74R9485 E
          By Chisum, Duncan, Stiles, Talton,
             Uher, et al.                                       H.B. No. 2473
          Substitute the following for H.B. No. 2473:
          By Jackson                                        C.S.H.B. No. 2473
                                 A BILL TO BE ENTITLED
    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  voluntary evaluation, review, or assessment of compliance with
   1-21  environmental or health and safety laws or any permit issued under
   1-22  those laws conducted by an owner or operator, an employee of the
   1-23  owner or operator, or an independent contractor of:
   1-24                    (A)  a regulated facility or operation; or
    2-1                    (B)  an activity at a regulated facility or
    2-2  operation.
    2-3              (4)  "Owner or operator" means a person who owns or
    2-4  operates a regulated facility or operation.
    2-5              (5)  "Penalty" means an administrative, civil, or
    2-6  criminal sanction imposed by the state to punish a person for a
    2-7  violation of a statute or rule.  The term does not include a
    2-8  technical or remedial provision ordered by a regulatory authority.
    2-9              (6)  "Person" means an individual, corporation,
   2-10  business trust, partnership, association, and any other legal
   2-11  entity.
   2-12              (7)  "Regulated facility or operation" means a facility
   2-13  or operation that is regulated under an environmental or health and
   2-14  safety law.
   2-15        (b)  A person acts intentionally for purposes of this Act if
   2-16  the person acts intentionally within the meaning of Section 6.03,
   2-17  Penal Code.
   2-18        (c)  For purposes of this Act, a person acts knowingly, or
   2-19  with knowledge, with respect to the nature of the person's conduct
   2-20  when the person is aware of the person's physical acts.  A person
   2-21  acts knowingly, or with knowledge, with respect to the result of
   2-22  the person's conduct when the person is aware that the conduct will
   2-23  cause the result.
   2-24        (d)  A person acts recklessly or is reckless for purposes of
   2-25  this Act if the person acts recklessly or is reckless within the
   2-26  meaning of Section 6.03, Penal Code.
   2-27        (e)  To fully implement the privilege established by this
    3-1  Act, the term "environmental or health and safety law" shall be
    3-2  construed broadly.
    3-3        SECTION 4.  AUDIT REPORT.  (a)  An audit report is a report
    3-4  that includes each document and communication, other than those set
    3-5  forth in Section 8 of this Act, produced from an environmental or
    3-6  health and safety audit.
    3-7        (b)  General components that may be contained in a completed
    3-8  audit report include:
    3-9              (1)  a report prepared by an auditor, monitor, or
   3-10  similar person, which may include:
   3-11                    (A)  a description of the scope of the audit;
   3-12                    (B)  the information gained in the audit and
   3-13  findings, conclusions, and recommendations; and
   3-14                    (C)  exhibits and appendices;
   3-15              (2)  memoranda and documents analyzing all or a portion
   3-16  of the materials described by Subdivision (1) of this subsection or
   3-17  discussing implementation issues; and
   3-18              (3)  an implementation plan or tracking system to
   3-19  correct past noncompliance, improve current compliance, or prevent
   3-20  future noncompliance.
   3-21        (c)  The types of exhibits and appendices that may be
   3-22  contained in an audit report include supporting information that is
   3-23  collected or developed for the primary purpose of and in the course
   3-24  of an environmental or health and safety audit, including:
   3-25              (1)  interviews with current or former employees;
   3-26              (2)  field notes and records of observations;
   3-27              (3)  findings, opinions, suggestions, conclusions,
    4-1  guidance, notes, drafts, and memoranda;
    4-2              (4)  legal analyses;
    4-3              (5)  drawings;
    4-4              (6)  photographs;
    4-5              (7)  laboratory analyses and other analytical data;
    4-6              (8)  computer-generated or electronically recorded
    4-7  information;
    4-8              (9)  maps, charts, graphs, and surveys; and
    4-9              (10)  other communications associated with an
   4-10  environmental or health and safety audit.
   4-11        (d)  To facilitate identification, each document in an audit
   4-12  report should be labeled "COMPLIANCE REPORT:  PRIVILEGED DOCUMENT,"
   4-13  or labeled with words of similar import.  Failure to label a
   4-14  document under this section does not constitute a waiver of the
   4-15  audit privilege or create a presumption that the privilege does or
   4-16  does not apply.
   4-17        SECTION 5.  PRIVILEGE.  (a)  An audit report is privileged as
   4-18  provided in this section.
   4-19        (b)  Except as provided in Sections 6, 7, 8, and 9 of this
   4-20  Act, any part of an audit report is privileged and is not
   4-21  admissible as evidence or subject to discovery in:
   4-22              (1)  a civil action, whether legal or equitable;
   4-23              (2)  a criminal proceeding; or
   4-24              (3)  an administrative proceeding.
