SENATE LABOR AND COMMERCE COMMITTEE January 23, 1997 1:35 p.m. MEMBERS PRESENT Senator Loren Leman, Chairman Senator Jerry Mackie, Vice Chairman Senator Mike Miller MEMBERS ABSENT Senator Tim Kelly Senator Lyman Hoffman COMMITTEE CALENDAR SENATE BILL NO. 41 "An Act relating to environmental audits and health and safety audits to determine compliance with certain laws, permits, and regulations." HEARD AND HELD PREVIOUS SENATE COMMITTEE ACTION No previous Senate Committee action to record. WITNESS REGISTER Mr. Mike Pauley, Staff Senator Leman State Capitol Juneau AK 99801-1182 POSITION STATEMENT: Reviewed SB 41. Mr. Randy Ruedrich, Chairman Alaska Chapter International Association of Drilling Contractors 101 W. Benson Anchorage AK 99503 POSITION STATEMENT: Supported SB 41 and offered an amendment. Mr. Joe Hegna, Manager Environment, Health & Safety ARCO Alaska Alaska Oil & Gas Association Anchorage AK POSITION STATEMENT: Supported the intent of SB 41. Ms. Janice Adair, Director Division of Environmental Health Department of Environmental Conservation 555 Cordova Street Anchorage AK 99501 POSITION STATEMENT: Supported concepts of SB 41, but hoped to work with committee on some details regarding the privilege. Mr. Douglas Donegan, Vice President Trident Seafoods Corporation 5011 Jewel Lake Rd. Anchorage AK POSITION STATEMENT: Supported SB 41. Ms. Pam LaBolle, President Alaska State Chamber of Commerce 217 Second Street, Suite 200 Juneau Alaska 99801 POSITION STATEMENT: Supported SB 41. Mr. Dwight Perkins, Special Assistant Department of Labor P.O. Box 21149 Juneau AK 99802-1149 POSITION STATEMENT: Opposed SB 41. Ms. Toby Steinberger, Assistant Attorney General Department of Law 1031 W. 4th Ave., Suite 200 Anchorage AK 99501-1994 POSITION STATEMENT: Commented on SB 41. Mr. Al Dwyer, Director Division of Labor Standards and Safety Department of Labor P.O. Box 107021 Anchorage AK 99510-7021 POSITION STATEMENT: Commented on SB 41. Mr. Eric Yould, Executive Director Alaska Rural Electric Cooperative Association 703 West Tudor Rd. #200 Anchorage AK 99503 POSITION STATEMENT: Supported SB 41. Ms. Marie Sansone, Assistant Attorney General Department of Law P.O. Box 110300 Juneau AK 99811-0300 POSITION STATEMENT: Commented on SB 41. ACTION NARRATIVE TAPE 97-1, SIDE A Number 001 SB 41 ENVIRONMENTAL & HEALTH/SAFETY AUDITS  Number 001 CHAIRMAN LEMAN called the Senate Labor and Commerce Committee meeting to order at 1:35 p.m. He introduced SB 41 as the first order of business before the committee. MIKE PAULEY , staff to Senator Leman, explained that SB 41 would create an incentive system to encourage business and other regulated entities to conduct voluntary self-audits of their internal operations which would identify and correct any non- compliance with environmental or occupational health and safety regulations. SB 41 is similar to SB 199 which was considered in the last legislature. The Senate approved SB 199, but it was left pending in the House Finance Committee upon adjournment although it was endorsed by many organizations. Mr. Pauley explained that SB 41 establishes two incentives to encourage self-audits: (1) Limited Immunity - "Entities that conduct voluntary self-audits will be immune from civil and administrative penalties for violations discovered through a self-audit that are 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." (2) Qualified Privilege - "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. This provision recognizes that an audit report by its very nature is a self-incriminating document: It discovers problems, identifies what personnel or management deficiencies are responsible, and recommends corrective action. Studies show that many businesses opt not to perform audits out of fear that the resulting reports will be used by agencies or hostile third parties as a 'road map to prosecution'. As with the immunity benefit, the privilege has limitations. 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." Mr. Pauley noted that Senator Leman intended to remove Section 3 on page 12. Last year the bill was changed so that the privilege would only be applicable in civil and administrative cases. Section 3 refers to criminal cases, which was determined unnecessary by the drafter. Mr. Pauley informed everyone that there are currently 20 states that have enacted self-audit laws similar to SB 41, not 18 states as the sponsor statement says. Number 167 RANDY RUEDRICH , Chairman of the Alaska Chapter of the International Association of Drilling Contractors (IADC), said that SB 41 is a good start toward encouraging improvement in Alaska's industry compliance regarding health, safety and environmental laws. Mr. Ruedrich attested to the effectiveness of properly supervised self- evaluation and self-regulation as a way in which to improve health, safety and environmental performance. He also discussed the 1988 North Sea incident which lead to an