Table 57: Median Percent Reductions in Dust Lead Loadings from Pre to One Year Post Intervention for LHR, LHR+ W and Baltimore Round One HUD Evaluation Units Surface Type and Sample Type LHR Median % Decline, Pre to 1 Yr Post LHR+ W Median % Decline, Pre to 1 Yr Post Balt. HUDc Median % Decline, Pre to 1 Yr Post Bare Floors: Composite Single Surface 82 NAb 94 96 NAa 84 Interior window sills: Composite Single Surface 82 NAb 97 97 NAa 98 Window Troughs: Composite Single Surface 89 NAb 98 99 NAa 90 aNA= not applicable. Composite dust samples were not taken in the Baltimore Round One HUD Evaluation units. bNA= not applicable. No single surface results are presented for LHR units because only 2 LHR units had Phase III single surface samples collected. cBaltimore HUD unit data are from Round I of the National Evaluation of HUD's Lead Based Paint Grant Program and were compiled using pre intervention and one year post intervention data for units that were vacant before treatment. For floors, both interior and entry data were included.

At one year post intervention, Baltimore Round One HUD Evaluation units had a significantly higher percentage of bare floor and window trough results that exceeded HUD clearance standards of 100 and 500 µ g/ ft2, respectively, indicating that treatments in LHR+ W units may have been " performing better" than those in Baltimore Round One units. This finding is surprising given the similarity of treatments performed in the two sets of units ( Table 58 on page 95). 11/ 23/ 05 95 Table 58: One Year Post Intervention " Failures" of HUD Clearance Standards for LHR+ W and Baltimore Round One HUD Evaluation Units Based on Single Surface Sampling Surface Type LHR Units % " Failed" b LHR+ W Units % " Failed" b Baltimore HUD Units % " Failed" b Bare Floorsa NA 14 57%

Interior window sills NA 17 11%

Window Troughs NA 14 35%

aBaltimore Round One HUD evaluation unit floor samples include all floor surfaces ( i. e., bare and carpeted); LHR and LHR+ W unit floor samples are bare floor surfaces only. b Based on initial clearance testing using clearance standards of 100 µ g/ ft2, 500 µ g/ ft2 and 800 µ g/ ft2, for floors, sill and troughs, respectively.

Two years after treatments were first performed, composite dust lead loadings on all surfaces were less than pre intervention levels ( Table 59).

Table 59: Median Percent Reductions in Compositea Dust Lead Loadings from Pre to Two Years Post Intervention for LHR and LHR+ W Units Surface Type and Sample Type LHR Median % Decline, Pre to 2 Yrs Post LHR+ W Median % Decline, Pre to 2 Yrs Post Bare Floors Interior Window Sills Window Troughs 78 79 39 88 97 96 aNo single surface results are presented because only composite samples were collected at Phase IV.

3. Does the replacement of windows in units that also undergo the prescribed treatments result in substantially lower lead dust loadings immediately after completion of the treatments?

As discussed in Section VII. E and as summarized in Table 60 on page 96, although the percent reduction in pre to immediate post intervention composite dust lead loadings was similar for the LHR and LHR+ W treatment groups, the median percent reductions in dust lead loadings as measured by single surface dust sampling were significantly associated with assigned treatment group for sills and troughs but not for floors. These reductions imply that lead hazard reduction interventions that include window replacement are more effective than those that simply treat windows in lowering window related dust lead loadings. This conclusion is further supported by a comparison of study unit data with those of the Baltimore Round One HUD Evaluation units. In general, Baltimore Round One units had all windows replaced and the magnitude in dust lead loading reduction for these units closely matched that of the LHR+ W units. 11/ 23/ 05 96 Table 60: Median Percent Reductions in Dust Lead Loadings from Pre Intervention to Immediate Post Intervention for LHR, LHR+ W and Baltimore Round One HUD Evaluation Units Surface Type and Sample Type LHR Median % Decline LHR+ W Median% Decline Balt. HUD Median% Decline Bare Floors: Composite Single Surface 85 ( 49 units) 70 ( 16 units) 89 ( 56 units) 88 ( 63 units) NAa 95 ( 278 units)

Interior window sills: Composite Single Surface 94 ( 52 units) 84 ( 16 units) 99 ( 62 units) 99 ( 62 units) NAa > 99 ( 277 units)

Window Troughs: Composite Single Surface 95 ( 52 units) 94 ( 16 units) > 99 ( 62 units) 99 ( 62 units) NAa 99 ( 273 units)

aNA= not applicable. Composite dust samples were not taken in the Baltimore Round One HUD Evaluation units.

When applying the HUD Evaluation clearance standards for floors, interior window sills and window troughs ( 100 µ g/ ft2, 500 µ g/ ft2, and 800 µ g/ ft2, respectively), LHR+ W units had fewer single surface sample clearance " failures" than LHR units. Upon initial clearance testing, Baltimore Round One HUD Evaluation units had even fewer " failures" than either LHR+ W or LHR study units ( see Table 61). ( All Baltimore Round One units that " failed" clearance were recleaned and eventually met clearance standards when re tested.) Assigned treatment group was significantly associated with immediate post intervention interior window sill and window trough results " passing" or " failing" their respective standards, but was not significantly associated with bare floors " passing" or " failing" their standard.

Table 61: Immediate Post Intervention Clearance " Failure" Rates for LHR, LHR+ W, and Baltimore Round One HUD Evaluation Units Surface Type LHR Units % " Failed" b LHR+ W Units % " Failed" b Baltimore HUD Units % " Failed" b Bare Floorsa 60 41 29 Interior window sills 20 5 1 Window Troughs 50 19 6 aBaltimore Round One HUD evaluation unit floor samples include all floor surfaces ( i. e., bare and carpeted); LHR and LHR+ W unit floor samples are bare floor surfaces only. b Based on initial clearance testing using clearance standards of 100 µ g/ ft2, 500 µ g/ ft2 and 800 µ g/ ft2, for floors, sill and troughs, respectively. All Baltimore HUD units that initially failed were re cleaned and eventually met clearance standards upon re testing.

These results clearly suggest that, as anticipated, the prescribed risk reduction treatments, when coupled with full window replacement, achieve greater dust lead loading reductions for interior window sills and window troughs, as measured immediately after treatment. While the 11/ 23/ 05 97 prescribed EA 6 8 risk reduction window treatments are less costly and do reduce preintervention dust lead levels on interior window sills and window troughs, such treatments by themselves do not appear to consistently remedy all lead hazards associated with windows, as measured by immediate post intervention dust lead testing. For example, unless the lower sash is removed, it cannot be completely scraped and repainted before being reinstalled. Therefore, many layers of built up paint might remain, which could result in paint chips being easily dislodged as soon as the sash is opened or closed, even after the prescribed window treatments have been performed.

4. Do single surface dust wipe sample and composite dust wipe sample results correlate well in measuring the amount of lead dust both before and after completion of the prescribed treatments?

This evaluation question is addressed in Appendix J.

5. Do independent visual inspections accurately assess whether the prescribed treatments have been completed?

The most significant finding of this study is that, based on the LAAP inspectors' confirmatory visual assessments, 92 percent of the 121 study units should have " failed" the EA 6 8 immediate post intervention independent visual inspection. These " failures" were driven by one or more of the prescribed lead hazard reduction treatments not being performed or properly completed, as assessed by the LAAP inspectors. In addition, the magnitude of these identified " failures" was large, indicating that most reported " failures" should have been easily observable to the independent visual inspectors. Considering that each of the units passed a visual inspection performed by a certified independent inspector, this result suggests that such independent visual inspections did not accurately determine whether the prescribed treatments were met.

While performing their dust sampling and visual assessments, LAAP inspectors also noted anecdotally that the five or six independent visual inspectors they observed spent very little time ( e. g., five to 10 minutes in many cases) conducting the visual inspections, suggesting either carelessness or a lack of training in the level of detail needed to completely visually inspect a unit for compliance with the prescribed requirements.

