Environmental Due Diligence for Gas Stations is a Must During the Purchasing Process

The movement of fuel station and convenience store ownership has been very active for the past year.  Large corporations like 7-Eleven are purchasing entire chains and expanding their footprint across the country.  Buying and selling on a smaller scale is also rising as long-time owners retire or get out of the industry while new up and comers are excited to expand their businesses.  If you’re interested in buying your first location or expanding your portfolio, you must conduct environmental due diligence before committing to the purchase.

Are New Property Owners Liable for Environmental Damage Caused by Previous Owner’s Actions or Lack of Maintenance?

Congress passed the Comprehensive Environmental Response, Compensation, and Liability Act (CERCLA) in 1980 to protect nature from damage caused by the release of contaminants into the air, soil, and water.  Court decisions have applied a standard of strict liability to CERCLA compliance, meaning that a business can be deemed liable for damage and assessed fines and penalties regardless of the current business’s contributions to a former business’s actions.  Just by buying a property, a new owner can be held liable for issues arising from the previous owner’s actions.

What types of environmental issues are associated with gas station properties?

Environmental Due DiligenceBecause gas stations deal with the receipt, storage, and distribution of fuel, several problems can occur if the business isn’t managed appropriately.

  1. Subsurface contamination.  This is damage caused when fuels or other chemicals are spilled or leaked, allowing the contaminant to enter the air, water, or soil.  Some examples include leaks of petroleum products from storage tank systems or cleaning chemicals from car wash units.  By having a professional inspect the location and all of the equipment, you’ll find out whether or not the property conforms to requirements and if it’s been maintained well.
  2. Regulatory compliance.  Federal and state regulations require periodic tank inspections and various permits.  These agencies may award Notices of Violation (NOVs) that require capital investments to be made to repair substandard equipment.  A good assessment will reveal any outstanding regulatory issues.
  3. Business legacy.  Previous owners may have realized there were issues or nonconformities with their systems and processes without completing the necessary work to fix or eliminate them.  You’ll want to ensure there are no outstanding judgments, lawsuits, or other penalties applied to the business before you purchase it.

How can a purchaser limit their liability?

In 2002, the Brownfield Amendment was established to limit a landowner’s liability under CERCLA.  According to this Amendment, if an owner completes sufficient due diligence before purchasing a property, and later an issue surfaces that was not detected during that process, the owner can claim an “innocent landowner defense.”

For due diligence to be considered “sufficient,” it must follow documented industry standards.  For example, two ASTM methodology methods exist for using non-intrusive means (ASTM E1527) to inspect conditions and then a second process using intrusive investigation techniques (ASTM E1903) to further research suspected problem conditions.  These two methods are referred to as Phase I and Phase II assessments and are customizable for the unique characteristics of a particular property.

Choose WEnd Consulting to Help You Make Good Business Decisions

If you’re considering purchasing a gas station or convenience store, put the experience and resources of WEnd Consulting to work for you.  Our industry experts will guide you through the entire purchase or acquisition process, including connecting you to professionals who can conduct environmental due diligence for gas stations.  We’ll help you feel assured you have all the facts about a prospective business before you sign the final contract.  Contact us today to learn more about how WEnd Consulting can help you achieve success.