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Are Gas Stations Taboo for lenders

My previous experience with gas stations comes from a regulatory standpoint where the focus for evaluating the USTs was compliance. Currently, as an environmental professional, the evaluation of a gas station for a lender, involves more than just compliance when performing a Phase I ESA on gas station. The Energy Act of 2005 required that all USTs not inspected since 1998 to be inspected by August 8, 2007, and inspections every three years thereafter. In addition, the Energy Act requires training for the operator of the UST.  But is this inspection and training criteria stringent enough to give lenders a level of comfort to proceed with a loan? Could a lender, use inspection records and increased training alone and be comfortable that a release had not occurred.  Should a lender require Phase II’s on all gas stations regardless of compliance records?

I think compliance records along with a good visual inspection should always be included in evaluating a gas station. On newer stations, this maybe all that is needed.  But for older USTs compliance records and a visual inspection may just be the starting point. Since December 22, 1998, all UST systems (tanks and piping) should meet the new tank requirements in regards to spill and overfill prevention, corrosion protection, and release detection requirements.  These tanks are now at least 12 years old.  Even with good recordkeeping, a Phase II may be necessary to give the lender the level of confidence that the property value will not be diminished by latent contamination not identified by the due diligence process, especially if the borrower ended up defaulting on the loan.

Is this a no-brainer?  Any thoughts?

By Kimberly Houston