UNITED STATES E-v. ••*
                                £\TAL PROTECTION AGENCY
                                                           9838.1
                        JUL311987
MEMORANDUM

SUBJECT


FROM:


TO:
          Scope of the CERCLA Petroleum Exclusion  Under
          Sections 101(14) and 104(a)(2)
          Francis S. B 1 a k e   v
          General Counsel (LE-130)

          J. Winston Porter
          Assistant Administrator
            for Solid Waste and Emergency  Response  (WH-562A)
     One critical  and recurring issue arising  in  the  context  of
Superfund response activities has  been the  scope  of the  petroleum
exclusion under CERCLA.   Specifically, you  have asked  whether  used
oil which is contaminated by hazardous substances  1s  considered
"petroleum" under  CERCLA and thus  excluded  from CERCLA response
authority and liability  unless specifically listed under RCRA  or
some other statute.  For the reasons  discussed below,  we believe
that the contaminants present in used oil or any  other petroleum
substance are not  within the petroleum exclusion.  "Contaminants",
as discussed below, are  substances not normally found  in refined
petroleum fractions or present at  levels  which exceed  those
normally found in  such fractions.   If these contaminants are
CERCLA hazardous substances, they  are subject  to  CERCLA  response
authority and liability.

                          Background

     Under the Comprehensive Environmental  Response,  Compensation
and Liability Act  of 1980 as amended  (CERCLA), governmental
response authority, release notification  requirements, and
liability are largely tied to a release of  a "hazardous  sub-
stance." Section 104 authorizes government  response to releases
or threatened releases of hazardous substances, or "pollutants or
contaminants." Similarly, liability for response  costs and damages
under Section 107  attaches to persons who generate, transport  or

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                                                           9838.1
  dispose of hazardous substances  at  a  site  from  which  there
  Is a release or threatened  release  of  such  substances.   Under
  Section 103, a release  of  a  reportable  quantity of  a  hazardous
  substance triggers notification  to  the  National  Response
  Center.

     The term "hazardous  substance"  1s  defined  under  CERCLA
  Section 101(14) to include  approximately 714  toxic  substances
  listed under four other environmental  statutes,  Including RCRA.
  Both the definition of  hazardous  substance  and  the  definition
  of "pollutant or contaminant"  under Section 104(a)(2)  exclude
  "petroleum, including crude  oil  or  any  fraction  thereof,
  unless specifically listed  under  those  statutes.  !_/  Accordingly,
  no petroleum substance, including  used  oil, can  be  a  "hazardous
  substance" except to the extent  it  is  listed  as  a hazardous  waste
  under RCRA or under one of  the other  statutes.   Thus  two critical
  issues 1n assessing whether  a  substance 1s  subject  to  CERCLA Is
  whether or not, and to  what  extent, a  substance  is  "petroleum."
  This memorandum discusses the  second  type of  petroleum  exclusion
  issue.  The question, therefore,  is not whether  used  oil  is
  "petroleum" and thus exempted  from  CERCLA jurisdiction,  but  to
  what extent substances  found  in  used  oil which  are  not  found in
  crude oil or refined petroleum fractions are  also "petroleum".
  If such substances are  not  "petroleum"  then a release  of used
  oil  containing such substances may  trigger  CERCLA response
  actions, not to the release  of used oil, but  to  the contaminants
  present in the oil.
!_/   The full  texts  of these  provisions are as  follows:

     Section 101(14)
          •   •   •   •
     The term  [hazardous  substance] does  not Include  petroleum,
including crude oil  or any  fraction thereof which  is  not  other-
wise specifically  listed  or designated as a hazardous  substance
under subparagraphs  (A) through  (F) of this paragraph, and
the term does  not  Include natural  gas, natural  gas  liquids,
liquefied natural  gas, or synthetic gas usable  for  fuel  (or
mixtures of natural  gas and such  synthetic gas).

Section 104 («)(2)
      •  •  •   .•
     The term  [pollutant  or contaminant]  does not  include
petroleum, including  crude  oil and any fraction thereof which
is not otherwise specifically  listed or designated  as  hazardous
substances under section  101(14)(A) through (F) of  this title,
nor does it Include  natural gas,  1iquefled natural  gas, or
synthetic gas  of pipeline quality  (or mixtures  of  natural gas
and such synthetic gas).

