Commonwealth Court Affirms Denial of Service Station’s Claim for Remediation Costs

03/29/13

Lehr's Exxon Service Station, Inc.  v. Pennsylvania Underground Storage Tank Indemnification Fund, No. 781 C.D. 2012, Commonwealth Court of Pennsylvania

by Carl D. Buchholz, III
cbuchholz@rawle.com

Rawle & Henderson recently represented the Pennsylvania Underground Storage Tank Indemnification Fund (“the Fund”) with regard to a claim for costs incurred by Lehr’s Exxon Service Station for remediation expenses incurred cleaning up contaminated soil from an underground storage tank leak at the service station.  The Fund was created by the Commonwealth to reimburse owners of underground storage tanks for remediation costs incurred cleaning up releases from their underground tanks.  Among the eligibility criteria for receiving reimbursement for remediation costs from the Fund, a claimant must notify the Fund within 60 days after “confirmation of a release”, and must prove that the release occurred after February 1, 1994, the date the Act became effective.

The Lehr family had owned and operated Lehr’s Exxon Service Station since 1959.  The station had three underground storage tanks.   In October 2004, an investigation of the property by a potential purchaser, including soil samples, indicated underground gasoline contamination on the property.  Lehr’s took no action at that time with respect to further investigation of the suspected contamination.  In May 2005, Mr. Lehr met with representatives of the potential buyer of the property to discuss the suspected contamination.  During this meeting, Mr. Lehr and his attorney received the field notes and laboratory analysis of the October 2004 soil samples which confirmed gasoline contamination.  The potential purchaser’s environmental consultant advised Mr. Lehr and his attorney that they had 60 days to notify the Fund of the release or risk losing eligibility for reimbursement from The Fund.

Lehr’s did not notify the Fund of the suspected release at that time, but rather pressure-tested the active system and checked inventory control records which indicated there was no evidence of missing product from the active tank system and lines going back to the 1990s.

Lehr’s took no further action to investigate the contamination. The property was eventually sold and Lehr’s engaged an environmental consultant (AES) to do the environmental work necessary to shut down the station and remove the underground tanks.  In February 2007, AES supplied Lehr’s with a proposal for various environmental work on the property, including removal of an estimated 65 tons of suspected petroleum contaminated soil.  In December 2007, Lehr’s received a written project proposal from AES which specifically referenced a volume of contaminated soil 20 to 22 feet below the existing tanks.

When the product lines and dispensers were removed in June 2008, soil contamination below the diesel fuel dispenser was observed.  Finally, on June 23, 2008, Lehr’s reported the release to the Fund.  Testing of the contaminated soil revealed it contained leaded gasoline, which was not sold at the station after the early 1980s.

Lehr’s Exxon subsequently submitted its claim for its remediation costs associated with cleaning up the contaminated soil to the Fund.  The Fund’s Executive Director determined that Lehr’s was ineligible for reimbursement because Lehr’s did not comply with the requirements to notify the Fund within 60 days of a confirmed release and to prove that the contamination occurred after February 1, 1994, the date of the initial eligibility for benefits under the Act.  Lehr’s appealed the decision of the Executive Director to the full Underground Storage Tank Indemnification Board (“the Board”).  The Board affirmed the findings and conclusions of the Executive Director denying Lehr’s claim and Lehr’s filed an appeal to the Commonwealth Court of Pennsylvania.

On appeal, Lehr’s counsel argued that the pressure testing that Lehr’s conducted on the station’s lines and tanks after the initial suspicion of a release “showed a tight system and no leaks” and that the first “confirmation” of a leak did not occur until the distribution lines and dispensers were removed in June 2008.  Lehr’s also argued that the contamination was from a diesel fuel release, which was not sold at the station until 2007, well after the February 1, 1994 effective date of the Act.

Rawle & Henderson argued that the Fund’s mandatory 60-day reporting period was triggered on numerous occasions, beginning in 2004, long before the tanks were finally closed in May 2008.  Further, Rawle & Henderson argued that the pressure testing did not confirm that a release had not occurred before the 1990’s, only that the present system was intact.  Lastly, Rawle & Henderson noted that the analysis of the contamination revealed it was not diesel fuel, which was sold at the station only after 2007, but was unleaded gasoline, which was not sold at the station after the early 1980’s, which precluded Lehr’s from establishing that the contamination occurred after February 1, 1994.

Carl Buchholz represented the Fund at oral argument before a three-judge panel of the Commonwealth Court on December 10, 2012.  On January 13, 2013, the Court issued its opinion affirming the Fund’s and Board’s denials of Lehr’s remediation costs.  As to Lehr’s contention that its inventory and pressure testing in May 2005 relieved it of any duty to report the “unconfirmed”, the panel stated:

"Although Lehr performed addition testing, it did not confirm that a release had not occurred.  At most, it confirmed that the applicable system was not the source of the release on the property."

As to Lehr’s contention that it did not have confirmation of a “confirmed release” until the lines were removed in May 2008, the Court stated:

"We agree with the Fund that the Board’s conclusion that Lehr had a confirmed release in May 2005, yet failed to timely report the release, is supported by substantial evidence….  Also, on May 13, 2005, Lehr received laboratory results of the soil samples from the two borings, which confirmed gasoline constituent contamination….[T]he June 2008, report was merely confirmation of the already confirmed May 13, 2005, release."

Lastly, the Court confirmed that Lehr’s had the burden of proving that the contamination in question occurred after February 1, 1994, the date of initial eligibility with benefits under the Act, and that it had failed to meet this burden.

 

Carl D. Buchholz, III is Chair of the Maritime, Insurance Coverage and Appellate Sections of Rawle & Henderson LLP. His federal appellate practice includes an argument before the United States Supreme Court as well as numerous arguments before the U.S. Court of Appeals for the Third Circuit. His state appellate practice includes seven arguments before the Pennsylvania Supreme Court as well as numerous arguments before the Pennsylvania Superior Court and Commonwealth Court. In 2006, the Pennsylvania Supreme Court appointed Carl to the Disciplinary Board of the Supreme Court of Pennsylvania. In 2010, the Pennsylvania Supreme Court designated Carl as Chair of the Disciplinary Board. He graduated from Muhlenberg College in 1967 and Villanova Law School in 1970 where he was a member of the Villanova Law Review and graduated with honors.