Legislature(1995 - 1996)

01/31/1996 03:40 PM RES

Audio Topic
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
txt
                   SENATE RESOURCES COMMITTEE                                  
                        January 31, 1996                                       
                           3:40 P.M.                                           
                                                                               
 MEMBERS PRESENT                                                               
                                                                               
 Senator Loren Leman, Chairman                                                 
 Senator Drue Pearce, Vice Chairman                                            
 Senator Steve Frank                                                           
 Senator Rick Halford                                                          
 Senator Robin Taylor                                                          
 Senator Georgianna Lincoln                                                    
                                                                               
  MEMBERS ABSENT                                                               
                                                                               
 Senator Lyman Hoffman                                                         
                                                                               
  COMMITTEE CALENDAR                                                           
                                                                               
 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."                                                 
                                                                               
  PREVIOUS SENATE COMMITTEE ACTION                                             
                                                                               
 SB 199 - No previous action to record.                                        
                                                                               
  WITNESS REGISTER                                                             
                                                                               
 Annette Kreitzer, Legislative Aide                                            
 Senator Loren Leman                                                           
 State Capitol                                                                 
 Juneau, AK 99801-1182                                                         
  POSITION STATEMENT:   Commented on SB 199.                                   
                                                                               
 John Riley, Director                                                          
 Litigation Support                                                            
 Texas Natural Resource Conservation Commission                                
  POSITION STATEMENT:   Commented on SB 199.                                   
                                                                               
 Jerry Davenport, Legal Counsel                                                
 MAPCO Petroleum                                                               
 1150 H & H Lane                                                               
 North Pole, AK 99705-7879                                                     
  POSITION STATEMENT:   Commented on SB 199.                                   
                                                                               
 Steve Torok, Senior Representative                                            
 U.S. EPA                                                                      
 Juneau, AK 99801                                                              
  POSITION STATEMENT:   Commented on SB 199.                                   
 Ron Sutcliffe, Assistant Attorney General                                     
 Department of Law                                                             
 310 K Street, Ste. 308                                                        
 Anchorage, AK 99501-2064                                                      
  POSITION STATEMENT:   Commented on SB 199.                                   
                                                                               
  ACTION NARRATIVE                                                             
                                                                               
  TAPE 96-9, SIDE A                                                            
                                                                               
 Number 001                                                                    
 SRES 1/31/96                                                                  
          SB 199 ENVIRONMENTAL & HEALTH/SAFETY AUDITS                         
                                                                              
  CHAIRMAN LEMAN  called the Senate Resources Committee meeting to             
 order at 3:40 p.m. and announced  SB 199  to be up for consideration.         
 He said that SB 199 was inspired by his attendance at an Energy               
 Council meeting where he found that 14 other states have already              
 done this and a number of others are contemplating it.                        
                                                                               
 Although the EPA originally resisted this idea, it is changing its            
 philosophy from the approach that government alone is responsible             
 for forcing people to act certain ways to encouraging people to act           
 in ways to meet our environmental laws.  He said many programs want           
 self-reporting, but they don't offer sufficient protection for                
 companies who voluntarily report a violation and then correct it.             
 SB 199 goes a long way to address that.                                       
                                                                               
 The key thought behind this bill is that government should view               
 business as a partner with a mutual interest of protecting our                
 environment.  In many cases, because of the complexities of our               
 environmental and health/safety laws, a lot of businesses may                 
 unwittingly be violating.  Correcting that behavior through a self-           
 audit approach before it causes a problem gets us closer to                   
 accomplishing our objectives.                                                 
                                                                               
 Number 80                                                                     
                                                                               
 ANNETTE KREITZER, Legislative Aide to Senator Leman, said she                 
 thought it was important to point out that "privileged materials"             
 as defined in this bill does not apply to documents,                          
 communications, reports, or information required by a regulatory              
 agency to be collected under a federal or state environmental                 
 health and safety law.  The privilege would not apply to                      
 information obtained by observation, sampling, or monitoring by a             
 regulatory agency or information obtained from a source not                   
 involved in the preparation of an environmental health and safety             
 audit report.                                                                 
                                                                               
 The voluntary disclosure and immunity clause on page six grants               
 limited immunity from administrative, civil, or criminal penalty              
 for a violation that's disclosed, if the violation is corrected               
 within a reasonable time.  The violation cannot have resulted in              
 injury to anyone at the site or in substantial off-site harm to               
 persons, property or the environment.  The immunity does not apply,           
 if the violation was knowingly committed, if people were hurt, or             
 if the violation was committed recklessly by any agent of the owner           
 or operator.  To receive immunity a facility that conducts a self-            
 audit has to give notice to the regulatory agency that it's going             
 to.  The notice has to include the facility or the portion of the             
 facility to be audited, the time the audit has to be done, and a              
 general scope of the audit.  A company cannot be in continuous                
 state of self-audit.  The audits must be complete no later than six           
 months from the start of the audit, unless the regulatory agency              
 agrees to an extension.                                                       
                                                                               
 Immunity does not apply if a person repeatedly or continuously                
 commits serious violations and does not attempt to bring the                  
 operation into compliance.                                                    
                                                                               
 MS. KREITZER then briefly reviewed for the committee the individual           
 sections.                                                                     
                                                                               
 Number 175                                                                    
                                                                               
 SENATOR TAYLOR asked for a practical example of how this would                
 apply.  MS. KREITZER replied that in other states, for example, if            
 you miss a reporting requirement, and you voluntarily disclose                
 that, you are not assessed a penalty.                                         
                                                                               
 SENATOR LEMAN noted that the whole concept of self-auditing started           
 around 1977, but it has become even more important since the Union            
 Carbide accident in Bohpal, India in 1984 where that company                  
 recognized that they were better off to go in and identify the                
 things that needed to be changed and made those changes.                      
                                                                               
 Number 209                                                                    
                                                                               
 JOHN RILEY, Director of Litigation, Texas Natural Resource                    
 Conservation Commission, said they passed similar legislation                 
 effective May 23, 1995.  He said this legislation is almost                   
 identical to theirs in spirit and in most of the provisions.                  
 Approximately 143 entities have availed themselves of the section             
 in law which anticipated applying for immunity should violations be           
 discovered.  They haven't necessarily sought the immunity, but they           
 have taken the first step of giving notice of intent.                         
                                                                               
 The types of entities are very different ranging from the                     
 University of Texas, municipalities, and industries.                          
                                                                               
 They have received 12 disclosures for immunity and a number of them           
 would not have been discovered through routine record-keeping.                
 None of the disclosures have been for any major contamination.                
 The law is being looked upon as a supplement to their traditional             
 enforcement mechanism, MR. RILEY said.                                        
                                                                               
 Workshops he has taught emphasize that the audit and their                    
 traditional enforcement are independent of each other.  If a                  
 violation is found simultaneously, immunity does not apply.  He               
 emphasized that the immunity is not from enforcement which mandates           
 certain remedial action or technical requirements.                            
                                                                               
 Number 323                                                                    
                                                                               
 SENATOR LEMAN asked if they could require short-term as well as               
 long-term remedial action.  MR. RILEY said that was right.                    
                                                                               
 SENATOR TAYLOR asked him for an example of how a violation would              
 have been treated before the law and how it is treated now.  MR.              
 RILEY explained there are some instances, like record-keeping,                
 where entities are much better at investigating themselves than the           
 agency is.                                                                    
                                                                               
