Recently, Wayne Lamb, our Managing Director, contributed to an article in the January 2015 Australasian Convenience and Petroleum Marketers Association (ACAPMA) magazine which focused on the dangers of underground fuel storage tanks. Having had many years experience in the fuel industry, Wayne was approached along with other industry experts to provide an insight into the risks behind this ‘Ticking Time Bomb’. The full article can be read here:
The potential failure of underground storage tanks and lines is a ticking time bomb for any independent petrol station operator, according to ACAPMA CEO, Nic Moulis.
“Many service stations have tanks that are 30-40 years old lying underground,” Nic said. “And because they are ‘out of sight, out of mind’, regular maintenance can be overlooked”.
“But given it can cost more than $1 million to replace some Underground Petroleum Storage Systems (UPSS) – plus a shut-down of 10-12 weeks – can you really afford to ignore them?”
Managing Director of Cadway Projects, Wayne Lamb, agrees, saying it is “too scary to think about”.
“But we should because not talking about it won’t make the issue go away”, Wayne said. “Hundreds of sites in Australia will have tanks fail in the next decade”.
“It is a simple fact that many sites built in the ’60s, ’70s and ’80s are still operating with at least some of their original steel tanks.
“The risk of an underground steel tank failing is a function of time and for many sites that time is fast approaching.
“And while there are many factors such as soil acidity, presence of groundwater, cathodic protection and its maintenance, dewatering practices and more, it is fair to say that a 40+ year steel tank represents a risk of failure too great to be ignored”
According to Enviotank’s Phil Quinan, modern composite products used for both tanks and pipes negate corrosion, “not only from the environment they are to be installed in, but more importantly from the products that are stored in then now and in the future”.
Modern fuels (bio- and low-sulphur) are more corrosive in nature than in the past and the interior od a UPSS is becoming more and more critical to the long-term serviceability of the system”, he says.
Leighton O’Brien CEO Reed Leighton says “based on our data collected over 20 years, the probability of a steel system failing in any given year is between 1.5% and 7%. It is not a question of “if” a steel system fails – it is simply a question of when”.
“Steel lines represent the greatest risk, particularly single-walled pressure lines with or without leak detectors”.
According to Reed, an owner of a steel system has two choices – run the asset to the point of failure or replace it before then.
“If a third-party certified monitoring system is in place, the point of failure can be detected in a timely manner that could minimise the size of a leak. A steel system is going to leak, it’s a good day to know when that starts”, he said.
Replacing the steel system before the point of failure ensures ongoing storage integrity – as long as a third-party testing company – independent to the installer – verifies the system on a ‘pre-bury’ and ‘post-bury’ basis. The more sensitive the test equipment, the tighter the storage system will be.
“Partly replacing the storage system – i.e. leave the tanks and replace the lines – is not something we at Leighton O’Brien would recommend”, Reed added.
“We have seen several cases where lines are replaced and a short time later, the tank systems fail.”
According to Wayne, the “ignore it and do nothing option” has the effect of increasing risk over time, “eroding your investment and devaluing your business which may ultimately be seen by a prospective purchaser one day as a liability rather than an asset”.
“This will have a huge impact on the retirement plans on many in the industry.”
Various Australian Standards apply across all states and territories to the design, installation, operation, maintenance and demolition of UPSS for service stations.
Other regulations and guidelines that need to be followed include the Australian Dangerous Goods Code (ADGC); state and territory work health and safety and environmental protection laws; and some local council planning by-laws.
David Johnson of the NSW EPA says failure to perform an integrity test after modifications or new installation attracts a maximum penalty of $22,000 for an individual and $44,000 for a corporation.
“And remediation could run into more than $1 million, even before the price of a new tank is factored in”, he said.
The EPA recommends that potential owners carry out a thorough due diligence by seeking the advice of qualifies professionals – such as a legal adviser, environmental consultant and technical consultant – before they buy.
If owners are not aware of what is happening under their forecourt, “the industry itself can suffer through increased regulation in response to failures; bad publicity; increased insurance premiums; and reduced effectiveness of lobbying efforts if we are seen as not serious about compliance”, Nic said.
Not to mention the cost of insurance. Grant Stillman, Principal Broker at Arthur J Gallagher, says that many independent service station owners remain unaware of the risk and “it’s a problem that is escalating”.
“A lot of these guys don’t have a plan at all – an upgrade plan or a repair plan”, Grant said.
According to Grant, it is “unacceptable” to buy a service station without a full environmental report, yet many people baulk die to the cost of such a report.
So once you have acknowledged the risk, what next? How can you effectively and efficiently determine how great that risk is?
According to Paul Richardson, Senior Sales Executive Queensland and South East Asia with Tank Solutions, the first thing you should do as an independent fuel retailer is get your hands on a copy of Australian Standard 4897 – and “know it inside out”.
That, along with the paperwork you received when you bought the service station site, should help you determine the steps you should take.
Paul suggests that UPSS owners ask themselves some simple yet searching questions.
“Start by asking yourself, how many old tanks are on my site? What are they made of and do I know when they were installed? The answers to these questions will form the basis of your action plan.”
According to Paul, the most common way a service station operator uncovers a leak is through discrepancies in fuel throughput reconciliation.
Russell Dupuy, Managing Director of EMS, agrees that the biggest risk of a leak is poorly managed daily reconciliation – dipping tanks, recording sales and accurate deliveries – typically evidenced by high daily variances that are highly variable.
“To mitigate the risk of a potential leak, a site UPSS owner should ensure their daily fuel management practices of tank dipping, recording sales and deliveries are done correctly y all employees and that any variances outside the normal pattern are rechecked on the day”, he said.
“They can ensure their dip sticks are correct and not damaged or worn, and in fact are correct for the tank and that their meters are checked and calibrated periodically.”
“These simple common sense practices can significantly improve day-to-day operation in terms of lower fuel variances but also support good quality data for robust analysis.”
Grant Stillman agrees: “A lot of sites have staff that are not doing daily monitoring. This is a basic management procedure that should be done.”
A number of technology solutions – such as double wall tanks and pipes, containment sumps, automatic tank gauges, electronic line leak detection, monitoring sensors, frequent SIR (Statistical Inventory Reconciliation) are widely available to further reduce risk.
Russell suggests that if SIR finds a discrepancy, there are steps a service station owner can take before jumping to the conclusion that a tank or line has a fault.
“Start with procedural problems – are staff taking dipstick measurements correctly? The next step is to test the meters to see if they are really faulty”, he said.
“If there are still issues, you need to shut the site down and do some precision testing.”
According to Grant, a lot of independent service station owners – who may have sunk their superannuation into a service station site – “just don’t understand their exposure”.
Which is why the NSW EPA prefers to work with operators so that money, which could be used to pay fines, is better used to improve and upgrade site infrastructure.
If you are in NSW, you can contact EPA to help you work through the environmental law governing service stations in NSW. UPSSREG@epa.nsw.gov.au or 131 555. Other states have similar regulatory bodies.
– Nicole Leedham (ACAPMAg January 2015 : Issue 22).
ACAPMA Members Magazine