Legislature(1995 - 1996)

03/06/1996 03:40 PM RES

Audio Topic
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
          SB 199 ENVIRONMENTAL & HEALTH/SAFETY AUDITS                         
 SENATOR LEMAN announced  SB 199  to be up next for consideration.             
 SENATOR TAYLOR moved to adopt the committee substitute to SB 199              
 for purposes of discussion.  There were no objections and it was so           
 MIKE PAULEY, Staff to Senator Leman, said the committee substitute            
 incorporates some of the changes suggested by administration                  
 witnesses.  A number of technical changes were made that tightened            
 the privilege and immunity provisions.                                        
 TAPE 96-24, SIDE B                                                            
 JEFF CARPENTER, Anchorage Industrial Hygienist with Alaska                    
 Occupational Safety and Health Program, said they believe this bill           
 will adversely affect the enforcement activities of the Alaska                
 Occupational Safety and Health Program by restricting their access            
 to documents relevant to an employers compliance with their                   
 regulations.  The committee substitute defines non-privileged                 
 documents as documents required by a regulatory agency to be                  
 maintained while the AOSHP only requires certain regulations                  
 information found in audits not specifically required by                      
 regulations to establish employer knowledge of an unsafe condition            
 and be the basis for a willful citation.  If this information were            
 to be considered part of an audit report, it could be withheld from           
 an inspector.  Additionally, employers would be immune from the               
 penalties if they voluntarily disclose an audit report.  Alaska               
 statutes establish penalties for violations of our standards and              
 makes no provisions for immunities from penalties, but they can be            
 reduced by as much as 97.5 percent as provided for in their                   
 compliance manual.                                                            
 PAUL GROSSI, Division of Workers Compensation, said they support              
 any legislation that makes the work place safer.  They have some              
 concerns with the present legislation.  They think it could                   
 negatively impact the Division fiscally and negatively impact                 
 employees, cause delay and burden of cases, and negatively impact             
 employers by adding additional litigation expenses.  Their concern            
 has to do with the restrictive privilege and the broad definition             
 of audits themselves.  They are concerned that a lot of information           
 that may be contained in audits may be germane to a workers                   
 compensation case.  It may be difficult because of the restricted             
 privilege to obtain that information; it is difficult to determine            
 the impact completely.                                                        
 SENATOR LEMAN commented that he met with Commissioner Cashen (DOL)            
 early in the session and he and Mr. Perkins agreed conceptually               
 with this approach of self audits.  They are trying to encourage              
 businesses and people to come into compliance with environmental              
 and health and safety laws and regulations.  He asked why they had            
 not come back with suggestions for making the bill work.                      
 MR. GROSSI replied that he had submitted his suggestions and                  
 perhaps they hadn't received them, yet.  He asked if they intended            
 to make information restrictive to the workers compensation                   
 process.  He said the Department did not want to punish anyone who            
 is making the work place safer.                                               
 SENATOR LEMAN asked him how it is different from  application of              
 some existing privilege like the attorney client privilege, the               
 doctor patient privilege, or work product privilege that they have            
 to deal with also.  MR. GROSSI replied that information, as far as            
 the actual events, is open for discovery right now.  SENATOR LEMAN            
 replied that the privilege does not extend to all information; the            
 underlying facts are not privileged.                                          
 Number 495                                                                    
 KEN DONAJKOWSKI, AOGA, supported the intent of SB 199.  The                   
 majority of their members currently conduct self audits as a means            
 of ensuring compliance and that is why they see value in this                 
 legislation.  There is more awareness now of health, safety, and              
 environmental issues in the work place and in communities.                    
 Interpretation of the regulations, in an effort to achieve                    
 compliance, has become correspondingly more difficult.  Self                  
 auditing serves to identify areas of inadvertent non-compliance,              
 allowing for corrective action.  This legislation also furthers the           
 climate of cooperation between industry and state agencies and                
 appropriately places the emphasis on voluntary compliance.                    
 This bill encourages companies who do not currently conduct self              
 audits to do so and encourages those who do to continue.  The                 
 ultimate goal of improving worker health and safety and minimizing            
 environmental impacts.                                                        
 Number 468                                                                    
 PAM LA BOLLE, President, Alaska State Chamber of Commerce,                    
 supported CSSB 199.  It provides businesses with an opportunity to            
 conduct self audits in a effort to assure they are in compliance              
 with environmental health and safety laws.  This creates an                   
 incentive for businesses who find they have inadvertently been out            
 of compliance to voluntarily correct their actions and strive to              
 operate in the acceptable and prescribed manner.                              
