COHA Targets Clean-Up Costs

What do you do when remediation costs for a fuel oil spill estimated at $179,900, instead turns into a bill for $1.2 million?

That’s what happened in the case of a spill that occurred at a farm in Ontario in 2006. The farm operators filed a civil claim against the fuel oil company that installed an above ground storage tank and delivered the fuel that spilled. The case was not decided until this year. The court found that the fuel oil company was not liable; the farm operators have filed a notice of appeal.

Besides garnering wide attention, the case embodies a cause-and-effect chain that threatens Canada’s fuel oil industry’and that the Canadian Oil Heat Association is mobilizing to address, said Stephen Koch, president of the association.

A spill or leak is the first link in the chain; the other links are insurance companies, remediation companies, environmental authorities and the courts.

“The biggest threat to our industry right now is insurance issues,” Koch said, citing continually rising premiums related to out-of-control remediation costs. “Homeowners are being directed by their insurance brokers to remove their oil-burning units and move to a different source of heating, so that they can reduce the premium that they pay on their house insurance. That’s become a huge threat to us right across Canada.”

In response, the COHA board this year approved and developed a Multi-Stakeholder Advisory Council that includes representatives from all the links in the aforementioned chain: government, remediation companies, insurance brokers, regulators and consumers as well as representatives of COHA.

The council’s purpose is to find ways to reduce risks of spills and leaks, in part by identifying their causes, whether tank failures, line failures or mistakes being made in installation or service. Collected data will be evaluated at the council’s next meeting, Oct. 16 in Toronto, at which risk-reduction priorities also are to be recommended.

In addition, the association’s technical committee, through its GreenTech certification program, is preparing to add education in new technologies and new methods of equipment installation and setup; the goal being to limit risk of contact or impact that might cause a system leak or spill.

The association has also asked government to be engaged so that the standards bodies are educated and informed as to what they should look for during inspections. The idea is to avoid disputes where an on-site inspector finds fault and the fuel oil company insists that its work was done “to code,” Koch said.

The new advisory council is also charged with looking into the reasons remediation costs have sky-rocketed.

In the case stemming from the leak at the Ontario farm, the judge expressed concern that there seemed to be no standard process for the remediation, according to Koch. Instead, the remediation company seemed to have been given “carte blanche,” without a process that would end in “a true understanding of the problem prior to the start of the remediation,” Koch said; the judge indicated that insurance companies that hire remediation companies should take more responsibility for oversight of the process.

“That particular judgment indicated within the industry and the stakeholder groups that we work with that something may be amiss here,” Koch said. “Is there concern of fraud or mismanagement within the remediation process?”

Exploring how government and industry could play an oversight role in remediation is another aim of the council. “We can reduce risk in spills and leaks,” Koch said. “The data we’re seeing is telling us that spills and leaks overall have decreased in the last couple of years. We haven’t seen a decline in remediation.” Allowing that state of affairs to continue would result in “continued pressure on the industry,” he said.

Gaining access to in-depth data on spills and leaks proved to be not-so-easy at first. While government regulators collect spill data, “They’re very limited on what they collect,” he said. “They don’t put in what caused the problem. It’s generally just where the spill happened, how many liters were spilled, and who were the key people.”

Further muddling the picture is that insurance companies rely on remediation company engineers or a consultant to verify that the minimum standard set by the environmental authorities has been met. The details typically have stayed with the insurer or the consultant, while the government “gets a kind of pass or fail report” and no more, Koch said. “They’re not getting that kind of in-depth data that we think we need in order to address some of the issues.”

Since regulatory bodies didn’t have the in-depth data, he said, “We went to the insurance companies.” But confidentiality issues made the insurance companies reluctant, initially, to release the information.

“So it became a struggle for about three months to actually get data,” Koch said. “The way we did it was with this Multi-Stakeholder Council’with government and everyone else in the same room talking.”

Another wrinkle is that governments and courts in the same jurisdictions have imposed different standards as to just what constitutes sufficient remediation.

Koch noted that in a case in Ottawa, Ontario, some eight years ago, a judge ordered that remediation had to go beyond the standard set by the province’so many parts per million’to what was called “zero-detect” or “pristine.” That raised a host of questions that have remained officially unanswered, including precisely what the judge meant by those terms.

“There really hasn’t been a direction from the government or the courts,” he said. Despite the uncertainty on that score, the ruling is often cited as a precedent in new cases pertaining to remediation.

Provinces are primarily responsible for developing the environmental standards to be met by remediation. But that too can be unsatisfactory for fuel oil dealers and their customers. For example, Nova Scotia uses a model from the U.S. that is designed for remediation of commercial sites. “It doesn’t really make sense for a homeowner that has a three-liter leak direct from his filter to be put in the same position as a gas station,” Koch said.

Graham Eisenhauer of West Nova Fuels in Halifax, Nova Scotia, chair of the Nova Scotia chapter of COHA, said that the cost of remediation in that province is significantly higher compared to other provinces, and that it is an issue he would like to see explored.

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