The Comprehensive Environmental Response, Compensation and Liability Act (CERCLA), commonly known as “Superfund” gives the federal government authority to respond to the releases or threatened releases of hazardous substances that may endanger public health or the environment. It is enforced by the Environmental Protection Agency (EPA). The Texas Solid Waste Disposal Act (TSWDA) contains similar provisions which are enforced by the Texas Commission on Environmental Quality (TCEQ). There are differences between the state and federal acts but they do not bear on this general discussion.
A Bank should have in place appropriate safeguards and controls to limit exposure to potential CERCLA and TSWDA environmental liability associated with real property held as collateral. A Bank faces two basic environmental risks when making loans secured by real estate:
•The risk of non-recovery because of a borrower’s inability to pay a loan and/or devaluation of the Bank’s collateral because of environmental problems on the property; and
•The risk of being held responsible for a borrower’s environmental cleanup and management costs and/or third party damages claims as a result of the lending relationship.
Every banker should understand these risks and every Bank should have policies and procedures in place to minimize these risks.