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Policy on Interpreting CERCLA Provisions Addressing Lenders and Involuntary Acquisitions by Government Entities
Note: EPA no longer updates this information, but it may be useful as a reference or resource.
[Federal Register: July 7, 1997 (Volume 62, Number 129)]
[Notices]
[Page 36423-36425]
From the Federal Register Online via GPO Access [wais.access.gpo.gov]
[DOCID:fr07jy97-144]
[[Page 36423]]
_______________________________________________________________________
Part IV
Environmental Protection Agency
_______________________________________________________________________
Policy on Interpreting CERCLA Provisions Addressing Lenders and
Involuntary Acquisitions by Government Entities; Notice
[[Page 36424]]
ENVIRONMENTAL PROTECTION AGENCY
[FRL-5853-4]
Policy on Interpreting CERCLA Provisions Addressing Lenders and
Involuntary Acquisitions by Government Entities
AGENCY: Environmental Protection Agency.
ACTION: Announcement and publication of policy on interpreting CERCLA
provisions addressing lenders and involuntary acquisitions by
Government entities.
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SUMMARY: Set forth below is the policy of the U.S. Environmental
Protection Agency (EPA) for interpreting the provisions of the
Comprehensive Environmental Response, Compensation, and Liability Act
(CERCLA) that address (1) lenders and (2) government entities that
acquire property involuntarily. The Asset Conservation, Lender
Liability, and Deposit Insurance Protection Act of 1996 (the ``Asset
Conservation Act'') amends the secured creditor exemptions under CERCLA
and Subtitle I of the Resource Conservation and Recovery Act (RCRA).
The Asset Conservation Act also validates the portion of EPA's ``CERCLA
Lender Liability Rule'' that addresses involuntary acquisitions by
government entities.
This policy clarifies the circumstances in which EPA intends to
apply as guidance the provisions of the CERCLA Lender Liability Rule
and its preamble in interpreting CERCLA's amended secured creditor
exemption. The document also reminds its readers of the effects of the
portion of the CERCLA Lender Liability Rule and the sections of the
preamble that address involuntary acquisitions by government entities.
EFFECTIVE DATE: June 30, 1997.
FOR FURTHER INFORMATION CONTACT: Laura Bulatao, Office of Site
Remediation Enforcement, U.S. Environmental Protection Agency, 401 M
St., SW (mail code 2273-A), Washington, DC 20460 (202-564-6028).
Dated: June 30, 1997.
Barry Breen,
Director, Office of Site Remediation Enforcement, U.S. Environmental
Protection Agency.
Policy on Interpreting CERCLA Provisions Addressing Lenders and
Involuntary Acquisitions by Government Entities
I. Introduction
This document sets forth the policy of the U.S. Environmental
Protection Agency (EPA) for interpreting the provisions of the
Comprehensive Environmental Response, Compensation, and Liability Act
(CERCLA) that address (1) lenders and (2) government entities that
acquire property involuntarily. The Asset Conservation, Lender
Liability, and Deposit Insurance Protection Act (the ``Asset
Conservation Act'' or ``Act''), 110 Stat. 3009-462 (1996), amends
CERCLA's secured creditor exemption. Using language very similar to the
language of EPA's ``CERCLA Lender Liability Rule'' (or ``Rule''), the
amendments define key terms and list activities that a lender may
undertake without forfeiting the exemption. See ``Final Rule on Lender
Liability Under CERCLA,'' 57 FR 18344 (April 29, 1992).1
(The portion of the Rule addressing lenders remains vacated by a court,
as described in section II below.) In addition to amending CERCLA's
secured creditor exemption, the Asset Conservation Act validates the
portion of the CERCLA Lender Liability Rule that addresses involuntary
acquisitions by government entities. It also amends Section 9003(h)(9)
of the Resource Conservation and Recovery Act (RCRA), which provides a
secured creditor exemption pertaining to underground storage tanks
(USTs).
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\1\ Except to the extent that the CERCLA lender liability
provisions apply to Subtitle I of the Resource Conservation and
Recovery Act (RCRA) pursuant to the amended Section 9003(h)(9) of
RCRA (see the end of section II below), this policy does not address
lender liability under any statutory or regulatory authority, rule,
regulation, policy, or guidance, other than CERCLA. Specifically,
this policy does not modify the ``UST Lender Liability Rule'' issued
by EPA on September 7, 1995 (40 CFR 280.200-280.230).
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Prepared in consultation with the U.S. Department of Justice (DOJ),
this policy clarifies the circumstances in which EPA intends to apply
as guidance the provisions of the CERCLA Lender Liability Rule and its
preamble in interpreting CERCLA's amended secured creditor exemption.
This document also reminds its readers of the effects of the portion of
the CERCLA Lender Liability Rule and the sections of the preamble that
address involuntary acquisitions by government entities.
II. Background
As enacted in 1980, Section 101(20)(A) of CERCLA exempted from the
definition of ``owner or operator'' ``a person, who, without
participating in the management of a vessel or facility, holds indicia
of ownership primarily to protect his security interest in the vessel
or facility.'' This language left lenders and other secured creditors
uncertain as to which types of actions--such as monitoring vessel or
facility operations, requiring compliance with applicable laws, and
refinancing or undertaking other types of loan workouts--these parties
might take to protect their security interests without forfeiting
CERCLA's secured creditor exemption. Courts did not always agree on
when a lender's actions were ``primarily to protect a security
interest,'' and what degree of ``participation in the management'' of
the property would forfeit the lender's eligibility for the exemption.
