HCS CSSB 199(RES): "An Act relating to environmental audits and health and safety audits to determine compliance with certain laws, permits, and regulations."
00HOUSE CS FOR CS FOR SENATE BILL NO. 199(RES) 01 "An Act relating to environmental audits and health and safety audits to 02 determine compliance with certain laws, permits, and regulations." 03 BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF ALASKA: 04 * Section 1. FINDINGS; INTENT. The legislature finds and intends as follows: 05 (1) as environmental regulations evolve, performance-based standards will 06 increasingly replace the traditional command-and-control approach of state regulatory 07 practices; this shift is expected to save money for both the state and regulated entities and to 08 lead to the integration of environmental protections and normal operating procedures for 09 regulated facilities and operations; in order to foster a partnership between the public and 10 private sectors and promote this integration, it is the intent of the legislature to establish under 11 this Act a responsible incentive program to encourage voluntary, critical self-evaluation by 12 regulated entities of their compliance with environmental requirements by authorizing certain 13 qualified privileges and immunities relating to those self-evaluations; 14 (2) the public has a strong interest in encouraging routine self-review of
01 environmental business practices and procedures; this encouragement can best be achieved 02 by preserving the free flow of information; the free flow of the kind of information that is 03 generated by self-audits would be curtailed if a privilege for the audits was not available; 04 therefore, it is the intent of the legislature to recognize an audit privilege under this Act in 05 order to protect the confidentiality of communications relating to voluntary internal 06 environmental audits; however, the legislature does not intend that audit reports privileged 07 under this Act may be used to shield a person from liability under applicable laws and 08 regulations by blocking access to relevant facts; 09 (3) the public also has a strong interest in obtaining cost-effective correction 10 of inadvertent environmental violations; this goal can best be achieved by offering qualified 11 immunity from administrative and civil penalties to regulated entities that promptly report 12 known violations of environmental regulations that are uncovered as part of an audit so that 13 the violations can promptly be corrected and a corrective action plan can be negotiated with 14 the appropriate governmental regulatory agency; 15 (4) an effective enforcement program is also necessary to protect the public 16 health and welfare and the environment; the legislature intends that the audit privilege and the 17 immunities established in this Act should be applied in a manner that promotes compliance 18 with environmental laws, whether through voluntary compliance or through enforcement 19 efforts. 20 * Sec. 2. AS 09.25 is amended by adding new sections to read: 21 ARTICLE 5. PRIVILEGES AND IMMUNITIES 22 RELATED TO DISCLOSURE OF CERTAIN SELF-AUDITS. 23 Sec. 09.25.450. AUDIT REPORT PRIVILEGE. (a) Except as provided in 24 AS 09.25.455 - 09.25.475, an audit report is privileged and is not admissible as 25 evidence or subject to discovery in 26 (1) a civil action, whether legal or equitable; 27 (2) a criminal proceeding; or 28 (3) an administrative proceeding, except for workers' compensation 29 proceedings. 30 (b) A person, when called or subpoenaed as a witness, may not be compelled 31 to testify or produce a document related to an environmental audit if
01 (1) the audit report is privileged under (a) of this section and is 02 inadmissible in the same proceeding; 03 (2) the testimony or document discloses an item listed in 04 AS 09.25.490(a)(1) that was made as part of the preparation of an environmental audit 05 report and that is addressed in a privileged part of an audit report; and 06 (3) for purposes of this subsection only, the person is a 07 (A) person who conducted all or a portion of the audit but did 08 not personally observe or participate in the relevant instances or events being 09 reviewed for compliance; 10 (B) person to whom the audit results are disclosed under 11 AS 09.25.455(b); or 12 (C) custodian of the audit results. 13 (c) A person who conducts or participates in the preparation of an 14 environmental audit and who has actually observed or participated in instances or 15 events being reviewed for compliance may testify about those instances or events but 16 may not, in a proceeding covered by (a) of this section, be compelled to testify about 17 or produce documents related to the preparation of or a privileged part of an 18 environmental audit or an item listed in AS 09.25.490(a)(1). 19 (d) A regulatory agency and an employee of a regulatory agency may not 20 request, review, or otherwise use an audit report that is privileged under (a) of this 21 section during an agency inspection of a regulated facility, operation, or property or 22 an activity of a regulated facility, operation, or property. 23 (e) To facilitate identification, each document in an audit report shall be 24 labeled "COMPLIANCE REPORT: PRIVILEGED DOCUMENT," or labeled with 25 words of similar import. 26 (f) A party asserting the privilege described in this section has the burden of 27 establishing the applicability of the privilege. 28 (g) This section may not be construed to 29 (1) prevent a regulatory agency from issuing an emergency order, 30 seeking injunctive relief, independently obtaining relevant facts, conducting necessary 31 inspections or taking other appropriate action regarding implementation and
