Unittd States
Environmental Protection
Agency
Office of
Solid Waste and
Emergency Response
v>EPA
DIRECTIVE NUMBER: 9832*12-
TITLE: Guidance on Federal Superfund Liens
September 22, 1987
September 22, 1987
APPROVAL DATE:
EFFECTIVE DATE:
ORIGINATING OFFICE. OECM
O FINAL
Q DRAFT
LEVEL OF DRAFT
£3 A — Signed by AA or OAA
OB — Signed by Office Director
O C — Review & Comment
REFERENCE (other documents):
OSWER OSWER OSWER
VE DIRECTIVE DIRECTIVE Dl
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United States
Environmental Protection
Of/ice of
Solid Waste and
Emergency Response
vvEPA
DIRECTIVE NUMBER: 9832*12-
TITLE: Guidance on Federal Superfund Liens
APPROVAL DATE: September 22, 1987
EFFECTIVE DATE: SePtember 22> 1987
ORIGINATING OFFICE: OECM
D FINAL
Q DRAFT
LEVEL OF DRAFT
C3 A — Signed by AA or DAA
D 8 — Signed by Office Director
DC — Review & Comment
REFERENCE (other documents):
S WER OSWER OSWER
DIRECTIVE DIRECTIVE Dl
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nrtOu tates nvronmental rotection Agency
Washington. DC 20460
QSWER Directive Initiation Request
1. Directive Number
9832.12
2. Originator Information
Name of Contact Person
Allen Danzigv,
Mail Code
LE 134S
Office
OECM
Telephone Cede
382-2845
3. Title
Guidance on Fedesal Superfund Liens
4. Summary of Directive (include brief statement of purpose) , , , . , ..u „= nf f^a-r-al 1-ipn
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UNITED STATES ENVIRONMENTAL PROTECTION AGENCY
WASHINGTON. D.C. 20460
SEP 22 IS8T
of
ENf ORCEMf.NT AND
COMPLIANCE MONITQHIfcG
MEMORANDUM
SUBJECT: Guidance on Federal Superfund Liens
FROM: Thomas L. Adams, Jr.
Assistant
TO: Regional Administrators, Regions I-X
Regional Counsels, Regions I-X
Directors, Waste Management Division,
Regions I-X
The purpose of this memorandum is to establish guidance on
the use of federal liens to enhance Superfund cost recovery.
Section 107(f) of the Superfund Amendments and Reauthorization
Act of 1986 ("SARA"), adds a new Section 107(1) to CERCLA, which
provides for the establishment of a federal lien in favor of the
United States upon property which is the subject of a removal or
remedial action.
This guidance provides: (1.) analysis of statutory issues
regarding the nature and scope of the lien, (2) policy on filing
a federal lien to support a cost recovery action, and (3) proce-
dures for filing a notice of lien and taking an in rem action to
recover the costs of a lien. Attached to the guTcTance is an
example of a notice of a Superfund lien.
I. STATUTORY BACKGROUND AND ISSUES
A. Property Covered by Lien
Sectt<^t07(l) of CERCLA provides that all costs and damages
for which-aggerson is liable to the United States in a cost
recovery aefcionr shall constitute a lien in favor of the United
States upoivall real property and rights to such property which
(1) belong to such person and (2) are subject to or affected by
a removal or remedial action. The lien applies to -all property
owned by the PRP upon which response action has been taken, not
just the portion of the property directly affected by cleanup
activities. The House Judiciary Committee Report on the lien
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provision in H.R. 2817 (p. 18), which was enacted as part of
SARA, states that "the lien should apply to the title to the
entire property on which the response action was taken." At the
same time, the Report notes that "it is not intended to extend
the lien to the title of other property held by the responsible
party." Id.
The lien provision is designed to facilitate the United States'
recovery of response costs and prevent windfalls. "A statutory
lien would allow the Federal Government to recover the enhanced
value of the property and thus prevent the owner from realizing a
windfall from fund cleanup and restoration activities." 131 Cong.
Rec. S11580 (Statement of Sen. Stafford) (September 17, 1985).
See also House Energy and Commerce Report on H.R. 2817, p. 140,
indicating that one of Congress1 primary purposes in enacting
the lien provision was to prevent unjust enrichment.
B. Duration and Effect of Lien
The federal lien arises "at the later of the following:
(A) the time costs are first incurred by the United States with
respect to a response action under [SARA, or] (B) the time that
the person is provided (by certified or registered mail) written'
notice of potential liability." (Emphasis added) (§107(1)(2)) .
