Tanks for Nothing: Oil Company Liability for Discharges of Gasoline from Underground Storage Tanks Divested to Station Owners
By Mark D. Oshinskie
INTRODUCTION
Nationwide, there are approximately 1.2 million petroleum underground storage tanks (“USTs”) buried at over 500,000 sites. By the early 1980s, a considerable amount of gasoline had leaked from these USTs into soil and groundwater. Despite abundant publicity and the enactment of federal and state laws designed to prevent tank leakage, this problem may still be growing. As early as 1984, it was estimated that between 75,000 and 100,000 tanks were leaking. By 1996, corrosion, in addition to piping failures and overfills, had already caused 317,488 confirmed UST leaks.
In New Jersey alone, there are approximately 3,800 gasoline stations. These stations typically have an average of four USTs each. There may be thousands of leaking gasoline tanks in New Jersey, if the leakage rates at these stations are commensurate with national estimates. The New Jersey Department of Environmental Protection has found that approximately 45% of closed tanks leaked and that 50% of the leaking USTs contaminated groundwater. Additionally, in New Jersey and other states, there are numerous abandoned stations, many of which may have corroded USTs. New Jersey's UST systems were required to have been upgraded or closed by December 22, 1998; as a result, many more UST leaks will be reported.
Many of the tanks currently in the ground were installed shortly after World War II to feed the increased demand for gasoline caused by suburbanization and increased automobile usage. Many of these tanks have exceeded their safe, useable life spans and have begun to leak. Without proper upgrade or replacement, many more can be expected to fail shortly. Society has spent an estimated $17 billion to clean up spills to date. An effective completion of this task may cost an additional $11 billion.
In some cases, the oil company whose brand name appears at the station may be liable for contamination because it owns the station and the tanks that store gasoline there. However, in what appears to have been an effort to avert liability, many oil companies divested tanks to station operators, especially in the late 1970s and early 1980s.
This article explores the circumstances under which oil companies may be found responsible for contamination that was detected after they divested the tanks. First, oil companies may be liable because recently detected contamination may have begun years earlier while the companies owned the tanks. Under a second theory, if the oil company as a franchisor had the ability to control the station at which the leak occurred, it is therefore responsible for the consequences of that leak. Under a third category encompassing products liability and fraudulent concealment theories, the oil company may be held liable for tank leakage because it sold the failed tanks *5 to the station owner. This paper analyzes these theories of liability as specific, emerging strategies that plaintiffs in New Jersey and other jurisdictions may use to assign liability to oil companies. Part I of this paper, focusing on groundwater, outlines the origins and implications of tank leaks on the environment. Part II also outlines the liability scheme for current or former owners of leaking USTs. Part III discusses the oil industry's knowledge of the problem and its potential consequences. Part IV focuses first on the theory of liability based on control, analyzing emerging case law in New Jersey and other state courts, while Part V addresses oil company liability based on products liability theories. Part VI briefly introduces other potential causes of action. The paper concludes in Part VII that oil companies may be liable under any of these theories for contamination detected after they divested these tanks to station owners.
Nationwide, there are approximately 1.2 million petroleum underground storage tanks (“USTs”) buried at over 500,000 sites. By the early 1980s, a considerable amount of gasoline had leaked from these USTs into soil and groundwater. Despite abundant publicity and the enactment of federal and state laws designed to prevent tank leakage, this problem may still be growing. As early as 1984, it was estimated that between 75,000 and 100,000 tanks were leaking. By 1996, corrosion, in addition to piping failures and overfills, had already caused 317,488 confirmed UST leaks.
In New Jersey alone, there are approximately 3,800 gasoline stations. These stations typically have an average of four USTs each. There may be thousands of leaking gasoline tanks in New Jersey, if the leakage rates at these stations are commensurate with national estimates. The New Jersey Department of Environmental Protection has found that approximately 45% of closed tanks leaked and that 50% of the leaking USTs contaminated groundwater. Additionally, in New Jersey and other states, there are numerous abandoned stations, many of which may have corroded USTs. New Jersey's UST systems were required to have been upgraded or closed by December 22, 1998; as a result, many more UST leaks will be reported.
Many of the tanks currently in the ground were installed shortly after World War II to feed the increased demand for gasoline caused by suburbanization and increased automobile usage. Many of these tanks have exceeded their safe, useable life spans and have begun to leak. Without proper upgrade or replacement, many more can be expected to fail shortly. Society has spent an estimated $17 billion to clean up spills to date. An effective completion of this task may cost an additional $11 billion.
In some cases, the oil company whose brand name appears at the station may be liable for contamination because it owns the station and the tanks that store gasoline there. However, in what appears to have been an effort to avert liability, many oil companies divested tanks to station operators, especially in the late 1970s and early 1980s.
This article explores the circumstances under which oil companies may be found responsible for contamination that was detected after they divested the tanks. First, oil companies may be liable because recently detected contamination may have begun years earlier while the companies owned the tanks. Under a second theory, if the oil company as a franchisor had the ability to control the station at which the leak occurred, it is therefore responsible for the consequences of that leak. Under a third category encompassing products liability and fraudulent concealment theories, the oil company may be held liable for tank leakage because it sold the failed tanks *5 to the station owner. This paper analyzes these theories of liability as specific, emerging strategies that plaintiffs in New Jersey and other jurisdictions may use to assign liability to oil companies. Part I of this paper, focusing on groundwater, outlines the origins and implications of tank leaks on the environment. Part II also outlines the liability scheme for current or former owners of leaking USTs. Part III discusses the oil industry's knowledge of the problem and its potential consequences. Part IV focuses first on the theory of liability based on control, analyzing emerging case law in New Jersey and other state courts, while Part V addresses oil company liability based on products liability theories. Part VI briefly introduces other potential causes of action. The paper concludes in Part VII that oil companies may be liable under any of these theories for contamination detected after they divested these tanks to station owners.
