Legislature(1997 - 1998)
03/14/1997 09:10 AM Senate FIN
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* first hearing in first committee of referral
+ teleconferenced
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+ teleconferenced
= bill was previously heard/scheduled
SENATE BILL NO. 41
"An Act relating to environmental audits to determine
compliance with certain laws, permits, and
regulations."
CO-CHAIR SHARP announced that the committee would continue
with pending action on SB 41, which had been heard
yesterday. Amendment 3 by Senator Parnell was on the table.
SENATOR PARNELL WITHDREW Amendment 3 without objection.
SENATOR PARNELL MOVED Amendment 10. SENATOR PHILLIPS
OBJECTED for the purpose of discussion.
MIKE PAULEY, STAFF TO SENATOR LEMAN, addressed the
committee regarding the amendment. The senator,
representatives from the administration and the drilling
contractors tried to come up with new language to address
their concerns. The redefinition of owner and operator
brings independent contractors under the definition making
them eligible for privileges and immunity under the bill.
SENATOR PHILLIPS asked if the Department of Environmental
Conservation (DEC) understood the amendment.
CO-CHAIR SHARP called on JANICE ADAIR, DIRECTOR, DIVISION
OF ENVIRONMENTAL HEALTH, DEPARTMENT OF ENVIRONMENTAL
CONSERVATION, who was available to the committee via
teleconference. He asked her to speak to Amendment 10.
MS. ADAIR asked Mr. Pauley if the amendment was their
definition of owner and operator they had prepared
yesterday. MR. PAULEY affirmed that it was the same
definition except the words "all or part of" had been
inserted before "regulated facility, operation or
property."
MS. ADAIR stated that DEC had no problems with the
amendment.
CO-CHAIR SHARP asked if there were further questions or
comments. SENATOR PHILLIPS WITHDREW his OBJECTION. There
being no further objection, Amendment 10 was ADOPTED.
SENATOR PARNELL stated he did not plan to offer Amendments
4 and 5. He believed the Alaska Oil and Gas Association had
withdrawn the amendments.
CO-CHAIR PEARCE MOVED Amendment 8 on behalf of Senator
Adams. SENATOR PARNELL OBJECTED.
CO-CHAIR PEARCE read the rationale for the record:
"In almost all cases the facts needed to prove
exceptions (a)(1)-(4) to the self-audit privilege will
be only within the knowledge and control of the owner
or operator who conducted the audit. Without knowing
what is in the privileged audit or communication, the
party seeking disclosure would find it virtually
impossible to establish that the privileged
information falls within the exception. Our U. S.
Supreme Court has held that 'The ordinary rule, based
on considerations of fairness, does not place the
burden upon a litigant of establishing facts
peculiarly within the knowledge of his adversary. The
9th Circuit has said the same.'" Our supreme court has
recognized that the burden of proof generally falls
upon the party asserting a fact, particularly where
that party controls the evidence bearing upon the
fact."
CO-CHAIR PEARCE believed Amendment 8 had been requested by
the Department of Law. She was not familiar with the entire
argument and hoped to have Senator Leman's staff speak to
it.
MR. PAULEY opposed Amendment 8 because it substantially
undermined the privilege the bill provided. The subject of
contention is language on page 7, lines 14-15 regarding the
burden of proof. He said the language had been used in
Oregon's law, the first state to pass audit privilege
legislation. Of twenty states that have passed this law,
the majority have that exact language. The proposed
amendment unfairly shifts the burden on the industry that
is asserting the privilege, in that the party claiming the
privilege has the burden of establishing that the
exceptions in (a)(1)-(4) don't apply. Mr. Pauley gave an
example to illustrate his point, suggesting that everyone
asserting this privilege has to prove they're not a crook.
It didn't make sense to him. He sent the proposed language
to a number of lawyers representing different industries
that would be affected by SB 41. He had heard back from
AOGA and they strongly disapproved of Amendment 8 and
believed it would nullify the privilege the bill offers.
SENATOR PHILLIPS asked to hear from DEC on the amendment.
MS. ADAIR stated that the issue had been identified in
earlier testimony as one that still needed to be resolved.
They had a different amendment prepared that was something
between Amendment 8 and what is currently in the bill. The
department thought the current drafting of the bill was
problematic, regarding asking that a potentially harmed
party be required to prove information that they have no
specific knowledge of or control over the documents that
could produce that knowledge. They had suggested that the
party, whether private, third-party or the state, make a
prima facie case before the court that there was reason to
believe that the audit documents should be disclosed for
one of the reasons established in the bill. The department
would like to see this problem addressed.
MS. ADAIR confirmed that they would be happy with Amendment
8, but recognized that the sponsor had difficulty with it.
They were prepared to continue to work to find compromise
language.
MR. PAULEY provided an additional concern that the
amendment included third parties seeking to overcome the
privilege. He clarified that the bill requires a 15-day
advance notice of intent by the agency to conduct an audit
in order to get the privilege and the immunity. The notice
has to state when the audit will begin, end, and the scope
of the audit, all of which was not privileged information,
although the audit report is privileged. The notice
information is available to the public and a third party
could be aware of this and routinely file motions in court
saying they believe the audit is being done for a
fraudulent purpose. At that point, the burden of proof
immediately shifts to the company doing the audit and they
have to somehow prove that they are not undertaking it for
a criminal purpose. Therefore, the legal counsel for
companies doing audits would be forever tied up in court
defending the fact that they aren't doing audits for a
criminal purpose. He summarized by strongly opposing the
amendment because it would injure the purpose of the bill.
MS. ADAIR briefly responded to Mr. Pauley's comments. She
stated that was the reason they had suggested the prima
facie showing so they wouldn't end up with "fishing
expeditions." With a prima facie showing, the court would
have to be given solid information as to why the exception
applies and it would insure fairness on both sides.
CO-CHAIR PEARCE WITHDREW Amendment 8 with the understanding
that they would try again if the department came up with
language that all could agree to. There was NO OBJECTION to
the motion and Amendment 8 was WITHDRAWN.
There were no further amendments offered.
SENATOR PARNELL MOVED CSSB 41(FIN) from committee with
accompanying fiscal notes. CO-CHAIR PEARCE asked if the
approved amendments changed some of the fiscal notes
accompanying the bill.
MR. PAULEY stated his understanding that the pipeline
tariff amendment (Amendment 6 adopted the previous day)
might have an impact on the fiscal note. CO-CHAIR SHARP
asked if it would be a positive or negative impact.
MR. PAULEY responded that it would reduce the assessed
costs of the bill.
CO-CHAIR SHARP requested a reconsideration of the fiscal
notes. SENATOR PHILLIPS suggested modifying the motion
pending fiscal notes. He asked to hear from the Department
of Law.
MARIE SANSONE, ASSISTANT ATTORNEY GENERAL, CIVIL DIVISION,
DEPARTMENT OF LAW, addressed the committee. The fiscal note
they had submitted included $75,000 for expert witnesses on
the pipeline tariff cases, which would come out with
Amendment 6. CO-CHAIR SHARP directed Senator Parnell to
modify his motion.
SENATOR PARNELL WITHDREW his original motion without
objection. SENATOR PARNELL MOVED CSSB 41(FIN) from
committee with individual recommendations and fiscal notes,
with the exception of a downward revised fiscal note from
the Department of Law.
Without objection, CSSB 41(FIN) was REPORTED OUT with a
previous zero fiscal note from Department of Health and
Social Services, a new zero fiscal note from the Department
of Labor, and new reduced fiscal notes from the Court
System (35.9), and the Department of Law (121.3).
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