Attachment A Division of Waste Management Response to Steel Tank

Attachment A

Division of Waste Management Response to Steel Tank Institute December

2010 Petition to Amend UST Rule 15A NCAC 02N .0903(a)

March 9, 2011

STAFF RECOMMENDATION

The Division of Waste Management (DWM) recommends that the Environmental Management

Commission (EMC) reject Steel Tank Institute’s (STI’s) petition for the following reasons:

A. Historically in North Carolina, cathodic protection systems have not been operated and

maintained in accordance with the requirements;

B. The 2007 secondary containment rules including the amendments made in 2009 provided ample

opportunity for public scrutiny to identify and address any major impacts to the regulated

community and to the steel tank industry;

C. The 2007 rules disallowing cathodically protected tanks do not have a significant adverse

financial impact on the regulated community or steel tank industry in North Carolina.

BACKGROUND

Federal and state regulations require that UST systems installed after December 22, 1988 must be

continuously protected from external corrosion. Before November 1, 2007 (the effective date of the

state’s new secondary containment rules), tanks, piping and other underground components that routinely

contained product could meet these requirements in one of three ways:

(1) UST system components could be constructed of materials such as fiberglass or plastic that would

not corrode;

(2) Metal components could to be isolated from the ground; or

(3) Metal components could have a dielectric coating (a thin imperfect asphalt-like coating) and a

cathodic protection system (a sacrificial anode system or impressed current system).

If tank owners/operators elected to use tanks with a cathodic protection system, additional operation and

maintenance requirements have to be met:

(1) Tanks with sacrificial anodes (also known as galvanic systems) have to be tested within six

months of installation and then every three years thereafter. Records of these tests must be

maintained for six years. (Sacrificial anodes are strapped to the sides of a tank at the factory prior

to installation.)

(2) For tanks with impressed current systems, the impressed current systems have to be designed by

a corrosion expert, tested within six months of impressed current system installation and then

every three years thereafter. The test records must be maintained for six years. Impressed current

systems require electrical current. Therefore, per the regulations, a tank owner/operator is also

required to check the ampere readings on the impressed current system rectifier every 60 days

and record those readings in a log. Records of the last three 60 day readings must be maintained.

(Impressed current systems are field installed cathodic protection systems that utilize sacrificial

anodes and electrical current.)

GWC March 2011 Item #2 Attachment B

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(3) If any test result from a sacrificial anode or impressed current system is a “fail” or

“inconclusive,” the tank owner/operator is required to have the cathodic protection system

repaired immediately and then retested.

(4) When sacrificial anodes become depleted and fail (according STI’s petition, 18% of cathodic

protection systems fail 6 to 12 years after tank installation and 42% more fail 12 to 19 years after

tank installation), tank owners/operators usually install impressed current systems. From that

point on, the tank owners/operators are required to comply with all of the impressed current

system requirements described in (2) above.

In contrast, tanks that are constructed of materials that do not corrode have no additional requirements

and no additional costs. Figure 1 (also see Table 1) shows the number of tanks installed in North

Carolina since 1990. It also shows the different types of tanks installed. The figure illustrates a decline in

the use of cathodically protected tanks (steel with sacrificial anodes) and an increase in the use of non-

corroding steel tanks (clad/jacketed). It is clear from this data that tank owners began to prefer tanks that

required less maintenance and monitoring.

After November 1, 2007, tanks with cathodic protection systems are no longer allowed to be installed.

Only double-walled steel tanks with two walls of steel and a thick fiberglass coating or with one steel wall

and an outer fiberglass or plastic shell are allowed. Double-walled fiberglass tanks are also allowed.

The 2007 rules did not eliminate steel tanks. The rules only limited the types of tanks installed to those

with non-corroding exterior walls. Tanks allowed to be installed include all of the popular clad and

jacketed steel tanks being manufactured and purchased by tank owners today – STI’s Permatank, STI’s

ACT 100 and 100U tanks, Highland Tank’s Titan and Highguard tanks, Modern Welding’s Glassteel II

tank, etc. These tanks are being manufactured by many of the same manufacturers that used to produce

cathodically protected steel tanks – General Industries in Goldsboro, NC manufactures Permatanks,

Highland Tank in Greensboro, NC and Pennsylvania manufactures Titan, Highguard, ACT 100 and ACT

100U tanks, Service Welding in Kentucky manufactures Permatanks, and Modern Welding in Georgia

manufactures Glassteel II tanks.

