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.
    1-5        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.
    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.
  15-14  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.