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     Although the term "hazardous substance" is defined by statute,
there 1s no CERCLA definition of "petroleum" and very little direct
legislative history explaining the purpose or intended scope of
this exclusion.  None of the four early Superfund bills originally
excluded responses to oil, although the apparent precursor to
Section 101(14), found 1n S. 1480, excluded "petroleum" without
explanation in all versions except that introduced.   The legisla-
tive debates on the final compromise indicate only that Congress
intended to enact later, separate superfund-type legislation to
cover "oil  spills." See generally 126 Cong. Rec. H11793-11802
(December 3, 1980).

     Since the enactment of CERCLA, the Agency has provided some
interpretations of the nature and scope of the petroleum exclusion.
In providing guidance in 1981 on the notification required under
Section 103 for non-RCRA hazardous waste sites the Agency  stated
that petroleum wastes, including waste oil, which are not  speci-
fically listed under RCRA are excluded from the definition of
"hazardous substance" under 101(14).  46 Fed.  Reg.  22145
(April 15,  1981). Z/

     In 1982 and in 1983, the General Counsel  Issued two opinions
on the CERCLA petroleum exclusion.  In the first opinion,  the
General Counsel distinguished under the petroleum exclusion
between hazardous substances which are Inherent in petroleum,
such as txenzene, and hazardous substances which are  added  to or
mixed with petroleum products.  The General Counsel  concluded
that the petroleum exclusion includes those hazardous substances
which are inherent in petroleum but not those added  to or  mixed
with petroleum products.   Thus, the exclusion  of diesel  oil  as
"petroleum" includes its hazardous substance constituents, such
as benzene and toulene, but RGB's mixed with oil would not be
excluded.  Moreover, if the petroleum product  and an added
hazardous substance are so commingled that, as a practical  matter,
they cannot be separated, then the entire oil  spill  is subject  to
CERCLA response authority.

     In the second opinion, the General Counsel  concluded  that
the petroleum exclusion as applied to crude oil  "fractions"
includes blended gasoline as well  as raw gasoline,  even  though
refined or blended gasoline contains higher levels  of hazardous
2_/   In the notice the Agency used the term "waste  oil"
     without stating whether it was intended to include  all
waste oil or only unadulterated waste oil.   The Agency has
subsequently interpreted the reference to "waste oil"  in this
notice to include only unadulterated waste  oil.  50 Fed.  Reg.
13460 (April 4, 1985).

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                            -  4  -                          9838. 1


substances.  The Increased  level of  hazardous  substances  results
from the blending of raw gasoline  with  other petroleum  fractions
to increase Its octane levels.   Because virtually  all  gasoline
which leaves the refinery is blended  gasoline,  the  petroleum
exclusion would Include virtually  none  of  this  fraction  if the
increased concentration of  hazardous  substances  due only  to its
processing made it subject  to  CERCLA.

     Finally,  the Agency has interpreted the petroleum  exclusion
in two recent  Federal  Register notices.  In the  April  4,  1985
final rule adjusting reportable  quantities under Section  102,
the Agency provided its general  interpretation  of  the  exclusion:

          EPA  Interprets the petroleum  exclusion to
          apply to materials such  as  crude oil,  petro-
          leum feedstocks,  and refined  petroleum
          products, even if  a  specifically listed  or
          designated hazardous substance 1s present
          in such products.  However, EPA  does  not
          consider materials such  as  waste oil  to which
          listed CERCLA substances have  been added  to
          be within the petroleum  exclusion.  Similarly,
          pesticides are not within  the  petroleum
          exclusion, even though the  active ingredients
          of the pesticide  may be  contained in  a petro-
          leum distillate:   when an  RQ  of  a listed
          pesticide is released, the  release must be
          reported.

