On February 4, 1994, the U.S. Court of Appeals for the D.C. Circuit vacated the U.S. Environmental Protection Agency's (EPA's) April 1992 lender liability rule, which delineated the scope of the Comprehensive Environmental Response, Compensation, and Liability Act's (CERCLA's) secured creditor exemption. The court held in Kelley v. U.S. Environmental Protection Agency that the regulation could not stand as a substantive or legislative rule because Congress, through CERCLA, gave courts and not EPA the authority to interpret questions of liability.

The decision has shaken the lending community and heightened its desire to have Congress address lender liability when reauthorizing CERCLA. This Comment surveys the state of lender liability after Kelley. After briefly reviewing the statutory framework for lender liability, this Comment summarizes the invalidated lender liability rule, which—depending on future judicial or legislative action—could yet be resurrected. Next, the authors discuss the Kelley decision and its potential ramifications. The dissent in Kelley is also reviewed to flesh out potential arguments that may arise if rehearing of the case is granted or a certiorari petition is filed. Because Kelley leaves lender liable to the same extent they were before EPA promulgated its lender liability rule, this Comment discusses lender liability case law, both before the final rule was promulgated and while it was in effect. This Comment also examines options for legislative relief and concludes by suggesting strategies lenders may employ to protect themselves in the absence of the final rule or legislative action.