By Chisum, Duncan, Stiles, Talton, Uher               H.B. No. 2473
       74R6424 DLF-D
                                 A BILL TO BE ENTITLED
    1-1                                AN ACT
    1-2  relating to audits and compliance management systems to determine
    1-3  compliance with certain laws, rules, and regulations; providing
    1-4  penalties.
    1-6        SECTION 1.  SHORT TITLE.  This Act may be cited as the Texas
    1-7  Environmental, Health, and Safety Audit and Compliance Management
    1-8  System Privilege Act.
    1-9        SECTION 2.  PURPOSE. The purpose of this Act is to encourage
   1-10  voluntary compliance with environmental and occupational health and
   1-11  safety laws.
   1-12        SECTION 3.  DEFINITIONS.  (a)  In this Act:
   1-13              (1)  "Audit or compliance management system report"
   1-14  means an audit or compliance management system report described by
   1-15  Section 4 of this Act.
   1-16              (2)  "Compliance management system" means a voluntary
   1-17  compliance assurance program established for a regulated facility
   1-18  or operation having at least the following elements:
   1-19                    (A)  a policy requiring conduct of operations in
   1-20  compliance with environmental or health and safety laws;
   1-21                    (B)  incentives to encourage employees to ensure
   1-22  compliance and report violations to management;
   1-23                    (C)  a clear definition of responsibility for
   1-24  compliance for each facility or operation;
    2-1                    (D)  adequate resources dedicated to compliance
    2-2  assurance activities;
    2-3                    (E)  training for employees with responsibilities
    2-4  related to compliance operations;
    2-5                    (F)  systematically implemented procedures for
    2-6  bringing about compliance at each facility or operation;
    2-7                    (G)  regular facility or operation-specific
    2-8  reviews of compliance;
    2-9                    (H)  auditing of compliance by qualified
   2-10  personnel who are independent from those who manage facility or
   2-11  site operations;
   2-12                    (I)  a mechanism to ensure prompt action to
   2-13  correct noncompliance and address the underlying cause of the
   2-14  noncompliance;
   2-15                    (J)  a mechanism for disciplining employees who
   2-16  intentionally or negligently contribute to the commission of
   2-17  violations;
   2-18                    (K)  effective management oversight of compliance
   2-19  and correction of noncompliance; and
   2-20                    (L)  a regular management review of compliance
   2-21  performance and management systems to identify needed improvements.
   2-22              (3)  "Environmental or health and safety law" means:
   2-23                    (A)  a federal or state environmental or
   2-24  occupational health and safety law; or
   2-25                    (B)  a rule, regulation, or regional or local law
   2-26  adopted in conjunction with a law described by Paragraph (A) of
   2-27  this subdivision.
    3-1              (4)  "Environmental or health and safety audit" means a
    3-2  voluntary evaluation, review, or assessment conducted by an owner
    3-3  or operator, an employee of the owner or operator, or an
    3-4  independent contractor of:
    3-5                    (A)  a regulated facility or operation; or
    3-6                    (B)  an activity at a regulated facility or
    3-7  operation.
    3-8              (5)  "Owner or operator" means a person who owns or
    3-9  operates a regulated facility or operation.
   3-10              (6)  "Person" means an individual, corporation,
   3-11  business trust, partnership, association, and any other legal
   3-12  entity.
   3-13              (7)  "Regulated facility or operation" means a facility
   3-14  or operation that is regulated under an environmental or health and
   3-15  safety law.
   3-16        (b)  A person acts intentionally for purposes of this Act if
   3-17  the person acts intentionally within the meaning of Section 6.03,
   3-18  Penal Code.
   3-19        (c)  To fully implement the privilege established by this
   3-20  Act, the term "environmental or health and safety law" shall be
   3-21  construed broadly.
   3-23  (a)  An audit or compliance management system report is a report
   3-24  that includes each document and communication arising out of the
   3-25  environmental or health and safety audit or out of a compliance
   3-26  management system.
