By Wallace Jensky, II, PG, JHA Environmental, Inc. as told to Alysha Webb
These days dealership service departments are pretty good at containing the pollution from all the petroleum products and hazardous materials they use in their work. But the current regulations governing the use and disposal of hazardous materials and petroleum didn’t go into effect until the late 1980’s.
Anytime you are buying or even leasing a dealership you should consider an environmental assessment. If a lender is involved, they will likely require one. It is especially important if you are dealing with an older store that was in operation before the latest regulations kicked in. Wallace Jensky, geologist at JHA Environmental Inc., talked with Automotive Buy Sell Report about environmental issues to look for if you are buying a dealership and guarding against environmental risks if you are an owner.
Environmental Site Assessments
The basic environmental assessment is called a Phase I Environmental Site Assessment (ESA). It is generally done when a deal is in 60-day escrow and takes three to four weeks to complete. The Phase I ESA reviews the historical and current uses of the Site. There are three possible conclusions: 1) There are, or are not, recognized environmental conditions (commonly called RECs); 2. Historical REC, where there is no current REC, but the owner has a No Further Action letter from the regulatory agency saying that a historical environment issue was addressed (cleaned up) to the satisfaction of the agency; 3) Controlled REC, where there is a recognized contamination at the property that the regulatory agency has determined is not a health risk to the public for the current use of the property.
Controlled RECs can “get tricky,” said Jensky. The property is still contaminated, but the contamination at the Site is under some sort of engineered control. That could limit the future redevelopment of the property.
Phase I or Phase II ESA?
If you are a buyer, it is worth paying for a Phase I ESA before the deal closes. For a dealership on three to four acres with 20 service bays that has been in business for 20 years, a Phase I ESA typically costs $3,000 to $4,000. That’s a cost worth bearing because the buyer (or landowner) is the one left holding the bag if an environmental problem is discovered after the dealership changes hands, said Jensky. “If there is an issue, the regulatory agency will come to the owner of record and ask him to clean it up,” he said.
If the Phase I ESA has identified specific RECs, a Phase II ESA may be recommended. In a Phase II, soil and/or groundwater samples are collected and analyzed to confirm or deny significant contamination at the site, and can include a “ballpark” remediation cost estimate. That allows the client or the client’s attorney to decide if a real estate transaction is worth continuing before making a significant capital investment.
Watch out for old lift vaults and former underground storage tanks
An important item to watch out for in older dealerships is underground storage tanks (USTs). They were often used for gasoline or new and used oil storage. Though they have mostly been removed, they may have leaked into the surrounding soil and/or the groundwater, said Jensky.
In the old days the fire department performed the inspection during removal of USTs. “They would make sure nothing blew up and then leave,” he said. However, if there is no documentation that the soil under the former UST was sampled and shown to be clean, the ground around where the old tanks were located should be thoroughly tested for contaminants during a Phase II ESA. Currently, tank removals are permitted and inspected by several environmental agencies with specific requirements for soil sampling.
Another common area of contamination is the soil around in-ground hydraulic piston vaults that held the movable hydraulic piston for a front-to-rear lift system. Modern dealerships have above-ground lifts that are completely contained as far as hazardous materials leakage is concerned, said Jensky. Not so the old vaults that collected floor wash and were sometimes used to dispose of unwanted waste liquid.
Old side-by-side and single-piston hydraulic lifts also had reservoir tanks and pipes that could leak, he added. The soil around old in-ground lift systems, either working, abandoned in-place, or removed, can be evaluated during a Phase II ESA. In-ground lifts are not regulated in California, but contaminated soil is.
Old parts washers are another contaminant culprit. Parts washers now are aqueous, but in the past they used a chlorinated solvent, similar to dry cleaning solution. “That’s really nasty and can cause cancer,” said Jensky. He has seen cases where waste solvents were dumped into the waste oil UST, the lift vault, or on the ground as weed control.
“If the dealership was built after 1995, I am not going to find much,” he said. “Parts washers are now aqueous and serviced and most lifts and tanks are now above ground. I look for proper documentation about parts washer maintenance, and disposal documentation for waste oil, used filters, and used coolant.”
Make sure you aren’t creating future environmental assessment problems
Dealers can take steps to smooth the way for any future environmental assessment. For example, Jensky recommended having a record of your waste disposal and parts washer maintenance schedule.
Regular maintenance pays off in other areas, as well. Anywhere there is a floor drain, or a car-wash bay, a clarifier must be installed to filter the drainage. Liquids now go through a three-chamber concrete tank for cleaning. In the past one-chamber separators were sometimes used. Jensky recommended ready-made clarifiers rather than job-built models.
Clean your clarifiers annually, said Jensky. The easiest way is to use an outside company that will use a vacuum truck to remove the contents. This needs to be part of routine annual maintenance, he said. “If not cleaned it stops functioning properly at some point,” said Jensky.
If you have any in-the-ground hydraulic lifts that you aren’t using, it is best to have them removed, recommended Jensky. Have the soil tested after they are removed, then patch the floor, he said. If you are still using older hydraulic lifts, don’t keep adding hydraulic fluid. “If it is sealed, you shouldn’t have to add” hydraulic fluid, said Jensky. If you do need to, it may be leaking.
With hydraulic lifts, “90 percent of the time there is not an issue, or the issue is in the shallow soil only” he said. “But if it gets into the ground water, then you have a problem.”
Even then, added Jensky, “A few leaking lifts, or a leaking car-wash clarifier aren’t generally a deal buster.” He just assessed several lifts that did need cleaning up. “It was less than $45,000 to remove the four lifts, clean up, transport and recycle the soil and backfill and patch the floor in the four bays,” said Jensky.