considerable inquiry by the British government. However, Ward Cullen who presided over the inquiry rejected the concept that the government or a special interest group could determine the best plan for the industry. Mr. Cullen instructed that each entity should develop its own health, safety and environmental compliance plans appropriate for its unique assets. Furthermore, the plan should be implemented and practices should be initiated for continuing audit of progress and correction of any identified shortcomings. Mr. Ruedrich noted that the industry as a whole has been evolving toward Mr. Cullen's approach since the inquiry. Mr. Ruedrich stated that SB 41 is good for everyone involved: the state, the employees, and business. Mr. Ruedrich said that with IADC's proposed amendment, operators and drilling contractors will be able to easily share the results of the self-evaluation reviews. This would help promote healthy and safe work conditions as well as environmental compliance. He emphasized that the owners of drilling rigs have been focusing on the improvement of health and safety records for nearly three decades. Statistics supporting this statement were discussed. Mr. Ruedrich stated that similar strides had been taken in the industry with regard to environmental compliance. SB 41 is beneficial in that the bill allows concentration on the remaining inefficiencies in the system. However, the aforementioned amendment is necessary in order to allow disclosure of reports between an independent contractor and its principles. The new environmental audit privilege should be expressly applicable to these disclosures. Mr. Ruedrich noted that this amendment as well as two other technical amendments were attached to his testimony. CHAIRMAN LEMAN acknowledged that the committee had received Mr. Ruedrich's written testimony as well as the proposed amendment. Number 300 CHAIRMAN LEMAN said that the amendment had just been received and if the committee decided to incorporate it into the bill, Legislative Legal Services would draft it. JOE HEGNA , Manager of Environment, Health & Safety ARCO Alaska, informed the committee that he wanted to make a statement on behalf of all the members of the Alaska Oil & Gas Association (AOGA). AOGA supports the intent of SB 41. Mr. Hegna informed the committee that the majority of AOGA members perform self-audits. He discussed SB 41 and the positive effects resulting from self- audits. Mr. Hegna offered to work with the Department of Environmental Conservation (DEC), the Department of Law (DOL), OSHA, and the bill's sponsor in order to pass legislation with the intent of SB 41. Number 375 JANICE ADAIR , Director of the Division of Environmental Health for DEC, thanked Chairman Leman for reintroducing SB 41 and removing the criminal aspects of the bill. She hoped to work with the committee and industry members to resolve some of the issues that DEC would like to be addressed in the bill. She said that DEC supported the concepts of SB 41, but some issues to prevent the possible misuse of the privilege would be necessary. Those areas are being worked on. Number 404 DOUGLAS DONEGAN , Vice President of Trident Seafoods Corporation, supported SB 41. SB 41 will encourage compliance with state and federal regulations in a cost effective manner. Smaller operations can become proactive under this legislation in order to ensure their compliance without penalties. Larger firms will be helped by SB 41 as well. Mr. Donegan stated that currently there is a built- in disincentive for employees to report problems and noncompliance due to the possibility of repercussions to the employee. SB 41 would deal with that disincentive. SB 41 should also ease the burden on agencies by allowing them to inspect more facilities than otherwise would be inspected. Mr. Donegan pointed out that OSHA's Voluntary Inspection Program is an example of how inspections increase when the possibility of penalty is withdrawn. Furthermore, the problem is often dealt with in a more timely fashion. CHAIRMAN LEMAN inquired as to Mr. Donegan's background. He informed the committee that before he worked for Trident Seafoods Corporation he was the Director of Environmental Health for DEC for six years. Previously, he served as a Special Assistant to the Commissioner of DEC for a couple of years. Previous to that Mr. Donegan served Whitney-Fidalgo Seafoods for eight years. In response to Chairman Leman, Mr. Donegan said that Trident Seafoods Corporation employs 1,248 full-time equivalent employees in Alaska or 3,000 employees if left unadjusted. Number 449 PAM LABOLLE , President of the Alaska State Chamber of Commerce, supported SB 41. Ms. LaBolle reiterated the positive effects of SB 41. She applauded the fact that SB 41 does not allow continued noncompliance to occur once the problem had been identified. She felt that disclosure should be privileged and there should be