WASHINGTON -- After a failed effort to pass Superfund reform legislation this year, lenders are again left wondering about their responsibility regarding contaminated collateral properties.

"The threat of environmental liability will continue to hang over bankers' heads until at least next year, forcing many to shy away from lending to small businesses... which handle potentially hazardous chemicals," said Donald Ogilvie, executive vice president of the American Bankers Association.

After clearing five congressional committees in the House and Senate, the bill was awaiting floor action in both chambers. But it was dragged to its grave by two controversial provisions unrelated to lender liability that Republicans refused to vote on separately.

Nonetheless, court decisions in the past two years have set some favorable precedents that clarify lender liability to some extent, according to Michael Crotty, the ABA's chief litigator.

"There are cases out there [saying] that the lender liability provision of this statute means what the EPA says it means," said Mr. Crotty. "Those have been helpful."

However, lenders yearn for a single definitive role to clarify their contamination cleanup responsibilities.

"This whole exercise has been to gain some certainty," said Alfred Pollard, senior director at the Bankers Roundtable. "We want this over with. We'd like to rely on a written statute that wraps this up once and for all."

The lender liability provisions of the measure aimed to codify a 1992 Environmental Protection Agency role that limited the responsibility of lenders for contamination that they did not cause or contribute to.

That rule was swept aside when the U.S. Court of Appeals for the District of Columbia decided that the EPA lacked the statutory authority to issue it.

The case was denied a rehearing earlier this year, but a coalition of groups, including the ABA, have until Oct. 27 to file a request for the Supreme Court to hear the case. Now that chances for a legislative remedy have faded away, Mr. Crotty said that the groups will have no choice but to move to the high court.

Yet even though the defeat of the Superfund bill was a major disappointment, some industry lobbyists view the progress made during this congressional session as significant.

"The good news is that we've been doing this since 1989, and the EPA has been supportive of us," said John Byrne, senior counsel for the ABA. "We've gotten through all these committees, and no one ever said that the lender liability provisions were a problem. EPA Adminsistrator Carol Browner even said that lender liability should be made a priority. We got further than we ever thought possible."

Mr. Byrne added that since the funding mechanism for Superfund will expire relatively soon, Congress will have to take up the reform package early in the next session.

"The taxing authority will expire at the end of 1995, and that extension will have to happen sometime at the beginning of the next Congress," he said.

During a recent meeting with Superfund reform supporters, Sen. Max Baucus, D-Mont. chairman of the Senate Environment and Public Works Committee, vowed to take up Superfund legislation early in the next Congress, Mr. Pollard said.

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