The Front Royal-Warren County Economic Development Authority, which has been concerned about taking on Superfund liability if portions of the Avtex Fibers plant are turned over for redevelopment, as actually owned about nine acres in a polluted portion of the plant since 1973, members were told this week.

And while most officials said the authority could be open for liability for cleanup costs at the site, that isn't likely.

The FMC Corp., which sold the plant to Avtex in 1976, deeded 9.08 acres to the authority in August 1973 as collateral on a $6.6 million industrial development bond issued by the authority.

The bond was used to make improvements to the facility's waste water treatment plant and install pollution control equipment, according to authority Chairman William Barnett.

Hubert H. Marlow Jr., the authority's attorney, said it was common practice at the time to have the project for which bonds were being issued be the collateral for the money borrowed. After the property was deeded to the authority, the authority leased it back to FMC.

The lease calls for FMC, at the end of the lease on June 1, 1998, to have the option of buying back the land and its improvements for $100.

The Comprehensive Environmental Response Compensation and Liability Act, or CERCLA, the 1980 law that put the Superfund program into place, requires that all owners of polluted properties placed on the Superfund list share in the liability for paying for its cleanup, regardless of whether they were responsible for the pollution.

Officials say they aren't sure what that means for the authority, either now or if FMC opts not to buy back the property in 1998, leaving the authority as the permanent owner of the land.

Scott C. Whitney, an environmental attorney who is representing the Warren County Redevelopment Corp. in its efforts to have portions of the plant released for reuse, said the law holds virtually all owners responsible.

"It could be" bad news for the authority, "particularly since there was release into the Shenandoah River and natural resources damage," he said.

Whitney said there have been exemptions from liability for lenders that held property only as security for a loan, but the authority wasn't precisely acting as a lender in this case.

Edward B. Sears, associate editor of the Environmental Law Reporter, said that protection, which was based on a 1992 rule created by the Environmental Protection Agency, was overturned in a Feb. 4, 1994, ruling by the U.S. Court of Appeals for the District of Columbia.

"The court held that the EPA had exceeded its authority in promulgating the rule, so there's no exception currently," he said. "There is no exemption at this point."

In an article in the June 1994 issue of his publication, Sears cites several federal cases in which lenders who foreclosed on polluted properties were held not to be liable. But those cases all involved a quick turnover of tile land after taking ownership. Tile article says the creditor must list the property with a third-party broker within one year of foreclosure.

No one seems to know what the authority's position would be if it had to take permanent ownership of the land.

While the lease includes hold-harmless provisions, the Superfund law says those clauses have no meaning in protecting an owner or operator from responsibility.

The law, though, includes an exemption for anyone not participating in the management of a site who owns it only to protect "his security interest."

Sears concludes in his article that the ruling overturning the lender liability rule "has thrown the issue of what it means to hold a security interest 'without participating in management' back into confusion."

Bob Fields, FMCs vice president for environment, health, safety and toxicology, said he doesn't know if the company will exercise its option to buy back the land in 1998. "We haven't figured that out yet," be said.

The waste water treatment facility is being used to pump and clean water from the Avtex plant and lagoons and whether FMC opts to buy it will depend on whether it's still needed for cleanup efforts in 1998, he said.

Whitney said he would advise the authority to join the redevelopment corporation in seeking federal legislation easing the liability problem. Tenth District Rep. Frank R. Wolf has offered an amendment to Superfund legislation in Congress that would lift any liability for the corporation if it takes ownership of portions of the plant for redevelopment.

Fields doesn't believe the liability issue will come back to haunt the authority.

"It really doesn't amount to a hill of beans in my estimation," he said.

While the authority may technically be in danger of being held liable, he said, "obviously I knew the IDA owned this land. My company went out and looked for PRPs (potentially responsible parties) to help us pay for this site."

While FMC sought to have the federal departments of Defense and Commerce help pay for the cleanup, it never tried to have the authority held responsible, he said.

"If I thought the IDA was a viable PRP, I would have gone after the IDA," said Fields, who doubts that the federal government will do that either.

"Legally, can the IDA be held a PRP? Yes. As a practical matter, there's no money there," he said.

EPA spokeswoman Amy Barnett said ownership of the land by the authority is news to that agency.

While agreeing that, as an owner, the authority may have a liability problem, she agreed with Fields that the EPA is unlikely to take action against it.

"The IDA has repeatedly stated to the EPA that they have no money," she said.

The courts would decide who the responsible parties are, Ms. Barnett said.

Fields said the land deeded to the authority includes the treatment plant, zinc recovery ponds, sludge filters and other facilities.

The land is included in the areas of the plant that are "pretty contaminated," Ms. Barnett said.

William Barnett said he first learned of the 1973 transaction this week through the Friends of the Shenandoah River.

Fields said he provided Ed Ward, a member of that group, with a copy of the lease after the treatment plant came up during a recent meeting.

Ward said he was interested because he believed the treatment plant could be used by the Front Royal Utilities Department.

But Utilities Director Charles W. Pomeroy said it's unlikely that the town would be interested in using the treatment plant.

"They've been using it to clean out those (contaminated) ponds and I don't know what's in it," he said. "I don't know if we would have any use for it. There's no (pipes) connecting it to the town."