   3-27        (b)  General components that may be contained in a completed
    4-1  audit or compliance management system report include:
    4-2              (1)  a report prepared by an auditor, monitor, or
    4-3  similar person, which may include a description of:
    4-4                    (A)  the scope of the audit or compliance
    4-5  management system;
    4-6                    (B)  the information gained in the audit or
    4-7  through the compliance management system and findings, conclusions,
    4-8  and recommendations; and
    4-9                    (C)  exhibits and appendices;
   4-10              (2)  memoranda and documents analyzing all or a portion
   4-11  of the materials described by Subdivision (1) of this subsection or
   4-12  discussing implementation issues; and
   4-13              (3)  an implementation plan or tracking system to
   4-14  correct past noncompliance, improve current compliance, or prevent
   4-15  future noncompliance.
   4-16        (c)  The types of exhibits and appendices that may be
   4-17  contained in an audit or compliance management system report
   4-18  include supporting information that is collected or developed for
   4-19  the primary purpose of and in the course of an environmental or
   4-20  health and safety audit or the compliance management system,
   4-21  including:
   4-22              (1)  interviews with current or former employees;
   4-23              (2)  field notes and records of observations;
   4-24              (3)  findings, opinions, suggestions, conclusions,
   4-25  guidance, notes, drafts, and memoranda;
   4-26              (4)  legal analyses;
   4-27              (5)  drawings;
    5-1              (6)  photographs;
    5-2              (7)  laboratory analyses;
    5-3              (8)  computer-generated or electronically recorded
    5-4  information; and
    5-5              (9)  maps, charts, graphs, and surveys.
    5-6        (d)  To facilitate identification, each document in an audit
    5-7  report should be labeled "COMPLIANCE REPORT:  PRIVILEGED DOCUMENT,"
    5-8  or labeled with words of similar import.  Failure to label a
    5-9  document under this section does not constitute a waiver of the
   5-10  audit privilege and does not create a presumption that the
   5-11  privilege does not apply.
   5-12        SECTION 5.  PRIVILEGE.  (a)  An audit or compliance
   5-13  management system report is privileged as provided in this section.
   5-14        (b)  Except as provided in Sections 6, 7, 8, and 9 of this
   5-15  Act, any part of an audit or compliance management system report is
   5-16  privileged and is not admissible as evidence or subject to
   5-17  discovery in:
   5-18              (1)  a civil action, whether legal or equitable;
   5-19              (2)  a criminal proceeding; or
   5-20              (3)  an administrative proceeding.
   5-21        (c)  A person, when called or subpoenaed as a witness, cannot
   5-22  be compelled to testify or produce a document if:
   5-23              (1)  the testimony or document relates to a matter that
   5-24  was the subject or within the scope of an environmental or health
   5-25  and safety audit or compliance management system and that is
   5-26  addressed in a privileged part of an audit or compliance management
   5-27  system report; and
    6-1              (2)  the person is:
    6-2                    (A)  a person who conducted any portion of the
    6-3  audit or who was responsible for any part of the compliance
    6-4  management system;
    6-5                    (B)  a person to whom the audit or compliance
    6-6  management system results are disclosed under Section 6(b) of this
    6-7  Act; or
    6-8                    (C)  a custodian of the audit or compliance
    6-9  management system results.
   6-10        (d)  An employee of a state agency may not request, review,
   6-11  or otherwise use an audit or compliance management system report
   6-12  during an agency inspection of a regulated facility or operation,
   6-13  or an activity of a regulated facility or operation.
   6-14        (e)  A party asserting the privilege described in this
   6-15  section has the burden of establishing the applicability of the
   6-16  privilege.
   6-17        SECTION 6.  EXCEPTION:  WAIVER.  (a)  The privilege described
   6-18  by Section 5 of this Act does not apply to the extent the privilege
   6-19  is expressly waived by the owner or operator who prepared the audit
   6-20  or compliance management system report or caused the report to be
   6-21  prepared.
