Environmental superliens and the problem of mortgage-backed securitization

Washington and Lee Law Review, Winter 2002 by Nash, Jonathan Remy

Thus, an increase in the ability and likelihood of the state to obtain reimbursement for environmental cleanup expenditures should increase overall environmental quality in the state. However, the extent to which a superlien statute results in more state cleanups varies with the funding mechanism that the state uses to finance environmental cleanups. The vast majority of U.S. jurisdictions (forty-nine states, as well as Puerto Rico) emulate the model of the federal CERCLA statute146 and provide for a separate state find dedicated to environmental cleanups (referred to as a "dedicated fund").147 A dedicated fund finances environmental cleanups conducted by the state, and recoveries from private parties as compensation for cleanup expenses financed by the state are paid into the dedicated fund. Only two United States jurisdictions, Nebraska and the District of Columbia, provide for no such dedicated fund (such states are "general environmental find states").148 Environmental cleanups conducted by the state come from funds subject to annual appropriation by the state legislature.149

A superlien statute will have a different overall effect in a dedicated fund state than it will in a general environmental fund state. A superlien statute increases the likelihood that a state will recover funds it expends to clean up contaminated properties. This means that states having dedicated funds will find them more easily replenished. Because state decision-makers presumably will be aware of this, the state should be able to, and therefore should be more likely to, undertake more environmental cleanups with a superlien statute than without. It follows that one reasonably can expect environmental quality to be higher in a dedicated fund state that has a superlien statute than in a state without one.

might be redirected to fund other environmental (or even non-environmental) priorities or, even more likely, used to justify reducing budget allocations to the state environmental agency. Whether decision-makers deem it appropriate to cut environmental funding or to use the benefits from the superlien statute to fund other initiatives (and thus to justify cutting direct funding of those initiatives), they reasonably can be expected to pass some of the benefits contributed by the superlien statute on to constituents in the form of tax cuts."' Thus, the effect of the passage of a superlien statute on a general environmental fund state is likely to comprise (i) increased environmental quality, though less than in a comparable dedicated fiend state, and (ii) an increase in the finds generally available to the state government.

is beneficial only where there is value in the property after cleanup, whereas a dedicated find has more general applicability.152

The foregoing allows some insight into the likely preferences of environmentalists and budget-constraint advocates as to whether a state should have a dedicated fund, a superlien statute, neither, or both. Table 2 presents these preferences for environmentalists. The columns tell whether or not the state enacts a superlien statute, and the rows represent whether the state is a dedicated fund state or not. The number in each box of the grid is the payoff that is, the relative preference153 _ of environmentalists to each possible combination of row and column.