   4-25        (c)  A person, when called or subpoenaed as a witness, cannot
   4-26  be compelled to testify or produce a document related to an
   4-27  environmental or health and safety audit if:
    5-1              (1)  the testimony or document discloses any item
    5-2  listed in Section 4 of this Act that was made as part of the
    5-3  preparation of an environmental or health and safety audit report
    5-4  and that is addressed in a privileged part of an audit report; and
    5-5              (2)  for purposes of this subsection only, the person
    5-6  is:
    5-7                    (A)  a person who conducted any portion of the
    5-8  audit but did not personally observe the physical events;
    5-9                    (B)  a person to whom the audit results are
   5-10  disclosed under Section 6(b) of this Act; or
   5-11                    (C)  a custodian of the audit results.
   5-12        (d)  An employee of a state agency may not request, review,
   5-13  or otherwise use an audit report during an agency inspection of a
   5-14  regulated facility or operation, or an activity of a regulated
   5-15  facility or operation.
   5-16        (e)  A party asserting the privilege described in this
   5-17  section has the burden of establishing the applicability of the
   5-18  privilege.
   5-19        SECTION 6.  EXCEPTION:  WAIVER.  (a)  The privilege described
   5-20  by Section 5 of this Act does not apply to the extent the privilege
   5-21  is expressly waived by the owner or operator who prepared the audit
   5-22  report or caused the report to be prepared.
   5-23        (b)  Disclosure of an audit report or any information
   5-24  generated by an environmental or health and safety audit does not
   5-25  waive the privilege established by Section 5 of this Act if the
   5-26  disclosure:
   5-27              (1)  is made to address or correct a matter raised by
    6-1  the environmental or health and safety audit and is made only to:
    6-2                    (A)  a person employed by the owner or operator,
    6-3  including temporary and contract employees;
    6-4                    (B)  a legal representative of the owner or
    6-5  operator;
    6-6                    (C)  an  officer or director of the regulated
    6-7  facility or operation or a partner of the owner or operator; or
    6-8                    (D)  an independent contractor retained by the
    6-9  owner or operator;
   6-10              (2)  is made under the terms of a confidentiality
   6-11  agreement between the person for whom the audit report was prepared
   6-12  or the owner or operator of the audited facility or operation and:
   6-13                    (A)  a partner or potential partner of the owner
   6-14  or operator of the facility or operation;
   6-15                    (B)  a transferee or potential transferee of the
   6-16  facility or operation;
   6-17                    (C)  a lender or potential lender for the
   6-18  facility or operation;  or
   6-19                    (D)  a governmental official or a state or
   6-20  federal agency; or
   6-21              (3)  is made under a claim of confidentiality to a
   6-22  governmental official or agency by the person for whom the audit
   6-23  report was prepared or by the owner or operator.
   6-24        (c)  A party to a confidentiality agreement described in
   6-25  Subsection (b)(2) of this section who violates that agreement is
   6-26  liable for damages caused by the disclosure and for any other
   6-27  penalties stipulated in the confidentiality agreement.
    7-1        (d)  Information that is disclosed under Subsection (b)(3) of
    7-2  this section is confidential and is not subject to disclosure under
    7-3  Chapter 552, Government Code. A public entity, public employee, or
    7-4  public official who discloses information in violation of this
    7-5  subsection commits an offense.  An offense under this subsection is
    7-6  a Class B misdemeanor.
    7-8  ADMINISTRATIVE HEARINGS OFFICIAL.  (a)   A court or administrative
    7-9  hearings official with competent jurisdiction may require
   7-10  disclosure of a portion of an audit report in a civil, criminal, or
   7-11  administrative proceeding if the court or administrative hearings
   7-12  official determines, after an in camera review consistent with the
   7-13  appropriate rules of procedure, that:
   7-14              (1)  the privilege is asserted for a fraudulent
   7-15  purpose;
   7-16              (2)  the portion of the audit report is not subject to
   7-17  the privilege under Section 8 of this Act; or
   7-18              (3)  the portion of the audit report shows evidence of
   7-19  noncompliance with an environmental or health and safety law and
   7-20  appropriate efforts to achieve compliance with the law were not
   7-21  promptly initiated and pursued with reasonable diligence after
   7-22  discovery of noncompliance.
   7-23        (b)  A party seeking disclosure under this section has the
   7-24  burden of proving that Subsection (a)(1), (2), or (3) of this
   7-25  section applies.