B. Recommendations Based on the study findings, the Center makes the following recommendations:

1. Increased oversight of independent visual inspectors by appropriate state agency officials is needed to assure that such inspectors are performing visual inspections in accordance with approved protocols and inspector training.

The LAAP inspectors' observations suggest that in field compliance checks of independent visual inspectors are critical to assuring that these inspections are properly performed. Frequent oversight evaluations of the inspectors may be necessary to emphasize regulatory commitment to proper performance of the visual inspection protocol and to ensure that fatigue and/ or routine 11/ 23/ 05 98 does not result in incomplete inspections. Additionally, state agency officials may want to review and, as necessary, revise the protocol and training for visual inspectors.

Neither EA 6 8 nor the Code of Maryland Regulations ( COMAR) specifies objective standards defining a visual inspection " success" or " failure." Further research ( outside the scope of this study) is needed to provide data that would help identify " de minimis" standards for visual inspections, i. e., in identifying thresholds at which certain observable conditions ( e. g., binding doors) contribute to elevated dust lead loadings. Until such data are available, visual inspectors should be trained to consider any easily observed " defect" on the surface types and components listed in Section 6 815( A)( 2) to constitute a " failure," especially given that many large and easily observed " failures" remained in the study units. In particular, attention should be paid to treatment " failures" of non intact paint, visible paint chips and debris, and rubbing of doors.

2. Clearance dust testing, upon completion of the prescribed lead hazard reduction treatments, should be added to the independent visual inspection as part of the lead hazard reduction treatment requirements of EA 6 8, , either by regulation or amendment to the statute.

Notwithstanding the " failure" of 92 percent of the independent visual inspections to accurately determine whether the study units were in compliance with the risk reduction standard, lead dust sample results obtained immediately after intervention revealed that a large percentage of units also had at least one bare floor, interior window sill or window trough lead dust result that would have " failed" clearance testing had such a test been required by EA 6 8. This finding confirms that visual inspections alone do not reveal all lead hazards. Although dust clearance sampling evaluates dust lead loading only at a single point in time and may not represent conditions existing throughout a dwelling unit, such sampling, when performed in conjunction with a visual inspection, would likely be more effective in determining the immediate post intervention status of the unit at the most critical point: immediately before new tenants assume residency. For these reasons, it is recommended that, for units in which the owner chooses the Lead Hazard Reduction treatment option of EA 6 8, a clearance dust testing requirement be added to the immediate post intervention independent visual inspection requirement, either by regulation or by amendment to the statute. In other words, a " clearance examination," including dust testing and a visual inspection, should be performed whenever an owner carries out prescribed lead hazard reduction treatments.

3. Rental property owners and their crews and independent contractors must perform a more intensive final cleaning upon completion of the prescribed lead hazard reduction treatments.

Dust sample results suggest that final cleaning after completion of the prescribed treatments was not, in many cases, sufficient to meet clearance dust standards, had they existed as a requirement in EA 6 8. It is presumed that those who meet such clearance standards and who pass the visual inspection are performing adequate cleaning. In the absence of clearance testing, owners and/ or contractors cannot know if dust lead loading has been reduced below such standards. However, these results point out that a thorough final cleaning is critical to reducing all lead hazards. For example, a substantial number of treatment visual assessment " failures" observed in the study 11/ 23/ 05 99 units were due to paint chips and debris being present even after the lead hazard reduction treatments had been completed. Owners' and contractors' training must highlight and emphasize proper cleaning techniques to increase the likelihood that dust lead loading can be reduced even when dust samples are not taken to confirm the results.

4. More comprehensive window treatments may be necessary to assure that interior window sills and window troughs do not continue to be an exposure source to lead.

Study results suggest that the window treatments prescribed in the statute produce reductions in lead dust and debris that may not be sufficiently protective based on relative percent changes and clearance " failures," particularly in housing units that are in poor condition. Study units that underwent full window replacement experienced a larger reduction in dust lead loading on interior window sills and window troughs, as measured by both composite and single surface sampling results, than the units undergoing just the prescribed window treatments and associated final cleaning. Also, by applying clearance lead dust standards for sills and troughs to single surface sample results, a higher percentage of study units that received just the prescribed window treatments would have " failed" clearance as opposed to those units that underwent window replacement. As older window sashes coated with many layers of lead based paint continue to rub against the window jamb, parting bead and stops, paint can chip off and fall onto the sill and/ or trough. Even when paint on window surfaces has been stabilized, a sill has been stripped and repainted or replaced and a trough cap has been installed, paint chips and debris can still be generated due to ongoing friction of the window component surfaces. For these reasons, appropriate state agency officials should consider thoroughly reviewing prescribed window treatment specifications for effectiveness.

The two year results suggesting that window component dust lead loadings remain much lower in window replacement units indicates that linking retreatment to tenant turnover makes more sense than conducting annual re inspections.

5. More emphasis needs to be placed on properly adjusting and re hanging doors to eliminate friction points.

Many doors in the study units were still rubbing or binding after the intervention had been completed. Furthermore, the independent visual inspectors typically " passed" units in which one or more doors still required adjusting and re hanging. Owners and contractors need more thorough training on how to properly address this prescribed treatment. Additionally, visual inspectors must be trained to check each door throughout a unit to make certain that it no longer rubs or binds, or otherwise causes friction.


EPA has concluded that this action may have tribal implications. However, it will neither impose substantial direct compliance costs on tribal governments, nor preempt tribal law. Under the RCRA statute, the federal government implements hazardous waste regulations directly in Indian Country. Thus, the changes to the hazardous waste regulations proposed today would not impose any direct costs on tribal governments. In addition, currently there are no facilities operating on land controlled by tribal governments, but if such facilities did locate in such areas, then this action could have tribal implications, to the extent that the proposed rule is intended to address potential adverse impacts of the 2008 DSW final rule.
	EPA consulted with tribal officials early in the process of developing this regulation to ensure they had an opportunity for meaningful and timely input into its development. Tribal representatives participated in the public meetings EPA held on the draft environmental justice methodology and noted that the census data used as the basis for the demographic analysis can undercount indigenous populations. EPA has noted this limitation in the analysis and has committed to working independently with the tribal governments as the rulemaking moves forward to ensure their concerns have been met. EPA specifically solicits additional comment from tribal officials on this proposed action and any tribal implications.
G. Executive Order 13045: Protection of Children from Environmental Health Risks and Safety Risks
      This action is not subject to Executive Order 13045 (62 FR 19885, April 23, 1997) because it is not economically significant as defined in Executive Order 12866. EPA has determined that this proposed rule will not have an adverse impact to children's health because it increases the level of environmental protection for all affected populations, including children. This action's health assessment are contained in Section VI of this preamble (as the hazard characterization portion of the environmental justice analysis). The public is invited to submit comments or identify peer-reviewed studies and data that assess effects of early life exposure to hazardous secondary materials being reclaimed.
H. Executive Order 13211: Actions that Significantly Affect Energy Supply, Distribution, or Use
      This action is not a "significant energy action" as defined in Executive Order 13211 (66 FR 28355 (May 22, 2001)), because it is not likely to have a significant adverse effect on the supply, distribution, or use of energy. As defined in Executive Order 13211, a "significant energy action" is any action by an agency (normally published in the Federal Register) that promulgates or is expected to lead to the promulgation of a final rule or regulation, including notices of inquiry, advance notices of proposed rulemaking, and notices of proposed rulemaking that: (1) is a significant regulatory action under Executive Order 12866 or any successor order and is likely to have a significant adverse effect on the supply, distribution, or use of energy; or (2) is designated by OMB as a significant energy action. This rule does not involve the supply, distribution, or use of energy and is not a significant regulatory action under Executive Order 12866. Thus, Executive Order 13211 does not apply to this rule.
I. National Technology Transfer and Advancement Act of 1995
      Section 12(d) of the National Technology Transfer and Advancement Act of 1995 ("NTTAA"), Public Law No. 104-113, 12(d) (15 U.S.C. 272 note) directs EPA to use voluntary consensus standards in its regulatory activities unless to do so would be inconsistent with applicable law or otherwise impractical. Voluntary consensus standards are technical standards (e.g., materials specifications, test methods, sampling procedures, and business practices) that are developed or adopted by voluntary consensus standards bodies. NTTAA directs EPA to provide Congress, through OMB, explanations when the Agency decides not to use available and applicable voluntary consensus standards.
	This proposed rulemaking does not involve technical standards. Therefore, EPA is not considering the use of any voluntary consensus standards.
J. Executive Order 12898: Environmental Justice
	Executive Order 12898 (59 FR 7629 (Feb. 16, 1994)) establishes federal executive policy on environmental justice. Its main provision directs federal agencies, to the greatest extent practicable and permitted by law, to make environmental justice part of their mission by identifying and addressing, as appropriate, disproportionately high and adverse human health or environmental effects of their programs, policies, and activities on minority populations and low-income populations in the United States. 	EPA has determined that this proposed rule will not have disproportionately high and adverse human health or environmental effects on minority or low-income populations because it increases the level of environmental protection for all affected populations without having any disproportionately high and adverse human health or environmental effects on any population, including any minority or low-income population. The purpose of this proposal is to revise the 2008 DSW final rule in such a way that reduces potential adverse impacts, including potential disproportionate impacts to minority and low-impact communities. See Section VI. for further discussion of the environmental justice analysis that was conducted for this proposed rule, a copy of which is included in the docket to today's proposed rule. In addition, the environmental justice analysis was subject to peer review. Copies of the peer review comments that EPA received, as well as how EPA responded to those comments are also in the docket to this proposal. EPA requests comments on EPA's environmental justice analysis, and whether there remains any potential adverse impacts of the proposed rule, including disproportionate impacts to minority and low-income communities, that is within the Agency's discretion to address.
List of Subjects
40 CFR Part 260
Environmental protection, Administrative practice and procedure, Hazardous waste, Reporting and recordkeeping requirements

