Baker & O'Brien, Inc.

Case Studies

Case Studies details

Case Studies details

Leaking Underground Storage Tanks: Who is Responsible?

Litigation, North America

February 1, 2021

Leaking underground storage tanks (UST) at retail gasoline marketing outlets became a public issue in the late 1970s and early 1980s.  In 1984, Congress created a program for the Environmental Protection Agency (EPA) regulation of USTs and, in 1986, established a trust fund to deal with leaking UST cleanup.  In 1988, the EPA promulgated rules to regulate USTs with a requirement that owners of USTs remove or upgrade them over the next 10-year period and delegated responsibility for UST regulation and cleanup to the states.

Around 2010, several lawsuits related to leaking UST cleanup cost liability were filed by states against various oil companies.  A key question upon which the responsibility for cleanup lay was ownership of the specific USTs.  The parties on one side argued that oil companies were responsible for leaking USTs at all retail locations that sold gasoline under those companies’ brands.  The counter argument was that this was only true in certain cases – but definitely not true in all cases.  Baker & O’Brien was retained to produce an expert report and provide expert testimony regarding retail marketing practices and ownership of retail outlets.

In some cases, a refiner may directly own and operate a retail outlet, including the property and improvements.  Generally, these represent a minority of the retail sites where branded gasoline and diesel fuel are sold.  There are a variety of contractual arrangements that allow independent retailers to market products under a major oil company’s brand.  Some of these are illustrated in the diagram below.

In most of these arrangements, the major oil company supplies product but does not own the property or improvements, including the USTs.  There are even cases where one major oil company grants a license to another major oil company to use its brand in specific geographic regions.  For example, when ExxonMobil divested refineries in California and New Jersey, it allowed the acquiring companies to use the Exxon or Mobil brands in those regions.  In such cases, the company whose brand is displayed at a retail outlet has no relationship with the branded site or the product delivered to that site.