H.B. No. 2473
1-1 AN ACT
1-2 relating to audits to determine compliance with certain laws,
1-3 rules, and regulations; providing penalties.
1-4 BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF TEXAS:
1-5 SECTION 1. SHORT TITLE. This Act may be cited as the Texas
1-6 Environmental, Health, and Safety Audit Privilege Act.
1-7 SECTION 2. PURPOSE. The purpose of this Act is to encourage
1-8 voluntary compliance with environmental and occupational health and
1-9 safety laws.
1-10 SECTION 3. DEFINITIONS. (a) In this Act:
1-11 (1) "Audit report" means an audit report described by
1-12 Section 4 of this Act.
1-13 (2) "Environmental or health and safety law" means:
1-14 (A) a federal or state environmental or
1-15 occupational health and safety law; or
1-16 (B) a rule, regulation, or regional or local law
1-17 adopted in conjunction with a law described by Paragraph (A) of
1-18 this subdivision.
1-19 (3) "Environmental or health and safety audit" means a
1-20 systematic voluntary evaluation, review, or assessment of
1-21 compliance with environmental or health and safety laws or any
1-22 permit issued under those laws conducted by an owner or operator,
1-23 an employee of the owner or operator, or an independent contractor
1-24 of:
2-1 (A) a regulated facility or operation; or
2-2 (B) an activity at a regulated facility or
2-3 operation.
2-4 (4) "Owner or operator" means a person who owns or
2-5 operates a regulated facility or operation.
2-6 (5) "Penalty" means an administrative, civil, or
2-7 criminal sanction imposed by the state to punish a person for a
2-8 violation of a statute or rule. The term does not include a
2-9 technical or remedial provision ordered by a regulatory authority.
2-10 (6) "Person" means an individual, corporation,
2-11 business trust, partnership, association, and any other legal
2-12 entity.
2-13 (7) "Regulated facility or operation" means a facility
2-14 or operation that is regulated under an environmental or health and
2-15 safety law.
2-16 (b) A person acts intentionally for purposes of this Act if
2-17 the person acts intentionally within the meaning of Section 6.03,
2-18 Penal Code.
2-19 (c) For purposes of this Act, a person acts knowingly, or
2-20 with knowledge, with respect to the nature of the person's conduct
2-21 when the person is aware of the person's physical acts. A person
2-22 acts knowingly, or with knowledge, with respect to the result of
2-23 the person's conduct when the person is aware that the conduct will
2-24 cause the result.
2-25 (d) A person acts recklessly or is reckless for purposes of
2-26 this Act if the person acts recklessly or is reckless within the
2-27 meaning of Section 6.03, Penal Code.
3-1 (e) To fully implement the privilege established by this
3-2 Act, the term "environmental or health and safety law" shall be
3-3 construed broadly.
3-4 SECTION 4. AUDIT REPORT. (a) An audit report is a report
3-5 that includes each document and communication, other than those set
3-6 forth in Section 8 of this Act, produced from an environmental or
3-7 health and safety audit.
3-8 (b) General components that may be contained in a completed
3-9 audit report include:
3-10 (1) a report prepared by an auditor, monitor, or
3-11 similar person, which may include:
3-12 (A) a description of the scope of the audit;
3-13 (B) the information gained in the audit and
3-14 findings, conclusions, and recommendations; and
3-15 (C) exhibits and appendices;
3-16 (2) memoranda and documents analyzing all or a portion
3-17 of the materials described by Subdivision (1) of this subsection or
3-18 discussing implementation issues; and
3-19 (3) an implementation plan or tracking system to
3-20 correct past noncompliance, improve current compliance, or prevent
3-21 future noncompliance.
3-22 (c) The types of exhibits and appendices that may be
3-23 contained in an audit report include supporting information that is
3-24 collected or developed for the primary purpose of and in the course
3-25 of an environmental or health and safety audit, including:
3-26 (1) interviews with current or former employees;
3-27 (2) field notes and records of observations;
4-1 (3) findings, opinions, suggestions, conclusions,
4-2 guidance, notes, drafts, and memoranda;
4-3 (4) legal analyses;
4-4 (5) drawings;
4-5 (6) photographs;
4-6 (7) laboratory analyses and other analytical data;
4-7 (8) computer-generated or electronically recorded
4-8 information;
4-9 (9) maps, charts, graphs, and surveys; and
4-10 (10) other communications associated with an
4-11 environmental or health and safety audit.