EPA may send out two different types of notice letters to PRPs.
The first, a general notice letter, will be sent early in the
process notifying the recipient that he or she has been identified
as a party who may be responsible for cleanup of the site or for
the costs of cleanup. In addition, the Agency may send a sub-
sequent "special" notice which will invoke and commence the
settlement procedures in Section 122 of SARA. The first of those
letters will satisfy the notice of potential liability required
for the federal lien to arise, assuming that it does give the PRP
notice of potential liability for cleanup of costs, and is for-
warded by certified or registered mail.
It is EPA's position that the lien provision applies to costs
incurred prior to and after passage of SARA. The lien also applies
to all future costs incurred at the site. The lien continues
"until ther.-liability for the costs (or a judgment against the
person arising out of such liability) is satisfied or becomes
unenforceable through operation of the statute of limitations
provided in section 113." (5107(1)(2))
C. Priority of Federal Lien In Relation to Other Property
Liens
•»
The federal lien is "subject to the rights of any purchaser,
holder of a security interest, or judgment lien creditor whose
interest is perfected under applicable State law before notice of
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Where the State has designated an office, such as a County
recording office, the lien should be filed in that office. This
will likely be the same office where State Superfund liens are
filed or where general real property liens, e.g. mechanic's liens,
are filed. "If the State has not by law designated one office for
the receipt of such notices of liens, the notice shall be filed in
the office of the clerk of the United States district court for the
district in which the real property is located." (5107(1)(3))
Where there is any doubt as to the designated State office,
the lien should be filed both in the office of the clerk of the
United States district court for the district in which the real
property is located and in the most appropriate local office for
recording property interests. Filing in the appropriate local
office is important, since parties with an interest in the property
are more likely to review liens in the local office than in federal
district court.
IV. IN REM ACTIONS FOR RECOVERING COSTS CONSTITUTING THE LIEN
Under Section 107(1)(4), "[t]he costs constituting the lien
may be recovered in an action in rem in the United States district
court for the district in whicTT~the removal or remedial action is
occurring or has occurred." An in rem action is an action against
the property of the PRP. In order to institute a proceeding in rem,
the property must "be actually or constructively within the reacH
of the court." 36 Am. Jur. 2d Forfeitures and Penalties S2B (1968).
By contrast, the typical cost recovery action is an in personatn
action against the PRP.
In rem actions should be considered where the litigation team
believes that an action to recover costs covered by the lien will
enhance its efforts to recover all costs incurred in a response
action. Such actions will be particularly useful where the pro-
perty constitutes a significant asset of the PRP, and where the
government is having difficulty reaching an expeditious cost
recovery settlement. The in rem action, which will seek an order
directing sale of the property,^/ should generally be combined with
an in personam action for costs. Before bringing an in rem action,
the regional^office should consider the amount of the claim, the
:•"-&.
.
2/ An in rem action may be delayed by an automatic stay, obtained
in a bankruptcy proceeding, which serves to stay, "any act to
create, perfect, or enforce any lien against property of the
estate." (Emphasis added) 11 U.S.C. S362(a)(4). The automatic
stay also prohibits perfection of a lien, through filing notice
of the lien, against a bankruptcy debtor.
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the federal lien has been filed [by EPAJ." (§107(1)(3)) Thus, the
unfiled federal lien is subordinate to rights that are perfected
under applicable State law before EPA files notice of its federal
Superfund lien. After EPA files notice of the federal lien, the
United States establishes its priority ahead of known and potential
purchasers, holders of security interests, and judgment lien credi-
tors whose interests have not been perfected.
During deliberation on the Superfund amendments, Congress
considered a provision in H.R. 2005 [S. 51] which provided for
constructive notice of an EPA lien. Under that provision, if EPA
failed to file its notice of lien in a timely fashion, the EPA
lien would nonetheless have had priority over a third party lien
which was filed prior in time if the third party had or reasonably
should have had actual knowledge that EPA had incurred costs
which would have given rise to a lien. See Environment and Public
Works Report on S. 51, p. 45. Thus, since this provision was
ultimately deleted from the Act, EPA must file its lien in order
to achieve priority over any other secured parties, and cannot rely
on constructive notice.
