Thursday
September 7, 1995
Part II
Environmental
Protection Agency
40 CFR Parts 280 and 281
Underground Storage Tanks—Lender
Liability; Final Rule
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46692 Federal Register / Vol. 60, No. 173 / Thursday, September 7. 1995 / Rules and Regulations
ENVIRONMENTAL PROTECTION
AGENCY
40 CFR Parts 280 and 281
[FRL-5292-1]
RIN 2050-AD67
Underground Storage Tanks—Lender
Liability
AGENCY: Environmental Protection
Agency.
ACTION: Final rule.
SUMMARY: The Environmental Protection
Agency (EPA) is issuing this rule under
the Resource Conservation and
Recovery Act (RCRA), Subtitle I—
Regulation of Underground Storage
Tanks. This rule limits the regulatory
obligations of lending institutions and
other persons who hold a security
interest in a petroleum underground
storage tank (UST) or in real estate
containing a petroleum underground
storage tank, or that acquire title or deed
to a petroleum UST or facility or
property on which an UST is located.
This final rule specifies conditions
under which these "security interest
holders" may be exempted from the
RCRA Subtitle I corrective action,
technical, and financial responsibility
regulatory requirements that apply to an
UST owner and operator. This rule
should result in additional capital
availability for UST owners, many of
whom are small businesses, and will
assist them in meeting environmental
requirements by improving their
facilities.
EFFECTIVE DATE: This rule is effective
December 6,1995.
ADDRESSES: The official record for this
rulemaking, Docket Number UST 3-18,
is located in the UST Docket, room
M2616 of the U.S. Environmental
Protection Agency, 401M Street, SW.,
Washington, DC. The docket is open
from 9 a.m. to 4 p.m., Monday through
Friday, excluding Federal holidays.
Docket materials, including a
comprehensive document containing
EPA's response to comments received
on the proposed rule, may be reviewed
by appointment by calling (202) 260-
9720. Copies of docket materials may be
made at a cost of $0.15 per page. The
mailing address is U.S. Environmental
Protection Agency, OUST Docket
(5305), 401 M Street, SW., Washington,
DC 20460. Please note that EPA is
planning to relocate the UST Docket to
Arlington, VA during September 1995.
You may call (202) 260-9720 for up-to-
date information on access to the
docket.
FOR FURTHER INFORMATION CONTACT: For
further information about this rule,
contact the RCRA/Superfund Hotline,
U.S. Environmental Protection Agency,
Washington, DC. 20460, (800) 424-9346
(toll-free) or (703) 412-9810 (local). For
the hearing impaired, the number is
(800) 553-7672 (toll-free), or (703) 412-
3323 (local). For technical information
on this rule, contact John Heffelfmger in
the EPA Office of Underground Storage
Tanks at (703) 308-8881.
SUPPLEMENTARY INFORMATION: The
contents of today's preamble are listed
in the following outline:
I. Background
II. Description of the UST Regulatory
Program
A. UST Technical Standards
1. Leak Prevention
2. Leak Detection
3. Release Reporting
4. Closure
5. Notification, Reporting, and
Recordkeeping
B. Corrective Action Requirements
C. Financial Responsibility Requirements
D. State Program Approval Regulations
E. Scope of the UST Program
III. The UST Security Interest Exemption and
Intent of Today's Rule
A. Overview
B. Legal Authority
C. Real Property Used as Collateral
D. Abandoned Tanks
E. Liability of a Holder as an Owner of an
Underground Storage Tank or
Underground Storage Tank System
1. Petroleum Production, Refining, and
Marketing
2. Indicia of Ownership
3. Primarily to Protect a Security Interest
4. "Holder" of Ownership Indicia
5. Participating in Management
F. Liability of a Holder as an Operator of
an Underground Storage Tank or
Underground Storage Tank System
- 1. Pre-Foreclosure Operation
2. Post-Foreclosure Operation
3. Release Reporting Requirements
Following Foreclosure
G. Financial Responsibility Requirements
H. State Implementation and State Program
Approval
I. Holders' Access to State Funds
J. Outstanding Loans and Loans in
Foreclosure Upon the Effective Date of
the Rule
IV. Issues Outside the Scope of this Rule
A. Petroleum Producers, Refiners, and
Marketers
B. Third Party Liability
C. Trustee and Fiduciary Liability
D. Hazardous Substance Tanks
E. Hazardous Waste Tanks
F. Aboveground Storage Tanks and Heating
Oil Tanks' B
V. Economic Analysis
VI. Regulatory Assessment Requirements
A. Executive Order 12866
B. Regulatory Flexibility Act
C. Paperwork Reduction Act
D. Unfunded Mandates Reform Act
I. Background
EPA is establishing regulatory criteria
specifying which RCRA Subtitle I
requirements are applicable to a secured
creditor. Section 9003(h)(9) of RCRA
exempts from the definition of "owner,"
for purposes of § 9003 (h)—EPA
Response Program for Petroleum, those
person;! who, without participating in
the management of the UST or UST
system, and who are not otherwise
engaged in petroleum production,
refining, and marketing, maintain
indicia of ownership in an UST or UST
system primarily to protect a security
interest. Those most affected by this
"security interest exemption" include
private lending institutions or other
persons thai: provide loans secured by
real estate containing an UST or UST
system, or that acquire title to, or other
indicia of ownership in, a contaminated
UST or UST system.1 However, the
security interest exemption is not
limited solely to lending institutions; it
potentially applies to any person whose
indicia of ownership in an UST or UST
system Is maintained primarily to
protect a security interest.
The RCRA Subtitle I security interest
exemption affects not only secured
creditors but also UST and UST system
owners who seek capital through the
private lending market. Today's rule
provides a regulatory exemption from
the federal UST regulatory requirements
for those persons who provide secured
financing to UST and UST system
owners. EPA expects this rule, in
conjunction with the statutory
exemption in § 9003(h)(9), to encourage
the extension of credit to credit-worthy
UST owners. Until now, EPA believes
that concerns over environmental
liability have made a significant number
of lenders reluctant to make loans to
otherwise credit-worthy owners and
operators of USTs. The free flow of
credit to UST owners (many of whom
are small entities that may rely on
secured financing mechanisms for
capital) i.s expected to assist UST
owners in meeting their obligations to
upgrade, maintain, or otherwise comply
with RCRA Subtitle I and other
environmental requirements.
Conversely, the lack of such capital may
adversely affect the ability of an UST
owner to meet its obligations under
Subtitle I, with concomitant adverse
environmental impacts from USTs and
1 Under the laws of some states, an interest in real
property mny include an interest in USTs or UST
systems located on that property. See Sunnybrook
Realty Co. Inc. v. State of New York, Kesbec, Inc.
v. State of Mew York, Claim Nos. 32844, 33125,15
Misc. 2d 739; 182 N.Y.S. 2d 983. Of course, the loan
documents may specifically include or exclude
USTs as collateral securing the obligation.
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ftdrt» / VbL §9, Nb. 17» / Ttomdiy. Stptsmbe. 7. 1985 / 8ul« and Regulatos
due l@ the laek ef finanela§ te make the
neeesiary imprevemeats,
The Ageney Is also eaaeeraed that if
otherwise gredit'Werfey UST ewaer s
and operalori are uaable te stela
financing to perferm leak deteetiaa
teslii or te upgrade or replaee defieieat
tankg, th§ market far UST equipmeat
eauld he adversely affeeted, thereby
limiting the availability and/or affeetiai
the east of sueh equipmeat. la additiea,
i laek of adequate eapital eeuld preduee
a ripple effeet whieh weuld eut aefess
oilier portieai ef the Unrelated
industrial seeter fa? equipragat aad
§ervieeii For example, ba§ed @a letters
reeelved from UST equipmeat
manufaeturers, !PA believes feat this
isolor has suffered a§ a direst result ef
Qi§ eapital squeeie aa UST ewaers aad
op§Falersi The Ageney is further
§one§raed that many UST equipmeat
manufaeturers may Had it iagreasingly
diffteult to sustaia their preduetiea ef
UST equipmeat, Uaaeeessary
69a§tfi6ti0a§ ea fee free flew ef eapital
Uader the Hagardeus aad Selid Wast§
Netifieatiea (iaeludiaj
itaadasds far agw UST
uadergreuad sterap taak§ by addia§
Subtitls I te fee Reseureg eeagervatiea
aad Reeevery Aet, Subtitle i required
IFA te develep a eempreaeagivg
replatery program fe? UlTs iteriag
_9B|regs dire§ted fee Apaey te publish
replatieag feat weuld require ewagrs
aad eperatew ef aew taaks aad taak§
already ia fee sreuad te p§v@at aad
deteet leakg, eUaaup liakg, aad
demea§trate feat they are flaaaeially
eempea§atia§ feirl pafties far rg§ultia§
icBUiatUiJ icqitixiciiiojxea oc?c-i -frrt VHITMOM toQ^tt orac3 t\3Ct
§avif§afflgat: ia aaditi§a> should a igak
eeeuf, th§ r§|iiif§ffi8nts provide that th§
owner is responsible for addressing the
problem. These same requirements
apply to any person who "operates" an
UST system. The term "operator" is
very broad and means "any person in
control of, or having responsibility for,
the daily operation of the underground
storage tank" (§ 9001(4), 42 USC
6991(4)). As with owners, there may be
more than one operator of a tank at a
given time. Each owner and operator
has obligations under the statute and
regulations. In this respect, it is
important to understand that a person
may have obligations under Subtitle I
either as an owner or as an operator, or
both.
The following subsections describe
briefly each of the major components of
the UST regulatory program applicable
to persons who own or operate USTs
and UST systems.
A. UST Technical Standards
The technical standards of 40 CFR
Part 280 referred to here include:
Subpart B—UST systems: Design,
Construction, Installation, and
aetifieatiea requireaiiatB}! Subpart 0—
dsasral Operating Riauiremssts
eerresiea g? ettetiea, regertini aad
reeerdkggpiaff)! Subpart B=R§lea§§
Seteetiaas I iSOJO frepertiai ef
Rekagg Rgpertiai, lavirtigatiea, aad
Geafiffflatieas aal Subpart G=0ut ef
Serviee UiT Systems (iaeludiai
tifflpefary tad piraianiat eleiure).
Thggg rgiulatieag tapes@ ebliptiena
upea UST ewagfi aad eggraten,
ggpaf at§ fees* fes Subtitfg I eoae
aetiea rgauiremeat§ di§eus§gd ia
I,
fgleage pgveatiaa e? detgetiea features,
48 QFR1188,11 requires UIT ewaef§
aad eperaterg te eaguf e that fegir taaks
spills aad eve?fills ae later feaa
Begember 11, llli. Taakg iagtalled
befere Beeember 11, IliS must be
seplaged er upgraded by fittiag them
with g@rresiea pretegtiea aad spill aad
ever fill pf eveatiea devigeg t@ brias
them up te aew=taak staadards-. UlTs
iastalled after Beggmber 11, llil must
be a'befgl§ss=feiafeiged pla§tig,
g§fr§§i@a=pf@tegted steel, a gempesite §f
feg§g materials, §f detesmiaed by feg
implefflgatiag agsaey to be aa less
protective of human health and the
environment, and must be designed,
constructed, and installed in accordance
with a code of practice developed by a
nationally recognized association or
independent testing laboratory. Piping
installed after December 22,1988
generally must be protected against
corrosion in accordance with a national
code of practice. All owners and
operators must also ensure that releases
due to spilling or overfilling do not
occur during product transfer and that
all steel systems with corrosion
protection are maintained, inspected,
and tested in accordance with § 280.31.
2. Leak Detection
In addition to meeting the leak
prevention requirements, owners and
operators of USTs must use a method
listed in §§ 280.43 through 280.44 for
detecting leaks from portions of both
tanks and piping that routinely contain
product. Deadlines for compliance with
the leak detection requirements have
been phased in based on the tank's age:
The oldest tanks, which are most likely
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te leak, had fee eafliest eempliaage ume psaea aetefmiaea gy me
deadliaeg: Fhage=ia ef fee leak detegtiga implemeatiai aseagy} pfigf te fee
fe|uifeffl|atg wag eempleted ia llll, pefiaaaeat gllsufe gf aa UIT- !a
aad all UiT gptog ghguld agw be ia additiga, gwaefg aad gpefatgfg must
ggfapliaage wife feege f epifemeatg: keep fegefdg ef tegtiag fegultg fgf fee
gafegdig jfgtegtiga gygtem, if eae ig
ugedi leal detegtiea peffgfmaage aad
upkeep; fepaifgi aad gite ag§eggmeat
ea ggvef age pf gvided by a gtate
fuad:
UiT ewaef g aad epef atgf g mugt, ia
B, iMe Pmgmm Apprnwl Regufetims
iubtitle I ef mSA allewg gtate UST
pfepaaig appfeved by IPA te epefate ia
lieu elfee
c^pocjiixocz tyjj t±tc ±lliJp±o±±ic±±tHJtS HBcfioJTj
fee digggvefy gf aay f eleaged f eplated
UiT gubgtaaeeg, ef aay gugpegted
feleage: Uaugual epefatiai geaditieag ef
meaitefiai fegultg iadigaaai
mugt alge be lepgfted te the
4:Slegufe
Qwaef g gf epef atefg wag wguld like
tg take taakg git ef epefatiea mugt
eithef tempgfafily gf pefmaaeatly glg§e
fee® ia aegefdaage wife 48 @H paft
i§8 gubpaft @=Qut=ef=ie?vige UiT
iygtemg aad eiggyie: Whea UiT
aad epefatefg mugt eeatiaue epefatiea
aad maiateaaage gf geffggiga pfetegtiea
aad, ualegg all UiTg have beea emptied,
feleage detegtiea: If tempsfafily gleged
fe? feee lasathg m mefei fee U§T
§ptesi'§ ¥§at liaeg iau§t fee left epea
aad feagtieaiai, aad all ethe? lia§§,
puiap§, maawap, aad aagilla?y
§ijaipm§at ai«§t Be gapped aad §egu?ed:
Ale? li gjgathg, taak§ that d@ ast meet
eitae? the peffeaaaage gtaadafd? ^^
aewUif §pteg}§8ftae
oVeffill device fequir'Sffigatsj imuit feg
permanently closed, unless a site
assessment is performed by the owner
or operator and an extension is obtained
from the implementing agency. To close
a tank permanently, an owner or
operator generally must: Notify the
regulatory authority 30 days before
closing (or another reasonable time
period determined by the implementing
agency); determine if the tank has
leaked and, if so, take appropriate
notification and corrective action;
empty and clean the UST; and either
remove the UST from the ground or
leave it in the ground filled with an
inert, solid material.
5. Notification, Reporting, and
Recordkeeping
UST owners who bring an UST
system into use after May 8,1986 must
notify state or local authorities of the
existence of the UST and certify
compliance with certain technical and
other requirements, as specified in
§ 280.22. Owners and operators must
also notify the implementing agency at
least 30 days (or another reasonable
Qwaefg aad eeefatgfi ef UiT gygteaig
egataiaiaf petf eleuai gf hasaf dgug
guggtaagig aiugt iavegtipte, ggafifm,
aad fegpgad te ggafifaied feleageg, ag
--.
Taege sepifeaieBtg iaglude, waefe
appfepfiatei Feffefffliai a feleage
iavegtiptiea waea a felease ig
gygpegted gf tg detef miae if fee UiT
fptesi ig fee ggufge gf aa gfNite impagt
fiavegtigatiga aad ggafifiaatiga gtepg
iaglude ggadugtiag teitg te detef aiiae if
a leak e?agtg ia fee UiT 8f UiT gy§tea
aad ggadugtiai a gite gaegk if tegtg
iadigate feat a leak deeg aet e^i§t but
geataiaiaatiea i§ pfeseatji aetifyiai fee
appepMate a|eagjeg ef fee feleage
wifeia a gpegified pefied ef time
immediate agtiea te pfeveat aay
feiea§§j§ugH a§ femeviag pf§dag
fee Uif gy§teai)i geataiaiai aad
immediately gl§aaia§ up §pill§ §?
§v§fl]l§i msaitefiai aad pfsveatiai fee
§pf ead @f iiatamiaatiea iat§ tke §@I
aad/ff peuadwati? j a§§gmllia|
detailea iafsfmatisa assut fee §it§ and
fee aatuf§ @f tae feleasej femeviai feee
PR Paft fll get gtaadafdg fgf gtate
pf eifiiaig tg meet:
I: lee^e efths
Taiij ful@ applieg galy tg petfgleuai
uadefgf euad gtef age taakg feat afe
gubjegt te Iubtitle I ef R@HA: Taefe afe
geftaia typg ef gla§g§g ef taakg feat afe
eMgludedftem iubtitle I ef W$A,
Taefetefe, the pevigieag ef feig fule de
aet apply !;e heldeig ef seguf ity iatef egtg
ia e^efaded taakg= Amea| fegge taakg
§pegitgally eluded by gtatute afe^
Fafffl (lad fegideatial taakg gf 1,188
ialleai3 ef legg gapaeity uged fef gtefiag
mgtef fuel fef aeaeemmefgial pufje§egj
taakg uged fef gtgfiag heatia§ eil fef
geagumptive uge ga the pfemigeg whefe
gtgfedi; taakg gtefed ea gf abgve the
seef ef uadefpeuad afeag (gueh a§
bagemgatg e? tuaaelgjj geptig taak§i
gygtemg fgi= ggllegtiai gtgfmwatef ef
wag tewatei'j aad flsw^fefsuih pfegegg
8 ?
iii: f hs Uif §§gariiy iataft
gfacticaBlg; irivestigaiing soil and
groundwater contamination; and, in
some cases, outlining and implementing
a detailed corrective action plan for
remediation.