50 Fed.   Reg.  13460 (April  4,  1985).

     In  March  10, 1986, the  Agency published a  notice of  data
availability and request for comments on the proposed used  oil
listing  under  RCRA.  51 Fed. Reg.  8206.  In that notice,  the
Agency responded to commenters who had  argued that  the RCRA
listing  would>discourage used  oil  recycling because it would
subject  generators, transporters,  processors, and users to
Superfund liability.  The Agency stated  that used oil which
contains hazardous substances  at levels  which exceed those
normally found 1n petroleum  are  currently  subject to CERCLA.
51 Fed.  Reg. 8206 (March 10, 1986).   Although the  fact that
the used oil 1s contaminated does  not remove 1t  from the  pro-
tection  of the petroleum exclusion,  the  contaminants in the
used oil are subject to CERCLA response  authority 1f they  are
hazardous substances.   Accordingly,  most used oil,  even without
a specific listing, would not  be fully  within the petroleum
exclusion, irrespective of  the listing.

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                                                      9838 .1
                          Discussion

     Because there Is no .definition of "petroleum" in CERCLA
or any legislative history which clearly expresses the Intended
scope of this exclusion, there are several  possible interpre-
tations which could be given to this provision.  However,  we
believe that our current interpretation, under which "petroleum"
includes hazardous substances normally found in refined petroleum
fractions but does not include either hazardous substances found
at levels which exceed those normally found 1n such fractions
or substances not normally found in such fractions, is most
consistent with the statute and the relevant legislative history.
Under this interpretation, the source of the contamination,
whether intentional addition of hazardous substances to the
petroleum or addition of hazardous substances by use of the
petroleum, is not relevant to the applicability of the petroleum
exclusion.  The remainder of this memorandum explains in greater
detail  this interpretation and its legal basis, and responds to
arguments raised in opposition to this interpretation.

     The following is our interpretation of "petroleum" under
CERCLA 101(14) and 104(a)(2), which we believe to be consistent
with Congressional intent and the position  which the Agency has
taken on the scope of the petroleum exclusion thus far.  First,
we interpret this provision to exclude from CERCLA response and
liability crude oil and fractions of crude  oil, including  the
hazardous substances, such as benzene, which are indigenous in
those petroleum substances.  Because these  hazardous substances
are found naturally in all crude oil and Its fractions, they must
be included in the term "petroleum," for that provision to have
any meaning.

     Secondly, "petroleum" under CERCLA also includes hazardous
substances which are normally mixed with or added to crude oil
or crude oil fractions during the refining  process.  This  includes
hazardous substances the levels of which are Increased during
refining.  These substances are also part of "petroleum" since
their addition 1s part of the normal oil separation and processing
operations at a refinery 1n order to produce the product commonly
understood to be "petroleum."

     Finally, hazardous substances which are added to petroleum
or which Increase 1n concentration solely as a result of con-
tamination of the petroleum during use are  not part of the
"petroleum" and thus are not excluded from  CERCLA under the

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exclusion. 3/  In such cases, EPA may respond to releases of the
added hazardous substance, but not the oil  Itself.

     We believe that an Interpretation of "petroleum" to Include
only indigenous, refinery-added hazardous substances Is the
interpretation of this provision which is most consistent with
Congressional Intent.  The language of the provision, Its
explanation in the legislative history,  and the Congressional
debates on the final Superfund bill clearly Indicate that Congress
had no intention of shielding from Superfund response and liability
hazardous substances merely because they are added, intentionally
or by use, to petroleum products.

     The language of the petroleum exclusion describes "petroleum"
principally in terms of crude oil  and crude oil fractions.   This
language is virtually Identical to the language used in an  earlier
Superfund bill to define "oil." £/  There 1s no Indication  1n the
statute or legislative history that the  term "petroleum" was to
be given any meaning other than its ordinary, everyday meaning.
See Malat v. Riddel!. 383  U.S. 569, 571  (1966) (words of a  statute
should be interpreted where possible in  their ordinary, everyday
sense).  Petroleum is defined in a standard dictionary as
3/   The mixing of two or more excluded  petroleum  substances,
     such as blending of fuels,  would  not  be  considered  con-
tamination by use, and the mixture would thus  also be  an
excluded substance.

£/   See H.R. 85, 96th Cong.,  2d Sess. §101(s)  (as passsed  by
     the House, September 1980)  (""011"  means  petroleum,
including crude oil or any fraction or residue  therefrom").
H.R. 85 was designed principally to provide compensation and
assess liability for oil tanker  spills In  navigable waters.
As discussed below, the omission of this "oil  spill" coverage
under the petroleua exclusion  was believed to  be the most
significant omission 1n terms  of response  to  environmental
releases under the final Superfund bill.

