Legislature(1995 - 1996)
03/27/1996 01:50 PM Senate FIN
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* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+ teleconferenced
= bill was previously heard/scheduled
SENATE BILL NO. 199
An Act relating to environmental audits and health
and safety audits to determine compliance with
certain laws, permits, and regulations; and
amending Alaska Rules of Appellate Procedure 202,
402, 602, 603, 610, and 611.
Co-chairman Halford directed that SB 199 be brought on for
discussion and noted a prior hearing on the bill. DOUG
MERTZ came before committee on behalf of the Prince William
Sound Regional Citizens' Advisory Committee, a non-profit
corporation formed to promote environmentally safe operation
of the Alyeska terminal and associated tanker traffic. The
group consists of 18 organizations in communities and
boroughs throughout the area impacted by the EXXON VALDEZ
spill as well as commercial fishing, aquaculture, native,
recreation, tourism, and environmental representatives.
While the group supports the fundamental goal of fostering
greater compliance with environmental health and safety
requirements through a cooperative approach that encourages
regulated entities to find and correct problems themselves,
SB 199 would not accomplish that in its current form. It
would instead invite abuse, generate more public distrust
and cynicism, and widen the chasm between regulators and
regulated entities.
The group thus recommends the following changes:
1. Eliminate the self-audit provision. It creates a
shield that is too broad and which interferes with
the public's right to know. EPA has found
that a self-audit privilege is not necessary
to encourage self-auditing by industry.
Immunity from prosecution for self-disclosed
violations is sufficient to encourage self-
auditing.
2. That regulatory agencies not request or use
environmental audit reports to initiate a civil or
criminal prosecution of a self-disclosed
violation. That is the device
successfully used by EPA.
3. More precision be added to standards language. As
an example, Mr. Mertz noted language requiring
disclosure of a violation to occur "promptly."
EPA policy requires disclosure within 10 days. He
noted the use of vague generalities in other areas
of the bill and correspondent use of precise
numbers in federal policy.
4. Immunity be narrowed so that violators are not
allowed to retain any of the economic benefits
derived from violations. Immunity should
extend only to punitive portions of
enforcement actions. That would provide for
fundamental fairness to competitors who have
complied, by eliminating the economic
advantage of noncompliance.
5. Certain provisions that presently create a safe-
haven for violators be tightened or eliminated.
Specifically, the violator should not be
able to disclose a violation and invoke
immunity after there has already been
notice of a citizen suit or a whistle-
blower complaint concerning the same
violation. The violator should also not
be able to disclose a violation and
invoke immunity if the violation has
imminently and substantially endangered
the public or the environment. The
violator should not be able to create a
permanent safe-haven by repeated or
continuous self-audits or by announcing
an audit after it already has reason to
believe a violation may have occurred.
6. Disclosure of a violation should not shield the
violator from prosecutions for other violations based
on disclosed facts or which are discovered
because of disclosed facts.
As currently written, the bill would lead to more litigation
and effectively shield the violator from future
investigations and prosecutions, even for violations that
are not voluntarily disclosed.
KEN DONAJKOWSKI, Audit Consultant (E.H.& S area) ARCO
Alaska, next testified via teleconference on behalf of the
Alaska Oil and Gas Association--a trade association whose 19
members account for the majority of oil and gas exploration,
production, transportation, refining and marketing in
Alaska. The Association supports the intent of SB 199. A
majority of members currently conduct self-audits as a means
of ensuring compliance and thus see value in the proposed
legislation.
Over the past 25 years, health, safety, and environmental
regulations have become increasingly complex. Not
incidentally, interpretation of these regulations has become
correspondingly difficult. Self-auditing identifies areas
of inadvertent noncompliance and leads to corrective action.
Self-audit is encouraged not only to ensure compliance but
to generally improve health, safety, and environmental
performance. The proposed legislation encourages greater
utilization of self-audits by providing immunity and
confidentiality.
Immunity should be offered as an incentive for companies to
identify, disclose, correct and prevent recurrence of
noncompliance. To be effective, self-auditing should be
undertaken without fear of consequences from regulatory
agencies and without concern for final outcome. Providing
immunity for deficiencies that are discovered through self-
auditing recognizes efforts by companies to comply rather
than penalizing them for those efforts. Immunities should
not, however, extend to those who knowingly and willfully
commit violations and subsequently audit in order to shield
themselves from the consequences.
