Legislature(1997 - 1998)
03/12/1997 09:08 AM Senate FIN
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* first hearing in first committee of referral
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= bill was previously heard/scheduled
+ teleconferenced
= bill was previously heard/scheduled
Senate Bill No. 41
"An Act relating to environmental audits to determine
compliance with certain laws, permits, and
regulations."
Senator Loren Leman, related that SB 41 was similar to
legislation that he had introduced in the 19th Alaska State
Legislature with SB 199; furthermore, the prior legislation
had passed the Senate, but had been in the House Finance
Committee when the legislature had adjourned the prior
year. He noted that when the bill had been originally
introduced, it had provided for environmental audits, as
well as health and safety self-audits; however, the bill
had been amended in the judiciary committee over his
objections and the health and safety self-audit portion had
been deleted. He opined that deleting the health and safety
self-audit portion of legislation was a mistake and urged
the committee to take another look at it because having it
in the bill would provide additional benefits to Alaska's
workers. He reported that SB 41 created 2 incentives to
encourage businesses and other regulated entities to
conduct voluntary self-audits of their internal operations
and explained that the purpose of the audits would be to
identify and correct any non-compliance with environmental
regulations. He related that the bill's first incentive was
limited immunity and explained that entities that conducted
environmental self-audits would be immune from civil and
administrative penalties for violations that were
discovered, provided that several conditions were met. He
stated that the regulated entity must take action to
correct the identified problem and prevent its future
occurrence and that immunity would not be available for
violations that caused substantial offsite-damage or
serious onsite or offsite injury; additionally, there were
several other conditions that must be, which were contained
in the bill.
Senator Leman continued to speak to SB 41 and related that
the second incentive in the bill was qualified privilege.
He stated that the self-critical analysis that was
contained within an audit report would be considered
privileged and therefore not admissible as evidence or
subject to discovery in civil or administrative
proceedings; this provision recognized that an audit report
by nature was a self-incriminating document that discovered
problems, identified what personnel or management
deficiencies were responsible, and recommended corrective
action. He offered that many studies had shown that
businesses or individuals opted not to perform audits based
on the fear that the resulting reports would be used by
agencies or hostile 3rd parties as a "roadmap" to
prosecution; as with the bill's immunity benefit, this
privilege also had limitations. He expounded that the
privilege could be overcome if it was asserted for a
fraudulent purpose or if the regulated entity had failed to
take the required actions to correct the areas of non-
compliance. He opined that some people had misrepresented
what the privilege did and had referred to it as a cloak of
secrecy, but offered that this was not the intent of the
bill. He stated that the intent of the legislation was to
create the incentive for people to make changes to their
operations, not to create a cloak of secrecy and urged the
committee to see through the language of the opponents of
the bill's concept and details. He asserted that the
purpose of self-auditing would be to bring about full
compliance with regulations that were designed to protect
the environment and that the intent was to encourage
businesses and public institutions to integrate
environmental protection measures into their normal
operating procedures. He stated that currently more than
1,000 of the world's larger corporations had self-audit
programs and that the state needed to encourage smaller
companies to adopt those programs as well. He noted that
many of the larger companies in Alaska were conducting
self-audits and that the bill would help the smaller
businesses to participate. He expressed a desire to improve
and expand the existing audit programs and noted that the
state could not totally depend on government inspectors to
regulate business. He offered that the bill would help
bring people into compliance.
Senator Leman continued to discuss SB 41 and related that
20 other states had passed some form of self-audit
incentive legislation; additionally, 8 other states were
debating the same measures in their respective legislatures
in the current year. He thought that the success from this
type of legislation had been very good and related that he
had recently returned from a conference in Washington D.C.
where he had spoken with legislators from other states
regarding the issue. He stated that self-audit incentive
bills had been in place in Texas for 2 or 3 years and that
the program had completed about 400 audits; furthermore,
there had been substantial evidence that the program was
working as intended. He stated that in addition to Texas,
several other states with similar environmental concerns as
Alaska had self-audit laws; these states included Oregon,
Idaho, Utah, Colorado, and Wyoming. He pointed out that
legislation to encourage self-auditing had been introduced
in the last congressional session and understood that
similar legislation would be introduced in the 105th
Congress. He pointed out that while other measures talked
about making Alaska open for business, SB 41 actually took
Alaska in that direction and concluded that the legislation
would make it clear that Alaska wanted a cooperative and
not a confrontational relationship with the business
community.