 Number 375                                                                    
                                                                               
 SENATOR LINCOLN asked if he had seen a reduction in environmental             
 inspections they would normally go out on or was there a                      
 reprioritization of their resources that they now have with self              
 auditing.  MR. RILEY said he hadn't seen any, yet, but it is                  
 anticipated that at some point their inspections will not have to             
 focus on same entities with the same frequency that they do now.              
 This would happen if they are satisfied that they are getting a               
 sufficient return on their self-policing mechanism.                           
                                                                               
 Number 396                                                                    
                                                                               
 SENATOR LINCOLN asked if disclosures are made public.  MR. RILEY              
 clarified that they do not advertise disclosures, but it is proper            
 interpretation of their act that those disclosure letters are                 
 public information.                                                           
                                                                               
 SENATOR LINCOLN asked how their legislation affects the oil                   
 industry on self-auditing.  MR. RILEY said, generally speaking, he            
 hoped there would be benefit from industry's compliance status.               
 They don't have to fear that documents they generate in the process           
 would be used against them.                                                   
                                                                               
 Number 442                                                                    
                                                                               
 SENATOR HALFORD asked if he found an entity they were involved in             
 an enforcement action on had used the self-audit provisions in any            
 way as a shield.  MR. RILEY said the only shield their law offers             
 is a shield from a monetary penalty.                                          
                                                                               
 SENATOR HALFORD asked what was his reaction when they are dealing             
 with an entity they are about to start an investigation of, because           
 of information or complaints, and they get a notice of self-audit             
 at the same time.  MR. RILEY said they wouldn't stop a scheduled              
 inspection for a response to a complaint just because they received           
 a notice of intent to audit.  They would continue the inspection              
 and see if they meet at the end with the same information.  They              
 exercise their discretion if they determine a good effort is made.            
                                                                               
 SENATOR LEMAN said that the "privilege" applies to the audit                  
 itself, not to the underlying facts.                                          
                                                                               
 SENATOR TAYLOR said he was troubled by the possibility that the               
 opposite of the bill were true now and that an entity which is                
 self-reporting is subjecting themselves to the full penal aspects             
 of whatever the violation might have been, even though they are the           
 ones who reported it.  MR. RILEY said it is not clear whether self-           
 reporting would be given consideration for having made the                    
 disclosure.                                                                   
                                                                               
 SENATOR HALFORD said he was concerned with both directions.  In               
 "instructions" listed under "guidance" it says, "regional                     
 inspectors are cautioned not to schedule inspection based solely              
 upon the receipt of such a notice."  (Senator Halford was referring           
 to a TNRCC guidance document available from Senate Resources                  
 Staff.)                                                                       
                                                                               
 Number 520                                                                    
                                                                               
 JERRY DAVENPORT, legal counsel for MAPCO Petroleum, said he has had           
 the opportunity to work in Oklahoma with the state agency                     
 developing a penalty policy which has elements similar to the                 
 immunity provisions in SB 199.  Prior to this he worked as the head           
 of the environmental law section of Nature Ways Co. in Texas and              
 was very involved in doing audits.                                            
                                                                               
 MR. DAVENPORT explained that typically a company performs an audit,           
 because the law and regulations in the environmental area are                 
 extremely complex.  Getting the information to the employee to try            
 to comply with the regulations on a facility level basis is a very            
 difficult process.  They have other day-to-day concerns than                  
 reading the 13,000 pages of federal regulations.  Audits are a key            
 tool in determining a facility is complying with all the                      
 regulations and helping it to improve its management of the                   
 environmental area, as well as correcting any specific violation.             
                                                                               
 Before a company adopts the position where it will actively go                
 forward and audit its facilities and try to get in compliance,                
 rather than waiting for a regulator to come by and inspect a                  
 facility, a number of questions come up.  One is if they disclose             
 the audits, will they be penalized for it, and will the audits be             
 used against them by people who oppose their activities.                      
                                                                               
 He said in most cases if an inspection finds compliance problems,             
 most agencies will work with companies and recognize that voluntary           
 efforts are key to maintaining a high level of compliance within a            
 particular state.  Of course, this isn't always the case.  Penalty            
 policies in some states discourage the types of activities that               
 should be encouraged to maintain a high level of compliance.  In              
 all honesty, when they are asked by some companies if they will be            
 penalized for inadvertent violation, they have to say that it could           
 happen, that it could be severe; but, it is far better for a                  
 company to seek out its own problems and solve them rather than to            
 wait for the state to find them.                                              
                                                                               
 SB 199, MR. DAVENPORT thought, crafted a very careful balance                 
 between the carrot for encouraging voluntary audits and self-                 
 evaluation and penalties for violations.                                      
                                                                               
  TAPE 96-9, SIDE B                                                            
                                                                               
 Number 590                                                                    
                                                                               
 MR. DAVENPORT clarified that the areas identified under audit are             
 the only areas covered.  He informed the committee that Oklahoma              
 adopted a similar policy.  In Oklahoma's policy, the term "company"           
 was used in order to mean those typically covered.  A large Air               
 Force base was the first to take advantage of the penalty policy.             
 He said that the policy encouraged an early review from the                   
 regulating community.  In conclusion, Mr. Davenport stated that the           
 audit is a key tool in order for companies and regulated entities             
 to comply with the complicated laws and regulations they face.                
                                                                               
 CHAIRMAN LEMAN informed Mr. Davenport and Mr. Riley that testimony            
 would be taken from the Department of Law who have expressed                  
 concern regarding the application of the audit privilege.  He asked           
 them to stay on line in order to answer possible questions.  Both             
 Mr. Davenport and Mr. Riley agreed.                                           
                                                                               
 Number 565                                                                    
                                                                               
 [THE TESTIMONY OF JANICE ADAIR IS TRANSCRIBED VERBATIM.]                      
                                                                               
 For the record, my name is JANICE ADAIR and I'm here representing             
 DEC today.  We certainly agree that an objective, systematic and              
 periodic review of a facilities operation is a very good idea.                
 It's one of the best things the company can do to help comply with            
 state and federal environmental laws.  DEC's normal operating                 
 procedure is to not take any enforcement action where things are              
 reported to us by a company where they have found a violation.  We            
 have never taken enforcement action.  I think it's also important             
 to recognize that DEC does not have administrative penalties and we           
 have very limited civil penalties; and Marie Sansone from the                 
 Department of Law will talk about that more.  I did bring a copy of           
 a project that we're trying to do here with car shops, auto shops             
 which will provide them with technical assistance on doing an audit           
 because that is one of the problems that small companies have; is             
 just even how to do one.  There are no standards.  And then also              
 provide them with some immunity if violations are found provided              
 they are quickly corrected.                                                   
                                                                               
 Number 545                                                                    
                                                                               
 We do have concerns with this piece of legislation, however.  The             
 privilege that's created creates a secret.  It withholds                      
 information from the public and from the regulatory agency. And it            
 has the real potential to increase public suspicion about the                 
 activities and motivations of the company.  We believe that this              
 would actually decrease cooperation.  We have found that approaches           
 that are more open and inclusive are much more effective at                   
 building good working relationships between the industry and                  
 public, between the industry and the agency, and between the agency           
 and the public.  So that everyone understands what it is that is              
 going on.                                                                     
                                                                               
