WASHINGTON -- A group including the banking industry's largest trade organization has asked the U.S. Supreme Court hear a case that could help lenders avoid environmental cleanup costs.

The group, which includes the American Bankers Association, is challenging a U.S. Court of Appeals decision that overturned a rule limiting lender liability for environmental cleanup. Most of the cases of concern to lenders involve properties used to secure loans that turn out to be contaminated by hazardous chemicals.

The rule, mandated in 1992 by the Environmental Protection Agency, would have been codified by provisions in Superfund reform legislation that died in the waning days of the last congressional session.

Congress is expected to take up Superfund legislation again next year, well before the Supreme Court is likely to deal with the case. Even so, the group filed its petition to ensure that the industry has alternatives if Congress does not act.

"The Supreme Court would decide sometime in January or February of 1996," said Michael Crotty, the ABA's chief litigator. "By that time it may very well be moot, but we don't want to put all our eggs in one basket. We don't just want to rely on legislation, because who knows what those people up there are going to do."

Lenders have been looking to clear the haze surrounding their environmental liability ever since February, when the U.S. Court of Appeals for the District of Columbia swept aside the EPA rule that limited the responsibility of lenders for contamination that they did not cause or contribute to.

This made lenders wary of lending to businesses that routinely use hazardous chemicals. The lack of credit made clean-up problems worse, according to Jeff Galloway, partner at Hughes, Hubbard & Reed, a New York law firm.

"Without clear guidelines of what a bank can and can't do, it's prudent for banks to take their hands off properly and not work with the borrower to work out a loan," said Mr. Galloway, who specializes in lender liability cases. "This makes less financing available to the borrower, making it more likely there will be a problem cleaning up any problems."

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