60 FR 46691-46715 Tuesday, Sept. 7, 1995 Underground Storage Tanks--Lender Liability; Final Rule

[Federal Register: September 7, 1995 (Volume 60, Number 173)]
[Rules and Regulations ]
[Page 46691-46715]
From the Federal Register Online via GPO Access [wais.access.gpo.gov]

[[Page 46691]]

Part II

Environmental Protection Agency

40 CFR Parts 280 and 281

Underground Storage Tanks--Lender Liability; Final Rule

[[Page 46692]]

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, 401 M 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 Heffelfinger 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 Responsibilizy 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
   J. Holders' Access to State Funds
   K. Outstanding Loans and Loans in Foreclosure Upon the Effective Date of the Rule
IV. Issues Outside the Scope of this Rule
   Petroleum Producers, Refiners, and Marketers
   Third Party Liability
   Trustee and Fiduciary Liability
   Hazardous Substance Tanks
   Hazardous Waste Tanks
   Aboveground Storage Tanks and Heating Oil Tanks
V. Economic Analysis
VI. Regulatory Assessment Requirements
   Executive Order 12866
   Regulatory Flexibility Act
   Paperwork Reduction Act
   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 Sec. 9003(h)--EPA Response Program for Petroleum, those persons 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 that 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.

\1\ Under the laws of some states, an interest in real property may 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 New 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.

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 Sec. 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) is 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

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UST systems that are out of compliance due to the lack of financing to make the necessary improvements.

The Agency is also concerned that if otherwise credit-worthy UST owners and operators are unable to obtain financing to perform leak detection tests, or to upgrade or replace deficient tanks, the market for UST equipment could be adversely affected, thereby limiting the availability and/or affecting the cost of such equipment. In addition, a lack of adequate capital could produce a ripple effect which would cut across other portions of the UST-related industrial sector for equipment and services. For example, based on letters received from UST equipment manufacturers, EPA believes that this sector has suffered as a direct result of the capital squeeze on UST owners and operators. The Agency is further concerned that many UST equipment manufacturers may find it increasingly difficult to sustain their production of UST equipment. Unnecessary constrictions on the free flow of capital for UST improvements to meet regulatory requirements could force companies to abandon their production of UST equipment or to close altogether, and it may have adverse impacts on the environment by inhibiting future investment in or development of new UST technological innovations.

The preamble to this rule is structured as follows: The following section briefly describes the UST program. This section is followed by a discussion of the rule, which includes a description of the various options lenders may exercise both pre- and post-foreclosure with respect to regulatory compliance for a secured UST or UST system. The rule concludes with regulatory text.

II. Description of the UST Regulatory Program

Based on the Agency's study of the banking community's lending practices and discussions with representatives of both lenders and borrowers, EPA believes that the lending community in general is not particularly familiar with the UST statutory scheme and regulatory program. Because USTs and UST systems are likely to be used as collateral in securing loans to borrowers, the Agency believes that it is appropriate and useful to briefly describe the UST program in the preamble of this rule. The following discussion is general in nature and is intended to provide a framework for lenders or others to better understand the scope and intent of the program; it is not intended to be a substitute for the regulations themselves.

Under the Hazardous and Solid Waste Amendments of 1984, Congress responded to the increasing threat to groundwater posed by leaking underground storage tanks by adding Subtitle I to the Resource Conservation and Recovery Act. Subtitle I required EPA to develop a comprehensive regulatory program for USTs storing petroleum or hazardous substances. Congress directed the Agency to publish regulations that would require owners and operators of new tanks and tanks already in the ground to prevent and detect leaks, cleanup leaks, and demonstrate that they are financially capable of cleaning up leaks and compensating third parties for resulting damages.