   7-26        (c)  Notwithstanding Chapter 2001, Government Code, a
   7-27  decision of an administrative hearings official under Subsection
    8-1  (a)(1), (2), or (3) of this section is directly appealable to a
    8-2  court of competent jurisdiction without disclosure to the
    8-3  administrative tribunal.
    8-4        SECTION 8.  NONPRIVILEGED MATERIALS.  (a)  The privilege
    8-5  described in this Act does not apply to:
    8-6              (1)  a document, communication, datum, or report or
    8-7  other information required by a regulatory agency to be collected,
    8-8  developed, maintained, or reported under a federal or state
    8-9  environmental or health and safety law;
   8-10              (2)  information obtained by observation, sampling, or
   8-11  monitoring by a regulatory agency; or
   8-12              (3)  information obtained from a source not involved in
   8-13  the preparation of the environmental or health and safety audit
   8-14  report.
   8-15        (b)  This section does not limit the right of a person to
   8-16  agree to conduct and disclose an audit report.
   8-17        SECTION 9.  COURT REVIEW AND DISCLOSURE.  (a)  If there is
   8-18  reasonable cause to believe a criminal offense has been committed
   8-19  under an environmental or health and safety law, the attorney
   8-20  representing the state may obtain an audit report for which a
   8-21  privilege is asserted under this Act under a search warrant,
   8-22  criminal subpoena, or discovery as allowed by the Code of Criminal
   8-23  Procedure and the Texas Rules of Criminal Procedure.
   8-24        (b)  On receipt of the audit report, the attorney
   8-25  representing the state shall seal the report and may not review or
   8-26  disclose the contents of the report.
   8-27        (c)  Not later than the 30th day after the date an audit
    9-1  report is received under Subsection (a), the owner or operator who
    9-2  prepared the report or for whom the report was prepared may file
    9-3  with a court of competent jurisdiction a petition requesting an in
    9-4  camera review to determine whether all or a portion of the report
    9-5  is privileged or is subject to disclosure under this Act.  An owner
    9-6  or operator who fails to file a petition under this subsection
    9-7  within the period specified by this subsection waives the
    9-8  privilege.
    9-9        (d)  On the filing of a petition under Subsection (c) of this
   9-10  section, the court shall issue an order that:
   9-11              (1)  schedules the in camera review for a date not
   9-12  later than the 45th day after the date the petition is filed; and
   9-13              (2)  authorizes the attorney representing the state to
   9-14  remove the seal from the report to review the report, subject to
   9-15  appropriate limitations on distribution or disclosure of the report
   9-16  that are specified in the order to protect against unnecessary
   9-17  disclosure.
   9-18        (e)  The attorney representing the state may consult with
   9-19  enforcement agencies regarding the contents of the report as
   9-20  necessary to prepare for the in camera review.
   9-21        (f)  Information used in preparation for the in camera review
   9-22  under Subsection (e) of this section:
   9-23              (1)  is confidential;
   9-24              (2)  may not be used in any investigation or legal
   9-25  proceeding; and
   9-26              (3)  is not subject to disclosure under Chapter 552,
   9-27  Government Code.
   10-1        (g)  Subsection (f) of this section does not apply to
   10-2  information a court finds to be subject to disclosure.
   10-3        (h)  On the motion of a party, a court or the appropriate
   10-4  administrative official shall suppress evidence offered in any
   10-5  civil, criminal, or administrative proceeding that arises or is
   10-6  derived from review, disclosure, or use of information obtained
   10-7  under this section if the review, disclosure, or use is not
   10-8  authorized under this section.  A party allegedly failing to comply
   10-9  with this section has the burden of proving that the evidence
  10-10  offered did not arise and was not derived from the unauthorized
  10-11  review, disclosure, or use.
  10-12        (i)  The parties may stipulate to entry of an order directing
  10-13  that specific information contained in an audit report is or is not
  10-14  subject to the privilege.
  10-15        (j)  A court may compel the disclosure of only those portions
  10-16  of an audit report relevant to issues in dispute in the proceeding.
  10-17        (k)  A person commits an offense if the person:
  10-18              (1)  discloses information in violation of Subsection
  10-19  (b) or (f) of this section; or
  10-20              (2)  knowingly discloses information provided to the
  10-21  person in violation of this section.
  10-22        (l)  An offense under Subsection (k) of this section is a
  10-23  Class B misdemeanor.
  10-24        (m)  A court may find a person who discloses information in
  10-25  violation of this section in contempt of court and may order other
  10-26  appropriate relief.
  10-27        SECTION 10.  VOLUNTARY DISCLOSURE; IMMUNITY.  (a)  Except as
   11-1  provided by this section, a person who makes a voluntary disclosure
   11-2  of a violation of an environmental or health and safety law is
   11-3  immune from an administrative, civil, or criminal penalty for the
   11-4  violation disclosed.
