Selling a gas station comes with unique environmental considerations that owners and realtors must address to ensure a smooth, legally compliant transaction. The operations associated with gas stations can result in releases of contaminants from underground storage tanks (USTs) and other pollutants, making environmental due diligence essential. This blog provides a guide for sellers and realtors, focusing on environmental liabilities, compliance, and best practices to facilitate a successful sale.
Common Environmental Contaminants at Gas Stations
Gas stations commonly use the following constituents, which if they are released into the environment, can require extensive environmental investigation and remediation. They include:
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- Volatile Organic Compounds (VOCs): Common VOCs found in gasoline products, which are typically stored in large quantities in USTs, include benzene, toluene, ethylbenzene, and xylene (BTEX), which are harmful byproducts of petroleum.
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- Chlorinated Solvents: These are typically used in engine repair and painting operations and if they are released into the soil and/or groundwater, they can pose risks to human health and be very resistant to natural breakdown in the environment.
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- Heavy Metals: Lead and other metals, often found in gasoline and automotive products, can pose risks to human health and the environment. Many gas stations also offer car maintenance services, which generate waste like used motor oil, antifreeze, and other hazardous materials that can contribute to contamination, if released into the environment.
The Importance of Environmental Due Diligence – Avoiding Liability
A Phase I Environmental Site Assessment (ESA) is a critical tool in managing liability when buying or selling a property, particularly a gas station, due to the high potential for contamination. The purpose of a Phase I ESA is to identify previously documented and potential environmental liabilities that may affect the value of the property and expose the buyer to unexpected investigation and cleanup costs. Under the federal Comprehensive Environmental Response, Compensation, and Liability Act (CERCLA), and many State laws, liability for contamination is strict, joint, and several. This means:
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- Strict Liability: Purchasers can be held liable for contamination even if they did not cause it.
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- Joint and Several Liability: Multiple parties can be held responsible for the entire cost of cleanup, regardless of their degree of fault.
Therefore, anyone who buys contaminated property can be potentially held responsible for environmental investigation and cleanup, even if they were unaware of the contamination at the time of purchase. However, CERCLA, and some State laws, provide defenses to liability, including:
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- Innocent Landowner Defense: Protects those who unknowingly acquire contaminated property, provided they conducted “All Appropriate Inquiries” (typically through a Phase I ESA).
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- Bona Fide Prospective Purchaser Defense (BFPP): Allows buyers to potentially avoid liability if they purchase property with knowledge of contamination, as long as they comply with certain conditions such as preventing the further migration or extent of contamination and cooperating with regulators regarding the investigation or remediation of the contamination.
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- Contiguous Property Owner Defense: Protects owners of properties adjacent to a contaminated site, provided they did not cause or contribute to the contamination.
Conducting a thorough Phase I ESA is crucial for accessing these defenses and limiting exposure to environmental liability. (Note: to meet the requirements of the defenses listed above, the Phase I ESA must be conducted in accordance with the “American Society of Testing & Material’s” [ASTM] and the EPA’s “All Appropriate Inquiries” [AAI] requirements for performing Phase I ESAs.)
1. Phase I Environmental Site Assessment (ESA): The first critical step in the sale of a gas station is conducting a Phase I ESA by the Purchaser. This assessment identifies previously documented and potential environmental liabilities based on:
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- Historical Research: A review of past property uses that might suggest contamination risks (e.g., previous fuel storage or industrial activities). Such research typically includes a review of historical aerial photographs, City directories, Fire Insurance Maps, and topographic maps.
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- Regulatory Records Review: Examination of federal, state, and local databases for any records of environmental violations, contaminant release or cleanup incidents, or permits associated with the property.
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- Site Inspection: A visual inspection to identify current hazards such as evidence of spills, USTs, poor waste management practices, and other signs of contamination.
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- Personnel Interviews: Interviews with current and former property owners, operators, and employees provide valuable insights into past uses and potential sources of contamination that may not be visible during site inspections or uncovered in records.
2. Phase II ESA: If the Phase I ESA identifies potential contamination, a Phase II ESA is necessary. This involves physical testing, including soil, groundwater, or air sampling, to determine the extent of contamination and the need for cleanup or remediation efforts.
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- Presence/Absence Testing: At gas stations, soil, and groundwater tests are essential to confirm the presence or absence of contaminants, particularly in areas where USTs are or formerly were located.