01 enforcement of an applicable environmental law, except as otherwise provided in 02 AS 09.25.475; or 03 (2) authorize a privilege for uninterrupted or continuous environmental 04 audits. 05 Sec. 09.25.455. EXCEPTION: WAIVER. (a) The privilege in AS 09.25.450 06 does not apply to the extent the privilege is expressly waived in writing by the owner 07 or operator who prepared the audit report or caused the report to be prepared. 08 (b) Disclosure of an audit report or information generated by an environmental 09 audit does not waive the privilege established by AS 09.25.450 if the disclosure is 10 made 11 (1) to address or correct a matter raised by the environmental audit and 12 is made only to 13 (A) a person employed by the owner or operator, including 14 temporary and contract employees; 15 (B) a legal representative of the owner or operator; 16 (C) an officer or director of the regulated facility, operation, or 17 property; 18 (D) a partner of the owner or operator; or 19 (E) an independent contractor retained by the owner or operator; 20 (2) under the terms of a confidentiality agreement between the person 21 for whom the audit report was prepared or the owner or operator of the audited 22 facility, operation, or property and a 23 (A) partner or potential partner of the owner or operator of the 24 facility, operation, or property; 25 (B) transferee or potential transferee of the facility, operation, 26 or property; 27 (C) lender or potential lender for the facility, operation, or 28 property; 29 (D) government official or a state or federal agency; or 30 (E) person or entity engaged in the business of insuring, 31 underwriting, or indemnifying the facility, operation, or property; or
01 (3) under a claim of confidentiality to a government official or agency 02 by the person for whom the audit report was prepared or by the owner or operator. 03 (c) A party to a confidentiality agreement described in (b)(2) of this section 04 who violates that agreement is liable for damages caused by the disclosure and for 05 other penalties stipulated in the confidentiality agreement. 06 (d) Information that is disclosed under (b)(3) of this section is confidential and 07 is not subject to disclosure under AS 09.25.110 - 09.25.125. 08 (e) Disclosure of a portion of an audit report after waiver of the privilege 09 under (a) of this section, after disclosure under (b) of this section, or through any other 10 means may not be construed to waive the privilege established under AS 09.25.450 for 11 any other part of the audit report. 12 Sec. 09.25.460. EXCEPTION: DISCLOSURE REQUIRED BY COURT OR 13 ADMINISTRATIVE HEARINGS OFFICIAL. (a) A court or administrative hearing 14 official with competent jurisdiction may require disclosure of a portion of an audit 15 report in a civil, criminal, or administrative proceeding if the court or administrative 16 hearing official determines, after an in camera review consistent with the appropriate 17 rules of procedure, that the 18 (1) privilege is asserted for a fraudulent purpose; 19 (2) portion of the audit report is not subject to the privilege under 20 AS 09.25.465; 21 (3) portion of the audit report shows evidence of noncompliance with 22 an environmental law and appropriate efforts to achieve compliance with the law were 23 not promptly initiated and pursued with reasonable diligence after discovery of 24 noncompliance; or 25 (4) audit report was prepared for the purpose of avoiding disclosure of 26 information required for an investigative, administrative, or judicial proceeding that, 27 at the time of the report's preparation, was imminent or in progress. 28 (b) A party seeking disclosure under this section has the burden of proving that 29 (a) of this section applies. 30 Sec. 09.25.465. NONPRIVILEGED MATERIALS. (a) The privilege under 31 AS 09.25.450 does not apply to that part of an audit report that contains
01 (1) a document, communication, datum, report, or other information 02 required by a regulatory agency to be collected, developed, maintained, or reported 03 under an environmental law, under a permit issued under an environmental law, as a 04 requirement for obtaining, maintaining, or renewing a license, or as a requirement 05 under a contract or lease with the state; 06 (2) information that a regulatory agency obtains by observation, 07 sampling, or monitoring; 08 (3) information that a regulatory agency obtains from a source that was 09 not involved in compiling, preparing, or conducting the environmental audit report; 10 (4) a document, communication, datum, report, or other information 11 collected, developed, or maintained in the course of a regularly conducted business 12 activity or regular practice other than an environmental audit; 13 (5) a document existing before the commencement of, and independent 14 of, the environmental audit; or 15 (6) a document prepared after the completion of, and independent of, 16 the environmental audit. 17 (b) An audit report is not privileged and is admissible as evidence and subject 18 to discovery in a proceeding relating to pipeline rates, tariffs, fares, or charges. 19 (c) An audit report is not privileged and is admissible as evidence and subject 20 to discovery if the report was commenced after the owner or operator knew of an 21 impending inspection or investigation by a regulatory agency. 22 (d) This section does not limit the right of a person to agree to conduct and 23 disclose an audit report. 24 Sec. 09.25.475. VOLUNTARY DISCLOSURE; IMMUNITY. (a) Except as 25 provided by this section, a person who makes a voluntary disclosure of a violation of 26 an environmental law is immune from an administrative or civil penalty for the 27 violation disclosed, for a violation based on the facts disclosed, and for a violation 28 discovered because of the disclosure that was unknown to the person making the 29 disclosure. 30 (b) A disclosure is voluntary for the purposes of this section only if 31 (1) the disclosure was made promptly after knowledge of the
