Sunshine State Casualties?

"Hundreds" of gas stations face closure over new tank rule, poor economy

Greg Lindenberg, Editor, CSP

TALLAHASSEE, Fla. -- Hundreds of gas stations around the state of Florida may be forced to shutdown because of a new insurance regulation that requires them to have a double-walled underground gasoline storage tank by the end of the year, reported CBS 4-TV. Even though the new tank deadline is not until Dec. 31, 2009, insurers have already begun cutting off station owners who will not or cannot upgrade to the new tanks, which can cost up to $400,000.

It is illegal to operate in Florida without pollution insurance, and an estimated 20% of the state's approximately 8,000 to 9,000 [image-nocss] stations have yet to make the change, the report said. Larger, newer stations are not likely to have a problem.

"With the smaller ones, the older ones with two or three bays, definitely the tanks are an issue," real estate broker Marc Gomes, vice president of PetroProperties & Finance, Coral Gables, Fla., told the news outlet. "They can't afford to get them done, or they cannot afford to get financing to get them done."

Real estate broker and consultant Ron Santicola, president of Highland Beach, Fla.-based Condevco LLC, told CBS 4, "There were people who had tank construction jobs lined up, and the banks pulled funding."

And Jack Barsin, president of Tank Insure Inc., Merritt Island, Fla., told the news agency, "If it is a mom-and-pop and the margins are slim, it's not worthwhile for them to spend $250,000 to $300,000 to upgrade the tanks. Some will shut that down and just run the convenience store. You will see more and more of it by the end of the year."

Another reason insurance companies are skittish is because of the risk of fuel spilling during installation; clean up costs can run into the five figures, said the report.

Barsin said ACE Insurance, which provides pollution liability insurance, has already dropped at least 200 of his clients. The other two major providers have stopped writing policies for new customers.

Christina Lloren with the Florida Department of Environmental Protection said they were aware that insurers are not renewing policies for gas stations, but they could not control the decisions of the insurance companies.

"We never expected insurers to cancel so quickly or with the broad brush they chose to use in doing so," Jim Smith, president and CEO of the Florida Petroleum Marketers & Convenience Store Association (FPMA), told CSP Daily News. "They made millions of dollars in premiums since 1996 with very few claims paid. Their underwriters have evidently decided that the best way to go forward was to cancel and eliminate any future claims. There will probably be hundreds even thousands of smaller facilities that will be forced to close. Many will be in rural markets where sales volumes can't produce enough revenue to warrant an investment of $250,000 dollars or more."

He added, "The troubling fact is many will be on evacuation routes used during hurricanes. That will place a greater burden on urban and metro locations that will see their inventories depleted. If a hurricane makes landfall, those facilities will face at least a 72 hour delay in getting fuel back in. It takes that long because it will take time to assess damage to terminal facilities before trucks can even begin to load. This of course will create panic buying and the situation will take weeks to reach anything close to normal."

According to Smith, "the key point with the insurance is that state law requires you to have it or you can't sell petroleum. Even those retailers who want to upgrade won't because they won't be able to operate in the time between the cancellation of their insurance and the date of the new installation. Banks aren't going to lend to a business that is not producing income. and few retailers if any have the financial resources to fund it themselves. If they did they still couldn't operate without insurance. There will also be a number of government and commercial applications that will have a difficult time meeting the double-wall requirements. To date, we have not gotten help on the insurance issue though we have made arguments to state officials as well as the EPA."

It is not just gas stations at risk, the report added. The tank rule affects hundreds of businesses with underground fuel tanks, whether the fuel is for a generator or lawn mowers. Some Publix Super Markets have underground fuel tanks to run standby generators, as do some hospitals, farms and nursing homes, which are also subject to the regulation.