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- UST Tank Testing: Most gas stations have three or more tanks, one for each grade of gasoline or diesel fuel serviced at the station. UST integrity testing is crucial to determine whether these tanks are leaking or at risk of leaking.
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- Air Sampling: Vapor intrusion is a significant concern at gas stations, particularly if high concentrations of chlorinated solvents are present in the soil or groundwater in close proximity to buildings. This occurs when petroleum vapors migrate from contaminated soil or groundwater into indoor air spaces through cracks in building foundations or sumps or floor drains. Air sampling—especially sub-slab vapor testing beneath building floors—is critical to identify potential indoor air quality issues.
Legal and Regulatory Framework
Gas stations must comply with various environmental laws, including:
Federal Laws
1. Comprehensive Environmental Response, Compensation, and Liability Act (CERCLA): Commonly known as Superfund, CERCLA addresses cleanup and liability issues for contaminated sites.
2. Resource Conservation and Recovery Act (RCRA): This federal law governs the management of hazardous waste and USTs.
Relevant State Laws
3. Michigan: The Michigan Natural Resources and Environmental Protection Act (NREPA), commonly known as the Michigan Hazardous Spill Act, may apply to the sale of gas stations. This law requires the reporting and cleanup of hazardous substances released into the environment.
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- Under NREPA, property owners and operators must take immediate action to report spills to the Michigan Department of Environment, Great Lakes, and Energy (EGLE), and are responsible for the cleanup of any contamination. Failure to comply can result in significant penalties, including fines and potential legal action.
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- Sellers of gas stations in Michigan should ensure all historical spills have been properly reported and remediated.
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- Buyers should conduct thorough due diligence to avoid inheriting liability for unaddressed contamination.
Additionally, Michigan buyers can protect themselves from liability under NREPA by completing a Baseline Environmental Assessment (BEA). A BEA documents the environmental conditions of a property at the time of purchase or occupancy, establishing the extent of contamination prior to new ownership. This allows new owners or operators to avoid liability for pre-existing contamination, provided they take reasonable steps to prevent further harm. The BEA must be submitted to EGLE within 45 days of purchase or occupancy. For gas station buyers in Michigan, completing a BEA is a critical step to ensure liability protection and limit exposure to costly environmental cleanups.
4. Illinois: The Illinois Environmental Protection Act (IEPA) governs the reporting, cleanup, and management of hazardous substance releases, including those from gas stations. Under this Act, property owners and operators are not universally required to report all releases of hazardous substances to the Illinois Environmental Protection Agency (IL-EPA). Reporting requirements generally depend on the circumstances, such as the volume and type of the release. The Act mandates the reporting of releases that exceed a reportable quantity (RQ) to relevant agencies like the Illinois Emergency Management Agency (IEMA) or the National Response Center (NRC). However, participation in cleanup programs like the Illinois EPA’s Site Remediation Program (SRP)—and obtaining a No Further Remediation (NFR) Letter—is voluntary.
Property owners typically pursue the NFR Letter to address contamination issues, especially when preparing for property transactions or to limit liability. In essence, reporting a release is required under the IEPA if it meets specific criteria for regulatory thresholds, but engaging in remediation efforts and obtaining an NFR Letter are optional unless there are transaction-related needs or other incentives to do so
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- The IL-EPA also oversees the state’s Leaking Underground Storage Tank (LUST) Program, which applies to gas stations and addresses contamination from USTs. Failure to comply with IEPA regulations can result in penalties, including fines and enforcement actions.
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- Sellers of gas stations in Illinois should ensure all past spills or leaks have been reported and remediated according to state standards.
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- Buyers should conduct thorough environmental due diligence, including a review of UST records and any past remediation efforts, to avoid inheriting potential liability under Illinois law.
Environmental Checklist Before Selling a Gas Station
Here is a checklist to guide gas station owners and commercial realtors through the environmental aspects of a gas station sale:
Phase I and Phase II ESAs
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- Has there been a documented spill or leak at the site?
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- Action: Investigate regulatory records and past remediation efforts. Consider additional environmental testing if concerns persist.
-
- Has there been a documented spill or leak at the site?
-
- Are there potential vapor intrusion issues from contaminated soil or groundwater?
-
- Action: Perform sub-slab vapor testing or indoor air quality assessments if needed.
-
- Are there potential vapor intrusion issues from contaminated soil or groundwater?