4-12 (d) To facilitate identification, each document in an audit
4-13 report should be labeled "COMPLIANCE REPORT: PRIVILEGED DOCUMENT,"
4-14 or labeled with words of similar import. Failure to label a
4-15 document under this section does not constitute a waiver of the
4-16 audit privilege or create a presumption that the privilege does or
4-17 does not apply.
4-18 (e) Once initiated, an audit shall be completed within a
4-19 reasonable time not to exceed six months unless an extension is
4-20 approved by the governmental entity with regulatory authority over
4-21 the regulated facility or operation based on reasonable grounds.
4-22 SECTION 5. PRIVILEGE. (a) An audit report is privileged as
4-23 provided in this section.
4-24 (b) Except as provided in Sections 6, 7, 8, and 9 of this
4-25 Act, any part of an audit report is privileged and is not
4-26 admissible as evidence or subject to discovery in:
4-27 (1) a civil action, whether legal or equitable;
5-1 (2) a criminal proceeding; or
5-2 (3) an administrative proceeding.
5-3 (c) A person, when called or subpoenaed as a witness, cannot
5-4 be compelled to testify or produce a document related to an
5-5 environmental or health and safety audit if:
5-6 (1) the testimony or document discloses any item
5-7 listed in Section 4 of this Act that was made as part of the
5-8 preparation of an environmental or health and safety audit report
5-9 and that is addressed in a privileged part of an audit report; and
5-10 (2) for purposes of this subsection only, the person
5-11 is:
5-12 (A) a person who conducted any portion of the
5-13 audit but did not personally observe the physical events;
5-14 (B) a person to whom the audit results are
5-15 disclosed under Section 6(b) of this Act; or
5-16 (C) a custodian of the audit results.
5-17 (d) A person who conducts or participates in the preparation
5-18 of an environmental or health and safety audit and who has actually
5-19 observed physical events of violation, may testify about those
5-20 events but may not be compelled to testify about or produce
5-21 documents related to the preparation of or any privileged part of
5-22 an environmental or health and safety audit or any item listed in
5-23 Section 4 of this Act.
5-24 (e) An employee of a state agency may not request, review,
5-25 or otherwise use an audit report during an agency inspection of a
5-26 regulated facility or operation, or an activity of a regulated
5-27 facility or operation.
6-1 (f) A party asserting the privilege described in this
6-2 section has the burden of establishing the applicability of the
6-3 privilege.
6-4 SECTION 6. EXCEPTION: WAIVER. (a) The privilege described
6-5 by Section 5 of this Act does not apply to the extent the privilege
6-6 is expressly waived by the owner or operator who prepared the audit
6-7 report or caused the report to be prepared.
6-8 (b) Disclosure of an audit report or any information
6-9 generated by an environmental or health and safety audit does not
6-10 waive the privilege established by Section 5 of this Act if the
6-11 disclosure:
6-12 (1) is made to address or correct a matter raised by
6-13 the environmental or health and safety audit and is made only to:
6-14 (A) a person employed by the owner or operator,
6-15 including temporary and contract employees;
6-16 (B) a legal representative of the owner or
6-17 operator;
6-18 (C) an officer or director of the regulated
6-19 facility or operation or a partner of the owner or operator; or
6-20 (D) an independent contractor retained by the
6-21 owner or operator;
6-22 (2) is made under the terms of a confidentiality
6-23 agreement between the person for whom the audit report was prepared
6-24 or the owner or operator of the audited facility or operation and:
6-25 (A) a partner or potential partner of the owner
6-26 or operator of the facility or operation;
6-27 (B) a transferee or potential transferee of the
7-1 facility or operation;
7-2 (C) a lender or potential lender for the
7-3 facility or operation;
7-4 (D) a governmental official or a state or
7-5 federal agency; or
7-6 (E) a person or entity engaged in the business
7-7 of insuring, underwriting, or indemnifying the facility or
7-8 operation; or
7-9 (3) is made under a claim of confidentiality to a
7-10 governmental official or agency by the person for whom the audit
7-11 report was prepared or by the owner or operator.