C. Financial Responsibility
Requirements
The financial responsibility
regulations (40 CFR part 280 subpart H)
require that UST owners or operators
demonstrate the ability to pay the costs
of corrective action and to compensate
third parties for injuries or damages
resulting from the release of petroleum
from USTs. The regulations require all
owners or operators of petroleum USTs
to maintain an annual aggregate of
financial assurance of $1 million or $2
million, depending on the number of
USTs owned. Financial assurance
options available to owners and
operators include: Purchasing
commercial environmental impairment
liability insurance; demonstrating self-
insurance; obtaining guarantees, surety
bonds, or letters of credit; placing the
required amount into a trust fund
administered by a third party; or relying
A-, ©veiview
Tsday'i i;eplati§a §ddf§§§§§ ta§
f§|upm8at§ sf iusatle I feat a?g
appligailg te § p§?§§a wke a§M§ §
§§gufity- iatgf§§! ia a pgtfelguffi Uif 8f
UST system, or in a facility or property
on which a petroleum UST or UST
system is located, from the time that the
person extends the credit up through
and including foreclosure and re-sale. A
holder of a security interest who
satisfies the conditions in this rule will
not be considered either an "owner" or
an "operator" of an underground storage
tank for purposes of compliance with
Subtitle I regulatory requirements.
The security interest exemption under
Subtitle I, § 9003(h)(9) of RCRA, 42
U.S.C. § 6991b(bJ(9), on which this rule
is based, provides:
As used in this subsection, the term
"owner"' does not include any person who,
without participating in the management of
an underground storage tank and otherwise
not engaged in petroleum production,
refining, and marketing, holds indicia of
ownership primarily to protect the owner's
security interest in the tank.
While limited legislative history
exists concerning tie RCRA Subtitle I
security interest exemption, EPA
believes; this provision is intended to
provide protection from liability for a
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Federal Register / Vol. 60. No. 173 / Thursday, September 7, 1995 / Rules and Regulations
46695
person whose only connection with a
tank is as the holder of a security
interest; i.e., a bank or other creditor
who has made a loan to a borrower
(commonly the tank's owner) and who
has in return secured the loan by taking
a security interest in the tank or in the
property on which the tank is located.
No guidance or other indication is
available concerning the types of
activities that Congress considered to be
consistent with the Subtitle I security
interest exemption, or about the types of
activities that Congress considered to be
impermissible participation in an UST
or UST system's management.
The statutory exemption explicitly
addresses liability for corrective action
at petroleum UST-contaminated sites.
Other portions of the statute and
regulations applicable to an "owner" of
a tank include 40 CFR part 280 subparts
B, C, D, E (§ 280.50 only), and G
(hereafter referred to as the "UST
technical standards" for purposes of this
rule), and Subpart H—Financial
Responsibility. The statute is silent with
respect to a holder's liability for these
other requirements solely as a
consequence of having ownership rights
in a tank primarily to protect a security
interest. The Agency does not believe
that these limited ownership rights rise
to the level of full "ownership"
sufficient to make the holder an
"owner" of the tank, as that term is used
in § 9001(3) of RCRA Subtitle I.
Therefore, EPA is providing, under its
broad rulemaking authority in § 9003,
that a holder who meets the criteria
specified in this rule (i.e., whose only
connection with the tank is as the bona
fide holder of a security interest in a
petroleum UST or UST system or in a
facility or property on which a
petroleum UST or UST system is
located) is not subject to the UST
technical standards, corrective action,
and financial responsibility
requirements otherwise applicable to a
tank owner. EPA believes that this is
both appropriate under the Agency's
rulemaking authority and consistent
with Congressional intent in providing
the § 9003(h)(9) exemption for those
persons who provide only financing to
owners of a tank. Accordingly, a
qualifying holder will not be required to
comply with the full panoply of EPA
regulations implementing Subtitle I that
apply to tank owners prior to or
following foreclosure, provided that the
requirements of today's rule are
satisfied.
With respect to a holder's potential to
be an "operator" of a tank prior to
foreclosure, consistent with the
provisions of this rule, the holder
typically will not be involved in the
day-to-day operations of the tank, and
will therefore not incur liability as an
"operator."2 By foreclosing, however,
the holder takes affirmative action with
respect to the tank and displaces the
borrower; therefore, by necessity, the
holder has taken "control of * * * [and]
responsibility for * * *" the tank, and
therefore could be considered a tank
operator under the definition at 42 USC
6991(4). However, under today's rule, a
foreclosing holder can avoid regulation
as an UST "operator" in certain
circumstances. In general, a holder will
not be considered an UST "operator" if
petroleum is not added to, stored in, or
dispensed from the UST. In order to
satisfy this condition, this rule allows a
holder to empty the UST within a
certain period of time after foreclosure,
and undertake specified minimally
burdensome and environmentally
protective actions to secure and protect
the UST or UST system. On the other
hand, a holder who operates a tank by,
for example, storing or dispensing
petroleum following foreclosure will be
subject to the full range of requirements
applicable to any person operating a
tank (including corrective action
requirements).
In developing today's rule, EPA
examined the potential obligations
under Subtitle I of government entities
that act as conservators or receivers of
assets acquired from failed lending and
depository institutions, such as the
Federal Deposit Insurance Corporation
(FDIC) and Resolution Trust
Corporation (RTC). Where a government
entity or its designee is acting as a
conservator or receiver, EPA interprets
the security interest exemption RCRA
Subtitle I section 9003(h)(9) to preclude
the imposition of the insolvent estate's
liabilities against the government entity
acting as the conservator or receiver,
and considers the liabilities of the
institution being administered to be
limited to the institution's assets. The
situation of a conservator or receiver of
a failed or insolvent lending institution
is analogous to that of a trustee
(particularly a trustee in bankruptcy)
that is administering an insolvent's
estate and, in accordance with those
principles, the insolvent's liabilities
generally are to be satisfied from the
estate being administered and not from
* Of course, a lender which has control of or
responsibility for the daily operation of a tank
would be an "operator" under § 9001(4), and
therefore subject to all requirements applicable to
an operator of a tank, including corrective action.
Similarly, such acts may also constitute
"participation in the management" of the tank,
which would void the §9003(h)(9) exemption and
obligate the lender to comply with these same
technical, financial, and corrective action
requirements as an owner.
the assets of the conservator or receiver.
Therefore, satisfaction of an estate's
debts or liabilities would not reach the
general assets of the FDIC, the RTC,
those of any other government entity
acting in a similar capacity, or those of
a private person acting on behalf of the
conservator or receiver. (The broader
issue of trustee and fiduciary liability is
discussed in section IV.C. of this
preamble.)
B. Legal Authority
EPA is promulgating today's rule to
close a gap in the Subtitle I security
interest exemption that must be
addressed in order to provide holders
with certainty regarding their
responsibility for UST regulatory
compliance. While the statutory
exemption explicitly applies to holders
who become owners of underground
storage tanks, the exemption does not
address holders in the capacity of an
UST operator. The Agency believes that
without promulgating a rule under
EPA's broad grant of rulemaking
authority applying the protection found
in the statutory security interest
exemption to holders as operators as
well as owners, the statutory exemption
may be rendered virtually meaningless,
since an owner of an UST is also
typically an UST operator. EPA does not
believe that Congress, in creating
section 9003(h)(9), intended for an
otherwise exempt holder of a security
interest to nonetheless fall subject to
UST regulatory obligations as an
operator. As such, EPA's exercise of its
rulemaking authority in this rule is
appropriate and, perhaps, needed to
fully effectuate the purpose of the
statute.
In the proposed rule, EPA cited the
legal authority that provides the basis
for development of the UST lender
liability rule—section 9003(b), 42 U.S.C.
6991b(b) of RCRA Subtitle I, and briefly
explained the difference between the
statutory authority supplied under the
Comprehensive Environmental
Response, Compensation, and Liability
Act (CERCLA) for the vacated
Superfund lender liability rule and the
authority supplied under RCRA Subtitle
I for an UST lender liability rule. While
several commenters stated their belief
that EPA has sufficient authority under
RCRA to promulgate a regulation
regarding UST lender liability, some
commenters also expressed concern that
the rule would be challenged in light of
the outcome of litigation on the
CERCLA lender liability rule.3
3 On Feb. 4,1994, the U.S. Court of Appeals for
the D.C. Circuit vacated EPA's 1992 rule on lender
Continued
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46S9B Federal Register / Vol. 60, No. 173 / Thursday, September 7, 1995 / Rules and Regulations
EPA believes that the authority
granted in section 9003 of Subtitle I
clearly provides the Agency with broad
rulemaking authority, as well as explicit
rulemaking authority to, in its
discretion, exempt certain classes of
owners and operators (i.e., holders of
security interests as described in this
rule) from the UST technical standards,
corrective action requirements, and
financial responsibility requirements.
Section 9003 expressly directs the
Agency to "promulgate release
detection, prevention, and correction
regulations applicable to all owners and
operators of underground storage tanks,
as may be necessary to protect human
health and the environment." Section
9003(b) permits the Agency, in
promulgating regulations under Subtitle
I, to make distinctions in its UST
regulations between types or classes of
tanks, based upon, inter alia, "the
technical capability of the owners and
operators." Because security interest
holders are typically not as a general
matter engaged in the operation and
maintenance of USTs (and thus do not
possess the technical capacity of most
UST owners and operators), EPA does
not believe that requiring them to
comply with highly detailed technical
requirements is appropriate where
requiring them to aa so is not necessary
for protection of human health and the
environment. Furthermore, the Agency
believes an exemption from these
regulatory requirements is appropriate
in the context of this rule, where an
exemption will serve, albeit indirectly,
to advance the goals of Subtitle I by
making credit more available and thus
aiding in the implementation of tank
upgrading and replacement
requirements.
However, this authority is not open-
ended, as section 9003(a) requires EPA
to promulgate regulations that are
protective of human health and the
environment. Without compromising
the level of protectiveness established
by the UST program, EPA previously
relied on its section 9003 (b) authority
when it excluded a group of owners and
operators from RCRA Subtitle I
requirements in the final Financial
liability under CERCLA in Kelley. et al. v. EPA, No.
93-1312. The CERCLA rule interpreted a statutory
exemption under CERCLA that is similar to that
under RCRA Subtitle I. The Court held that "EPA
lack[ed] statutory authority to restrict by regulation
private rights of action arising under the statute
* * *" Kelley, slip op. at 3. Whereas CERCLA
contains a provision regarding private rights of
action, there is no explicit provision for private
rights of action contained in RCRA Subtitle I.
Furthermore, § 9003 of Subtitle I expressly confers
EPA a broad rulemaking authority; to the extent that
the grants of rulemaking authority were not
sufficiently explicit under CERCLA, such is not the
case under RCRA Subtitle I.
Responsibility Rule (53 FR 43322, Oct.
26,1988). (In relevant part, the
preamble to the final Financial
Responsibility Rule states: "The Agency
does not interpret the Congressional
intent of Subtitle I to preclude
exempting any class of USTs from
otherwise applicable requirements
when the Agency has determined that
such requirements are not necessary to
protect human health or the
environment.") That rule exempted
states and the federal government from
the UST financial responsibility
requirements since those entities were,
as a class, able to satisfy the purpose of
the financial responsibility
requirements in the absence of
regulation.
Similarly, for purposes of this rule,
EPA believes that it is reasonable, in
light of the purposes behind this rule, to
exempt a holder from RCRA Subtitle I
technical standards, corrective action
requirements, and financial
responsibility requirements as an
operator if its USTs are empty and
secure (as explained later in today's
rule) or if the holder chooses to also
engage in environmentally beneficial
activities (as discussed later in this
preamble). Because of tht eligibility
conditions a holder must meet before
enjoying this regulatory exemption,
IPA's UST regulations will satisfy the
statutory requirement that they be
protect!va of human health and the
environment.
C. Real Property Used as Collateral
A number of commenters pointed out
that the proposed rule conveys the
impression that under common
commercial practice a security interest
holder typically holds an UST or UST
system as collateral for a loan
obligation. These commenters went on
to state that such an impression is
incorrect. They maintained that in a
typical lending relationship, the lender
holds a security interest not in the UST
or UST system, but rather in the real
property on which the UST or UST
system is located.
EPA recognizes that borrowers
generally pledge real property as
collateral rather than tanks, which are
considered fixtures of real property
under many state laws. While the
Agency failed to refer to real property in
its definition of the term, "holder," it
specifically defined "security interest"
as meaning "an interest in a petroleum
UST or UST system or in the facility or
property on which the UST or UST
system is located, created or established
for the purpose of securing a loan or
other obligation." EPA acknowledges
that the phrase, "UST or UST system or
facility or property on which the UST or
UST system is located," was not used
consistently throughout the proposed
rule. This was due in part to the way in
which Subtitle I's requirements are
structured—UST compliance
responsibility rests with the owner or
operator of the UST or UST system, not
the property on which the UST or UST
system is located. Therefore, when
describing a holder's liability as an
owner or operator under Subtitle I
requirements, EPA is obliged to address
that liability in terms of how it relates
to the ownership or operation of the
UST or UST system. Nevertheless, in
order to maintain consistency with
commercial practice and to clarify that
the exemption applies to a holder's
collateral in the real estate containing an
UST, as well as to the UST itself, the
Agency has applied the use of the term,
"UST or UST system or facility or
property on which the UST or UST
system, is located," throughout today's
final rule, whenever appropriate.
D. Abandoned Tanks
A few commenters expressed concern
about the effect that the rule would have
upon the number of contaminated sites
for which there might be no identifiable
or financially capable liable party,
which might increase the number of
abandcmel tanks that would have to be
cleaned up with public funding. There
are a numbir of reasons why EPA does
not expect the rule to Increase the
number of abandoned tanks.
First,, this regulation is intended to
provide clarity and meaning to the
existing federal statutory security
interest: exemption. The rule does not
decreasie the universe of regulated tanks
from those currently regulated under
Subtitle I. Further, the rule does not
affect the legal obligations to comply
with applicable Subtitle I requirements
of a previous owner or operator who
abandons a tank. Such previous UST
owners and operators can be held liable
for regulatory compliance or cost
recovery under the Leaking
Underground Storage Tank Trust Fund.
Financial condition does not affect the
liability of a. tank owner or operator
under Subtitle I.
Second, the rule is expected to help
UST owners and operators acquire
capital to keep their businesses healthy
and in compliance with environmental
requirements, and in the process, reduce
the number of abandoned tanks and
potential petroleum releases.
Furthermore, the Agency believes that
by expanding capital availability, this
rule will encourage early compliance
with the upcoming 1998 Subtitle I
requirement regarding tank upgrading or
-------
replacement, UST owners who acquire
capital to upgrade or replace old,
corroded tanks earlier than 4881 greatly
contribute to preventing further
petroleum contamination,
While contemplating the effect this
rule might have upon the number of
abandoned tanks, the Agency also
recognised that many holders currently
abandon UST properties they hold as
collateral rather than foreclosing en
them and risking potential liability for
cleanup costs, EPA believes that this
rulo wfll actually Improve protection of
human health and the environment by
providing an incentive to holders whe
are interested in taking advantage of thi§
regulatory exemption to empty any
tanks they acquire through foreclosure,
thus preventing future releases, As a
result of the rule's Increasing the
number of holders who tako advantage
of the security Interest exemption and
subsequently extend more UST-related
loans, EPA expects there to be fewer
abandoned or so-called orphan tanks
and fewer releases that might otherwise
occur due to the lack of eapital available
for tank upgrading and replacement,
JS, Mobility ofa Holder as an Owner ef
an Underground Storage Tanker
Underground Storage Tank System
The following sections describe the
key terms used in this rule. For the most
part, those are also terms used in the
8 Q003(h)(9) security interest exemption.
This section specifies the activities that
are not "participating in the
management" of a tank and whieh a
holder may under today's rule, engage
in consistent with Subtitle 1 regulatory
requirements,
1. Potroloum Production, Refining, and
Marketing
"Production of petroleum" includes,
but Is not limited to, activities involved
In the production of crude oil or other
forms of petroleum, as well as the
production of potroloum products from
purchased materials, either domestically
or abroad. "Refining" includes tho
processes of cracking, distillation,
eaparatlon, conversion, upgrading, and
finishing of roflnod potroloum or
potroloum products. "Marketing"
Includes the distribution, transfer, or
salo of potroloum or potroloum products
for wholosalo or retail purposes. A
holder who stores potroloum products
In USTs for on-slto consumption only,
such as to provide hoat to an office
building or to refuel its own vehicles, is
not considered to bo engaged in
potroloum production, refining, or
marketing tor the purposes of tho UST
regulatory program.
1. Indicia ef Ownership
For purpe§e§ ef this ?____.
ownership" means ownership ef
that lives ri§§ te a security interest
within the ambit ef thi§ fute ii en§ that
treleuffl UST er UST iptem, er in a
facility er property on whieh a
Eetroleum UST er UST system i§
seated, Thi§ definition is net intended
to limit er qualify type, quality, er
quantity ef ownership indicia that may
be held by a person fir the purpose ef
the regulatory exemption, The nature @f
the ownership interest may vary
according t© the typ§ ef secured
transaction and the nature ef the
guarantor er surety), Accordingly
ownership interest er right te an
faeility er property en which the UST er
the interest i§ t© secure the repayment
J. White & R, Summers, Handieek en
' " . .- > . — ...
interest, an interest in a security
interest, er any ether interest in an UST
er UST system, Fer purposes ©f this
rule, examples ef such indicia include,
but are not limited to, a mortgage, deed
of trust, ©r legal er equitable title
ebtained pursuant t© foreclosure er its
equivalents, a surety bond, guarantee ©f
an ebligation, ©r an assignment, lien,
pledp, er ether right to or form ©f
eneumbranee against a petroleum UST
or UST system, ©r a facility or property
©n whieh a petrsleum UST er UST
system is located. Accordingly, it is not
necessary for a person t© hold actual
title or a security interest in order t©
maintain seme indicia or evidence of
ownership in an UST or UST system.