EPA's UST regulations, 40 CFR Parts 280 and 281, apply to any person who owns or operates an UST or UST system. The term owner is defined in the statute generally to mean any person who owns an UST used for the storage, use, or dispensing of substances regulated under Subtitle I of RCRA (which includes both petroleum and hazardous substances) (Sec. 9001(3), 42 USC 6991(3)). Owners are responsible for complying with the technical requirements, financial responsibility requirements, and corrective action requirements specified in the statute and regulations. These requirements are intended to ensure that USTs are managed and maintained safely, so that they will not leak or otherwise cause harm to human health and the environment. In addition, should a leak occur, the requirements provide that the 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 (Sec. 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 Notification (including performance standards for new UST systems, upgrading of existing UST systems, and notification requirements); Subpart C--General Operating Requirements (including spill and overfill control, corrosion protection, reporting and recordkeeping); Subpart D--Release Detection; Sec. 280.50 (reporting of suspected releases) of Subpart E--Release Reporting, Investigation, and Confirmation; and Subpart G--Out of Service UST Systems (including temporary and permanent closure). These regulations impose obligations upon UST owners and operators, separate from the Subtitle I corrective action requirements discussed in Section II. B of this preamble.

Leak Prevention
Before EPA regulations were issued, most tanks were constructed of bare steel and were not equipped with release prevention or detection features. 40 CFR Sec. 280.21 requires UST owners and operators to ensure that their tanks are protected against corrosion and equipped with devices that prevent spills and overfills no later than December 22, 1998. Tanks installed before December 22, 1988 must be replaced or upgraded by fitting them with corrosion protection and spill and overfill prevention devices to bring them up to new-tank standards. USTs installed after December 22, 1988 must be fiberglass-reinforced plastic, corrosion-protected steel, a composite of these materials, or determined by the implementing agency to be no 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 Sec. 280.31.
Leak Detection
In addition to meeting the leak prevention requirements, owners and operators of USTs must use a method listed in Secs. 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 [[Page 46694]] to leak, had the earliest compliance deadlines. Phase-in of the leak detection requirements was completed in 1993, and all UST systems should now be in compliance with these requirements.
Release Reporting
UST owners and operators must, in accordance with Sec. 280.50, report to the implementing agency within 24 hours, or another reasonable time period specified by the implementing agency, the discovery of any released regulated UST substances, or any suspected release. Unusual operating conditions or monitoring results indicating a release must also be reported to the implementing agency.
Closure
Owners or operators who would like to take tanks out of operation must either temporarily or permanently close them in accordance with 40 CFR part 280 subpart G--Out-of-Service UST Systems and Closure. When UST systems are temporarily closed, owners and operators must continue operation and maintenance of corrosion protection and, unless all USTs have been emptied, release detection. If temporarily closed for three months or more, the UST system's vent lines must be left open and functioning, and all other lines, pumps, manways, and ancillary equipment must be capped and secured. After 12 months, tanks that do not meet either the performance standards for new UST systems or the upgrading requirements (excluding spill and overfill device requirements) must be 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.
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 Sec. 280.22. Owners and operators must also notify the implementing agency at least 30 days (or another reasonable time period determined by the implementing agency) prior to the permanent closure of an UST. In addition, owners and operators must keep records of testing results for the cathodic protection system, if one is used; leak detection performance and upkeep; repairs; and site assessment results at permanent closure (which must be kept for at least three years).

B. Corrective Action Requirements

Owners and operators of UST systems containing petroleum or hazardous substances must investigate, confirm, and respond to confirmed releases, as specified in Secs. 280.51 through 280.67. These requirements include, where appropriate: Performing a release investigation when a release is suspected or to determine if the UST system is the source of an off-site impact (investigation and confirmation steps include conducting tests to determine if a leak exists in the UST or UST system and conducting a site check if tests indicate that a leak does not exist but contamination is present); notifying the appropriate agencies of the release within a specified period of time; taking immediate action to prevent any further release (such as removing product from the UST system); containing and immediately cleaning up spills or overfills; monitoring and preventing the spread of contamination into the soil and/or groundwater; assembling detailed information about the site and the nature of the release; removing free product to the maximum extent practicable; investigating 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 on coverage provided by a state assurance fund.