40 CFR Part 261
Environmental protection, Hazardous waste, Solid Waste, Recycling

40 Part 266
Environmental protection, Hazardous Waste, Recycling

Dated:

_______________________________________________
Lisa P. Jackson,
Administrator.

For the reasons set out in the preamble, title 40, chapter I of the Code of Federal Regulations is proposed to be amended as follows:

PART 260 -- HAZARDOUS WASTE MANAGEMENT SYSTEM: GENERAL

   #    1. The authority citation for part 260 continues to read as follows:

   Authority: 42 U.S.C. 6905, 6912(a), 6921 - 6927, 6930, 6935, 6937, 6938, 6939 and 6974.

Subpart B -- Definitions

   #    2. Amend section 260.10 as follows:
      a. Remove the definition of "hazardous secondary material generated and reclaimed under the control of the generator,"
      b. Add in alphabetical order the definition of "contained" to read as follows:

§ 260.10  Definitions

*  *  *  *  *

Contained means a unit (including a land-based unit as defined in this subpart) that  meets the following criteria:  (1) the unit is in good condition, with no leaks or other continuing or intermittent unpermitted releases of the hazardous secondary materials to the environment, and is designed, as appropriate for the hazardous secondary materials, to prevent releases of hazardous secondary materials to the environment. Such releases may include, but are not limited to, releases through surface transport by precipitation runoff, releases to groundwater, wind-blown dust, fugitive air emissions, and catastrophic unit failures; (2) the unit is properly labeled or otherwise has a system (such as a log) to immediately identify the hazardous secondary materials in the unit; and (3) the unit does not hold incompatible materials and addresses any potential risks of fires or explosions. Hazardous secondary materials in units that meet the applicable requirements of 40 CFR parts 264 or 265 are considered to be contained.
*  *  *  *  *

Subpart C -- Rulemaking Petitions

   #    3. Section 260.30 is amended by revising the introductory paragraph to read as follows:
§ 260.30 Non-waste determinations and variances from classification as a solid waste.
In accordance with the standards and criteria in § 260.31 and § 260.34 and the procedures in § 260.33, the Regional Administrator may determine on a case-by-case basis that the following recycled materials are not solid wastes:
* * * * *
   #    4. Amend § 260.31 as follows:
      a. Revise the introductory text of paragraphs (a) and (b);
      b. Revise paragraph (c).

§ 260.31 Standards and criteria for variances from classification as a solid waste.
(a) The Regional Administrator may grant requests for a variance from classifying as a solid waste those materials that are accumulated speculatively without sufficient amounts being recycled if the applicant demonstrates that sufficient amounts of the material will be recycled or transferred for recycling in the following year. If a variance is granted, it is valid only for the following year, but can be renewed, on an annual basis, by filing a new application. The Regional Administrator's decision will be based on whether the hazardous secondary material is legitimately recycled as specified in § 260.43 and the following criteria:
*   *   *   *   *
(b) The Regional Administrator may grant requests for a variance from classifying as a solid waste those materials that are reclaimed and then reused as feedstock within the original production process in which the materials were generated if the reclamation operation is an essential part of the production process. This determination will be based on whether the hazardous secondary material is legitimately reclaimed as specified in § 260.43 and the following criteria:
*   *   *   *   *
(c) The Regional Administrator may grant requests for a variance from classifying as a solid waste those materials that have been partially reclaimed but must be reclaimed further before recovery is completed, if the partial reclamation has produced a commodity-like material. A determination that a partially reclaimed material for which the variance is sought is commodity-like will be based whether the hazardous secondary material is legitimately recycled as specified in §260.43 and on whether all of the following decision criteria are satisfied:
		(1) Whether the degree of partial reclamation the material has undergone is substantial;
      (2) Whether the partially-reclaimed material has sufficient economic value that it will be purchased for final reclamation;
      (3) Whether the partially-reclaimed material is a viable substitute for a product or intermediate produced from virgin or raw materials which feeds subsequent  production steps;
      (4) Whether there is a guaranteed end market for the partially-reclaimed material;
		(5) Whether the partially-reclaimed material is handled to minimize loss.
   #    5. Section 260.32 is amended by revising the introductory paragraph to read as follows:
§ 260.32 Variances to be classified as a boiler.
In accordance with the standards and criteria in § 260.10 (definition of "boiler"), and the procedures in § 260.33, the Regional Administrator may determine on a case-by-case basis that certain enclosed devices using controlled flame combustion are boilers, even though they do not otherwise meet the definition of boiler contained in § 260.10, after considering the following criteria:
*   *   *   *   *
   #    6. Section 260.33 is amended by revising the introductory paragraph and paragraphs (a), (b), and (c) and by adding paragraph (d) to read as follows:
§ 260.33 Procedures for variances from classification as a solid waste, for variances to be classified as a boiler, for legitimacy variances, or for non-waste determinations.
The Regional Administrator will use the following procedures in evaluating applications for variances from classification as a solid waste, applications to classify particular enclosed controlled flame combustion devices as boilers, applications for legitimacy variances, or applications for non-waste determinations.
(a) The applicant must apply to the Regional Administrator for the variance or non-waste determination. The application must address the relevant criteria contained in § 260.31, § 260.32, § 260.34, or § 260.43 as applicable.
(b) The Regional Administrator will evaluate the application and issue a draft notice tentatively granting or denying the application. Notification of this tentative decision will be provided by newspaper advertisement or radio broadcast in the locality where the recycler is located, and be made available on EPA's Web site. The Regional Administrator will accept comment on the tentative decision for 30 days, and may also hold a public hearing upon request or at his discretion. The Regional Administrator will issue a final decision after receipt of comments and after the hearing (if any).
(c) In the event of a change in circumstances that affect how a hazardous secondary material meets the relevant criteria contained in § 260.31, § 260.32, § 260.34 or § 260.43 upon which a variance or non-waste determination has been based, the applicant must re-apply to the Regional Administrator for a formal determination that the hazardous secondary material continues to meet the relevant criteria and therefore is not a solid waste.
(d) Facilities receiving a variance or non-waste determination must provide notification as required by § 260.42 of this chapter.