   11-5        (b)  A disclosure is voluntary only if:
   11-6              (1)  the disclosure was made promptly after knowledge
   11-7  of the information disclosed is obtained by the person;
   11-8              (2)  the disclosure was made in writing by certified
   11-9  mail to an agency that has regulatory authority with regard to the
  11-10  violation disclosed;
  11-11              (3)  the violation was not independently detected by an
  11-12  agency with enforcement jurisdiction before the disclosure was
  11-13  made;
  11-14              (4)  the disclosure arises out of a voluntary
  11-15  environmental or health and safety audit;
  11-16              (5)  the person who makes the disclosure initiates an
  11-17  appropriate effort to achieve compliance, pursues that effort with
  11-18  due diligence, and corrects the noncompliance within a reasonable
  11-19  time; and
  11-20              (6)  the person making the disclosure cooperates with
  11-21  the appropriate agency in connection with an investigation of the
  11-22  issues identified in the disclosure.
  11-23        (c)  A disclosure is not voluntary for purposes of this
  11-24  section if it is a report to a regulatory agency required solely by
  11-25  a specific condition of an enforcement order or decree.
  11-26        (d)  The immunity established by Subsection (a) of this
  11-27  section does not apply and an administrative, civil, or criminal
   12-1  penalty may be imposed under applicable law if:
   12-2              (1)  the person who made the disclosure intentionally
   12-3  or knowingly committed or was responsible within the meaning of
   12-4  Section 7.02, Penal Code, for the commission of the disclosed
   12-5  violation;
   12-6              (2)  the person who made the disclosure recklessly
   12-7  committed or was responsible within the meaning of Section 7.02,
   12-8  Penal Code, for the commission of the disclosed violation and the
   12-9  violation resulted in substantial off-site harm to persons,
  12-10  property, or the environment;
  12-11              (3)  the offense was committed intentionally or
  12-12  knowingly by a member of the person's management and the person's
  12-13  policies or lack of prevention systems contributed materially to
  12-14  the occurrence of the violation; or
  12-15              (4)  the offense was committed recklessly by a member
  12-16  of the person's management, the person's policies or lack of
  12-17  prevention systems contributed materially to the occurrence of the
  12-18  violation, and the violation resulted in substantial off-site harm
  12-19  to persons, property, or the environment.
  12-20        (e)  A penalty that is imposed under Subsection (d) of this
  12-21  section should, to the extent appropriate, be mitigated by factors
  12-22  such as:
  12-23              (1)  the voluntariness of the disclosure;
  12-24              (2)  efforts by the disclosing party to conduct
  12-25  environmental or health and safety audits;
  12-26              (3)  remediation;
  12-27              (4)  cooperation with government officials
   13-1  investigating the disclosed violation;
   13-2              (5)  relative lack of harm or economic benefit; or
   13-3              (6)  other relevant considerations.
   13-4        (f)  In a civil, administrative, or criminal enforcement
   13-5  action brought against a person for a violation for which the
   13-6  person claims to have made a voluntary disclosure, the person
   13-7  claiming the immunity has the burden of establishing a prima facie
   13-8  case that the disclosure was voluntary.  After the person claiming
   13-9  the immunity establishes a prima facie case of voluntary
  13-10  disclosure, other than a case in which under Subsection (d) of this
  13-11  section immunity does not apply, the enforcement authority has the
  13-12  burden of rebutting the presumption by a preponderance of the
  13-13  evidence or, in a criminal case, by proof beyond a reasonable
  13-14  doubt.
  13-15        SECTION 11.  CIRCUMVENTION BY RULE PROHIBITED.  A regulatory
  13-16  agency may not adopt a rule or impose a condition that circumvents
  13-17  the purpose of this Act.
  13-18        SECTION 12.  APPLICABILITY.  The privilege created by this
  13-19  Act applies to environmental or health and safety audits that are
  13-20  conducted on or after the effective date of this Act.
  13-22  This Act does not limit, waive, or abrogate the scope or nature of
  13-23  any statutory or common law privilege, including the work product
  13-24  doctrine and the attorney-client privilege.
  13-25        SECTION 14.  EMERGENCY.  The importance of this legislation
  13-26  and the crowded condition of the calendars in both houses create an
  13-27  emergency and an imperative public necessity that the
   14-1  constitutional rule requiring bills to be read on three several
   14-2  days in each house be suspended, and this rule is hereby suspended,
   14-3  and that this Act take effect and be in force from and after its
   14-4  passage, and it is so enacted.