Total System Containment

Prevention of fuel oil releases is important to insurers, homeowners and regulators for different reasons. For property insurance carriers, the focus is on loss prevention and reduction in claims. For homeowners, the focus is on conservation of the environment, retention of property value and undisrupted enjoyment of the home. Regulators are concerned about minimizing and eliminating releases that are health safety hazards and significantly affect the environment.

THE COMPLETE FUEL OIL SYSTEM

Although the fuel oil storage tank has been the focus of traditional loss prevention initiatives, it is but one segment of the fuel distribution system. Releases are also attributable to other components. It is therefore important to examine the entire fuel distribution system including fuel lines, filters, valves, connections, etc., which account for 29% of all fuel oil releases.

Variations on the metallic tank — such as fibre-glass and double-wall or double-bottom tanks — are now commonplace. Nevertheless, most Canadian homeowners are unable or unwilling to accept a higher cost for such tanks, whereas most European governments have banned the use of single-wall steel tanks since the early 1970s. Approximately 1.1-million Canadian homes use oil for heating or domestic hot water use.

Most failures are a result of corrosion from the inside of the tank rather than the outside. A corrosive sludge develops at the inside bottom by the accumulation and condensation of atmospheric moisture. With the exception of the “belly” of the tank, upper interior surfaces of the tanks are often in reasonably good condition.

The corrosive effects of micro-organisms, in addition to their detection and remediation, have been extensively studied during the 20th century. Micro-organisms do not introduce a new corrosion mechanism. Rather, they influence and accelerate the chemical and electrochemical corrosion kinetics that results in Microbial Influenced Corrosion (MIC); this can result in penetration of single-wall steel oil storage tanks in as few as eight months.

Also, the government has mandated the petroleum industry to reduce the sulphur content in fuel oil. It is a well-documented fact that ultra-low sulphur fuels (ULSF) can lose natural antioxidants that help prevent the fuel from forming gums and sludges; ULSF can also be more corrosive than conventional fuels, thus introducing yet another element to the interior environment of a tank.

Studies in the United States have proven that single-wall steel tanks do not have a ‘service life.’ The American Petroleum Institute (API) completed a study comparing types of failures and ages of components. Tanks were split up into three groups: a) 1-15 years old, b) 16 to 30 years old and c) 30+ years of age. The most likely tank to fail on the basis of age alone was a tank from Group A. The technical basis for this counter-intuitive result is that there are far more important parameters to consider than age alone, such MIC, water/ condensation and installation deficiencies, when predicting tank failures.

ULTRASONIC TESTING

The only non-destructive, conclusive method of determining when a residential single-wall steel tank has failed is by way of ultrasonic testing. Ultrasonic testing has been proven effective in the United States for more than 20 years; it is part of the Environmental Protection Agency (EPA)’s requirement as a viable, non-destructive testing method of single-wall steel tanks. A tank is deemed to have failed when corrosion has deteriorated the metal to the point that the tank’s integrity has been compromised and is no longer safely capable of holding its content.

Ultrasonic testing of a tank begins with determining the tank metal thickness (gauge) by testing the top of the tank, an area unlikely to be affected by corrosion. As a result of the manufacturing process, the actual thickness of the metal can vary within the range of a gauge; as such, the top measurement is taken and used as a baseline for comparative purposes. Additional readings are taken along the belly of the tank, the area most prone to deterioration and where moisture and sludge collect. The belly readings are compared against the test gauge reading to determine if corrosion is present and, if so, to what extent.

A full review of the installation, fuel lines and other relevant site data, including ambient conditions, are obtained. An assessment of the condition is provided in an objective manner.

A corrective action report is provided for non-compliant installations, including estimated cost for each item, as an aid to both homeowners and underwriters.

Individually, the fuel oil industry, government regulators, the insurance industry and the inspection industry involved in this issue have not been effective in developing a unified strategy to reduce fuel oil releases.

The CAN/CSA B139 standard mandates inspection of the fuel distribution system, including the tank, as part of the annual service of the heating system. Other than a visual observation, technicians have had no means to test the tank; because of the subjective nature of a visual inspection, some may have been reluctant to approve or reject a tank for continued use.

Some of the insurers’ recent approaches to the fuel oil release situation have consisted in either limiting or excluding coverage by endorsement. Others have relied on the age and/or location of the tank to establish underwriting guidelines. Still others have resorted to having insureds and/or brokers fill out questionnaires as a method of risk assessment. However, statistics show the response rate to questionnaires is less than 30%. Also, they are seldom properly completed due to lack of knowledge or ability to identify components and/or assessing deficiencies. Therefore, the information submitted is often incomplete and erroneous, which could lead an underwriter to draw inaccurate conclusions.

Some insurance companies have mandated tank replacement based on exterior tank appearance, age or visual inspections, without adequately validating their reasons for replacement. For example, the age of tank as the sole determining criteria is unfounded: field experience shows tanks less than four years old failing ultrasonic tests.

Until now, the insurance or pre-purchase inspection industry has been relying on visual observations to determine the condition of tanks. This approach has validity in determining compliance with the CAN/CSA B-139 requirements, but it cannot provide an assessment of the integrity of the tank. Moreover, visual observations are subject to varying interpretations; releases have continued to escalate despite the increased reliance on visual inspections.

REVERSING THE TREND

Past segmented approaches by various stakeholders have not been effective in reducing releases. A new approach is necessary. By bringing together various stakeholders — such as the homeowner, the fuel oil industry, insurance industry, inspection industry and government regulators — to use and share technology in a unified collective approach, we will mitigate the problem of fuel oil releases.

The first line of defence in preventing pollution-related losses lies with educat- ing the homeowner about the need for systematic preventative maintenance of the fuel distribution system.

Secondly, ultrasonic testing and code compliance inspections should be required to identify failures and deficiencies and corrective actions undertaken to ensure compliance with CAN/CSA B-139. The risk management process must continually re-evaluate changes in time or conditions.

Thirdly, the oil industry is well-positioned to offer ultrasonic testing to the homeowner as part of the annual service of the heating system, providing this was a requirement of the insurance industry and or government regulators.

The technical committee of the Canadian Oil Heat Association (COHA) recently reached a consensus on the va lidity of ultrasonic testing and ideas freely exchanged on how to best implement a strategy. An authority having jurisdiction such as the Technical Standards and Safety Authority (TSSA) in Ontario should consider including ultrasonic testing as part of the required comprehensive inspection program scheduled to take place in 2012.

Individually, government agencies such as territorial housing authorities, Department of Indian Affairs, Supply and Services Canada and Environment Canada have been considering ultrasonic testing. One of the government housing corporations specifically has embarked on a program to test all oil tanks on their properties; plans are currently underway to make ultrasonic testing available to the general public in 2011.

A single Web-based portal where inspections, including ultrasound readings, are collected and accessed by insurance companies, technicians, inspection companies, and government agencies has recently been developed. This portal is the tool by which technicians update information on a particular installation once repairs, modifications or replacements are completed so that the records kept up to date. An insurance company wishing to underwrite a risk that uses fuel oil can access the latest information and underwrite it based on most recent and most accurate data.

Spills from domestic fuel oil storage systems have been a significant problem in Canada. A systematic and cooperative approach demonstrates the best potential for identifying problematic systems and addressing them before catastrophic failure occurs. This methodology has been proven effective in the United States, to the point at which it is no longer acceptable to allow corrosion factors to progress to the point that a release occurs.

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By bringing together various stakeholders — such as the homeowner, the fuel oil industry, insurance industry, inspection industry and government –to use and share technology in a unified, collective approach, we will mitigate the problem of fuel oil releases.