Senator Adams noted that he was trying to understand the
bill and inquired if it encouraged companies to clean up
their acts without penalties from the Department of
Environmental Conservation (DEC) through self-audits.
Senator Leman replied that the bill would provide
incentives so that companies would make changes to their
existing operations if they had identified shortcomings in
operations that they did not know existed outside of
conducting the audit; in this case there would be limited
immunity and privilege.
Senator Adams inquired if the bill provided the same right
to municipalities. Senator Leman responded in the
affirmative and stated that municipalities would be able to
participate. He related that in the Texas, the university
and the municipalities had profound participation.
Senator Adams directed the committee's attention to page 6,
line 27 through page 7, line 15 of the bill, which
discussed an exemption of disclosure by the court; he
inquired if this section represented a "catch 22" and
further queried how a party seeking disclosure under this
section would prove anything if they did not know what the
report contained and therefore, did not have the
information. Senator Leman responded that the section in
question provided for an in-camera review and it would be
looked at in the judge's chambers. Senator Adams opined
that this represented a problem.
JANICE ADAIR, DEPARTMENT OF ENVIRONMENTAL CONSERVATION,
ANCHORAGE (via teleconference), stated that the sponsor had
been working with DEC on the bill, but that the department
still had areas of concern. She related that the department
thought there was a way to properly construct a privilege
and immunity for self-audits that would not jeopardize the
primacy of federally delegated programs. She stated that
the bill's sponsors had been open to several of the
department's suggestions, but that there were still several
areas that needed to be addressed; the burden of proof
section that Senator Adams had pointed out was one area
that the department felt should be addressed. She explained
that the department wanted to ensure that the objective or
underlined facts were not subject to the privilege. She
thought that some of the definitions had been affected by
amendments that had been made in the Senate Judiciary
Committee and that those needed to be looked at;
additionally, similar terms in the bill needed to be
reviewed. She related that there was concern in DEC about
how the bill would impact pipeline-tariff cases.
Co-Chair Sharp inquired if Ms. Adair had Amendments 1
through 7. Ms. Adair replied in the affirmative. Co-Chair
Sharp requested Ms. Adair to address any of the amendments
that the department felt would meet some of its concerns.
Ms. Adair stated that Amendment 6 was the tariff amendment
that the department had offered to address those concerns;
however, the other amendments had not been designed to
address concerns of the department.
Senator Adams requested an explanation of the section
contained within page 6, line 17 through page 7, line 15 of
the bill and admitted that he was having difficulty with
that section. She explained that the section stated that if
a person believed that the privilege had been
inappropriately applied to the audit report, they could
request the court or hearing officer to set aside the
privilege; furthermore, the bill lined out the reasons why
a person could make such a request. She explained that the
problem was that subsection (b), which was on page 7, line
15, put the burden of proof on the person that any of the
exceptions applied. She explained that case law indicated
that asking somebody prove something for which they had no
knowledge was an extremely difficult hurdle; the
department's suggestion was that a party seeking disclosure
could make a prima facie case that gave a reason why the
exception should apply. She offered that asking someone to
prove something from a document that they had not seen was
impossible.
Senator Adams observed that needing an exception would be
difficult to prove without the information. Ms. Adair
stated for example that a prima facie case might involve
the second exception, which was injury; she explained that
if a party was injured and believed that an audit would
show that the company in question knew the potential
existed but did not take action or contributed to the
injury, then the party would have to demonstrate to the
court why they thought that. She explained that the prima
facie case would not require someone to prove something,
but would require a reasonable explanation as to why the
party thought there was an exception; at this point, the
court would be in a position to agree or disagree with the
case and whether or not the information should be
disclosed.
MIKE HANUS, SENIOR STAFF ENGINEER, EXXON COMPANY U.S.A.