7-12 (c) A party to a confidentiality agreement described in
7-13 Subsection (b)(2) of this section who violates that agreement is
7-14 liable for damages caused by the disclosure and for any other
7-15 penalties stipulated in the confidentiality agreement.
7-16 (d) Information that is disclosed under Subsection (b)(3) of
7-17 this section is confidential and is not subject to disclosure under
7-18 Chapter 552, Government Code. A public entity, public employee, or
7-19 public official who discloses information in violation of this
7-20 subsection commits an offense. An offense under this subsection is
7-21 a Class B misdemeanor. It is an affirmative defense to the
7-22 clerical dissemination of a privileged audit report that the report
7-23 was not clearly labeled "COMPLIANCE REPORT: PRIVILEGED DOCUMENT"
7-24 or words of similar import. The lack of labeling may not be raised
7-25 as a defense if the entity, employee, or official knew or had
7-26 reason to know that the document was a privileged audit report.
7-27 SECTION 7. EXCEPTION: DISCLOSURE REQUIRED BY COURT OR
8-1 ADMINISTRATIVE HEARINGS OFFICIAL. (a) A court or administrative
8-2 hearings official with competent jurisdiction may require
8-3 disclosure of a portion of an audit report in a civil, criminal, or
8-4 administrative proceeding if the court or administrative hearings
8-5 official determines, after an in camera review consistent with the
8-6 appropriate rules of procedure, that:
8-7 (1) the privilege is asserted for a fraudulent
8-8 purpose;
8-9 (2) the portion of the audit report is not subject to
8-10 the privilege under Section 8 of this Act; or
8-11 (3) the portion of the audit report shows evidence of
8-12 noncompliance with an environmental or health and safety law and
8-13 appropriate efforts to achieve compliance with the law were not
8-14 promptly initiated and pursued with reasonable diligence after
8-15 discovery of noncompliance.
8-16 (b) A party seeking disclosure under this section has the
8-17 burden of proving that Subsection (a)(1), (2), or (3) of this
8-18 section applies.
8-19 (c) Notwithstanding Chapter 2001, Government Code, a
8-20 decision of an administrative hearings official under Subsection
8-21 (a)(1), (2), or (3) of this section is directly appealable to a
8-22 court of competent jurisdiction without disclosure of the audit
8-23 report to any person unless so ordered by the court.
8-24 (d) A person claiming the privilege is subject to sanctions
8-25 as provided by Rule 215 of the Texas Rules of Civil Procedure if
8-26 the court finds that the person intentionally or knowingly claimed
8-27 the privilege for unprotected information as provided in Section 8
9-1 of this Act.
9-2 (e) A determination of a court under this section is subject
9-3 to interlocutory appeal to an appropriate appellate court.
9-4 SECTION 8. NONPRIVILEGED MATERIALS. (a) The privilege
9-5 described in this Act does not apply to:
9-6 (1) a document, communication, datum, or report or
9-7 other information required by a regulatory agency to be collected,
9-8 developed, maintained, or reported under a federal or state
9-9 environmental or health and safety law;
9-10 (2) information obtained by observation, sampling, or
9-11 monitoring by a regulatory agency; or
9-12 (3) information obtained from a source not involved in
9-13 the preparation of the environmental or health and safety audit
9-14 report.
9-15 (b) This section does not limit the right of a person to
9-16 agree to conduct and disclose an audit report.
9-17 SECTION 9. COURT REVIEW AND DISCLOSURE. (a) If there is
9-18 reasonable cause to believe a criminal offense has been committed
9-19 under an environmental or health and safety law, the attorney
9-20 representing the state may obtain an audit report for which a
9-21 privilege is asserted under this Act under a search warrant,
9-22 criminal subpoena, or discovery as allowed by the Code of Criminal
9-23 Procedure and the Texas Rules of Criminal Procedure.
9-24 (b) On receipt of the audit report, the attorney
9-25 representing the state shall seal the report and may not review or
9-26 disclose the contents of the report.
9-27 (c) Not later than the 30th day after the date an audit
10-1 report is received under Subsection (a), the owner or operator who
10-2 prepared the report or for whom the report was prepared may file
10-3 with a court of competent jurisdiction a petition requesting an in
10-4 camera review to determine whether all or a portion of the report
10-5 is privileged or is subject to disclosure under this Act. An owner
10-6 or operator who fails to file a petition under this subsection
10-7 within the period specified by this subsection waives the
10-8 privilege.
