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The EPA Lender Liability Regulations: EPA's Questionable Authority to Promulgate the Regulations as Part of the National Contingency Plan

May 1993

Citation: ELR 10264

Author: Charles Dewey Cole

The Comprehensive Environmental Response, Compensation, and Liability Act of 1980 (CERCLA or Superfund)1 has been construed to impose strict, joint and several, and retroactive liability on owners and operators of sites where there is a release of a hazardous substance.2 The U.S. Environmental Protection Agency (EPA or the Agency) is charged with the responsibility of enforcing CERCLA to clean up the nation's toxic waste sites. Though CERCLA sets up a fund to pay for cleanup,3 the Act also envisions that those responsible for the contamination will pay cleanup costs. Thus, the Act provides for cost recovery actions, which may be brought by EPA and others who have the responsibility for cleanup.4

One vexing issue that has arisen under CERCLA is the liability for cleanup costs of a lender that holds a security interest, such as a mortgage, in the site.5 CERCLA § 101(20)(A) says that the phrase "owner or operator" does not include a person who, without participating in the management of a facility, holds indicia of ownership primarily to protect a security interest in the facility.6 Thus, CERCLA exempts from liability secured creditors, such as mortgagees, that do not participate in the management of the hazardous waste site.7

Charles Dewey Cole Jr. practices law with the firm of Meyer, Suozzi, English & Klein, in Mineola, New York. He graduated with an A.B. from Columbia College; he received a J.D. from St. John's University School of Law, where he was research editor of the St. John's Law Review; he graduated with an M.L.I.S. from The University of Texas at Austin; and he was awarded an LL.M. from New York University School of Law. Mr. Cole served as a law clerk to Chief Judge Joe J. Fisher of the U.S. District Court for the Eastern District of Texas from 1979 to 1980 and as a law clerk to Judge Thomas M. Reavley of the U.S. Court of Appeals for the Fifth Circuit from 1981 to 1982.

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