SENATE BILL 41 "An Act relating to environmental audits and health and safety audits to determine compliance with certain laws, permits, and regulations." MICHAEL PAULEY, STAFF, SENATOR LOREN LEMAN, commented that SB 41 would establish two incentives for businesses and other regulated entities to conduct voluntary self-audits of internal operations, in an effort to secure full compliance with environmental laws and regulations. The first incentive would be limited immunity. Entities that conduct voluntary self-audits would be immune from civil and administrative penalties for violations discovered, provided several conditions had been met. The instances of noncompliance must be discovered through a self-audit and reported promptly to the appropriate regulatory agency. The regulated entity must take action to correct the identified problem and prevent its future recurrence. Immunity is not available for violations causing substantial off-site damage or serious on-site injury. In addition, no immunity would be available for violations that were knowingly committed or that resulted from recklessness. Immunity can be denied to regulated entities with a history of similar violations, or a pattern of disregard for environmental laws. 2 The second incentive would be qualified privilege. Certain portions of the reports generated from voluntary self-audits will be considered privileged and therefore not admissible as evidence or subject to discovery in civil or administrative proceedings. The provision recognizes the valuative portion of an audit report which is self- incriminating. Privilege can be overcome if asserted for a fraudulent purpose or if the regulated entity has failed to take required actions to correct areas of noncompliance. SB 41 would create an incentive for companies and individuals acting in good faith to police themselves and maintain full compliance with highly complex regulations. Co-Chair Therriault asked if immunity would need to be disclosed to the regulatory agency. Mr. Pauley replied that immunity would only be available for those violations which are disclosed and discovered through a self-audit. Additionally, the bill provides a notice provision, providing a fifteen day in advance notice to the Department of Environmental Conservation (DEC) explaining the scope of the audit. Co-Chair Therriault questioned concerns which had been expressed in previous committees of referral regarding the "whistleblower" protection laws. Mr. Pauley explained that SB 41 neither adds or takes away any rights or protection currently provided to whistleblowers under applicable State law. In several places, the text of SB 41 clearly anticipates the positive role whistleblowers may play in calling attention to environmental problems. Certain provisions in the bill will strike a balance between the rights of employees to testify about what they have witnessed and the rights of employers to preserve the confidentiality of audit documents which are typically very sensitive and costly to produce. SB 41 also provides a mechanism through which any party can petition to have privileged audit documents disclosed for serious reasons. JANICE ADAIR, (TESTIFIED VIA TELECONFERENCE), DEPARTMENT OF ENVIRONMENTAL CONSERVATION (DEC), ANCHORAGE, spoke to the sections of the bill which the Department would support, pointing out that their concerns had been addressed. She continued, the "privilege of support" which the legislation would allow is narrow. It applies only to a portion of the audit addressing the analytical aspect of the auditor including recommendations. The Department has the authority to review the privilege portion of the audit and the confidentiality of the owner/operator. That information 3 can be retained in the agency file, not being subject to the Public Audit Act. Ms. Adair added that if the audit indicated a violation, it would need to be addressed by the Department. From that point forward, the proposed practices are similar to those currently used by DEC. She reiterated that the bill would not preclude DEC from seeking damages for cost recovery, only penalties for violation. SUSAN SCHRADER, EXECUTIVE DIRECTOR, ALASKA ENVIRONMENTAL LOBBY (AEL), JUNEAU, testified that AEL supports industry's efforts towards voluntarily compliance with environmental regulations, but that they strongly oppose passage of SB 41. Achieving compliance with regulations will require industry and government to work together. The broad language of SB 41 will cripple the State's ability to enforce protection of Alaska's environment and public welfare. She noted that the legislation would greatly obstruct efforts to find the balance between incentives for responsible monitoring and effective enforcement of regulations. Ms. Schrader listed the reasons that AEL oppose SB 41: * The legislation is a bill of secrecy. It would keep vital information regarding the public's health and safety hidden from review by the agencies we depend upon to enforce environmental laws. It would limit the employees' right to know. * This is a bill of amnesty to industries that conceal or condone noncompliance. Immunity from civil and administrative penalties is bad public policy and effectively rewards non-compliance. The bill would let crime go unpunished and encourages violators to profit at the expense of law-abiding competitors. * The legislation would be a full-employment bill for attorneys. The bill will create more confusion, litigation and expense regarding the enforcement of regulations. Ms. Schrader pointed out that environmental regulations have been passed out of necessity. She stressed that industry has a less than admirable record of self-regulating. The public's health and safety must continue to be protected, particularly in today's heated competitive climate where industry is more likely to cut corners for economic advantages. In response to Co-Chair Therriault query regarding the "in- 4 camera" review, Mr. Pauley explained the procedure was outlined on Page 7, Line 9, of the Judiciary version of the bill. In the "in-camera" review, the judge determines if any of the conditions described in numbers #1 through #5 would require disclosure of audit reports. Co-Chair Therriault inquired if DEC had offered a fiscal note. Ms. Adair replied that the financial impact to the Department would be reflected in the Department of Law's fiscal note. Co-Chair Hanley MOVED to report HCS CS SB 41 (JUD) out of Committee with individual recommendations and with the accompanying fiscal notes. There being NO OBJECTION, it was so ordered. HCS CS SB 41 (JUD) was reported out of Committee with a "do pass" recommendation and with fiscal notes by the Alaska Court System and the Department of Law, and with a zero fiscal note by the Department of Labor dated 3/18/97.