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The Oil Tank Conundrum

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Many homebuyers fail to consider the potential risks of purchasing a property that currently includes, or in the past has included, underground and aboveground oil storage tanks. Buyers who are told that the home heating system was converted from oil to gas also may not pursue the subject further. This is a huge mistake!

Very old homes may have originally been heated by coal. When oil heating systems became available, these homes’ systems were converted to oil and new homes built in the 1930s-1990s most commonly included oil heating systems as well. After World War II, when natural gas became plentiful, many homes were converted from oil to gas heat. In the course of these conversions from oil to gas, underground tanks and piping may have been removed or abandoned. Therefore, the home buyer must ascertain the status of these tanks and those that remain aboveground. In addition, it is vital that currently operating oil heating systems be professionally inspected prior to closing and that contracts of sale contain adequate protection for buyers.

Because steel tanks were not designed to be buried, they may eventually rust and leak; so, too, can tanks designed for underground use if they are not properly rust-proofed. Until the mid-1980s, most tanks were made of bare steel. Any underground tank that is currently in use and that is 15 to 20 years old should be tested by the buyer. Water in the tank can cause oil tank failure: tank water, not external rust, is the most common cause of failure; overfilling is another cause of oil leakage. So, if you are buying an oil-heated home, demand proof that the existing tank is a modern, double-walled tank with replacement piping, vents and refill alarms. Fiberglass tanks are less likely to leak and some are warranted for 30 years. However, the best place for a new tank is aboveground–in a basement, garage or storage shed. If the tank is in the basement, then it should be surrounded by a low brick or cement berm so that a leak can be spotted immediately and be easily cleaned up and the tank replaced without further damage.

Underground tanks that leak can pose a grave danger to the environment and a significant hit to your pocketbook. If you buy a house with a leaking tank then you are responsible for the damage, including testing, tank removal and replacement, and site cleanup. Be aware that some insurance companies will not insure homes with underground tanks or won’t cover cleanup costs, nor will some lending institutions approve mortgages. If your homeowner’s policy has a «pollution exclusion» then you might not be covered if your tank leaks. The problem of obtaining insurance policies for properties with underground tanks has become so acute that some heating oil companies are now writing the policies.

Even abandoned and nominally empty underground tanks are dangerous. If not properly filled (for example, with sand, gravel or foam), they can collapse, causing a sinkhole; explode; or start a fire. Not all supposedly empty tanks are actually empty: They may contain residual oil, water and dangerous vapors if they have not been completely emptied. Eventually, they may leak these contents into the environment. Not only can they harm your property but they may also damage neighboring properties and open you, the owner, to a lawsuit.

For example, contamination of drinking water supplied by private wells can result from oil tank leakage. Some sellers whose homes have been converted to gas heating systems before they bought the homes may not even be aware that underground oil tanks exist on their property. But you, the buyer, must be vigilant. What can you do to protect yourself?

You can hire a professional inspector because home inspectors do not include oil tanks and soil contaminants in their inspections. You, the buyer, want a site assessment that includes soil sampling and tank testing. Get a certification letter to show to your lender and to your insurance company.

Before you hire an inspector, do a few things yourself:

For aboveground tanks, look for oil stains under the tank, especially–it’s where most leaks occur–and around the oil-fired equipment. Ask the seller for the property history–you want information about current and previous oil heating systems and evidence of leakage. Check outside the house for evidence of excavation, especially near the building. Look for stained and smelly soil and a sheen on any groundwater. Look for seepage of oil through the building foundation walls. Oil odors and stains may exist where oil-fired equipment is not presently in use or even if the system is current. Look outside and inside for cement patchwork where gas-fired heating equipment now exists. Look for disconnected oil lines that penetrate the house’s foundation wall; perhaps there will also be a concrete channel in the basement floor leading to the furnace area. Look for a vent pipe–usually near the oil tank fill pipe but even at a distance away from it. If the system was converted to gas heat, then look for the gas meter and for an oil tank fill valve and/or breather tube: These signs may indicate that a tank was abandoned but not removed. Inside the house, look for small copper lines–this shows that the house was formerly heated by oil. If oil is the current heating system, look at these copper feed lines for evidence of corrosion–the lines may corrode when they come into contact with concrete floors, and leaks may result. As you walk through the house, note any odor of oil. Long-term exposure to oil vapors–even to low levels–can cause skin rashes, headaches and sore throats.

If the seller claims that there was a tank but it was abandoned or removed, then ask for a copy of the documentation that attests that it was done properly. You will need this certification to show to your home insurance company and to your lending institution. Documents should include proof that site inspection for contaminants was performed.

Even though there is no law against transferring a house with a buried tank, for the seller the best advice is to remove an old unused tank before putting the house on the market. Some government programs give grants to homeowners to remove and to replace tanks. The prudent buyer may demand a contingency in the sales contract that the seller remove the buried tank and/or perform environmental testing prior to the sale. Removal is preferable because an empty tank that is fine now may prove to be dangerous in the future. A seller should check with his/her municipality regarding the rules for oil tank removal and decommissioning.

Before putting the house on the market, the seller should also check for stains, odors and leaks.

He/she might notice a drop in the oil level when oil is not being consumed. There might also be a sudden and otherwise unreasonable increase in the amount of home heating oil while the system is in use. If so, the seller should call in the appropriate testing contractors who can do tank locating (and decommissioning) by using ground-penetrating radar and by checking for sinkhole threats, oil and gas tanks, old excavations etc.

In 1996, a New York State law was enacted, requiring that inactive belowground and aboveground tanks must be emptied, cleaned and purged of all vapors. If removing the tank, remove the vent line and fill line or cap the fill line with concrete. If the tank is left in place, leave the vent line open and intact and cap or remove the fill line. (Of course, the best option is simply to remove
the tank.)

If a leak is discovered then it must immediately be reported to the Spills Hotline at 1-800-457-7362 and within two hours to the Department of Environmental Conservation. The DEC requires registration of buried tanks storing over 1100 gallons of oil but home heating tanks commonly store 275 to under 1000 gallons. (However, in certain New York counties tanks under 1000 gallons may be regulated by New York State.) The DEC becomes involved when there is a leak–a threat to the environment. The DEC will require that the leak be stopped, that remediation be done and that if a DEC contractor is used then the homeowner must reimburse the DEC for the contractor’s work; and the DEC can impose fines and penalties.

By ensuring that proper procedures have been performed by the seller and that adequate protections have been afforded to the buyer, oil tank considerations should be no impediment to a successful closing.

By Vivian J. Oleen

Vivian Oleen is a licensed realtor at Sopher Realty.

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