The release of any amount of petroleum or other hazardous material should raise immediate concern for the responsible or potentially liable party, and calls for an efficient and rapid response. Failure to timely respond, even with a small spill, can result in very significant costs relative to the size of the release.

Many petroleum products and hazardous materials are capable of migrating long distances in a very short time. This is especially true if the release reaches subsurface structures, such as sewer lines and underground utility trenches, where the spilled product may freely migrate along such structures, or if the spill reaches a moving waterway. For instance, in the event that the spill reaches a river, the responsible party may required to clean up several miles of river, especially if that waterway is subject to tidal changes. Damage to natural resources, if not properly and immediately responded to, may also be highly out of proportion when compared to the amount spilled. In addition, there are the costs of settling any third party property damage claims brought as a result of the spill.

‘Risk-Based Decision Making’

Most risk managers and owners of companies with potential environmental exposure resulting from spills are surely aware of the high cost involved in cleanups. However, those same individuals may not have considered how effective and timely negotiation of cleanup levels with the appropriate state and/or federal agency can substantially reduce the amount of expense that may be involved in cleaning up a small spill. In those jurisdictions that allow for "risk-based decision making," the responsible party may, subject to approval, propose and implement its own plans for cleanup, resulting in substantial savings in remediating the spill. Risk-based decision making is defined by the EPA as a "mechanism for identifying necessary and appropriate action." Put simply, risk-based decision making is an opportunity for a responsible party to take the initiative after a spill and prepare its own cleanup plan for approval by the appropriate authorities, matching the remediation effort to the risk posed by the contamination. In some cases, it may be possible to convince the authorities that no remediation is required in view of the limited risk to the public. However, if the responsible party is unable to quickly assess and respond to the problem, and promptly formulate an acceptable plan, the responding agency will, in most cases, simply order the party to clean up the spill to pre-release levels, resulting in substantial costs to the responsible party.

Liability For Underground Storage Tank Releases

Liability for releases from underground storage tanks ("UST") has become a hot topic in the area of environmental law and an important issue for parties with potential exposure for such releases. For example, a recent class action lawsuit filed in Massachusetts alleges that releases from USTs have caused billions of dollars in damages to nearby property owners. A similar class action suit was filed this past year in Alabama. The Alabama lawsuit seeks damages of at least $100,000 for each owner of property located within 250 feet of a leaking UST.

Aside from the potential liability to the public for leaking USTs, owners, and even lessees, of property on which USTs are located also face stringent governmental action for UST releases. Recently, a civil penalty of $199,325 was assessed against three companies in North Carolina for violations of the underground storage tank provisions of the Resource Conservation and Recovery Act ("RCRA"). The penalty is reported as being the largest penalty settlement for the EPA's UST program nationwide. Moreover, in addition to payment of the penalty, the companies have been required by the EPA to correct each of the violations, implement a comprehensive environmental compliance policy and perform three supplemental environmental projects. As a result, compliance with each of the requirements imposed by the EPA will cost the three companies involved even more than the actual dollar amount of the fine.

UST Compliance

It is important to note that by December 22, 1998, all USTs must be in compliance with upgrade requirements contained in regulations originally promulgated by the EPA in 1988, codified at 40 CFR Part 280. The key aspects of the 1988 upgrade requirements include the installation of spill protection, overfill protection and corrosion protection for all existing USTs. Owners and operators of existing USTs may (1) add protective equipment to meet the new UST standards, (2) upgrade the UST to meet the requirements, (3) close the UST or (4) replace the UST with a new tank. In order to meet the spill protection requirements of the 1988 regulations, UST owners and operators may simply add protective equipment such as the installation of a catchment basin around the UST fill pipe. Either an automatic shutoff device or an overfill alarm may be added to existing USTs to meet the overfill protection requirement. There are three options available for providing the required corrosion protection: lining the tank with non-corrodible material, installing a cathodic protection system or adding both tank lining and cathodic protection.

According to EPA estimates, there are approximately 800,000 USTs in the United States that require upgrading by 1998. Those companies owning USTs may expect that the EPA and state environmental agencies will strictly enforce compliance with the regulations through the EPA's field citation program. Companies with USTs on their properties should review the applicable regulations and prepare an internal environmental compliance policy in order to ensure that the appropriate preventative actions have been taken.

A small spill or the presence of a UST on one's property may easily be dismissed as insignificant. However, the potential exposure for product releases should never be underestimated. Failure to respond to even a small spill or release of hazardous material and/or petroleum product can lead to rapidly escalating costs, penalties for non-compliance and significant liability. Those companies prepared to respond rapidly and effectively to any size spill or release will be rewarded with significant cost savings and reduction of potential exposure.