As I pen this column, the dog days of summer are beginning, and 2021 is already half over. Given these past six months, it seems safe to say that the early days of the Obama administration were a cakewalk versus the political headwinds our industry now faces. The latest challenge involves underground storage tanks (USTs) and a push to outlaw single-walled and other tanks over 30 years old.
This is being promoted by avowed anti-fossil fuels zealots positioning themselves as pragmatic neutral “experts” on the subject. They know, as we do, that compelling owners of older retail petroleum properties to conduct blanket UST upgrades will exacerbate store closures.
Fifteen years ago, the state of Florida required that all tanks be converted to double-walled design by 2009/2010. Once underway, a surprising number of these tanks were found to still be in good serviceable condition. Back then, the replacement cost at an average site was around $150,000, while the cost today is more than double that amount.
One marketer recently commented to me that removing serviceable tanks could cause more environmental harm than leaving them in place. This makes one wonder if their end game is to truly protect the environment or to simply accelerate the demise of petroleum by creating needless economic hardship.
The long-term solvency of state tank funds and their ability to adequately address future cleanups, due to projected declines in fuel demand, has also been cited as another reason to target older tanks. This illogically assumes that older tanks will suddenly become a major source of problems, while in reality, the lack of funding issue ignores the fact that, for years, many states have raided their tank funds for uses beyond the intended purpose. Thus, the future solvency of tank funds may not be as dire as they would have folks believe.
Fuel marketer associations can proactively confront this anti-petro assault by promoting practical approaches, including a risk-based analysis of tank fees based upon age and configuration, with incentives built in to promote higher levels of maintenance and leak detection than current regulations require.
Older systems could be given regulatory and insurance life extensions that will mitigate the necessity of yanking them all out of the ground wholesale. This includes supporting enhanced electronic-line leak detection and Continuous Statistical Leak Detection (CSLD) that continuously monitors fuel height and temperature to detect quiet periods in the underground storage tank and collect leak-detection data during idle times. This type of sophisticated technology can catch minor leaks at a much lower cost versus full-blown upgrades that will put the economic viability of thousands of retail sites in jeopardy.
Negative Impact
Allowing this UST assault to go unchallenged may dampen large buyer appetite toward our industry, while decreasing deal values. Some of the negative consequences include:
- Increased lender deal scrutiny that may reduce loan-to-value (LTV) financing leverage and increase buyer equity requirements
- Extended due diligence timing and hurdles
- Heightened environmental risk and expense
- Diminished long-term relevance of marginal sites due to previously unnecessary expense
For branded marketers supplying third-party retail customers, the unanticipated risks include possible dealer store closures and supply contract defaults, resulting in brand recapture penalties and repayment of unamortized monies to be borne by the marketer.
This issue is clearly not an isolated one, but another layer of the multifaceted existential threat that our industry faces from anti-petroleum activists. A concerted industry effort is essential to mitigate the intended harm and steer the dialogue in a logical direction.
As I’ve written many times before, if you own, operate or supply retail petroleum sites, you need to be an active member in your state petroleum marketer and convenience store association to help protect and preserve the well-being of your business, family and, ultimately, the American way of life that we all hold so dear.
Mark Radosevich is a strong industry advocate, recognized petroleum veteran and president of PetroActive Services. He can be reached by email at [email protected] and by phone at (423) 442-1327.
