State Taking Action on Owners of Leaking Underground Storage Tanks

“Which form of proverb do you prefer? ‘Better late than never,’
or ‘Better never than late?’”  

Lewis Carroll

Every time you fill up, it is likely that the gasoline that goes into your tank is stored in an underground storage tank (UST). According to the Environmental Protection Agency, 18,589 USTs are currently active in Michigan. But, over the years, many of these USTs end up leaking and releasing their contents into the environment, creating what are known as leaking underground storage tank, or “LUST” sites.

EPA has catalogued 22,394 releases from USTs in Michigan. Cleanups have occurred at 13,522 sites, but 8,872 cleanups are yet to be completed. Michigan’s statute governing LUST sites is Part 213 of the Michigan Natural Resources and Environmental Protection Act. Part 213 creates a process by which leaks are discovered, reported and addressed, the violation of which may subject owners and operators of USTs to significant penalties for noncompliance. You can search for open LUST sites and their current status here.

Given that cleanups have not occurred at nearly 40 percent of LUST sites, one has to assume that the state is quite busy with cleanups and enforcement actions across Michigan. However, an EPA study about the backlog of LUST sites in Michigan showed that while Michigan has made “significant progress” towards reducing its LUST backlog, only 16 percent of releases are high priority. A full 33 percent have so little information about them the state has not identified a priority classification.

If you are potentially responsible for investigating and cleaning up a LUST site, these numbers may give you some comfort that it will be a while before the dtate gets around to processing your site. But, a recent Michigan Court of Appeals decision should make you think twice about dragging your feet. It appears that the state is now directing some resources to resolving open LUST sites.

In Department of Natural Resources and Environment vs. Strefling Oil Company, et al., an owner of USTs on three parcels had leaks from them between 1994 and 2001. The owner reported the releases, as required, and retained a consultant to begin the process of responding to the releases form the USTs. One requirement towards responding to a release is the preparation of a report titled a “Final Assessment Report” or “FAR,” which the owner had to complete and submit to the state one year from the date of reporting the release.

The owner never submitted the FAR. In 2006, the state informed the owner that the FARs for the three properties were overdue and that it would start to accrue civil penalties. The state sent an additional reminder in 2007. Nothing occurred again until 2011 when the state filed a complaint against the owner of the USTs and the owners of the properties on which the USTs were located.

The trial court found that the owner of the USTs and the owners of the properties were liable for past and future response costs, completion of remedial activities, civil fines administrative penalties. The court determined that the owners of the properties on which the USTs were located were liable under Part 213 because they controlled the property on which the USTs were located, they were familiar with the oil business, and they could therefore reasonably anticipate that the use of USTs could result in a release of contaminants into the soil.

On appeal, the Michigan Court of Appeals mostly agreed with the lower court, with the exception of the lower court’s award of attorney fees, as the state failed to keep adequate records to establish the reasonableness of the fees. The costs, fines and penalties assessed against the defendants totaled approximately $818,500, and the attorneys’ fees that the Court of Appeals disallowed totaled about $20,000.

While the Court of Appeals was unanimous in holding the owner of the USTs responsible, in a concurring opinion, one judge stated that she would have ruled that the property owners were not liable under Part 213. In her concurring opinion, she stated that “a landowners’ mere allowance of the normal operation of underground storage tanks on his property is insufficient by itself to impose liability under Part 213 . . . “ In essence, if a party was not directly responsible for activities that caused a release, that party could not be held liable under the standard set in Part 213, according to the concurrence.

EPA’s review of Michigan’s LUST program identified a variety of factors for the backlog of open LUST sites. It is certain that one reason is likely the feeling among many owners that the chances of enforcement are remote. That appears to be changing.

If you own one of these sites and are tardy in providing the required reports and work to remedy a LUST site, it may be a good idea to revisit it. The cost of response is one thing, but it can be compounded with the assessment of fines, penalties and costs. In other words, to answer Lewis Carroll’s question, better late than never.

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