 As we read the bill, the audit report which is a very comprehensive           
 definition and includes the corrective action plan that a company             
 would create to correct any violations that they had discovered               
 would be privileged and would not be subject to any kind of                   
 disclosure.  But the audit report, the documents that make up that            
 audit report, do not have to be labelled in any way.  And yet if an           
 employee, a State employee, inadvertently discloses that audit                
 report they are subject to criminal sanctions, a Class B                      
 misdemeanor.  The department could ask a court to privately review            
 the audit and lift the privilege on any portion of it.  But we'd              
 first be able to prove fraud or that the audit would show non-                
 compliance.  And we don't know how we would prove that if we had              
 not ever seen the documents that make up the audit report.  If                
 there's reasonable cause to believe a criminal offense has                    
 occurred, the court can allow a State AG to review the audit.  But            
 any information that AG receives from his or her review -                     
 apparently, even if it leads to a lifting of the privilege - can't            
 be used to prosecute the alleged criminal.  If they do, if the                
 agency were to make the decision to go ahead with a criminal                  
 prosecution, we believe that we'd have to bring in a new attorney             
 probably, new inspectors from the department.  Because we have to             
 prove that any information we use didn't come from the review of              
 that audit.  So, practically speaking, we don't think that the                
 audit privilege would ever be lifted.                                         
                                                                               
 Information is, as was pointed out, that's required by law to be              
 provided to the department isn't subject to the dis -- to the                 
 privilege.  But we're not certain if that includes items that are             
 in the permits; where we have a permit stipulation that might make            
 a regulation more specific to a given facility.  Nor do we believe            
 it would include any contracts or leases or compliance orders by              
 consent which is a very common agreement that DEC reaches with a              
 lot of the regulated community.  The owner or operator can                    
 voluntarily disclose to us any of the violations that their audit             
 identifies and receive immunity from criminal, civil, or                      
 administrative enforcement actions providing they give us notice.             
 But as we read this, the disclosure is public information but the             
 actions that they take to correct the violation are not.  They are            
 covered, they're within the definition of the audit report and                
 would be privileged.  So, you would have documentation out there              
 that a violation had been discovered through the disclosure letter,           
 but whatever action the company chose to take to correct it would             
 be - would remain under the audit privilege.  We see that as a                
 potential problem.                                                            
                                                                               
 There are also stipulations about when the disclosure is not                  
 voluntary.  If it's by enforcement or decree, the immunity doesn't            
 apply if the violation was done intentionally.  Here, there is also           
 some standard on injury or harm, but they're different standards.             
 Some it is substantial injury, some is just injury, there's other             
 references to substantial harm and then other references to just              
 harm.  So, we're not really certain what has to be proven at what             
 point and time for the immunity.  The court can find the immunity             
 doesn't apply if violations are serious, repeated, or continuous,             
 and that the person hasn't taken any actions to correct the                   
 violations such that they've created a pattern.  And that a pattern           
 is defined as serious violations that are separate and distinct at            
 the same facility.  So you have this concept of these continuous              
 violations that then somehow become separate and distinct at the              
 same facility.  And we do have, there are operators in this state             
 that will move from facility to facility and create the same                  
 violations in different facilities.  So you would have, those fly-            
 by-night operators that could potentially receive immunity under              
 this bill.                                                                    
                                                                               
 As I said in the beginning, we do support environmental audits.  We           
 think that they're very good and it's one of the reasons that we're           
 doing this, this pit stop program.  And if it is as successful as             
 other states have been with it, we plan to expand it to others.               
 But we do have some concerns about the way this bill is drafted.              
                                                                               
 CHAIRMAN LEMAN summarized Ms. Adair's testimony to mean that she              
 agreed with the legislation conceptually, but some of the language            
 needs to be tightened in order to agree on the concept of the bill.           
 JANICE ADAIR:  We think that our current policy is working very               
 well.  So, I think as far as that goes conceptually we are in                 
 agreement.  CHAIRMAN LEMAN asked Ms. Adair if she would be willing            
 to work with the committee in order to ensure that the language of            
 the bill is consistent with DEC policy and what the committee wants           
 to accomplish.  JANICE ADAIR:  If we can do that, we certainly                
 will--yes.                                                                    
                                                                               
 Number 489                                                                    
                                                                               
 SENATOR TAYLOR pointed out that one aspect of SB 199 to which Ms.             
 Adair objected was that a DEC employee could be prosecuted if they            
 leaked the information to someone.  Are they prosecuted under the             
 current policy?                                                               
                                                                               
 JANICE ADAIR:  Through the Chair, Senator Taylor, no.  We have the            
 presumption that our files are public information.  Someone can               
 come in and look in our files.  If we have confidential information           
 in our files, what we endeavor to do is mark those and keep them in           
 a different location.  Since this document isn't required to be               
 labelled and it is a voluminous definition, it can include a lot of           
 different things and there is no requirement that it be labelled in           
 any way.  So, someone could give it to us - a secretary being very            
 efficient, not knowing what it is puts it in the facility file and            
 a few days later someone comes in to look at that facility file and           
 there is the information.  And it has then been disclosed, it is              
 inadvertent.  But none-the-less, it has been disclosed.                       
                                                                               
 SENATOR TAYLOR said that the industry should be penalized for its             
 inadvertent mistakes, but the agency, DEC, and its employees should           
 not.  JANICE ADAIR:  Mr. Chairman, Senator Taylor, confidential               
 documents should be labelled confidential.                                    
                                                                               
 SENATOR TAYLOR indicated that DEC should be able to take care of              
 that.  If an audit were received, isn't there a certain protocol.             
 JANICE ADAIR:  If we knew that's what it was.  We may not know what           
 it is.  SENATOR TAYLOR pondered how an employee of DEC could be               
 dealt with if the employee did not like a decision made by DEC and            
 the employee makes calls to various federal agencies.  How do we              
 get to that employee if the process specified in SB 199 is                    
 objectional?  JANICE ADAIR:  Mr. Chairman, Senator Taylor, I don't            
 know that you will ever be able to take care of disgruntled                   
 employees in any employment situation.  But, confidential documents           
 that a company expects to be kept confidential should be submitted            
 in that fashion.  The definition of audit in this bill is so broad            
 that we could receive information that was not realized to be part            
 of an audit report.  It would just simply go on the file and be               
 available for public review.  There was no intent, it's a very                
 different situation than someone who purposely takes it and                   
 purposely discloses it; who intentionally does that.  It is an                
 inadvertent mistake that causes the document to be disclosed.                 
                                                                               
 SENATOR TAYLOR asked Ms. Adair if she would object to the penal               
 aspect of the bill if the bill specified that confidential                    
 documents be labelled as such.  JANICE ADAIR:  Mr. Chairman,                  
 Senator Taylor, if that was the only thing that was changed in the            
 bill, we would still have concerns with the legislation.  SENATOR             
 TAYLOR asked if Ms. Adair would still have concern with that one              
 provision.  JANICE ADAIR:  We would still have concerns with that             
 provision.                                                                    
                                                                               
 SENATOR TAYLOR did not understand why Ms. Adair would have problems           
 with penalizing an employee who intentional leaked information from           
 properly labelled documents.  JANICE ADAIR:  That particular                  
 section doesn't require that the employee intentionally release it.           
 It just simply says, if it's released.                                        
                                                                               