D. State Program Approval Regulations

Subtitle I of RCRA allows state UST programs approved by EPA to operate in lieu of the federal program. EPA's state program approval regulations under 40 CFR Part 281 set standards for state programs to meet.

E. Scope of the UST Program

This rule applies only to petroleum underground storage tanks that are subject to Subtitle I of RCRA. There are certain types or classes of tanks that are excluded from Subtitle I of RCRA. Therefore, the provisions of this rule do not apply to holders of security interests in excluded tanks. Among those tanks specifically excluded by statute are: Farm and residential tanks of 1,100 gallons or less capacity used for storing motor fuel for noncommercial purposes; tanks used for storing heating oil for consumptive use on the premises where stored; tanks stored on or above the floor of underground areas (such as basements or tunnels); septic tanks; systems for collecting stormwater or wastewater; and flow-through process tanks (42 U.S.C. Sec. 6991(1)).

III. The UST Security Interest Exemption and Intent of Today's Rule

A. Overview

Today's regulation addresses the requirements of Subtitle I that are applicable to a person who holds 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, 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, Sec. 9003(h)(9) of RCRA, 42 U.S.C. Sec. 6991b(h)(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 the RCRA Subtitle I security interest exemption, EPA believes this provision is intended to provide protection from liability for a [[Page 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 (Sec. 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 Sec. 9001(3) of RCRA Subtitle I. Therefore, EPA is providing, under its broad rulemaking authority in Sec. 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 Sec. 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. <SUP>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).

\2\ Of course, a lender which has control of or responsibility for the daily operation of a tank would be an operator under Sec. 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 Sec. 9003(h)(9) exemption and obligate the lender to comply with these same technical, financial, and corrective action requirements as an owner.

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 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 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, Sec. 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.

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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 do 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 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 the eligibility conditions a holder must meet before enjoying this regulatory exemption, EPA's UST regulations will satisfy the statutory requirement that they be protective 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 abandoned tanks that would have to be cleaned up with public funding. There are a number 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 decrease 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 [[Page 46697]] replacement. UST owners who acquire capital to upgrade or replace old, corroded tanks earlier than 1998 greatly contribute to preventing further petroleum contamination.
While contemplating the effect this rule might have upon the number of abandoned tanks, the Agency also recognized that many holders currently abandon UST properties they hold as collateral rather than foreclosing on them and risking potential liability for cleanup costs. EPA believes that this rule will actually improve protection of human health and the environment by providing an incentive to holders who are interested in taking advantage of this 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 take 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 capital available for tank upgrading and replacement.

E. Liability of a Holder as an Owner of an Underground Storage Tank or Underground Storage Tank System

The following sections describe the key terms used in this rule. For the most part, these are also terms used in the Sec. 9003(h)(9) security interest exemption. This section specifies the activities that are not participating in the management of a tank and which a holder may under today's rule, engage in consistent with Subtitle I regulatory requirements.