01 information disclosed is obtained by the person; 02 (2) the disclosure was made in writing by certified mail to an agency 03 that has regulatory authority with regard to the violation disclosed; 04 (3) an investigation of the violation was not initiated or the violation 05 was not independently detected by an agency with enforcement jurisdiction before the 06 disclosure was made using certified mail; under this paragraph, the agency has the 07 burden of proving that an investigation of the violation was initiated or the violation 08 was detected before receipt of the certified mail; 09 (4) the disclosure arises out of a voluntary environmental audit; 10 (5) the person who makes the disclosure initiates, within a reasonable 11 time, an appropriate effort to achieve compliance, pursues that effort with due 12 diligence, and corrects or implements a series of measures designed to remedy the 13 noncompliance within a reasonable time; 14 (6) the person making the disclosure cooperates with the appropriate 15 agency in connection with an investigation of the issues identified in the disclosure and 16 agrees under terms of a confidentiality agreement to disclose to the agency, on request 17 of the agency, the part of the audit report that describes the implementation plan or 18 tracking system developed to correct past noncompliance, improve current compliance, 19 or prevent future noncompliance; and 20 (7) the violation did not result in substantial injury to one or more 21 persons at the site or substantial off-site harm to persons, property, or the environment. 22 (c) A disclosure is not voluntary for purposes of this section if it is a report 23 to a regulatory agency required solely by a specific condition of an enforcement order 24 or decree. 25 (d) The immunity established by (a) of this section does not apply and an 26 administrative or civil penalty may be imposed under applicable law if the 27 (1) person who made the disclosure knowingly committed the disclosed 28 violation; 29 (2) person who made the disclosure recklessly committed or was 30 responsible for the commission of the disclosed violation and the violation resulted in 31 substantial injury to one or more persons at the site or substantial off-site harm to
01 persons, property, or the environment; 02 (3) offense was committed intentionally or knowingly by a member of 03 the person's management or an agent of the person and the person's policies or lack 04 of prevention systems contributed materially to the occurrence of the violation; or 05 (4) offense was committed recklessly by a member of the person's 06 management or an agent of the person, the person's policies or lack of prevention 07 systems contributed materially to the occurrence of the violation, and the violation 08 resulted in substantial injury to one or more persons at the site or substantial off-site 09 harm to persons, property, or the environment. 10 (e) An administrative or civil penalty that is imposed on a person for violation 11 of an environmental law when the person has made a voluntary disclosure under (a) 12 of this section but is not granted immunity because of (d) of this section may, to the 13 extent appropriate and not prohibited by law, be mitigated by 14 (1) the voluntariness of the disclosure; 15 (2) efforts by the disclosing party to conduct environmental audits; 16 (3) remediation; 17 (4) cooperation with government officials investigating the disclosed 18 violation; 19 (5) the nature of the violation; and 20 (6) other relevant considerations. 21 (f) In order to receive immunity under this section, a facility conducting an 22 environmental audit must give notice by certified mail to an appropriate regulatory 23 agency of the fact that it is planning to commence the audit. The notice must specify 24 the facility or portion of the facility to be audited, the date the audit will begin and 25 end, and the general scope of the audit. Immunity under this section is available only 26 for violations that are revealed through or discovered as a result of information and 27 documents first produced or obtained during the time period specified in the notice. 28 The notice may provide notification of more than one scheduled environmental audit 29 at a time. Once initiated, an audit shall be completed within the time period specified 30 in the notice except that the audit period may be extended once for up to 60 days if 31 the facility gives notice of the extension and its duration to the appropriate regulatory