Privilege further protects companies from inappropriate and
unnecessary repercussions of disclosing audit results to
agencies. It also ensures that the auditing process is not
compromised. The issue is not one of secrecy but ability to
conduct candid interviews with personnel. To remain
effective, it is necessary to preserve the integrity of the
audit process and maintain the trust and cooperation of
employees. Traditional legal privileges limit the
flexibility important to the self-auditing process. As with
immunity, there are reasonable limits to application of
privilege. It should protect the products of an audit
(audit report, working papers, and action plan), but it
should not be a vehicle to hide underlying facts.
In his concluding remarks, Mr. Donajkowski advised that SB
199 moves health, safety, and environmental compliance in a
positive direction through encouragement of self-auditing.
He urged passage of legislation containing the intent of SB
199. He reiterated that looking for deficiencies,
identifying them, disclosing them to appropriate agencies,
and correction is the essence of self-auditing. It is an
important tool for voluntary compliance. Without privilege
and immunity, voluntary self-audits can put a company at a
competitive disadvantage relative to companies that do not
audit.
Discussion followed between Senator Randy Phillips and Mr.
Donajkowski regarding the association's interaction with
various federal and state agencies on problem areas in the
proposed bill.
[Senator Sharp arrived at the meeting at this time.]
LAURIE OTTO, Deputy Attorney General, Criminal Division,
Dept. of Law, came before committee. She said that while
the intent of the bill is good, she would speak to the
effect of the legislation on prosecutors. Two things impact
ability of the state to prosecute crimes involving
environmental or health and safety laws:
1. Privileges as they apply to criminal prosecution.
2. Immunities.
It is the opinion of the Dept. of Law that the combined
effect of the foregoing provisions "is to make it impossible
to prosecute any offense where an environmental audit
privilege is claimed." The bill makes an exception for "bad
actors." The definition of "environmental audit," at the
end of the bill, is so broad that "anything could fall
within it." There are no standards, certification, or
licensing requirements for auditors. There is broad
disagreement, within the field, on what constitutes an
environmental audit. Presumably, a bid proposal for cleanup
would be considered privileged under the bill.
The extent of the privilege is not carefully delineated.
Every witness interview, document, scientific test, gathered
pursuant to what is identified as an audit would be
privileged. The bill provides a full, complete, and
absolute shield against provision of "any document to the
state and against prosecution of anybody." It would allow
companies to "go in and vacuum up every piece of evidence
that might be incriminating, . . . under the shield of an
environmental audit." Environmental crimes are regulatory
offenses. Like any other white collar offense, they are
proven with documents generally obtained from the offender.
If the legislature does not want environmental offenses
prosecuted as crimes, it would be easier and more
straightforward to eliminate criminal penalties for the
crimes covered by SB 199. Retention of such crimes in
statute and passage of the proposed bill would give the
appearance of ability to prosecute. The public would then
demand the filing of charges in areas where the department
has no practical ability to prosecute.
Ms. Otto said she asked staff in the office of special
prosecutions and appeals to review the legislation to
determine whether arguments around cited problems could be
made. She then advised that the view presented by staff was
"even more negative than what I'm expressing to you today."
Ms. Otto said that since the proposed bill is modeled on
Texas law, she contacted the national district attorneys
association to determine what the national experience has
been. The response indicated experience similar to cited
concerns. The association unanimously passed a resolution
against "this kind of legislation." Ms. Otto referenced
both the resolution and correspondence from the association,
outlining problems experienced with similar legislation.
Senator Randy Phillips expressed frustration over department
criticism of the legislation in the absence of suggested
alternatives or corrective provisions. Ms. Otto said that
EPA has a model that appears to work effectively. There are
also other things that can be done from a prosecution
standpoint. She cited ability of a judge who sentences a
corporation for a crime discovered as a result of an audit
to take that into account at sentencing. Language could
lower the class of offense if discovered via audit.
Further, provisions could require that documents be turned
over to the state but not utilized in court. The state
would, at least, have access to documents to evaluate what
is and is not admissible. The current bill creates a bar to
receipt of documents and provides companies transactional
immunity from prosecution.