immunity. SB 41, she said, supports the concept that government and industry should work together. Number 467 MR. DWIGHT PERKINS, Department of Labor, thanked Senator Leman for amending the concerns the Division of Workers Compensation had last year. He provided the committee with a letter from the Attorney General's office outlining the department's concerns. MR. PERKINS stated that this bill would adversely affect the enforcement activities of the Alaska Occupational Safety and Health by restricting inspector access to documents relevant to an employers compliance with ACOSH regulations. It would prohibit ACOSH from using audit reports to establish employer knowledge of hazards which is critical in issuing a willful citation. Repeat citations cannot be issued if an employer voluntarily disclosed a violation and claimed immunity as SB 41 provides. Other regulatory agencies that encounter occupational hazards would be prohibited from referring these hazards to ACOSH if the hazards were contained in an audit report that had been voluntarily disclosed to them. Employers would be immune from penalties if they voluntarily disclosed an audit report to ACOSH. AS18.60.095 establishes penalties for violations of ACOSH standards and make no provisions for immunities from penalties. In the OSH Act of 1970, Section 18c2 and AS18.60.030.6 require that the Department of Labor enforce standards at least as effectively as those requirements found in the federal OSH Act. SB 41 abrogates the Department's authority established by Alaska statutes. MR. PERKINS said they fear the State could lose that portion of the State Plan that had been given to them by the federal government. In that case, federal inspectors could come in and get the information that they are allowed to get now. He didn't know if the committee wanted to challenge the federal government in court. Regarding the 20 states with similar legislation adopted, he said that no state had adopted these health and safety provisions. He concluded that he was willing to work with the committee on these issues. CHAIRMAN LEMAN said his intention was to create a safer workplace and a better environment in Alaska. He thought it made sense to encourage businesses to audit their own health and safety operations so they can make changes. MR. PERKINS agreed and said that his concern is if they do that and someone gets killed on the job, the State will not have access to those audits. SENATOR MACKIE said he supported the intent of the legislation and asked if there was a way to have similar incentives for employers to find, identify, and correct inefficiencies in the workplace. He asked if OSHA funding was a certain problem or was it someone's opinion and was there a way to get around it. TAPE 97-1, SIDE B Number 590 MR. PERKINS replied that they have the ability to do audits from within the Department now at no cost to the employers. All it takes is a phone call. SENATOR MACKIE asked what incentive there was for a business to call them, if they could be prosecuted for significant violations that may be found. MR. PERKINS replied when the Departments consultants go in there, that audit becomes privileged from enforcement. So there is time to fix the problem areas without citations. SENATOR MACKIE asked how that differed from what is proposed in this legislation. MR. PERKINS said he couldn't answer that and referred it to the director. CHAIRMAN LEMAN noted on page 5, line 14 there was a provision for getting the information. His intent was to have that concern covered to protect from fraudulent assertions. MS. TOBY STEINBERGER, Assistant Attorney General, explained that there is a federal OSHA Act that gives the Department of Labor the authority to approve State OSHA programs. One of the criteria to have a State enforcement program is that it must be as effective as the federal program in all respects, including procedures. One of the procedures federal OSHA requires is the right to conduct discussions and subpoena documents. This bill would provide restrictions on what the agencies could subpoena. Number 511 The second major difference, she said, is under certain circumstances this bill provides immunity and federal law does not provide any immunity. This would make the standard not as effective as the federal procedures of enforcement. We now have a federally approved enforcement program. She noted that the Texas law that was mentioned has no affect on federal enforcement because they don't already have a federally approved enforcement program. MS. STEINBERGER noted a letter from the Director of Region 10, dated April 23, 1996 stating that the State would not be as effective under this legislation. CHAIRMAN LEMAN said he is not surprised that a federal agent would take that position and he thought he could also reasonably argue just the opposite. He noted that the State could conduct an investigation by taking it before a