01 agency by certified mail before the original time period expires. 02 (g) A regulatory agency may not initiate an inspection, monitoring, or other 03 investigative activity based solely on the receipt of a notice under (f) of this section. 04 The agency has the burden of proving that an inspection, monitoring, or other 05 investigative activity initiated after receipt of a notice under (f) of this section was not 06 initiated based solely on the receipt of the notice. 07 (h) The immunity under this section does not apply if a court or administrative 08 law judge finds that the person claiming the immunity has 09 (1) repeated an unreasonable number of times or continuously 10 committed violations that are the same as, or similar to, the violation for which 11 immunity is sought under this section; and 12 (2) not attempted to bring the facility, operation, or property into 13 compliance, so as to constitute a pattern of disregard of environmental laws. 14 (i) A violation that has been voluntarily disclosed and to which immunity 15 applies must be identified in a compliance history report as being voluntarily disclosed. 16 (j) A person is not immune under this section if the disclosure is in a 17 proceeding relating to pipeline rates, tariffs, fares, or charges. 18 (k) A person may not be required to waive immunity as a condition of a 19 compliance plan or similar agreement. 20 Sec. 09.25.485. RELATIONSHIP TO OTHER RECOGNIZED PRIVILEGES. 21 AS 09.25.450 - 09.25.490 do not limit, waive, or abrogate the scope or nature of a 22 statutory or common law privilege, including the work product doctrine, the attorney- 23 client privilege, and any other privilege recognized by a court with appropriate authority in 24 this state. 25 Sec. 09.25.490. DEFINITIONS. (a) In AS 09.25.450 - 09.25.490, 26 (1) "audit report" means a report that includes each document and 27 communication, other than those set out in AS 09.25.465, produced from an 28 environmental audit; general components that may be contained in a completed audit 29 report include 30 (A) a report, prepared by an auditor, monitor, or similar person, 31 that may include a description of the scope of the audit, the information gained
01 in the audit, findings, conclusions, recommendations, exhibits, and appendices; 02 the types of exhibits and appendices that may be contained in an audit report 03 include supporting information that is collected or developed for the primary 04 purpose of and in the course of an environmental audit, including 05 (i) interviews with current or former employees; 06 (ii) field notes and records of observations; 07 (iii) findings, opinions, suggestions, conclusions, 08 guidance, notes, drafts, and memoranda; 09 (iv) legal analyses; 10 (v) drawings; 11 (vi) photographs; 12 (vii) laboratory analyses and other analytical data; 13 (viii) computer generated or electronically recorded 14 information; 15 (ix) maps, charts, graphs, and surveys; and 16 (x) other communications associated with an 17 environmental audit; 18 (B) memoranda and documents analyzing all or a portion of the 19 materials described in (A) of this paragraph or discussing implementation 20 issues; and 21 (C) an implementation plan or tracking system to correct past 22 noncompliance, improve current compliance, or prevent future noncompliance; 23 however, "audit report" does not include formal communications or agreements 24 between an owner or operator and the appropriate agency regarding a 25 compliance implementation plan or strategy; 26 (2) "environmental audit" means a voluntary, confidential, critical, 27 internal, and retrospective review, evaluation, or analysis of current or past conduct, 28 practices, and occurrences and their resulting consequences, including an assessment 29 that is a part of the owner's or operator's compliance management system, that is 30 conducted randomly, regularly, or in response to a particular event by an owner or 31 operator or by an employee or independent contractor of an owner or operator and is
01 (A) conducted in the expectation that it will be confidential; and 02 (B) specifically and exclusively designed and undertaken for the 03 purpose of determining compliance with environmental laws or a permit issued 04 under those laws; 05 (3) "environmental law" means 06 (A) a federal or state environmental law; or 07 (B) a rule, regulation, or municipal ordinance adopted in 08 conjunction with or to implement a law described by (A) of this paragraph; 09 (4) "intentionally" has the meaning given in AS 11.81.900; 10 (5) "knowingly" has the meaning given in AS 11.81.900; 11 (6) "owner or operator" means a person who owns or operates a 12 regulated facility, operation, or property; 13 (7) "penalty" means an administrative or civil sanction imposed by the 14 state to punish a person for a violation of a statute or rule; the term does not include 15 a technical or remedial provision ordered by a regulatory authority; 16 (8) "recklessly" has the meaning given in AS 11.81.900; 17 (9) "regulated facility, operation, or property" means a facility, 18 operation, or property that is regulated under an environmental law. 19 (b) To fully implement the privilege and immunity established under 20 AS 09.25.450 - 09.25.490, the term "environmental law" shall be construed broadly. 21 However, the term "environmental law" may not be construed so broadly as to include 22 a law governing occupational health and safety, and the term "environmental audit" 23 may not be construed to include a health and safety audit. 24 * Sec. 3. AS 12.45 is amended by adding a new section to read: 25 Sec. 12.45.052. PRIVILEGE RELATING TO CERTAIN SELF-AUDITS. An 26 audit report based on an environmental audit is privileged to the extent provided under 27 AS 09.25.450 - 09.25.490. 28 * Sec. 4. APPLICABILITY. The privilege created by AS 09.25.450 - 09.25.490, added 29 by sec. 2 of this Act, applies to environmental audits that are conducted on or after the 30 effective date of this Act.