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. 1-4 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 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. 7-7 SECTION 7. EXCEPTION: DISCLOSURE REQUIRED BY COURT OR 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. 13-21 SECTION 13. RELATIONSHIP TO OTHER RECOGNIZED PRIVILEGES. 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.