Before natural gas became widely available, most homes in Canada relied on fuel oil for heating. Even today, in the Atlantic provinces, oil remains the dominant heating fuel, used in about 42% of households. The term oil here refers to a low-viscosity product distilled from crude oil. It is heavier than gasoline and similar to diesel. There are different grades of fuel oil based on composition and specific gravity. Any home with oil heating must have an oil storage tank. This article will introduce basic knowledge about oil tanks, along with the problems and risks they may pose to properties.

Basics of Oil Tanks

Oil tanks may be installed on the basement floor, on the exterior ground, or buried underground outside. Early oil tanks were typically made of steel. Later on, to extend their lifespan, manufacturers began producing tanks of stainless steel, fiberglass, or composite materials. Some tanks even have internal liners. However, in my inspection experience, almost all tanks I've encountered are steel, suggesting that alternative materials are not widely used.

Prior to 1971, there were no standards governing tank manufacturing or installation. Starting from 1971, all tanks were required to bear Standards Council of Canada (CSA) labels. Today's oil tanks must meet CSA or Underwriters Laboratories of Canada (ULC) standards, and comply with fire safety codes. The typical lifespan is 15 - 25 years for indoor tanks, and 10 - 15 years for outdoor ones. Tank capacity can reach 1,000 litres, and a full tank may weigh up to one ton.

For a basement floor installation, you will see from exterior two metal pipes entering into house, with one pipe connected on the top of the tank in basement. Viewed from outdoor, one pipe is a 2" diameter fill pipe (normally capped when not in use), and the other is a 1-1/4" diameter vent pipe that ends in an open downward-facing "gooseneck" above the fill pipe. The vent pipe allows air to escape as the tank is being filled, and helps the delivery person judge the oil level based on sound.

A tank typically has a dipstick gauge on top. A steel supply line emerges from the tank's lower side, fitted with a shut-off valve and an oil filter. It connects to a 3/4" diameter copper supply line running to the furnace. The tank is usually supported by four steel legs, which must sit on a sturdy base, elevating tank from the floor. A tank must be installed at least 10 feet from the furnace, away from combustible materials and ignition sources. Additionally, the tank should never be placed flush against an exterior wall, to prevent corrosion.

For underground tanks, they are typically buried about 2 feet deep. In addition to seeing fill and vent pipes outdoor, you'll usually see a supply line entering through the basement foundation near the tank location.

Risks of Oil Tanks

The biggest programs with oil tanks are corrosion and leaks. The primary cause of steel corrosion is exposure to water. Then, where does the water come from?

One source is condensation inside the tank. Since the tank is never completely full, there's always some air space at the top. When moisture in this air contacts cold interior surfaces, condensation occurs. Because water is heavier than oil, it sinks to the tank bottom, causing corrosion from the inside out. This explains why leaks usually start at the bottom, and often result in rapid drainage of entire tank once they occur.

Underground tanks experience more severe interior condensation due to lower temperatures. In addition, direct contact with soil exposes them to moisture and chemicals that corrode the tank from the outside. These internal and external corrosive forces combine to dramatically accelerates deterioration, and shorten the lifespan, making underground tanks particularly prone to leaks. For this reason, nowadays, new underground tank installations are essentially prohibited unless there are compelling reasons and proven technical safeguards.

A leaking underground tank can seriously contaminate surrounding soil, groundwater, and rivers. Just one litre of oil can pollute one million litres of drinking water. Cleanup costs can be enormous - ranging from $25,000 to $50,000 or more. I heard one extreme case in Ontario exceeding $1 million. Remediation may involve removing the tank and pipes, replacing soil, purifying water sources, and even replacing a home's foundation.

Above ground tanks carry similar leak risks plus explosion and fire hazards. In an accident, the tank essentially becomes a bomb with potentially catastrophic consequences. Therefore, whether above or below ground, oil tanks represent significant safety and environmental hazards that homeowners must be vigilant. Insurance companies take this issue very seriously due to the substantial risks and potential liabilities involved.

