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service station are high risk investments

Don’t buy a service station without an environmental site assessment

Knight Frank claims that investors looking for higher returns are bypassing residential property and purchasing service stations. While great investment opportunities exist, purchasers need to be aware of contamination issues that can pose significant environmental risks and result in unexpected liabilities. Undertaking an environmental site assessment can be a critical factor in protecting your commercial interests and making sure you don’t pay thousands of dollars in remediation costs.

Geo-Logix has performed hundreds of contamination assessments on decommissioned and operating service stations over the last decade. We have assisted clients in removing sites from contaminated land registers, performed due diligence checks and helped them to meet EPA regulations and development requirements.

Environmental Risks

The NSW EPA has advised that the underground petroleum storage tanks used at most petrol stations and fuel depots are one of the most common causes of contamination in NSW. When petrol is released into the ground it will adsorb to soil, partition into vapour or dissolve in groundwater.

Accidental petroleum spills are the main route of soil and groundwater contamination, however, contamination may also be related to service bays and car washes where pollutants from oil, grease lubricants, detergents and the like can contaminate storm water.

Human Risks

Volatile organic compounds Benzene, Toluene, Ethylbenzene and Xylene (BTEX) are commonly found in petroleum products and can be associated with human health risks including fatigue, headache, nausea and drowsiness and even permanent nerve damage, if exposure is heavy and prolonged. Benzene is also a human carcinogen.

Due Diligence

In any land or business purchase, it is important to know and understand the features and risks of the asset. While there is nothing inherently wrong with acquiring land or assets that have associated liabilities, it makes sense to understand these in order to assess their true value. This is particularly prudent for petroleum businesses given the incidence of contamination with such businesses and the industry’s practice of transferring existing risk and liability through sale and lease agreements.

An environmental site assessment can provide data on whether contamination exists on a site in the soil or groundwater. Any associated liabilities can then be factored into land transfer negotiations and contracts. If no contamination is found, developers get peace of mind that a site is clean and likely to meet government and council regulations for a change in land use.

Contamination Baseline

An environmental site assessment can also be valuable in leases as well as asset purchases. As the tenant is usually obliged to remediate the land at the end of the lease to the condition it was at its commencement, a contamination baseline will define what (if any) contamination existed at the commencement of the lease. Likewise, service station owners are liable for the costs of a clean-up if contamination is detected. Without soil and groundwater data, a tenant or owner may need to pay to remediate contamination they didn’t cause.

Assessing Service Station Sites

Assessment of service station sites should conform to the Australian and New Zealand Guidelines for the Assessment and Management of Contaminated sites and follow associated EPA guidelines. A good consultant will be able to follow these guidelines and also apply a risk assessment approach to ensure contamination regulations are appropriately applied to your site.

A site that is found to be contaminated presents significant and expensive challenges. Our best advice to anyone who intends to buy or redevelop a service site is to get an environmental site assessment done first.

For further information on UPSS decommissioning, contamination assessments or due diligence advice email Ben Pearce at bpearce@geo-logix.com.au.

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