   #    7. Amend § 260.34 as follows:
      a. Revise the introductory text of paragraph (a);
      b. Revise the introductory text of paragraph (b) and (b)(4);
      c. Revise the introductory text to paragraph (c) and (c)(5).

§ 260. 34 Standards and criteria for non-waste determinations.

(a) An applicant may apply to the Regional Administrator for a formal determination that a hazardous secondary material is not discarded and therefore not a solid waste. The determinations will be based on the criteria contained in paragraphs (b) or (c) of this section, as applicable. If an application is denied, the hazardous secondary material might still be eligible for a solid waste variance or exclusion (for example, one of the solid waste variances under § 260.31). Determinations may also be granted by the State if the State is either authorized for this provision or if the following conditions are met:

*   *   *   *   *

(b) The Regional Administrator may grant a non-waste determination for hazardous secondary material which is reclaimed in a continuous industrial process if the applicant demonstrates that the hazardous secondary material is a part of the production process and is not discarded. The determination will be based on whether the hazardous secondary material is legitimately recycled as specified in § 260.43 and on the following criteria:

(1) * * *

(2) * * *

(3) * * *

(4) Other relevant factors that demonstrate the hazardous secondary material is not discarded, including why the hazardous secondary material cannot meet, or should not have to meet, the conditions of an exclusion under § 261.2 or § 261.4 of this chapter.

(c) The Regional Administrator may grant a non-waste determination for hazardous secondary material which is indistinguishable in all relevant aspects from a product or intermediate if the applicant demonstrates that the hazardous secondary material is comparable to a product or intermediate and is reclaimed and is not discarded. The determination will be based on whether the hazardous secondary material is legitimately recycled as specified in §260.43 and on the following criteria:

(1) * * *

(2) * * *

(3) * * *

(4) * * *

(5) Other relevant factors that demonstrate the hazardous secondary material is not discarded, including why the hazardous secondary material cannot meet, or should not have to meet, the conditions of an exclusion under § 261.2 or § 261.4 of this chapter.

   #    8. Amend § 260.42 as follows:
      a. Revise the introductory text to paragraph (a) and (a)(1), (a)(4), (a)(5), (a)(6), (a)(7), (a)(8) and (a)(9);
      b. Remove (a)(10);
      c. Revise paragraph (b).

§ 260.42 Notification requirement for hazardous secondary materials.

(a)  Facilities managing hazardous secondary materials or hazardous recyclable materials under §§ 260.30, 261.4(a)(23) or part 266 subpart D must send a notification prior to operating under the regulatory provision and by March 1 of each even-numbered year thereafter to the Regional Administrator using EPA Form 8700-12 that includes the following information:
   (1) The name, address, and EPA ID number of the facility;

   (2) *  *  *

   (3) *  *  *

   (4) The regulation under which the hazardous secondary materials will be managed;

   (5) When the facility began or expects to begin managing the hazardous secondary materials in accordance with the regulation;

   (6) A list of hazardous secondary materials that will be managed according to the exclusion (reported as the EPA hazardous waste numbers that would apply if the hazardous secondary materials were managed as hazardous wastes);

   (7) For each hazardous secondary material, whether the hazardous secondary material, or any portion thereof, will be managed in a land-based unit;

   (8) The quantity of each hazardous secondary material to be managed annually; and

   (9) The certification (included in EPA Form 8700-12) signed and dated by an authorized representative of the facility.

(b)  If a facility managing hazardous secondary materials has submitted a notification, but then subsequently stops managing hazardous secondary materials in accordance with the regulation(s) listed above, the facility must notify the Regional Administrator within thirty (30) days using EPA Form 8700-12. For purposes of this section, a facility has stopped managing hazardous secondary materials if the facility no longer generates, manages and/or reclaims hazardous secondary materials under the regulation(s) above and does not expect to manage any amount of hazardous secondary materials for at least one year.

   #    9. Section 260.43 is amended by revising the section heading and paragraphs (a), (b) and (c) to read as follows:
§ 260.43 Legitimate recycling of hazardous secondary materials.
(a) Recycling of hazardous secondary materials for the purpose of the exclusions or exemptions from the hazardous waste regulations or alternate regulatory standards must be legitimate. Hazardous secondary material that is not legitimately recycled is discarded material and is a solid waste. In determining if their recycling is legitimate, persons must address all the requirements of this paragraph.
(1) Legitimate recycling must involve a hazardous secondary material that provides a useful contribution to the recycling process or to a product or intermediate of the recycling process. The hazardous secondary material provides a useful contribution if it
(i) Contributes valuable ingredients to a product or intermediate; or
(ii) Replaces a catalyst or carrier in the recycling process; or
(iii) Is the source of a valuable constituent recovered in the recycling process; or
(iv) Is recovered or regenerated by the recycling process; or
(v) Is used as an effective substitute for a commercial product.
(2) The recycling process must produce a valuable product or intermediate. The product or intermediate is valuable if it is
(i) Sold to a third party; or
(ii) Used by the recycler or the generator as an effective substitute for a commercial product or as an ingredient or intermediate in an industrial process.
(3) The generator and the recycler must manage the hazardous secondary material as a valuable commodity. Where there is an analogous raw material, the hazardous secondary material must be managed, at a minimum, in a manner consistent with the management of the raw material or in an equally protective manner. Where there is no analogous raw material, the hazardous secondary material must be contained. Hazardous secondary materials that are released to the environment and are not recovered immediately are discarded.
(4) The product of the recycling process
(i) Must contain concentrations of any hazardous constituents found in Appendix VIII of part 261 of this chapter at levels that are comparable to or lower than those found in analogous products; or
(ii) Must not exhibit a hazardous characteristic (as defined in part 261 subpart C) that analogous products do not exhibit.
(b) Persons performing the recycling of hazardous secondary materials for the purpose of obtaining exclusions or exemptions from the hazardous waste regulations or alternative regulatory standards must maintain documentation of their legitimacy determination on-site.
(1) Documentation must be either a written description of how the recycling meets all four factors in § 260.43(a) or a copy of a legitimacy variance received from the person's implementing agency.
(2) Documentation must be maintained for three years after the recycling operation has ceased.
(c) An applicant may petition the Regional Administrator for a formal determination that a recycling process is legitimate without meeting the requirements under § 260.43(a)(3) or § 260.43(a)(4). The Regional Administrator will use the procedures in § 260.33 in evaluating petitions for legitimacy variances.
(1) In making a determination on a petition for a legitimacy variance, the Regional Administrator will evaluate all factors and consider legitimacy as a whole. In determining whether a process that does not meet one or both of the requirements under § 260.43(a)(3) or § 260.43(a)(4) is still legitimate, the Regional Administrator can consider the protectiveness of the storage methods, exposure from toxics in the product, the bioavailability of the toxics in the product, and any other relevant considerations.

PART 261 -- IDENTIFICATION AND LISTING OF HAZARDOUS WASTE

10. The authority citation for Part 261 continues to read as follows:

Authority: 42 U.S.C. 6905, 6912(a), 6921, 6922, 6924(y) and 6938.