Non-Scope Considerations – Not Required in a Phase 1
Non-scope considerations, such as the presence of wetlands and asbestos are not required under the standard ASTM Phase I ESA. New gas station owners and buyers should consider requesting these assessments, particularly if the transaction includes not only the purchase of real property, but also the purchase of the gas station business as part of the due diligence, as they can significantly impact property use and potential development plans.
Wetlands, Endangered Species, and Cultural Resources
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- Are there wetlands or protected species habitats on or near the site?
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- Action: Conduct a desktop wetland review and endangered species screening. If flagged, arrange for an on-site assessment by specialists.
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- Are there wetlands or protected species habitats on or near the site?
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- Are there any known cultural or archeological sites?
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- Action: Engage a cultural resource consultant to identify any archeological concerns.
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- Are there any known cultural or archeological sites?
Asbestos, Lead Paint, and Building Conditions
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- Are there older buildings on the site (pre-1980) that could contain asbestos or lead paint?
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- Action: Have an asbestos and lead paint survey conducted as part of the Phase I ESA to identify potential risks.
-
- Are there older buildings on the site (pre-1980) that could contain asbestos or lead paint?
-
- Is a Property Condition Assessment (PCA) needed for buildings on the property?
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- Action: Conduct a PCA to evaluate the condition of building systems and potential environmental hazards.
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- Is a Property Condition Assessment (PCA) needed for buildings on the property?
Business Operations and Compliance Audits
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- Does the business generate hazardous or universal waste (e.g., used oil, batteries)?
-
- Action: Review hazardous and universal waste management practices and ensure compliance with state and federal regulations.
-
- Does the business generate hazardous or universal waste (e.g., used oil, batteries)?
-
- Does the site store large quantities of hazardous substances (over 10,000 pounds)?
-
- Action: Verify if Tier II reporting is required and ensure annual reports are filed with local emergency planning authorities.
-
- Does the site store large quantities of hazardous substances (over 10,000 pounds)?
-
- Does the gas station operate under valid environmental permits (air, water, wastewater)?
-
- Action: Ensure all permits are up-to-date, review for any violations, and address any issues before the sale.
-
- Does the gas station operate under valid environmental permits (air, water, wastewater)?
-
- Does the business require a Spill Prevention, Control, and Countermeasure (SPCC) Plan?
-
- Action: If the facility stores oil in quantities above federal thresholds, ensure an SPCC Plan is in place and certified by a professional engineer.
-
- Does the business require a Spill Prevention, Control, and Countermeasure (SPCC) Plan?
Best Practices for Sellers and Realtors
-
- Engage an Environmental Attorney Early in the Process: Involve an attorney experienced in environmental transactions from the start to provide legal guidance and assistance with compliance with all environmental regulations. The attorney can coordinate and manage the due diligence process to identify and mitigate potential environmental liabilities.
-
- Have the Attorney Manage the Entire Environmental Due Diligence Process: Allow the Attorney to oversee all aspects of the due diligence, from hiring environmental consultants to reviewing the results of ESAs. This provides confidence that the assessments are conducted properly and that any environmental concerns are addressed.
-
- Seek Recommendations for Environmental Professionals from Your Attorney: Work with your attorney to identify and engage reputable environmental consultants with expertise in gas station transactions. This collaboration can enhance the quality of the due diligence and ensure that all potential environmental issues are thoroughly investigated.
-
- Disclose Environmental Information: Sellers should disclose any known environmental liabilities upfront to prevent complications during the transaction. This includes providing documentation of past ESAs, remediation activities, and compliance records.
-
- Negotiate Environmental Provisions and Establish Escrow Accounts: Ensure that environmental issues are addressed in the sales agreement, including indemnification clauses and responsibilities for ongoing monitoring and cleanup. If necessary, consider establishing an escrow account to cover the costs of any required remediation or post-closing environmental obligations, providing added protection for both buyers and sellers.
-
- Stay Informed on Regulations: Both sellers and realtors should keep up-to-date with local, state, and federal environmental regulations that may impact the sale of gas stations. This will help ensure compliance and avoid costly surprises.
Conclusion
Selling a gas station presents unique environmental challenges, including potential contamination from underground storage tanks, hazardous waste, and vapor intrusion. Conducting thorough due diligence, such as Phase I and Phase II Environmental Site Assessments (ESAs), and adhering to regulations like CERCLA and state-specific laws, is essential to manage liabilities and protect all parties involved.
