Underground Storage Tank Liability

June 16, 2008

The U.S. Environmental Protection Agency’s administrative appeals board (Board) recently upheld an administrative law judge’s (ALJ) ruling that an owner/operator of 72 underground storage tanks at 23 gas stations in 3 states, pay a penalty of nearly $3.2 million for violations of federal and state underground storage tank (UST) regulations.

The Board upheld the ALJ’s decision that the owner/operator failed to have adequate release detection methods, inventory control, and tank gauging. The Board also determined that the owner/operator did not conduct line tightness tests, did not test its automatic line leak detectors on an annual basis, did not adequately perform interstitial monitoring, and did not comply with corrosion protection and overfill and spill prevention requirements. The fact that the owner/operator had hired state-certified contractors to perform the required interstitial monitoring and installation of overfill protection did not relieve the owner/operator from liability under these claims. The Board stated that a party may not avoid liability by simply blaming a third party.

The owner/operator argued that the only evidence available to EPA to prove many of these violations was a lack of documentary evidence that the owner/operator had conducted the required testing. Therefore, because the regulations required only a 1-year record retention period, the ALJ determined that EPA could only consider 1 year of violations. The Board rejected this argument and included violations for the full 5-year period under the applicable statute of limitations in its penalty calculations. Finally, the Board held that the owner/operator failed to meet its financial responsibility requirements and its self-insurance claim lacked formal guarantees.

The prudent owner/operator would be well-advised to take the opportunity to ensure that its day-to-day operations are satisfying regulatory requirements. The UST regulations have been in full-effect for approximately ten years, thus giving owner/operators plenty of time to become complacent about their UST management obligations. The recent $3.2 million penalty against a relatively small owner/operator should stir owner/operators to action.

It is also important to note that, the Energy Policy Act of 2005 amended federal and state UST inspection procedures to require that each UST system be inspected by a state or federal UST inspector once every three years. To meet these inspection requirements, state agencies responsible for enforcement of UST regulations have increased the number of inspectors. Since all UST owners can now expect a visit from a state or federal UST inspector, regular evaluation of an owner/operator’s compliance with the applicable regulations will help identify any regulatory deficiencies, which can then be corrected to minimize corrective action costs and non-compliance penalties.

The lawyers and professional staff of the Frost Brown Todd Environmental Department are available to consult with owner/operators to evaluate compliance status with the UST requirements and develop corrective action strategies for any identified deficiencies.

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