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 Project, 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 Envirotank’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 them now and in the future”.
“Modern fuels (bio- and low-sulphur) are more corrosive in nature than in the past and the interior of 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 “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 of many in the industry.”
And it’s not only the cost to repair a failed tank or line that needs to be taken into consideration. There are also risks to the environment, and to the industry as a whole.
Various Australian standards apply across all states and territories to the design, installed, 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 bylaws.
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 to 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 qualified professionals such as a legal advisor, 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 are not serious about compliance,” Nic said.
Not to mention the cost of insurance. And Grant Stillman, Principal Broker at OAMPS Insurance Brokers 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 due to the cost of such a report.
So once you have acknowledged the risk, what next? How can 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 as an independent fuel retailers 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 how 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 the fuel though put 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 by 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 dip-stick measurements correctly? The next step is to test the meters to see if they are 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 the site infrastructure.
If you are in NSW, you can contact the 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.
You can take positive action to assess and manage risks across your site.
- Audit the age and condition of all the UPSS in your network.
- Undertake a risk assessment and rate your sites in order of greatest to least risk of tank UPSS failure.
- Perform an equipment integrity test (EIT) on the high risk sites to create some baseline data.(
- Implement or maintain a network wide wet stock inventory reconciliation system (SIR) to monitor the tightness of the UPSS for each site.
- Formulate a plan and generate a budget to replace the highest risk UPSS with new low risk non-corrodible, double contained and actively leak monitored UPSS.
- Approach the issue in a strategic way with the long term goal to de-risk your business which in turn will protect your investment and security your future by maintaining the value of your asset.