S. Primarily To Protect a Security
Interest
The term, "primarily to protect a
security interest" as used in tills
regulation, means a holder's indicia of
ownership are held primarily for the
purpose of securing payment ©r
gerfermanee of an obligation, EPA
itends this phrase t© require that the
ownership interest be maintained
primarily for the purpose of, ©r
primarily in connection with, securing
payment or performance of a loan or
other obligation (a seeurity interest), and
not an interest in the UST or UST
system or faeility or property on which
the UST or UST system is located held
for some other reason.
A security interest may arise pursuant
to a variety of statutory or common law
financing transactions, While a seeurity
interest is ordinarily created by mutual
consent, such as a secured transaction
within the scope of Article i of the
Uniform Commercial Code, there are
other means by whieh t security interest
may be created, some of whieh may or
may not bt the result of a consensual
arrangement between tht parties t© tht
Ai a matter ef general law, security
interests may arise frem transactions in
which an interest in an UST or UST
purpose ©f securing a loan or ether
obligation, and includes mortgages,
deeds ef truit, liens, and title held
pursuant to lease financing transactions,
security interests may also arise from
installment sales, trust receipt
factoring airgeratnts or accounts
receivable financing agreements,
consignments, among others, provided
that the transaction creates or
establishes tn interest in an UST or UST
system for the purpose of securing a
loan or other obligation,
and requested clarification of the term
"lease financing transaction in which
i the rule. A
"lease financing transaetien" is a
common financing transaction for
equipment and other types of personal
property, and is treated under this rule
ts a seeurity interest. These are leasts
where the form of the transaction
provides for the lesser te acquire title te
the preperty for and at the discretion of
the lessee. The lessor then recovers its
lean (i.e., the purchase price ©f the
property) through rental payments from
the lessee and, in some eases, from the
sile of the property t© the Isssti ©r t
third party tt the end of the lease. Thus,
is the holder of a security interest in the
property.
At the beginning of the lease
financing transactions covered by this
rule, thelessor does not initially select
the leased property. Instead, this is done
by the lessee or a third party. Further,
during the initial lease or any re-lease,
the lessor doas not control the daily
aroptrtyrThi primary reason the lessor
nolas indicia of ownership in tht
property is to protect its security
interest in the event that the debtor/
Itssei fells to pay off its obligation to
-------
liSi / Rul. and
, a
a varitty ef mechanisms, and ii still
under this rule provided that it
complies with the other provisions of
this rule.
In contrast to the preceding
discussions, "indicia of ownership"
held "primarily to protect {a] security
interest" do not include evidence of
interests in the nature of an investment
in the UST or UST system or in the
facility or property on which the UST or
UST system is loeated, or an ownership
interest held primarily for any reason
other than as protection for a security
interest. The person holding ownership
indicia to protect a security interest may
have additional, secondary reasons for
maintaining the indicia in addition to
protecting a security interest;
maintaining indicia for reasons in
""="«*«* **=» j£»* wtwwkiiig « s \3tiwtii iv Alit^ji^]
may be consistent with the exemption
and this rule. However, any such
additional reasons must be secondary to
protecting a security interest in the
secured UST or UST system or in the
facility or property on which the UST
system is loeated. EPA recognizes that
lending institutions have revenue
interests in the loan transactions that
create security interests; such revenue
interests are not considered to be
investment interests, but are considered
secured transactions falling within the
security interest regulatory exemption.
4, "Holder" of Ownership Indicia
A "holder" as used in this regulation
is a person who maintains ownership
indicia primarily to protect a security
interest, however acquired or held. The
term "holder" includes the initial
holder (such as the loan originator) and
any subsequent holder, such as a
successor-in-interest, subsequent
purchaser on the secondary market, loan
guarantor, surety, or other person who
maintains indicia of ownership
primarily to protect a security interest,
The term also includes any person
acting on behalf of or for the benefit of
the holder, such as a court-appointed
receiver or a holder's agent, employee,
or representative.
Finally, it should be noted that
lending institutions, which typically
hold a large number of security
interests, may also act in some trustee,
fiduciary, or other capacity with respect
to an UST or UST system. However, this
rule does not address circumstances in
which a lending institution or any
person acts as a trustee, or in a non-
lending capacity, or has any interest in
an UST or UST system other than as
provided in this rule. Because this
regulation, as well as thg exgmptlon in
I iOOi(h)(i), addresses enly persons
who maintain a "security interest," any
discussion of persons with ether
interests or involvement in an UST or
UST system is beyend thi seepe ef this
rule. Of course, a trustee er etner
fiduciary, er any ether person who
holds indicia of ownership in the UST
or UST system primarily to protect a
security interest, may fall within this
n,
5. Participating in Maaapment
As used in this rule, "participation in
control of deeisionmakini related to the
operations of an UST or UST system by
the holder. Participation in management
does not include the mere capacity or
unexereised right er ability to influence
the operational aspects or day-to-day
operations of an UST or UST system or
facility or property on which an UST or
UST system is located, For purposes of
this rule, actual involvement in the
operational aspects or day-to-day
operation of the UST or UST system
means use of the UST to contain
fetroleum, and includes the storage,
lling, or dispensing of petroleum
contained in an UST or UST system. For
purposes of this rule, a holder
performing the functions of a plant
manapr, operations manager, chief
operating officer, chief executive officer,
and the like, of the facility or business
at which the UST is located is
considered to be exercising management
control or decisionmaking authority
over the operational aspects of the UST
or UST system and therefore,
participating in management, unless the
responsibilities for the position
specifically exclude all UST operational
responsibilities. Control over the
operational aspects of management
should not be confused, however, with
those activities which constitute
administrative or financial management,
or involvement in environmental
compliance activities or activities taken
to protect human health and the
environment. Involvement in
administrative, financial management,
or environmental compliance activities
does not, by itself, constitute
participation in management under this
rule.
The proposed rule included a two-
participation that attempted to
distinguish between the scope of general
activities acceptable for a holder to
undertake, and those activities that
could be carved out purely as
operational activities rather than other
activities related to UST er UiT system
responsibilities, Hewgvsr, tag Apaey
reesivid a liumbtF ef eomm§nt§ en th§
prepoigd mlt indicating that the
tintra! test merely added eeafusiea in
itermlaiai whether er net a heldir
wti tnpiiiii in manapmtat
participation, CoasifUiatly, tat pairal
test hanbttn emitted*in this fiaalruli,
mansjement participation is best
defined as tetual involvement in the
manapment er eeatrel ef
operatianal aspects er dty*te=day
operations of the UST er UST system,
and net the financial, admiaistrative er
environmental cemplianet aspects ef
thi UST or UST system er faeflity er
property on which the UST er UST
system is legated.
The fallowing sections discuss and
deseribn tht specific activities ef a
holder that the rule defines as not being
instances ef participation in
management by a person holding
indieia ef ownership primarily te
protect i security interest in the UST er
UST sysitem or facility er property on
which an UST or UST system is loeated.
Therefore, conduct of these activities
will not, by itself, void the exemption
provided under this rule.
It beai's repeating, however, that the
activities idisntifigd in this rule de net
specify the only activities that may be
undertaken by a holder without losing
the protection of this security interest
regulatory exemption, and one should
not infer that activities not specifically
mentioned in this rule are automatically
considered evidence of participation in
on a casii-by-'case basis, generally
determined by whether or not the
it or
control «f deeisionmaking related to the
operational aspects or day-to-day
operations oi: an UST or UST system.
a. Actions that are not participation in
management, Participation in the
in themselves, exceed the bounds of this
regulator exemption: Policing the loan;
undertaking financial work out with a
borrower where the obligation ii in
default or in threat of default;
undertaking foreclosing and winding up
operations (as described later in this
preamble); or preparing for sale or
liquidation of the UST or UST system or
facility o;f property on which the UST or
UST system is loeated. In addition, the
holder is not considered to be
participating in the management of the
UST or U'ST system or facility or
property on which the UST or UST
system is loeated, by monitoring the
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Federal Register / Vol. 60, No. 173 / Thursday, September 7, 1995 / Rules and Regulations 46699
activities refated to the UST tectmical
standards or other federal, state or local
environmental laws and regulations; by
requiring or conducting on-site
investigations, including site
assessments, inspections, and audits, of
the environmental condition of the UST
or UST system or facility or property on
which the UST or UST system is located
or of the borrower's financial condition;
by requiring or conducting UST or UST
system corrective action in compliance
with 40 CFR part 280 subpart F or
applicable state requirements in those
states which have been delegated
authority by EPA to administer the UST
program; by monitoring other aspects of
the UST or UST system considered
relevant or necessary by the holder; by
requiring certification of financial
information or compliance with
applicable duties, laws, or regulations,
or by requiring other similar actions.
Such oversight and obligations of
compliance imposed by the holder are
not considered part of the management
of an UST or UST system or facility or
property on which the UST or UST
system is located. Although such
oversight and obligations may inform
and perhaps strongly influence the
borrower's management of an UST or
UST system, the holder is not
considered to bo participating in
management whore the borrower
continues to be in control of the day-to-
day operations of the UST or UST
system.
The following sections describe in
more detail two areas of special interest
to those who commented on the
proposed rule regarding actions in
which holders may engage without
jeopardizing their security interest
exemption.
(1) Administrative and Financial
Management. Administrative and
financial management activities may be
engaged in by a holder in the course of
managing a loan portfolio and do not
exceed the boundaries of the security
interest exemption. Such activities may
include providing financial or other
assistance, environmental investigations
or monitoring of the borrower's business
and collateral, engaging in "loan work
out" activities, foreclosing on a secured
UST or UST system or facility or
property on which an UST or UST
system is located, winding down
operations following foreclosure, or
divesting itself of the foreclosed-on
property containing an UST or UST
system.
(2) Actions Taken to Protect Human
Health and the Environment. In the
proposed rule, EPA included a separate
discussion of voluntary environmental
activities undertaken by a holder to
protect human health and the
environment. A number of commenters
stated that this discussion conflicted in
part with the discussion entitled
"Participating in Management," thereby
creating uncertainty regarding a holder's
ability to conduct or to require a
borrower to conduct site investigation
and remediation activities, as well as
leak prevention and leak detection
activities. The "Participating in
Management" section of the proposal's
preamble contained information that
simultaneously stated that
environmental compliance activities
would be considered evidence of
participation in UST or UST system
management, while describing several
environmental compliance activities for
which a lender could engage in without
being considered to be participating in
UST or UST system management. The
Agency also stated in the proposal's
preamble that lender actions which
protect human health and the
environment are appropriate to include
within the scope of protected UST or
UST system activities because of the
special position and role played by
holders in the Subtitle I program, and
recognized by Congress in the UST
security interest statutory exemption,
Several commenters stated the
importance of allowing security interest
holders to undertake UST remediation
to ensure that they can sell UST
properties they acquire through
foreclosure without jeopardizing
protection from Subtitle I liability.
Commenters stated that without such
protection, many holders will remain
reluctant to extend loans to UST owners
and operators, undermining the intent
of the statutory exemption. Several of
these commenters asserted the
advantage of allowing holders to take
the lead in remediating contaminated
sites, rather than waiting on state
agencies with limited resources to
conduct such cleanups. By directly
undertaking such voluntary corrective
actions, holders can more quickly
eliminate threats to public safety,
health, and the environment.
Thus, in order to clarify EPA's
original intent to allow holders to
voluntarily conduct site remediations as
well as other environmentally beneficial
activities on properties on which they
hold a security interest, the Agency
asserts that both environmental
compliance activities and activities that
are undertaken voluntarily to protect
human health and the environment will
not be considered evidence of
participation in the management of an
UST or UST system or facility or
property on which an UST or UST
system is located. A holder who
undertakes these actions must do so in
compliance with the applicable
requirements in 40 CFR part 280 or
applicable state requirements in those
states that have been delegated authority
by EPA to administer the UST program
pursuant to 42 USC § 6991c and 40 CFR
part 281.
The following list provides examples
of those activities that a holder can
engage in without exceeding the bounds
of the UST security interest
exemption—these are examples only
and do not represent all allowable
activities: release response and
corrective action for UST systems,
environmental site investigations, tank
upgrading and replacement, leak
detection, and maintenance of corrosion
protection. These activities are not
required of a holder as a condition for
obtaining the security interest
exemption as an UST "owner"; holders
are allowed to participate in these
activities without losing the protection
of the exemption. Other activities that
are not considered participation in
management may be required of a
holder as a condition for obtaining the
security interest exemption as an UST
"operator." These activities are
discussed later in this preamble, and
include: tank emptying, capping and
securing lines, permanent or temporary
closure of an UST or UST system, and
release reporting.
b. Actions taken throughout the loan
transaction process that are not
participation in management. In the
proposed rule, EPA described the major
components of the loan transaction
process, including elements of that
process that occur both prior to and
after foreclosure. Most of that discussion
is included in this final rule as well, in
order to provide clarity and guidance to
those UST owners and operators and
security interest holders interested in
this rule.
(1) Actions at the inception of the
loan or other transaction giving rise to
a security interest. Actions undertaken
by a holder prior to the inception of a
transaction in which indicia of
ownership are held primarily to protect
a security interest are not considered
evidence of participation in the
management of the UST or UST system.
Thus, consultation and negotiation
concerning the structure and terms of
the loan or other obligation, the
payment of interest, the payment
period, and specific or general financial
or other advice, suggestions, counseling,
guidance, or other actions at or prior to
the time that indicia of ownership are
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46700 Federal Register / Vol. 60, No. 173 / Thursday, September 7, 1995 / Rules and Regulations
first held are not, for purposes of this
rule, considered evidence of
participation in the management of the
UST or UST system or facility or
property on which the UST or UST
system is located. Activities that take
place prior to holding indicia of
ownership are not relevant for
determining whether the holder has
participated in the management of the
UST or UST system after the time that
the holder acquires indicia of
ownership.
In addition to such pre-loan
involvement, a holder may determine
(whether for risk management or any
other business purpose) to undertake or
require an environmental investigation
(which could include a site assessment,
inspection, and/or audit) of an UST or
UST system securing the loan or other
obligation. Such environmental
investigation may be undertaken by the
holder, for example, or the holder may
require one to be conducted by another
party (such as the borrower) as a
condition of the loan or other
transaction. Neither RCRA Subtitle I nor
this rule require that such an
environmental investigation be
undertaken to qualify for the security
interest exemption, and the obligations
of a holder seeking to avail itself of the
exemption cannot be based on or
affected by the holder's not conducting
or not requiring an environmental
investigation in connection with the
security interest. Similarly, a holder is
not engaged in management
participation as a result of undertaking
or requiring an environmental
investigation, and nothing in this rule
should be understood to discourage a
holder from undertaking or requiring
such an environmental investigation in
circumstances deemed appropriate by
the holder. Because lender-conducted or
required investigations of a borrower's
business or collateral are information-
gathering in nature, such activities
cannot be considered to be management
participation by a holder.
In the event that a pre-loan
environmental investigation of an UST
or UST system reveals contamination,
the holder may undertake any one of a
variety of responses that it deems
appropriate: For example, the holder
may refuse to extend credit or to follow
through with the transaction or instead
•maintain indicia of ownership in other,
non-contaminated property as
protection for the security interest.
Alternatively, a holder may determine
that the risk of default is sufficiently
slight (or that the extent of
contamination is minimal and does not
significantly affect the value of the UST
or UST system as collateral) to proceed
to extend credit and maintain indicia of
ownership in the UST or UST system.
Additionally, the holder may require the
borrower to report and clean up the
contamination as a condition for
extending the loan. Such activities are
not considered participation in the
management of the UST or UST system
or facility or property on which the UST
or UST system is located, and a holder
that knowingly takes a security interest
in contaminated collateral is not subject
to compliance with the RCRA Subtitle I
corrective action regulatory program on
that basis.
(2) Policing the security interest or
loan. A holder may undertake actions
that are consistent with holding
ownership indicia primarily to protect a
security interest which include, but are
not limited to, a requirement that the
borrower clean up a release from the
UST or UST system which may have
occurred prior to or during the life of
the loan or security interest (as
described in the last section); a
requirement of assurance of the
borrower's compliance with applicable
federal, state, and local environmental
or other laws and regulations during the
life of the loan or security interest;
securing authority or permission for the
holder to periodically or regularly
monitor or inspect the UST or UST
system or facility or property on which
the UST or UST system is located, or the
borrower's business or financial
condition, or both; or to comply with
legal requirements to which the holder
is subject; or other requirements or
conditions by which the holder is able
to police adequately the loan or security
interest, provided that the exercise by
the holder of such other loan policing
activities are not considered evidence of
control over the operational aspects of
UST or UST system or facility or
property on which the UST or UST
system is. located.
The authority for the holder to take
such actions may be contained in
contractual (e.g., loan) documents or
other relevant documents specifying
requirements for financial,
environmental, and other warranties,
covenants, and representations or
promises from the borrower. While the
regulatory exemption in this rule
requires that the actions undertaken by
a holder in overseeing or managing the
loan or other obligation be consistent
with those of a person whose indicia of
ownership in an UST or UST system (or
facility or property on which an UST or
UST system is located) is held primarily
to protect a security interest, a holder is
not expected to be an insurer or
guarantor of environmental safety or
quality at a secured UST or UST system.
The inclusion of environmental
warranties and covenants is not
considered to be evidence of a holder's
acthijg as an insurer or guarantor, and a
finding of "management participation"
cannot be premised on the existence of
such terms or upon the holder's actions
that ensure that the UST or UST system
is managed in an environmentally
sound manner. Since these actions are
consistent with holding indicia of
ownership primarily to protect a
security interest, they are not
considered to be participation in
management in this rule.
