[Federal Register Volume 62, Number 129 (Monday, July 7, 1997)]
[Notices]
[Pages 36424-36425]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 97-17595]



[[Page 36423]]

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Part IV





Environmental Protection Agency





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Policy on Interpreting CERCLA Provisions Addressing Lenders and 
Involuntary Acquisitions by Government Entities; Notice

  Federal Register / Vol. 62, No. 129 / Monday, July 7, 1997 / 
Notices  

[[Page 36424]]



ENVIRONMENTAL PROTECTION AGENCY

[FRL-5853-4]


Policy on Interpreting CERCLA Provisions Addressing Lenders and 
Involuntary Acquisitions by Government Entities

AGENCY: Environmental Protection Agency.

ACTION: Announcement and publication of policy on interpreting CERCLA 
provisions addressing lenders and involuntary acquisitions by 
Government entities.

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SUMMARY: Set forth below is the policy of the U.S. Environmental 
Protection Agency (EPA) for interpreting the provisions of the 
Comprehensive Environmental Response, Compensation, and Liability Act 
(CERCLA) that address (1) lenders and (2) government entities that 
acquire property involuntarily. The Asset Conservation, Lender 
Liability, and Deposit Insurance Protection Act of 1996 (the ``Asset 
Conservation Act'') amends the secured creditor exemptions under CERCLA 
and Subtitle I of the Resource Conservation and Recovery Act (RCRA). 
The Asset Conservation Act also validates the portion of EPA's ``CERCLA 
Lender Liability Rule'' that addresses involuntary acquisitions by 
government entities.
    This policy clarifies the circumstances in which EPA intends to 
apply as guidance the provisions of the CERCLA Lender Liability Rule 
and its preamble in interpreting CERCLA's amended secured creditor 
exemption. The document also reminds its readers of the effects of the 
portion of the CERCLA Lender Liability Rule and the sections of the 
preamble that address involuntary acquisitions by government entities.

EFFECTIVE DATE: June 30, 1997.

FOR FURTHER INFORMATION CONTACT: Laura Bulatao, Office of Site 
Remediation Enforcement, U.S. Environmental Protection Agency, 401 M 
St., SW (mail code 2273-A), Washington, DC 20460 (202-564-6028).

    Dated: June 30, 1997.
Barry Breen,
Director, Office of Site Remediation Enforcement, U.S. Environmental 
Protection Agency.

Policy on Interpreting CERCLA Provisions Addressing Lenders and 
Involuntary Acquisitions by Government Entities

I. Introduction

    This document sets forth the policy of the U.S. Environmental 
Protection Agency (EPA) for interpreting the provisions of the 
Comprehensive Environmental Response, Compensation, and Liability Act 
(CERCLA) that address (1) lenders and (2) government entities that 
acquire property involuntarily. The Asset Conservation, Lender 
Liability, and Deposit Insurance Protection Act (the ``Asset 
Conservation Act'' or ``Act''), 110 Stat. 3009-462 (1996), amends 
CERCLA's secured creditor exemption. Using language very similar to the 
language of EPA's ``CERCLA Lender Liability Rule'' (or ``Rule''), the 
amendments define key terms and list activities that a lender may 
undertake without forfeiting the exemption. See ``Final Rule on Lender 
Liability Under CERCLA,'' 57 FR 18344 (April 29, 1992).1 
(The portion of the Rule addressing lenders remains vacated by a court, 
as described in section II below.) In addition to amending CERCLA's 
secured creditor exemption, the Asset Conservation Act validates the 
portion of the CERCLA Lender Liability Rule that addresses involuntary 
acquisitions by government entities. It also amends Section 9003(h)(9) 
of the Resource Conservation and Recovery Act (RCRA), which provides a 
secured creditor exemption pertaining to underground storage tanks 
(USTs).
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    \1\ Except to the extent that the CERCLA lender liability 
provisions apply to Subtitle I of the Resource Conservation and 
Recovery Act (RCRA) pursuant to the amended Section 9003(h)(9) of 
RCRA (see the end of section II below), this policy does not address 
lender liability under any statutory or regulatory authority, rule, 
regulation, policy, or guidance, other than CERCLA. Specifically, 
this policy does not modify the ``UST Lender Liability Rule'' issued 
by EPA on September 7, 1995 (40 CFR 280.200-280.230).
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    Prepared in consultation with the U.S. Department of Justice (DOJ), 
this policy clarifies the circumstances in which EPA intends to apply 
as guidance the provisions of the CERCLA Lender Liability Rule and its 
preamble in interpreting CERCLA's amended secured creditor exemption. 
This document also reminds its readers of the effects of the portion of 
the CERCLA Lender Liability Rule and the sections of the preamble that 
address involuntary acquisitions by government entities.