A. CATHODIC PROTECTION SYSTEMS HAVE NOT BEEN OPERATED AND

MAINTAINED IN ACCORDANCE WITH FEDERAL AND STATE REQUIREMENTS

The primary reason that the 2007 rules disallowed cathodically protected tanks from being installed after

that date was a 20-year history in North Carolina of widespread non-compliance with the operation and

maintenance requirements for cathodic protection systems.

The UST program has been inspecting regulated UST systems for over 20 years. These inspections also

include tanks installed prior to December 22, 1988 and which were upgraded with corrosion protection

(primarily impressed current systems) by 1998. Based on its inspection program, one out of every three

to four inspections (we currently perform about 2,800 inspections per year) finds violations of the

cathodic protection regulations. The common violations are failing to have a cathodic protection system

tested every three years, failing to have it repaired in a timely manner if a test fails or if the system

becomes inoperative, failing to keep the electricity on for impressed current systems and failing to

maintain the test records or 60 day readings.

Compliance with corrosion protection is difficult because of the periodic testing, record keeping and extra

maintenance needed to keep these systems operating properly. Furthermore, there are extra costs for

electricity, testing/corrosion expert system designs, repairs, downtime during repairs, etc. Also, most

UST systems change hands frequently and often the new owners do not know or understand the cathodic


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protection operation and maintenance requirements. Therefore, cathodic protection systems are not tested

or maintained as needed. Lack of compliance has led to notices of violation, fines and, in some cases,

removal of tanks.

Over the years, ensuring compliance with cathodic protection requirements has caused the state to expend

a great amount of resources performing inspections, issuing notices of violation, filing enforcement

recommendations, assessing penalties and responding to legal appeals, training owner and operators,

training staff, tracking compliance and testing data and preparing forms, policy documents, guidance

materials.

The rate of non-compliance for properly operating and maintaining cathodic protection systems has

become a national issue as is evidenced by the operator training requirement placed on states by the

federal Energy Policy Act of 2005. North Carolina must now implement a training program for non-

compliant operators providing day long training on cathodic protection system requirements in addition to

other requirements.

In summary, installation of tanks with cathodic protection systems was disallowed as an option after

November 1, 2007 due to the difficulty in maintaining and monitoring these systems and the enormous

amount of state resources required to ensure compliance with the regulatory requirements.

B. THE 2007 SECONDARY CONTAINMENT RULES (INCLUDING 2009 AMENDMENTS)

HAD SUFFICIENT PUBLIC SCRUTINY TO IDENTIFY AND ADDRESS ANY MAJOR

IMPACTS TO THE REGULATED COMMUNITY AND TO THE STEEL TANK

INDUSTRY.

STI’s petition stated that the “2007 change in the regulation was not widely publicized and not well

known in the industry. No effort was made to inform tank owners or tank fabricators that cathodic

protection was being removed from the regulation for new storage tank installations….Steel Tank

Institute was actively involved in the most recent rulemaking with the NCDENR, and agency staff was

not forthcoming about the rule revision in question despite their knowledge of the adverse effects it would

have on the steel tank industry.”

DWM asserts that its staff has been forthcoming about all proposed rule changes and has responded with

honesty and candor to all questions asked. In fact, staff have met or exceeded the minimum public

notification standards required by the Administrative Procedures Act (NCGS 150B-21.12). From 2005

through 2010, STI has been directly involved in the UST rulemaking proceedings and has had ample

opportunity to review and provide comments on issues that concern it or the businesses and organizations

that it represents. Furthermore, staff did not have reason to believe that this rule would have an adverse

effect on the steel tank industry. As shown in Figure 1 and Table 1, tank owners installed only a handful

of these tanks in the years before the secondary containment rules were even drafted. Instead, they were

installing clad and jacketed steel tanks which do not require cathodic protection systems.