(3) Loan work out. The holder may
determine that actions need to be taken
with respect to the UST or UST system
to safeguard the security interest from
loss. These actions may be necessary
when, for example, a loan is in default
or threat of default, and are commonly
referred to as "loan work out" activities.
"Loan work out" is largely an undefined
term but is generally understood in the
financial community to mean those
activities undertaken to prevent,
mitigate, or cure a default by the obligor
or to preserve or prevent the diminution
of the value of the security. Loan work
out activities are recognized by EPA as
a common lender undertaking and, as
such, these actions will not take a
holder outside of the scope of the
security interest exemption provided
that such actions do not include
decisionmaking control over the day-to-
day operation of the UST or UST system
or facility or property on which the UST
or UST system is located.
When the holder undertakes loan
work out activities, provides financial or
other advice, or similar support to a
financially distressed borrower, the
holder will remain within the scope of
this security interest regulatory
exemption only so long as the holder
does riot participate in management as
defined herein under the section
entitled "Participating in Management."
Loan work out actions that are not
evidence of "participation in
management" include, but are not
limited to: Restructuring or
renegotiating the terms of the security
interest; requiring payment of additional
rent or interest; exercising forbearance
with regard to the security interest;
requiring or exercising rights pursuant
to an assignment of accounts or other
amounts owing to an obligor; requiring
or exercising rights pursuant to an
escrow agreement pertaining to amounts
owing to an obligor; providing specific
or general financial or other advice,
suggestions, counseling, or guidance;
and exercising any right or remedy the
holder is entitled to by law or under any
warranties, covenants, conditions,
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representations, or promises from the
borrower.
(4) Foreclosure. In order to secure
performance of an obligation, a holder
often must take possession of an UST or
UST system or facility or property on
which an UST or UST system is located,
as a result of a borrower's business
failure and the subsequent foreclosure
of the real property used to secure that
obligation. The foreclosure process often
results in the holder's taking record title
or deed to the UST or UST system or
facility or property on which an UST or
UST system is located. Financial
institutions and others who hold
security interest exemptions are thereby
justifiably concerned about the risks
inherent in acquiring liability for
compliance with the RCRA Subtitle I
requirements for underground storage
tanks.
EPA received several comments
regarding the foreclosure process and
the use of the term "foreclosure or its
equivalents" in the proposed rule to
trigger the date upon which several
conditional measures were proposed to
begin. Several commenters explained
the linear fashion in which the
foreclosure process generally works,
indicating that no specific date could be
tied to the term "foreclosure" by itself.
EPA recognizes that since this rule
places several time-related conditions
upon a holder to enable it to avoid
liability as an UST "operator" under the
security interest exemption, it is
incumbent upon the Agency to select a
precise definition of the term
"foreclosure." On the other hand, as
commenters suggested, there is no one
best consistently used and practical step
in the process that can be used as a date
to define the end of the foreclosure
process. EPA has taken all of these facts
into consideration and determined that
for purposes of this rule, "foreclosure"
means that a legal, marketable or
equitable title or deed has been issued,
approved and recorded, and that the
holder has obtained access to the UST,
UST system, UST facility, and property
on which the UST or UST system is
located, provided that the holder acted
diligently to acquire marketable title or
deed and to gain access to the UST, UST
system, facility and property on which
the UST or UST system is located.
EPA acknowledges that the definition
of "foreclosure" used in this rule
describes only part of the process that
is generally associated with the
foreclosure process. In response to many
comments, however, the concept of real
property "access" has also been
included in the definition. The
definition used in this rule was selected
to provide a point of reference for
indicating the completion of the
foreclosure process and point at which
a holder could physically access any
USTs or UST systems located on the
property acquired through the
foreclosure process.
Other components of the foreclosure
process not referenced specifically in
this rule's definition of foreclosure
include: foreclosure judgment,
foreclosure sale, purchase at foreclosure
sale, acquisition or assignment of title in
lieu of foreclosure, acquisition of a right
to possession or title, or other agreement
in settlement of the loan obligation, or
any other formal or informal manner by
which the holder acquires possession of
the borrower's collateral for subsequent
disposition in partial or full satisfaction
of the underlying obligation. These
actions associated with the foreclosure
process are considered to fall within the
scope of this regulatory exemption as
necessary incidents to holding
ownership indicia primarily to protect a
security interest, so long as the holder's
acquisition pursuant to foreclosure is
reasonably necessary to ensure
satisfaction or performance of the
obligation, is temporary in nature, and
occurs while the holder is actively
seeking to sell or otherwise divest the
foreclosed-on UST or UST system of
facility or property on which the UST or
UST system is located.
In general, under this rule, a
foreclosing holder must, in order to
maintain consistency with the security
interest exemption, seek to sell or
otherwise divest itself of foreclosed-on
property in a reasonably expeditious
manner using whatever commercially
reasonable means are available or
appropriate, taking all facts and
circumstances into account. A holder
cannot, under the terms of this rule,
reject or refuse offers for the property
that represent fair consideration for the
asset and remain within the regulatory
exemption. "Fair consideration," for
purposes of this rule, is equivalent to or
in excess of the sum of the outstanding
principal (or comparable amount in the
case of a lease that constitutes a security
interest) owed to the holder
immediately preceding the acquisition
of full title (or in the case of a lease
financing transaction, possession of an
UST or UST system or facility or
property on which an UST or UST
system is located) pursuant to
foreclosure, plus any unpaid interest,
rent, or penalties {whether arising before
or after foreclosure). "Fair
consideration" also includes all
reasonable and necessary costs, debts,
fees or other charges incurred by the
holder incident to work out, foreclosure,
retention, preserving, protecting, and
preparing the UST or UST system or
facility or property on which the UST or
UST system is located, prior to sale, re-
lease pursuant to a lease financing
transaction (whether by a new lease
financing transaction or substitution of
the lessee) or other disposition, plus
environmental compliance costs (such
as tank emptying, upgrading,
replacement, and removal, as well as
site assessment and corrective action
costs); less any amounts received by the
holder in connection with any partial
disposition of the property and any
amounts paid by the borrower
subsequent to the acquisition of full title
(or possessions in the case of an UST or
UST system subject to a lease financing
transaction) pursuant to foreclosure. A
holder that outbids or refuses offers
from parties offering fair consideration
for the property establishes that the
property is no longer being held
primarily to protect a security interest.
The terms of the bid are relevant for this
purpose, and a holder is not required to
accept offers that would require it to
breach duties owed to other holders, the
borrower, or other persons with
interests in the property that are owed
a legal duty. In addition, the term "fair
consideration" refers to an all cash offer,
which is intended to ensure that this
rule would not require a holder to
accept a bid that contains unacceptable
conditions, such as'requirements for
indemnification agreements, non-cash
offers, "bundled" offers, etc. This
provision should not be read to require
that a holder may accept only cash
offers, however; a holder is always free
to accept any offer _satisfactory to the
holder. The exact requirement that
would be imposed by this regulation is
that a holder may not reject a cash offer
of fair consideration for the foreclosed-
on property. If it does, or if it outbids
others offering fair consideration, then
the holder would, under this rule, be
considered to be an owner of the UST
or UST system or facility or property on
which the UST or UST system is located
in the same manner as any other
purchaser.
This rule's provisions defining "fair
consideration" and specifying when the
foreclosing holder may reject or outbid
offers for the property were formulated
to reflect the amount that the holder
may bid at the foreclosure sale, or not
reject during the foreclosure sale or
thereafter, in order to recover on its loan
or other obligation. In addition, there
may be multiple security interests in a
borrower's property held by secured
creditors, which the definition of "fair
consideration" must account for.
Therefore, for a senior creditor, the term
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"fair consideration" means a cash
amount that represents a value equal to
or greater than the outstanding
obligation owed to the holder (including
the fees, penalties, and other charges
incurred by the holder in connection
with the property). "Fair consideration"
further indicates that the amount that
will recover the holder's "security
interest" in the property may vary
depending on the seniority of the loan
or other obligation that is being
foreclosed upon. Specifically, a junior
creditor may be required to outbid
senior creditors in order to recover the
value of its loan or other obligation. The
definition of fair consideration therefore
distinguishes between what junior or
senior creditors may bid or not reject for
purposes of maintaining the exemption.
In addition, in order to avoid liability
under law (for example, to the
borrower), the foreclosing holder may be
required to seek an amount at the
foreclosure sale that is greater than the
outstanding obligation owed to the
foreclosing holder, or to sell the
property in a different manner;
therefore, this rule does not require a
holder to accept an offer of "fair
consideration" if to do so would subject
the holder to liability under federal or
state law.
In this way the rule's provisions with
respect to the sale or disposition of
property will not conflict with the
manner in which such sales are required
to be conducted under general
principles of law applicable to the
holder and the disposition of the
property including the UST or UST
system. For purposes of this rule, the
definition of "fair consideration" is an
objective test to determine whether the
foreclosing holder has an investment or
other interest in the property that is not
within the exemption, or whether the
holder's post-foreclosure activities
indicate that it continues to maintain its
ownership indicia in the property
primarily to protect a security interest,
and is therefore within the protective
ambit of this rale.
While a holder may use whatever
means are reasonable and appropriate
for marketing foreclosed-on property to
establish that it is seeking to divest itself
of property in an expeditious manner,
EPA has established the following
"bright line" test that a holder may
choose to use to definitely establish that
it continues to hold indicia of
ownership primarily to protect a
security interest, and is not an "owner"
of foreclosed-on property for purposes
of complying with the UST regulatory
program. Under the "bright line" test a
holder must, within 12 months
following foreclosure (as defined herein
under the section entitled
"Foreclosure"), list the property with a
broker, dealer, or agent who deals with
the type of property in question, or
advertise the property as being for sale
or disposition on at least a monthly
basis in either a real estate publication
or a trade or other publication suitable
for the property in question, or a
newspaper of general circulation
(defined as one with a circulation over
10,000, or one suitable under any
applicable federal, state, or local rules of
court for publication required by court
order or rules of civil procedure)
covering the area where the property is
located. If the holder satisfies these
criteria, the holder is considered to have
complied with the requirement in this
rule that it is seeking to sell or otherwise
divest the property in an expeditious
manner. A holder choosing to avail
itself of this bright line test will be able
to provide clear and unambiguous
evidence that it is not the UST or UST
system's "owner" following foreclosure,
for purposes of complying with the UST
regulatory program.
EPA also recognizes that market
conditions, the condition of the
property, and other factors may mean
that despite reasonable efforts to
expeditiously sell or divest foreclosed-
on property, the property may not be
quickly sold. Therefore, this regulation
does not impose a time requirement for
the ultimate disposition of foreclosed-on
property. Provided that the property is
being actively offered for sale by the
holder and no offers of fair
consideration are ignored, outbid, or
rejected, foreclosed-on property may
continue to be held by the holder
without the holder being considered an
"owner" of the UST or UST system or
facility or property on which the UST or
UST system is located.
In the proposed rule, EPA proposed
that in order for a holder to avoid losing
the protection of the security interest
exemption, the holder must act upon a
written, bonafide, firm offer of fair
consideration for the property within 90
days of receipt of the offer. A few
commenters expressed a concern that 90'
days would not provide a holder enough
time to complete such a transaction in
cases where the purchaser undertakes a
site assessment before finalizing the
transaction. The Agency has maintained
the same language as that contained in
the proposed rale, but wants to clarify
that the requirement to "act upon" an
offer does not mean that a purchase
transaction must be completed with the
90-day time period. Rather, the holder
must consider the offer, which may
include, but is not limited to,
responding to the offer and/or initiating
a purchase transaction within 90 days.
If at any time after six months following
the acquisition of marketable title the
holder outbids, rejects, or does not act
upon within 90 days of receipt of, a
written, bona fide, firm offer of fair
consideration for the property, the
holder will lose the protection of the
rule. Under this rule, a "written, bona
fide, firm offer" is a legally enforceable,
commercially reasonable, offer,
including all material terms of the
transaction, from a ready, willing, and
able purchaser who demonstrates to the
holder's satisfaction the ability to
perform. Where a holder outbids,
rejects, or fails to act upon an offer of •
fair consideration, the holder is
considered, for the purpose of this
regulator}' exemption, to be maintaining
its indicia of ownership in the property
as protection for investment purposes,
and riot as security for the obligation.
(5) Winding up operations after
foreclosure. In addition, in the post-
foreclosure context, this rale provides
that a holder that forecloses on an UST
or UST system with ongoing operations
may wind up the UST or UST system's
operations without also being
considered to be participating in
management. Winding up is considered
a protected activity by a foreclosing
holder because, without such
protection, foreclosure would not be
possible where practical or commercial
necessity dictates that the foreclosing
holder undertake such actions.
"Winding up" in the post-foreclosure
context includes those actions that are
necessary to close down an UST or UST
system's operations, secure the site, and
otherwise protect the value of the
foreclosed assets for subsequent sale or
liquidation. In winding up an UST or
UST system, a holder may undertake'all
necessary security measures or take
other actions that protect and preserve
an UST or UST system's assets,
including steps taken to prevent or
minimize the risk of a release or threat
of release of the UST or UST system's
contents.
F. Liability of a Holder as an Operator
of an Underground Storage Tank or
Underground Storage Tank System
While the Subtitle I security interest
exemption excludes a holder from the
definition of "owner" for regulatory
compliance purposes, the statute does
not explicitly address a holder's
responsibilities as an UST or UST
system "operator." EPA .recognizes that
the absence of explicit language in the
security interest exemption regarding a
holder's responsibility for the Subtitle I
requirements as an "operator" creates a
potential problem for holders, since
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Federal Register / Vol. 60, No. 173 / Thursday, September 7, 1995 / Rules and Regulations 46703
EPA's UST regulations (as described in
Section n of this preamble) apply to
both owners and operators of
underground storage tanks.
Some concern was expressed by
commenters regarding the absence in
the proposed rule of an outright
exemption for holders from the
definition of "operator" and the
potential liability to which a holder
could be exposed by engaging in any
affirmative action in respect to an UST
or UST system. EPA believes that
Congress did not grant holders an
outright exemption to the term
"operator" in the Subtitle I security
interest exemption because it may have
wanted to ensure that holders did not
engage in the day to day operations of
the UST or UST system. The Agency
believes this intent can be inferred from
the statutory requirement that a holder
may not "participate in the
management" of the UST or UST system
•without voiding the exemption. EPA
realizes that in order to provide
meaning to the exemption, however, it
is important to define how a holder can
acquire title and access to an UST or
UST system or facility or property on
\vhich an UST is located, and take
affirmative actions to protect the value
of their security interest, without losing
the protection of the security interest
exemption. Consequently, this
regulation provides a road map that
ensures that holders can utilize the
security interest exemption, while
reflecting the intent that exempted
holders be prohibited from operating
USTs or UST systems. The following
sections discuss the actions that a
holder can and cannot take to remain
within the protective ambit of the
regulatory security interest exemption.
1. Pro-Foreclosure Operation
Prior to foreclosure, it is the borrower,
not the holder, who generally is in
control of, or has responsibility for, the
daily operation of an UST or UST
system, and is subject to the full range
of requirements applicable to operators
of USTs. During this time period, a
holder is permitted to conduct those
activities related to its financial and
administrative obligations of managing a
loan portfolio, as well as environmental
compliance activities and activities
undertaken voluntarily to protect
human health and the environment in
compliance with 40 CFR part 280. The
holder in this position will not lose its
ability to take advantage of this
regulatory exemption as a result of
engaging in these activities. If the holder
becomes engaged in the daily operation
of an UST or UST system, however, it
becomes subject to the full range of
requirements applicable to operators of
USTs or UST systems.
2. Post-Foreclosure Operation
Once a holder has foreclosed on an
UST or UST system or facility or
property on which the UST or UST
system is located, it displaces the
borrower and could become engaged in
the day-to-day operation of an UST or
UST system merely by storing product
in the UST or UST system. EPA
considers an UST to be in use and in
operation if petroleum is added to,
dispensed from, or stored in the UST.
Therefore, except as provided in this
rule, a holder cannot continue to use,
store, dispense, or fill petroleum in an
UST or UST system after obtaining
marketable title and access to the UST
or UST system or facility or property on
which the UST or UST system is located
without incurring Subtitle I liability
(unless there is another operator
available, as described later in this
section). That does not mean, however,
that a holder is barred from taking
affirmative actions to ensure that a tank
is no longer in use, by demonstrating
that the tank is no longer storing,
dispensing or being filled with
petroleum. The holder best
demonstrates this by emptying tanks it
acquires through the foreclosure
process. Thus, in order to qualify for the
exemption, it is essential for a holder to
empty all tanks that it knows about or
should know about shortly after
undertaking foreclosure (the time period
following foreclosure is discussed later
in this section), unless there is another
operator who takes responsibility for
complying with 40 CFR part 280 (as
described later in this section). An UST
or UST system is empty—in accordance
with § 280.70—when all materials have
been removed using commonly
employed practices so that no more than
2.5 centimeters (one inch) of residue, or
0.3 percent by weight, of the total
capacity of the UST system, remain in
the system. Stated simply, this means
that all product must be removed from
the UST or UST system so that only one
inch of residue remains. To ensure that
the UST system has been adequately
secured, vent lines must be left open
and functioning, and all other lines,
pumps, manways, and ancillary
equipment must be capped and secured
(§ 280.70).