 CHAIRMAN LEMAN noted that there is a section that specifies that if           
 the document is not clearly labelled then it would be an                      
 affirmative defense.  Chairman Leman agreed with Senator Taylor and           
 Senator Halford.  He was interested in hearing from the people in             
 Texas about this issue.  Chairman Leman indicated that placing the            
 burden on those submitting the audit to label it would be agreeable           
 with him.  JOHN RILEY said that they decline to receive information           
 that is part of an environmental audit.  MR. RILEY explained that             
 their legislation requires that before accepting a document, the              
 department would enter into a confidentiality agreement.  The                 
 confidentiality agreement obligates the submitter to label the                
 documents.  In practice, the submitter must label their documents,            
 but this is not provided for in the legislation.                              
                                                                               
 Number 402                                                                    
                                                                               
 CHAIRMAN LEMAN agreed with that method.                                       
                                                                               
 SENATOR TAYLOR expressed concern that this legislation would bind             
 the agencies within the State while having no impact on any federal           
 agency to whom the same document could be leaked.  He pointed out             
 that he and his office staff receive information of a proprietary             
 nature involving various oil matters in Alaska.  He emphasized that           
 he and his employees fall under that sanction; if anyone discloses            
 any of that information, they could be sent to jail.  Why should              
 the standard be different for DEC?                                            
                                                                               
 CHAIRMAN LEMAN noted that there is a Congressional bill which would           
 change federal law to do this.                                                
                                                                               
 SENATOR HALFORD suggested that if the purpose is immunity, then the           
 documents could be sent to DEC sealed and remain so.  There is no             
 reason to ever open those documents at DEC.  Documents are at DEC             
 in order that the entity can prove that it is working on it.  The             
 only time proof would be needed would be in the case of a                     
 violation.  He stated that perhaps, the best manner in which to               
 deal with this would be by DEC receiving the sealed documents so              
 that the entity can prove they sent the documents if need be.                 
                                                                               
 Number  369                                                                   
                                                                               
 [THE TESTIMONY OF MARIE SANSONE IS TRANSCRIBED VERBATIM.]                     
                                                                               
 My name is MARIE SANSONE, and I've reviewed this bill from                    
 primarily the standpoint of its application in civil and                      
 administrative proceedings.  My remarks today are of two                      
 categories:  some are just background information and the other               
 category would be to raise what we view are very serious problems             
 and concerns with the bill.  As you noted in your remarks, the                
 audit privilege concept is based on an evidentiary privilege that             
 was first recognized in the early '70s in a case Redice vs. Doctors           
 Hospital.  In that case, a patient had died.  After the death of              
 the patient, there was a medical peer review group.  The patient's            
 family sought the communications by the medical peer review group             
 to prove medical malpractice.  In 1970, the D.C. Circuit Court of             
 Appeals recognized a concept that there should be a privilege for             
 self-critical analysis or self-evaluative analysis where the                  
 purpose of that analysis is to prevent future malpractice or future           
 bad conduct.  That concept spread and nearly all the state                    
 legislatures adopted such a statute and we have one in this State.            
 So we do have a type of limited audit privilege, if you will, in AS           
 18.23.030.  And it may be worth looking at that statute for                   
 language or concepts related.  It's 18.23.030.  After that case,              
 several courts went on to extend the concept of this privilege to             
 other areas of law.  Some courts completely rejected the concept              
 even in the area of medical peer review.  Other courts modified it.           
 In general, there has never really been among the courts any                  
 consensus on what are the proper elements to assert a privilege or            
 to overcome a privilege.  The courts have, for the most part,                 
 rejected the privilege in environmental cases.  There is one recent           
 exception and that is the Reichhold case out of the Federal                   
 District Court in Florida.  And I've brought copies of that                   
 decision with me, because it does set out conditions and criteria             
 that the court considered important in the environmental fields.              
 And that case happened to be a private case among private parties             
 for contribution over a contaminated site.  Alaska State law,                 
 except for the medical peer review, does not have an audit                    
 privilege.  We do have the attorney-client privilege, the work-               
 product privilege, and the evidentiary rule that against--that                
 evidence of subsequent, remedial measures are inadmissible.  And              
 these evidentiary rules are used to protect audits, at least in               
 part.  They are available as a mechanism.  There's also a mechanism           
 in the rules of civil procedure for parties to obtain protective              
 orders against disclosure.  So, I wanted to leave the committee               
 with the impression that we are not without mechanisms to protect             
 information.                                                                  
                                                                               
 The federal law that would apply to Alaska - there is federal law             
 on the privilege and I've brought that case with me too.  In 1992,            
 the Ninth Circuit Dowling vs. American Hawaii Cruises held that               
 there would be no privilege of self-critical analysis for internal            
 corporate reviews of matters related to safety concerns.  The Ninth           
 Circuit didn't say that would never happen, but the conditions they           
 establish in their decision do set up a hurdle that would have to             
 be overcome.  Interestingly, the Reichhold case which recognized              
 the privilege relies on Dowling.  So, the Reichhold court thought             
 it could be done and I think those cases are very worthwhile to               
 look at just in terms of requirements and exceptions that they set            
 out.  If the bill were to pass in its present form, the federal law           
 of evidence would apply to any federal cases; but the State                   
 legislation would apply to State cases.  That could create some odd           
 situations as we just mentioned a few minutes ago in the hearing.             
                                                                               
 The audit privilege legislation for environmental cases, like what            
 Texas has - the concept for that started to develop in the early              
 '90s in Oregon and Colorado.  Similar bills have been introduced in           
 other states, fourteen have passed and a number are pending, some             
 have failed, some have been vetoed, and there are also federal                
 bills.  I've provided the committee staff with a notebook that                
 contains testimony and background on many of these bills both by              
 industry and by enforcement agencies for and against the bills.               
 And that would give anyone who wants to take a look at it an idea             
 of the scope of the discussion.                                               
                                                                               
 Number 294                                                                    
                                                                               
 Virtually no one has ever disagreed with the concept that voluntary           
 audits should be encouraged.  That under appropriate circumstances,           
 there should be either penalty reductions, good conduct credits,              
 whatever, perhaps no enforcement as a break for a company that's              
 acting in good faith and actually reviewing its behavior and making           
 its corrections.  But once you get past that initial agreement over           
 the concepts and policies, there is or has been a lot of debate.              
 And these bills have had vigorous and almost unanimous opposition             
 from the federal and state enforcement agencies.  The United                  
 States' Attorney General for the Department of Justice has opposed            
 the privilege or an evidentiary privilege established in                      
 legislation.  The EPA in its new audit policy, while it creates a             
 policy that is designed to encourage audits and offer breaks and              
 incentives for audits opposes state legislation creating the                  
 evidentiary privilege.  The National District Attorney's                      
 Association has vigorously opposed this type of legislation and               
 many state attorneys general have also opposed this type of                   
 legislation.  Their concerns have been that the bill is actually              
 not necessary to encourage compliance.  That unless they're                   
 carefully drafted they'll create safe harbors for polluters,                  
 promote fraud, that they'll divest state enforcement officials of             
 their discretion, invest that discretion in judges who will not be            
 familiar with the case or the evidence.  That the secrecy the bill            
 could create if it's drafted very broadly would create mistrust of            
 the enforcement agencies, regulatory agencies, and the very                   
 corporation it's intended to benefit.  The corporations are                   
 conducting audits to avoid accidents and liability and that the               
 fear of a disclosure requirement would not inhibit those audits.              
 In the jurisdictions where this type of legislation has been                  
 debated, some industries have vigorously supported the bills.                 
 Other industries have supported the concept of incentives, but not            
 necessarily through a statutory privilege or immunity.  In any                
 event, there's been a huge volume of testimony and that can                   
 probably tell you I've given it at least five inches worth.  And I            
 don't intend to cover all of that.  In states where its been                  
 debated, it has produced a very adversarial bill.  These bills                
 contain within their framework, this adversarial relationship is              
 built right into the bill.  And I think if you carefully go through           
 a lot of the exceptions and provisions in the Texas bill, you will            
 see that.  One provision will be very broad, the next provision               
 will kind of chisel away, another provision will be broad, the next           
 will chisel away.  So, that adversarial nature is built right into            
 the bill.                                                                     
                                                                               