 The issue of disclosure and privileged information and the                    
 presumption of immunity are important when voluntarily disclosing             
 evidence of a selfincriminating nature.                                       
 Number 444                                                                    
 DAVID HUTCHENS, Executive Director, Alaska Rural Electric                     
 Cooperative Association, supported SB 199.  They think it is very             
 important that businesses be encouraged to find out what their                
 problems are in complying with the regulatory environment and take            
 corrective action.  As it is today, if results of self audits can             
 be discovered for regulatory purposes for penalty impositions, they           
 are afraid there are entirely too many businesses that don't want             
 to know what kind of problems they may have and if they don't know,           
 obviously corrective action is not being taken.                               
 SENATOR LEMAN asked if he had any specific concerns that he could             
 suggest changes for.  MR. HUTCHENS replied that the language in the           
 committee substitute addressed his concerns.                                  
 Number 420                                                                    
 JANICE ADAIR, Department of Environmental Conservation, testified             
 that they do agree with the concept behind this bill.  Conducting             
 self audits is an important way to insure compliance with                     
 environmental laws.  They appreciate the changes made to the                  
 committee substitute, but they still have some concerns.  The                 
 definition of environmental health and safety law has not been                
 clarified.  The more traditional environmental programs within DEC            
 such as air and water quality and contaminated sites they would               
 expect to fall within the scope of SB 199.  Less clear for their              
 agency are the impacts on the other programs within DEC that are              
 primarily public health related, such as seafood processing, other            
 kinds of food commodity processing, sanitation, public facilities,            
 and drinking water.                                                           
 How the audits are done and who may conduct them and the scope of             
 the audit remains problematic.  Environmental audits are still a              
 relatively new management tool undertaken only by the most                    
 sophisticated companies.  This is the reason behind the shop sweep            
 program they discussed with the committee in another hearing.                 
 Even though they recognize there are no generally accepted                    
 standards for audit, the department does not want to adopt                    
 regulations that dictate how audits ought to be done.  They believe           
 a more cooperative method is better to develop guidelines with a              
 particular industries or sectors.  This becomes even more critical            
 if there is a privilege or an immunity associated with the audit.             
 It has to be a creditable exercise.                                           
 The proposed cs allows the audit to be done by an employee even if            
 that employee has no ability to carry out the audit                           
 recommendations.  They think the audit needs to be done by someone            
 who knows what's going on; knows how the facility operates, how it            
 should operate, what the rules are, and someone who can or works              
 for someone who can commit the company to whatever corrective                 
 action may be necessary.                                                      
 The definition of audit report hasn't changed.  A particular                  
 concern is the inclusion of the corrected action plan as a part of            
 that report.  In order to receive the immunity a facility has to              
 voluntarily disclose any violations discovered as a part of the               
 audit.  To be considered voluntary, the disclosure has to be made             
 promptly, the violation must be corrected, and the facility must              
 cooperate with the agency in connection with an investigation of              
 the issues identified in the disclosure.  They interpret this to              
 mean working with the agency on a corrective action plan.  Under              
 the privileged section, they can't ask for the audit and the                  
 corrective action plan is a part of the audit.  It may disclosed to           
 them, but it remains confidential.  The report of the violation is            
 not confidential and they are concerned this will undercut the                
 public's confidence that the facility and the agency are dealing              
 with the corrections adequately.                                              
 Another important consideration is how the federal courts have                
 defined the critical self analysis privilege.  Ms. Sansone                    
 testified about the Reichhold Chemicals vs. Textron decision, but             
 one of the things they didn't talk about very much in the court's             
 ruling was the privilege applied only for retroactive analyses.  It           
 did not apply for prospective analyses of the company's actions.              
 The court was very clear that the evaluations of potential                    
 environmental risks of a proposed course of action made in advance            
 of the decision to adopt that course of action are not protected by           
 a privilege.                                                                  
 By the terms of the proposed legislation, as in the original, the             
 privilege is not limited to critical self analysis of past actions.           
 A facility operator could undertake an audit, find that a certain             
 course of action might result in environmental damage, go ahead and           
 take that course of action, yet benefit from the privilege.                   
 They believe that protecting criminal actions through a privilege             
 or through an immunity is bad public policy.  The bill seems to               
 recognize that criminal actions should not be protected in that it            
 says among other stipulations the immunity doesn't apply if the               
 person intentionally or knowingly committed or was responsible for            
 the action that lead to the violation.  Therefore, it seems to                
 recognize that those elements generally looked for in a criminal              
 case (a certain state of mind) would exclude the person from the              
 benefits of the immunity.  But that's contradicted in other                   
 sections of the bill.  In the first section that establishes the              
 privilege, it states the privilege applies in criminal proceedings.           
