Leaking Underground Heating Oil Tanks: Three Case Studies

Underground Leak TankHeating oil tanks were commonly used in Florida prior to development of the HVAC system. Many older residences and businesses have abandoned or inactive heating oil tanks. In some cases, the tanks exist without the owners’ knowledge.

The heating oil, or fuel oil, stored in the tanks is a diesel product and is regulated by the Florida Department of Environmental Protection (FDEP), in accordance with Florida Administrative Code (FAC) Chapter 62 780, “Contamination Site Cleanup Criteria.”

The discharge or prior spillage of regulated fuel oil has complicated many real estate transactions. A diligent approach to investigate and resolve potential environmental concerns associated with such tanks can minimize the complications and make the transaction proceed smoothly.

The purpose of this case study report is to explain the regulatory status, discuss economic risks and the current lack of funding, present three case studies, and provide a standard approach for dealing with heating oil tanks.

Regulatory Status

There has been some confusion regarding the regulatory status of heating oil tanks. To clarify this issue, the following rules should be understood:

  • Storage Tank Regulation : FAC Rule 62 761.300(2)(a)5.: “Any storage tank system with a storage capacity of less than 30,000 gallons used for the sole purpose of storing heating oil for consumptive use on the premises where stored is exempt from the requirements of Chapter 62 761.FAC.” Heating oil tanks are not regulated by the storage tank rules and therefore do not have to be registered.
  • Petroleum Regulation: FAC Rule 62 780 states: “The cleanup criteria contained in this rule shall apply to any cleanup of a site contaminated with petroleum or petroleum products.” The fuel oil stored within the tank is regulated if released into the environment.

To summarize, the physical tank is not regulated, but the petroleum product contained within the tank is regulated.

As outlined in this case study article, it is important to approach the concern diligently to minimize this risk. A potential buyer of a home with a heating oil tank should be concerned about:

  • Environmental quality and health impacts
  • Regulatory requirements
  • Financial impacts
  • Resale potential
  • Third-party liability

If a significant release of petroleum is identified, then each of the above issues should be investigated diligently. However, many tanks have only minor releases of product or no release at all, and the above issues are easy to resolve. Soil and groundwater samples from the tank vicinity should provide the data necessary to properly evaluate the risks.

Disclosure

Based on interviews with real estate attorneys, the owner/seller of a home with a heating oil tank must disclose the presence of the tank to the buyer. Their conclusion is in part based on the following excerpts from Johnson v. Davis [480 So. 2d 625 (FLA. 1985)]

The law appears to be working toward the ultimate conclusion that full disclosure of all material facts must be made whenever elementary fair conduct demands it.

Accordingly, we hold that where the seller of a home knows of facts materially affecting the value of the property which are not readily observable and are not known to the buyer, the seller is under a duty to disclose them to the buyer.

Thus, according to the real estate attorneys interviewed, the seller of the home may be found liable for failing to disclose the presence and potential risk of the tank.

For commercial properties, research with real estate attorneys indicates that the principle of caveat emptor (let the buyer beware) still applies to commercial real estate transactions, with some exceptions. Recent case law has reaffirmed this legal precedent (see Wasser v. Sasoni, 652 So. 2d 411). Buyers of commercial real estate generally perform environmental assessments to investigate the potential risks associated with purchasing the subject property.

No Cleanup Program

FDEP manages a state-funded Petroleum Restoration Program for assessment and remediation of contaminated properties that are eligible for the program. Taxes on gasoline and diesel fuel sales in Florida go to the Inland Protection Trust Fund. Based on the funding source, vehicular fueling operations are generally the only facilities considered for the program.

Interviews with regulatory agents in the Tallahassee FDEP headquarters confirm that there is no current program to provide remediation funding for petroleum releases at heating oil tank sites. If the financial resources of the responsible party are limited, FDEP will reportedly review financial statements to determine if state assistance is warranted to achieve the regulatory objectives of 62 780. With the exception of hardship cases, state funding is generally not available.

Case Study: Worst Case Scenario

In Polk County, a residential heating oil tank discharge resulted in a dispute that was settled out of court. The homeowner in the 1960s switched over to an HVAC system and abandoned the heating oil tank by cutting off and covering the vent pipe and the fill port. The fuel oil in the tank was never pumped out.

The property was subsequently sold twice. The second of the three owners was not notified of the existence of the tank, had no knowledge of the tank, and did not disclose the tank to the third and most recent owner. The third owner decided to build a swimming pool and discovered a substantial discharge of fuel oil during the excavation process. No disclosures were made and several environmental concerns had to be resolved through litigation.

Case Study: Bad Case Scenario Resolved Smoothly

In Manatee County, a homeowner listed the property for sale with knowledge of the potential risks associated with the heating oil tank. Environmental services were performed and a discharge was identified. The tank was pumped and removed from the ground by licensed contractors with professional environmental engineering oversight. Several holes had rusted through the tank. As the pit was open, petroleum impacted soils were removed for proper disposal.

A substantial amount of product was released from the leaking tank. Groundwater pumping reduced groundwater contaminant concentrations to acceptable regulatory standards. FDEP was notified and a report meeting the requirements of FAC Chapter 62 780 was submitted. FDEP provided a No Further Action letter and the real estate transaction closed. The new owner acquired the property, which was no longer regulated by FDEP. The problem was solved, and the property was sold.

Case Study: Good Case Scenario

In Collier County, diligent sampling was performed in the vicinity of a home heating oil tank. No evidence to suggest the presence of a release was identified in the investigation. Recommendations regarding tank pumping and proper closure of the tank were provided. The seller was provided with a report containing the data necessary to demonstrate to the buyer (and lender and attorney) that the tank was diligently investigated and the risks successfully minimized. The closing proceeded without environmental issue.

Approach to Resolving Concerns

Luckily, most heating oil tanks have not presented a problem that would require remediation as described in the first two cases. Most heating oil tanks are small (less than 750 gallons) and buried in the unsaturated soil zone beneath the ground surface. In other words, most tanks are above the water table, which makes them less susceptible to leaks, Most of the heating oil tanks in Florida are not significant environmental concerns.

To promote a smooth real estate transaction, the issue should be addressed professionally. Soil borings and/or groundwater samples should be collected and analyzed in accordance with FDEP guidelines. Product disposal, tank status, environmental quality, economic risks, health risks, regulatory status, and other associated issues should be assessed by a qualified environmental professional. The assessments can be performed within the time requirements of a closing deadline with proper notice and favorable field results.