First it was high credit card fees. Then came higher gas prices. Now, hundreds of gas stations around the state are shutting down because their insurance companies will not renew policies unless stations install new double-walled underground gas tanks, which can cost $400,000.
That can make or break stations, which make money on the sale of sodas and plastic-wrapped honey buns, not gas.
“We are going to lose a lot of stations because they have not upgraded,” said Pat Moricca, president of the Florida Gasoline Retailers Association in Longwood.
Charles Beale, owner and vice president of Delta Petroleum, a Mangonia Park-based firm that sells and installs the tanks, said: “There are a lot of people having trouble. I had one in here the other day who had tears in his eyes. He said there was a good chance he would lose his property and his business.”
Figures are not available on how many stations have closed, but an estimated 20 percent of the state’s approximately 8,000 to 9,000 gas stations have yet to make the change.
“If it is a mom-and-pop and the margins are slim, it’s not worthwhile for them to spend $250,000 to $300,000 to upgrade the tanks. Some will shut that down and just run the convenience store,” said Jack Barsin, president of Tank Insure Inc. in Merritt Island. “You will see more and more of it by the end of the year.”
It’s not just gas stations at risk.
George Lott, owner of Lott Bros. Marina in North Palm Beach, spent $20,000 to have the marina’s underground tank removed rather than replacing it for around $100,000.
“It would have taken me the rest of my life to pay that off with what we make on gas,” he said. In business since 1962, the marine and tackle store no longer sells fuel to boaters.
The tank rule affects hundreds of businesses with underground fuel tanks, whether the fuel is for a generator or lawn mowers.
Publix Super Markets has fuel tanks to run standby generators; hospitals in Palm Beach County do, too. Golf courses, churches, nursing homes and farms are subject to the regulation.
But it comes at the worst possible time for gas station owners.
When gas prices were high, station owners had to pay up to 12 cents a gallon to credit card companies, which tie their fees to the cost of gas. As prices nose-dived, the tiny profit margins on gas sales tightened even further. As the recession took hold, even the sale of snacks _ a profit generator _ fell.
The nation’s credit crunch has exacerbated the inability of station owners to finance new tanks, a job that typically costs $200,000 to $300,000.
Larger, newer stations aren’t likely to have a problem.
“With the smaller ones, the older ones with two or three bays, definitely the tanks are an issue,” said real estate broker Marc Gomes, vice president of PetroProperties and Finance in Coral Gables. “They can’t afford to get them done, or they cannot afford to get financing to get them done.”
Real estate broker and consultant Ron Santicola, president of Highland Beach-based Condevco LLC, said: “There were people who had tank construction jobs lined up, and the banks pulled funding.”
The wave of insurance cancellations “came out of nowhere,” Moricca said. “This was something we never expected.”
Even though the new tank deadline is not until Dec. 31, insurers have been cutting off stations since last year. Lott, for instance, said he made the decision after cancellation of the marina’s pollution insurance in September.
It’s illegal to operate in Florida without pollution insurance.
Tank Insure’s Barsin said ACE Insurance, a global firm headquartered in Zurich, Switzerland, has dropped at least 200 of his clients. The other two major providers of pollution liability insurance will not write policies for new customers.
“I have files lined up the wall that have been non-renewed by ACE,” Barson said. “They can’t get insurance.”
The Florida Department of Environmental Protection is aware that insurers are not renewing policies for gas stations.
“We can’t control the decisions of the insurance company,” spokeswoman Cristina Llorens said.
One reason insurance companies are skittish is that evidence of fuel spills might be found during installation. Remediation could easily run into five figures, Santicola said.
“You can’t blame the insurance company,” she added.
Jim Smith, president and CEO of the Florida Petroleum Marketers and Convenience Store Association in Tallahassee, estimates at least several hundred stations are in jeopardy of closing or have closed because of the lack of pollution liability insurance.
Staying open may just cost too much.
Carl Berner, president of Berner Oil in Clewiston, is primarily a wholesale distributor whose company delivers fuel to farmers and small gas stations. He also owns six stations, including two in Clewiston that need new tanks. That town’s future is in jeopardy because of the state’s pending buyout of U.S. Sugar Corp.
“I am looking at a quote to do my tanks right now for $184,000, and that is with me providing the tanks. We are looking at $200,000 to $220,000 per location,” Berner said. “I have to do a couple of locations out here, and I am looking at the town being decimated.”
Rich Ice Cream made the decision more than a decade ago.
“We were told they needed $150,000 worth of upgrades” to gas and diesel tanks, said Alan Beswick, plant engineer for the West Palm Beach ice cream maker. “We decided at that point it wasn’t worth it.”
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