Home Insurance and Relevant Regulations

Insurance coverage for oil spills varies across policies. Most only cover damage to neighboring properties, but not the policyholder's own property. Homeowners must clarify this with their insurance agents. Insurers pay close attention to whether a tank is present, its age, and condition. Any uncertainty may lead to coverage denial.

The Technical Standards and Safety Authority (TSSA) regulates oil tank installation, maintenance, and decommissioning. Website: www.tssa.org | Phone: 1-877-682-8772. Homeowners can contact them for authoritative information. In case of a leak, homeowners should also contact the federal Ministry of the Environment's Spills Action Centre at 1-800-268-6060. Key regulations regarding home insurance and oil tank use:

1. Insurance Bureau of Canada requires that homes with outdoor tanks over 15 years old or indoor tanks over 25 years old should be denied coverage. In practice, if tank age cannot be verified, insurers typically require replacement.
2. TSSA requires that all underground tanks must be removed or replaced by August 01, 2009. However, NO mandated service life or replacement timeline exists for above ground tanks.
3. TSSA requires that all underground tanks must be registered with TSSA by May 01, 2002. Otherwise, fuel suppliers cannot deliver oil.
4. TSSA requires that starting from May 01, 2002, fuel suppliers must have qualified personnel perform a Comprehensive Inspection before initial delivery oil to a tank. This inspection must be repeated every 10 years. Any issues found should result in delivery refusal.
5. TSSA requires that all abandoned tanks must be removed from properties unless homeowners apply for and receive TSSA approval through a Variance Process.
6. All companies performing tank-related work must register with TSSA, and all workers must be TSSA-certified.

Considerations for Real Estate Transaction Parties

If you're purchasing a home with an old active tank in basement, budget for its replacement - otherwise you won't obtain home insurance. For an abandoned basement tank, prepare $400 - $600 for removal. If an outdoor underground tank exists, get a professional environmental assessment, and be prepared to remove it. Removing a non-leaking underground tank starts at $3,000.

Above ground tanks are big, and usually easy to spot unless intentionally concealed. However, underground tanks may go unnoticed due to landscape changes, multiple ownerships, or lack of records. Since standard home inspections are visual only, and don't cover hidden or buried tanks. This means buyers face potential risks. Then, what can buyers do?

My Advice

If you're buying an older home (especially prior mid-1960s), oil heating was likely used at some point. You shall be aware of, and trace the possible exitance of an abandoned tank, even if it is not oil heating now, as the fuel might has been converted, Buyer's agents should possess relevant knowledge and assist buyers with this critical issue. Look for clues, such as:

• Suspicious metal pipes on the exterior wall or ground (possible fill/vent pipes)
• Unused metal pipes entering the basement foundation
• Leftover copper pipes on basement floor (possible supply lines)
• All concealed spaces including those in crawlspace and outdoor

Ask the seller directly or request disclosure. You can also contact the TSSA or fire department for more information.

Sellers and their agents have a legal duty to disclose the presence of oil tanks. Failure to do so may result in legal actions. For example, a buyer in downtown Toronto discovered a tank with leftover oil in the crawlspace after closing. Fortunately, the tank reminded intact but required removal. The space had been locked and inaccessible during viewings. The buyer sued for compensation. The seller claimed that the tank had been there for years with no issue, and didn t know anything shall be done about it. The seller's agent stated that he had never visited the space, didn t know its existence, therefore, it had nothing to do with him. The court ruled against the seller and agent, because:

• It is a common sense that an oil tank is not a usual feature, requiring disclosure.
• Locking access suggested intentional concealment.
• The seller agent had professional obligations to inquire about such information.

Conclusion

Oil tanks represent a significant risk for all parties involved in real estate transactions. Stay alert and approach with caution. However, this doesn't mean that oil-heated homes are inherently dangerous. All heating systems - natural gas, electric, or oil - have some safety risks. As long as regulations are followed, preventive measures are taken, and regular maintenance is done, oil remains a reliable heating option.

This article was originally published in "Real Estate Weekly", Issue #402, September 21, 2012.