D. State Superfund Liens
Most States have passed "Superfund" statutes similar to the
federal law. However, a State Superfund lien only applies to
response work paid for by a State. Some of the State statutes,
such as those in Massachusetts, New Hampshire, New Jersey, Arkansas
and Tennessee, contain "superlien" provisions which provide that
any expenditures made pursuant to the statute constitute a first
priority lien upon the real property of a hazardous waste dis-
charger. Several other States provide that expenditures from the
hazardous waste fund will constitute a lien in favor of the State,
although not a first-priority lien.
II. POLICY ON FILING FEDERAL LIENS IN COST-RECOVERY ACTIONS
EPA has the authority to file notice of a lien on any real
property where Superfund expenditures have been made. Regional
offices shouidi carefully evaluate the value of filing notice of a
lien whenev«|^the Agency has identified a landowner as a potenti-
ally liabl«§j|§«ty under Section 107. Filing of notice of the
federal liem^will be particularly beneficial to the government's
efforts to recover costs in a subsequent Section 107 action in the
following situations:
(1) the property is the chief or the substantial
asset of the PRP;
(2) the property has substantial monetary value;
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(3) there is a likelihood that the defendant owner
nay file for bankruptcy. See Revised Hazardous
Waste Bankruptcy Guidance, Office of Enforcement
and Compliance Monitoring, May 23, 1986;
(4) the value of the property will increase signi-
ficantly as a result of the removal or remedial
work; or
(5) the PRP plans to sell the property.
Regional offices should not file notice where it appears that
the defendant satisfies the elements of the innocent landowner
defense pursuant to Section 107(b)(3).
Where existing perfected non-Superfund liens on the property
equal or exceed the value of the property as enhanced by the
Superfund expenditures, it may not be worthwhile to file notice of
the federal lien. However, in some cases, a foreclosing party,
such as a bank, may take over the property, and EPA may believe
that the foreclosing party is liable under Section 107. See United
States v. Maryland Bank and Trust Co.. 632 F. Supp. 573 (D. Md.
1986). In such cases, EPA should file a lien as to the foreclosing
party after foreclosure and after other acts creating liability
have taken place.
Pursuant to Section 545(2) of the Bankruptcy Code, a lien
unperfected as cf the time of filing of the bankruptcy petition
will be invalidated by the bankruptcy trustee. Thus, where there
is a likelihood of a bankruptcy filing, notice of the Superfund
lien should be filed as early as possible. Finally, note that
filing notice of the lien is not subject to pre-enforceraent review
of the liability of the landowner for the response costs.J/
III. PROCEDURES FOR FILING LIENS
Notice of the federal lien should be filed at the time that
the owner ia provided notice of potential liability. By this time,
the lien wilt, have arisen since EPA will have incurred costs, e.g..
I/ Courts have rejected claims that owners are entitled to notice
and hearing prior to filing of the lien. In Spielman Fond.
Inc. v. Hanson's Inc., 379 F. Supp. 997 (D. Ariz.) (3 judge court),
summarily aff'd. 4TT U.S. 901 (1974), the court held that filing of
a mechanic's lien did not amount to a taking of significant property
without due process, since it did not prohibit the transfer of title,
Subsequent court decisions have followed this holding. See, e.g.,
B & P Development v. Walker. 420 F. Supp. 704 (W.D. Pa. T9T6).
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in conducting a PRP search. The government's priority will relate
back to the date that the notice of the lien was filed. See
Uniform Commercial Code, 59-312(5)(a). Unlike some State Superfund
lien provisions. Section 107 does not establish a deadline by which
notice must be filed.
A. Preparing the Notice
Regional enforcement personnel should refer to State
requirements for filing notice of the lien. We encourage the
Regions to work with State Attorney General Offices to assure
that the Regions accurately interpret State law, and to consult
with OECM and DOJ in determining whether to file notice of the
lien.
Notice should generally include: (1) the name of the property
owner, (2) a precise legal description of the property on which the
lien will arise, (3) an explanation by the Regional official of the
basis for the lien, (4) the address of the Regional Administrator
or other Regional official delegated authority to sign notices of
liens, and (5) a.provision that the lien shall remain until all
liability is satisfied. The notice should cite CERCLA Section
107(1) and be notarized with the Agency seal.
Notice may also include such information as: (1) the amount
of fund expenditures upon which the lien is claimed and (2) a
description of labor performed and materials supplied, including
dates. However, since the statute does not require specification
of costs, the notice should clarify that, where response work is
ongoing, the amount of the lien will increase as the costs incurred
increase. The property description to be included in the notice of
the lien should be the legal description (i.e., metes and bounds,
or lot, block and subdivision) rather than a general post office or
street address. We have attached an example of a notice of a
federal lien.
