Defining the scope of lender liability after Kelley v. EPA: Who will have safe harbor?
In 1980, Congress enacted CERCLA in order to clean up toxic waste sites and identify broad classes of people who would be financially responsible for the clean-up efforts. One of these broad classes of responsible parties includes owners or operators of hazardous waste sites. This category created enormous potential for liability risk for lenders who hold title to contaminated property as collateral. Congress created a {open_quotes}safe harbor{close_quotes} exemption from liability within the definition of owners and operators in order to protect lenders who held title merely as protection of a security interest. Conflicting interpretations have caused a great deal of confusion for lending institutions. In response to fears of unlimited liability expressed by lending institutions and in consideration of the federal government`s increasing role as a secured creditor, the Environmental Protection Agency (EPA) issued a regulation in 1992 that attempted to define clearly the scope of a lender`s liability under CERCLA. This rule provided the lending community with a precise standard by which to guide their actions in order to avoid incurring liability. In Kelley v. EPA, the EPA`s regulation that attempted to clarify issues of lender liability under CERCLA was struck down by the United States Court of Appeals for the D.C. Circuit. The court held that Congress had not granted the EPA authority to promulgate regulations that would define the scope of lender liability in private party litigation. It further determined that federal courts should evaluate claims in private cost recovery actions independent of the EPA`s {open_quotes}institutional view{close_quotes}. This note postulates that the Kelley decision to invalidate the rule once again exposes lenders to unlimited liability under CERCLA by leaving them to make decisions based on an ambiguous statutory provision that has been interpreted both broadly and narrowly in the past.
- OSTI ID:
- 83432
- Journal Information:
- Energy Law Journal, Vol. 16, Issue 1; Other Information: PBD: 1995
- Country of Publication:
- United States
- Language:
- English
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