Subpart A -- General

   #    11. Section 261.2 is amended by removing paragraph (a)(2)(ii) and by revising the introductory text to paragraph (e).
§ 261.2 Definition of Solid Waste
*   *   *   *   *
(e) Materials that are not solid waste when recycled. (1) Materials are not solid wastes when they can be shown to be legitimately recycled as specified in § 260.43 by being:
*   *   *   *   *
   #    12. Amend § 261.4, as follows:
   a. Republish the introductory text of paragraph (a);
   b. Revise paragraphs (a)(6) and (a)(7);
   c. Revise the introductory text to paragraph (a)(8);
   d. Revise paragraphs (a)(9)(i) and (a)(9)(ii);
   e. Revise paragraphs (a)(10) and (a)(11);
   f. Revise the first sentence of (a)(12)(i);
   g. Revise the first sentence of (a)(12)(ii);
   h. Revise paragraph (a)(13);
   i. Revise the introductory text of paragraph (a)(14);
   j. Revise paragraph (a)(17)(i);
   k. Revise the introductory text to (a)(18);
   l. Revise paragraph (a)(19);
   m. Revise the introductory text to paragraph (a)(20) and the introductory text to paragraph (a)(21);
   n. Revise paragraph (a)(22)(ii);
   o. Revise paragraph (a)(23);
   p. Remove paragraphs (a)(24) and (a)(25);
   q. Republish the introductory text of paragraph (b);
   r. Revise paragraphs (b)(12) and (b)(14).

§ 261.4 Exclusions.
(a) Materials which are not solid wastes. The following materials are not solid wastes for the purpose of this part:
*   *   *   *   *
(6) Pulping liquors ( i.e., black liquor) that are legitimately reclaimed as specified in §260.43 of this chapter in a pulping liquor recovery furnace and then reused in the pulping process, unless it is accumulated speculatively as defined in §261.1(c) of this chapter.
(7) Spent sulfuric acid legitimately used to produce virgin sulfuric acid as specified in §260.43 of this chapter, unless it is accumulated speculatively as defined in §261.1(c) of this chapter.
(8) Secondary materials that are legitimately reclaimed as specified in §260.43 of this chapter and returned to the original process or processes in which they were generated where they are reused in the production process provided:
*   *   *   *   *
(9)(i) Spent wood preserving solutions that have been legitimately reclaimed as specified in §260.43 of this chapter and are reused for their original intended purpose; and
(ii) Wastewaters from the wood preserving process that have been legitimately reclaimed as specified in §260.43 of this chapter and are reused to treat wood.
*   *   *   *   *
(10) EPA Hazardous Waste Nos. K060, K087, K141, K142, K143, K144, K145, K147, and K148, and any wastes from the coke by-products processes that are hazardous only because they exhibit the Toxicity Characteristic (TC) specified in section 261.24 of this part when, subsequent to generation, these materials are legitimately recycled as specified in §260.43 of this chapter to coke ovens, to the tar recovery process as a feedstock to produce coal tar, or mixed with coal tar prior to the tar's sale or refining. This exclusion is conditioned on there being no land disposal of the wastes from the point they are generated to the point they are recycled to coke ovens or tar recovery or refining processes, or mixed with coal tar.
(11) Nonwastewater splash condenser dross residue from the treatment of K061 in high temperature metals recovery units, provided it is shipped in drums (if shipped) and not land disposed before legitimate recovery as specified in §260.43 of this chapter.
(12)(i) Oil-bearing hazardous secondary materials ( i.e. , sludges, byproducts, or spent materials) that are generated at a petroleum refinery (SIC code 2911) and are legitimately recycled as specified in §260.43 of this chapter by being inserted into the petroleum refining process (SIC code 2911 -- including, but not limited to, distillation, catalytic cracking, fractionation, gasification (as defined in 40 CFR 260.10) or thermal cracking units (i.e., cokers)) unless the material is placed on the land, or speculatively accumulated before being so recycled. *   *   *
 (ii) Recovered oil that is legitimately recycled as specified in §260.43 of this chapter in the same manner and with the same conditions as described in paragraph (a)(12)(i) of this section. *   *   *
(13) Excluded scrap metal (processed scrap metal, unprocessed home scrap metal, and unprocessed prompt scrap metal) being legitimately recycled as specified in §260.43 of this chapter.
(14) Shredded circuit boards being legitimately recycled as specified in §260.43 of this chapter provided that they are:
*   *   *   *   *
(17) *   *   *
(i) The spent material is legitimately recycled as specified in §260.43 of this chapter to recover minerals, acids, cyanide, water or other values;
*   *   *   *   *
 (18) Petrochemical recovered oil from an associated organic chemical manufacturing facility, where the oil is legitimately recycled as specified in §260.43 of this chapter by being inserted into the petroleum refining process (SIC code 2911) along with normal petroleum refinery process streams, provided:
*   *   *   *   *
 (19) Spent caustic solutions from petroleum refining liquid treating processes legitimately used as a feedstock as specified in § 260.43 of this chapter to produce cresylic or naphthenic acid unless the material is placed on the land, or accumulated speculatively as defined in §261.1(c).
(20) Hazardous secondary materials legitimately used as specified in § 260.43 to make zinc fertilizers, provided that the following conditions specified are satisfied:
*   *   *   *   *
 (21) Zinc fertilizers legitimately made from hazardous wastes, or hazardous secondary materials that are excluded under paragraph (a)(20) of this section as specified in §260.43 of this chapter, provided that:
*   *   *   *   *
(22) *   *   *
*   *   *   *   *
(ii) Used, intact CRTs as defined in §260.10 of this chapter are not solid wastes when exported for legitimate recycling as specified in §260.43 of this chapter provided that they meet the requirements of §261.40.
*   *   *   *   *
(23) Hazardous secondary material generated and legitimately reclaimed under the control of the generator provided that it complies with (i) and (ii) below:
(i) (A) The hazardous secondary material is generated and reclaimed at the generating facility (for purposes of this definition, generating facility means all contiguous property owned, leased, or otherwise controlled by the hazardous secondary material generator) or

(B) The hazardous secondary material is generated and reclaimed at different facilities, if the reclaiming facility is controlled by the generator or if both the generating facility and the reclaiming facility are controlled by a person as defined in § 260.10 of this chapter, and if the generator provides one of the following certifications: "on behalf of [insert generator facility name], I certify that this facility will send the indicated hazardous secondary material to [insert reclaimer facility name], which is controlled by [insert generator facility name] and that [insert the name of either facility] has acknowledged full responsibility for the safe management of the hazardous secondary material". For purposes of this paragraph, "control" means the power to direct the policies of the facility, whether by the ownership of stock, voting rights, or otherwise, except that contractors who operate facilities on behalf of a different person as defined in § 260.10 of this chapter shall not be deemed to "control" such facilities, or

(C) The hazardous secondary material is generated pursuant to a written contract between a tolling contractor and a toll manufacturer and is reclaimed by the tolling contractor, if the tolling contractor certifies the following: "on behalf of [insert tolling contractor name], I certify that [insert tolling contractor name] has a written contract with [insert toll manufacturer name] to manufacture [insert name of product or intermediate] which is made from specified unused materials, and that [insert tolling contractor name] will reclaim the hazardous secondary materials generated during this manufacture. On behalf of [insert tolling contractor name] I also certify that [insert tolling contractor name] retains ownership of, and responsibility for, the hazardous secondary materials that are generated during the course of the manufacture, including any releases of hazardous secondary materials that occur during the manufacturing process". The tolling contractor must maintain at its facility for no less than three years records of hazardous secondary materials received pursuant to its written contract with the tolling manufacturer, and the tolling manufacturer must maintain at its facility for no less than three years records of hazardous secondary materials shipped pursuant to its written contract with the tolling contractor. In both cases, the records must contain the name of the transporter, the date of the shipment, and the type and quantity of the hazardous secondary material shipped or received pursuant to the written contract. These requirements may be satisfied by routine business records (e.g., financial records, bills of lading, copies of DOT shipping papers, or electronic confirmations). For purposes of this paragraph, tolling contractor means a person who arranges for the production of a product or intermediate made from specified unused materials through a written contract with a toll manufacturer. Toll manufacturer means a person who produces a product or intermediate made from specified unused materials pursuant to a written contract with a tolling contractor.

(ii) (A) The hazardous secondary material is generated and reclaimed within the United States or its territories.