     Although the bill containing the  precursor to Section
101(14), S. 1480, does not have  a definition  of "petroleum",
its accompanyfng report did explain the  term  "petroleum  oil"
in the context of the taxing provisions:

     The term "petroleum oil"  as used  in subsection 5  means
     petroleum, Including crude  petroleum  and  any  of its
     fractions or residues other than  carbon  black.

S. Rep. No. 96-848, 96th Cong.,  2d Sess. 70 (1980).

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          an oily flammable bituminous liquid that
          •ay vary from almost colorless to black,
          occurs 1n many places 1n the upper strata
          of the earth, 1s a complex mixture of
          'hydrocarbons with small  amounts of other
          substances, and Is prepared for use as
          gasoline, naphtha, or other products by
          various refining processes.

Webster's Ninth New Collegiate Dictionary 880 (1985).  Thus, an
Interpretation of the phrase "petroleum, Including crude oil or
any fraction thereof to Include only crude oil, crude oil
fractions, and refined petroleum fractions Is consistent with
the plain language of the statute. J5/

     The only legislative history  which specifically discusses
this provision states that

          petroleum,  Including crude oil and Including
          fractions of crude oil  which are not otherwise
          specifically listed or designated as hazardous
          substances  under subparagraphs (A) through (F)
          of the definition, 1s excluded from the defini-
          tion of a hazardous substance.  The reported
          bill  does not cover spills or other releases
          strictly of oIK

S. Rep. No.  96-848, 96th Cong., 2d Sess. 29-30 (1980) (emphasis
added).  Thus, the petroleum exclusion 1s explained as an
exclusion from CERCLA for spills or releases only of oil.
The legislative history clearly contemplates that the petroleum
5_/   This distinction under the exclusion 1n Title I  of
     CERCLA between petroleum as the substance that leaves
the refinery and the. hazardous substances which are added to
it prior to, during or after use was also made by  Congress  in
Title II, the revenue provisions or CERCLA.   In Title II,
Congress nade a distinction between "chemicals",  petrochemical
feedstocks and Inorganic substances, taxed in Subchapter B  of
Chapter 38 of Internal Revenue Code, and "petroleum", crude
oil and petroleum products, taxed in Subchapter A.  Section
211 of CERCLA.  The 11st of taxed chemicals  Includes  many of
the contaminant hazardous substances typically found  in used
oil:  arsenic, cadmium, chromium, lead oxide, and  mercury.
The term "petroleum products" was explained  1n the legislative
history as Including essentially crude oil and its refined
fractions.  H. Rep. No. 96-172, Part III, 96th Cong., 2d
Sess. 5  (1980) (to accompany H.R. 85).

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                            • o —
exclusion will  not apply to  mixtures  of petroleum and other
toxic materials since these  would  not be releases "strictly
of oil".

     The Congressional  debates  on  the final  compromise Superfund
legislation provides further clarification  of Congressional
intent concerning the scope  of  the petroleum exclusion,  both in
terms of what this provision deleted  from the bill  and what it
did not.  First,  the major  concern expressed with respect to the
final compromise  bill was the omission  of its oil spill  juris-
diction due to the petroleum exclusion.   See e.g. 126 Cong. Rec.
H11787 (Rep.  Florio) (daily  ed.  December TT"!"?^));  j_d. at H11790
(Rep. Broyhill);  j_d. at H11792  (Rep.   Madigan);  j_d.  at H11793
(Rep. Studds);  jjd. at H11795 (Rep. Biaggi);  j^.   at H11796 (Rep.
Snyder).  This  omission was  of  concern  because it was believed
to leave coastal  areas  and  fisheries  vunerable to tanker spills
of crude and  refined oil, such  as  the wreck  of the  Arqg  Merchant,
and offshore  oil  well accidents.   126 Cong.  Rec. H11793(Rep.
Studds) (daily  ed. December  3,  1980).   See  also  126 Cong. Rec.
S10578 (proposed  amendment to S1480 by  Sen.  Magnuson) (daily ed..
August 1, 1980);  id. at S10845  (proposed amendment  to S1480 by
Sen.   Gravel) (daily ed. .August  5, 1980).   The  omitted  coverage
of oil spills was believed to include approximately 500  spills
per year, 126 Cong.  Rec. H11796  (Rep.  Snyder) (daily ed.
December 3, 1980), far  less  than  the  number  of contaminated oil
releases each year.