Several commenters expressed
concern about a blanket requirement for
holders to discontinue operation of an
UST or UST system upon acquisition of
the UST or UST system through
foreclosure, particularly if a lessee or
other tenant was present at the site. In
response to these commenters concerns,
EPA believes that tanks can remain in
use if there is someone who is available
to take responsibility as an operator for
compliance with the Subtitle I
requirements. There may be situations,
for example, when a lessee is willing to
continue operating an UST or UST
system as the "operator," in compliance
with Subtitle I, while a holder is in
possession of the UST or UST system or
facility or property on which the UST is
located. In some instances, the holder
may want to arrange for a different
person to operate the UST or UST
system, for example, when the existing
lease expires. In those cases where an
operator (other than the holder) exists
who is in control of and has
responsibility for the daily operation of
the UST, and who can be held
responsible for compliance with 40 CFR
part 280 requirements, the holder would
not be considered the operator. Under
these circumstances it is not necessary,
in order to retain the security interest
exemption, for a holder to empty the
tanks for which it is knowledgeable
about upon foreclosure, or to empty
tanks that it becomes knowledgeable of
later. (The issue of known and unknown
tanks is discussed later in this section.)
In foreclosure, to avoid being an
"operator" of the UST, in addition to
emptying and securing the UST or UST
system, a holder must also comply with
the Subtitle I requirements for either
temporary or permanent closure, in
order to retain the security interest
exemption. A holder who chooses to
permanently close its UST or UST
system, must do so in accordance with
§§ 280.71 through 280.74, Subpart G—
Out of Service UST Systems and
Closure, except the holder is not
required to perform corrective action if
contamination is discovered. A holder
who chooses to temporarily close its
tanks is required to maintain corrosion
protection and report any known or
suspected releases from the UST system.
In accordance with § 280.70(a), release
detection is not required as long as the
UST system is empty. A foreclosing
holder who fails to satisfy the
conditions established in this rule for
retaining the security interest exemption
could be an "operator" under the
Subtitle I regulations and would
therefore be subject to the full panoply
of Subtitle I regulatory obligations
applicable to all operators of tanks,
including the corrective action
regulations.
a. Costs of post-foreclosure temporary
closure conditions. A few commenters
expressed concern that the costs
associated with the proposed rule's
post-foreclosure conditions to empty
tanks and enter temporary closure
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46704 Federal Register / Vol. 60, No. 173 / Thursday, September 7, 1995 / Rules and Regulations
would prevent lenders from making
UST-related loans. EPA does not believe
that the costs associated with
performing these actions are significant,
compared to the cost of alternatives that
holders would otherwise face.
First, in the absence of this regulatory
exemption, as an "operator" upon
foreclosure, a holder would have to
comply with the UST technical
standards in some manner. Entering
temporary closure is one way to comply
with the UST technical standards. The
only condition placed upon a holder by
this rule that differs from what normally
constitutes temporary closure under the
technical standards is the requirement
for emptying tanks. The estimated total
cost of emptying one tank and draining
the associated pipes is $950. $350 of
this cost is attributed to the mobilization
of a truck for fuel disposal, which
remains a fixed price per site. The total
estimated cost per four-tank facility is
$2750 ($600 per tank, plus $350 for the
truck). The total cost for securing the
lines is estimated at $225 per facility.
These costs could be as much as the cost
for release detection for tanks that a
holder does not empty and that remain
in use, estimated at up to $2800 for a
four-tank facility. Under the
requirements in 40 CFR § 280.70 for
temporary closure, an owner or operator
is allowed to either empty and secure its
tanks, or perform release detection.
While this regulatory exemption
restricts a holder's choice to emptying
and securing its tanks, no new costs are
imposed upon the holder, since without
this rule, the holder would have to pay
approximately the same cost, whether it
chose to empty its tanks or maintain
release detection. For further
information regarding the costs of
emptying tanks and securing lines,
please see the "Background Document
in Support of the Lender Liability Rule
for Underground Storage Tanks Under
Subtitle I of the Resource Conservation
and Recovery Act" located in the UST
Docket at 401 M Street, SW., room 2616,
Washington, DC 20460.
b. Time frame for emptying USTs and
securing UST systems EPA received the
most comments regarding the period of
time allowed to demonstrate that a
holder is no longer storing product, and
thereby no longer operating an UST or
UST system. All but one person who
commented on the 15-day time frame in
the proposed rule maintained that 15
days was not enough time to empty
tanks and complete temporary closure
after foreclosure. EPA proposed 15 days
originally because our research
indicated that only seven days should
be necessary to empty the tanks and
secure the lines at an UST facility once
a contractor had been selected. Another
seven days was added to provide time
for the holder to become familiar with
the details of this regulatory exemption
and identify a qualified contractor. The
Agency is obliged by the regulatory
authority under section 9003(b), 42
U.S.C. 6991b(b) of Subtitle I to
promulgate regulations based not only
upon the technical capability of owners
and operators, but also upon what is
necessary to protect human health and
the environment. It is therefore
incumbent upon the Agency to select
the shortest time period needed by a
holder to empty tanks and secure lines.
Commenters listed a variety of
reasons why more time would be
needed for emptying tanks, including:
special problems associated with rural
communities such as long distances—
travel time and locating a qualified
contractor; snow, ice and other
inclement weather conditions (thick
snow and/or ice can make tanks
difficult or impossible to detect and
empty during winter months);
contracting delays related to difficulties
in locating, scheduling and negotiating
a price with a contractor, and in some
cases, in obtaining various bids; banks'
(especially small banks') unfamiliarity
with EPA regulations; multiple tanks at
large facilities; laboratory testing
requirements imposed by some states;
and finding alternative storage
arrangements, especially for non-
marketers. Government agencies, acting
in a receivership capacity, could face
special difficulties due to protracted
contract bidding requirements.
Recommendations proposed by
commenters, due to these various
delays, ranged from 30 to 140 days.
Based on these commenters' concerns
and information that they provided, the
Agency has concluded that 60 calendar
days is a reasonable, minimum period of
time after undergoing foreclosure, as
that term is defined under section III. C.
5. of this preamble, to allow a holder to
empty its known tanks (see discussion
of unknown tanks later in this section).
This decision is based upon the
following estimated time frame
developed from information received by
commenters: approximately one week to
become familiar with Subtitle I and the
details of this regulatory exemption, and
to locate all USTs and the extent of the
UST system on the foreclosed property;
5 weeks to complete a contractor
bidding process and hire a qualified
contractor, perform laboratory tests if
necessary (accounting for travel time
and weather delays), and apply for and
obtain approval for content disposal if
required by the state; two weeks to
schedule contractor and for contractor
to perform and complete work related to
emptying all USTs and securing the
UST system (accounting for travel time,
other commitments and weather
delays).
EPA also recognizes that the time
needed for a holder to empty its tanks
and secure its UST system may vary
based upon the holder's geographic
location. Extreme weather conditions in
areas such as Alaska, special problems
associated with rural communities, and
additional requirements imposed by
some states, may pose special problems
for holders attempting to empty tanks in
an expeditious manner. Thus, holders in
some states may need more than 60 days
to empty their tanks and secure their
UST systems. Therefore, EPA believes
that the implementing agency should
have the ability to select a time frame
that it Jinds most appropriate for
holders, either based upon individual
holders' needs (case-by-case
determination), or based upon a
standard time frame for all holders
under Ihe jurisdiction of that
implementing agency. Thus, a holder
who wishes to take advantage of this
regulatory exemption, must empty its
known tanks within 60 days after
foreclosure or within 60 days after the
effective date of this rule, whichever is
later, or wiliin another reasonable
timeframe as specified by the
implementing agency.
c. Unknown Tanks. Many
commenters noted that a holder may not
know of the existence of an UST when,
through foreclosure, it acquires title to
an UST or UST system or facility or
property on which an UST or UST
system is located. Several examples
were provided by commenters
demonstrating the problems associated
with identifying all the USTs that may
be located on a property it acquires.
Among the examples, commenters
stated that USTs may not be registered
with the state, or it may be difficult for
a holder to know of the existence of an
UST on agricultural property or on other
non-fuel-marketer properties.
Sometimes the borrower does not
disclose the existence of any USTs or
the exact number and location of the
USTs. Even if the holder is aware that
USTs may be located on the property, it
may encounter difficulty in identifying
the USTs' exact locations. This could be
especially difficult when a site is
covered with snow or ice during the
winter, Furthermore, USTs are
sometimes hidden under asphalt or
even under buildings. Performing an
environmental assessment or audit is no
guarantee that USTs will be found. As
one coitnmenter asserted, even a phase II
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Federal Register / Vol. 60, No. 173 / Thursday, September 7, 1995 / Rules and Regulations 46705
site assessment could fail to indicate the
presence of USTs.
Several commenters urged EPA to
adopt a more practical approach to
emptying tanks that may not be
discovered by the holder until after the
60-day time period following
foreclosure. EPA believes that unless a
holder is allowed to empty a tank upon
discovering it, rather than potentially
losing the protection of the regulatory
security interest exemption if it fails to
identify and empty all its tanks within
60 days after foreclosure, holders will
remain suspicious of extending credit to
UST owners and operators,
undermining the purpose of this rule.
Therefore, a holder can remain within
the protective ambit of this rule by
emptying an unknown UST within 60
days after discovering it or within 60
days after the effective date of this rule,
whichever is later, or within another
timeframe as specified by the
implementing agency.
d. Permanent closure. A number of
commenters objected to EPA's proposal
pertaining to holders who had not
disposed of the UST or UST system or
facility or property on which the UST or
UST system is located, within 12
months after foreclosure. The Agency
proposed that in order for these holders
to maintain the regulatory exemption,
they must either enter permanent
closure if they failed to dispose of the
UST or UST system 12 months after
foreclosure, or perform a site assessment
and apply for an extension of temporary
closure from the implementing agency.
Several commenters doubted that they
would be able to sell properties with
USTs within 12 months. They argued
that permanent closure would be
burdensome and unnecessary to protect
human health and the environment,
since the requirement to empty the UST
would eliminate the threat of
contamination from further releases
from the UST.
Commenters also insisted that holders
do not possess the technical capacity of
the average UST owner or operator, so
they should not have to enter permanent
closure to retain the exemption.
Furthermore, commenters did not
believe that it was appropriate for a
holder, who acts as a temporary
custodian of the UST or UST system, to
decide the ultimate fate of a facility
(whether to take the tanks permanently
out of operation). Rather, they asserted,
that decision should be left up to the
subsequent purchaser. As one
commenter stated, total closure could
severely hinder a holder's selling
opportunities and eventually remove
the property from the mainstream of
commerce. Although the proposed rule
offered holders the option of applying
for an extension of temporary closure
from the implementing agency, some
states prohibit such extensions, which
would leave holders in those states
without any option other than
permanent closure of the tanks.
EPA agrees with commenters that the
decision regarding whether or not a tank
should be permanently closed should
generally be left with whoever
purchases the UST or UST system or
facility or property on which the UST is
located from the holder. The Agency has
concluded that USTs that are emptied,
secured and placed in temporary
closure for the temporary period of time
for which they are possessed by a holder
should not need to be permanently
removed or permanently closed in place
in order to protect human health and
the environment. Therefore, in this final
rule, a holder may retain the regulatory
exemption by temporarily closing but
not permanently closing its USTs and
UST systems. However, if a holder is
unable to dispose of an UST property
within 12 months, it must conduct a site
assessment if the USTs are older and do
not meet new tank performance
standards (discussed later in this
section). EPA believes that it is
important for a holder to conduct such
an assessment in order for the
implementing agency to determine if
there is any contamination on the site,
and if so, make a determination
regarding the potential amount of risk
posed to human health and the
environment and whether that risk
warrants the implementing agency
taking corrective action. (While this rule
precludes a holder's liability for
corrective action costs if the holder
retains its eligibility for the exemption
as provided in the rule, the
implementing agency can undertake
corrective action measures on the
holder's site based upon its assessment
of the risks posed by any contamination
identified there.) As in the case of other
temporarily closed tanks, in order to
maintain protection of human health
and the environment, contamination
should not be allowed to remain
unidentified for more than 12 months
after an UST or UST system has been
taken out of service (or in this case,
more than 12 months after foreclosure,
as that term is defined under
§ 280.210(c) of this rule). For purposes
of this provision, the 12-month period
begins to run from the effective date of
the rule or from the date on which the
UST or UST system is emptied and
secured, whichever is later.
The Agency does not consider the site
assessment condition to be unduly
burdensome for several reasons. First, a
holder will only need to perform a site
assessment if the USTs that the holder
has acquired have not been upgraded or
replaced to meet the requirements of
§ 280.20 for new UST systems or
§ 280.21 for upgraded systems, or if no
external release detection method is in
operation. Many of a holder's USTs
should be upgraded or replaced since
many of the loans that UST owners and
operators are requesting are expected to
be used for upgrading or replacing
substandard tanks. Furthermore, after
1998, all tanks are required to be
upgraded or replaced, so holders should
encounter few substandard USTs after
that time. A site assessment can also be
averted if one of the external release
detection methods allowed in § 280.43
(e) or (f) is operating at the end of the
12-month period, and the release
detection method operating indicates
that no release has occurred.
The Agency is also aware that
conducting a site assessment during
property transfers has become a
standard business practice and that few
property transactions currently take
place •without one. If a holder should
have to bear the cost of performing a site
assessment, that cost may in some cases
be passed on to the subsequent
purchaser, and in some states, the
holder may be reimbursed for the cost
of performing a site assessment through
the state's petroleum assurance fund or
through other assistance programs.
While EPA cannot require states to pay
or reimburse a holder for performing a
site assessment (or for undertaking any
other actions that would protect the
environment, such as corrective action),
the Agency encourages states to provide
assistance to holders who wish to
engage in environmental compliance
activities or voluntary environmental
actions in order to protect their security
interest.
3. Release Reporting Requirements
Following Foreclosure
Under today's rule, upon foreclosure,
a holder taking advantage of the
regulatory exemption from corrective
action regulations must nevertheless
comply with the requirement in
§ 280.50 that the discovery of any
releases from the UST be reported to the
implementing agency. Only the
reporting requirement must be followed;
the holder need not comply with
§ 280.52, despite the reference to that
provision in § 280.50. The release
reporting requirement of § 280.50 is part
of Subpart E, which details the
obligations for reporting known or
suspected releases, investigating off-site
impacts, confirming that a release has
occurred, and cleaning up spills and
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46706 Federal Register / Vol. 60, No. 173 / Thursday, September 7, 1995 / Rules and Regulations
overfills. While Subpart E generally
implements Subtitle I's corrective action
and site investigation requirements,
from which a holder may be excluded
under today's rule, § 280.50 has
historically been viewed by EPA as part
of the UST technical standards.
A holder is responsible, following
foreclosure, for reporting to the
implementing agency, any discovery of
released regulated substances, or any
suspected release at an UST site or in
the surrounding area. Such reporting is
considered necessary to ensure
protection of human health and the
environment. By the holder's informing
the implementing agency of a release,
the implementing agency can then
determine the appropriate response
action, if any.
In the absence of today's rule a
holder, as an UST operator, would have
to perform release investigation and
confirmation in accordance with
§§ 280.51 through 280.53. Under today's
rule, a holder who chooses to take the
tank(s) out of service as described in
this rule is required to follow the
procedures established in § 280.50 but is
not subject to the release investigation
and confirmation requirements in
§§ 280.51 through 280.53. A holder who
elects to keep the tank(s) in operation,
however, is obligated to comply with all
of the Subpart E requirements,
including those related to release
investigation and confirmation, and
corrective action.
G. Financial Responsibility
Requirements
RCRA § 9003(c), as implemented by
EPA at 40 CFR Part 280 Subpart H—
Financial Responsibility, requires
owners or operators of petroleum USTs
to demonstrate financial responsibility
for taking corrective action and for
compensating third parties for bodily
injury and property damage caused by
accidental UST releases. As discussed
earlier under Section III. A. of this
preamble, EPA is defining, for purposes
of its Subtitle I corrective action and
technical requirements, the term
"owner" to mean that a holder who
maintains ownership rights in an UST
or UST system primarily to protect a
security interest does not rise to the
level of a full "owner," and therefore is
not subject to compliance with those
regulatory requirements. As described
earlier, this approach to EPA's .
regulatory program is consistent with
the Subtitle I statutory security interest
exemption. Similarly, a holder is not
subject to the financial responsibility
requirements as an UST owner.
The Agency is also exempting a
holder as an UST "operator" from the
financial responsibility requirements,
provided the holder satisfies the
conditions contained in this rule. Before
a holder takes possession of an UST or
UST system, a holder is not considered
an UST operator, for purposes of EPA's
technical and financial responsibility
regulations, if it is acting merely as a
holder and is not in control of the daily
operation of the UST or UST system.
Therefore, a holder typically is not
subject to the UST financial
responsibility requirements of 40 CFR
Part 280 Subpart H as an operator prior
to foreclosure.
Under this rule a holder is exempted
from corrective action as an operator
after foreclosure if it ensures that its
tanks no longer store petroleum and it
complies with the temporary or
permanent closure requirements
specified in this rule. (See Section III. F.
2. of this preamble). In these situations,
where the holder is not liable for
corrective action and where the tanks
are empty and pose little threat of
release, it would serve no useful
purpose to require a holder to
demonstrate compliance with the
financial responsibility requirements for
corrective action. Therefore, the Agency
is exempting holders who satisfy all the
other requirements in this rule from
demonstrating Subtitle I financial
responsibility for UST corrective action.
A holder's responsibility for
demonstrating UST financial
responsibility for third-party bodily
injury and property damage
compensation poses a different issue.
While RCRA Subtitle I does not include
provisions that actually impose third-
party liability upon UST owners and
operators, it does require UST owners
and operators to demonstrate their
ability to compensate third parties for
bodily injury and property damage
caused by accidental releases arising
from the operation of an UST or UST
system. The Agency believes that a
holder who complies with all the
conditions set forth in today's rule
should not be required to comply with
any of the UST financial responsibility
requirements as an owner or operator,
including those for both corrective
action and third-party liability coverage.
