Cleaned-up site to house biofuels station

Cleaned-up site to house biofuels station

By Matt Cooper
The Register-Guard
September 26, 2005

Franko Oil Co. ran a Eugene area filling station for 15 years, mishandled the gasoline and contaminated the ground, then declared bankruptcy and dissolved after the state asked the company to look into cleaning it up.

Now the federal government - in other words, taxpayers - will foot the bill: $200,000, in the form of a cleanup grant so that the old fill-up on McVay Highway near Lane Community College can be converted into a new-age station offering alternative fuels.

Taxpayers, in fact, may pay to clean up many of the 1,400-plus contaminated gas station sites across Oregon, because regulators say they have no way to collect from some negligent owners.

"We have operators that have no financial means to do the cleanup," said Dave Belyea of the state Department of Environmental Quality. "We're starting to see more people walking away from (contaminated) sites."

Since the adoption of federal regulations governing underground storage tanks in 1988, nearly 6,800 businesses in Oregon - more than half of them gas stations - reported leaks to the state.

Of those, 5,400 have cleaned up their own sites. Most paid for the work, although the state has spent $3 million to clean up 100 stations in rural areas where gas stations were deemed a critical service, Belyea said.

There are still more than 1,400 contaminated gas stations left, and they're the problem cases: complex, expensive cleanups, often in rural areas, where the cost of the work might eclipse the property's value, prompting mom-and-pop owners to abandon the site.

Some of these owners may file for Chapter 7 bankruptcy, as Franko did in 1991, Belyea said.

Company dissolves in 1993

Under federal bankruptcy law, companies may declare bankruptcy and either dissolve, under Chapter 7, or reorganize, under Chapter 11.

In either situation, regulators such as the state can fight for company assets as payment for cleanup costs; if no assets exist, however, the agencies - and the taxpayers - absorb the cleanup costs.

Franko Oil dissolved in 1993 and former representatives could not be reached for comment. Belyea said the state tried unsuccessfully to get a company trustee to release money for cleanup costs.

Another firm bought the site with the intent of cleaning and selling it. But that firm did not complete adequate work on the site, and the state levied fines of about $100,000, which have not been paid, Belyea said.

A third firm did some cleanup work for the second firm and was awarded the property for nonpayment of those services, Belyea said. That firm failed to pay property taxes, however, and the county foreclosed on the site about 2004, he said.

The state didn't consider that firm to be legally liable for the cleanup, Belyea said.

SeQuential Biofuels of Eugene, which sells alternative fuels, showed interest in the property at 86714 McVay Highway and won the $200,000 federal cleanup grant in May, Belyea said.

The state will use the federal money, plus $50,000 from SeQuential, to pay for cleanup that includes excavation, removal of tanks and testing of soil and water samples. In return, the county will give SeQuential the site.

Ian Hill, a managing partner with SeQuential, said the grant accelerated his company's plans for a 24-hour commercial and retail biofuel station, expected to open by March.

He said the public expenditure is justified because there's a public interest in creating an environmentally safe site that generates jobs and tax revenue.

"The taxpayer certainly is burdened by some amount of money for cleanup, but they get that back in multiple ways," Hill said.

The DEQ's Belyea speculates that fewer and fewer private owners will use their own funds to clean up polluted service station sites, as the state targets those properties that are increasingly complicated and expensive to clean up.

The state currently recovers about 80 percent of its cleanup expenses from current and former owners and operators but "we're spending more of our hours per site to get it cleaned up, and the percentage (of recovered costs) is probably going to drop," Belyea said. "It is increasingly expensive" to clean the problem sites, he said.

One option for the state, he said, is to secure grants from the federal Environmental Protection Agency for the cleanup of "brownfields" - abandoned or under-used properties where expansion or redevelopment is hindered by environmental contamination.

EPA looks at brownfields

Across the nation, there are hundreds of thousands of brownfield sites - everything from methamphetamine labs to old gas stations to dry-cleaning operations. Most haven't been cleaned up; among those that are being cleaned up, the majority are funded by private interests, said Brooks Stanfield, brownfields project manager for the EPA's regional office in Seattle.

His program addresses the others with redevelopment potential, including those where the cost of cleanup may far exceed the value of the site, even once it's clean.

Before a brownfields grant will be awarded, the agency ensures that there is no responsible owner or operator with the means to pay for cleanup, Stanfield said.

The grants then go to assessment and cleanup costs of those sites with potential for reuse.

New uses could be anything from an alternative fuels station to a tourist center to a drive-through espresso stand.

He acknowledged that, in essence, the program is use of public money to address problems left by private parties.

But Stanfield believes the long-term benefits are worth it: For every dollar that the agency puts into the program, other public and private entities add $6. Moreover, redevelopment of contaminated sites cuts down on sprawl that would otherwise consume pristine land.

"We're using public funds, but we're leveraging a hugeamount of private funds in the process," Stanfield said. "We're using this to recycle valuable land."

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