10-9 (d) On the filing of a petition under Subsection (c) of this
10-10 section, the court shall issue an order that:
10-11 (1) schedules the in camera review for a date not
10-12 later than the 45th day after the date the petition is filed; and
10-13 (2) authorizes the attorney representing the state to
10-14 remove the seal from the report to review the report, subject to
10-15 appropriate limitations on distribution or disclosure of the report
10-16 that are specified in the order to protect against unnecessary
10-17 disclosure.
10-18 (e) The attorney representing the state may consult with
10-19 enforcement agencies regarding the contents of the report as
10-20 necessary to prepare for the in camera review.
10-21 (f) Information used in preparation for the in camera review
10-22 under Subsection (e) of this section:
10-23 (1) is confidential;
10-24 (2) may not be used in any investigation or legal
10-25 proceeding; and
10-26 (3) is not subject to disclosure under Chapter 552,
10-27 Government Code.
11-1 (g) Subsection (f) of this section does not apply to
11-2 information a court finds to be subject to disclosure.
11-3 (h) On the motion of a party, a court or the appropriate
11-4 administrative official shall suppress evidence offered in any
11-5 civil, criminal, or administrative proceeding that arises or is
11-6 derived from review, disclosure, or use of information obtained
11-7 under this section if the review, disclosure, or use is not
11-8 authorized under this section. A party allegedly failing to comply
11-9 with this section has the burden of proving that the evidence
11-10 offered did not arise and was not derived from the unauthorized
11-11 review, disclosure, or use.
11-12 (i) The parties may stipulate to entry of an order directing
11-13 that specific information contained in an audit report is or is not
11-14 subject to the privilege.
11-15 (j) A court may compel the disclosure of only those portions
11-16 of an audit report relevant to issues in dispute in the proceeding.
11-17 (k) A court may find a person who discloses information in
11-18 violation of this section in contempt of court and may order other
11-19 appropriate relief.
11-20 SECTION 10. VOLUNTARY DISCLOSURE; IMMUNITY. (a) Except as
11-21 provided by this section, a person who makes a voluntary disclosure
11-22 of a violation of an environmental or health and safety law is
11-23 immune from an administrative, civil, or criminal penalty for the
11-24 violation disclosed.
11-25 (b) A disclosure is voluntary only if:
11-26 (1) the disclosure was made promptly after knowledge
11-27 of the information disclosed is obtained by the person;
12-1 (2) the disclosure was made in writing by certified
12-2 mail to an agency that has regulatory authority with regard to the
12-3 violation disclosed;
12-4 (3) an investigation of the violation was not
12-5 initiated or the violation was not independently detected by an
12-6 agency with enforcement jurisdiction before the disclosure was made
12-7 using certified mail;
12-8 (4) the disclosure arises out of a voluntary
12-9 environmental or health and safety audit;
12-10 (5) the person who makes the disclosure initiates an
12-11 appropriate effort to achieve compliance, pursues that effort with
12-12 due diligence, and corrects the noncompliance within a reasonable
12-13 time;
12-14 (6) the person making the disclosure cooperates with
12-15 the appropriate agency in connection with an investigation of the
12-16 issues identified in the disclosure; and
12-17 (7) the violation did not result in injury to one or
12-18 more persons at the site or substantial off-site harm to persons,
12-19 property, or the environment.
12-20 (c) A disclosure is not voluntary for purposes of this
12-21 section if it is a report to a regulatory agency required solely by
12-22 a specific condition of an enforcement order or decree.
12-23 (d) The immunity established by Subsection (a) of this
12-24 section does not apply and an administrative, civil, or criminal
12-25 penalty may be imposed under applicable law if:
12-26 (1) the person who made the disclosure intentionally
12-27 or knowingly committed or was responsible within the meaning of
13-1 Section 7.02, Penal Code, for the commission of the disclosed
13-2 violation;
13-3 (2) the person who made the disclosure recklessly
13-4 committed or was responsible within the meaning of Section 7.02,
13-5 Penal Code, for the commission of the disclosed violation and the
13-6 violation resulted in substantial injury to one or more persons at
13-7 the site or off-site harm to persons, property, or the environment;
13-8 (3) the offense was committed intentionally or
13-9 knowingly by a member of the person's management or an agent of the
13-10 person and the person's policies or lack of prevention systems
13-11 contributed materially to the occurrence of the violation; or
13-12 (4) the offense was committed recklessly by a member
13-13 of the person's management or an agent of the person, the person's
13-14 policies or lack of prevention systems contributed materially to
13-15 the occurrence of the violation, and the violation resulted in
13-16 substantial injury to one or more persons at the site or off-site
13-17 harm to persons, property, or the environment.