This regulatory exemption is consistent
with the interpretation of that language
adopted in the preamble to the UST
financial responsibility final rule (53 FR
at 43323). In that rule, EPA exempted
tanks taken out of operation prior to the
effective date of the rule from UST
financial responsibility compliance. In
the preamble to the final rule, EPA
recognized that "insurance providers
would be extremely reluctant to assure
tanks taken out of operation because of
the perceived greater uncertainty
associated with them" (53 FR at 43327).
In particular, insurers have indicated
that in the case of foreclosed USTs, they
would be concerned about vandalism
and other threats to USTs at non-
operational, unattended gas stations or
similar locations with public access.
The preamble also states that "even if
providers of assurance would assure
these tanks, it is unlikely that they
would cover leaks which occurred
before the effective date of the policy"
(53 FR at 43327).
A similar situation exists for holders
who empty their tanks and enter
temporary or permanent closure after
foreclosure. EPA has discovered that it
is practically impossible to obtain third-
party environmental insurance coverage
for a new owner of empty tanks.
Providers of financial assurance are
reluctant to provide any coverage for
tanks that no longer store petroleum
product. Further, providers are reluctant
to provide coverage for damages that
occur after the effective date of the
policy for releases that might have
occurred prior to the effective date of
the policy. Under this rule a holder is
required to empty its tanks in order to
be exempt from corrective action
regulatory requirements. Since
providers are unlikely to provide any
coverage for empty tanks at non-
operati.onal facilities or for releases that
occurred prior to foreclosure, and since
third-party damages would be extremely
unlikely to stem from releases occurring
after the holder forecloses on and
empties its tanks, the Agency believes it
is unnecessary to require third-party
liability coverage for such tanks.
RCRA § 9003(c)(6) supports this
regulatory exemption. That provision
emphasizes the connection between the
UST financial responsibility
requirement and a tank's operational
status: "The regulations promulgated
pursuEint to this section shall include:
* * * (6) requirements for maintaining
eviden.ce of financial responsibility for
taking corrective action and
compensating third parties for bodily
injury and property damage caused by
sudden and nonsudden accidental
releases arising from operating an
underground storage tank." [emphasis
added,] The Agency believes that since
a holder must demonstrate that its tanks
are empty and that it is complying with
the UST temporary or permanent
closure requirements in order to avoid
corrective action liability as an operator,
there should be no need for a holder
who meets these requirements to
demonstrate financial responsibility for
corrective action or third-party damages.
By requiring the holder to empty the
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Federal Register / Vol. 60, No. 173 / Thursday, September 7, 1995 / Rules and Regulations 46707
tank in order to be exempt from
corrective action requirements, EPA is
ensuring that damages caused by future
releases from that tank will be
minimized if not avoided altogether. As
a result, holders who act in accordance
with the requirements described in this
rule are exempt from all Subtitle I
financial responsibility requirements.
H. State Implementation and State
Program Approval
EPA received numerous comments
regarding the problems associated with
the absence of lender liability
provisions in many states, as well as the
problems generated by the variety of
state UST lender liability provisions
that currently exist. Some commenters
argued that the only way to make
today's rule effective would be for EPA
to require states to enact state legislation
regarding UST lender liability. Other
commenters specifically addressed state
program approval requirements and
state clean up funds. In general, the
comments indicate that several
misconceptions exist regarding the role
of state programs in implementing
Subtitle I, the state program approval
process and state clean up funds.
First, as many commenters pointed
out, today's rule only affects federal
UST requirements, and only provides an
eligible holder protection against federal
enforcement actions. Since the UST
program is implemented primarily
through the states under state laws, a
holder can be afforded protection
against UST liability at the state level
only if the state has enacted its own
lender liability legislation, regulations,
or policies.
Several states have already enacted
laws or regulations containing UST
lender liability provisions. In many
states without existing lender liability
provisions, state legislatures are
debating lender liability bills. While
EPA can encourage states to enact UST
lender liability provisions, the Agency
does not have the authority to require
that states adopt such provisions.
Therefore, the Agency strongly urges
those states without security interest
exemptions to enact legislation similar
to what is included in today's Federal
rule. EPA believes that such action is
crucial in the effort to increase the
availability of capital to UST owners
and operators.
Several comments submitted to EPA
addressed state program approval and
whether or not states could broaden
protections for holders. A state's lender
liability legislation or regulations may
affect the state's program approval and
states need to be cognizant of that
relationship when considering the
enactment of a security interest
exemption.
UST state program approval, as
provided for under RCRA Subtitle I
§ 9004, and as implemented by 40 CFR
part 281, provides states the ability to
operate an UST regulatory program in
lieu of the federal program if they first
submit the program for review and
receive approval from EPA. EPA
approval of a state program means that
the requirements in the state's laws and
regulations will be in effect rather than
the federal requirements. Program
approval ensures that a single set of
requirements (the state's) will be
enforced in that state, thus eliminating
the duplication and confusion that can
result from having separate state and
federal requirements. EPA considers
state program approval to be an integral
part of the UST regulatory program.
EPA's approval review focuses
primarily on the basic state authorities
(laws and regulations) needed to
achieve the underlying objectives of the
federal regulations covering the UST
technical standards, corrective action,
and financial responsibility
requirements. The UST state program
approval process is also based upon a
performance-oriented approach. The
statutory test for an approvable state
program is that it be "no less stringent"
than the federal requirements and
include as many categories of UST
systems (or be as broad in scope) as the
federal requirements. EPA reviews the
state's specific statutory and regulatory
provisions as well as their interpretation
by the Attorney General of the state.
Enactment of lender liability
legislation or regulations is not a
requirement for receiving or
maintaining state program approval. A
state program without a security interest
exemption is acceptable under EPA's
state program approval requirements,
since failure to have such a provision
would not narrow the scope of the state
program, nor render it "less stringent"
than the federal program. However, in
order to fully effectuate the purpose of
today's rule in expanding capital
opportunities to UST owners and
operators, EPA recommends that states
act promptly to enact secured creditor
provisions.
If a state program includes an UST
security interest exemption, EPA will
evaluate it against the criteria in
§ 281.39 of this rule. A state program
that exempts a holder from UST
requirements as an owner and operator
may be approved if: The holder is
maintaining indicia of ownership
primarily to protect a security interest in
a petroleum UST or UST system; the
holder does not participate in the
management or operation of the UST or
UST system; and the holder does not
engage in petroleum production,
refining, and marketing. The state's
program application should address the
issue of UST lender liability in the
"Scope" section of its state program
description, under § 281.21 of the State
Program Approval regulations.
A state may encounter program
approval conflicts if it enacts a lender
liability provision that is broader in
scope or less stringent than today's
federal lender liability rule. However,
this rule should not present a barrier for
states to receive state program approval.
The program approval requirements
contained in this rule are intended to
provide enough flexibility to allow
states to enact various UST lender
liability provisions without jeopardizing
their ability to receive or maintain
approval of their state program.
/. Holders' Access to State Funds
EPA received several comments
regarding a holder's ability to apply for
state cleanup funding to remediate an
UST property acquired through
foreclosure. Some commenters also
expressed concern about a holder's
ability to access other state assistance
programs intended for UST owners and
operators. While the EPA cannot require
states to ensure that holders are
included among those eligible for a
state's cleanup fund, reinsurance
program, loan or grant program, today's
rule is not intended to prohibit or
discourage states from allowing holders
access to these programs.
A few commenters highlighted the
confusion that exists regarding the
association between EPA's financial
responsibility requirements and the
state cleanup funds. EPA believes that it
is important for holders to understand
the purpose of state cleanup funds, the
relationship between EPA and these
state funds, and the relationship
between the financial responsibility
requirements and state cleanup funds.
As described earlier under section II.
C. of this preamble, the financial
responsibility requirements were
promulgated to ensure that UST owners
and operators demonstrated their ability
to pay the costs of conducting
remediation and compensating third
parties for injuries or damages due to
UST contamination. There are an array
of acceptable financial responsibility
compliance mechanisms, including
insurance, guarantees, letters of credit,
surety bonds, fully-funded trust funds
and state assurance funds. State
assurance or cleanup funds have
become the most common and low cost
financial responsibility compliance
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46708 Federal Register / Vol. 60, No. 173 / Thursday, September 7, 1995 / Rules and Regulations
mechanism for tank owners and
operators. As described earlier in this
preamble under section HI. G., holders
who are eligible for today's regulatory
security interest exemption are not
responsible for demonstrating financial
assurance. However, as noted by
commenters, many holders would like
to obtain access to state cleanup funds
to voluntarily remediate any
contamination that might be located on
an UST property they obtain through
foreclosure in order to protect human
health and the environment, and make
the property more attractive to potential
purchasers. Some commenters were
concerned that the proposed lender
liability rule would have the
unintended effect of blocking such
access.
State cleanup funds have been
established in many states to assist UST
owners and operators in performing
corrective action. States may apply to
EPA for approval of its cleanup fund as
a financial assurance mechanism. States
are not, however, required by law or
regulation to establish a cleanup fund or
any other state UST assistance program,
or to submit the fund to EPA for
approval.
Each state fully controls how its fund
functions. No two state cleanup funds
are identical; they vary in the amounts
and types of coverage provided, in their
eligibility requirements, in the amount
of funding, funding source, method of
payment, and program implementation.
EPA's understanding is that currently,
holders are eligible to apply for state
cleanup fund monies in some states and
not in others. That situation will likely
continue upon promulgation of this
rule, as this rule is not intended to alter
the eligibility of holders to apply for
state cleanup fund monies. While EPA
cannot require that states provide
holders access to these funds, EPA
encourages states to recognize the
benefits associated with remediating
UST properties held by holders in terms
of increased protection of human health
and the environment, and the enhanced
ability to return these properties to
productive use.
/. Outstanding Loans and Loans in
Foreclosure Upon the Effective Date of
the Rule
In the proposed rule, EPA requested
comments regarding how the potential
liability associated with a holder's
current holdings acquired through
foreclosure could affect the extension of
future UST-related loans. Many
commenters expressed their concern
that financial institutions would be
unwilling to extend loans to properties
containing USTs if those institutions
incurred significant costs in relation to
properties on which they had already
foreclosed. Several commenters also
insisted that the Subtitle I security
interest exemption was not intended by
Congress to be contingent upon EPA's
exercise of its rulemaking authority.
These commenters noted that a rule that
does not include a holder's current UST
holdings would effectively void the
secured creditor exemption that has
been part of RCRA since 1986, thereby
denying holders the protection that
Congress provided in the law.
Commenters also expressed concern
that failure to include in the exemption
a holder's outstanding loans in
foreclosure would create the need for a
cumbersome recordkeeping system, in
which holders would have to keep track
of whether foreclosures occurred prior
to or after the effective date of the rule.
Commenters also indicated that
enforcement would be hampered unless
states began requiring holders to report
the date on which foreclosures occur, as
defined under § 280.210(c). They stated
that such a reporting requirement would
add an additional burden on security
interest holders, not intended by
Congress' statutory exemption for
security interest holders.
In addition, several commenters
mentioned the benefits that would be
afforded the environment by including
outstanding loans within the
exemption's protective ambit. For
example, commenters stated that
holders would be encouraged to empty
USTs and undertake voluntary cleanups
on currently foreclosed properties
containing USTs if such properties were
included in the rule.
Based on the comments received, EPA
has concluded that there is sufficient
evidence to indicate that the intent of
the rule in expanding credit
opportunities for UST owners and
operators would be undermined if the
rule does not cover holders of existing
security interests and holders of security
interests already in foreclosure upon the
effective date of the rule. Furthermore,
such protection for holders could
provide additional environmental
benefits; by encouraging holders in
foreclosure at the time the rule is issued
to empty their tanks, contamination will
be curtailed at numerous UST sites
throughout the country. Therefore,
holders of existing as well as future
security interests, including those in
foreclosure upon the effective date of
this rule, fall within the rule's protective
ambit as long as the holder satisfies the
conditions contained in this rule for the
regulatory security interest exemption.
IV. Issues Outside the Scope of This
Rule
A. Petroleum Producers, Refiners, and
Marketers
Several commenters requested that
the security interest exemption be
expanded to cover petroleum producers,
refiners, and marketers who hold
indiciii of ownership primarily to
protect a security interest. They claimed
that a petroleum marketer who extends
loans i:o UST owners is no different than
a financial institution that extends loans
to UST owners, except that a marketer's
experience in the petroleum industry
helps it avoid unsound practices that
lead to foreclosures. Commenters
further stated that these "petroleum
marketer-creditors" supply loans to
many small businesses that cannot get
loans elsewhere, and that without an
exemption for petroleum producers,
refiners, and marketers, capital from
these [sources would dry up.
The statutory exemption for security
interest holders in Subtitle I specifically
excludes petroleum producers, refiners,
and marketers. Since the Subtitle I
security interest exemption excludes
petroleum producers, refiners, and
marketers, the Agency has not extended
the regulatory exemption to these
EPA disagrees with commenters who
stated that small businesses will be
harmtd by today's rule. To the contrary,
the Afjeney expects this regulatory
exemption to increase the total amount
of capital available to small businesses,
who are currently most in need of
capital for UST improvements.
Financial institutions, currently
reluctant to make UST-related loans to
small businesses should, as a result of
this rule, greatly increase the total
availability of capital for UST owners
who are otherwise credit worthy.
Although holders who engage in
petroleum production, refining, and
marketing are not covered by this
regulatory exemption, they should not
expect to automatically be held liable
for cleaning up contamination caused
by a borrower. Under the federal UST
regulations, such a holder would need
to meet the regulatory definition of
either "owner" or "operator" of the UST
in order to be potentially liable for
contamination caused by the UST. A
determination as to whether or not a
holder who engages in petroleum
production, refining, and marketing is
responsible for UST cleanup costs as an
ownei: or operator will be based on the
individual circumstances of the case, as
has been the situation in the past. Thus,
this rule does not affect the current
liability scheme for holders who also
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Federal Register / Vol. 60,No. 173 /Thursday, September 7, 1995 / Rules and Regulations 46709
engage in petroleum production,
refining, and marketing. As a result,
EPA does not believe that capital from
these sources will "dry up" as some
commenters stated.
A few commenters were confused
about the effect of the rule upon a
holder's ability to extend capital to or
foreclose on an UST property that was
used by a borrower to produce, refine,
or market petroleum. EPA believes that
the restriction in the statutory security
interest exemption was intended to
prevent petroleum producers, refiners,
and marketers from personally
employing the exemption. Thus, the
restriction in the exemption allows
holders who do not engage in petroleum
production, refining, and marketing to
hold a security interest in an UST or
UST system for a borrower who engages
in these areas of business.
B. Third Party Liability
Several commenters addressed the
issue of a holder's protection from third
party actions. In general, these
commenters requested that the final rule
grovide protection for holders from UST
Ugation initiated by private parties
(i.e., private legal actions not involving
the United States government). Since
RCRA Subtitle I does not impose
liability pertaining to third parties, EPA
has not addressed third party liability in
this rule. Third parties who wish to
recover UST regulatory compliance and
corrective action response costs may
have a cause of action against holders
under various provisions of federal and
state law, other than Subtitle I of RCRA.
While this rule cannot offer protection
for holders from every conceivable type
of liability related to UST contamination
on properties held by holders to protect
a security interest, it specifies the types
of activities that holders may engage in
while remaining within the protective
ambit of the Subtitle I security interest
exemption. In so doing, it provides
certainty for holders whose primary
concern is fear of being held liable by
the federal government under relevant
UST statutes and regulations—not third-
party actions.
C. Trustee and Fiduciary Liability Under
Subtitle I
EPA received a number of comments
requesting that the security interest
exemption be expanded to cover
trustees and fiduciaries acting in a
fiduciary capacity. Commenters stressed
the importance of providing the trust
operations of a financial institution
protection from RCRA Subtitle I
liability. They expressed concern that
tha financial institution or individual
financial officer acting as a trustee or
fiduciary could face personal liability
under RCRA Subtitle I if any or all of
a trust's assets are contaminated by an
UST release. Commenters asserted that
they should not be held personally
liable for the cleanup of trust properties
because prior to their appointment as
trustee or fiduciary they would have no
way of knowing whether the trust's
property was contaminated, nor would
they have been able to have prevented
the contamination. They maintained
that protection for all areas of a financial
institution's operations was crucial to
stimulate more credit for small
businesses to upgrade and improve their
UST systems. Commenters further
stated that a large environmental
expense on the trust side of a financial
institution would have a significant,
negative effect upon UST-related
lending on the commercial side.
EPA carefully considered the
comments received regarding this issue,
but has not provided the specific relief
requested by commenters. Since the
primary purpose of this rule is to
expand the availability of capital to UST
owners by encouraging lenders to make
loans to credit-worthy UST owners, it is
appropriate for EPA to provide an
exemption for holders of security
interests on UST-related loans. The
Agency is not convinced, however, that
it is necessary to extend the exemption
to other persons, such as trustees, who,
in their capacity as trustee, are not
involved in making UST-related loans to
tank owners.
The Agency believes that in most
instances, however, the liability of a
trustee may be limited by the operation
of existing trust law. While
acknowledging the complexities of trust
law as well as numerous jurisdictional
variations, EPA believes the concepts
described in the Restatement (Second)
of Trusts (1959)4 provide a fair
representation of the common law of
trusts, and generally would be
applicable to trusts involving
underground storage tanks.