 Number 239                                                                    
                                                                               
 With that background, I want to emphasize a few points.  We're very           
 concerned with the breadth of the bill.  The definition of                    
 environmental or health and safety law is very broad.  It is not              
 just DEC and OSHA; there are environmental bills, environmental               
 laws vested in many state agencies and they are scattered                     
 throughout the entire Alaska statutes.  DNR has environmental                 
 enforcement, regulatory authority.  The Alaska Oil & Gas                      
 Conservation Commission regulates oil and gas drilling to prevent             
 land and water contamination.  And they have, they are participants           
 in the EPA's underground injection control program.  The joint                
 pipeline office regulates the Trans-Alaska Pipeline for                       
 environmental compliance and safety.  Department of Fish and Game             
 has what could be construed as environmental laws.  The Department            
 of Public Safety regulates hazardous materials.  And I probably               
 omitted many agencies and many environmental laws.  So that would             
 be one of our concerns: that it would be improper and incorrect to            
 view this bill as just dealing with DEC enforcement.  If that were            
 the intent, it would need to be more narrowly restricted.  Or                 
 perhaps, that is not the intent, but I think it's important to                
 understand that.  Similarly, there are many laws that could be                
 considered occupational and health and safety laws not just OSHA.             
 But worker's compensation would be classified as an occupational              
 and health and safety law.  The Department of Health and Social               
 Services regulates and licenses health facilities and operations,             
 not just for patient care type regulations.  But in many cases, for           
 occupational, compliance with occupational laws.  Professional and            
 occupational licenses are another area that could be construed as             
 a health and safety law.  So, again if the intent is that this                
 would just cover OSHA enforcement, the bill as its drafted does not           
 do that.                                                                      
                                                                               
 Number 213                                                                    
                                                                               
 We're also concerned with the definition of environmental or health           
 or safety audits.  These audits can be conducted by an owner or               
 operator, an employee, an independent contractor.  We don't have a            
 concern so much as to who conducts an audit; but the critical issue           
 in granting immunity or granting a privilege, giving someone a                
 break would be who had the authority to initiate that audit, who              
 had the authority to commit the funds and undertake the corrective            
 action.  As the bill is drafted, anyone in a large corporation in             
 any division could initiate an audit.  Maybe they would have                  
 authority to undertake the correction, maybe they wouldn't.  But              
 that is very simply too broad when we're going to give sweeping               
 privileges and immunities.  As a practical matter, when the                   
 attorney general's office includes an audit requirement in a                  
 settlement agreement one of the criteria that we would look at is:            
 does the person or the entity have the wherewithal to actually                
 conduct and complete the audit and undertake the corrections.  That           
 would be very important to us to whether or not they should be                
 entitled to any kind of break on whether or not we're going to                
 bring a case, or whether or not we would offset any civil                     
 assessment.  Related to that, but not the same concern, is there              
 are no standards for audits.  There's no licensing for audits and             
 there's a variety of audits.  So that combined with the question of           
 who can undertake one creates potential for abuse we feel.                    
                                                                               
 Number 184                                                                    
                                                                               
 Perhaps the most troubling aspect is the definition of audit report           
 in the bill.  And the bill is drafted so broadly that any document            
 or communication of any nature whatsoever that is generated before,           
 during and after the audit, if it can somehow relate to the audit             
 and the resulting corrective actions is classified as the audit               
 report.  In the law of evidence there is nothing, not even the                
 attorney-client privilege that would even approach a privilege of             
 that scope.   We don't believe there's justification for creating             
 a privilege for the raw data that might be collected in the audit:            
 the photos, the maps, and so forth.  I find it very hard to see               
 that there can be a justification for that.  We believe there's no            
 justification for the privilege to apply to the implementation plan           
 or the corrective tracking system.  There'd be no point to gather             
 the information and chart a course of corrective action and then              
 keep that information confidential, or at least it doesn't seem               
 like there'd be any point to keeping it confidential.  Because if             
 you were undertaking the corrective action that frequently is to              
 provide employee training, obtain appropriate permits.  It just               
 doesn't seem to make sense.                                                   
                                                                               
 The case law that I've provided you, the Dowling and the Reichhold            
 case, recognize that there's no justification for keeping a                   
 privilege -- keeping a report confidential for post-audit conduct.            
 So, if a party conducts an audit, the audit finds deficiencies and            
 recommends corrective actions and then lo and behold those aren't             
 undertaken, there's an accident, there's injury; that report should           
 not be confidential as to that post-accident, that post-audit                 
 conduct.  And that is a principle that is recognized in the federal           
 courts that have recognized an audit privilege.  Finally, along               
 with the audit report definition most courts carve out exceptions             
 for evidence where there's exceptional necessity or extraordinary             
 hardship.  And those circumstances might be that a witness died or            
 a witness is impossible to locate who was interviewed as part of              
 the audit, that the evidence is destroyed or missing, it is                   
 impossible to otherwise obtain the evidence.  That kind of                    
 exception should be built into those provisions.                              
                                                                               
 We're very concerned with the marking requirement.  The report is             
 supposed to be marked, but there are no consequences to not marking           
 them.  There are all kinds of materials that could be part of the             
 audit report that would look no different from any other document             
 that might be submitted to DEC or to a regulatory agency.  Under              
 the bill, anyone can mark a document.  Anyone can mark a document             
 at any time even years after an audit is completed.  For the                  
 immunity provisions to kick in, there has to be advance notice to             
 the regulatory agency of the audit but not for the privilege.  So,            
 apart from the immunity, there's no real starting point to when you           
 can start thinking about the audit and start marking your materials           
 confidential.  I guess the point, the conclusion to that is that if           
 the legislature concludes there's policy reasons that would support           
 creating an evidentiary and disclosure privilege, those policy                
 reasons we do not believe would support going this far.  We just              
 think its too broad, that it will invite fraud and abuse.  And that           
 we'll be keeping information secret that's actually vital to                  
 protecting public health and safety.                                          
                                                                               
