Environmental Issues in Real Estate

Of primary environmental concern for buyers and sellers of Seattle real estate is the presence of hazardous substances and potentially harmful conditions.

Underground Oil Storage Tanks

About 640,000 underground storage tanks(USTs) nationwide store petroleum or hazardous substances that can harm the environment and human health if the USTs release their stored contents. The EPA estimates that at least 40 percent of all petroleum USTs were either leaking or had leaked in the past. With the large number of USTs in Washington, steps should be taken to determine whether a tank exists and, if so, whether decommissioning and/or clean up are required.

Dealing with oil tanks can be complicated. If you purchase a home where an underground storage tank exists (average life of a tank is 25 years) and you were unaware of the tank when you purchased the home, you can undergo considerable financial expense if the tank begins to leak when you are the home owner or should you decide to sell it later. If you are considering the purchase of real estate in Seattle or an outlying area, then you should be aware of your options. You can simply have the oil tank checked at the next filling or you can choose to have it decommisssioned.

Oil Tank Decommissioning

An oil tank that has been out of service for a period of one year, must be:

• Removed from the ground, or
• Permanently closed in place.

If an underground heating oil tank is closed in place, all of the following requirements must be met:

• Flammable and combustible liquids, as well as sludge, must be removed from the tank and connected piping.
• The suction, inlet, gauge, vapor return and vapor lines must be disconnected.
• All remaining underground piping and openings must be capped or plugged.
• A record of the tank size, location and date of abandonment must be maintained.
• The tank must be filled with an approved, inert solid material. (there is an exception to this requirement--if the tank is below grade, the local Fire Chief may allow the tank to simply be capped.)

Liability Insurance

In 1988, the Environmental Protection Agency(EPA) published technical standards and requirements for petroleum USTs in response to serious long-standing environmental problems. These requirements addressed the construction, replacement, and upgrading of USTs, as well as on-going maintenance such as leak detection, testing, record keeping and other tank management processes. Owners and operators of USTs were also required to demonstrate financial responsibility for corrective action and for compensating third parties for bodily injury and/or property damage, in case of an accidental release of petroleum.

In response, the Washington State Legislature created the Polution Liability Insurance Agency (PLIA). The mission of the (PLIA) is to make pollution liability insurance available and affordable to the owners and operators of regulated petroleum underground storage tanks (USTs) and heating oil tanks by offering reinsurance services to the insurance industry. Because homeowners are responsible for cleanup of contamination if a leak occurs and complete coverage most often not available from standard homeowners' insurance policies, reinsurance by the State would enable insurance companys to provide less coverage, and therefore lower premiums, while the UST owner would still have the necessary coverage.

Originally, the reinsurance program was intended for rural communities with one or two gas stations, then in 1995, the Legislature made pollution liability coverage available for owners of active heating oil tanks. The program provides up to $60,000 of insurance coverage for cleanup of contamination from active heating oil tanks that are registered in the program prior to the contamination occurring. The program is funded by a fee that heating oil dealers pay per gallon of heating oil sold. There is no cost to the homeowner for this coverage. All that is required is that the owner fill out the required pdf form and send it in along with a copy of their most recent bill from their oil company. Coverage does not run with the property--once the property changes hands the new owners must also register the same way.

One final note: the oil in the tank is considered personal property (perhaps this is not the case in other states) and the escrow officer should credit the value of the oil remaining in the tank to the seller. Since the buyer will be using the heat it only makes sense that they should pay for it.