 Therefore, the audit would not be discoverable even if it could               
 demonstrate criminal intent.  The section that establishes the                
 immunity states that it is also available for criminal penalties.             
 It goes on to apparently exclude those elements looked for to                 
 decide criminal action.                                                       
 They also believe that establishing a privilege for environmental             
 audits is unnecessary.  All testimony has been such that an                   
 immunity would encourage people to disclose and they have concurred           
 in the past that immunity is not problematic for them, but they do            
 have problems with the privilege.  They currently, as policy, offer           
 people immunity from civil and administrative actions in certain              
 circumstances.  They think a privilege that creates a secret would            
 only serve to increase public skepticism of both the industries               
 operating in Alaska and how the agency deals with them.                       
 The question of whether or not the critical self analysis privilege           
 should apply is best decided by the courts which can take the                 
 specifics of each case into account.  A state established privilege           
 would do nothing to protect industries from potential action on the           
 part of federal agencies such as EPA.  In fact, it's probable that            
 privilege would lead to increased federal enforcement.                        
 EPA has already testified that this legislation could negatively              
 impact the State's ability to retain its delegation of federal                
 programs such as the Clean Air Program, drinking water, or solid              
 waste.  In order for the State to receive program delegation, we              
 have to have the ability to enforce the provisions of the program.            
 They understand EPA's concern is with the mandatory immunity                  
 provisions for all criminal, civil, and administrative actions.               
 Loosing delegation would result not only in the loss of funding for           
 the variety of programs delegated from EPA, but it would also                 
 result in increased federal enforcement and dual requirements, both           
 in state and federal rules that regulate the public.                          
 The legislation continues the idea that a disclosure is not                   
 voluntary if it is required solely by a specific provision of an              
 enforcement order or decree, but it does not mention leases,                  
 contracts, permits, statutes, or regulations.                                 
 There are different standards for harm determining if a closure is            
 voluntary as opposed to whether or not the immunity applies.  In              
 some cases you must find substantial harm and injury.  In other               
 cases you have to find substantial injury and harm.                           
 The provision on the circumvention by regulation being prohibited             
 they believe is unnecessary.  The Administrative Procedures Act               
 does state that a regulation adopted is not valid or affective                
 unless consistent with statute.                                               
 Number 283                                                                    
 STEVE WHITE, Assistant Attorney General, noted that Ms. Marie                 
 Sansone, Assistant Attorney General, had testified earlier                    
 regarding their concerns.                                                     
 MR. WHITE said that all the changes in the committee substitute               
 were positive ones.  Many of them addressed the comments made by              
 Ms. Sansone.  The Department of Law still has some concerns not               
 addressed by the committee substitute.  Those are set out in Ms.              
 Sansone's letter which he highlighted.  He said one of her                    
 remaining concerns with the bill is how the privilege would work in           
 a federal court action.  She describes that on page 3 of her memo.            
 On page 4 and 5 she discusses the wide breadth of the proposed                
 privileges.  As they are aware, the privilege would govern laws               
 administered by many agencies, not just DEC.  On page 5 and 6 she             
 talks about the conduct of the audits.  It's uncertain who in the             
 company would have the authority to initiate an audit and who would           
 have the authority, then, to initiate and oversee corrective                  
 They have a concern dealing with the definition of an audit report.           
 An audit report covers a lot of information and maybe some of the             
 information was not intended, but in any event, it would cover the            
 raw data, federal surveys and maps that might be discovered, as               
 well as the conclusions and observations from the audit.  It would            
 cover post-audit activities on not just the audit themselves, but             
 remedial activities and comments and reports and observations on              
 Most privileges are an escape valve, so to speak, because if                  
 privilege protects information from disclosure, quite often there             
 are provisions that allow information to be disclosed in case of              
 exceptional necessity or extraordinary hardship.  This relief valve           
 is not present for the privilege.                                             
 Page 7 through 9 discussed the breadth of the privilege which can             
 be asserted against the State or by the State or between any third            
 parties.  It can be applied in any kind of lawsuit no matter what             
 the issue is.  It obviously can be applied at all stages of                   
 criminal proceeding.  The bill creates an immunity that is very               
 Number 220                                                                    
 MARK WHEELER, Alaska Environmental Lobby, said they support efforts           
 by industry to comply with environmental regulations.  In order to            
 make SB 199 effective they believe it needs some changes.                     
 Environmental audits should not be privileged because it invites              
 secrecy instead of the openness need to build public trust in                 
 industry's ability to self police.  Furthermore a privilege would             
 invite defendants to claim as audit material evidence DEC needs to            
 establish a violation or determine who is responsible.                        
