Environmental Liability Hits Cost of Every Business

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Potential environmental liability stands to increase everyone's cost of doing business due to the way the government seeks to recover clean up costs, according to Fred Kempf, attorney with Pate and Payne.

All sectors of business could be affected because of the government's broad definitions of owners and operators, Kempf told business people gathered Monday for a luncheon seminar hosted by Union Bank & Trust Co.

Popular sentiment is on the side of green grass and clean air, he said, but underneath those ideals are Environmental Protection Agency procedures which seek to recover clean up costs from anyone even remotely associated with a contaminated site.

Banks have become involved in the legal liability as a result of foreclosures. As a defense mechanism, banks find themselves requiring an environmental audit before granting commercial mortgages, he said.

The Superfund amendments of 1986 gave the EPA the ``power to impose strict liability on owners and operators," he said.

"It allows the government to clean up a site and charge the cost back to the owners and operators," Kempf explained. "It allows the EPA to go after PRPs - potentially responsible parties.

``Under strict liability, the EPA is looking for the deep pockets."

This philosophy has prompted the agency to sue banks to pay for the clean up of sites which the bank owned as a result of foreclosure. Banks have argued that they should not be held responsible since they had nothing to do with the contamination and they only acquired the property to protect their security interests. Courts have ruled against the banks.

Kempf also gave an example of a bank which had made a commercial loan, and the borrower company began having financial difficulties. To protect its interest, the bank helped the borrower company manage its finances so it could pay the loan.

``The EPA said the bank was involved in the company's management; therefore, it was an operator," he said. "The bank fought it. The court held that the bank was an operator.

"This is a bit of a scary thing.''

Kempf said the only defenses in such suits from the government are acts of war, acts of God and the innocent landowner defense.

To assert the innocent landowner defense, a company must show that:

- The land was acquired after the placement of the substance.

- The owner did not know the hazardous substance was there.

- The owner tried to find out if there was any environmental problem.

The environmental audit, which must be conducted by an expert, is used to prove the last part of the test, he said.

A clean environmental audit of a property provides banks with a mechanism to assert the innocent landowner defense if the property is later foreclosed and is shown to be contaminated, he said.

Jerry Hopkins, senior vice president of Union Bank, told the group that for banks the environmental issue is a ``continuing potential liability.''

He said the environmental audit is a one-time event which gives the condition of the property only for the day the audit was conducted. He said banks, therefore, must continually monitor the environmental condition of properties. . .

- Oklahoma banks will begin offering Christmas music cassettes this week to raise money for the Childrens Medical Research Foundation and Childrens Hospital of Oklahoma.

The goal of the Christmas project, which is sponsored by the Oklahoma Bankers Association, is to raise $25,000 for the children, said Karen Sullivan, vice president of the association. The 20 participating banks contributed to produce 2,500 tapes of ``The Stars Come Out for Christmas.'' Featured artists on the 22 songs include Ray Charles, Kenny Loggins, James Taylor, Ricky Skaggs, Oak Ridge Boys, Lee Greenwood and Barbara Mandrell. …

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