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Commercial and Residential Underground Storage Tanks in New Jersey: A Primer

September 13, 2013

by Drew M. Edwards, Esq.

It seemed like a good idea at the time. For most of the 20th century, homeowners and businesses across the country buried their oil storage tanks underground to save space and hide an eyesore. Unfortunately, after a few decades many tanks began to leak, costing property owners significant money and causing an environmental disaster that has prompted state and federal regulations. Today, approximately 581,000 underground storage tanks (USTs) exist in the USA. What should you do if one of them is on your property? The answer depends on a number of factors including: 1) whether you are a buyer or a seller, 2) the age and type of tank, 3) whether or not it has leaked, and 4) the applicable laws and regulations.

What are the dangers?

The basic danger with any UST is that it may leak and discharge toxic chemicals into the soil. If this happens, the property owner will be required to remove and replace the contaminated soil — an expensive and time-consuming process. In many circumstances, such as when the contaminated soil is beneath the building’s foundation, it is difficult or impractical to remove all contamination. The task becomes vastly more complicated when the contaminants migrate into the groundwater. In that case, the property owner is required to hire a licensed environmental contractor to monitor the groundwater for many years. In addition to possible environmental damage, USTs that are regulated by NJ or Federal law may cause licensing and permit liabilities for property owners who fail to comply with these laws.

USTs on residential property

Underground heating oil tanks on residential property are not covered by either Federal or NJ state UST law, though local ordinances may apply. Residential tanks do not have to be registered with the NJ DEP (though any contamination that results from a leaking tank will still have to be remediated by law). This may sound like good news for homeowners, but it is a double-edged sword. While a homeowner with a UST on her property can avoid regulatory compliance burdens, this also means that an unregulated residential UST can leak and contaminate a property for years or decades without the homeowner’s knowledge. Many property owners remain unaware of the contamination until they are ready to sell their homes. Note that even though NJ and Federal law do not cover these tanks, many municipalities in NJ have adopted local ordinances covering USTs. Always check with your town before taking any action regarding a UST on residential property.

USTs on residential property most often become an issue when a house is sold. If you are buying property with a UST, it is usually safest to require the seller to remove the tank. This is true even if the tank has been decommissioned and unused for years. There may be contamination directly beneath the tank that may be difficult to detect unless the tank is removed. Make sure that the company that removes the tank tests the surrounding soil for contamination as well. It typically costs around $500.00 to remove a residential UST. Since residential USTs are such a problem,most buyers will not purchase a house with a UST on the property and sellers will almost always bear the cost of removal. This should be stated in the contract of sale.

Of course, you may not know whether the property has a UST before you sign the contract. Even if the seller tells you that there is no UST on the property, there may be an old tank that even the seller does not know about. For this reason, you should always hire a qualified contractor to search the property for USTs, and include language dealing with USTs in every real estate contract. If the property has any history of commercial use, make sure that any regulated tanks have been removed properly, and that the tanks are all registered as “closed” with the NJ DEP (see below).

Commercial USTs

Most USTs used for commercial purposes will be covered by either NJ or Federal regulation, meaning that they must be registered and monitored while in use, and that the NJ DEP and/or the Federal government must be notified before they are removed or decommissioned. NJ’s Department of Environmental Protection has a handy guide listing the types of USTs which are subject to state and federal regulation. It is available here: http://www.nj.gov/dep/srp/bust/regulated_ust_fact_sheet.pdf

What a buyer will choose to do with a UST will be dependent on many factors. For example, could the buyer use the UST in her business? If so, she will have to decide whether the regulatory burden outweighs the benefits of continued use. Any buyer, whether they are removing, decommissioning, or retaining a UST, will have to first determine the type of tank and whether or not it complies with regulations.

Old tanks, specifically those from the 1970s and earlier, should be removed for the same reasons as residential USTs. These single-walled steel tanks often have no safety features and simply cannot be monitored or operated safely. As with residential tanks, even if such a tank has been decommissioned, it is often best to remove it completely to be sure that no contamination has occurred in the past.

Removing a regulated commercial UST is a time-consuming and complicated process. You should make your final decision about whether or not to remove the tank at least 6 weeks before your due diligence period ends. Don’t assume that you will be able to leave it to the last minute and quickly hire a contractor to remove the tank. The applicable regulatory requirements will depend on the contents of the tank; for USTs that also fall under Federal regulations, there may be additional Federal requirements. At the bare minimum, the NJ DEP requires a 14-day notice prior to a commercial heating oil tank’s removal, but many steps must be completed before even this notice can be given. The contractor who does the physical removal work must be licensed for UST removal, and any problems with the tank’s registration must be corrected before the 14-day notice can be given. Allow two weeks to find and solicit bids from licensed contractors, two weeks for preliminary paperwork, and another two weeks for the 14-day notice period. If you discover a UST late in the due diligence period (for example, after your Phase I is complete), don’t be afraid to ask for an extension so that you can deal with it properly.

Removing a large commercial UST is also much more costly than removing a small unregulated residential tank, mostly due to the extensive environmental consulting and paperwork that is required. Expect costs of around $10,000.00 for a 5000 gallon commercial heating oil UST. The issue of who will bear this cost must be negotiated between the buyer and seller. The older the tank, the more leverage a buyer will have when asking the sellers to bear the cost of its removal.

Regulated tanks can also be decommissioned in place, but the regulatory burden is comparable to removal. Also keep in mind that when you sell the property, a future buyer may request that you remove the decommissioned tank, so it could become a problem for you later.

Whatever type of property and underground tank you are dealing with, you should start the process early and hire a knowledgeable attorney and environmental professional to ensure that the situation is handled properly.

DISCLAIMER: The foregoing is provided for informational purposes only, and does not constitute legal advice. It is not a substitute for legal or professional advice. Any legal advice should be tailored to specific clients and their specific needs. No attorney-client relationship is created by any use of this website. You should not act on the information contained in any of the materials on this website without first consulting a competent attorney licensed to practice in your jurisdiction.

From → Business, Real Estate

2 Comments
  1. Hi we are an NJDEP licensed underground storage tank removal company located in Lyndhurst NJ. If any of your clients would like a free estimate give us a call 201-933-6100.

  2. Hi Drew,

    thank you for this article. Oil tank removal seems always to be quite scary for homeowners. My company, ATS TRUST -licensed by NJDEP- made a video to show the five easy steps of a buried tank removal: http://www.youtube.com/watch?v=1YDZZGH4Z6o

    I think you could be interested in watching it.

    Best,
    Marie

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