 Non-compliance which results in economic gain should not be                   
 tolerated.  DEC should seek to recover such economic gain.  While             
 filing for immunity a self audit must have a number of additional             
 requirements.  It must secure before notice of a citizen suit the             
 filing of a complaint by a third party and before the reporting of            
 a violation to DEC by a whistle blower employee.  The responsible             
 party must correct any violation discovered under the self audit              
 within 60 days, certify in writing the corrections have been made,            
 and take appropriate measures to remedy any environmental or human            
 harm due to the violation.                                                    
 A violation discovered by a self audit must not have presented an             
 imminent and substantial endangerment to public health or the                 
 environment.  The regulated entity must agree in writing to take              
 steps to prevent the recurrence of violation discovered under the             
 self audit and any violation discovered in the self audit must not            
 have occurred previously within the past three years at the same              
 SENATOR LEMAN noted that the bill does cover some of his concerns             
 and the committee would take his recommendations and make sure the            
 bill had been tightened adequately.                                           
 Number 212                                                                    
 NANCY WELLER, Division of Medical Assistance, said the Commissioner           
 sent them a letter asking for a possible exclusion from this bill.            
 The Division of Medical Assistance performs two functions which               
 guarantee the safety of all Alaskans when they are receiving health           
 care services in facilities in the State.  That's licensing of                
 health care facilities under State law and certifying health care             
 facilities which allows them to build the medicare or medicaid                
 program for services they receive.  The certification is performed            
 under a contract with the federal health care financing                       
 administration under a very broad and vague federal law.  They                
 don't have regulations that govern that function; they operate with           
 policy and procedure manuals that are issued by the medicaid                  
 They do encourage self audits of the health care facilities and               
 want them to correct their deficiencies before they are discovered            
 by the survey teams.  They work with them very carefully so they              
 know what they are looking for when they certify the facilities.              
 They think it's very important for the safety of all Alaskans and             
 especially for the expenditure of public funds that they don't give           
 any of the facilities the ability to hide anything from the survey            
 teams.  They have had some problems in the past with records being            
 SENATOR LEMAN asked what the requirements for reporting are now for           
 these facilities.  He said that would not be privileged                       
 information.  MS. WELLER answered that all information in the                 
 facilities is available to the surveyors.  Not only do they look at           
 the physical plant, they go through all of their records.  She said           
 they have no State regulations that cover this function because it            
 is done under contract with the Health Care Financing                         
 Administration and it's not done under federal regulations, but               
 under procedure manuals.                                                      
 Number 156                                                                    
 DAVID ROGERS, Council of Alaska Producers, supported the intent of            
 SB 199.  Unfortunately, he hadn't had time to review the committee            
 substitute, but would get back to the committee with any                      
 Number 143                                                                    
 GERON BRUCE, ADF&G, said they support the idea of encouraging                 
 voluntary compliance and disclosure.  Some ADF&G programs would be            
 adversely affected under SB 199.  Their program for protecting                
 anadromous fish streams which has been a law in the State since               
 statehood began has worked very effectively.  It has been their               
 philosophy to work up front with operators to make sure their plans           
 and projects are able to go forward on schedule while protecting              
 anadromous fish habitat.  They have a very high rate of issuance              
 for permits that are requested and they have a very low violation             
 rate.  They are concerned an unintended consequence of this                   
 legislation would be to encourage some people to withhold                     
 information they might otherwise disclose because they might                  
 perceive it would be in their interests to hold it back in case               
 they did have an audit done.  They are concerned it would dampen              
 the spirit of cooperation they actually have in implementing Title            
 16 right now.                                                                 
 The other concern they have deals with State hatcheries that are              
 contracted out to private non-profit regional aquaculture                     
 associations.  Those hatcheries, although they are operated by                
 private entities, are still State property.  If there should ever             
 come a time when one of those facilities wanted to return one of              
 those facilities to the State, if there was some activity they                
 conducted that was illegal or environmentally damaging, if they               
 returned one of those audits before they return the property, they            
 believe they could shift the cost of any cleanup to the State.                
 This concerns the Department.                                                 
 SENATOR LEMAN asked him if he thought that would be covered under             
 the fraudulent protection provision in the bill.  MR. BRUCE said he           
 thought it might be difficult to prove the person's intention for             
 performing the audit.  SENATOR LEMAN noted that the privilege                 
 applies only if they immediately do the fix.                                  
 SENATOR HALFORD said he didn't see how that worked because                    
 basically they are protected from their own information, but not              
 from their prior acts.                                                        
 SENATOR LEMAN said it was his intention to keep working on the bill           
 and asked interested parties to submit language that would fix                
 their concerns.                                                               

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