[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: orders@ntis.fedworld.gov.
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