Ms. Otto explained that environmental regulation is not her
field. She advised that she was merely telling members what
effect the bill would have on prosecutors who are asked to
enforce legislation. She said she was providing practical
information "about what this bill does." She further
advised that the legislation should not be applied to the
"criminal arena." The state should not let those who are
knowingly and intentionally violating the law "off the
hook." That does not help anybody in the industry since it
provides a competitive advantage to wrong-doers. Tightening
the bill and providing definitions would help.
PAM LaBOLLE, President, Alaska State Chamber of Commerce,
next came before committee in support of the legislation.
She asked that members keep in mind the goal of having
regulations that protect the environment, health, and
safety. Having "everyone comply with those regulations"
makes the bill "very reasonable." It allows those who have
inadvertently been out of compliance to voluntarily correct
the situation without fear of prosection. There is no
incentive for self-audit if the end result is liability for
fines, jail, and lawsuits. The legislation provides an
opportunity to reach the goal of a partnership between
business and government. Similar legislation has been
successful in other states.
[Senator Zharoff arrived at the meeting at this time.]
In response to questions from Senator Phillips, Mrs. LaBolle
noted that self-audits discover things "that nobody knows
about." The state does not have enough regulators and
enforcers to find them. The proposed bill would put
business in the position of "helping to bring these about."
BETH KERTTULA, Assistant Attorney General; Oil, Gas, and
Mining Section; Dept. of Law; next came before committee.
Co-chairman Halford asked what would need to be changed,
within the bill, to remove application to tariff cases and
associated fiscal implications. Ms. Kerttula noted that, as
presently written, privilege sections impact self-audit
information now received from pipeline owners and Alyeska.
Those provisions would have to be rewritten so that the
privilege would not apply. The state currently receives
both safety and environmental audits. Further, immunity
provisions would impact state ability to recover under the
existing tariff. Exemption of the tariff and APUC-related
filings could solve the problem.
Discussion followed between Ms. Kerttula and Co-chairman
Halford regarding placement of exemption language within
CSSB 199 (Res). Ms. Kerttula expressed need for time within
which to develop appropriate language. She also said she
could not guarantee that the "fix" would work. She advised
she would attempt to craft an appropriate amendment.
Senator Leman, sponsor of the legislation, came before
committee referencing comments in support of the "intent" of
the bill. He then described past discussions with the Dept.
of Law regarding provisions within the legislation. He
concurred that the bill "does the good things," but he said
he did not agree that it would have the negative impact
suggested by the department. The sponsor stressed that the
intent is greater compliance with environmental laws and
increased worker safety. He took exception to misstatements
regarding the contents of the bill.
Referencing comments by Ms. Kerttula relating to tariff
problems, Senator Leman suggested that she was "probably
reaching a little far." It is not the intent that the
legislation prevent the state from moving forward on tariff
cases. He agreed that some measure of comfort could be
provided if the issue was clarified under "non-privilege
materials."
The sponsor referenced comments by Ms. Otto, and voiced
reluctance to define "exactly what constitutes an audit."
He further noted that 17 other states have passed similar
legislation and cited some of the provisions adopted by
those states.
Senator Sharp attested to slow-downs by representatives of
the administration who offer nothing tangible as an
alternative. He then described a past situation in which an
offer by OSHA for voluntary inspection led to successive
OSHA monitoring. He expressed need for legislation that
provides for voluntary audit and compliance without fear of
administrative repercussions.
Senator Zharoff asked if the legislation would impact
ongoing cases. Would it limit state ability to obtain
information and necessitate state expenditures to obtain
reports and information now routinely received from
companies? Co-chairman Halford noted that the bill applies
to environmental and health and safety audits conducted "on
or after the effective date." Senator Leman referenced page
4, line 4, and explained that privilege does not apply if a
person or company is required to report specific information
to the state. Senator Zharoff noted correspondence from the
Dept. of Law indicating that in the case of the 1995 tariff
case, it would have cost approximately $25 million to
conduct needed audits. If the proposed bill is enacted, the
state will not have access to that type of information and
would have to bear the cost of obtaining it. Senator Leman
said he did not want to compromise state ability to pursue
tariff cases. He voiced his belief that necessary tariff
information, which is presently being provided, would be
exempt under provisions at page 4, lines 4 through 15. He
further advised that he would not object to clarifying
language. Information needed for tariff cases should be
part of the operating permit.