(via teleconference), stated that the Alaska Oil and Gas
Association (AOGA) supported the intent of SB 41. He
explained that AOGA was a 19-member trade association
company that accounted for the majority of oil and gas
exploration, production, transportation, refining, and
marketing activities in Alaska. He related that AGOA
supported the intent of environmental self-audit
legislation that provided immunity from penalties and
ensured confidentiality and explained that the majority of
AGOA members currently conducted self-audits as a means of
ensuring compliance; furthermore, the company saw value in
legislation that encouraged the regular utilization of
self-audits by providing immunity and privilege. He
explained that immunity would act as an incentive for
companies to identify, correct, and prevent the
reoccurrence of non-compliant behavior; privilege protected
the company from the unnecessary repercussions of
disclosing all of it results and helped preserve the
integrity of the audit process. He stated that looking for
deficiencies, identifying them, disclosing them to the
appropriate agencies, and making corrections were what
self-auditing was about. He offered that self-auditing was
an important tool for voluntary compliance and that AOGA
believed the legislation moved the lines in a positive
direction towards encouraging self-auditing. He concluded
that AOGA would continue to work with DEC, the Department
of Law, and bill's sponsors on SB 41.
SUSAN SCHRADER, EXECUTIVE DIRECTOR, ALASKA ENVIRONMENTAL
LOBBY (via teleconference), testified against SB 41. She
explained that the Alaska Environmental Lobby was a
coalition of different conservation groups throughout
Alaska that represented about 10,000 members. She shared
that she had been the draftee of the position paper that
Senator Leman "has suggested perhaps misrepresented this
legislation." She respectfully disagreed that her position
paper misrepresented the bill and opined that it offered an
alternative interpretation of "these" bills that had been
passed in other states. She reported that the Alaska
Environmental Lobby supported the goal of the bill, which
was to encourage compliance by providing incentives for
regulated industry to voluntarily find, disclose, and
correct violations of environmental laws; however, the
lobby was of the opinion that the bill would not achieve
this goal. She offered that responsible corporations did
not need the added secrecy and immunity privileges in order
to audit their operations. She stated that in 1997, the
Environmental Protection Agency adopted its self-policing
program and reported that the program appeared to be
working nicely; to date, 105 companies had voluntarily
disclosed violations at over 350 facilities. She offered
that responsible companies were doing fine without the
added privilege and secrecy provisions within the bill and
opined that the legislation would make it easier for the
industries that were irresponsible to continue to act that
way. She stated that the Alaska Environmental Lobby felt
that the bill was one of secrecy that would keep vital
information hidden from review by the agencies that Alaska
depended on to enforce the laws, as well as keep it hidden
from the legal system. She pointed out that the legislation
limited employees' right to know, as well as the right to
know of property owners who were adjacent to certain
industries. She related that in other states, there were
cases in which residents who were living near landfills had
great difficulty obtaining information regarding concerns
of possible contaminated ground water and problems with air
quality due to methane escapes.
Ms. Schrader continued to speak to the bill and offered
that it would increase litigation because the people who
needed the information would have to undergo a long
laborious court process to try to overcome the privilege
requirement in the legislation; furthermore, in the
meantime, drinking water may have been contaminated. She
opined that the legislation would allow companies to
conceal and condone non-compliance and that the supporters
of the bill were making the assumption that companies would
come forward with their violations and correct them in a
timely manner; however, she did not see the incentive for
companies to come forward with their violations and correct
them in a timely manner. She opined that past experience
had shown that prompt compliance was not always the course
of action that industry would choose. She reported that the
Alaska Environmental Lobby felt that the bill would create
more confusion, litigation, and expense and pointed out
that DOL had offered over a 12 amendments to the bill in
previous committees in order to clarify the legal language
in the legislation; this was a prime example of the
problems that the courts would be facing if the legislation
was enacted. She pointed out that the term "construed
broadly" in the legislation's definition section would pull
in all manner of federal, state, and municipal laws. She
offered that legislation that safeguarded the environment
was passed out of necessity and was typically a reaction to
a nasty problem that needed to be fixed. She spoke of
industry's "less than admirable" record of self-regulating
and opined that the bill would only weaken a process in
Alaska that was already weakened by budget cuts. She
offered that the bill's intent could and should be met by
simple legislation that provided clear incentives through
leniency for self-disclosure and correction that would
define the time windows and would not contain privilege
provisions.
SB 41 was HEARD and HELD in committee for further
consideration.
SB 35 was SCHEDULED but not HEARD.
SB 109 was SCHEDULED but not HEARD.
Co-Chair Sharp discussed the following meeting's agenda.
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