Even though Congress is unlikely to clarify the extent of lender liability for cleanup of hazardous waste on sites foreclosed on by institutions. the Environmental Protection Agency will soon publish another regulation to help resolve the ambiguities.
Shelley Fudge, an EPA policy specialist, confirmed that the agency will publish. possibly by late November, a proposed regulation under the Resource Conservation and Recovery Act. The EPA had published a final rule in April under the Superfund law--the Comprehensive Environmental Response, Compensation and Liability Act--that limits lender liability. 'We'd like to have seen the deal closed legislatively, but we feel that our efforts have jostled a lot more policy statements out of the government than we've had before," said John Byrne, senior federal legislative counsel for the American Bankers Association.
Byrne was referring to several legislative efforts to go beyond that regulation and set statutory limits for lender liability under CERCtA and the RCRA (see The Mortgage Marketplace, Aug. 24. page 1). The Chemical Manufacturers Association and the state of Michigan have challenged the legality of the Cercla regulation. but the U.S. Circuit Court of Appeals for the District of Columbia has refused to stay implementation of the regulation as it awaits briefs from the interested parties. Fudge said the proposed regulation under RCRA would be more limited than the earlier regulation because RCRA contains a more limited 'secured creditor' exemption than does Cercla. 'This regulatton will apply only to underground storage tanks.' she said. The Cercla regulation exempts a lender from liabilitywhen it forecloses on a polluted property if the lender does not 'participate in the management of the property."
An amendment attached by the Senate to a bill (S. 2733) dealing with regulation of the Federal National Mortgage Association and the Federal Home Loan Mortgage Corporation would specify limits on lender liability under both environmental laws. In addition. the National Waste Reduction. Recycling and Management Act (H.R. 3865) to reauthorize RCRA ma be the object of a lender liability amendment on the House floor.
The problem arises under both laws. which consider 'potentially responsible parties' to be 'strictly. jointly and severally liable.' 'Strictly' means they can be sued to clean up a site. even if they did nothing to cause the pollution.