Under the well-established and
generally accepted principles governing
the obligations of trusts and the liability
of trustees, as articulated in the
Restatement, the trustee is technically
personally responsible for the liability:
"The trustee is subject to personal
liability to third persons on obligations
incurred in the administration of the
trust to the same extent that he would
be liable if he held the property free of
trust." Restatement (Second) of Trusts
« The Restatement (Second) of Trusts (1959) is an
authoritative summary of tha law of trusts prepared
by the American Law Institute. Although the
Restatement is not codified into law, it is frequently
used as a guide to interpretation by courts.
§ 261. However, the rule of personal
liability is tempered by a right to
indemnification: "The Trustee is
entitled to indemnity out of the trust
estate for expenses properly incurred by
him in the administration of the trust."
ID. § 244. Accordingly, the rule is that
ordinarily the trustee may obtain
indemnification from the trust assets for
the acts within his or her official
capacity. Thus, EPA believes that in
most instances, a trust's assets would bo
available for cleanup of trust property
contaminated by USTs.
D. Hazardous Substance Tanks
Several commenters noted that
hazardous substance UST systems are
regulated under Subtitle I, and indicated
that the rule would be more useful if
holders would not have to concern
themselves with determining which
USTs contained petroleum and which
contained other substances. They
requested that the rule also apply to
USTs storing hazardous substances.
Such a rule, reasoned one commenter,
would better reflect the actual property
inspection and examination process that
holders undertake with respect to their
collateral.
Today's regulatory exemption does
not apply to non-petroleum, hazardous
substance USTs or UST systems
regulated under Subtitle I. The primary
reasons for this are, first, the security
interest exemption appears in one
specific section of RCRA Subtitle I,
titled EPA Response Program for
Petroleum (see RCRA section 9003(h)).
As the title indicates, the security
interest provision applies to petroleum
USTs and UST systems. Second, the
primary purpose of this rule is to
expand capital availability for small
business petroleum UST owners and
operators, particularly petroleum
retailers. The Agency believes that a
rule pertaining exclusively to petroleum
USTs and UST systems will address the
needs of this particular group of tank
owners and operators.
E. Hazardous Waste Tanks
As explained under section III of this
preamble, the RCRA Subtitle I security
interest exemption specifically applies
to USTs that are regulated under
Subtitle I and that are used to contain
an accumulation of petroleum. A few
commenters requested that EPA expand
the exemption to include tanks storing
hazardous waste as well.
Today's rule only addresses
petroleum USTs regulated under
Subtitle I of RCRA. Hazardous waste is
regulated under Subtitle C of RCRA.
Section 9001(2)(A) of Subtitle I
explicitly excludes USTs containing
-------
Fidwtl Seglttef / Vel. §0, He. 371 / Thuf§day, Sspttmbgr 7, 19i§ / Rulii and Rigulattons
Subtitlg I, IPA dgrivgs it§ authority te
dgvglep today's ml§ in part fceai igetioa
I of Subtitle I ef RGRA=1PA
authority a
I USTs an
regulation
Subtitle G, Thus, toda
gxelusively to IPA's HERA
US ' ' '
;al requ
e Subtitlg
applies
ubtitlg 1
F, Abevesprnd Sterep Tanks and
Heating Oil Tanks
proposed regulatory exemption apply to
abeveground storage tanks (AiTs) and
tanks used to store heating oil for
eoasumptivg use on thg premises where
stored art rgiulatgd under RGRA
Subtitle I, although thgy may bg
laws fg.|., thg Oil Pollution Aet) or statg
laws, Today's rulg only addressgs
fetroleum USTs regulated under
ubtitlg I ef RGRA, Thg rulg applies
exclusively to iPA's RGRA Subtitlg 1
gnvironmgntal requirements outsidg of
thg Subtitlg I regulatory context,
Whilg ASTs and heating ©11 tanks
ugtd for ©n-iltt consumption are
excluded frem thg federal UST
them. Under fgdgral law, states are
allowgd te develop more strinpat
requirements, as well as requirements
imposed AST aad/or heating oil taak
requirements. States that
to providg statutory tad regulatory
exclusions fer holders that extend loans
to borrowers who own er operate ASTs
or heating oil tanks, partieularly if it
would have a positive influence on the
ability of an UST owner or operator to
«„=« »»g«. „=. „ =,„««* „.„=,= =. ««««„ gvaluatt thg gffgeti ef a regulation on
in thg past if the rulg had been in gffget. small gatitins, If thg rulg is likely to
IPA did not rgeeive any substantive have a "significant impact on a
comments er data regarding this requgit substantial numbgr ef small gntitigs,"
for information, and as a result, was then a Rggulatery Flexibility Analysis
usablg te eollgct and analygg any new must bis pgrfermed, Bgcausg this rule
data that would assist the A§gaey in
quantitatively gvaluating furl'
rule's potential effects upon
small entities that hold security
interests in UST§ or UST systems, by
:owth. For those interested in a morg
Seeumgnt in Support of the Lendgr
Liability Rulg for Undgrpound Storafg
Tasks Undgr Subtitle I of the Resoureg
Gonsgrvatien and Rgeevery Aet,"
loeated in the OUST Doeket at 401M
Street, SW,, reem Mills, Washington,
VI,
V. leonomie Analysis
In the proposed rule, IPA requested
that eommenters furnish information
that would help the Ageaey bitter
uaderstand how this regulatory
exemptioa would tffeet an UST owner
or operator's ability to comply with UST
regulations. The Ageney speeifiatlly
requested informatioa regarding the
eurreat iaterest rate eharged for loans
when property with ©at or more USTs
is used as collateral. In addition, holders
were asked about the extent to whieh
Under Executive Order 11888 [ii FR
B17S8 (October 4,1991)1, the Agency
must determine whether the regulatory
action is "significant" and therefore
subject to revigw by thg U.S. Offieg ef
Managemgnt and Budget (OMB) and the
requirements ef the Ixeeutivg Order.
The Order defines "significant
regulatory action" as ong that is likely
to result in a rule that mays
(1) Have an annual ef&et on the
economy ef $100 million or more or
adversely affect in a material way the
economy, a sector of the economy,
productivity, competition, jobs, the
envirenmeat, public health er safety, or
state, leeal, or tribal goverameats or
communities;
(1) Create t serious inconsistency or
otherwise interfere with an action taken
er plaaaedby aaother ageaeyj
[3) Materially alter the budgetary
impact of eatitlemeats, grtats, user fees,
or loaa propams or the rights and
obliaatieas of reeipieats thereof, or
(4) Raise novel legal or policy issues
arising out ef legal mandates, the
Presideat's priorities, or the priaeiples
set forth in the Ixeeutive Order.
Pursuant to the terms of Ixeeutive
availability ef capital for small business
UST owneri, EPA certifies that today's
rule weuld not have a sipiifieant impact
on a substantial numbgr of small
gntitiet,
that this rule is t "significant regulatory
action" because it raises unique or novel
policy issues. Therefore, this rule is
subject to review by OMB. OMI,
however, elected to waive its review of
the final rule. Thus, no changes were
made in the final rule in response to
OMB reeommeadatioas.
B, Regulatety Flexibility Aet
la accordance with the Regulatory
Flexibility Aet of 1880, ageneies must
This rule does not contain any new
information collection requirements
To the exteat that this rule discusses
any iaf ermation collection rgquirements
storage tank regulations, those
requirements have been approved by the
OMI under the Paperwork Reduction
Act aad have been assisaed control
number 10150=0088 (IGR no. 1380.04).
Under Section 101 ef the Uafuaded
Mandates Reform Aet of 19ii, sigaed
iato law on March 11,1998, IPA must
rule wligre the estimated costs to state,
local, eir tribal governments in the
aggregate, or to the private sector, will
be S10ID million or more ia aay oae year.
Under Section 2QS, IPA must select the
most eost=gffeetive and least
burdensome alternative that achieves
the objective of the rule and is
consistent with statutory requiremeats.
Seetioa 108 requires IPA to establish t
plaa fer iaibrmiag and advisiag any
small lovemmeats that may bi
significantly impacted by the rule.
IPA has determiaed that this rule
does not include a federal maadate that
may result ia estimated costs of $100
millioa or more to either state, leeal or
tribal governments in the aggregate, or
to the jsrivate sector,
List ef Subjects in 40 GFR Parts 180 and
ill
Hazardous substances, Insurance, Oil
pollution, Reportiag and reeordkeepinf
requirements, Surety bonds, Water
pollution control, Water supply.
Ditgd:Au|U8t29,1898,
Carol M. Browner,
Admintstrater.
For the reasons set out in the
preamble title 40, chapter I of the Code
follows:
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Federal Register / Vol. 60, No. 173 / Thursday, September 7, 1995 / Rules and Regulations 46711
PART 280—TECHNICAL STANDARDS
AND CORRECTIVE ACTION
REQUIREMENTS FOR OWNERS AND
OPERATORS OF UNDERGROUND
STORAGE TANKS (UST)
1. The authority citation for part 280
is revised to read as follows:
Authority: 42 U.S.C. 6912,6991,6991a,
699lb, 6991C, 6991d, 6991e, 6991f, 6991g,
699lh.
2. Part 280 is amended by adding
subpart I consisting of §§ 280.200
through 280.240 to read as follows:
Subpart I—Lender Liability
Sac.
280.200 Definitions.
280.210 Participation in management.
280.220 Ownership of an underground
storage tank or underground storage tank
system or facility or property on which
an underground storage tank or
underground storage tank system is
located.
280.230 Operating an underground storage
tank or underground storage tank system.
Subpart I—Lender Liability
f 280.200 Definitions.
(a) UST technical standards, as used
in this subpart, refers to the UST
proventative and operating requirements
under 40 CPR part 280, subparts B, C,
D, G, and § 280.50 of subpart E.
(b) Petroleum production, refining,
and marketing,
(1) Petroleum production means the
production of crude oil or other forms
of petroleum (as denned in § 280.12) as
well as the production of petroleum
products from purchased materials.
(2) Petroleum refining means the
cracking, distillation, separation,
conversion, upgrading, and finishing of
refined petroleum or petroleum
products.
(3) Petroleum marketing means the
distribution, transfer, or sale of
petroleum or petroleum products for
wholesale or retail purposes.
(c) Indicia of ownership means
evidence of a secured interest, evidence
of an interest in a security interest, or
evidence of an interest in real or
personal property securing a loan or
other obligation, including any legal or
equitable title or deed to real or personal
property acquired through or incident to
foreclosure. Evidence of such interests
include, but are not limited to,
mortgages, deeds of trust, liens, surety
bonds and guarantees of obligations,
title held pursuant to a lease financing
transaction in which the lessor does not
select initially the leased property
(hereinafter "lease financing
transaction"), and legal or equitable title
obtained pursuant to foreclosure.
Evidence of such interests also includes
assignments, pledges, or other rights to
or other forms of encumbrance against
property that are held primarily to
protect a security interest. A person is
not required to hold title or a security
interest in order to maintain indicia of
ownership.
(d) A holder is a person who, upon
the effective date of this regulation or in
the future, maintains indicia of
ownership (as denned in § 280.200(c))
primarily to protect a security interest
(as defined in § 280.200(f)(l)) in a
petroleum UST or UST system or
facility or property on which a
petroleum UST or UST system is
located. A holder includes the initial
holder (such as a loan originator); any
subsequent holder (such as a successor-
in-interest or subsequent purchaser of
the security interest on the secondary
market); a guarantor of an obligation,
surety, or any other person who holds
ownership indicia primarily to protect a
security interest; or a receiver or other
person who acts on behalf or for the
benefit of a holder.
(e) A borrower, debtor, or obligor is a
person whose UST or UST system or
facility or property on which the UST or
UST system is located is encumbered by
a security interest. These terms may be
used interchangeably.
(f) Primarily to protect a security
interest means that the holder's indicia
of ownership are held primarily for the
purpose of securing payment or
performance of an obligation.
(l) Security interest means an interest
in a petroleum UST or UST system or
in the facility or property on which a
petroleum UST or UST system is
located, created or established for the
purpose of securing a loan or other
obligation. Security interests include
but are not limited to mortgages, deeds
of trusts, liens, and title pursuant to
lease financing transactions. Security
interests may also arise from
transactions such as sale and leasebacks,
conditional sales, installment sales,
trust receipt transactions, certain
assignments, factoring agreements,
accounts receivable financing
arrangements, and consignments, if the
transaction creates or establishes an
interest in an UST or UST system or in
the facility or property on which the
UST or UST system is located, for the
purpose of securing a loan or other
obligation.
(2) Primarily to protect a security
interest, as used in this subpart, does
not include indicia of ownership held
primarily for investment purposes, nor
ownership indicia held primarily for
purposes other than as protection for a
security interest. A holder may have
other, secondary reasons for
maintaining indicia of ownership, but
the primary reason why any ownership
indicia are held must be as protection
for a security interest.
(g) Operation means, for purposes of
this subpart, the use, storage, filling, or
dispensing of petroleum contained in an
UST or UST system.
§280.210 Participation In management.
The term "participating in the
management of an UST or UST system"
means that, subsequent to the effective
date of this subpart, December 6,1995,
the holder is engaging in
decisionmaking control of, or activities
related to, operation of the UST or UST
system, as defined herein.
(a) Actions that are participation in
management.
(1) Participation in the management of
an UST or UST system means, for
purposes of this subpart, actual
participation by the holder in the
management or control of
decisionmaking related to the operation
of an UST or UST system. Participation
in management does not include the
mere capacity or ability to influence or
the unexercised right to control UST or
UST system operations. A holder is
participating in the management of the
UST or UST system only if the holder
either;
(i) Exercises doeisionmaking control
over the operational (as opposed to
financial or administrative) aspects of
the UST or UST system, such that the
holder has undertaken responsibility for
all or substantially all of the
management of the UST or UST system;
or
(ii) Exercises control at a level
comparable to that of a manager of the
borrower's enterprise, such that the
holder has assumed or manifested
responsibility for the overall
management of the enterprise
encompassing the day-to-day
decisionmaking of the enterprise with
respect to all, or substantially all, of the
operational (as opposed to financial or
administrative) aspects of the enterprise.
(2) Operational aspects of the
enterprise relate to the use, storage,
filling, or dispensing of petroleum
contained in an UST or UST system,
and include functions such as that of a
facility or plant manager, operations
manager, chief operating officer, or chief
executive officer. Financial or
administrative aspects include functions
such as that of a credit manager,
accounts payable/receivable manager,
personnel manager, controller, chief
financial officer, or similar functions.
Operational aspects of the enterprise do
not include the financial or
administrative aspects of the enterprise,
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46712 Federal Register / Vol. 60, No. 173 / Thursday, September 7, 1995 / Rules and Regulations
or actions associated with
environmental compliance, or actions
undertaken voluntarily to protect the
environment in accordance with
applicable requirements in 40 CFR part
280 or applicable state requirements in
those states that have been delegated
authority by EPA to administer the UST
program pursuant to 42 USC 6991c and
40 CFR part 281.
(b) Actions that are not participation
in management pre-foreclosure.
(1) Actions at the inception of the
loan or other transaction. No act or
omission prior to the time that indicia
of ownership are held primarily to
protect a security interest constitutes
evidence of participation in
management within the meaning of this
subpart. A prospective holder who
undertakes or requires an environmental
investigation (which could include a
site assessment, inspection, and/or
audit) of the UST or UST system or
facility or property on which the UST or
UST system is located (in which indicia
of ownership are to be held), or requires
a prospective borrower to clean up
contamination from the UST or UST
system or to comply or come into
compliance (whether prior or
subsequent to the time that indicia of
ownership are held primarily to protect
a security interest) with any applicable
law or regulation, is not by such action
considered to be participating in the
management of the UST or UST system
or facility or property on which the UST
or UST system is located.
(2) Loan policing and work out.
Actions that are consistent with holding
ownership indicia primarily to protect a
security interest do not constitute
participation in management for
purposes of this subpart. The authority
for the holder to take such actions may,
but need not, be contained in
contractual or other documents
specifying requirements for financial,
environmental, and other warranties,
covenants, conditions, representations
or promises from the borrower. Loan
policing and work out activities cover
and include all such activities up to
foreclosure, exclusive of any activities
that constitute participation in
management.
(i) Policing the security interest or
loan.
(A) A holder who engages in policing
activities prior to foreclosure will
remain within the exemption provided
that the holder does not together with
other actions participate in the
management of the UST or UST system
as provided in § 280.210(a). Such
policing actions include, but are not
limited to, requiring the borrower to
clean up contamination from the UST or
UST system during the term of the
security interest; requiring the borrower
to comply or come into compliance with
applicable federal, state, and local
environmental and other laws, rules,
and regulations during the term of the
security interest; securing or exercising
authority to monitor or inspect the UST
or UST system or facility or property on
which the UST or UST system is located
(including on-site inspections) in which
indicia of ownership are maintained, or
the borrower's business or financial
condition during the term of the
security interest; or taking other actions
to adequately police the loan or security
interest (such as requiring a borrower to
comply with any warranties, covenants,
conditions, representations, or promises
from the borrower).
(B) Policing activities also include
undertaking by the holder of UST
environmental compliance actions and
voluntary environmental actions taken
in compliance with 40 CFR part 280,
provided that the holder does not
otherwise participate in the
management or daily operation of the
UST or UST system as provided in
§ 280.210(a) and § 280.230. Such
allowable actions include, but are not
limited to, release detection and release
reporting, release response and
corrective action, temporary or
permanent closure of an UST or UST
system, UST upgrading or replacement,
and maintenance of corrosion
protection. A holder who undertakes
these actions must do so in compliance
with the applicable requirements in 40
CFR part 280 or applicable state
requirements in those states that have
been delegated authority by EPA to
administer the UST program pursuant to
42 U.S.C. 6991C and 40 CFR part 281.
A holder may directly oversee these
environmental compliance actions and
voluntary environmental actions, and
directly hire contractors to perform the
work, and is not by such action
considered to be participating in the
management of the UST or UST system.