Petroleum 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 petroleum products from purchased materials, either domestically or abroad. Refining includes the processes of cracking, distillation, separation, conversion, upgrading, and finishing of refined petroleum or petroleum products. Marketing includes the distribution, transfer, or sale of petroleum or petroleum products for wholesale or retail purposes. A holder who stores petroleum products in USTs for on-site consumption only, such as to provide heat to an office building or to refuel its own vehicles, is not considered to be engaged in petroleum production, refining, or marketing for the purposes of the UST regulatory program.
Indicia of Ownership
For purposes of this rule, indicia of ownership means ownership or evidence of an ownership interest in a petroleum UST or UST system, or in a facility or property on which a petroleum UST or UST system is located. This definition is not intended to limit or qualify type, quality, or quantity of ownership indicia that may be held by a person for the purpose of the regulatory exemption. The nature of the ownership interest may vary according to the type of secured transaction and the nature of the holder's relationship (such as that of a guarantor or surety). Accordingly, indicia of ownership may be evidence of any ownership interest or right to an UST or UST system, such as a security interest, an interest in a security interest, or any other interest in an UST or UST system. For purposes of this rule, examples of such indicia include, but are not limited to, a mortgage, deed of trust, or legal or equitable title obtained pursuant to foreclosure or its equivalents, a surety bond, guarantee of an obligation, or an assignment, lien, pledge, or other right to or form of encumbrance against a petroleum UST or UST system, or a facility or property on which a petroleum UST or UST system is located. Accordingly, it is not necessary for a person to hold actual title or a security interest in order to maintain some indicia or evidence of ownership in an UST or UST system.
Primarily To Protect a Security Interest
The term, primarily to protect a security interest as used in this regulation, means a holder's indicia of ownership are held primarily for the purpose of securing payment or performance of an obligation. EPA intends this phrase to require that the ownership interest be maintained primarily for the purpose of, or primarily in connection with, securing payment or performance of a loan or other obligation (a security interest), and not an interest in the UST or UST system or facility 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 security interest is ordinarily created by mutual consent, such as a secured transaction within the scope of Article 9 of the Uniform Commercial Code, there are other means by which a security interest may be created, some of which may or may not be the result of a consensual arrangement between the parties to the transaction. In general, a transaction that gives rise to a security interest within the ambit of this rule is one that provides the holder with recourse against the UST or UST system or facility or property on which the UST or UST system is located; the purpose of the interest is to secure the repayment of money, the performance of a duty, or of some other obligation. See generally J. White & R. Summers, Handbook on the Uniform Commercial Code Sec. 22 (2d Ed. 1980); Restatement of Security (1941).
As a matter of general law, security interests may arise from transactions in which an interest in an UST or UST system is created or established for the purpose of securing a loan or other obligation, and includes mortgages, deeds of trust, liens, and title held 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 or accounts receivable financing agreements, consignments, among others, provided that the transaction creates or establishes an interest in an UST or UST system for the purpose of securing a loan or other obligation.
Some commenters were confused by and requested clarification of the term lease financing transaction in which the lessor does not select initially the leased property, as used is the rule. A lease financing transaction is a common financing transaction for equipment and other types of personal property, and is treated under this rule as a security interest. These are leases where the form of the transaction provides for the lessor to acquire title to the property for and at the discretion of the lessee. The lessor then recovers its loan (i.e., the purchase price of the property) through rental payments from the lessee and, in some cases, from the sale of the property to the lessee or a third party at the end of the lease. Thus, the lessee is the borrower and the lessor is the holder of a security interest in the property.
At the beginning of the lease financing transactions covered by this rule, the lessor 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 does not control the daily operation and maintenance of the property. The primary reason the lessor holds indicia of ownership in the property is to protect its security interest in the event that the debtor/lessee fails to pay off its obligation to [[Page 46698]] the lessor. If a debtor/lessee defaults, a lessor may acquire the property through a variety of mechanisms, and is still considered to hold indicia of ownership 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 located, 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 addition to protecting a security interest 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 located. 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.
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 successorin -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 nonlending capacity, or has any interest in an UST or UST system other than as provided in this rule. Because this regulation, as well as the exemption in Sec. 9003(h)(9), addresses only persons who maintain a security interest, any discussion of persons with other interests or involvement in an UST or UST system is beyond the scope of this rule. Of course, a trustee or other fiduciary, or any other person who holds indicia of ownership in the UST or UST system primarily to protect a security interest, may fall within this security interest regulatory exemption.
