[Federal Register Volume 60, Number 237 (Monday, December 11, 1995)]
[Notices]
[Pages 63517-63519]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 95-29842]



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ENVIRONMENTAL PROTECTION AGENCY

[FRL-5341-3]


CERCLA Enforcement Against Lenders and Government Entities That 
Acquire Property Involuntarily

AGENCY: Environmental Protection Agency.
ACTION: Announcement and publication of policy.

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SUMMARY: This policy memorandum sets forth the Environmental Protection 
Agency (``EPA'') and the Department of Justice's (``DOJ'') policy 
regarding the government's enforcement of the Comprehensive 
Environmental Response, Compensation and Liability Act (``CERCLA'') 
against lenders and against government entities that acquire property 
involuntarily. As an enforcement policy, EPA and DOJ intend to apply as 
guidance the provisions of the ``Lender Liability Rule'' promulgated in 
1992, thereby endorsing the interpretations and rationales announced in 
the Rule. See 

[[Page 63518]]
``Final Rule on Lender Liability Under CERCLA,'' 57 Fed. Reg. 18344 
(April 29, 1992). This rule was vacated by the Circuit Court of Appeals 
for the District of Columbia in 1994.
    The purpose of the memorandum is to provide guidance within EPA and 
DOJ on the exercise of enforcement discretion in determining whether 
particular lenders and government entities that acquire property 
involuntarily may be subject to CERCLA enforcement actions. The 
memorandum advises EPA and DOJ personnel to consult both the regulatory 
text of the Rule and the accompanying preamble language in exercising 
their enforcement discretion under CERCLA as to lenders and government 
entities that acquire property involuntarily.

FOR FURTHER INFORMATION CONTACT: Laura Bulatao, Office of Site 
Remediation Enforcement, 401 M St. SW. (Mail Code 2273A), Washington, 
DC 20460 (202-564-6028), or the RCRA/Superfund Hotline at 800-424-9346 
(in the Washington, DC area at 703-412-9810).

    Note: The memorandum below has been altered from the original 
memorandum issued on September 22, 1995 to reflect updated 
information about obtaining additional copies and whom to contact 
for further information. No other changes were made to the text of 
the policy. The original memorandum issued on September 22, 1995 was 
not published in the Federal Register.

    Dated: November 30, 1995.
Jerry Clifford,
Director, Office of Site Remediation Enforcement, U.S. Environmental 
Protection Agency.

Memorandum

Subject: Policy on CERCLA Enforcement Against Lenders and Government 
Entities That Acquire Property Involuntarily
From: Steven A. Herman, Assistant Administrator, Office of Enforcement 
and Compliance Assurance, United States Environmental Protection Agency
Lois J. Schiffer, Assistant Attorney General, Environment and Natural 
Resources Division, United States Department of Justice
To: Regional Administrators, Regions I-X, EPA, Regional Counsel, 
Regions I-X, EPA, Waste Management Division Directors, Region I-X, EPA, 
Chief, Environmental Enforcement Section, DOJ, Assistant Section 
Chiefs, Environmental Enforcement Section, DOJ

    This memorandum sets forth the Environmental Protection Agency's 
(``EPA'') and the Department of Justice's (``DOJ'') policy regarding 
the government's enforcement of the Comprehensive Environmental 
Response, Compensation and Liability Act (``CERCLA'') against lenders 
and against government entities that acquire property involuntarily. As 
an enforcement policy, EPA and DOJ intend to apply as guidance the 
provisions of the ``Lender Liability Rule'' promulgated in 1992, 
thereby endorsing the interpretations and rationales announced in the 
Rule. See ``Final Rule on Lender Liability Under CERCLA,'' 57 Fed. Reg. 
18,344 (April 29, 1992).1 (This rule has been vacated by a court, 
as described below in the ``Background'' section).

    \1\ This guidance does not address lender liability under any 
statutory or regulatory authority, rule, regulation, policy, or 
guidance, other than CERCLA. Specifically, this guidance does not 
cover lender liability determinations as they relate to the Resource 
Conservation and Recovery Act (``RCRA'') and RCRA's Underground 
Storage Tank program.

ADDRESSES: Additional copies of this policy statement can be ordered 
from the National Technical Information Service (NTIS), U.S. Department 
of Commerce, 5285 Port Royal Rd., Springfield, VA 22161. Orders must 
reference NTIS accession number PB95-234498. For telephone orders or 
further information on placing an order, call NTIS at 703-487-4650 for 
regular service or 800-553-NTIS for rush service. For orders via email/
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Internet send to the following address: [email protected].

FOR FURTHER INFORMATION CONTACT: Laura Bulatao, Office of Site 
Remediation Enforcement (Mail Code 2273A), U.S. Environmental 
Protection Agency, 401 M Street, SW., Washington, DC 20460 (202-564-
6028), or the RCRA/Superfund Hotline at 800-424-9346 (in the 
Washington, DC area at 703-412-9810).

