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Property Values, Tanks, and Contamination

Because oil tank contamination cleanups can cost between $15,000 to $20,000 (or more), the status of the oil tank and the level of contamination will affect the property value.  Until cleaned up, the contamination caused by a leaking underground oil tank may be considered to be a "defect to the property" lowering the property value. 

When contamination levels are unknown, a buyer is at high risk of ending up with environmental liability and potential cleanup costs.  Because 88% of underground oil tanks have leaked, buyers must assume the worst case scenario until contamination levels are documented for soil and groundwater.  This assumption may result in purchase offers under the fair market value of the property. 

Unknown contamination levels also mean that the seller's and the potential buyer's  exposure to third party lawsuits is also unknown.  

In most cases, this lower property value perception is unnecessary if the seller will remove tank and conduct the necessary assessment and cleanup.  Even if not all of the soil contamination can be safely removed, most sites will qualify for official incident closure by the State of North Carolina.  This means that the buyer does not become responsible for the tank and contamination and also that the property is in compliance with State and Federal regulations. 

Mortgage companies may need to consider the potential cost of oil contamination cleanup when financing properties that are likely to have or have had an underground oil tank.  Mortgage companies may also be concerned about assuming tank and contamination liability if they are forced to foreclose on the property.  Please see our Responsibility / Liability page. 

This property devaluing is not as simple as determining if the oil tank has been removed from the property or not.  A tank removal is relatively inexpensive ($1900).  A contamination cleanup is expensive ($15,000 to $20,000). 

In fact, a tank removal without a proper assessment can be a larger financial problem and may devalue the property more than having the tank still present.

Solution: 

Remove the tank and conduct a proper contamination assessment.  With both soil and groundwater contamination levels documented, the value of a property is better determined and a fair price for the property can be agreed upon by both the buyer and the seller. 

For properties for sale with a tank still present on the property, PES recommends a "fast track property assessment described in item #2 below.  This will allow soil and groundwater levels to be determined within 4 to 6 weeks after tank removal. 

If groundwater is contaminated above the North Carolina Groundwater standards, the State can restrict the use of groundwater by requiring irrigation wells to be properly abandoned.  In this case, groundwater can not be used, even for irrigating.  (This protects people from exposure to fuel oil contamination in groundwater.)

List of Relative Property Values:  (based on tank status and contamination levels)

Highest Value

  1.  BEST:  Tank properly removed, cleanup completed, and incident closed by the State. 

This requires approximately 4 to 12 months to complete (tank removal to State incident closure). 

The Buyer knows exactly the condition of the property and does not take responsibility for the tank leak or any contamination remaining at the site.  The State has verified compliance with assessment and cleanup requirements. 

Property owner (seller) ends their responsibility for the tank and contamination by complying State and Federal requirements (tank removal, contamination cleanup, reporting requirements, etc.) 

Because this may take approximately 4 to 12 months to complete, it must be started well before the property is for sale.  PES does offer a fast tract tank removal / contamination cleanup and assessment (see option #2 below).  For some additional cost, a fast track assessment will remove the tank and contaminated soil according to State Guidelines and will measure the remaining contamination levels in both soil and groundwater.  This can be accomplished in approximately 4 to 6 weeks. 

Yard condition after underground oil tank removal.

  1. VERY GOOD:  Fast Track Option: Tank properly removed, contaminated soil excavated, and the remaining soil and groundwater measured for contamination levels before a property sale.  (Completed in approximately 4 to 6 weeks).

This allows a complete understanding of contamination levels in both soil and groundwater.  From this data, it can be predicted with reasonable certainty what the State will require for incident closure. 

There may be some additional costs to conduct this scope of work on the "fast track" accelerated time frame rather than strictly following the State's directed schedule. 

Because the tank is removed and contamination reported to the State before the buyer owns the property, the buyer does not take ownership of the tank and does not take responsibility for the contamination.

  1. GOOD:  The tank is properly removed  and a contamination assessment is being done during the current property transaction.  (Groundwater is typically not assessed until approximately 2 to 3 months after the tank is removed as directed in State Guidelines and policy.)

Buyer does not tank possession of the tank.  The contamination release is reported to the State with the Seller is identified as the responsible party.  Because the tank is removed and contamination reported to the State before the buyer owns the property, the buyer does not take ownership of the tank and does not take responsibility for the contamination.

However, the buyer does not have full assessment of soil and groundwater before purchasing the property. 

The seller remains responsibility for the contamination cleanup even after the property is sold. 

Trust Fund is available to assist with the cleanup costs. 

  1. OK:  Buying the property with the underground tank present and with documents that show the tank will be eligible for the Trust Fund $0 deductible.

Buyer knows the potential cost of assuming the property with the tank and any contamination that may be present.  However, the exact condition of the property is unknown.  Depending on the tank history, the buyer may become legally responsible for the tank and associated contamination. The buyer does know that they will qualify for the Trust Fund $0 deductible.

Tanks "filled with sand" fall into this property value category (#4) or into property value category #6 (below) depending on Trust Fund eligibility. 

  1. Filling the tank with sand or concrete adds no value to the property what so ever.

"Filled tanks" without state approval or soil sample results are not considered closed tanks.

The concern regarding contaminated soil and/or groundwater is not addressed. 

If contaminated, the buyer may assume the legal liability of the tank and contamination. 