 Now with respect to the privilege, and I believe this might be a              
 conflict between the way the bill is drafted and the way its being            
 implemented in Texas, but if you look at the very first paragraph             
 of the bill - that privilege applies to any type of litigation, it            
 can, whether it's civil, criminal or administrative.  It could be             
 asserted by public or private parties, it could be asserted when              
 the State is bringing a case.  It wouldn't necessarily have to be             
 an enforcement case.  It could be asserted if the State has been              
 sued and we're trying to obtain discovery of an audit report in our           
 defense.  And it could be asserted between private parties and                
 there's quite a lot of case law where private parties argue about             
 this in terms of contribution over contaminated sites or insurance.           
 So, it is an issue that comes up in private litigation.  The way              
 the bill is drafted, again I don't know if this the intent or not,            
 but it applies to any type of dispute:  negligence, intentional               
 torts, contract problems, property problems.  The State has leases.           
 We have property management contracts.  DOT is concerned that it              
 would come up in condemnation cases.  The University and Mental               
 Health Lands Trust manage property and this could be asserted in              
 any dispute involving those issues.  Now, again that may not be the           
 intent, but that is the effect of the language.  Construction law             
 is another area where there could be serious consequences.  The               
 State either contracts or gives grants to municipalities for large            
 public works projects.  Often there have to be audits in connection           
 with these projects.  As far as DEC goes, DEC brings injunctions on           
 occasion to stop continuing violations and civil assessment and               
 cost recovery statutes; it could come up in any of these contexts.            
 It would apply to any type of remedy, not just penalties.  It could           
 be damages.  It obviously applies to criminal proceedings.  In                
 administrative proceedings, that those could be conceivably                   
 enforcement.  There are other administrative proceedings such as              
 revocations of licenses where professionals or facilities have                
 fallen far below in the accepted standard of conduct.  We sometimes           
 litigate over lease terminations in administrative context because            
 the lessees are not maintaining the property.  Contract debarment             
 is another type of administrative proceeding.  In other words, and            
 I probably haven't mentioned all the types of proceeding, but the             
 State participates in many proceedings.  And the privilege applies            
 to all of those.  So the potential for the impact of this bill is             
 enormous.  To create a new privilege that could be invoked in so              
 many different types of proceedings, would take very careful study            
 and review.  The privileges that are in the law that have been in             
 effect, those privileges evolved over a very long periods of time             
 and were refined through the courts and they're very narrow.                  
 Civil, for a broad privilege of this nature, it is very contrary to           
 our civil discovery of practice and policy, the laws of civil                 
 discovery.  We have very broad discovery to promote resolution of             
 disputes and promote a level playing field.  Parties in civil                 
 litigation are required to disclose any matters that are relevant             
 to the subject matter of the dispute.  And that's to encourage                
 settlement and proper resolution of the dispute.  When a privilege            
 is asserted under the civil rules, or if a party desires a                    
 protective order, there are mechanisms in effect now to achieve               
 that.                                                                         
                                                                               
 The third point I want to make - we feel that the provisions in               
 many respects are cumbersome, confusing, and would create                     
 substantive problems.  We feel there are a number of drafting                 
 problems that have evolved here just from picking up the bill and             
 trying to impose it on Alaska law.  For example, the bill provides            
 the person asserting the privilege has a burden of proving it                 
 applies.  Well, with the definitions this broad, a party could                
 simply assert and prove just about anything.  That is the scope of            
 the definitions.  The burden then shifts to the person seeking                
 discovery or to the State to show that the documents fall in a                
 category that's not protected, or that there's fraud, or that                 
 there's been non-compliance.                                                  
                                                                               
 TAPE 96-10, SIDE A                                                            
 Number 001                                                                    
                                                                               
 But as this bill is drafted, it would be logically impossible to do           
 that.                                                                         
                                                                               
 The second problem we see there, again, is the post-report conduct            
 should not be subject to the privilege.  That principle is picked             
 up in our medical peer review law and our Reichhold case.                     
                                                                               
 We're concerned with the category of nonprivileged material.  As              
 drafted, it refers to materials collected under the law.  It                  
 doesn't mention permits or other authorizations.  They frequently             
 contain detailed requirements.  It doesn't reference, although                
 possibly there's later provisions that would cover it, judicial and           
 administrative orders.  But, significantly, this section does not             
 provide for public contracts, public grants, to require audits or             
 require this information.  While it's true, you can still agree               
 under this bill to exchange that information, I think that the                
 provisions are such that we would lose quite a bit of bargaining              
 leverage to do that.                                                          
                                                                               
 With respect to immunity, Ron Sutcliffe will discuss that.  I do              
 want to point out a few things.  The bill provides immunity for               
 administrative penalties.  DEC does not have any administrative               
 penalty authority.  Therefore, the bill would not have any effect             
 on DEC in this regard.  Other agencies do have administrative                 
 penalty authority and it would affect them.  DEC does not have                
 civil penalty authority, except for air quality and hazardous                 
 waste.  In all other areas of DEC environmental regulation there is           
 no civil penalty authority.  The civil assessments are required to            
 be compensatory for damages and costs and remedial.                           
                                                                               
 Another concern that arises here is that if you look throughout the           
 Alaska statutes, there's penalty provisions throughout them.  Some            
 are detailed.  Some are simple.  They are all very different.  The            
 bill as drafted applies to all of those.  So, its exact impact                
 would not be known without very careful study.                                
                                                                               
 As a fifth point, we are very concerned with the provisions that              
 impact State employees.  In recognizing that there are concerns               
 with unauthorized disclosure information, there are still many                
 provisions in here that cast State employees and State agencies in            
 a very negative light and would actually have a very chilling                 
 affect on their ability to do their job.  In a similar reverse                
 image, many of the exceptions for the corporations cast                       
 corporations in a very adverse light and are designed to ferret-out           
 corporations that are bad actors or midnight dumpers.  These types            
 of provisions in the bill set up very adversarial tensions that do            
 not foster good audits.  Where we have required audits in                     
 environmental enforcements and where they have worked, there's been           
 a great deal of cooperation between the agency and the entity.  The           
 agencies have been involved in designing the audit, have monitored            
 the conduct of the audit, have reviewed the conclusions.   I do               
 have several examples of that.                                                
                                                                               
 A couple of years ago, we had a very successful compliance sort-of            
 by consent with Kake Tribal Corporation.  They had approximately              
 10-years of violation.  Previous enforcement efforts had failed.              
 There had been two criminal convictions, one probation revocation,            
 and numerous notices of violation, but did not produce any results.           
 They had multiple violations in every area, solid waste, hazardous            
 waste, water quality, drinking water, sewage, all around a great              
 deal of problems.  The first step of the civil enforcement action             
 was to require and agree with Kake on conducting, we called it an             
 assessment, but it was actually an audit.  They did a very thorough           
 job.  They reported to us violations we were not aware of, that               
 were very serious.                                                            
                                                                               
 As part of the settlement, they received a very significant                   
 reduction in their civil assessment for this.  They also undertook            
 projects that went way beyond any legal requirements.                         
                                                                               
 Another example of where audits are very successful in the State is           
 the joint pipeline office.  The joint pipeline office works to                
 audit the pipeline and they have received a national award for the            
 audit structure they use.  They have indicated in a communication             
 they have detected 5,000 violations through audits.  That's a                 
 significant number of violations of health and safety laws.  Their            
 response was to correct that and no penalties have been assessed.             
                                                                               
