Deep trouble for gas stations – new environmental regulations
A tough new federal law is expected to cause a sharp decline in the number of U.S. gasoline stations over the next six years. The U.S. Environmental Protection Agency (EPA) estimates that 53 percent of the approximately 80,000 rural gas stations – and 25 percent of the 200,000 stations nationwide – will close by the end of 1998 because of new federal regulations affecting underground storage tanks.
“We are very concerned” about station closures, says Sammy Ng, a branch chief with the EPA’s Office of Underground Storage Tanks. “Given the mandate we got from Congress, we have done everything we could to make the regulations as flexible as possible to minimize the impacts.” But Ng says the EPA also had to protect the environment and public health from the fuel leaks into ground water and soil.
Among the business owners expected to close stations over the next six years is Bruce Chiles, president and chief executive officer of Chiles Oil Co., in Pulaski, Tenn. He operates or supplies petroleum products to 24 stations, and he says he expects to close half of them as a result of the regulations, which require the upgrading of the underground-storage-tank (UST) systems. The systems include the tanks and underground pipes.
Chiles, who owns all of the UST systems at the 24 stations and is responsible for upgrading them, already has removed some tanks and has made plans to remove others, he says. “We just cannot justify the expense of upgrading the tanks.”
One of the systems that Chiles will eliminate is at Howard’s Grocery in Minor Hill, Tenn. Store owner William A. Howard says 40 percent of his business is selling gas, and when that ceases, he expects his grocery business to suffer. Howard, who has operated the gas-and-grocery store since 1952, says the gas service “brings traffic. You stop traffic, you stop business.”
The legislative provision that spawned the UST regulations was included in the Resource Conservation ad Recovery Act of 1984. Sponsors of the legislation said that fuel leaking from underground tanks was causing widespread contamination of ground water and soil, posing health and safety risks. Without controls, they said, the problem would intensify as more and more tanks eroded. The regulations issued by the EPA became effective in December 1988 and are being phased in through 1998.
The UST regulations mandate, among other things, that by Dec. 22, 1998, all underground tanks must have corrosion protection, devices to prevent overfilling and spills, and leak-detection devices.
The rules also require that certain records be kept and that owners and operators of USTs have $1 million available in some way – such as through insurance – to clean any contamination from leaking tanks or pipes. Nonmarketers of petroleum who have their own tanks, such as car dealerships and car-rental agencies, must have $500,000 available.
Chiles estimates the cost to upgrade his UST systems is $15,000 to $20,000 per 8,000-gallon tank. A typical gas station has two or three tanks.
The Petroleum Marketers Association of America (PMAA), in Washington, D.C., says a recent survey of its 11,000 member companies found that the average 1991 expenditure for complying with the UST regulations was over $96,000. The same survey found that companies closed more than one-fourth of their stations from 1989 to 1992 rather than incur the expense of upgrading. PMAA members own nearly 50,000 gas stations and sell about 50 percent of the country’s petroleum products.
“The whole area of UST regulatory compliance is a tremendous [burden] on a lot of people,” says David Morehead, a vice president of the marketer’s association. “It’s a big expense, especially for those marginal stations that are just making it.” Many stations in heavily populated areas will be able to manage the costs of upgrading their tanks because of the volume of business they do, Morehead says, but in rural, less-populated areas “there are some real concerns about station closures.”
Ng of the EPA says the agency is trying to lessen the burden on UST owners and operators through nonregulatory measures, such as being flexible on cleanup requirements.
But the costs of upgrading tanks, not of cleaning up leaks, is the expense many UST owners find too burdensome and costly. Moreover, petroleum marketers are finding it difficult to obtain financing for making UST system improvements, according to the petroleum marketers’ associaton. In a weak economy, many banks refuse to make loans to such businesses with low profit margins.
Another headache for some UST owners and operators is that the federal regulations do not pre-empt more-stringent regulations adopted by some states.
In Florida, for example, the state Department of Environmental Regulation adopted its own UST regulations and is about to change those rules for the third time since 1989. For John S. Maassen III, president of Maassen Oil Co., in Arcadia, Fla., the constant changes have meant digging up and replacing the tanks and pipes at his six outlets, an exercise that has cost his petroleum marketing company nearly $250,000 in the past three years. Maassen says of the Department of Environmental Regulation: “Their next rule change could wipe us out.”
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