(ii) Loan work out. A holder who
engages in work out activities prior to
foreclosure will remain within the
exemption provided that the holder
does not together with other actions
participate in the management of the
UST or UST system as provided in
§ 280.210(a). For purposes of this rule,
"work out" refers to those actions by
which a holder, at any time prior to
foreclosure, seeks to prevent, cure, or
mitigate a default by the borrower or
obligor; or to preserve, or prevent the
diminution of, the value of the security.
Work out activities include, but are not
limited to, restructuring or renegotiating
the terms of the security interest;
requiring payment of additional rent or
interest; exercising forbearance;
requiring or exercising rights pursuant
to an assignment of accounts or other
amounts owing to an obligor; requiring
or exercising rights pursuant to an
escrow agreement pertaining to amounts
owing (to an obligor; providing specific
or general financial or other advice,
suggestions, counseling, or guidance;
and exercising any right or remedy the
holder is entitled to by law or under any
warranties, covenants, conditions,
representations, or promises from the
borrower.
(c) Foreclosure on an UST or UST
system or facility or property on which
an UST or UST system is located, and
participation in management activities
post-foreclosure.
(1) Foreclosure, (i) Indicia of
ownership that are held primarily to
protect: a security interest include legal
or equitable title or deed to real or
personal property acquired through or
incident to foreclosure. For purposes of
this subpart, the term "foreclosure"
means that legal, marketable or
equitable title or deed has been issued,
approved, and recorded, and that the
holder has obtained access to the UST,
UST system, UST facility, and property
on which the UST or UST system is
located, provided that the holder acted
diligently to acquire marketable title or
deed and to gain access to the UST, UST
system, UST facility, and property on
which the UST or UST system is
located. The indicia of ownership held
after foreclosure continue to be
maintained primarily as protection for a
security interest provided that the
holder undertakes to sell, re-lease an
UST o;r UST system or facility or
property on which the UST or UST
system is located, held pursuant to a
lease financing transaction (whether by
a new lease financing transaction or
substitution of the lessee), or otherwise
divest itself of the UST or UST system
or facility or property on which the UST
or UST system is located, in a
reasonably expeditious manner, using
whatever commercially reasonable
means are relevant or appropriate with
respect to the UST or UST system or
facility or property on which the UST or
UST system is located, taking all facts
and circumstances into consideration,
and provided that the holder does not
participate in management (as defined
in § 280.210(a)) prior to or after
foreclosure.
(ii) For purposes of establishing that
a holder is seeking to sell, re-lease
pursuant to a lease financing transaction
(whether by a new lease financing
transaction or substitution of the lessee),
or divest in a reasonably expeditious
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Fodmrd
/ Val eo, Na. in I Thufiday, i§pt§ab§f 7, !§§§ / Hui§§ and l§gulati§a§
manner §n UST or UST system as
facility or property 0a whieh the UST er
UST system is legated, the helder may
uga whatever eommereially reasonable
means m are relevant er appropriate
with respeet to the UST er UST system
or faelllty er property en whieh me UiT
or UST system Is leeated, er may
employ the means speeifted in
8 UO,I10(a)(a), A holder that outbids,
rejects, or mils te a§t upon a written
bonafide, firm offer affair
consideration for the UST er UST
system or faelllty §r property §n whieh
me UST er UST system is legated, as
provided in 8 i80,Iie(e)(l), is not
considered te held indieia of ownership
purposes of this provision, the 41=
month period begins t§ run from
l§§§ or from fee date feat
disposition and liquidation, A holder,
who does not partfeipate in
management prior to er after
fereelesure, may sell, release, pursuant
to a lease financing transaetien (whether
by a n§w lease finaneing transa§Uon er
substitution of the lessee), an UiT or
UST system or faeility or property on
whieh the UST er UST system is
loeatedi liquidate, wind up operations,
and take measures) prior te sale or ether
dispesitien, te preserve,preteet, er
prepare th§ §ggured UiTe? UiT §y§t§ffl
er faellity er prepgrty §a whigh feg UIT
OF UiT system i§ legated, A. helder may
al§9 arrange for an existing or new
ep§rat8f te eoatiaue §r initials
f nation ef the U§T §r UiT §pt§ffl:
8 heldsF may geadugt the§g a§1ivitig§
witheut voiding the §ggurity iatgrg§t
, subjeet te th§ f§pif §sigat§
(i) A holder establishes that the
ownership indicia maintained after
foreclosure continue to be held
primarily to protect a security interest
by, within 12 months following
foreclosure, listing the UST or UST
system or the facility or property on
which the UST or UST system is
located, with a broker, dealer, or agent
who deals with the type of property in
question, or by advertising the UST or
UST system or facility or property on
which the UST or UST system is
located, as being for sale or disposition
on at least a monthly basis in either a
real estate publication or a trade or other
publication suitable for the UST or UST
system or facility or property on which
the UST or UST system is located, or a
newspaper of general circulation
(defined as one with a circulation over
10,000, or one suitable under any
applicable federal, state, or local rules of
court for publication required by court
order or rules of civil procedure)
covering the location 'of the UST or UST
system or facility or property on which
the UST or UST system is located. For
holder has obtained assess to the UiT,
UST system, UiT faeility and prepert
en whieh the UiT er UiT system is
loeated, whiehever is later, provided
that the helder aeted diligently te
obtain assess te fee UST, UiT system,
UST fasility and property en whieh the
UiT er UiT system is leeated, If fee
helder fails te aet diligently te aepire
marketable title er deed er te gain asst..
te fee UiT or UiT system, the 4i=monfe
?eried begins to run frem Beeember I,
111 er from fee date en whish the
helder first asauires either title te er
possession ef fee seeured UiT er UiT
system, er faeility er property ei whigh
fe§ y§f @f UiT system is legated,
whiehever is later:
fii) A helder feat outbids, rejeets, er
fails te aet upen an effer ef fair
eensideratien fer the UiT er UiT
system er the faeility er property en
whieh fee UiT er UST system ie
legated, establishes by sueh outbidding,
rejeetiea, er failure te aet, feat the
ownership iadiiia ia th§ sggurgd UiT
§r UiT system §r feality er preperty §a
whiga the UiT er UiT system is legated
are aet held primarily t§ srstegt tag
§§gu|ity iatgrg§t, ual@§§ tag hiliif i§
f epirgd, ia &t dgr is §v@ii liability
uadgr fg&eral m state law, t§ make a
i t§ sbtaia a hips? sfe; §?
property en whieh fee UST er UiT
system Is losated, release, pursuant to
a lease Unaneini transastien (whether
by a new lease ananeing transaetion or
substitution of fee lessee), ef an UST er
UST system er faeility or property on
whieh fee UiT er UiT system is
leeated, or ether disposition! The value
ef fee seeurity interest also ineludes
environmental investigation eosts
(whieh eeuld inelude a site assessment,
inspeetien, and/er audit of fee UST er
UiT system er feeilit;
whishfeeUiTerUI
dctjdiio iwyutet^t alia BBrreeuve aeiiBH BBS
lain assess ineurred under I § iiStil through
ffl§aagr.
(A) Fair consideration, in the case of
a holder maintaining indicia of
ownership primarily to protect a senior
security interest in the UST or UST
system or facility or property on which
the UST or UST system is located, is the
value of the security interest as defined
in this section. The value of the security
interest includes all debt and costs
incurred by the security interest holder,
and is calculated as an amount equal to
or in excess of the sum of the
outstanding principal (or comparable
amount in the case of a lease that
constitutes a security interest) owed to
the holder immediately preceding the
acquisition of full title (or possession in
the case of a lease financing transaction)
pursuant to foreclosure, plus any
unpaid interest, rent, or penalties
(whether arising before or after
foreclosure). The value of the security
interest also includes all reasonable and
necessary costs, fees, or other charges
incurred by the holder incident to work
out, foreclosure, retention, preserving,
protecting, and preparing, prior to sale,
the UST or UST system or facility or
wife any ether applieable federal, state
er leeallaw er regulations less any
amounts reeeivea by the helder in
eenneetien wife any partial disposition
of the property and any amounts paid
by the lerrewer (if net already applied
. y .3 i *]]•,• \y rJT
subsepent te fee aepisitien ef full title
(or pessessien in the ease ef a lease
finaneing transaetien) pursuant te
fereglesure: In the ease of § helder
maiataiaiag iadigia ef ewaership
primarily te preteet § junior segurity
laterest, fair geasideratiea i§ the value
sggurity iaterests plus tag value §f the
sggurity iaterest held by tag juai@?
heldif, eagh galgulated §§ §et fsfth ia
tai§ paragripa:
(if @utbid§, fg|ggt§, §f fail§ tf §§l
upea §a §fe §1 fai? geaiiiif itiea
ffl§aa§ feat fe§ haldgf 8iitbid§, fgj§6t§,
or fails to act upon within 90 days of
receipt, a written, bona fide, firm offer
of fair consideration for the UST or UST
system or facility or property on which
the UST or UST system is located
received at any time after six months
following foreclosure, as defined in
§280.210(c). A "written, bonafide, firm
offer" means a legally enforceable,
commercially reasonable, cash offer
solely for the foreclosed UST or UST
system or facility or property on which
the UST or UST system is located,
including all material terms of the
transaction, from a ready, willing, and
able purchaser who demonstrates to the
holder's satisfaction the ability to
perform. For purposes of this provision,
the six-month period begins to run from
December 6,1995 or from the date that
marketable title or deed has been issued,
approved and recorded to the holder,
and the holder has obtained access to
the UST, UST system, UST facility and
property on which the UST or UST
system is located, whichever is later,
provided that the holder was acting
diligently to acquire marketable title or
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48714 Federal Register / Vol. 60, No. 173 / Thursday, September 7, 1995 / Rules and Regulations
deed and to obtain access te the UST or
UST system, UiT facility and property
on which the UST or UST system is
located. If the holder fails to act
diligently to acquire marketable title or
deed or to gain'aeeess to the UST or
UST system, the six-month period
begins to run from December 0,1995 or
from the date on whieh the holder first
acquires either title to or possession of
the secured UST or UST system, or
facility or property on whieh the UST or
UST system is located, whichever is
(3) Actions that are not participation
in management pest-foreclosure. A
holder is not considered to be
Batleipating in the management ef an
BT or UST system or faeility or
property on which the UST or UST
system \% located when undertaking
actions under 40 GFR part 280, prov
that the holder does not otherwise
participate in the management er daily
operation of the UST or UST system as
(a) Does not participate in the
management of the UST or UST system
as defined in § 280.210; and
(b) Does not engage in petroleum
f reduction, refining, and marketing as
tfinedin§280.200(b),
§180.136 Operating an underground
storage tank er underground storage tank
system.
(a) Operating an UST or UST system
prior to foreclosure. A holder, prior to
foreclosure, as defined in § 280.2lO(c),
is not an "operator" of a petroleum UST
or UST system for purposes of
compliance wife the UST technical
standards as defined in § 280,200(a), the
UST corrective action requirements
under §§ 280,51 through 280.07, and the
UST financial responsibility
requirements under §§ 280.80 through
280.111, provided that, after December
8,1995, the holder is not in control of
er dees net have responsibility for the
daily operation of the UST or UST
lueh allowable actions include, but are
er
:UiTe?UiT
Wife fees
@P!f art i§8 8? a:
r@auir§mgatg la
;ggg §tale§ th§t have
administer the UST program pursuant to
42 U.S.C. 6991c and 40 CFR part 281.
A holder may directly oversee these
environmental compliance actions and
voluntary environmental actions, and
directly hire contractors to perform the
work, and is not by such action
considered to be participating in the
management of the UST or UST system.
§ 280.220 Ownership of an underground
storage tank or underground storage tank
system or facility or property on which an
underground storage tank or underground
storage tank system is located.
Ownership of an UST or UST system
or facility or property on which an UST
or UST system is located. A holder is
not an "owner" of a petroleum UST or
UST system or facility or property on
which a petroleum UST or UST system
is located for purposes of compliance
with the UST technical standards as
defined in § 280.200(a), the UST
corrective action requirements under
§§ 280.51 through 280.67, and the UST
financial responsibility requirements
under §§ 280.90 through 280.111,
provided the person:
(b) Operating an UiT or UST system
after foreclosure. The following
provisions apply to a holder who,
through foreclosure, as defined in
§ l§Q,118(e), aequiiti a petroleum UiT
or UiT §ygtem or faeility or proptrty on
whieh a ggteelgum UiT or UiT system
i§ legated,
(I) A h@ld§? i§ set aa "epgrate?" ef
a p§tf§l§um UiT @f UiT system far
puipeggg ef gesipUaaei with 48 6F1
gart 110 if fegfg !§ aa epgrate?, efeg?
taaa fee helfe, wh@ i§ ia eeatiel ef er
has responsibility fa? the daily
operation of the UST or UST system,
and who can be held responsible for
compliance with applicable
requirements of 40 CFR part 280 or
applicable state requirements in those
states that have been delegated authority
by EPA to administer the UST program
pursuant to 42 U.S.C. 6991c and 40 CFR
part 281.
(2) If another operator does not exist,
as provided for under paragraph (b)(l)
of this section, a holder is not an
"operator" of the UST or UST system,
for purposes of compliance with the
UST technical standards as defined in
§ 280.200(a), the UST corrective action
requirements under §§ 280.51 through
280.67, and the UST financial
responsibility requirements under
§§ 280.90 through 280.111, provided
that the holder:
(i) Empties all of its known USTs and
UST systems within 60 calendar days
after foreclosure or within 60 calendar
days after December 6,1995, whichever
is later, or another reasonable time
period specified by the implementing
agency, so that no more than 2.5
centimeters (one inch) of residue, or 0.3
percent by weight of the total capacity
of the UST system, remains in the
system; leaves vent lines open and
functioning; and caps and secures all
other lines, pumps, manways, and
ancillary equipmt nt; and
(ii) Empties those USTs and UST
systems mat are discovered after
foreclosure within GO calendar days
after discovery or within 60 calendar
days lifter December 6,1995, whichever
is later, or another reasonable time
period specified by the implementing
agency, so that no more than 2,5
centimeters (one inch) of residue, or 0,3
percent by weight of tiae total capacity
of the UST system, remains in the
system; leaves vent lines open and
functioning; and caps and secures all
other lined, pumps, manways, and
ancillary equipment.
(3) If another operator does not exist,
as provided for under paragraph (b)(l)
of mil) section, in addition to satisfying
the conditions under paragraph (b)(2) of
this lection, the holder must either:
(i) Permanently close the UST or UST
system in accordance with §§ 280,71
through 2110,74, except i 280,72(b); or
(ii) Temporarily close the UiT or UST
system in accordance with the following
applicable previ§ion§ of 1280,70!
(A) Eoatfau§ operation and
aneg with § 810,11;
(I) Report §u§p§eted fgteaggg t@ the
implementing aggaey; aad
(G) Seaduei a site a§§@ggm§at la
aeearda&Ee with §219,71 (a) if fei UiT
system i§ temporarily closed for m8re
than 12 months and the UST system
does not meet either the performance
standards in § 280.20 for new UST
systems or the upgrading requirements
in § 280.21, except that the spill and
overfill equipment requirements do not
have to be met. The holder must report
any suspected releases to the
implementing agency. For purposes of
this provision, the 12-month period
begins to run from December 6,1995 or
from the date on which the UST system
is emptied and secured under paragraph
(b)(2) of this section, whichever is later.
(4) The UST system can remain in
temporar}' closure until a subsequent
purchaser has acquired marketable title
to the UST or UST system or facility or
property on which the UST or UST
system is located. Once a subsequent
purchaser acquires marketable title to
the UST or UST system or facility or
property on which the UST or UST
system is located, the purchaser must
decide whether to operate or close the
UST or UST system in accordance with
applicable requirements in 40 CFR part
280 or applicable state requirements in
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Federal Register / Vol. 60, No. 173 / Thursday, September 7, 1995 / Rules and Regulations 46715
those states that have been delegated
authority by EPA to administer the UST
program pursuant to 42 U.S.C. 6991c
and 40 CFR part 281.
PART 281—APPROVAL OF STATE
UNDERGROUND STORAGE TANK
PROGRAMS
1. The authority citation for part 281
is revised to read as follows:
Authority: 42 U.S.C. 6912, 6991 (c), (d), (e),
fe).
Subpart C—[Amended]
2. Section 281.39 is added to subpart
C to read as follows:
§281.39 Lender liability.
(a) A state program that contains a
security interest exemption will be
considered to be no less stringent than,
and as broad in scope as, the federal
program provided that the state's
exemption:
(1) Mirrors the security interest
exemption provided for in 40 CFR part
280, subpart I; or
(2) Achieves the same effect as
provided by the following key criteria:
(i) A holder, meaning a person who
maintains indicia of ownership
primarily to protect a security interest in
a petroleum UST or UST system or
facility or property on which a
petroleum UST or UST system is
located, who does not participate in the
management of the UST or UST system
as defined under § 280.210 of this
chapter, and who does not engage in
petroleum production, refining, and
marketing as defined under § 280.200(bJ
of this chapter is not:
(A) An "owner" of a petroleum UST
or UST system or facility or property on
which a petroleum UST or UST system
is located for purposes of compliance
with the requirements of 40 CFR part
280; or
(B) An "operator" of a petroleum UST
or UST system for purposes of
compliance with the requirements of 40
CFR part 280, provided the holder is not
in control of or does not have
responsibility for the daily operation of
the UST or UST system.
(ii) [Reserved]
(b) [Reserved]
[FR Doc. 95-21982 Filed 9-6-95; 8:45 am]
BILLING CODE 6560-50-P
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