(B) The hazardous secondary material is contained as defined in § 260.10 of this chapter. A hazardous secondary material released to the environment is discarded and a solid waste unless it is immediately recovered for the purpose of recycling. Hazardous secondary material managed in a unit with leaks or other continuing releases of the hazardous secondary material is discarded and a solid waste.

(C) The hazardous secondary material is not speculatively accumulated, as defined in § 261.1(c)(8), and the material is placed in a storage unit with a label indicating the first date that the excluded hazardous secondary material began to be accumulated. If placing a label on the storage unit is not practicable, the first date that the excluded hazardous secondary material began to be accumulated must be entered in an inventory log.
(D)  Notice is provided as required by § 260.42 of this chapter.
 (b) Solid wastes which are not hazardous wastes. The following solid wastes are not hazardous wastes:
*   *   *   *   *
(12) Used chlorofluorocarbon refrigerants from totally enclosed heat transfer equipment, including mobile air conditioning systems, mobile refrigeration, and commercial and industrial air conditioning and refrigeration systems that use chlorofluorocarbons as the heat transfer fluid in a refrigeration cycle, provided the refrigerant is reclaimed for further use in a manner that is legitimate as specified in §260.43 of this chapter.
*   *   *   *   *
(14) Used oil re-refining distillation bottoms that are used as feedstock to manufacture asphalt products in a manner that is legitimate as specified in §260.43 of this chapter.
*   *   *   *   *
   #    13. Amend § 261.6 as follows:
   a. Revise paragraph (a)(1);
   b. Revise the introductory text to paragraph (a)(2) and add paragraph (a)(2)(v);
   c. Revise the introductory text to paragraph (a)(3);
   d. Revise paragraph (c)(1) and the introductory text to (c)(2).
§ 261.6 Requirements for recyclable materials.
(a)(1) Hazardous wastes that are legitimately recycled as specified in §260.43 of this chapter are subject to the requirements for generators, transporters, and storage facilities of paragraphs (b) and (c) of this section, except for the materials listed in paragraphs (a)(2) and (a)(3) of this section. Hazardous wastes that are legitimately recycled will be known as "recyclable materials."
(2) The following recyclable materials are not subject to the requirements of this section when legitimately recycled as specified in §260.43 of this chapter but are regulated under subparts C through N of part 266 of this chapter and all applicable provisions in parts 268, 270, and 124 of this chapter.
*   *   *   *   *
 (v) Hazardous recyclable materials transferred for reclamation (40 CFR part 266, subpart D)
(3) The following recyclable materials are not subject to regulation under parts 262 through parts 268, 270, or 124 of this chapter and are not subject to the notification requirements of section 3010 of RCRA when legitimately recycled as specified in §260.43 of this chapter:
*   *   *   *   *
(c) (1) Owners and operators of facilities that store recyclable materials before they are recycled are regulated under all applicable provisions of subparts A though L, AA, BB, and CC of parts 264 and 265, and under parts 124, 266, 267, 268, and 270 of this chapter and the notification requirements under section 3010 of RCRA, except as provided in paragraph (a) of this section. (The recycling process itself is exempt from regulation as long as the recycling is legitimate as specified in §260.43 of this chapter, except as provided in §261.6(d).)
(2) Owners or operators of facilities that recycle recyclable materials without storing them before they are legitimately recycled are subject to the following requirements, except as provided in paragraph (a) of this section:
*   *   *   *   *
Subpart E -- Exclusions/Exemptions
   #    14. Section 261.38 is amended by adding paragraph (b)(17) to read as follows:
§ 261.38 Exclusion of comparable fuel and syngas fuel.
*   *   *   *   *
(b) *   *   *
*  *  *  *  *
(17) Legitimate recycling. Excluded fuel must be legitimately recycled as specified in §260.43 of this chapter.
*  *  *  *  *
   #    15. Section 261.39 is amended by revising the introductory paragraph to read as follows:
§ 261.39 Conditional Exclusion for Used, Broken Cathode Ray Tubes (CRTs) and Processed CRT Glass Undergoing Recycling.
Used, broken CRTs are not solid wastes if they are legitimately recycled as specified in §260.43 of this chapter and meet the following conditions:
*   *   *   *   *
   #    16. Section 261.40 is amended by being revised to read as follows:
§ 261.40 Conditional Exclusion for Used, Intact Cathode Ray Tubes (CRTs) Exported for Recycling.
Used, intact CRTs exported for legitimate recycling as specified in §260.43 of this chapter are not solid wastes if they meet the notice and consent conditions of §261.39(a)(5), and if they are not speculatively accumulated as defined in §261.1(c)(8).
   #    17. Section 261.41 is amended by revising paragraphs (a) and (b) to read as follows:
§ 261.41 Notification and Recordkeeping for Used, Intact Cathode Ray Tubes (CRTs) Exported for Reuse.
(a) Persons who export used, intact CRTs for legitimate reuse as specified in §260.43 of this chapter must send a one-time notification to the Regional Administrator. The notification must include a statement that the notifier plans to export used, intact CRTs for reuse, the notifier's name, address, and EPA ID number (if applicable) and the name and phone number of a contact person.
(b) Persons who export used, intact CRTs for legitimate reuse as specified in §260.43 of this chapter must keep copies of normal business records, such as contracts, demonstrating that each shipment of exported CRTs will be reused. This documentation must be retained for a period of at least three years from the date the CRTs were exported.
Subpart H -- Financial Requirements for Management of Excluded Hazardous Secondary Materials
   #    18. Part 261 is amended by removing Subpart H (261.140 through 261.151).
   Subpart H (§261.140 - §261.151) [removed]
PART 266 -- STANDARDS FOR THE MANAGEMENT OF SPECIFIC HAZARDOUS WASTES AND SPECIFIC TYPES OF HAZARDOUS WASTE MANAGEMENT FACILITIES
   #    19. The authority citation for part 266 continues to read as follows:
Authority: 42 U.S.C 1006, 2002(a), 3001 - 3009, 3014, 3017, 6905, 6906, 6912, 6921, 6922, 6924 - 6927, 6934, and 6937.
Subpart C -- Recyclable Materials Used in a Manner Constituting Disposal
   #    20. Section 266.20 is being amended by revising the introductory text to paragraph (a), paragraph (b), and paragraph (d)(2) to read as follows:
§ 266.20 Applicability.
(a) The regulations of this subpart apply to recyclable materials that are applied to or placed on the land, provided they are legitimately recycled as specified in §260.43 of this chapter:
*   *   *   *   *
(b) Products produced for the general public's use that are used in a manner that constitutes disposal and that contain recyclable materials are not presently subject to regulation if the recyclable materials have undergone a chemical reaction in the course of producing the products so as to become inseparable by physical means and if such products meet the applicable treatment standards in subpart D of part 268 (or applicable prohibition levels in §268.32 or RCRA section 3004(d), where no treatment standards have been established) for each recyclable material ( i.e., hazardous waste) that they contain, provided they are legitimately recycled as specified in §260.43 of this chapter.
*   *   *   *   *
(d) *   *   *
*   *   *   *   *
(2) They meet the applicable treatment standards in subpart D of Part 268 of this chapter for each hazardous waste that they contain and provided they are legitimately recycled as specified in §260.43 of this chapter.
   #    21. Section 266 is being amended by adding Subpart D to read as follows:
Subpart D  --  Hazardous Recyclable Materials
§266.30 Applicability
(a) The regulations of this subpart apply to hazardous recyclable materials that are reclaimed as defined in §261.1(a)(4). For the purposes of this subpart, a hazardous recyclable material is a hazardous waste this is being recycled.
(b) A hazardous recyclable material generator may accumulate hazardous recyclable material on-site for one year or less without a permit or without having interim status, provided that:
(1) The hazardous recyclable material generator provides notification as required by
§ 260.42 of this chapter;
(2) The hazardous recyclable material generator makes and documents advance arrangements for reclamation prior to operating under this subpart in a reclamation plan that (i) describes the hazardous recyclable material and identifies the reclamation facility where the material will be sent, (ii) includes written confirmation from the facility that they are able to reclaim the hazardous recyclable material (iii) documents the amount of hazardous recyclable material expected in each shipment and the anticipated frequency of shipments, and (iv) documents that the reclamation is legitimate per 40 CFR 260.43;
(3) While hazardous recyclable materials are being accumulated on-site, each container and tank is labeled or marked clearly with the words, "Hazardous recyclable material";
(4) The hazardous recyclable material generator complies as applicable either with all requirements applicable to large quantity generators or all requirements applicable to small quantity generators,  except for the 90 day storage time limit for large quantity generators and the 180 day (or 270 day) storage time limit for small quantity generators, and except that tanks and containers need not be labeled as containing "hazardous waste" if they instead are labeled as containing "hazardous recyclable materials."
 (c) Persons who transport or who store hazardous recyclable materials other than at the site of generation, prior to reclamation are subject to all applicable requirements of §§263 - 265 and §268.
Subpart F -- Recyclable Materials Utilized for Precious Metal Recovery
   #    22. Section 266.70 is being amended by revising paragraph (a) to read as follows:
§ 266.70 Applicability and requirements.
(a) The regulations of this subpart apply to recyclable materials that are legitimately reclaimed as specified in §260.43 of this chapter to recover economically significant amounts of gold, silver, platinum, palladium, iridium, osmium, rhodium, ruthenium, or any combination of these.
*   *   *   *   *
Subpart G -- Spent Lead-Acid Batteries Being Reclaimed
   #    23. Section 266.80 is being amended by revising paragraph (a) to read as follows:
§ 266.80 Applicability and requirements.
(a) Are spent lead-acid batteries exempt from hazardous waste management requirements? If you generate, collect, transport, store, or regenerate lead-acid batteries for legitimate reclamation purposes as specified in §260.43 of this chapter, you may be exempt from certain hazardous waste management requirements. Use the following table to determine which requirements apply to you. Alternatively, you may choose to manage your spent lead-acid batteries under the "Universal Waste" rule in 40 CFR part 273.
*   *   *   *   *
Subpart H -- Hazardous Waste Burned in Boilers and Industrial Furnaces
   #    24. Section 266.100 is being amended by revising paragraph (a) to read as follows:
§ 266.100 Applicability.
(a) The regulations of this subpart apply to hazardous waste burned or processed in a boiler or industrial furnace (as defined in §260.10 of this chapter) irrespective of the purpose of burning or processing, except as provided by paragraphs (b), (c), (d), (g), and (h) of this section. In this subpart, the term "burn" means burning for energy recovery or destruction, or processing for materials recovery or as an ingredient. The emissions standards of §§266.104, 266.105, 266.106, and 266.107 apply to facilities operating under interim status or under a RCRA permit as specified in §§266.102 and 266.103. Burning for energy recovery and processing for materials recovery or as an ingredient must be legitimate recycling as specified in §260.43 of this chapter.
*   *   *   *   *


