Environmental Law – Hauling Petroleum Products

Environmental Law – Hauling Petroleum Products

N.C. law that relates to or regulates public or private carriers who haul petroleum products is substantial and complex. Given the breadth and scope of both N.C.’s statutes and regulations, and the federal laws and regulations which are either adopted by or supplementary to the State’s rules, a truly comprehensive answer would require a specific fact pattern to address. Nevertheless, the following items are a good starting point for an analysis of several conceivable issues from a commercial carrier’s standpoint.

THE GASOLINE AND OIL INSPECTION ACT

 

N.C. General Statutes ¶119-14 et seq. is known as the Gasoline and Oil Inspection Act. It is the primary means by which the State exercises control over the production, handling and sale of gasoline and other petroleum products. While the Act is primarily focused on insuring proper practices and taxation with respect to the sale of these petroleum products, the Act also briefly touches on their transportation. N.C.G.S. ¶119-42 provides that “Every person hauling, transporting or conveying . . . between points in this State any motor fuel and/or any liquid petroleum product . . . over either the public highways or waterways of this State” must have in his possession an invoice, bill of sale, or bill of lading showing certain information with regard to the petroleum products being transported. In particular, the invoice must show:

• The name and address of the person from whom the petroleum products were obtained;
• The type and volume of all such petroleum products received; and
• The name and address of every person to whom such petroleum products have been delivered, as well as the number of gallons delivered to each such person.

Failure to produce such papers at the request of any agent of the Commissioner of Agriculture will result in the vehicle’s inspection. If inspection reveals any violation of the motor fuel tax and/or inspection laws, the vehicle and its contents can be seized and sold for the benefit of the common school fund of the State.

OIL POLLUTION AND HAZARDOUS SUBSTANCES CONTROL ACT

N.C. General Statute ¶143-215.75 et seq. is known as the Oil Pollution and Hazardous Substances Control Act of 1978. While not directly addressing the conduct of petroleum haulers, this Act is nevertheless of potential importance due to the liabilities that may be imposed for spills or releases of petroleum products into the environment. By its own terms, this Act is intended to support and compliment similar provisions of the Federal Water Pollution Control Act, which also imposes liability for spills or release of petroleum products into the environment. For brevity, only the N.C. Act is addressed here, since the Federal Act has a similar liability scheme.

The operative portion of the Act is found at ¶143-215.83. Here, the legislature has declared that it is unlawful for any person “to discharge, or cause to be discharged, oil or other hazardous substances into the environment, regardless of the fault of the person having control over the oil . . . or regardless of whether the discharge was the result of intentional or negligent conduct, accident or other cause.” The statute defines oil broadly, to include any type of petroleum product, including gasoline. Furthermore, ¶143-215.77(5) provides that a person “has control over” oil, and is therefore subject to liability for any discharge into the environment, when they are “using, transferring, storing, or transporting oil . . . immediately prior to a discharge of such oil . . . and specifically shall include carriers and bailees of such oil”.

Under this Act, then, liability attaches to the person who last has control over the oil before its release into the environment. Furthermore, the liability attaches regardless of whether such person was in any way at fault for the discharge, more commonly referred to as “strict liability”. A transporter or hauler of the petroleum, then, is potentially liable for any release that occurs before the petroleum products leave its possession. More importantly, the scope of potential damages for which the carrier may be liable is extensive.

Under the Act, the person having control over the oil at the time of a discharge has the following duties and potential liabilities:

• They must notify the Department of Environment and Natural Resources of the discharge;
• They must immediately undertake to collect and remove the discharge and to restore the area affected to its natural condition;
• They must make full restitution to the agencies of the State and local governments who participate in any removal or restoration project following a release;
• They are liable to the State for monetary damages equal to the cost of all reasonable and necessary investigations, and for all amounts necessary to restore all damaged public resources to their conditions prior to any release; and
• They are liable for civil penalties in an amount up to $5000 for any intentional or negligent discharge, or for any failure to report a discharge.

As this laundry list indicates, the potential liability for a release of petroleum into the environment is large, even for mere carriers. The strict liability aspects of the Act make these potential liabilities even more onerous.

LEAKING PETROLEUM UNDERGROUND STORAGE TANK CLEANUP ACT

N.C. General Statute ¶143-215.94 et seq. is known as the Leaking Petroleum Underground Storage Tank Cleanup Act of 1988. While its general focus is on ensuring that all underground storage tanks in N.C. comply with rules and regulations designed to prevent and detect leaks, it also has potential significance for carriers. Two particular issues are of importance:

• The potential liability of carriers or haulers for spills or overfilling of tanks in the delivery process; and
• The potential liability for carriers and haulers associated with delivering petroleum products to underground storage tanks that are not properly licensed or in compliance with the underground storage tank requirements.

With respect to the first issue, carriers and haulers face potential liability based upon the possibility of discharges to the environment occurring during the unloading of the petroleum product, which is generally done into underground storage tanks. The N.C. Court of Appeals opinion in the case of Jordan v. Foust Oil Company, Inc., 447 S.E.2d 491 (1994) is instructive in this regard. In this case, the Court of Appeals held that the defendant, who supplied and shipped gasoline via tanker truck to a service station near the plaintiff’s house, could be held liable for damages resulting from the gasoline leaking from the underground storage tanks to which the defendant made its deliveries. The Court held that the issue of whether the supplier could be held responsible based upon its having had control over the gasoline prior to it being emptied into the tanks, from which it subsequently leaked, was properly for the jury and reversed summary judgment in favor of the supplier.

This case demonstrates the interplay between the Leaking Petroleum Underground Storage Tank Cleanup Act and the Oil Pollution and Hazardous Substances Control Act. The Court ultimately concluded that since the two acts are codified in the same section, both must be construed together. The Court refused to grant any preference to the definitions of one act over the other, saying that the definition of the term “having control over” must be applied as it is written (see above), thereby placing suppliers in the precarious position of having potential liability for leaks from underground storage tanks over which they have no control.

Since the date of this case, however, both Federal and State regulations have been enacted which will hopefully clarify and simplify the potential responsibility of carriers in these situations. At 40 CFR 280.21, Congress has mandated that by December 22, 1998, all existing underground storage tanks in the United States must comply with strict leak prevention and detection standards or must be closed and removed from operation. N.C. has also adopted this regulation. Furthermore, ¶143-215.94U(a) provides that the owner-operator of a petroleum underground storage tank must annually obtain an operating permit from DENR which can be issued only after the owner-operator complies with all release detection requirements, including those set out at 40 CFR 280.21. Given the stringency of these new reporting and prevention measures, the potential for leaks, which would create liability for carriers under the Jordan case, should hopefully be minimized.

FEDERAL HAZARDOUS MATERIALS REGULATIONS

Last, but certainly not least, are the DOT’s and EPA’s regulations applying to transporters of hazardous materials. These two agencies have somewhat overlapping authority in this area, and both have issued extensive regulations that a petroleum hauler must comply with. As can be imagined, their scope is so broad that an efficient summary would be outside the capacity of this memo.