13-18 (e) A penalty that is imposed under Subsection (d) of this
13-19 section should, to the extent appropriate, be mitigated by factors
13-20 such as:
13-21 (1) the voluntariness of the disclosure;
13-22 (2) efforts by the disclosing party to conduct
13-23 environmental or health and safety audits;
13-24 (3) remediation;
13-25 (4) cooperation with government officials
13-26 investigating the disclosed violation; or
13-27 (5) other relevant considerations.
14-1 (f) In a civil, administrative, or criminal enforcement
14-2 action brought against a person for a violation for which the
14-3 person claims to have made a voluntary disclosure, the person
14-4 claiming the immunity has the burden of establishing a prima facie
14-5 case that the disclosure was voluntary. After the person claiming
14-6 the immunity establishes a prima facie case of voluntary
14-7 disclosure, other than a case in which under Subsection (d) of this
14-8 section immunity does not apply, the enforcement authority has the
14-9 burden of rebutting the presumption by a preponderance of the
14-10 evidence or, in a criminal case, by proof beyond a reasonable
14-11 doubt.
14-12 (g) In order to receive immunity under this section, a
14-13 facility conducting an environmental or health and safety audit
14-14 under this Act must give notice to an appropriate regulatory agency
14-15 of the fact that it is planning to commence the audit. The notice
14-16 shall specify the facility or portion of the facility to be
14-17 audited, the anticipated time the audit will begin, and the general
14-18 scope of the audit. The notice may provide notification of more
14-19 than one scheduled environmental or health and safety audit at a
14-20 time.
14-21 (h) The immunity under this section does not apply if a
14-22 court or administrative law judge finds that the person claiming
14-23 the immunity has, after the effective date of this Act,
14-24 (1) repeatedly or continuously committed serious violations, and
14-25 (2) not attempted to bring the facility or operation into
14-26 compliance, so as to constitute a pattern of disregard of
14-27 environmental or health and safety laws. In order to be considered
15-1 a "pattern," the person must have committed a series of violations
15-2 that were due to separate and distinct events within a three-year
15-3 period at the same facility or operation.
15-4 (i) A violation that has been voluntarily disclosed and to
15-5 which immunity applies must be identified in a compliance history
15-6 report as being voluntarily disclosed.
15-7 SECTION 11. CIRCUMVENTION BY RULE PROHIBITED. A regulatory
15-8 agency may not adopt a rule or impose a condition that circumvents
15-9 the purpose of this Act.
15-10 SECTION 12. APPLICABILITY. The privilege created by this
15-11 Act applies to environmental or health and safety audits that are
15-12 conducted on or after the effective date of this Act.
15-13 SECTION 13. RELATIONSHIP TO OTHER RECOGNIZED PRIVILEGES.
15-14 This Act does not limit, waive, or abrogate the scope or nature of
15-15 any statutory or common law privilege, including the work product
15-16 doctrine and the attorney-client privilege.
15-17 SECTION 14. AMENDMENT. Subchapter C, Chapter 552,
15-18 Government Code, is amended by adding Section 552.124 to read as
15-19 follows:
15-20 Sec. 552.124. EXCEPTION: CERTAIN AUDITS. Any documents or
15-21 information privileged under the Texas Environmental, Health, and
15-22 Safety Audit Privilege Act are excepted from the requirements of
15-23 Section 552.021.
15-24 SECTION 15. EMERGENCY. The importance of this legislation
15-25 and the crowded condition of the calendars in both houses create an
15-26 emergency and an imperative public necessity that the
15-27 constitutional rule requiring bills to be read on three several
16-1 days in each house be suspended, and this rule is hereby suspended,
16-2 and that this Act take effect and be in force from and after its
16-3 passage, and it is so enacted.