BILL ANALYSIS H.B. 2473 By: Chisum (Brown) Natural Resources 5-8-95 Senate Committee Report (Unamended) BACKGROUND Voluntary environmental, health and safety audits are becoming increasingly important as a tool for responsible businesses to determine whether they are in compliance with complex and stringent laws regulating environmental, health, and safety laws. There are not enough state and federal enforcement personnel to ensure that all laws are complied with by the companies. This situation has caused the state to encourage businesses to participate in voluntary compliance and audit programs. PURPOSE As proposed, H.B. 2473 establishes provisions to encourage businesses to voluntarily comply with environmental and occupational health and safety laws by performing audits and implementing compliance management systems. RULEMAKING AUTHORITY It is the committee's opinion that this bill does not grant any additional rulemaking authority to a state officer, institution, or agency. SECTION BY SECTION ANALYSIS SECTION 1. SHORT TITLE: Texas Environmental, Health, and Safety Audit and Compliance Management System Privilege Act. SECTION 2. PURPOSE. Sets forth the purpose of this Act. SECTION 3. DEFINITIONS. (a) Defines "audit report," "environmental or health and safety law," "environmental or health and safety audit," "owner and operator," "penalty," "person," and "regulated facility or operation." (b) Provides that a person acts intentionally for purposes of this Act if the person acts intentionally within the meaning of Section 6.03, Penal Code. (c) Provides that for purposes of this Act, a person acts knowingly, or with knowledge, with respect to the nature of the person's conduct when the person is aware of the person's physical acts. Provides that a person acts knowingly, or with knowledge, with respect to the result of the person's conduct when the person is aware that the conduct will cause the result. (d) Provides that a person acts recklessly or is reckless for purposes of this Act if the person acts recklessly or is reckless within the meaning of Section 6.03, Penal Code. (e) Requires the term "environmental or health and safety law" to be construed broadly to fully implement the privilege established by this Act. SECTION 4. AUDIT REPORT. (a) Provides that an audit report is a report that includes each document and communication, other than those set forth in Section 8 of this Act, from an environmental or health and safety audit (audit). (b) Sets forth the general components that may be contained in a completed audit report. (c) Authorizes certain types of exhibits and appendices to be contained in an audit report including supporting information collected or developed for the purpose of and in the course of an audit. (d) Provides that each document in an audit report should be labelled with a specific heading. Provides that a failure to label a document does not constitute a waiver of the audit privilege and does not create a presumption that the privilege does not apply. (e) Requires an audit to be completed within a time not to exceed six months unless an extension is approved by the governmental entity with regulatory authority over the regulated facility or operation. SECTION 5. PRIVILEGE. (a) Provides that an audit report is privileged. (b) Provides that except as provided in Sections 6-9, any part of an audit report is privileged and not admissible as evidence or subject to discovery in civil actions, criminal proceedings, or administrative proceedings. (c) Provides that a person, when called or subpoenaed as a witness, cannot be compelled to testify or produce a document related to an audit if the information discloses any item listed in Section 4 that was made part of the preparation of an environmental or health and safety audit report and is considered a privileged part of an audit report; and for purposes of this subsection only, the person is affiliated with the audit or audit results. (d) Authorizes a person who participates in the preparation of an audit and who has actually observed events of violation to testify about those events but prohibits the person from being compelled to testify about the preparation of any privileged part of an audit or any item listed in Section 4. (e) Prohibits an employee of a state agency from requesting, reviewing, or otherwise using an audit report during an agency inspection of a regulated facility or operation, or an activity of a regulated facility or operation. (f) Provides that a party asserting the privilege described in this section has the burden of establishing the applicability of the privilege. SECTION 6. EXCEPTION: WAIVER. (a) Provides that the privilege of this Act does not apply to the extent that the privilege is waived by the owner or operator who prepared the audit report or caused the report to be prepared. (b) Provides that disclosure of an audit report or any information generated by an audit does not waive the privilege established in Section 5 if the disclosure meets certain criteria. (c) Provides that a party to a confidentiality agreement described under Subsection (b)(2) who violates that agreement is liable for damages caused by the disclosure and for any other penalties stipulated in the agreement. (d) Provides that information that is disclosed under Subsection (b)(3) is confidential and is not subject to disclosure under the open records law, Chapter 552, Government Code. Provides that a public entity, public employee, or public official who discloses information in violation of this subsection commits a Class B misdemeanor. Provides that it is an affirmative defense to the dissemination of a report that the report was not clearly labeled. Prohibits the lack of labeling from being raised as a defense if the entity, employee, or official knew that the document was a privileged audit report. SECTION 7. EXCEPTION: DISCLOSURE REQUIRED BY COURT OR ADMINISTRATIVE HEARINGS OFFICIAL. (a) Authorizes a court or administrative hearings official with competent jurisdiction to require disclosure of a portion of an audit report in a civil, criminal, or administrative proceeding if the court or administrative hearings official makes certain determinations after an in-camera review consistent with the appropriate rules of procedure. (b) Provides that a party seeking disclosure under this section has the burden of proving that Subsection (a)(1), (2), or (3) of this section applies. (c) Provides that notwithstanding Chapter 2001, Government Code (Administrative Procedure Act), a decision of an administrative hearings official under Subsection (a)(1),(2), and (3) is directly appealable to a court of competent jurisdiction