This uncertainty was heightened by dicta in the Fleet Factors opinion,
where the circuit court suggested that a lender participating in the
management of a vessel or facility ``to a degree indicating a capacity
to influence the corporation's treatment of hazardous waste'' could be
considered liable under CERCLA.2 The lack of legislative
history on and inconsistent court treatment of the CERCLA
Sec. 101(20)(A) secured creditor exemption prompted EPA to address
potential lender liability for cleanup costs at CERCLA sites in the
CERCLA Lender Liability Rule, which was promulgated in April 1992.
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\2\ United States v. Fleet Factors Corp., 901 F.2d 1550, 1557
(11th Cir. 1990), cert. denied, 111 S. Ct. 752 (1991).
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Regarding the exemption for government entities that acquire
property involuntarily and the ``third-party'' defense potentially
available to those entities, neither the legislative history of CERCLA
Secs. 101(20)(D) and 101(35)(A) nor the case law provided sufficient
explanation of when a property acquisition or transfer is considered
involuntary. Thus, in the Rule, EPA also clarified the language of
these sections by providing examples of involuntary acquisitions by
government entities.
However, in Kelley v. EPA, the U.S. Court of Appeals for the
District of Columbia Circuit vacated the Rule on the ground that EPA
lacked authority to issue the Rule as a binding regulation.3
[[Page 36425]]
Nevertheless, the Kelley decision did not preclude EPA and DOJ from
following the provisions of the Rule as enforcement policy.
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\3\ 15 F.3d 1100 (D.C. Cir. 1994), reh'g denied, 25 F.3d 1088
(D.C. Cir. 1994), cert. denied, American Bankers Ass'n v. Kelley,
115 S. Ct. 900 (1995).
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Consequently, in 1995, EPA and DOJ issued their Policy on CERCLA
Enforcement Against Lenders and Government Entities that Acquire
Property Involuntarily (``1995 Enforcement Policy''). That document
explained that as an enforcement policy, EPA and DOJ intended to apply
as guidance the provisions of the CERCLA Lender Liability Rule and the
accompanying preamble, thereby endorsing the interpretations and
rationales announced in the Rule and preamble.
Partly in response to lenders' concerns that the 1995 Enforcement
Policy did not apply to contribution actions brought by third parties
attempting to recover their CERCLA response costs from lenders,
Congress enacted the Asset Conservation Act. Section 2502 of the Act
amends CERCLA's secured creditor exemption. Using language very similar
to the language of the CERCLA Lender Liability Rule, the new CERCLA
Sec. 101(20) (E)-(G) elaborates on the original exemption by defining
key terms and listing activities that a lender may undertake without
forfeiting the exemption. Additionally, Section 2504 of the Act
validates the portion of the CERCLA Lender Liability Rule that
addresses involuntary acquisitions by government entities.
The Asset Conservation Act also addresses lender liability under
Section 9003(h)(9) of RCRA. Section 2503 of the Act amends Section
9003(h)(9) of RCRA to protect holders of security interests both as
owners and operators of USTs. It also amends Section 9003(h)(9) of RCRA
to provide the following: the CERCLA lender provisions apply in
determining a person's liability as an owner or operator of an UST;
however, where those provisions are inconsistent with the ``UST Lender
Liability Rule'' issued by EPA on September 7, 1995 (40 CFR 280.200-
280.230), that rule will prevail.
As a result of the enactment of the Asset Conservation Act, EPA and
DOJ have withdrawn their 1995 Enforcement Policy, and EPA is now
issuing the policy statement below to provide guidance on interpreting
CERCLA's lender and involuntary acquisition provisions.
III. Policy Statement
A. Lenders and Other Secured Creditors
In light of the substantial similarities between CERCLA's amended
secured creditor exemption and the CERCLA Lender Liability Rule, where
the Rule and its preamble provide additional clarification of the same
or similar terms used in the secured creditor exemption, EPA intends to
treat those portions of the Rule and preamble as guidance in
interpreting the exemption. For example, when interpreting the term
``primarily to protect a security interest,'' EPA may consult the
portions of the CERCLA Lender Liability Rule that discuss that term. As
another example, when determining whether a lender is seeking to divest
itself of a foreclosed upon facility ``at the earliest practicable,
commercially reasonable time, on commercially reasonable terms,'' EPA
may consult the portions of the Rule that describe how a lender may
establish that it is undertaking to divest itself of the property ``in
a reasonably expeditious manner, using whatever commercially reasonable
means are relevant or appropriate'' and that it is continuing to hold
that property ``primarily to protect a security interest.''
B. Involuntary Acquisitions by Government Entities
As noted above, Section 2504 of the Asset Conservation Act
validated the portion of the CERCLA Lender Liability Rule that
addresses involuntary acquisitions by government entities. 40 CFR
300.1105 is therefore legally applicable to the interpretation of
CERCLA Secs. 101(20)(D) and 101(35)(A), the provisions that address
involuntary acquisitions by government entities. Similar to the
preamble to any valid regulation, the preamble to the CERCLA Lender
Liability Rule will be looked to as authoritative guidance on the
meaning of the portion of the Rule addressing involuntary acquisitions.
For example, when interpreting the meaning of ``involuntary acquisition
or transfer,'' EPA will consult the following definition contained in
the preamble:
[A]ny acquisition or transfer in which the government's interest
in, and ultimate ownership of, a specific asset exists only because
the conduct of a non-governmental party--as in the case of
abandonment or escheat--gives rise to a statutory or common law
right to property on behalf of the government.
(57 Fed. Reg. 18372 (1992)).
IV. Use of This Policy
This document is intended solely as guidance for employees of the
U.S. Environmental Protection Agency. It is not a rule and does not
create any legal obligations. Whether and how EPA applies this policy
in any given case will depend on the facts of the case.
For further information about this policy, please contact Laura
Bulatao in EPA's Office of Site Remediation Enforcement at (202)
564-6028.
[FR Doc. 97-17595 Filed 7-3-97; 8:45 am]
BILLING CODE 6560-50-P