[Federal Register: August 3, 2007 (Volume 72, Number 149)]
[Notices]
[Page 43298-43300]
[DOCID:fr03au07-103]

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SECURITIES AND EXCHANGE COMMISSION

[Investment Company Act Release No. 27917; 812-13290]

Medallion Financial Corp.; Notice of Application

July 30, 2007.
AGENCY: Securities and Exchange Commission (the ``Commission'').

ACTION: Notice of an Application for an Order Under Section 61(a)(3)(B)
of the Investment Company Act of 1940 (the ``Act'').

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SUMMARY OF APPLICATION: Applicant, Medallion Financial Corp., requests
an order approving a proposal to grant certain stock options to
directors who are not also employees or officers of the applicant (the
``Eligible Directors'') under its 2006 Non-Employee Director

Stock Option Plan (the ``2006 Director Plan'').

DATES: The application was filed on May 10, 2006 and amended on July
30, 2007.

HEARING OR NOTIFICATION OF HEARING: An order granting the application
will be issued unless the Commission orders a hearing. Interested
persons may request a hearing by writing to the Commission's Secretary
and serving applicant with a copy of the request, personally or by
mail. Hearing requests should be received by the Commission by 5:30
p.m. on August 24, 2007, and should be accompanied by proof of service
on applicant, in the form of an affidavit or, for lawyers, a
certificate of service. Hearing requests should state the nature of the
writer's interest, the reason for the request, and the issues
contested. Persons who wish to be notified of a hearing may request
notification by writing to the Commission's Secretary.

ADDRESSES: Secretary, U.S. Securities and Commission, 100 F Street,
NE., Washington, DC 20549-1090; Applicant, 437 Madison Avenue, 38th
Floor, New York, New York, 10022.

FOR FURTHER INFORMATION CONTACT: Shannon Conaty, Senior Counsel, at
(202) 551-6827, or Nadya B. Roytblat, Assistant Director, at (202) 551-
6821 (Division of Investment Management, Office of Investment Company
Regulation).

SUPPLEMENTARY INFORMATION: The following is a summary of the
application. The complete application is available for a fee at the
Public Reference Desk, U.S. Securities and Exchange Commission, 100 F
Street, NE., Washington, DC 20549-0102 (telephone<PHONE_NUMBER>).

Applicant's Representations

    1. Applicant, a Delaware corporation, is a business development
company (``BDC'') within the meaning of section 2(a)(48) of the Act.\1\
Applicant is a specialty finance company that has a leading position in
originating, acquiring and servicing loans that finance taxicab
medallions and various types of commercial businesses. Applicant
operates its businesses through five wholly-owned subsidiaries,
Medallion Funding Corp., Medallion Capital, Inc., Medallion Business
Credit, LLC, Freshstart Venture Capital Corp. and Medallion Bank.
Applicant is managed by its executive officers under the supervision of
its board of directors (``Board''). Applicant's investment decisions
are made by its executive officers under authority delegated by the
Board. Applicant does not have an external investment adviser within
the meaning of section 2(a)(20) of the Act.
    2. Applicant requests an order under section 61(a)(3)(B) of the Act
approving its proposal to grant certain stock options under the 2006
Director Plan to its Eligible Directors.\2\ Applicant has a nine member
Board. Six of the seven current Eligible Directors on the Board are not
``interested persons'' (as defined in section 2(a)(19) of the Act) of
the applicant. The Board approved the 2006 Director Plan at a meeting
held on February 15, 2006 and Applicant's stockholders approved the
2006 Director Plan at the annual meeting of stockholders held on June
16, 2006.\3\ The 2006 Director Plan will become effective on the date
on which the Commission issues an order on the application (the
``Approval Date'').\4\
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    \1\ Section 2(a)(48) defines a BDC to be any closed-end
investment company that operates for the purpose of making
investments in securities described in sections 55(a)(1) through
55(a)(3) of the Act and makes available significant managerial
assistance with respect to the issuers of such securities.
    \2\ The Eligible Directors receive a $35,000 per year retainer
payment, $3,500 for each Board meeting attended, $1000 for each
telephonic Board meeting, from $1,500 to $3,000 for each committee
meeting attended, and reimbursement for related expenses.
    \3\ On May 31, 2007, the Company's Board of Directors amended
the 2006 Director Plan by unanimous board consent. The Company and
its legal counsel have determined that such changes did not
necessitate a shareholder vote under Section 10 of the 2006 Director
Plan or pursuant to the provisions to the Act and the rules
promulgated thereunder.
    \4\ Applicant previously obtained similar relief for its 1996
Amended and Restated Non-Employee Director Stock Option Plan (the
``1996 Director Plan'', and together with the 2006 Director Plan,
the ``Director Plans''). See Medallion Financial Corp., Investment
Company Act Rel. Nos. 22350 (Nov. 25, 1996) (notice) and 22417 (Dec.
23, 1996) (order), as amended by Medallion Financial Corp.,
Investment Company Act Rel. Nos. 24342 (Mar. 17, 2000) (notice) and
24390 (Apr. 12, 2000) (order). The 1996 Director Plan expired on May
21, 2006. Applicant intends to implement the 2006 Director Plan to
replace the 1996 Director Plan.
---------------------------------------------------------------------------