II. Background

    As enacted in 1980, Section 101(20)(A) of CERCLA exempted from the 
definition of ``owner or operator'' ``a person, who, without 
participating in the management of a vessel or facility, holds indicia 
of ownership primarily to protect his security interest in the vessel 
or facility.'' This language left lenders and other secured creditors 
uncertain as to which types of actions--such as monitoring vessel or 
facility operations, requiring compliance with applicable laws, and 
refinancing or undertaking other types of loan workouts--these parties 
might take to protect their security interests without forfeiting 
CERCLA's secured creditor exemption. Courts did not always agree on 
when a lender's actions were ``primarily to protect a security 
interest,'' and what degree of ``participation in the management'' of 
the property would forfeit the lender's eligibility for the exemption. 
This uncertainty was heightened by dicta in the Fleet Factors opinion, 
where the circuit court suggested that a lender participating in the 
management of a vessel or facility ``to a degree indicating a capacity 
to influence the corporation's treatment of hazardous waste'' could be 
considered liable under CERCLA.2 The lack of legislative 
history on and inconsistent court treatment of the CERCLA 
Sec. 101(20)(A) secured creditor exemption prompted EPA to address 
potential lender liability for cleanup costs at CERCLA sites in the 
CERCLA Lender Liability Rule, which was promulgated in April 1992.
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    \2\ United States v. Fleet Factors Corp., 901 F.2d 1550, 1557 
(11th Cir. 1990), cert. denied, 111 S. Ct. 752 (1991).
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    Regarding the exemption for government entities that acquire 
property involuntarily and the ``third-party'' defense potentially 
available to those entities, neither the legislative history of CERCLA 
Secs. 101(20)(D) and 101(35)(A) nor the case law provided sufficient 
explanation of when a property acquisition or transfer is considered 
involuntary. Thus, in the Rule, EPA also clarified the language of 
these sections by providing examples of involuntary acquisitions by 
government entities.
    However, in Kelley v. EPA, the U.S. Court of Appeals for the 
District of Columbia Circuit vacated the Rule on the ground that EPA 
lacked authority to issue the Rule as a binding regulation.3

[[Page 36425]]