2005 Draft Rules

In April 2005 and prior to formal rulemaking, DWM sent a draft of the secondary containment rules to

STI for review and comment. The current language disallowing tanks with cathodic protection was in

that 2005 draft as15A NCAC .0301(g)(9)(C) (Attachment B). Mr. Charlie Frey of Highland Tank made

the comment that these tanks should not be excluded. Ms. Lorri Grainawi of STI commented that the new

performance standards did not include STI standards for its steel cathodically protected tank (known as

sti-P3tank). Staff did not provide an official response to those comments at that time, but did consider

those comments when preparing the next draft for formal rulemaking. Because of substantial non-

compliance with the cathodic protection requirements by tank owners/operators coupled with the


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declining rate of installation of these tanks, DWM did not change the draft rules to allow installation of

those tanks.

2007 Rulemaking

The current language disallowing tanks with cathodic protection appeared again in rules that were

published in the March 1, 2007 North Carolina Register (Attachment B). There were no comments

regarding that section of the rule by any of the reviewers. Ms. Lorri Grainawi again commented on the

Industry Standards section (15A NCAC 02N .0907) of the rule and requested that the Environmental

Management Commission (EMC) add the “following Steel Tank Institute Standard: 1) sti-P3

Specification and Manual for External Corrosion Protection of Underground Steel Storage Tanks,

stiP3….”

DWM responded in its “Public Comments and Staff Responses Regarding the Proposed Amendments to

15A NCAC 2N” document (Attachment B) that became part of the hearing record, “ The Division agrees

that your comment is accurate; however, under the proposed amendments only steel tanks that are

intrinsically protected from corrosion (e.g., fiberglass clad or jacketed tanks) would be allowed.

Therefore, the aforementioned standard will not be added to the rules.” The rules maintaining that

requirement were adopted by the EMC on July 12, 2007 and became effective November 1, 2007.

2009 Rulemaking

In December 2007, STI and others including Highland Tank brought a petition before the EMC

requesting to amend the very same section of the rules (15A NCAC 02N .0903 – Tanks) containing the

current language disallowing cathodically protected tanks. However, the petition that was submitted did

not address the cathodic protection issue at all. The concern that compelled the petitioners to submit that

petition was to change the language of .0903 to allow another interstitial monitoring method (electronic

liquid detecting sensors) to assist the steel tank industry who held that fiberglass tanks had an unfair

competitive advantage due to the availability of better monitoring methods for fiberglass tanks. The

amendments to .0901 and .0903 were published on May 1, 2009 in the North Carolina Register

(Attachment B). Mr. Charlie Frey of Highland Tank as well as Mr. Wayne Geyer attended the public

hearing. The rules were adopted by the EMC on November 19, 2009 and became effective on February

1, 2010. This rule change appears to have addressed steel tank manufacturers’ concerns.

In summary, the language disallowing cathodically protected tanks has been in the published rules and in

drafts of the rules for over six years. DWM complied with the requirements of the APA and provided

sufficient notice. The Petitioner and Highland Tank even commented on the proposed rule directly and/or

indirectly and were provided a direct response from staff. The regulated community and steel tank

industry were well aware of the rule and rulemaking procedures.

C. THE 2007 RULE DISALLOWING CATHODICALLY PROTECTED TANKS DOES NOT

HAVE A SIGNIFICANT ADVERSE FINANCIAL IMPACT ON THE REGULATED

COMMUNITY OR STEEL TANK INDUSTRY

STI’s petition claims that the 2007 rule disallowing cathodically protected tanks will have an adverse

financial impact on the steel tank industry including cathodic protection testers, experts and installers.

Based on its evaluation of the financial impacts, DWM finds that the impact is not nearly as significant as

STI’s petition alleges.