without disclosure of the audit to any person unless so ordered by the court. (d) Subjects a person claiming the privilege to sanctions if the court finds that the person intentionally or knowingly claimed the privilege for unprotected information. (e) Subjects a determination of court to interlocutory appeal to an appropriate appellate court. SECTION 8. NONPRIVILEGED MATERIALS. (a) Sets forth information to which the privilege described under this Act does not apply. (b) Provides that this section does not limit the right of a person to agree to conduct and disclose an audit report. SECTION 9. COURT REVIEW AND DISCLOSURE. (a) Authorizes the state's attorney to obtain an audit report for which a privilege is asserted under this Act under a search warrant, criminal subpoena, or discovery as allowed by the Code of Criminal Procedure and the Texas Rules of Criminal Procedure if there is reasonable cause to believe a criminal offense has been committed under an environmental or health and safety law. (b) Requires the state's attorney to seal the audit report on receipt and may not review or disclose the contents of the report. (c) Authorizes the owner or operator who prepared the report or for whom the report was prepared to file by the 30th day after the date an audit report is received, with the court of competent jurisdiction a petition requesting an in-camera review to determine whether all or a portion of the report is privileged or subject to disclosure. Provides that an owner or operator who fails to file a petition within the specified period waives the privilege. (d) Requires the court, on the filing of a petition under Subsection (c), to issue an order that schedules the in-camera review for a certain date; and authorizes the state's attorney to remove the seal from the report to review it. (e) Authorizes the state's attorney to consult with enforcement agencies regarding the contents of the report to prepare for the in-camera review. (f) Sets forth provisions regarding the information used in preparation for the in-camera review under Subsection (e). (g) Provides that Subsection (f) of this section does not apply to information a court finds to be subject to disclosure. (h) Requires a court or the appropriate administrative official to suppress evidence offered in any civil, criminal, or administrative proceeding that arises or is derived from review, disclosure, or use of information obtained under this section if the review, disclosure, or use is not authorized under this section. Provides that a party allegedly failing to comply with this section has the burden of proving that evidence offered did not arise and was not delivered from the unauthorized review, disclosure, or use. (i) Authorizes the parties to stipulate to entry of an order directing that specific information contained in an audit report is or is not subject to the privilege. (j) Authorizes a court to compel the disclosure of only those portions of an audit report relevant to issues in dispute in the proceedings. (k) Authorizes a court to find a person who discloses information in violation of this section in contempt of court and to order other appropriate relief. SECTION 10. VOLUNTARY DISCLOSURE; IMMUNITY. (a) Provides that except as provided by this section, a person who makes a voluntary disclosure of a violation of an environmental or health and safety law is immune from an administrative, civil, or criminal penalty for the violation disclosed. (b) Sets forth acts that make disclosure voluntary. (c) Provides that a disclosure is not voluntary for purposes of this section if it is a report to a regulatory agency required solely by a specific condition of an order or decree. (d) Provides that the immunity established under Subsection (a) of this section does not apply under certain circumstances and authorizes an administrative, civil, or criminal penalty to be imposed under applicable law if the person or the person's management or agent intentionally or knowingly committed or contributed materially to the disclosed violation; or the person or a member of the person's management who made the disclosure recklessly committed the violation resulting in substantial injury to one or more persons at the site or off-site harm to persons, property, or the environment. (e) Sets forth the appropriate mitigating factors of a penalty that is imposed under Subsection (d). (f) Provides that in a civil, administrative, or criminal enforcement action brought against a person for a violation for which the person claims to have made a voluntary disclosure, the person claiming the immunity has the burden of establishing a prima facie case that the disclosure was voluntary. Provides that after the person claiming the immunity establishes a prima facie case of voluntary disclosure other than a case in which under Subsection (d) of this section immunity does not apply, the enforcement authority has the burden of rebutting the presumption by a preponderance of the evidence or, in a criminal case, by proof beyond a reasonable doubt. (g) Requires a facility conducting an audit to give notice of the audit to an appropriate regulatory agency in order to receive immunity. Sets forth requirements and authorized content for the notice. (h) Provides that the immunity does not apply if a court or administrative law judge finds that the person claiming the immunity has, after the effective date, repeatedly or continuously committed serious violations and not attempted to bring the facility into compliance so as to constitute a pattern of disregard of environmental or health and safety laws. Defines "pattern." (i) Requires a violation that has been voluntarily disclosed and to which an immunity applies to be identified in a compliance history report as being voluntarily disclosed. SECTION 11. CIRCUMVENTION BY RULE PROHIBITED. Prohibits a regulatory agency from adopting a rule or imposing a condition that circumvents the purpose of this Act. SECTION 12. APPLICABILITY. Makes application of this Act prospective. SECTION 13. RELATIONSHIP TO OTHER RECOGNIZED PRIVILEGES. Provides that this Act does not limit, waive, or abrogate the scope of nature of any statutory or common law privilege, including the work product doctrine and the attorney-client privilege. SECTION 14. AMENDMENT; OPEN RECORDS LAW. Amends Chapter 552, Government Code, by adding Section 552.124, as follows: Sec. 552.124. EXCEPTION: CERTAIN AUDITS. Provides that any documents or information privileged under the Texas Environmental, Health, and Safety Audit Privilege Act are excepted from the requirements of Section 552.021. SECTION 15 Emergency clause. Effective date: upon passage.