Underground Storage Tank (UST) Closure in California: What’s the Cost of Doing Nothing?

Consequences of Not Complying with Underground Storage Tank (UST) Regulations

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California just reminded owners and operators of underground storage tanks (USTs) that they are required to permanently close single-walled (SW) USTs by December 31, 2025. This includes connected SW piping. This news should rally property owners and owners of service stations, former service stations, and other facilities that have operating USTs, unused USdTs, or abandoned USTs.

UST owners and operators might wonder what the big deal is. It’s reasonable to think - “out of sight, out of mind”, “those tanks have been there 30 years - I think”,  and “those tanks aren’t hurting anyone - who cares?” And really, it’s a good question - why go through some UST closure process that may go from bad to worse? In other words, what is the cost of doing nothing?

Regulations and Penalties for Non-Compliance with Underground Storage Tanks in California

UST Regulations

Underground storage tanks are highly regulated in California. There are state, county, and city regulations concerning all aspects of owning and operating USTs. Anyone that currently owns and/or operates USTs knows this regime well. But, those who own unused or abandoned USTs, might not even be aware the USTs exist or that they need to be removed.

Nevertheless, the regulation states that UST Systems which do not have secondary containment and a continuous leak detection system and have not been permanently closed by the regulatory due date are out of compliance and cannot be operated. Penalties for systems out of compliance are $500 to $5,000 per day per UST. 

That is just one cost of doing nothing.

Why Unused or Abandoned Underground Storage Tanks Pose a Liability Risk

The Unknown Liability of Underground Storage Tanks

Maybe you are aware of unused or abandoned USTs that predate the current UST reporting requirements, or maybe your property was used as a service station in the past but closed down operations long before the current regulatory regime existed. If USTs are there, they are unseen - so why bother with them? The answer is that at some point you may be exposed to the liability of owning unused or abandoned USTs.

This situation is highlighted in the UST Leak Prevention program’s most recent semi-annual report for January through June 2021. The report identified 17 new petroleum UST cleanup cases and found that twenty-four (24) percent of single-walled closures or upgrades resulted in the discovery of release. All this is built on records from the California Environmental Reporting System (CERS) collected since January 2013. It is likely there are plenty of UST systems not on record.

You may be liable for just the removal of the USTs (~$15,000), or you may be liable for removal and cleanup (~$600,000). Exposure occurs in various ways. For example,

  • Banks, developers, property owners, and buyers who are involved in financing a commercial property usually require a Phase I environmental assessment which could disclose the possible presence of USTs as an environmental concern.
  • A nearby property could undergo a Phase I investigation and disclose your USTs.
  • Underground utility work can result in the discovery of USTs.

In this case, the cost of doing nothing is related to peace of mind - you never know when exposure to liability may occur. 

The Cost of Waiting: Inflation and Interest Rates

Another cost of doing nothing is to pay more when the time comes. Inflation is always with us, a continual upward pressure on prices. For example, the consumer price index for California shows that between February 2016 and February 2020, inflation rose 13 percent. In general, this means a $10,000 job in February 2016 would cost around $11,300 in February 2020. In this case, the cost of doing nothing is $1,300.      

ustuncoveredThe cost of a loan is also a consideration. Interest rates change over time and the cost of borrowing money fluctuates. It’s possible waiting is rewarded by lower interest rates or punished by higher rates. Over the last few years, the cost of money has been relatively low, but that is changing as interest rates start to increase in the face of inflation. If you were thinking about taking out a loan to pay for UST work and waiting, you may be faced with higher costs. Now waiting may appear reasonable, to allow interest rates to recede; however, as you wait, inflation marches on. 

Stringent Cleanup Goals Can Increase Costs

There is no reason to believe cleanup goals will become less stringent in the future. As an example, take tetrachloroethylene (PCE) and trichloroethylene (TCE). Both are common contaminants and were used as industrial solvents and in dry cleaning. In 2016, environmental screening levels (ESLs) published by the San Francisco Bay Regional Water Quality Control Board (SFRWQCB) for PCE and TCE in groundwater were 3.0 ug/L and 5.0 ug/L, respectively. In many cases, ESLs are used as a basis for cleanup goals. In 2019, the groundwater ESLs were updated to 0.64 ug/L PCE and 1.2 ug/L TCE. This represents a 79 percent decrease in the PCE ESL and a 76 percent decrease in the TCE ESL.

This example shows that cleanup goals can become more stringent over time. In this case, the cost of doing nothing in 2016 is more stringent cleanup goals in 2019. Typically, more stringent cleanup goals result in more effort and more cost for environmental cleanup. This is another potential cost of doing nothing. 

The Impending Deadline: Potential Loss of Funding for Underground Storage Tank Cleanup

Sunset of Underground Storage Tank Funding Programs

California’s Underground Storage Tank Cleanup Fund helps owners and operators of petroleum USTs to cover the cost of investigation and cleanup in the case of a release. The program was set to sunset but was extended in 2014 for another 10 years. The new sunset date is January 1, 2026, and the new deadline for the submittal of a claim application is December 31, 2024.

It’s clear that funding programs have an end, and so the cost of doing nothing may be the loss of funding.

abandonedstationThe Cost to the Community of Doing Nothing with Unused or Abandoned USTs

Abandoned Property Creates Community Problems

In some cases, properties with unused or abandoned USTs go into disrepair when nothing is done. Redevelopment or sale is prohibited until the UST issue is cleared up. In time, the property can be abandoned because there are no resources to clean it up and/or redevelop it. Maybe the property value doesn’t support the cost of UST removal and possible cleanup. Ultimately, this creates problems for the community as the cost of doing nothing evolves into a cost to the community. Abandoned or unused properties depress the local economy, impede population growth, depress property values, increase crime, and impose heavy cost burdens on the local government.

Hassle-free Solutions for Underground Storage Tanks

Environmental UST Consultants: Our 30 Years of Expertise

After providing various examples highlighting the costs associated with neglecting unused underground storage tanks, abandoned USTs, and single-walled USTs and/or piping, we hope to assist you in making an informed decision. Our team has extensive experience spanning 30 years, helping clients determine the most suitable course of action, including accessing the UST Cleanup Fund, removing USTs, and addressing petroleum UST leaks with financial assistance from the UST Cleanup Fund. Follow the link below to arrange a complimentary consultation.

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