     However, it  was clear that  the omission of  oil  coverage was
intended to include  spills of oil  only,  and  there was no intent
to exclude from the  bill mixtures  of  oil  and hazardous substances
The remarks of  Rep.  Mikulski  are  typical  of  the  general  under-
standing of the effect  of the petroleum  exclusion 1n the final
bil 1 :

     The Senate bill 1s substantially  similar to the House
     measure, with the  exception  that  there  is no oil  title.
          I realize  that It  is  disappointing to  see no oil-
     related  provision  1n the bill, but  we  must  also realize
     that this  1s our only chance  to  get  hazardous  waste dump
     site cleanup legislation enacted.  .  .  .
          Moreover,  there is already  a  mechanism in  place that
     is designed  to  deal with spills  in  navigable waterways.
     There Is not, however,  any  provision currently  in our law
     that addresses  the potentially ruinous  situation  of
     abandoned  toxic dump sites.
         .1,  therefore, believe  that  it  is  imperative that we
     pass the Senate bill as a  very important beginning  in our
     attempt  to defuse  the ticking environmental  time bomb of
     abandoned  toxic waste sites.

Id. at H11796.

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     In addition, several speakers specifically Identified such
mixtures, as  releases not only covered by the legislation but
releases to  which the bill was addressed.

     Mr. Edgar ...
           In my State, hazardous substances problems have been
     discovered at an alarming rate 1n recent years.  In the
     summer  of 1979, an oil slick appeared on the Susquehanna
     River near Plttston, Pa.  When EPA officials responded
     under section 311 of the Clean Water Act, they learned
     that the slick contained a variety of highly poisonous
     chemicals in addition to the oil.
          Officials estimate that more than 300,000 gallons
     of acids, cyanide compounds, industrial solvents,  waste
     oil and other chemicals remain at this site where  they
     could be washed to the surface anywhere in a 10-square -
     mile surface.

id. at H11798.  See also 126 Cong.  Rec. S14963 (dally ed.
November 24, 1980) (Sen. Randolph)  (contaminated oil slick).
Other petroleum products containing hazardous substance
additives intended to be addressed  by the legislation include
PCB's in transformer fluid, 1d. at  S14963 (Sen. Randolph)  and
S14967 (Sen. Stafford), dioxTn" in motor fuel used as a  dust
suppressant, id.   at S14974 (Sen. Mitchell), PCB's in waste
oil, id. (Sen. Mitchell) J5/ and contaminated waste oil,  id.
at S14980  (Sen. Cohen).  Accordingly, Congress understood
the petroleum exclusion to remove from CERCLA jurisdiction
spills only  of oil, not releases of hazardous substances
mi xed with the o11.

     There are two principal arguments which have been  raised
in opposition to this interpretation.  First, the argument
has been made that this Interpretation narrows the petroleum
exclusion to the extent that it has became virtually meaning-
less.  As we have noted in previous opinions on this issue,
an interpretation which emasculates a provision of a statute
is strongly  disfavored.  Marsano v. Laird. 412 F.2d 65,  70
(2d Cir. 1969).  However, this Interpretation leaves a
significant  number of petroleum spills outside the reach of
CERCLA.  Spills or releases of gasoline remain excluded  from
CERCLA under the petroleum exclusion.  As Indicated by  the
legislative  history for the 1984 underground storage tank
6_/   The  illegal disposal of PCB's 1n North Carolina described
     by Senator Mitchell was a result of the spraying of 131,000
gallons of PCB-contaminated waste oil along a roadway.   See
126 Cong. Rec. H9448  (dally ed. September 23, 1980).