Participating in Management
As used in this rule, participation in management means actual involvement in the management or control of decisionmaking related to the operational aspects or day-to-day operations of an UST or UST system by the holder. Participation in management does not include the mere capacity or unexercised right or 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 petroleum, and includes the storage, filling, or dispensing of petroleum contained in an UST or UST system. For purposes of this rule, a holder performing the functions of a plant manager, 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-pronged general test of management 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 or UST system responsibilities. However, the Agency received a number of comments on the proposed rule indicating that the general test merely added confusion in determining whether or not a holder was engaging in management participation. Consequently, the general test has been omitted in this final rule. Instead, the Agency has concluded that management participation is best defined as actual involvement in the management or control of decisionmaking related to the operational aspects or day-to-day operations of the UST or UST system, and not the financial, administrative or environmental compliance aspects of the UST or UST system or facility or property on which the UST or UST system is located.
The following sections discuss and describe the specific activities of a holder that the rule defines as not being instances of participation in management by a person holding indicia of ownership primarily to protect a security interest in the UST or UST system or facility or property on which an UST or UST system is located. Therefore, conduct of these activities will not, by itself, void the exemption for holders of security interests provided under this rule.
It bears repeating, however, that the activities identified in this rule do not 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 management--those must be addressed on a case-by-case basis, generally determined by whether or not the holder is involved in the management or control of decisionmaking related to the operational aspects or day-to-day operations of an UST or UST system.
a. Actions that are not participation in management. Participation in the following activities will not exclusively, in themselves, exceed the bounds of this regulatory exemption: Policing the loan; undertaking financial work out with a borrower where the obligation is 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 or property on which the UST or UST system is located. In addition, the holder is not 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, by monitoring the [[Page 46699]] borrower's business; by requiring or conducting environmental compliance activities related to the UST technical 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 be participating in management where 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 Sec. 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 [[Page 46700]] 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 informationgathering 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, noncontaminated 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 acting 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 not 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, [[Page 46701]] 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 [[Page 46702]] 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 postforeclosure 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 rule.
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, bona fide, 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 rule, 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 regulatory exemption, to be maintaining its indicia of ownership in the property as protection for investment purposes, and not as security for the obligation.
(5) Winding up operations after foreclosure. In addition, in the post-foreclosure context, this rule 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 [[Page 46703]] EPA's UST regulations (as described in Section II 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 which 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. Pre-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 Sec. 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 (Sec. 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 Secs. 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 Sec. 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 [[Page 46704]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 Sec. 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 finds 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 the 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 within 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 commenter asserted, even a phase II [[Page 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 Sec. 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 Sec. 280.20 for new UST systems or Sec. 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 Sec. 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 Sec. 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 Sec. 280.52, despite the reference to that provision in Sec. 280.50. The release reporting requirement of Sec. 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 [[Page 46706]] 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, Sec. 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 Secs. 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 Sec. 280.50 but is not subject to the release investigation and confirmation requirements in Secs. 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 Sec. 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 nonoperational, 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-operational 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 Sec. 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 pursuant to this section shall include: * * * (6) requirements for maintaining evidence 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 [[Page 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 Sec. 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 Sec. 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 Sec. 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.

