## Facts

- CERCLA § 107(a) imposes cleanup-cost liability on specified categories, including “owners and operators,” and includes a secured-creditor exemption for certain lenders.
- EPA issued a final rule (40 C.F.R. § 300.1100) defining when a secured creditor’s conduct constitutes “participation in management” and listing lender activities that would not trigger owner/operator liability.
- EPA adopted the rule in response to concerns that uncertainty about CERCLA lender liability discouraged lending, foreclosure activity, and the use of potentially contaminated property as collateral.
- Michigan (through its Attorney General), the Michigan Department of Natural Resources, and the Chemical Manufacturers Association petitioned for review in the D.C. Circuit, challenging the rule as beyond EPA’s authority and inconsistent with CERCLA’s text.
- Lender and finance-industry groups intervened in support of EPA’s effort to limit lender liability.

## Issues

1. Whether CERCLA delegates to EPA authority to promulgate a binding rule defining the scope of lender liability and the secured-creditor exemption within CERCLA § 107(a).
2. Whether EPA’s regulation could be sustained as a nonbinding interpretive rule entitled to judicial deference.

## Decision

- The D.C. Circuit vacated EPA’s lender-liability rule and remanded.
- The court held CERCLA does not authorize EPA to determine by regulation who is liable under § 107(a), including the meaning of “owner,” “operator,” and the secured-creditor exemption.
- The court rejected EPA’s characterization of the regulation as merely interpretive because the rule effectively limited potential liability by creating categorical safe harbors and attempted to bind courts to that allocation of liability.
- Policy concerns about market “chill” could not supply statutory authority where Congress had not clearly delegated it.

## Legal Principles

- An agency may not create or reallocate private-party civil liability by regulation absent clear statutory delegation.
- Broad implementation authority (e.g., to administer response actions or related programs) does not imply authority to redefine statutory liability categories that Congress specified in the statute.
- A rule that establishes categorical exclusions from liability and purports to control how courts apply statutory liability terms functions as a legislative rule, not a mere interpretation, and is invalid without delegated rulemaking power.

## Conclusion

The court set aside EPA’s CERCLA lender-liability regulation because CERCLA did not delegate to EPA authority to define who may be held liable as an owner or operator under § 107(a), and EPA could not achieve by rulemaking a substantive limitation on lender liability that Congress had not enacted.


Kelley v. Env’t Prot. Agency, 15 F.3d 1100 (D.C. Cir. 1994)