The sponsor again stressed lack of state resources to police
operations and need for voluntary efforts toward compliance.
Co-chairman Halford asked that Ms. Kerttula prepare
conceptual language dealing with pipeline tariff cases under
non-privileged material provisions.
Senator Rieger referenced discussion concerning the intent
of the bill versus the manner in which it is drafted. He
voiced his recollection that Captain Hazelwood was
ultimately "let off" because he voluntarily disclosed the
EXXON VALDEZ oil spill. He cautioned that the committee
must "think through" how the bill is written.
END: SFC-96, #59, Side 1
BEGIN: SFC-96, #59, Side 2
Senator Leman countered the foregoing comment by voicing his
belief that Captain Hazelwood got off because the jury made
a bad decision "about his state of intoxication." He
stressed that for privilege and immunity to apply, the
agency must be notified in advance that a self-audit is
being performed. It would thus not apply in the Hazelwood
situation.
Co-chairman Halford raised a question regarding potential
loss of federal funds should the state program be less
stringent than OSHA requires. Mr. Leman said he was
satisfied that would not occur under the proposed bill. It
is not the intention that that occur. He reiterated that 17
other states have adopted similar legislation and suggested
that they would not knowingly jeopardize their federal
funding.
Senator Zharoff sought clarification of language at page 6,
subsection (g). Senator Leman explained that the state
cannot initiate an inspection solely upon receiving notice
of self-audit.
DWIGHT PERKINS, Special Assistant, Dept. of Labor, came
before committee. He explained that Alaska presently has a
state plan and total jurisdiction over safety and
environmental review through federal funding. The program
consists of auditing and compliance. If a company asks that
the department perform an audit, the information becomes
privileged. Staff then works with the company to achieve
compliance. Audit information is not shared with
enforcement staff. Alaska has the only state plan of that
kind. The federal government requires that the state be as
stringent as federal requirements. If that is not the case,
funding is jeopardized, and OSHA functions will revert to
the federal government. Senator Leman suggested that EPA
has made similar threats to other states. That agency has
not changed its policy to encourage self-audits.
Mr. Perkins advised of initial discussions with the sponsor
to the effect that the department would have no problem with
the bill if it does not change current operations and impede
inspectors. Following introduction, the department found
areas of concern. The Commissioner does not want to put the
federal government to the test with a program that is less
stringent. Mr. Perkins stressed major concerns regarding
worker safety. He noted that the bill would remove part of
the department's enforcement powers. The state faces the
possibility of losing its plan. He then referenced
correspondence from Region 10, sharing those concerns.
Senator Leman stressed that the issue is not whether or not
the state receives audits that are already being done. The
balance is self-audit and subsequent attempts at compliance
versus no audits and "not knowing what you're doing wrong."
The intent is to encourage audits and corrective action.
Discussion of compliance plans followed between Senator
Leman and Senator Zharoff.
Co-chairman Halford referenced the following conceptual
amendment proposed by the Dept. of Law:
Page 1, line 8:
Except for any audit reports relating to
the TAPS tariff or enforcement of the
state pipeline right-of-way.
Page 4, line 17:
Except for any voluntary disclosures
relating to the TAPS tariff or
enforcement of the state pipeline right-
of-way.
Senator Phillips MOVED for adoption. No objection having
been raised, the amendment was ADOPTED.
Co-chairman Halford next queried members regarding
disposition of the bill. Senator Sharp MOVED for passage of
CSSB 199 (Fin) with accompanying fiscal notes. Senator
Zharoff OBJECTED. Co-chairman Halford called for a show of
hands. CSSB 199 (Fin) was REPORTED OUT of committee on a
vote of 4 to 1, accompanied by the following fiscal notes:
Dept. of Military and Veterans Affairs 0
Dept. of Transportation and Public Facilities 0
Dept. of Environmental Conservation 39.0
Dept. of Natural Resources 40.0
Dept. of Fish and Game 66.5
Senator Sharp signed the committee report with a "do pass"
recommendation. Co-chairmen Halford and Frank and Senators
Phillips and Zharoff signed "no recommendation." Senator
Rieger indicated need for amendment.
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