Nevertheless, the Kelley decision did not preclude EPA and DOJ from 
following the provisions of the Rule as enforcement policy.
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    \3\ 15 F.3d 1100 (D.C. Cir. 1994), reh'g denied, 25 F.3d 1088 
(D.C. Cir. 1994), cert. denied, American Bankers Ass'n v. Kelley, 
115 S. Ct. 900 (1995).
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    Consequently, in 1995, EPA and DOJ issued their Policy on CERCLA 
Enforcement Against Lenders and Government Entities that Acquire 
Property Involuntarily (``1995 Enforcement Policy''). That document 
explained that as an enforcement policy, EPA and DOJ intended to apply 
as guidance the provisions of the CERCLA Lender Liability Rule and the 
accompanying preamble, thereby endorsing the interpretations and 
rationales announced in the Rule and preamble.
    Partly in response to lenders' concerns that the 1995 Enforcement 
Policy did not apply to contribution actions brought by third parties 
attempting to recover their CERCLA response costs from lenders, 
Congress enacted the Asset Conservation Act. Section 2502 of the Act 
amends CERCLA's secured creditor exemption. Using language very similar 
to the language of the CERCLA Lender Liability Rule, the new CERCLA 
Sec. 101(20) (E)-(G) elaborates on the original exemption by defining 
key terms and listing activities that a lender may undertake without 
forfeiting the exemption. Additionally, Section 2504 of the Act 
validates the portion of the CERCLA Lender Liability Rule that 
addresses involuntary acquisitions by government entities.
    The Asset Conservation Act also addresses lender liability under 
Section 9003(h)(9) of RCRA. Section 2503 of the Act amends Section 
9003(h)(9) of RCRA to protect holders of security interests both as 
owners and operators of USTs. It also amends Section 9003(h)(9) of RCRA 
to provide the following: the CERCLA lender provisions apply in 
determining a person's liability as an owner or operator of an UST; 
however, where those provisions are inconsistent with the ``UST Lender 
Liability Rule'' issued by EPA on September 7, 1995 (40 CFR 280.200-
280.230), that rule will prevail.
    As a result of the enactment of the Asset Conservation Act, EPA and 
DOJ have withdrawn their 1995 Enforcement Policy, and EPA is now 
issuing the policy statement below to provide guidance on interpreting 
CERCLA's lender and involuntary acquisition provisions.

III. Policy Statement

A. Lenders and Other Secured Creditors

    In light of the substantial similarities between CERCLA's amended 
secured creditor exemption and the CERCLA Lender Liability Rule, where 
the Rule and its preamble provide additional clarification of the same 
or similar terms used in the secured creditor exemption, EPA intends to 
treat those portions of the Rule and preamble as guidance in 
interpreting the exemption. For example, when interpreting the term 
``primarily to protect a security interest,'' EPA may consult the 
portions of the CERCLA Lender Liability Rule that discuss that term. As 
another example, when determining whether a lender is seeking to divest 
itself of a foreclosed upon facility ``at the earliest practicable, 
commercially reasonable time, on commercially reasonable terms,'' EPA 
may consult the portions of the Rule that describe how a lender may 
establish that it is undertaking to divest itself of the property ``in 
a reasonably expeditious manner, using whatever commercially reasonable 
means are relevant or appropriate'' and that it is continuing to hold 
that property ``primarily to protect a security interest.''

B. Involuntary Acquisitions by Government Entities

    As noted above, Section 2504 of the Asset Conservation Act 
validated the portion of the CERCLA Lender Liability Rule that 
addresses involuntary acquisitions by government entities. 40 CFR 
300.1105 is therefore legally applicable to the interpretation of 
CERCLA Secs. 101(20)(D) and 101(35)(A), the provisions that address 
involuntary acquisitions by government entities. Similar to the 
preamble to any valid regulation, the preamble to the CERCLA Lender 
Liability Rule will be looked to as authoritative guidance on the 
meaning of the portion of the Rule addressing involuntary acquisitions. 
For example, when interpreting the meaning of ``involuntary acquisition 
or transfer,'' EPA will consult the following definition contained in 
the preamble:

    [A]ny acquisition or transfer in which the government's interest 
in, and ultimate ownership of, a specific asset exists only because 
the conduct of a non-governmental party--as in the case of 
abandonment or escheat--gives rise to a statutory or common law 
right to property on behalf of the government.

    (57 Fed. Reg. 18372 (1992)).

IV. Use of This Policy

    This document is intended solely as guidance for employees of the 
U.S. Environmental Protection Agency. It is not a rule and does not 
create any legal obligations. Whether and how EPA applies this policy 
in any given case will depend on the facts of the case.

    For further information about this policy, please contact Laura 
Bulatao in EPA's Office of Site Remediation Enforcement at (202) 
564-6028.

[FR Doc. 97-17595 Filed 7-3-97; 8:45 am]
BILLING CODE 6560-50-P