    3. Applicant's Eligible Directors are eligible to receive options
under the 2006 Director Plan. Under the 2006 Director Plan, a maximum
of 100,000 shares of applicant's common stock, in the aggregate, may be
issued to Eligible Directors. There is no limit on the number of
applicant's common stock which may be issued to any one Eligible
Director. Each of the Eligible Directors elected at the annual meeting
of the Board on June 16, 2006 and on June 1, 2007 will be granted
options to purchase 9,000 shares of applicant's common stock on the
Approval Date. The 2006 Director Plan also provides that (i) at each
annual shareholders' meeting after the Approval Date, each Eligible
Director elected or re-elected at that meeting to a three-year term
will be granted options to purchase 9,000 shares of applicant's common
stock; and (ii) upon the election, reelection or appointment of an
Eligible Director to the Board other than at the annual shareholders'
meeting, that Eligible Director will be granted an option to purchase
that number of shares of common stock determined by multiplying 9,000
by a fraction, the numerator of which is equal to the number of whole
months remaining in the new director's term and the denominator of
which is 36. The options issued under the 2006 Director Plan will
become exercisable at each annual meeting of applicant's shareholders
with respect to one-third the number of shares covered by such option.
    4. Under the terms of the 2006 Director Plan, the exercise price of
an option will not be less than 100% of the current market value of, or
if the stock is not quoted on the date of the grant, the current net
asset value per share of, applicant's common stock on the date of the
issuance of the option as determined in good faith by the members of
the Board not eligible to participate in the 2006 Director Plan (the
``Director Plan Committee'').\5\ Options granted under the 2006
Director Plan will expire ten years from the date of grant and may not
be assigned or transferred other than by will or the laws of descent
and distribution. Any Eligible Director holding exercisable options
under the 2006 Director Plan who ceases to be an Eligible Director for
any reason, other than permanent disability, death or removal for
cause, may exercise the rights the director had under the options on
the date the director ceased to be an Eligible Director for a period of
up to three months following that date. No additional options held by
the director will become exercisable after the three month period. In
the event of removal of an Eligible Director for cause, all outstanding
options held by such director shall terminate as of the date of the
director's removal. Upon the permanent disability or death of an
Eligible Director, those entitled to do so under the director's will or
the laws of descent and distribution will have the right, at any time
within twelve months after the date of permanent disability or death,
to exercise in whole or in part any rights which were available to the

director at the time of the director's permanent disability or death.
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    \5\ Under the 2006 Director Plan, ``current market value''
(defined as ``fair market value'') is the closing sales price of
applicant's common shares as quoted on the NASDAQ Global Select
Market on the date of the grant, as reported in the Wall Street
Journal (Northeast Edition).
---------------------------------------------------------------------------

    5. Applicant's officers and employees, including employee
directors, are eligible or have been eligible to receive options under
applicant's 1996 Employee Stock Option Plan (the ``1996 Employee
Plan''), which expired on May 21, 2006, and the 2006 Employee Stock
Option Plan (the ``2006 Employee Plan'', and, together with the 1996
Employee Plan, the ``Employee Plans''). Eligible Directors are not
eligible to receive stock options under the Employee Plans. The
remaining 2,061,304 shares of applicant's common stock subject to
issuance to officers and employees under the Employee Plans represent
11.78% of the 17,502,515 shares of applicant's common stock outstanding
as of June 30, 2007. Eligible Directors are eligible or have been
eligible to participate in applicant's Director Plans under which
175,749 shares of applicant's common stock remain for issuance,
representing 1.00% of shares of applicant's common stock outstanding as
of June 30, 2007. The 100,000 shares of applicant's common stock that
may be issued to Eligible Directors under the 2006 Director Plan
represent 0.57% of shares of applicant's common stock outstanding as of
June 30, 2007. Therefore, the maximum number of applicant's voting
securities that would result from the exercise of all outstanding
options issued and all options issuable to directors, officers, and
employees under the Director Plans and the Employee Plans would be
2,237,053 shares of applicant's common stock, or approximately 12.78%
of shares of applicant's common stock outstanding as of June 30, 2007.
Applicant has no outstanding warrants, options, or rights to purchase
its voting securities, other than the options granted or to be granted
to its directors, officers, and employees under the Director Plans and
the Employee Plans.

Applicant's Legal Analysis

    1. Section 63(3) of the Act permits a BDC to sell its common stock
at a price below current net asset value upon the exercise of any
option issued in accordance with section 61(a)(3). Section 61(a)(3)(B)
provides, in pertinent part, that a BDC may issue to its non-employee
directors options to purchase its voting securities pursuant to an
executive compensation plan, provided that: (a) The options expire by
their terms within ten years; (b) the exercise price of the options is
not less than the current market value of the underlying securities at
the date of the issuance of the options, or if no market exists, the
current net asset value of the voting securities; (c) the proposal to
issue the options is authorized by the BDC's shareholders, and is
approved by order of the Commission upon application; (d) the options
are not transferable except for disposition by gift, will or intestacy;
(e) no investment adviser of the BDC receives any compensation
described in section 205(a)(1) of the Investment Advisers Act of 1940,
except to the extent permitted by clause (b)(1) or (b)(2) of that
section; and (f) the BDC does not have a profit-sharing plan as
described in section 57(n) of the Act.
    2. In addition, section 61(a)(3) provides that the amount of the
BDC's voting securities that would result from the exercise of all
outstanding warrants, options, and rights at the time of issuance may
not exceed 25% of the BDC's outstanding voting securities, except that
if the amount of voting securities that would result from the exercise
of all outstanding warrants, options, and rights issued to the BDC's
directors, officers, and employees pursuant to an executive
compensation plan would exceed 15% of the BDC's outstanding voting
securities, then the total amount of voting securities that would
result from the exercise of all outstanding warrants, options, and
rights at the time of issuance will not exceed 20% of the outstanding
voting securities of the BDC.
    3. Applicant represents that its proposal to grant certain stock
options to Eligible Directors under the 2006 Director Plan meets all
the requirements of section 61(a)(3)(B). Applicant states that the
Board is actively involved in the oversight of applicant's affairs and
that it relies extensively on the judgment and experience of its Board.
In addition to their duties as Board members generally, applicant
states that the Eligible Directors provide guidance and advice on
financial and operational issues, credit and loan policies, asset
valuation and strategic direction, as well as serving on committees.
Applicant believes that the availability of options under the 2006
Director Plan will provide significant at-risk incentives to Eligible
Directors to remain on the Board and devote their best efforts to
ensure applicant's success. Applicant states that the options will
provide a means for the Eligible Directors to increase their ownership
interests in applicant, thereby ensuring close identification of their
interests with those of applicant and its stockholders. Applicant
asserts that by providing incentives such as options, applicant will be
better able to maintain continuity in the Board's membership and to
attract and retain the highly experienced, successful and motivated
business and professional people who are critical to applicant's
success as a BDC.
    4. Applicant states that the maximum amount of voting securities
that would result from the exercise of all outstanding options issued
or issuable to the directors, officers, and employees under the
Director Plans and Employee Plans would be 2,237,053 shares of
applicant's common stock, or approximately 12.78% of applicant's shares
of common stock outstanding as of June 30, 2007, which is below the
percentage limitations in the Act. Applicant asserts that, given the
relatively small amount of common stock issuable to Eligible Directors
upon their exercise of options under the 2006 Director Plan, the
exercise of such options would not, absent extraordinary circumstances,
have a substantial dilutive effect on the net asset value of
applicant's common stock.

    For the Commission, by the Division of Investment Management,
pursuant to delegated authority.
Nancy M. Morris,
Secretary.
[FR Doc. E7-15058 Filed 8-2-07; 8:45 am]

BILLING CODE 8010-01-P