What You Should Know About Heating Oil TanksThroughout metropolitan cities like New York, heating oil tanks are part of our everyday lives. We trust them to hold the heating oil for our homes, apartments and the office buildings we work in.Smaller buildings like townhouse style dwellings will typically have oil tanks ranging from 550- gallons up to 2,000-gallons. Larger apartment and office buildings can have vessels ranging from 3,500-gallons to over 20,000-gallons. Oil tanks are most commonly constructed of steel or fiberglass and are either located above or below the ground. Above Ground Tanks (AST’s) are typically installed on saddles in the basement or in a designated “tank room” These AST’s are easier to manage because you can generally inspect them visually which helps in determining if a leak exists and an immediate repair/remedy can be made. Underground Storage Tanks (UST’s) are buried somewhere on the property which may include under the front sidewalk, courtyard areas or under the basement slab of the building. Depending on the size of the tank, the bottom of the tank may be 10-20 feet below the ground. UST’s are more difficult to inspect for leaks as a visual inspection is not practical. The two (2) most common ways to determine if a UST has leaked, is an inventory check or an integrity test. An inventory check is simple to accomplish by pulling out past oil bills and doing a comparison of the amount of oil delivered over a period of time (typically 1-5 years). The second way of determining if a tank is leaking is a precision or integrity test. The most common test available today is the Horner E-Z3 check which takes a few hours and cost between $700-$1,000. Any UST vessel over 1,100 gallons is required to be registered and tested every 5 years by the New York State Department of Environmental Conservation (NYSDEC). Failed tank results are required to be reported to the NYSDEC spills hotline. As these tanks grow older, the tendency for them to leak increases. In addition the interface of groundwater and other sources of water infiltration such as rain or seawater can shorten the lifespan of the tank. Refined oil in any quantity introduced back into Mother Nature never has a good outcome. From regional gulf impacts to tanker trucks spilling their cargo on the highway to oil seeping out the bottom of a buried tank are not a good thing for the environment. How big can the problem get? Addressing the leak will be based on the rock and soil composition around the tank. This will aide in determining the migration or plume of oil (how far has it traveled). Factors such as how long the tank has been leaking, how big is the tank, what is the type of oil being used (number 2, 4, or 6) will also be critical in determining the overall impact and cost to cure. With buildings so closely placed in the five (5) boroughs of New York City, investigating these oil tank events can be challenging and costly. The person who pays for the cost is “The Responsible Party” which is the entity the regulatory agency will seek reimbursement from if any costs associated with the cleanup are not paid for voluntarily. Over the years, building owners have found themselves the responsible party as the tank is a component of the building. However legal counsel should always be sought when addressing an oil tank situation. It is difficult to estimate the cost of a cleanup without proper data but many times an oil impact may be localized and addressed in a timely manner and not bankrupt the responsible party. A new roof can cost more than a localized oil impact. In addition, escrow accounts can be established during a sale or a financing of a properly in which some of the proceeds are put in a separate account to address the environmental concern. There are times where the impact is severe and far reaching. These properties have channels within the state Brownfield’s program and state hazardous waste sites bureau in order to obtain a path for regulatory satisfaction. Regulators An important part to the management of a UST or a UST that has leaked (affectionately known as the LUST List) is the local, state and federal regulatory agency interaction. Starting at the Federal level (EPA) and delegating down to the State (NYSDEC) and finally ending up with a local health department or in NYC include the NYCDEP. Each one has certain jurisdictions they handle or delegate to another agencies protocols. Most oil/petroleum spills are handled by the NYSDEC. The investigation, remediation, and follow up monitoring that may be required are done so under their oversight. Upon completion of the intended objectives, a spill closure date is provided and the site is taken off the active spills list. This component may in some cases add more uncertainty to the final cost and time frame required for final closure. The Lending Community Over the past few decades financial institutions have increasingly been requiring more due diligence on environmental issues in connection to their real estate loans. The reason is risk. Lending institutions do not want to be managing environmental investigations or remediation on properties that they have been foreclosed on. Aside from managing and possibly paying for these issues, there is a potential decrease in the value of the real estate based on the cost, complexity and time frame required to properly address the issue. One of the top culprits on the list: Underground Storage Tanks. Just the presence of the vessel gets many lenders asking when it was installed. How big is the tank? Is it registered? Was it tested recently? Insurance companies act in a similar manner. What is our risk? They determine this in the premiums we pay and the inclusions/exclusions provided by the policy we receive. Many insurance policies on property alone now have UST exclusions due to past remediation cost absorbed by the carrier but not factored into the premium of the policy. Insurers do offer pollution policies in different forms that can be purchased by small and large property owners. How they reduce risk is with due diligence. From database reports that track registered tanks to hiring seasoned consultants to physically inspect the property for all environmental concerns (referred to as a phase one assessment), lenders use these tools to better gauge their environmental risk. Based upon the outcome of the due diligence implemented, the lender is better able to decide if more due diligence is required or if they feel the issue such as an oil tank (above or below ground) has been satisfied. Lenders can decide against making a loan based on the actual or perceived environmental impact. UST Management Be pro active when managing a UST or AST. Stay up on registrations and tank testing requirements. Conduct visual inspections when appropriate and try to establish a path of good stewardship. If you have a UST that is not in service or you would like to convert it to an AST or other heating source, contact a reputable firm with knowledge of the protocols. Tanks less than 1,100 gallons have different requirements than those above 1,100 gallons. Properly removing or abandoning a tank in accordance with the established protocols can be straight forwarded if no impact of oil has occurred outside of the tank vessel. Soil samples can help answer that question. Removal of buried tanks can be more complex as access issues will always exist in the confines of a metropolis like New York City. In addition, in many cases structural integrity issues of the building may complicate the removal process. In these cases, the abandonment process is an acceptable alternate in which sand, concrete slurry or foam are poured into the cavity of the tank vessel. Understanding the differences of the tank size and proper methodology when taking a UST out of service is critical as these questions may come up when marketing a property or obtaining financing from a real estate lender.
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