What does an air compressor that pumps "oil" do to a tank?

[md21722]

I have seen two compressors with shot rings that were pumping oil. In both cases the tanks had inches of powdered rust colored in them, usually at one corner. In cases where the pump was good, but the tank not drained regularly, the tank was more likely to have water and flakes of rust coming off the tank shell. Just wondering what other experiences folks have had.

 

[engineer2]

I've seen what looks like runny baby poop. It's an emulsion of oil and water. If enough collects in the tank, the oil will separate and float on top. I would think the oil blowby would keep flakes of rust to a minimum.