Lenders to Seek Exemption in Land Cleanup : Environment: The industry will ask Congress to limit liability on property that was contaminated before it was acquired.
In a move that is expected to draw the ire of environmentalists, lending officials on Thursday will renew their call for reform of the federal Superfund Act and urge Congress to limit their liability for the cleanup of polluted property they acquire through foreclosure.
Although the lending industry has been lobbying for change for more than a year, its concern has intensified in the wake of a Jan. 14 U.S. Supreme Court decision to let stand a lower court ruling that imposed environmental cleanup liability on banks or other secured creditors of contaminated property. After failing to get judicial relief in the case, Fleet Factors Corp. vs. United States, the industry is taking its case to Congress.
Industry leaders say they will warn the Senate Environment and Public Works Committee that environmental problems buried deep in the books of ailing banks and thrifts could weaken the nation’s beleaguered financial institutions. They could be forced to stop making some loans to real estate developers and business owners if they can be held responsible for cleaning up property they didn’t pollute.
“There’s no question this law is having a dampening effect on real estate lending,” said Robert Bannister, senior vice president for government affairs at the Washington-based National Assn. of Home Builders, one of the groups expected to submit testimony.
Environmental groups and even the Chemical Manufacturers Assn. argue that lenders are exaggerating the scope of the problem to avoid paying their fair share for environmental cleanup.
Under the Comprehensive Environmental Response, Compensation and Liability Act, or Superfund law, parties holding title to contaminated property may be sued to institute cleanup measures. Lenders say they are being unfairly dragged into such lawsuits when owners cannot be found or are bankrupt.
An October study by the Southern Finance Project, a Charlotte, N.C., consumer advocate group, found that only seven of 17,095 potentially responsible parties targeted by the Environmental Protection Agency have paid for any cleanup and the cost averaged $95,000.
“Limiting lender liability is a solution waiting for a problem,” said Robert Flagg, an official with the Chemical Manufacturers Assn. “If lenders get an exemption from Superfund, then municipalities and the insurance companies will follow suit and we will be the only ones left” to pay cleanup bills.
The question of who pays for the cleanup of toxic waste sites has not only vexed the lending and real estate communities in recent years but also the federal government. Because the Federal Deposit Insurance Corp. and the Resolution Trust Corp. have inherited contaminated property once held by failed banks and thrifts, the Environmental Protection Agency could end up suing other government agencies over the Superfund law.
FDIC officials, who are scheduled to testify Thursday, have said contamination problems have been found at 270 properties it holds and that cleanup costs for 50 of those properties may be as much as three times their market value.
