation, or monthly manual monitoring for tanks less than 1,000 gallons.  At least one year of passing monthly leak detection should be available.

Each UST should be fitted with overfill protection, which prevents the tank from being overfilled during deliveries.  Spill containment (spill buckets) should be installed around each fill port to prevent releases during delivery hose disconnection.  There should be no tears or holes in the spill bucket, and it should be clear of liquid and debris.  Fill caps should be tight fitting and locked.  Staining around vent lines is an indication that overfill protection does not exist or is not functioning.

Product lines are generally constructed of steel, fiberglass, or flexible piping and may be single-walled or double-walled.  Piping is required to have leak detection: mechanical leak detectors, electronic leak detectors, or liquid sensors (for double-walled systems).  At a minimum, annual test reports for the leak detectors and tightness testing for the product lines is required and a record should be available.  Electronic leak detectors can test product lines periodically and provide annual test results, but these need to be tested annually for operation, also.

There are a wide variety of dispenser systems.  Inspection of the piping under a dispenser for fuel drips or weeping at fittings should be performed.  Dispensers may have containment sumps installed under the dispensers to contain fuel leaks from the dispenser piping.  Water or fuel in a containment sump under a dispenser indicates that either the dispenser piping is leaking or the containment sump is leaking.  Regulations may require periodic sump testing (depending on the age of the sump) to determine whether or not they are liquid-tight.

ATGs offer many options for testing the tank system periodically.  It is important to review the records of the ATG to determine if it is programmed properly to provide the necessary testing and to get the necessary testing records for the UST system.  Records of manual inventory monitoring, if this method is used for monthly leak detection, should be reviewed.

Steel tanks and piping should be protected from corrosion.  If containment sumps regularly contain water, or if containment sumps are not installed and steel piping is in contact with soil, the steel piping in the sumps is required to be protected from corrosion.  Corrosion protection can be achieved by installing a tank with a coating of corrosion-resistant material (fiberglass), adding galvanic anodes to the tank or piping, or installing an impressed current cathodic protection system.  Regulations require triennial testing of galvanic or impressed current systems.  Bimonthly measurement of voltage and amperage for impressed current systems is required.  Records for testing and measurement are required to be retained to demonstrate corrosion protection is active and effective. 

Registration of the USTs is required.  The size, age, and type of product stored are generally listed on the registration certificate or in the state’s registration database.  As-built drawings of UST systems help to provide an understanding of how and when the system was constructed.  The age of UST system is important to know so that upgrade requirements can be can be verified.  Typically, UST manufacturers warranty their tanks for 30 years, and some states require replacement after the warranty period runs out.  New federal regulations will require that UST owners demonstrate compatibility with biofuels if the USTs will be used to store biofuel (biodiesel, ethanol-blended gasoline), which can be problematic if the type of tank construction or age is not known.

Finally, it is recommended that UST systems be tested prior to purchase.  Testing of the tank, lines, leak detectors, and ATGs prior to purchase not only provides assurance that the tank is not leaking, but commonly can identify other problems with the UST system that are not observable during a visual inspection of the tanks.  A test of the operability of the system along with a review of past regulatory compliance inspection results will help identify existing issues to be resolved prior to closing on a property. 

Failure to identify and resolve compliance issues prior to a purchase can not only result in regulatory and administrative headaches, but also can leave an owner with a significant financial burden should a release occur.  Many states have a petroleum trust fund that will assist in the investigation and cleanup of releases; however, the eligibility requirements of such trust funds (and some private insurers) depend largely on maintaining compliance with state and federal regulations.  A release from a non-compliant system can leave an owner with a costly cleanup.