Oil tanks and residential conveyancing

Gib van Ert • 4 December 2014

Photo credit: http://kish.ca/2012/04/underground-storage-oil-tanks-ust/

Oil tanks and soil contamination

• Oil tanks were used to store heating oil

• The tanks were often buried, then abandoned or forgotten as people began switching to other heating sources

• Often full of oil when abandoned

• Now corroding, leaking hydrocarbon into soil

Oil tanks and soil contamination

• No one really knows how many there are or where they are

• Lawyers must distinguish between oil tanks and soil contamination—separate (if intimately related) issues

Oil tanks threaten deals

• Usually neither buyer nor seller is aware of the tank, and associated contamination, when drafting the contract

• They become aware before closing—sometimes shortly before

• They panic (understandably)

Remediation cost recovery

• People who incur costs remediating contaminated sites have a statutory cause of action under the Environmental Management Act

• The action is for the claimant’s “reasonably incurred costs of remediation of the contaminated site”

• Usually applied in industrial sites but applicable to any contaminated site, including residential land contaminated by leaky oil tanks

Responsible persons

• Liability under the Act is absolute, retroactive, joint and separate

• Liability turns on whether a defendant is a “responsible person”

• Long statutory definition, but if you owned contaminated land you are likely a responsible person

• “Innocent owner” exception: five-part test for determining whether a previous owner of a site is excluded from liability for remediation costs

Proving contamination under the Act

• Not as easy as you might think

• Contamination means the presence in soil (etc.) of a hazardous waste or prescribed substance in excessive quantities or concentrations

• So homeowner must have soil samples taken

• These must be light and heavy extractable petroleum hydrocarbon samples (LEPH/HEPH). If not, you can lose on a technicality: Simpson v. Chapman 2009 BCPC 28

Proving contamination under the Act

• You also have to prove the extent of contamination, i.e. its boundaries

• Remediation practitioners sometimes don’t fuss about this as much as lawyers would like them to

• Sight and smell tests may or may not suffice

Common problems in oil tank clauses

• Usually drafted by real estate agents not lawyers

• Some common deficiencies in these clauses which solicitors should (where possible) avoid and which litigation counsel can (where possible) exploit

Problematic precedents

“Seller warrants that there is no underground oil storage tank on the property. In the event an

underground oil tank exists, the Seller at his/her expense will drain and/or remove the

tank and provide a letter of decommissioning of the tank in accordance with the rules and

regulations of the local municipality or City and in accordance with the BC Fire Code."

Problematic precedents

“Subject to the buyer on or before [date] at the buyer's expense obtaining and approving an

inspection report...to confirm the seller's disclosure that no oil tank exists on the

property. If an oil tank is discovered contrary to the seller's disclosure, then the seller agrees to remove, at their cost, prior to completion, the oil tank per the City of New Westminster bylaws governing approved oil tank removal.”

Problematic precedents

“The Seller agrees that the Seller will, at the Seller's expense, have the underground oil tank on the Property, if any, removed from the property by a

registered contractor and have the soil surrounding the underground oil tank assessed for contamination and any contamination cleaned and removed by a registered contractor approved by the District of

West Vancouver, and 1 months before closing date to provide evidence of the said testing, cleaning and

removal from the said contractor...”

Problematic precedents

“Should an underground Oil Tank be found on the property on or before completion the Seller will, at

the Seller's expense, decommission and remove with the appropriate City Permit such tank and remove any contaminated soil according to the

Provincial regulation (British Columbia Fire Code) and the Environmental Protection Division. The Seller

will provide the Buyer a Certificate of Decommissioning/removal and copy of the

Closure Report.”

Problematic precedents

“The Seller shall, at the Seller’s expense, remedy the soil contamination caused by the underground oil storage tank in compliance

with current environmental standards as overseen by the municipal authorities and obtain a certificate of approval from the

municipal authorities...”

Suggestions for improvement

• I'm no solicitor

• Nothing is foolproof

• Two clauses: oil tank inspection as a condition of purchase (in every buyer's offer) and a remediation obligation (if the buyer wants to proceed with the purchase after a tank is discovered)

Improved precedent (condition of purchase)

Subject to the Buyer obtaining an oil tank inspection of the Property and being satisfied with the results by [date]. The Seller agrees to

permit the Buyer or his agents to enter the Property for the purpose of this inspection.

Improved precedent (remediation obligation)

The Seller shall, at the Seller's expense: (1) remove the oil tank from the Property; (2) remediate any contamination of the Property, and of any affected adjoining properties, to the standards set out in the Environmental Management Act and the Contaminated Sites Regulation; (3) comply with all applicable municipal requirements; and (4) provide the Buyer with documentation proving that the above steps have been taken.

Gib van Ert

CounselHunter Litigation Chambers604 891 2409 gvanert@litigationchambers.com