Increased Options for Underground Storage Tank Closures

By Steve Hilfiker

In 2012, the FDEP has emphasized their desire to help facilitate the closure of regulatory files on impacted sites.  This is a great opportunity for many impacted property owners, lenders and prospective purchasers.  The focus on regulatory closure will open opportunities for redevelopment, and enable more cost-effective solutions for parties responsible for previously expensive or cumbersome resolutions.

The Florida Department of Environmental Protection’s Office of General Counsel was on center stage on September 12, 2012, when they explained the June 2012 revisions to the Institutional Controls Procedures Guidance document that will ease the process of regulatory storage tank closure through risk-based corrective action.  The information was presented via webinar to a large audience of Florida environmental professionals, who now have more tools than ever to close the regulatory files on impacted properties.

As outlined in Laurel Lockett’s article in the September issue of the Specifier, RBCA streamlining has reduced the post-assessment legal documentation process necessary to obtain clearance from lenders, tenants, easement holders and utilities to close discharges with reasonable conditions.

Conditional closure is easier now in most cases.  Prior requirements to obtain legal consent from secured lenders, easement holders and others with an interest in the property, who were often simply not interested in the matter, caused unnecessary cost and time, and it plagued a viable closure option.

For example, the legal department of a utility company resisted efforts to consent to RBCA at a site in central Florida.  They simply did not want to deal with it.  The matter provided no benefit (or impact) to their operations, and busy people tend to not address issues that are not urgent to them.  When they did respond, it was hasty, required additional information, and we had to try to keep the disinterested utility legal department involved in an outcome which did not benefit them.  It took several years.

The new guidance simply requires a demonstration of legal notice if the controls will not materially affect the interest, and if the third party has a concern, they have the opportunity to address it.  The RBCA process requires an approved assessment, posting legal notices, title research, a survey in many cases, recording fees, and some correspondence to obtain approvals, but the parties will usually be motivated to get it done, rather than resistant to the whole idea.  This is a good thing.

If streamlined RBCA unfolds as intended, decision-makers will become more comfortable with it.  As consultants managing risk so our clients can close files, sell, or refinance, it is our duty to educate the lending and real estate community that the ‘O’ in SRCO stands for ‘order’.  Site Rehabilitation Completion Orders with Conditions are still orders, representing final agency action on a regulated discharge.  It is a viable and reliable means to close regulatory files.

The Low-Scored Site Initiative is another closure option that has helped owners of currently or formerly impacted property in locations where down-gradient nearby drinking water wells do not exist.  LSSI has increased the rate of regulatory closures, and has provided relief to many site owners with low-risk impacts.  LSSI enables mitigated risk, allows contamination to remain on sites under controlled and stable conditions, and provides closure to clean sites in the cleanup program that have not had a chance for state-funded assessments in many years.

At RBCA and LSSI sites that have achieved file closure, while contaminants remain on site, sufficient precautions, controls, and data have been obtained to protect human health and the environment.  In other words, the risks have been mitigated, the liability no longer exists, and the future owners should not be concerned.  If they are informed and we do our jobs as environmental consultants to properly document and educate the interested parties, there should be no environmental issues to block economic progress on these sites.

So transactions, redevelopment and refinancing should not be inhibited if a RBCA closure option is successful.  To the industry associations and FDEP officials involved in making this happen, well done!

Many sites do not qualify for RBCA because impacts migrate off site beneath the adjacent roadway (an engineering control).  Provided worker safety is protected in a reliable manner, it would be in the best interest of property owners and the State-funded Petroleum Cleanup Program, to extend restrictive covenants within public rights of way.  Two aspects of the June 2012 guidance document make this feasible.  The process can include off site impacts if the impacted owner agrees to the restrictions, and a stipulation of restrictive covenants requires that if impacted areas are disturbed (which could happen if any utility work was done in a right of way), impacted soil and groundwater needs to be properly disposed of in a manner that will not pose a risk to humans or the environment.  Cooperation by Departments of Transportation at such sites would expand site closure options.  As long as their interests are managed as part of the closure documentation process, perhaps someday this can become more common.

How many sites exist in Florida with hardships based on one or more of the following scenarios?  A responsible owner operating in compliance, paid insurance premiums, and managed their sites diligently but couldn’t afford the upgrades ended up with impacted property but no insurance.  Determinations of coverage were (perhaps wrongly) denied based on differences of opinion regarding the date and source for the release.  Annual inspections and or release detection systems failed at some point to detect an ongoing small quantity release.  Sampling was not required during tank closure or upgrade at a PLRIP or PCPP-eligible site (one of the discharge-specific forms of cleanup program eligibility), and impacts unrelated to the eligible discharge that could have been discovered at a time when the owner had insurance were found later and insurance was declined or not available.  Many similar scenarios exist, including owners of non-program eligible sites or sites with a low program cap, high copayment, or deductible, and in each of these cases, an owner is facing substantial liability that they frequently cannot afford.  The new closure options should be considered as a form of relief to these property owners.

The most important factor in this discussion is that the property owners maintain the authority to select the best option to resolve the pollution conditions and unique circumstances of their sites.  The best form of closure is and always will be the remediation of impact to cleanup target levels.  Cost-effective remedial advancements such as episodic sparging, bioremedial recirculatory treatment systems, and other innovative technologies continue to be developed.

An owner should never be forced to accept a risk based closure where impacts remain on their site.  Provided they have that security, numerous strategies to manage risk and expanding options for site closure will help in the restoration and redevelopment of impacted property in Florida, and that message needs to be clearly explained to lenders.

Lenders should be encouraged by the developments described in this article.  Many of these developments represent opportunity for banks who understand that loans are secure on sites where the risks are managed.  Regulatory file closure, whether it is done through remediation, determinations of No Further Action, or conditional closure on deed restricted property, terminates enforcement.  Borrowers are no longer liable on sites with closed enforcement files.  Such loans are secure from an environmental regulatory perspective.  As lenders increase their roles in these sites, further opportunities for impacted property owners will emerge.

Steve Hilfiker is president of Environmental Risk Management, Inc, a Florida assessment, remediation, forensic and risk management firm, and can be reached at steve@ermi.net.

Bob Fingar is a shareholder at Guilday, Tucker, Schwartz & Simpson, P.A., where he represents petroleum site owners in matters involving insurance coverage, cleanup, real estate transactions, and compliance.  He can be reached at bob@guildaylaw.com.

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