Background
Action Taken
                          United States
                          Environmental Protection
                          Agency
                          Solid Waste and
                          Emergency Response
                          5403W
EPA 510-F-95-004
September 1995
Office of Underground Storage Tanks
Environmental
Fact Sheet


 EPA's Lender Liability Rule

 for Underground Storage Tanks


        Many underground storage tank (UST) owners and operators,
 particularly small businesses, need capital to makp improvements to their
 facilities to comply with a broad spectrum of environmental regulations.
 EPA is particularly concerned about the ability of UST owners and
 operators to comply with federal UST upgrading and replacement
 requirements,. The uncertainty of the liability of secured-creditors (financial
 institutions and others who extend secured loans) regarding UST properties
 that they hold as collateral has had a chilling effect on lenders' willingness to
 make loans to UST owners. This rule should remove a current barrier to the
 financing of UST facilities and result in greater capital availability for UST
 owners and operators. In addition, this rule supports the Clinton
 Administration's Brownfields Economic Redevelopment Initiative, which is
 intended to demonstrate ways to return abandoned, contaminated urban
 sites to productive use and to ensure future development is done in a
 sustainable, environmentally sound manner.      |
                                            !

      Subtitle  I of the Resource Conservation and Recovery Act (RCRA)
 contains a "security interest exemption" that provides secured creditors
 ("lenders") an explicit statutory exemption from corrective action (cleanup)
 liability for releases from petroleum USTs. However, many lenders are
 unaware of the existence of this exemption, and many others are uncertain
 about its scope of coverage. Further confusion hajs resulted from various
 court cases regarding Superflmd lender liability. In 1994, the D.C. Circuit
 Court of Appeals vacated EPA's Superfund lendei1 liability  rule, which'
 attempted to  clarify the security interest exemption in the Comprehensive
 Environmental Response, Compensation, and Liability Act (CERCLA). The
 court decision and EPA's Superfund rule were limited to actions taken under
 CERCLA and do not affect today's UST rule:   j

       The UST-specific lender liability rule was published in the Federal
'Register on September 7, 1995. This final rule specifies conditions under  ,
 which certain secured lenders may be exempted from RCRA Subtitle I
 regulatory requirements for petroleum underground storage tanks. Under
 the rule, a lender is eligible for an exemption, both prior to and after
 foreclosure, from compliance with all Subtitle I requirements as an UST
 "owner" and "operator" if the lender: 1) holds an ownership interest in aa
 UST, or in a property on which the UST is located, in order to protect its
 security interest (a lender typically holds property j as collateral as part of the
 loan transaction); 2) does not engage in petroleun^ production, refining, and
 marketing; and 3) does not participate in the management or operation of
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 Discussion
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 the UST. A lender also must empty its UST(s) within 60 days after
. foreclosure, and either temporarily or permanently close the UST(s)
 unless there is a current operator at the site (other than the lender) who
 can be held responsible for compliance with UST regulatory
 requirements.

     EPA believes that a lender holds -only limited ownership rights when
 it takes possession of an UST property primarily to protect a security
 interest. These limited ownership rights do not rise to the level of full
 ownership sufficient to make the lender an "owner" of the UST(s)  under
 RCRA Subtitle I, provided the lender meets the criteria specified in
 today's rule (i.e., holds indicia of ownership primarily to protect a
 security interest without participating in management of an UST or
 engaging in petroleum production,  refining, and marketing).

     By foreclosing, a lender takes  control of and responsibility for the
 UST, thus potentially subjecting it to all Subtitle I requirements that an
 "operator" must meet. Under today's rule, however, a lender is exempt
 from the federal'UST regulatory requirements as an operator if: 1) there
 is a current operator at the site who can be held responsible for
 compliance with Subtitle I regulatory requirements; or 2) the UST(s) are
 emptied within 60  days after foreclosure and the lender either
 temporarily or permanently closes the UST(s).

     A lender who chooses to participate in management of or continue
 operation of its USTs through storage, filling, or dispensing of petroleum
 is not eligible for the regulatory exemption and faces potential UST
 regulatory responsibility for corrective action in the event of a release.
 The lender may also be responsible  for compliance with the UST
 technical standards and financial responsibility requirements under
 Subtitle I of RCRA.

    _ In contrast to operating an UST system, the-rule allows a lender to
 participate in a wide range of administrative and financial management
 activities for USTs as well as to undertake activities to protect human
 health and the environment. Among the activities that a lender may
 perform  without incurring liability under RCRA Subtitle I are loan
 origination,  loan policing and work  out, foreclosure on and sale of the
 UST or UST property, environmental inspections or audits, corrective
 action for releases from USTs, and emptying and closing USTs.

       The rule, titled "Underground Storage Tanks—Lender
Liability,"amends the Code of Federal Regulations at 40 CFR Parts 280
 and 281. For additional information or for a copy of thet Federal Register
notice, including electronic access on the Internet or EPA's CLU-IN
 system, contact EPA's RCRA/Superfund Hotline, Monday through
Friday, 8:30 a.m. to 7:30 p.m. EST.  The national toll-free number for
callers outside the Washington, D.C., service area is 1 800 424-9346;
callers within the Washington, D.C., area must use 703 412-9810. For
the hearing impaired, the number is  TDD  1 800 553-7672, or 703 412-
3323 (local).   .

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