STI claims that steel tank fabricators will lose over $26,000,000 in sales of cathodically protected tanks

over the next 20 years. This figure assumes that 102 cathodically protected tanks will be installed in

North Carolina each year for the next 20 years. STI arrived at this average number based on the total

number of cathodically protected tanks that STI estimates were installed in North Carolina over the past


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20 years. Figure 1 shows the actual number of regulated tanks registered in North Carolina since 1990.

The total number is further broken down by types of tanks – cathodically protected (steel with anodes),

steel clad/ jacketed and fiberglass. The total number for the past 20 years roughly corresponds to STI’s

estimate. However, the graph clearly shows that the number of cathodically protected tanks installed did

not remain steady each year, but plummeted after 1996. In fact, between 1997 and 2007, there was an

average of only 7.7 cathodically protected tanks installed each year. If you consider the period from 2000

to 2007, there was an average of only 3 tanks per year. Since 2003, only two tanks were installed.

DWM’s analysis of the data shows that installations of cathodically protected tanks sharply declined over

the past 20 years and long before the secondary containment rules were proposed. It appears that tank

owners just chose to install clad/jacketed steel tanks or fiberglass tanks instead of the cathodically

protected tanks.

A more realistic yet still optimistic estimate for a cost analysis is to use an average of 3 cathodically

protected tanks per year over the next 20 years. Using STI’s unit costs, this would result in a loss of sales

of cathodically protected tanks of about $787,000 over 20 years – only 3% of the cost impact estimated

by STI. The adverse financial impact on steel tank manufacturers can be further offset by their sales of

non-corrodible clad and jacketed steel tanks (including those such a Permatank for which STI holds a

patent) in the place of cathodically protected steel tanks. Therefore, the actual potential adverse financial

impact to steel tank manufacturers is really only a fraction of that estimated by STI.

In addition, based on the assumption that 102 cathodically protected tanks will not be allowed to be

installed each year for the next 20 years, STI estimated that cathodic protection testers, experts and

installers would lose about $4,050,000 in business revenue. Using DWM’s more realistic estimate of 3

tanks per year, the testers/experts/installers lost business revenue would only be about $121,500 – again a

very insignificant cost impact. It should also be noted, that an increase in business revenue for the

cathodic protection testers/experts/installers would result in a loss of business revenue for

owners/operators of cathodically protected tanks. In fact, the impact to these parties should probably not

even be considered since their costs would actually create an adverse financial impact of the same amount

for the tank owners/operators.

In summary, STI’s $26 million dollar estimate of financial impact to steel tank manufacturers is not based

on realistic assumptions. When historical trends for tank installations are considered, the adverse

financial impact is reduced to about $800,000 over 20 years or about $40,000 per year. Based on its cost

analysis, DWM has determined that maintaining the current rule disallowing installation of new

cathodically protected tanks will not create a significant adverse financial impact to the steel tank

manufacturers.


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522

346

250 235 215

59 4816 18 25 11 8 4 0 0 0 0 2

1490

1064

972

1038

1197

789745

706

783

710

548

490

373

282317 330

360

241

0

200

400

600

800

1000

1200

1400

1600

Figure 1. Types of Tanks Installed between 1/1/90 to 11/1/2007**After 11/1/07, tanks must be clad/jacketed steel or fiberglass.

# Steel w/ anode tanks # CLAD/Jacketed steel tanks # Fiberglass tanks Total Installed


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Table 1. Types of Tanks Installed 1990 - 2007

Year # Steel w/ anode tanks # CLAD/Jacketed steel tanks# Fiberglass tanks Total Installed

1990 522 202 766 1490

1991 346 133 585 1064

1992 250 218 504 972

1993 235 341 462 1038

1994 215 476 506 1197

1995 59 323 407 789

1996 48 349 348 745

1997 16 359 331 706

1998 18 405 360 783

1999 25 363 322 710

2000 11 236 301 548

2001 8 234 248 490

2002 4 192 177 373

2003 0 165 117 282

2004 0 195 122 317

2005 0 175 155 330

2006 0 186 174 360

2007 2 123 116 241

Total 1759 4675 6001 12435


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Documents

Attachment A Division of Waste Management Response to Steel Tank