Engaging an experienced environmental attorney early on, coordinating with qualified consultants, and ensuring compliance with environmental regulations can streamline the process and help address issues before they become obstacles. By following best practices and staying informed, sellers and buyers can minimize risks and ensure a smooth, legally compliant transaction.
For more insights or assistance with environmental due diligence and real estate transactions, contact our team of experienced environmental attorneys. Contact Alexander Karana at Alexander.Karana@vonbriesen.com.
About the Author
Alexander Karana, Esq. is a first-generation Chaldean-Assyrian American attorney based in Chicago, Illinois, and Detroit, Michigan. Known for his innovative approach to intellectual property law, Alex specializes in prosecuting patents and trademarks for a wide range of clients, from startups and small businesses to Fortune 500 companies. With expertise spanning industries such as engineering, technology, entertainment, music, and sports, Alex is a trusted advisor for clients navigating the complexities of today’s IP landscape.
Combining his legal acumen with a technical background in chemical engineering, Alex brings a unique perspective to solving intricate intellectual property challenges. Whether counseling creators, entrepreneurs, or multinational corporations, Alex is dedicated to protecting innovation and empowering his clients to thrive in competitive markets.
Education:
J.D., University of Illinois Chicago (formerly The John Marshall Law School), 2020
B.S., Chemical Engineering, Michigan State University, 2013
Awards and Recognitions:
-
- Super Lawyers: Illinois Rising Star (2024-2025)
-
- Best Lawyers: Ones to Watch in America (2024-2025) in Entertainment and Sports Law, Intellectual Property, and Patent Law
Contact:
Email: alexander.karana@vonbriesen.com / me@alexkarana.com
Website: alexkarana.com
Phone: 331-399-1840
Legal Disclaimer
This blog is for informational purposes only and does not constitute legal advice. For specific legal concerns, please consult a qualified attorney. The opinions expressed are those of the author and do not necessarily reflect the views of any affiliated organizations.
For personalized legal counsel or to learn more about protecting your intellectual property, don’t hesitate to reach out.
-
- Has there been a documented spill or leak at the site?
-
- Action: Investigate regulatory records and past remediation efforts. Consider additional environmental testing if concerns persist.
-
- Has there been a documented spill or leak at the site?
-
- Are there potential vapor intrusion issues from contaminated soil or groundwater?
-
- Action: Perform sub-slab vapor testing or indoor air quality assessments if needed.
-
- Are there potential vapor intrusion issues from contaminated soil or groundwater?
Non-Scope Considerations – Not Required in a Phase 1
Non-scope considerations, such as the presence of wetlands and asbestos are not required under the standard ASTM Phase I ESA. New gas station owners and buyers should consider requesting these assessments, particularly if the transaction includes not only the purchase of real property, but also the purchase of the gas station business as part of the due diligence, as they can significantly impact property use and potential development plans.
Wetlands, Endangered Species, and Cultural Resources
-
- Are there wetlands or protected species habitats on or near the site?
-
- Action: Conduct a desktop wetland review and endangered species screening. If flagged, arrange for an on-site assessment by specialists.
-
- Are there wetlands or protected species habitats on or near the site?
-
- Are there any known cultural or archeological sites?
-
- Action: Engage a cultural resource consultant to identify any archeological concerns.
-
- Are there any known cultural or archeological sites?
Asbestos, Lead Paint, and Building Conditions
-
- Are there older buildings on the site (pre-1980) that could contain asbestos or lead paint?
-
- Action: Have an asbestos and lead paint survey conducted as part of the Phase I ESA to identify potential risks.
-
- Are there older buildings on the site (pre-1980) that could contain asbestos or lead paint?
-
- Is a Property Condition Assessment (PCA) needed for buildings on the property?
-
- Action: Conduct a PCA to evaluate the condition of building systems and potential environmental hazards.
-
- Is a Property Condition Assessment (PCA) needed for buildings on the property?
Business Operations and Compliance Audits
-
- Does the business generate hazardous or universal waste (e.g., used oil, batteries)?
-
- Action: Review hazardous and universal waste management practices and ensure compliance with state and federal regulations.
-
- Does the business generate hazardous or universal waste (e.g., used oil, batteries)?
-
- Does the site store large quantities of hazardous substances (over 10,000 pounds)?
-
- Action: Verify if Tier II reporting is required and ensure annual reports are filed with local emergency planning authorities.
-
- Does the site store large quantities of hazardous substances (over 10,000 pounds)?
-
- Does the gas station operate under valid environmental permits (air, water, wastewater)?