 These are the models we would want to use in crafting audit policy.           
 Audits that do not create and foster adversarial relationships and            
 that actually do produce compliance and positive relationships                
 between the agencies and the regulating community.                            
                                                                               
 I'll be happy to answer any questions.                                        
                                                                               
 Number 127                                                                    
                                                                               
 SENATOR HALFORD said it seemed that they could deal with this whole           
 issue if we just codified the federal privilege in State law and              
 applied it.                                                                   
                                                                               
 MS. SANSONE said that would certainly overcome a lot of our                   
 objections and it would not set up a state/federal conflict in the            
 evidence law.                                                                 
                                                                               
 SENATOR LINCOLN asked if there was anything in the bill she did               
 like and had she attempted to work it out with the sponsor of the             
 bill.  MS. SANSONE replied that they had discussed approaches that            
 would preserve the intent that would work.  They haven't been able            
 to explore those in depth, yet.  They like the concept of audits              
 from the civil standpoint.  They have no objections to giving                 
 people offsets or reductions, or working with them to give them               
 breaks for audits.  We think that's appropriate.  I think the                 
 immunity section, if you try to apply the immunities, there's many            
 exceptions and you could argue for a long time whether you were in            
 an exception or not.  The important thing is that we encourage                
 people to audit.  That we get them into compliance and that if                
 there is good conduct, they probably are entitled to some kind of             
 break.  Whether that's immunity, whether that's penalty reduction.            
 The incentives through the immunity provision are aimed at a very             
 narrow group of people for violations that don't result in injury.            
 Corporations or individuals that have violations that result in               
 injury and damages maybe could benefit even more from conducting              
 audits and I think we could agree we should encourage that.                   
                                                                               
 SENATOR HALFORD asked if we codified the federal privilege and its            
 four points, would she have any objections to that applying                   
 directly to environmental audits.  MS. SANSONE replied that she               
 thought that would be appropriate.  She thought including the                 
 policy statement that is now in the bill would be good, also.                 
                                                                               
 SENATOR HALFORD asked if in the federal privilege that immunity               
 applied even though injury or death may occur.  MS. SANSONE replied           
 that under the federal law that privilege attaches to the prior               
 conduct, the evaluation of the prior conduct.  If there's future              
 bad or negligent conduct, it does not apply.                                  
                                                                               
 SENATOR HALFORD asked if it attaches to prior conduct that includes           
 injury or death.  MS. SANSONE said that is correct.                           
                                                                               
 Number 217                                                                    
                                                                               
 STEVE TOROK, Senior Representative, U.S. EPA, said they had not               
 completed a thorough review of SB 199, but he wanted to make some             
 general comments on the concept.  Alaska and EPA share the goal of            
 achieving cooperation of regulated entities to obtain compliance              
 with environmental laws.  The critical question is how to achieve             
 that goal without shielding environmentally irresponsible behavior            
 or increasing environmental litigation.  The vast majority of                 
 regulated entities do comply with environmental law.  The focus of            
 their enforcement is, and has been, on the violators, not the                 
 compliers.                                                                    
                                                                               
 EPA's policy applies when a regulated entity undertakes a voluntary           
 environmental audit or self-evaluation.  It provides three                    
 incentives to conduct them and disclose violations that may be                
 discovered during those audits.  First, EPA will completely                   
 eliminate punitive penalties for companies or public entities that            
 voluntarily identify, disclose, and correct violations.  EPA will             
 also reduce punitive based penalties by up-to 75 percent for                  
 regulated entities that meet most, but not all, of the conditions.            
                                                                               
 This ability to partially reduce penalties is preferable to an all            
 or nothing approach.                                                          
                                                                               
 Second, the EPA will not recommend to the Department of Justice               
 (DOJ) that criminal charges be brought against a company acting in            
 good faith to identify, disclose, and correct violations, so long             
 as no serious actual harm has occurred.  Under the federal system,            
 the DOJ has the ultimate authority on criminal prosecutions.                  
 However, EPA recommendations carry significant weight.                        
                                                                               
 Third, EPA will not request voluntary environmental audit reports             
 to trigger or initiate enforcement actions.  This was in practice             
 since 1986 and its change will alleviate the fears that an audit              
 report will invite investigations that would not otherwise occur.             
 EPA may request audit report information, if violations have been             
 identified by other means.                                                    
                                                                               
 In summary, EPA, has struck a balance between the encouragement of            
 good behavior and the loss of some regulatory discretion.  The                
 policy allows EPA to exercise its enforcement discretion in those             
 cases where environmental violations must be addressed by the                 
 severity of criminal sanctions.  EPA will also be able to assess              
 penalties where the violator has realized an economic benefit as a            
 result of that violation, since the agency believes that even a               
 company that inadvertently violates environmental law, should not             
 gain a business advantage over companies that do comply with                  
 environmental laws.                                                           
                                                                               
 Several independent studies support EPA's final policy of voluntary           
 cooperation.  An Arthur Anderson survey of corporate general                  
 counsels in 1992 revealed that nearly 60 percent of the                       
 corporations surveyed have had compliance audits performed between            
 1989 - 1991. Another almost four percent before 1989 had already              
 conducted environmental audits.  While only 37 percent of the                 
 corporations surveyed had never undertaken a formal compliance                
 audit.  This shows that a majority of the corporations have already           
 found it to be to their advantage to conduct compliance audits.  Of           
 those corporations conducting audits, only 16 percent of the                  
 general counsels reported that they altered their procedures for              
 conducting audits, because of concerns that the violations they               
 find might be used against them.  The overwhelming majority                   
 expressed no such concern.                                                    
                                                                               
 Voluntary cooperation by regulated entities is also exemplified in            
 a study of the Investor Responsibility Research Center (IRRC).  In            
 its 1994 corporate profiles directory, the IRRC surveyed more than            
 249 companies covering 75 of the 86 standard industrial groups.               
 The study found a large amount of voluntary compliance through                
 various programs.                                                             
                                                                               
 Preliminary results from EPA's internal survey on the use of                  
 information from voluntary self-disclosures and voluntarily                   
 performed environmental audits supports the EPA's policy goals.               
 EPA regional offices reported that of the over 4,600 enforcement              
 actions taken during fiscal years 1993 - 1994, only 62 reported               
 actions, nearly one percent, were initiated on the basis of                   
 voluntary self-disclosed information.  Of that one percent, 75                
 percent had penalties that were either reduced or eliminated                  
 completely.  To their knowledge, the federal government has never             
 initiated a criminal enforcement case based upon a voluntarily                
 submitted environmental audit.                                                
                                                                               
 Alaska enjoys a reputation of a State that exercises enforcement              
 discretion and actually puts its effort towards solving the                   
 problem, not putting its effort toward collecting punitive damages.           
                                                                               
 In other audit privilege states, the existence of an environmental            
 audit privilege has not lead to any increase in voluntary                     
 compliance.                                                                   
                                                                               
 The EPA generally opposed the creation and adoption of new                    
 statutory and environmental evidentiary privileges.  The issue                
 associated with the privileges and subsequent litigation create               
 serious resource drains on government and private litigators.  Such           
 statutes can encourage litigation.                                            
                                                                               
 The U.S. Supreme Court has stated in a number of opinions that                
 privileges are impediments to the search for the truth.  They                 
 should not be created lightly, nor construed broadly.                         
                                                                               