I. 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 [[Page 46708]] mechanism for tank owners and operators. As described earlier in this preamble under section III. 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.

J. 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 USTrelated 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 Sec. 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 indicia of ownership primarily to protect a security interest. They claimed that a petroleum marketer who extends loans to 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 persons.
EPA disagrees with commenters who stated that small businesses will be harmed by today's rule. To the contrary, the Agency 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 USTrelated 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 owner 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 [[Page 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 provide protection for holders from UST litigation 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 the 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) <SUP>4 provide a fair representation of the common law of trusts, and generally would be applicable to trusts involving underground storage tanks.

\4\ The Restatement (Second) of Trusts (1959) is an authoritative summary of the 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.

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 Sec. 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. Sec. 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 be 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 [Page 46710]] hazardous waste from regulation under Subtitle I. EPA derives its authority to develop today's rule in part from section 9003(h) of Subtitle I of RCRA--EPA Response Program for Petroleum. This authority applies exclusively to Subtitle I USTs and does not extend to the regulation of hazardous waste under Subtitle C. Thus, today's rule applies exclusively to EPA's RCRA Subtitle I UST program and does not affect any environmental requirements outside of the Subtitle I regulatory context.

F. Aboveground Storage Tanks and Heating Oil Tanks

A few commenters requested that in addition to petroleum USTs, the proposed regulatory exemption apply to aboveground storage tanks (ASTs) and heating oil tanks. Neither ASTs nor tanks used to store heating oil for consumptive use on the premises where stored are regulated under RCRA Subtitle I, although they may be regulated sometimes under other federal laws (e.g., the Oil Pollution Act) or state laws. Today's rule only addresses petroleum USTs regulated under Subtitle I of RCRA. The rule applies exclusively to EPA's RCRA Subtitle I UST program and does not affect any environmental requirements outside of the Subtitle I regulatory context.
While ASTs and heating oil tanks used for on-site consumption are excluded from the federal UST requirements, several states do regulate them. Under federal law, states are allowed to develop more stringent requirements, as well as requirements that are broader in scope than federal the ones. Thus, holders may find themselves responsible for certain state-imposed AST and/or heating oil tank requirements. States that are concerned about lender liability issues may choose to provide statutory and regulatory exclusions for holders that extend loans to borrowers who own or operate ASTs or heating oil tanks, particularly if it would have a positive influence on the ability of an UST owner or operator to obtain capital.

V. Economic Analysis

In the proposed rule, EPA requested that commenters furnish information that would help the Agency better understand how this regulatory exemption would affect an UST owner or operator's ability to comply with UST regulations. The Agency specifically requested information regarding the current interest rate charged for loans when property with one or more USTs is used as collateral. In addition, holders were asked about the extent to which credit might have been more available in the past if the rule had been in effect.
EPA did not receive any substantive comments or data regarding this request for information, and as a result, was unable to collect and analyze any new data that would assist the Agency in quantitatively evaluating further the rule's potential effects upon environmental protection and economic growth. For those interested in a more detailed discussion of the costs and benefits associated with today's rule, please refer to 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 OUST Docket at 401 M Street, SW., room M2616, Washington, DC 20460.

VI. Regulatory Assessment Requirements

A. Executive Order 12866

Under Executive Order 12866 [58 FR 51735 (October 4, 1993)], the Agency must determine whether the regulatory action is significant and therefore subject to review by the U.S. Office of Management and Budget (OMB) and the requirements of the Executive Order. The Order defines significant regulatory action as one that is likely to result in a rule that may:
(1) Have an annual effect on the economy of $100 million or more or adversely affect in a material way the economy, a sector of the economy, productivity, competition, jobs, the environment, public health or safety, or state, local, or tribal governments or communities;
(2) Create a serious inconsistency or otherwise interfere with an action taken or planned by another agency; (3) Materially alter the budgetary impact of entitlements, grants, user fees, or loan programs or the rights and obligations of recipients thereof, or
(4) Raise novel legal or policy issues arising out of legal mandates, the President's priorities, or the principles set forth in the Executive Order.
Pursuant to the terms of Executive Order 12866, it has been determined that this rule is a significant regulatory action because it raises unique or novel policy issues. Therefore, this rule is subject to review by OMB. OMB, however, elected to waive its review of the final rule. Thus, no changes were made in the final rule in response to OMB recommendations.

B. Regulatory Flexibility Act

In accordance with the Regulatory Flexibility Act of 1980, agencies must evaluate the effects of a regulation on small entities. If the rule is likely to have a significant impact on a substantial number of small entities, then a Regulatory Flexibility Analysis must be performed. Because this rule may actually result in cost savings for small entities that hold security interests in USTs or UST systems, by lowering the cost and increasing the availability of capital for small business UST owners, EPA certifies that today's rule would not have a significant impact on a substantial number of small entities.

C. Paperwork Reduction Act

This rule does not contain any new information collection requirements under the provision of the Paperwork Reduction Act, 44 U.S.C. 3501 et seq.
To the extent that this rule discusses any information collection requirements imposed under existing underground storage tank regulations, those requirements have been approved by the OMB under the Paperwork Reduction Act and have been assigned control number 2050-0068 (ICR no. 1360.04).