Because tank contamination can have several responsible parties, the seller is not released from tank and contamination responsibility. 

Filled tanks can be a costly obstacle when contamination cleanup is required at a later date. 

  1. POOR:  Buying the property with the underground tank present but without documents that show the tank will be eligible for the Trust Fund $0 deductible.

Buyer does not know the potential cost of assuming the property with the tank and any contamination that may be present.  Additionally the exact condition (soil and groundwater contamination) of the property is unknown.  Depending on the tank history, the buyer may become legally responsible for the tank and associated contamination.

The buyer may not be able to obtain the documents needed to access the Trust Fund's $0 deductible after the property sale.  Without proof of being a "tank owner," the buyer (new property owner) may have an out-of-pocket expense of approximately $6000 plus tank removal costs (~$1900) plus consultant costs above the amount that will be reimbursed by the Trust Fund.  The out-of-pocket expense for this situation will be approximately $6000 more than property value #3 above. The cost may be approximately $11,000 in total. (Please see Responsibility and Liability page)

Depending on the tank use history, the seller (previous property owner) may remain responsibility for the tank and contamination. 

Tanks "filled with sand" fall into this category or into property value #4 depending on Trust Fund eligibility.  These tanks may become the responsibility of the buyer because they are still present and the potential contamination has not been addressed. 

The presence of contamination remains unknown.

  1. BAD:  Buying a property where a tank was removed without contamination assessment some time earlier and the former tank location is known (documented).

Trust Fund assistance may not be available for this property. However, a $15,000 to $20,000 cleanup may be required.

The presence of contamination remains unknown.

The exact condition of the property is unknown until soil assessment and groundwater samples are collected. 

Cleanup may not be reimbursed by the State.  If contamination is discovered, the State will reimburse for contamination assessment but may not reimburse for contamination cleanup.  The State only reimburses for soil excavation when it is conducted within 90 days of the tank removal.  After that window, the State will only reimburse for contamination assessment work.  This means that a Notice of Residual Petroleum (NRP) may be required on the property. At tank removal, soil excavation could have removed all of the contaminated soil such that a NRP would not have been required.  (Please see Tanks Property Transactions page and our Incident Closure Scenario page.) 

The State could assess fines and civil penalties against the person who removed the tank and was neglectful in assessing and reporting contamination to the State. 

Depending on the tank use history, the seller (previous property owner) may remain responsible for the tank and contamination. 

  1. VERY BAD:  Buying a property where a tank was removed without contamination assessment several years earlier and the former tank location is unknown (undocumented).

It may be difficult for the buyer to check for petroleum contamination because the former tank location can not be verified.  It's hard to hit a target when you don't know where the target is. 

Trust Fund assistance may not be available for this property. 

The presence of contamination remains unknown.

The exact condition of the property is unknown until soil and groundwater assessment samples are collected. 

Cleanup may not be reimbursed by the State.  If contamination is discovered, the State will reimburse for contamination assessment but may not reimburse for contamination cleanup.  The State only reimburses for soil excavation when it is conducted within 90 days of the tank removal.  After that window, the State will only reimburse for contamination assessment work.  This means that a Notice of Residual Petroleum (NRP) may be required on the property. At tank removal, soil excavation could have removed all of the contaminated soil such that a NRP would not have been required.  (Please see Tanks Property Transactions page and our Incident Closure Scenario page.)

The State could assess fines and civil penalties against the person who removed the tank and was neglectful in assessing and reporting contamination to the State. 

Depending on the tank use history, the seller (previous property owner) may remain responsible for the tank and contamination. 

  1. WORST:  The existence of a tank is completely unknown but the house was built before 1975 (with or without other clues of oil heat). 

The presence of an underground oil tank is completely unknown, making this property a high risk purchase. 

The buyer has no assurance that a leaking tank was not located on the property at one time.  Therefore, the buyer does not know if underground contamination is likely or unlikely.  Furthermore, it is unclear where to check for contamination.

The presence level of petroleum contamination remains unknown. 

If contamination is present, the buyer does not know what levels of contamination exist on the property.

It may be difficult for the buyer to check for petroleum contamination because the former tank location can not be verified.  It's hard to hit a target when you don't know where the target is.  A systematic search for fuel contamination can be very costly and may still not be conclusive. 

If contamination is discovered and Trust Fund eligibility can be obtained, the State will reimburse for contamination assessment but will not reimburse for contamination cleanup.  The State only reimburses for soil excavation when it is conducted within 90 days of the tank removal.  After that window, the State will only reimburse for contamination assessment work.  This means that a Notice of Residual Petroleum (NRP) may be required on the property. At tank removal, soil excavation could have removed all of the contaminated soil such that a NRP would not have been required.  (Please see Tanks Property Transactions page and our Incident Closure Scenario page.) 

Depending on the tank use history, the seller (previous property owner) may remain responsibility for the tank and contamination. 

Trust Fund assistance is unverified.  It is likely the current tank owner will either:

a)  have to qualify for the Trust Fund as a property owner and have an out-of-pocket expense of approximately $6000 plus tank removal costs (~$1900) plus consultant costs above the amount that will be reimbursed by the Trust Fund or

b)  the Trust Fund will not be available to the property owner at all. 

Or … perhaps an underground oil tank was never buried on this property. 

The more unknowns there are about a property, the higher the risk of purchasing that property.  "Unknowns" about a leaking tank can potentially cost $20,000 or more. 

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