Buying a gas station: the environmental and tank checklist

A Phase I environmental site assessment reviews the site’s history, government records and the current condition of the property, and includes a site visit and interviews. Done to the ASTM E1527-21 standard, it is how a buyer meets EPA’s “all appropriate inquiries” rule, which matters for certain protections under federal cleanup law (EPA).

Timing matters: the inquiry must be done or updated within one year before you take ownership, and parts of it, such as the government records search, the site visit and the owner interviews, within 180 days. Your lender will usually order the Phase I and rely on it too.

If the Phase I finds a “recognized environmental condition,” such as an old release or tanks with poor records, the next step is usually a Phase II: soil and sometimes groundwater samples near the tanks, lines and dispensers. It costs more and takes longer, so build time for it into your due diligence period.

• State registration for every tank: install date, size, material and single or double wall
• Monthly release detection records and annual line leak detector tests
• Walkthrough inspection logs (federal rules require them at least every 30 days)
• Spill prevention and overfill equipment tests (generally every three years under the 2015 federal rule)
• Cathodic protection tests, if the system has them
• Operator training certificates
• Proof of financial responsibility: tank insurance or the state fund
• State inspection reports and any violations

EPA lists the federal requirements on its UST page; states can add more. Also look the site up in your state’s tank and cleanup database yourself.

Many stations have a past release. A closed case with a “no further action” letter is common and usually manageable. An open case means someone still has to finish the cleanup, so the contract must say who.

Many states run cleanup funds that pay for eligible releases, such as Ohio’s PUSTRCB and Florida’s Petroleum Restoration Program. Whether coverage can pass to a new owner depends on the state, so ask early.

• A due diligence period long enough for a Phase II if needed
• The right to walk away, or renegotiate, if the reports find a problem
• A price credit for old tanks you plan to replace
• An escrow or holdback until a cleanup milestone is reached
• A seller indemnity for known issues, limited in time and amount
• Pollution legal liability insurance

An environmental attorney should write these terms. See our Preferred Partners for attorneys and lenders who work on station deals.

Check the business as carefully as the ground. Match fuel gallons to supplier invoices, inside sales to POS reports and purchase invoices, and lottery income to state statements. Read the fuel supply agreement for the remaining term, gallon commitments and what happens on a sale. Confirm the lease terms or the title, and that licenses can transfer to you.