Under the recent SARA delegation, the Regional Administrator
has been delegated authority to sign the notice of filed lien.
The Regional Administrator may redelegate this authority at his/her
discretion.
B.
To eseHIPiish its priority among other secured parties and
creditors, EPA must file notice of the lien "in the appropriate
office within the State (or county or other governmental sub-
division), as designated by State law, in which the real property
subject to the lien is located." ($107(1)(3))
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condition of the site after the response action and the likely
marketability of,the site. Note that an in rem action will require
the same elements of proof as any cost recovery action.
Section 107(1)(4) further states that "[njothing in this
subsection shall affect the right of the United States to bring an
action against any person to recover all costs and damages for
which such person is liable under subsection (a) of this section."
Thus, where the government seeks to enforce the federal lien, it is
not precluded from recovering the balance of its response costs
directly from the landowner or any other liable party.3/
DISCLAIMER
This memorandum and any internal procedures adopted for its
implementation are intended solely as guidance for employees of the
U.S. Environmental Protection Agency. They do not constitute
rulemaking by the Agency and may not be relied upon to create a
right or a benefit, substantive or procedural, enforceable at law
or in equity, by any person. The Agency may take action at variance
with this memorandum or its internal implementing procedures. j
Attachment • .
3/ Moreover, after EPA obtains a judgment, it should consider
using state judgment lien provisions, which may* cover all real
property of the debtor.
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S632J2
NOTICE OF FEDERAL LIEN
NOTICE IS HERESY GIVEN by the United States of America that it holds a lien on
the lands and premises described below situated in the State of Washington,
as provided by Section 107 (f) of the Superfund Amendments and Reauthorization
Act of 1986 (SARA). Public Law No. 99-499. amending the Comprehensive Enviromental
Response. Compensation, and Liability Act of 1980 (CERCIA), 42 U.S.C. $9601 et
se£. . co secure Che payment to the United States of all costs and damages covered
by that Section for which Western Processing Company, foe. and Carat J. Nieuwenhuis
(and the marital community composed of himself and his wife) are liable to the
United States xrxder Section 107(a) of CERCLA as amended. The lien for uhich this
instrument gives notice exists in favor of the United States upon all real property
and rights to such property vhich belong to said persons and are. have been, or will
be. subject to. or affected by, raooval and remedial actions as defined by federal
law. at or near 7215 South 196th in the City of Kent, County of King, State of
Washington, including the following, described land:
That portion of the Southeast Quarter (S.E. 1/4) of the -
Northwest Quarter (N.W. 1/4) of Section One (1). Township
Twenty-Two (22) North, Range Four (4) East, Willanette
Meridian, lying Westerly of the Puget Sound Electric
rigfrt-of-way less than North Thirty (30) feet of Drainage
Ditch No. One (1). containing 12.9 acres more or less. -
This .statutory lien exists and continues until the liability for such costaJ
and damages (or for any decree or judgement against such persons arising out of *
such liability) is satisfied or becomes unenforceable through: the operation of the
statute of limitations as provided by Section 113 of Public Law 99-499.
IN WITNESS ^HEREOF, the United States has caused this instrument to be executed
through the (Orated/ j^ates Enviromental Protection Agency, and its attorney, in his
officials-capacity as Regional Counsel of the United States Environmental Protection
Dated^at
day of
f-
\
f
'
UNITED STATES OF AMERICA and
UNITED STATES ENVIROWENTAL
PROTECTION AGENCY
United States Ol^Sttica)
State of
County of
)sa
, F ? ' /^
VA^James R. Moore
•F* Regional Counsel
S. EPA, Region 10
t-. ;tb.is' £ j day of S A/U Afll»' . \9
Qri-rte- * phev unders igned Notary, Janes R. Moore,
7 . there appeared personally
own to me to be the Regional
States Environmental Protection Agency, Region 10, and he
£ he signed the foregoing NOTICE OF FEDERAL HEN in a representative
;*he Jree and voluntary act and deed of the United States and its said
and purposes therein mentioned. GIVEN under my hand and official
year first stated above. "
My Camission Expires
. I I _
;/^ y/ yC-
~
_
NOTAKY FUBLICn and tor te State
of Washington residing at Seattle
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