D. Unfunded Mandates Reform Act

Under Section 202 of the Unfunded Mandates Reform Act of 1995, signed into law on March 22, 1995, EPA must prepare a statement to accompany any rule where the estimated costs to state, local, or tribal governments in the aggregate, or to the private sector, will be $100 million or more in any one year. Under Section 205, EPA must select the most cost-effective and least burdensome alternative that achieves the objective of the rule and is consistent with statutory requirements. Section 203 requires EPA to establish a plan for informing and advising any small governments that may be significantly impacted by the rule.
EPA has determined that this rule does not include a federal mandate that may result in estimated costs of $100 million or more to either state, local or tribal governments in the aggregate, or to the private sector.

List of Subjects in 40 CFR Parts 280 and 281

Hazardous substances, Insurance, Oil pollution, Reporting and recordkeeping requirements, Surety bonds, Water pollution control, Water supply.

Dated: August 29, 1995.
Carol M. Browner,
Administrator.

For the reasons set out in the preamble title 40, chapter I of the Code of Federal Regulations is amended as follows: [[Page 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, 6991b, 6991c, 6991d, 6991e, 6991f, 6991g, 6991h.

2. Part 280 is amended by adding subpart I consisting of Secs. 280.200 through 280.240 to read as follows:
Subpart I--Lender Liability
Sec.
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
Sec. 280.200 Definitions.

(a) UST technical standards, as used in this subpart, refers to the UST preventative and operating requirements under 40 CFR part 280, subparts B, C, D, G, and Sec. 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 defined in Sec. 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 defined in Sec. 280.200(c)) primarily to protect a security interest (as defined in Sec. 280.200(f)(1)) 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.
(1) 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.
Sec. 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 decisionmaking 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, [[Page 46712]] 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 preforeclosure.
(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 Sec. 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 Sec. 280.210(a) and Sec. 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 Sec. 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 or 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 Sec. 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 [[Page 46713]] manner an UST or UST system or facility or property on which the UST or UST system is located, the holder may use whatever commercially reasonable means as 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, or may employ the means specified in Sec. 280.210(c)(2). A holder that outbids, rejects, or fails to act upon 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, as provided in Sec. 280.210(c)(2), is not considered to hold indicia of ownership primarily to protect a security interest.
(2) Holding foreclosed property for disposition and liquidation. A holder, who does not participate in management prior to or after foreclosure, may sell, re-lease, pursuant to a lease financing transaction (whether by a new lease financing transaction or substitution of the lessee), an UST or UST system or facility or property on which the UST or UST system is located, liquidate, wind up operations, and take measures, prior to sale or other disposition, to preserve, protect, or prepare the secured UST or UST system or facility or property on which the UST or UST system is located. A holder may also arrange for an existing or new operator to continue or initiate operation of the UST or UST system. The holder may conduct these activities without voiding the security interest exemption, subject to the requirements of this subpart.
(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 purposes of this provision, the 12- month period begins to run from December 6, 1995 or from the date that the marketable title or deed has been issued, approved and recorded, 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 acted diligently to acquire marketable title or deed and to obtain access to the UST, UST system, UST 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 access to the UST or UST system, the 12-month period begins to run from December 6, 1995 or from the date on which the holder first acquires either title to or possession of the secured UST or UST system, or facility or property on which the UST or UST system is located, whichever is later.
(ii) A holder that outbids, rejects, or fails to act upon an offer of fair consideration for the UST or UST system or the facility or property on which the UST or UST system is located, establishes by such outbidding, rejection, or failure to act, that the ownership indicia in the secured UST or UST system or facility or property on which the UST or UST system is located are not held primarily to protect the security interest, unless the holder is required, in order to avoid liability under federal or state law, to make a higher bid, to obtain a higher offer, or to seek or obtain an offer in a different manner.
(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 property on which the UST or UST system is located, release, pursuant to a lease financing transaction (whether by a new lease financing transaction or substitution of the lessee), of an UST or UST system or facility or property on which the UST or UST system is located, or other disposition. The value of the security interest also includes environmental investigation costs (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), and corrective action costs incurred under Secs. 280.51 through 280.67 or any other costs incurred as a result of reasonable efforts to comply with any other applicable federal, state or local law or regulation; less any amounts received by the holder in connection with any partial disposition of the property and any amounts paid by the borrower (if not already applied to the borrower's obligations) subsequent to the acquisition of full title (or possession in the case of a lease financing transaction) pursuant to foreclosure. In the case of a holder maintaining indicia of ownership primarily to protect a junior security interest, fair consideration is the value of all outstanding higher priority security interests plus the value of the security interest held by the junior holder, each calculated as set forth in this paragraph.
(B) Outbids, rejects, or fails to act upon an offer of fair consideration means that the holder outbids, rejects, 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 Sec. 280.210(c). A written, bona fide, 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 [[Page 46714]] deed and to obtain access to the UST or UST system, UST 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 access to the UST or UST system, the six-month period begins to run from December 6, 1995 or from the date on which the holder first acquires either title to or possession of the secured UST or UST system, or facility or property on which the UST or UST system is located, whichever is later.
(3) Actions that are not participation in management postforeclosure. A holder is not considered to be participating in the management of an UST or UST system or facility or property on which the UST or UST system is located when undertaking actions under 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 Sec. 280.210(a) and Sec. 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.
Sec. 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 Sec. 280.200(a), the UST corrective action requirements under Secs. 280.51 through 280.67, and the UST financial responsibility requirements under Secs. 280.90 through 280.111, provided the person:
(a) Does not participate in the management of the UST or UST system as defined in Sec. 280.210; and
(b) Does not engage in petroleum production, refining, and marketing as defined in Sec. 280.200(b).