judge or hearing officer. Number 445 MR. AL DWYER, Director, Division of Labor Standards and Safety, pointed out that on page 5, line 15 the Department can go to court and require disclosure, but line 29, paragraph (b) says a party seeking disclosure under this section has the burden of proving that (a) of this section applies. He asked how an investigator was supposed to determine that if the documents are not available. He agreed that the worker would ultimately be safer if an employer conducted voluntary safety audits, but unfortunately there are five to 10% of employers who would do nothing with a safety audit. It is the Department's job to uncover those. The only way they can do that is to investigate them. Currently, he explained, they have audits that have not generated citations. He said that the chance of accidents occurring in small companies is high because they cannot afford to hire full-time safety professionals like oil companies do. They, therefore, target high incident industries like logging and seafood. MR. DWYER concluded that nine tenths of the people who do self- audits will do a good job, but the ones that don't are their concern. CHAIRMAN LEMAN commented that the small percentage is not protected by immunity or privilege, because to get any protection there has to be immediate change in behavior. MR. DWYER said his main concern is losing the program to the federal government. CHAIRMAN LEMAN agreed with that concern and said that was not the intent. SENATOR MACKIE felt the intent was good and pointed out that Chairman Leman had explained that the 10 percent who would not take any action are required to take corrective action immediately or face a penalty. Is there language in the bill that requires immediate corrective action after a noncompliance is discovered, he asked. MR. DWYER expressed concern that he would be at a location, find a violation and the company would claim immunity and say that a safety-audit was done the day before. Who does the safety-audit? What is the definition of "substantial injury"? When the department investigates an injury or fatality and discovers a cause that was included in a self-audit, that cannot be used as willful against the company. Mr. Dwyer felt that willful would be deserved. He pointed out that the department would have to know what was in the audit in order to request a copy of the audit from the court to use against the company. CHAIRMAN LEMAN understood Mr. Dwyer's concerns and requested that he get any further concerns to him in order for the committee to address them. JEFF CARPENTER , Industrial Hygienist with the Department of Labor, supported audits. He explained that part of the function of State OSHA is to provide audits to its employers. There are programs in place that encourage audits and do much of what is the thrust of the bill. The difference is that the program is sanctioned by Federal OSHA. Number 340 CHAIRMAN LEMAN asked Mr. Carpenter if he could give an estimate of how many businesses use his services, especially in dangerous industries. JEFF CARPENTER said that currently, there are about eight full-time consultants and trainers. Generally, about 200 consultations and visits are performed annually. Also about 300- 500 training presentations are given annually. These visits are mandated to be skewed to smaller employers in high hazard industries. CHAIRMAN LEMAN asked if OSHA's Voluntary Inspection Program leave those who use the services open to third party lawsuits. JEFF CARPENTER deferred to Toby Steinberger. MS. STEINBERGER said she believed that the records held by consultation could not be used by enforcement, but the records are subject to public access, and therefore, CHAIRMAN LEMAN felt that was a negative side to using OSHA's Voluntary Inspection Program and thought perhaps the law regarding public access to those records should be reviewed. ERIC YOULD , Executive Director of the Alaska Rural Electric Cooperative Association, supported SB 41 and requested the ability to provide substantive comments later on this legislation. Mr. Yould believed that SB 41 was not a method to abrogate the responsibility of the existing regulators, but merely another mechanism for enhancement. MARIE SANSONE , Assistant Attorney General for the Department of Law, commented that SB 41 is long and confusing with regard to the provisions referring to one another and suggested that the provisions could be more uniform without as much cross-referencing. With regard to the OSHA programs, Ms. Sansone explained that to lawyers and program administrators "as effective" would be a comparison of the remedies and penalties available in federal law. CHAIRMAN LEMAN asked if anyone else in Juneau wished to testify on SB 41. Hearing none, Chairman Leman announced that SB 41 would be held until next Tuesday. There being no further business before the committee, the meeting was adjourned at 2:55 p.m.