WASHINGTON -- Banking industry lobbyists are increasingly optimistic that Congress will pass a bill casing the liability of lenders for properties that are used to secure loans and that turn out to be contaminated by hazardous chemicals.

With Congress moving quickly toward adjournment, and facing a number of major, timeconsuming issues - including health care legislation - the outlook for Superfund legislation is better than many people had anticipated, bank lobbyists said.

"The momentum is in our favor," said John Byrne, senior counsel at the American Bankers Association. "We could get this done in October if all the other buttons get pushed."

Committee Actions Needed

The "other buttons" include a Senate Environment and Public Works Committee vote that could be taken as early as next week and a House Public Works and Transportation Committee hearing that has not yet been scheduled.

A staff aide to the House panel said a hearing "could come up conceivably next week."

"If you had asked us in March about where we'd want to be now," said Mr. Byrne, "this would be close to the answer. The administration, through the agencies, agrees that bankers have legitimate concerns about liability."

The House Ways and Means Committee must vote on financing provisions in the legislation, but the fact that the panel has already scheduled a July 26 hearing amid the chaos of the health care reform debate is "good news," according to Mr. Byrne.

A Broad Coalition

The funding provisions should easily move.through the Senate Finance Committee, since many of its members also sit on the Environment and Public Works Committee, Mr. Byrne said.

The Superfund bill has gathered support from an unusual assortment of groups, including bankers, environmentalists, and chemical companies, "groups that usually don't get along," Mr. Byrne said. "It's the broadest coalition I've seen."

"There's really strong support for this," said Alfred Pollard, chief lobbyist at the Bankers Roundtable. "The issue here is simply the clock."

Codifying an EPA Rule

Provisions in the legislation would not only limit private lender liability but also clarify the environmental cleanup responsibilities of federal lending or banking agencies.

Institutions in receivership or conservatorship will generally not be held liable for contaminated property.

In essence, the lender liability provisions will codify a 1992 rule of the Environmental Protection Agency. The provisions only limit the liability of lenders for contamination that they did not cause or contribute to.

The EPA, in consultation with the Treasury, will be able to issue guidelines requiring lenders to have appropriate procedures to assess environmental risk before making a loan.

In February, the U.S. Court of Appeals for the District of Columbia overturned the 1992 EPA rule limiting lenders' environmental liability for properties on which they have made loans.

Lacking Authority?

The appellate court ruled that the EPA did not have statutory authority to issue the rule, which let lenders, insurers, and others operate without fear that environmental contamination caused by borrowers would trigger cleanup liability.

Before the 1992 rule, many lenders inherited damage liability when they foreclosed on contaminated properties.

The EPA, along with a group of organizations including the ABA that submitted a joint brief, was recently denied a rehearing of the appellate court decision. "We realized that the only possibility of getting this rule renewed is through legislation," Mr. Byrne said.

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