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1 ©g HilateH©fl D leakage of gasoline from underground tanks
appears £® be the greatest source of groundwater contamination
in the United States,  130 Cong, Ree,  S2027, 2028 (daily ed,
February if>9 1984) (Sen,  Durenberger),   In additions,  spills
of crude or refined petroleum are not subject to Superfund,
as was frequently noted prior to its passage.,  See general ly
126 Congo  Rec« H11786-H11802 (daily ed,  Decembe~Fl>, 1980),
Moreover,  under this interpretation not  all  releases  of used
oil will be subject to CERCLA since used oil  does not neces-
sarily contain non-indigenous hazardous  substances or hazardous
substances in elevated levelSo  7/  Although  used oil  is
generally  "contaminated"  by definition,  see  e0g,, RCRA Section
1005 (36), the impurities added by use  may not be CERCLA
hazardous  substances,,

     A second argument which has been made opposing this
interpretation is that Congress intended to  include in the
term "petroleum" all hazardous  substances added through
normal use of the petroleum substance.   However, even if it
were possible to determine in a response situation whether a
hazardous  substance was added intentionally  or only through
normal use or to determine what additions are "intentional0,
the legislative history is contrary to  such  a distinction.,
As noted above, the Senate Report explaining  this provision
states that it excludes releases or spills strictly of oil.
This explanation expresses Congressional intent that  releases
of mixtures of oil and toxic chemicals,  i. e „_  releases which
are not strictly of oil,  would  be subject to  CERCLA response
authority"!  Rel eases of contaminated oil even if contaminated
due to "normal use"  are  not releases strictly of oil.

     Furthermore, the Congressional debates  prior to  passage
clearly indicate an intent that contaminated  oil would be
subject to Superfund as several such releases were discussed

as the focus of the legislation.,  Congress was concerned
with the environmental and health effect of  abandoned toxic
waste sites9 nofe whether  the presence of such hazards was
intentional OP dye t© normal practices.,   In  fact, one of the
petroleuQ=ln!azi)pd©us substance mixtures most  often mentioned
during tfaQ debates was that of  PCB contaminated oil,  which
is a typio  ©? centaai nation arguably resulting from the "normal
use0 of tfao ©11 in transformers-  Accordingly, an interpretation
of the petreleura exclusion which includes as  °petroleum"
hazardous  substances added during use of the  petroleum would
not be consistent with Congressional intent.,
]_/   Data submitted to EPA by the Utility Solid Haste
     Activities Group _et_ al .  in Appendix C of their comments
on the RCRA Used Oil listTng, February 11, 1986,

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                                                   9838.1
     Finally, although the Superfund Amendments and Reauthori zatlon
Act of 1986  (SARA) contains several provisions related to oil
and oil releases, 1t did not amend the petroleum exclusion under
CERCLA.  Moreover, the new provisions concerning oil  and oil
releases and their legislative history do not Indicate a
Congressional intent Inconsistent with this opinion.

     The only discussion of "petroleum" in the Conference
Report for SARA is in the context of defining the scope of the
new petroleum response fund for leaking underground storage
tanks under  Subtitle I of the Resource Conservation and Recovery
Act (RCRA).  Subtitle I  defines "petroleum" in a manner nearly
identical  to CERCLA.  The Conference Report specifies  that
used oil would be subject to the response fund notwithstanding
its contamination with hazardous substances.   H. Rep.  No. 99-962,
99th Cong., 2d Sess. 228 (1986).  The Conference Report is
not inconsistent with the Agency's position on "petroleum"
under CERCLA since it merely specifies that the leaking under-
ground storage tank (UST) response fund is applicable  to tanks
containing certain mixtures of oil and hazardous substances,
as well as to tanks containing uncontaml nated petroleum.  In
fact, the Report further states that the  UST  response  fund
must cover releases of used oil from tanks since "releases
from tanks containing used oil would not  rise to the  priority
necessary. . .for CERCLA response", 1d. (emphasis added), not
because such releases would be entirely excluded from  CERCLA
jurisdiction.  See also  132 Cong. Rec. S14928 (daily  ed. October
3, 1986) (Senator Chaffee) (Nothing in Section 114,  pertaining
to liability for releases of recycled oil, "shall  affect or
impair the authority of  the President to  take a response action
pursuant to Section 104  or 106 of CERCLA  with respect  to any
release. ..of used oil or recycled oil");  132  Cong.  Rec.  H9611
(daily ed. October 8, 1986) (Rep. Schneider)  ("...the  oil
companies are rightfully assessed a significant share  of the
Superfund tax. ..Waste oils laced with contaminants  have been
identified, at at least 153 Superfund sites in 32 States.").

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