I. Background

    This policy guidance establishes EPA's and DOJ's position regarding 
possible enforcement actions against lenders and government entities 
who are associated with property that may be subject to a CERCLA 
response action. EPA and DOJ recognize CERCLA's unintended effects on 
lenders and government entities and the relative concern from these 
parties regarding the consequences of potential enforcement. In light 
of these concerns, lenders may refuse to lend money to an owner or 
developer of a contaminated or potentially contaminated property or 
they may hesitate in exercising their rights as secured parties if such 
loans are made. Additionally, government entities that involuntarily 
acquire property may be reluctant to perform certain actions related to 
contaminated or potentially contaminated property.
    The language of Section 101(20)(A) leaves lenders and other 
interested parties uncertain as to which types of actions--such as 
monitoring vessel or facility operations, requiring compliance with 
applicable laws, and refinancing or undertaking loan workouts--they may 
take to protect their security interests without risking EPA 
enforcement under CERCLA. Courts have not always agreed on when a 
lender's actions are ``primarily to protect a security interest,'' and 
what degree of ``participation in the management'' of the property will 
forfeit the lender's eligibility for the exemption. This uncertainty 
was heightened by dicta in the Fleet Factors 2 opinion, where the 
circuit court suggested that a lender participating in the management 
of a vessel or facility ``to a degree indicating a capacity to 
influence the corporation's treatment of hazardous waste'' could be 
considered liable under CERCLA.3

    \2\ United States v. Fleet Factors Corp., 901 F.2d 1550, 1557 
(11th Cir. 1990), cert. denied, 111 S. Ct. 752 (1991).
    \3\ Fleet, 901 F.2d at 1557.
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    The lack of legislative history on and consistent court treatment 
of the CERCLA Section 101(20)(A) security interest exemption prompted 
EPA to address potential lender liability for cleanup costs at CERCLA 
sites in the Lender Liability Rule, which was promulgated in April 
1992.
    Regarding the exemption for government entities, neither the 
legislative history of CERCLA Sections 101(20)(D) and 101(35)(A) nor 
the case law provide sufficient explanation of when a property 
acquisition or transfer is considered involuntary. Thus, in the Rule, 
EPA also clarified the language of these sections, describing when a 
government entity was exempted from CERCLA enforcement as an owner or 
operator or was protected from third party actions.
    However, in Kelley v. EPA,4 the Circuit Court of Appeals for 
the District of Columbia vacated the Rule on the ground that EPA lacked 
authority to issue the Rule as a binding regulation. Nevertheless, the 
Kelley decision did not preclude EPA and DOJ from following the 
provisions of the Rule as enforcement policy, and the agencies have 
generally done so.

    \4\ 15 F.3d 1100 (D.C . Cir. 1994), reh. denied, 25 F.3d 1088 
(D.C. Cir. 1994), cert. denied, American Bankers Ass'n v. Kelly, 115 
S.Ct. 900 (1995).
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II. Policy Statement

    This memorandum reaffirms EPA's and DOJ's intentions to follow the 

[[Page 63519]]
    provisions of the Lender Liability Rule as enforcement policy. EPA and 
DOJ endorse the interpretations and rationales announced in the Rule 
and its preamble. The purpose of this memorandum is to provide guidance 
within EPA and DOJ on the exercise of enforcement discretion in 
determining whether particular lenders and government entities that 
acquire property involuntarily may be subject to CERCLA enforcement 
actions. In making such determinations, EPA and DOJ personnel should 
consult both the regulatory text of the Rule and the accompanying 
preamble language in exercising their enforcement discretion under 
CERCLA as to lenders and government entities that acquire property 
involuntarily.5

    \5\  See 57 Fed. Reg. 18,344 (April 29, 1992) (text and 
preamble).
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    After the promulgation of the Lender Liability Rule, but prior to 
its invalidation, several district and circuit courts adhered to the 
terms of the Rule or interpreted the statute in a manner consistent 
with the Rule.6 Moreover, notwithstanding the Rule's invalidation 
in Kelley, since that decision several courts have also interpreted the 
statute in a way that is consistent with the Rule.7 EPA and DOJ 
believe that this case law is further evidence of the reasonableness of 
the agencies' interpretation of the statute, as embodied formerly in 
the Rule and now in this policy statement.

    \6\  See Northeast Doran, Inc. v. Key Bank of Maine, 15 F.3rd 1 
(1st Cir. 1994); United States v. McLamb, 5 F.3d 69 (4th Cir. 1993); 
Waterville Indus., Inc. v. Finance Authority of Maine, 984 F. 2d 549 
(1st Cir. 1993); United States v. Fleet Factors, 901 F.2d 1150 (11th 
Cir. 1990), on remand, 821 F. Supp. 07 (S.D. Ga. 1993); Kelley v. 
Tiscornia, 810 F. Supp. 901 (W.D. Mich. 1993); Grantors to the 
Silresim Site Trust v. State Street Bank & Trust Co., 23 ELR 20428 
(D. Mass. Nov. 24, 1992).
    \7\  See Z & Z Leasing, Inc. v. Graying Reel, Inc., 873 F.Supp. 
51 (E.D. Mich. 1995); Kemp Industries, Inc. v. Safety Light Corp., 
857 F.Supp. 373 (D.N.J. 1994).
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III. Use of This Policy

    The policies and procedures established in this document and any 
internal procedures adopted for its implementation are intended solely 
as guidance for employees of EPA and DOJ. They do not constitute 
rulemaking and may not be relied on to create a right or benefit, 
substantive or procedural, enforceable at law, or in equity, by any 
person. EPA and DOJ reserve the right to act at variance with this 
guidance or its internal implementing procedures.

[FR Doc. 95-29842 Filed 12-8-95; 8:45 am]
BILLING CODE 6560-50-P