 EPA feels that incentives should be structured in policy rather               
 than establishing a statutory evidentiary privilege or immunity,              
 the later of which could be used to shield evidence of violations             
 from law enforcement officials, deny the public its right to know             
 useful information affecting its health and environment, MR. TOROK            
 stated.                                                                       
                                                                               
 Number 350                                                                    
                                                                               
 If the legislature feels that a statutory provision is necessary to           
 encourage environmental auditing and voluntary compliance, they are           
 prepared to work with them on its development.                                
                                                                               
 Number 373                                                                    
                                                                               
 SENATOR HALFORD asked for clarification on the percentage of                  
 companies concerned with enforcement of violations that were                  
 discovered through environmental audit.  MR. TOROK restated that 60           
 percent of corporations surveyed had already had a compliance audit           
 performed.  Only 16 percent of those had altered their procedures             
 for conducting the audits, because of concerns that the violations            
 they find can be used against them.                                           
                                                                               
 SENATOR HALFORD said he thought 16 percent was a significant                  
 number.                                                                       
                                                                               
 Number 414                                                                    
                                                                               
 SENATOR HALFORD also stated he thought that SB 199 was specific in            
 avoiding his concern regarding evidence needed in enforcement being           
 tainted by evidence covered under a privilege.  He said he thought            
 it was the intent of the sponsor that that wasn't the case.                   
                                                                               
 MR. TOROK said one of the areas they would be concerned about are             
 the immunities and how they would affect delegated federal programs           
 that the state has already assumed, or is working toward                      
 presumption.  For example, the Clean Air requirements are for the             
 State to have similar, if not equal, capabilities of collecting               
 penalties.  Whether the State decides to collect penalties is up to           
 its discretion.  In order for them to grant approval of the                   
 program, the State has to have the capability to collect the                  
 penalties.                                                                    
                                                                               
 SENATOR HALFORD asked if they were to codify the federal privilege            
 with regard to self critical analysis, that would not be a problem.           
 MR. TOROK said that would address the privilege, but he didn't know           
 if that would address the immunity issue.  SENATOR HALFORD agreed,            
 but he thought they were so closely related, that one flows from              
 the other.                                                                    
                                                                               
 Number 430                                                                    
                                                                               
 RON SUTCLIFFE, Assistant Attorney General, said the immunity                  
 provision is the issue that concerns the Criminal Division most.              
 They are afraid it may effectively undermine their ability to                 
 prosecute serious environmental crime.  They believe the "bad                 
 actors" would use it to avoid criminal liability.                             
                                                                               
 There were some ambiguities with the way the immunities were                  
 written in the bill.  In criminal law, MR. SUTCLIFFE said, if there           
 are ambiguities, they are going to be strictly construed against              
 the State.                                                                    
                                                                               
 Starting with section 475, the environmental disclosure is                    
 voluntary if it's made promptly and there is no definition of what            
 promptly means.                                                               
                                                                               
 Also when you make a disclosure and have to send it by certified              
 mail, it's not clear whether the sending of it triggers the                   
 notification or the receipt of it does.                                       
                                                                               
 Under subsection 5 the person who makes the disclosure has to                 
 initiate an appropriate effort, which should be defined.  The "due            
 diligence" definition should be tied to some other "due diligence"            
 definition in criminal law.                                                   
                                                                               
 In subsection 7, they are concerned with the substantial off-site             
 harm and what that means.                                                     
                                                                               
 On page 7, in subsection (d) (1) - (3) they had problems with the             
 negligence, because it's not clear who would determine negligence.            
                                                                               
 Under subsection (f) there is no definition for substantial injury            
 which could pose some problems.  Also, in subsection f there is               
 presumption language, that the State would have to prove beyond a             
 reasonable doubt, in order to rebut the presumption, and that would           
 be an intolerable burden.  There are other standards that are                 
 possible, like clear and convincing evidence, that would be easier            
 to use.                                                                       
                                                                               
 Number 481                                                                    
 SENATOR HALFORD asked what standard of evidence they use to                   
 prosecute.  MR. SUTCLIFFE answered proof beyond a reasonable doubt            
 in a criminal case.  Under subsection (h) there is a way for the              
 State to get around the immunity provisions, if there have been               
 repeated or continuously committed violations.  However, there is             
 no definition of a serious violation.                                         
                                                                               
 His Division was concerned that there had to be three distinct and            
 separate events in a three year period at the same facility or                
 operation and that might result in them moving around.  It would be           
 more appropriate for it to apply to any of the facilities a                   
 corporation might own.                                                        
                                                                               
 Number 524                                                                    
                                                                               
 MR. SUTCLIFFE said one of the problems with the privileges was the            
 that a corporation could appoint everyone at a facility as part of            
 the audit team, so, if these people were subpoenaed later, they               
 could testify about things that did not happen as a result of the             
 audit.  He thought that would lead to a lot of hearings on motions            
 to quash subpoenas.                                                           
                                                                               
 He said it was clear from the legislation that they could use                 
 independently discovered material to prosecute, but they were                 
 afraid that would end up in a series of proceedings where they have           
 to prove to the court that they actually discovered it from an                
 independent source.                                                           
                                                                               
 SENATOR LEMAN said if the audit report were sealed, their job would           
 be easy.  MR. SUTCLIFFE answered the way it written now, if they              
 got it from a search warrant, if it were sealed, he wouldn't be               
 able to get it from DEC.  Under a search warrant, it's sealed                 
 anyway.  SENATOR LEMAN clarified that if it were sealed in the                
 first place they wouldn't have to prove to the court that the                 
 source of information was other than the audit report.  MR.                   
 SUTCLIFFE agreed.                                                             
                                                                               
 SENATOR HALFORD asked in prosecution, do they have to deal with the           
 existing privilege against self-critical analysis.  MR. SUTCLIFFE             
 answered that he had never run-up-against it and he had had only              
 one self-critical audit in two years which he declined.  SENATOR              
 HALFORD commented that that meant there was some protection, then.            
 MR. SUTCLIFFE said the violation had been discovered by DEC before            
 the disclosure, but it had been remedied, so they exercised                   
 discretion.  He said when he prosecutes, he does it in front of a             
 jury of 12 people, and he couldn't imagine a jury convicting, if              
 the violation had been remedied.                                              
                                                                               
 SENATOR HALFORD asked if the administration has commented on                  
 language on page 9, section 09.25.480 Circumvention by Regulation             
 Prohibited.  MR. SUTCLIFFE said he didn't know the answer.                    
                                                                               
 SENATOR TAYLOR said he thought this concept was well worth looking            
 into and he commented on an incident that happened in Wrangell when           
 EPA did not exercise their discretion.                                        
                                                                               
 TAPE 96-10, SIDE B                                                            
 Number 580                                                                    
                                                                               
 SENATOR TAYLOR said he got the penalty reduced to $2500, but                  
 everybody felt like they were being treated like some sort of                 
 criminal.  They were subjected to arrogance and insult.  That is              
 what prompts legislation such as this.  He said that attitude was             
 very frustrating to have to deal with and he applauded all the                
 assistance that has been offered on working out good legislation.             
 Number 552                                                                    
                                                                               
 CHAIRMAN LEMAN said they were running out of time, thanked everyone           
 for their help and adjourned the meeting at 6:03 p.m.                         
                                                                               

Document Name Date/Time Subjects