-
- Action: Ensure all permits are up-to-date, review for any violations, and address any issues before the sale.
-
- Does the gas station operate under valid environmental permits (air, water, wastewater)?
-
- Does the business require a Spill Prevention, Control, and Countermeasure (SPCC) Plan?
-
- Action: If the facility stores oil in quantities above federal thresholds, ensure an SPCC Plan is in place and certified by a professional engineer.
-
- Does the business require a Spill Prevention, Control, and Countermeasure (SPCC) Plan?
Best Practices for Sellers and Realtors
-
- Engage an Environmental Attorney Early in the Process: Involve an attorney experienced in environmental transactions from the start to provide legal guidance and assistance with compliance with all environmental regulations. The attorney can coordinate and manage the due diligence process to identify and mitigate potential environmental liabilities.
-
- Have the Attorney Manage the Entire Environmental Due Diligence Process: Allow the Attorney to oversee all aspects of the due diligence, from hiring environmental consultants to reviewing the results of ESAs. This provides confidence that the assessments are conducted properly and that any environmental concerns are addressed.
-
- Seek Recommendations for Environmental Professionals from Your Attorney: Work with your attorney to identify and engage reputable environmental consultants with expertise in gas station transactions. This collaboration can enhance the quality of the due diligence and ensure that all potential environmental issues are thoroughly investigated.
-
- Disclose Environmental Information: Sellers should disclose any known environmental liabilities upfront to prevent complications during the transaction. This includes providing documentation of past ESAs, remediation activities, and compliance records.
-
- Negotiate Environmental Provisions and Establish Escrow Accounts: Ensure that environmental issues are addressed in the sales agreement, including indemnification clauses and responsibilities for ongoing monitoring and cleanup. If necessary, consider establishing an escrow account to cover the costs of any required remediation or post-closing environmental obligations, providing added protection for both buyers and sellers.
-
- Stay Informed on Regulations: Both sellers and realtors should keep up-to-date with local, state, and federal environmental regulations that may impact the sale of gas stations. This will help ensure compliance and avoid costly surprises.
Conclusion
Selling a gas station presents unique environmental challenges, including potential contamination from underground storage tanks, hazardous waste, and vapor intrusion. Conducting thorough due diligence, such as Phase I and Phase II Environmental Site Assessments (ESAs), and adhering to regulations like CERCLA and state-specific laws, is essential to manage liabilities and protect all parties involved.
Engaging an experienced environmental attorney early on, coordinating with qualified consultants, and ensuring compliance with environmental regulations can streamline the process and help address issues before they become obstacles. By following best practices and staying informed, sellers and buyers can minimize risks and ensure a smooth, legally compliant transaction.
For more insights or assistance with environmental due diligence and real estate transactions, contact our team of experienced environmental attorneys. Contact Alexander Karana at Alexander.Karana@vonbriesen.com.
About the Author
Alexander Karana, Esq. is a first-generation Chaldean-Assyrian American attorney based in Chicago, Illinois, and Detroit, Michigan. Known for his innovative approach to intellectual property law, Alex specializes in prosecuting patents and trademarks for a wide range of clients, from startups and small businesses to Fortune 500 companies. With expertise spanning industries such as engineering, technology, entertainment, music, and sports, Alex is a trusted advisor for clients navigating the complexities of today’s IP landscape.
Combining his legal acumen with a technical background in chemical engineering, Alex brings a unique perspective to solving intricate intellectual property challenges. Whether counseling creators, entrepreneurs, or multinational corporations, Alex is dedicated to protecting innovation and empowering his clients to thrive in competitive markets.
Education:
J.D., University of Illinois Chicago (formerly The John Marshall Law School), 2020
B.S., Chemical Engineering, Michigan State University, 2013
Awards and Recognitions:
-
- Super Lawyers: Illinois Rising Star (2024-2025)
-
- Best Lawyers: Ones to Watch in America (2024-2025) in Entertainment and Sports Law, Intellectual Property, and Patent Law
Contact:
Email: alexander.karana@vonbriesen.com / me@alexkarana.com
Website: alexkarana.com
Phone: 331-399-1840
Legal Disclaimer
This blog is for informational purposes only and does not constitute legal advice. For specific legal concerns, please consult a qualified attorney. The opinions expressed are those of the author and do not necessarily reflect the views of any affiliated organizations.
For personalized legal counsel or to learn more about protecting your intellectual property, don’t hesitate to reach out.