Sec. 280.230 Operating an underground storage tank or underground storage tank system.

(a) Operating an UST or UST system prior to foreclosure. A holder, prior to foreclosure, as defined in Sec. 280.210(c), is not an operator of a petroleum UST or UST system for purposes of compliance with the UST technical standards as defined in Sec. 280.200(a), the UST corrective action requirements under Secs. 280.51 through 280.67, and the UST financial responsibility requirements under Secs. 280.90 through 280.111, provided that, after December 6, 1995, the holder is not in control of or does not have responsibility for the daily operation of the UST or UST system.

(b) Operating an UST or UST system after foreclosure. The following provisions apply to a holder who, through foreclosure, as defined in Sec. 280.210(c), acquires a petroleum UST or UST system or facility or property on which a petroleum UST or UST system is located.

(1) A holder is not an operator of a petroleum UST or UST system for purposes of compliance with 40 CFR part 280 if there is an operator, other than the holder, who is in control of or has responsibility for 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)(1) 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 Sec. 280.200(a), the UST corrective action requirements under Secs. 280.51 through 280.67, and the UST financial responsibility requirements under Secs. 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 equipment; and
(ii) Empties those USTs and UST systems that are discovered after foreclosure within 60 calendar days after discovery 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 equipment.
(3) If another operator does not exist, as provided for under paragraph (b)(1) of this section, in addition to satisfying the conditions under paragraph (b)(2) of this section, the holder must either:
(i) Permanently close the UST or UST system in accordance with Secs. 280.71 through 280.74, except Sec. 280.72(b); or
(ii) Temporarily close the UST or UST system in accordance with the following applicable provisions of Sec. 280.70:
(A) Continue operation and maintenance of corrosion protection in accordance with Sec. 280.31;
(B) Report suspected releases to the implementing agency; and
(C) Conduct a site assessment in accordance with Sec. 280.72(a) if the UST system is temporarily closed for more than 12 months and the UST system does not meet either the performance standards in Sec. 280.20 for new UST systems or the upgrading requirements in Sec. 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 temporary 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 [[Page 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

The authority citation for part 281 is revised to read as follows:

Authority: 42 U.S.C. 6912, 6991 (c), (d), (e), (g).

Subpart C--[Amended]

2. Section 281.39 is added to subpart C to read as follows:

Sec. 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 Sec. 280.210 of this chapter, and who does not engage in petroleum production, refining, and marketing as defined under Sec. 280.200(b) 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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60 FR 46691-46715 Tuesday, Sept. 7, 1995 Underground Storage Tanks--Lender Liability; Final Rule

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