EPA Eases Banks' Risk With Liability Rules for Groundwater Pollution

WASHINGTON - The Environmental Protection Agency adopted rules Thursday making it safer for banks to lend money to people who purchase contaminated properties.

The rules, part of what the agency calls its "brownfields action agenda," hold property owners blameless for pollution that seeps onto their land through underground aquifers.

Banks have refused to finance purchases of these contaminated properties, fearing they could become liable for the clean-up if they had to foreclose.

"This should alleviate the kinds of concerns that bankers have in these situations," said Bruce Diamond, director of the EPA's office of site remediation enforcement. "If the owner is not liable, the bank will not be liable."

In addition to the action on so-called "brownfields" - urban areas, as opposed to rural "greenfields" - the EPA said it is expanding the use of advanced purchase agreements. In these deals, the government agrees not to sue the bank or borrower developing a contaminated property.

The EPA expanded eligible properties to include the list of contaminated properties maintained under the Superfund laws. Once a site qualifies, developers must prove the project will benefit either the government's clean-up efforts or the community's economic welfare. For example, a project would qualify for an advanced purchase agreement if it provides jobs to area residents.

Previously, community benefit did not count.

EPA officials said the new rules should encourage builders to develop inner city sites, rather than tearing up pristine areas in suburban or rural areas.

Banking industry observers praised the changes, saying they offer the industry some security from pollution clean-up suits.

"I'm excited with the direction this is taking," said Alfred Pollard, senior director at the Bankers Roundtable. "It is evolving in the right way."

"Anything that makes it easier to clean up the environment, serve low- and moderate-income communities, and alleviate regulatory burden is a boon to mankind," agreed Karen Shaw, president of the industry consulting firm ISD/Shaw Inc.

Mr. Pollard said bankers must scrutinize each agreement to ensure it includes the proper protections.

Also, the rules are only a stop-gap measure, he said. Congress still must pass pending measures that protect banks from clean-up suits, he said.

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