   6-22        (b)  Disclosure of an audit or compliance management system
   6-23  report or any information generated by an environmental or health
   6-24  and safety audit or compliance management system does not waive the
   6-25  privilege established by Section 5 of this Act if the disclosure:
   6-26              (1)  is made to address or correct a matter raised by
   6-27  the environmental or health and safety audit or compliance
    7-1  management system and is made only to:
    7-2                    (A)  a person employed by the owner or operator,
    7-3  including temporary and contract employees;
    7-4                    (B)  a legal representative of the owner or
    7-5  operator;
    7-6                    (C)  an  officer or director of the regulated
    7-7  facility or operation or a partner of the owner or operator; or
    7-8                    (D)  an independent contractor retained by the
    7-9  owner or operator;
   7-10              (2)  is made under the terms of a confidentiality
   7-11  agreement between the person for whom the audit or compliance
   7-12  management system report was prepared or the owner or operator of
   7-13  the audited facility or operation and:
   7-14                    (A)  a partner or potential partner of the owner
   7-15  or operator of the facility or operation;
   7-16                    (B)  a transferee or potential transferee of the
   7-17  facility or operation; or
   7-18                    (C)  a lender or potential lender for the
   7-19  facility or operation;  or
   7-20              (3)  is made under a claim of confidentiality to a
   7-21  governmental official by the person for whom the audit or
   7-22  compliance management system report was prepared or by the owner or
   7-23  operator.
   7-24        (c)  A party to a confidentiality agreement described in
   7-25  Subsection (b)(2) of this section who violates that agreement is
   7-26  liable for damages caused by the disclosure and for any other
   7-27  penalties stipulated in the confidentiality agreement.
    8-1        (d)  Information that is disclosed under Subsection (b)(3) of
    8-2  this section is confidential and is not subject to disclosure under
    8-3  Chapter 552, Government Code. A public entity, public employee, or
    8-4  public official who discloses information in violation of this
    8-5  subsection commits an offense.  An offense under this subsection is
    8-6  a Class B misdemeanor.
    8-8  court of competent jurisdiction may require disclosure of a portion
    8-9  of an audit or compliance management system report in a civil,
   8-10  criminal, or administrative proceeding if the court determines,
   8-11  after an in camera review consistent with the appropriate rules of
   8-12  procedure, that:
   8-13              (1)  the privilege is asserted for a fraudulent
   8-14  purpose;
   8-15              (2)  the portion of the audit or compliance management
   8-16  system report is not subject to the privilege under Section 8 of
   8-17  this Act; or
   8-18              (3)  the portion of the audit or compliance management
   8-19  system report shows evidence of noncompliance with an environmental
   8-20  or health and safety law and appropriate efforts to achieve
   8-21  compliance with the law were not promptly initiated and pursued
   8-22  with reasonable diligence after discovery of noncompliance.
   8-23        (b)  A party seeking disclosure under this section has the
   8-24  burden of proving that Subsection (a)(1), (2), or (3) of this
   8-25  section applies.
   8-26        SECTION 8.  NONPRIVILEGED MATERIALS.  (a)  The privilege
   8-27  described in this Act does not apply to:
    9-1              (1)  a document, communication, datum, report, or other
    9-2  information required by a regulatory agency to be collected,
    9-3  developed, maintained, or reported under a federal or state
    9-4  environmental or health and safety law;
    9-5              (2)  information obtained by observation, sampling, or
    9-6  monitoring by a regulatory agency; or
    9-7              (3)  information obtained from a source not involved in
    9-8  the preparation of the environmental or health and safety audit or
    9-9  in the compliance management system.
   9-10        (b)  A regulatory agency may not adopt a rule or impose a
   9-11  condition that circumvents this Act by requiring disclosure of an
   9-12  audit or compliance management system report.
   9-13        SECTION 9.  COURT REVIEW AND DISCLOSURE.  (a)  If there is
   9-14  reasonable cause, based on information obtained from a source
   9-15  independent of an audit or compliance management system report, to
   9-16  believe a criminal offense has been committed under an
   9-17  environmental or health and safety law, the attorney representing
   9-18  the state may obtain an audit or compliance management system
   9-19  report for which a privilege is asserted under this Act under a
   9-20  search warrant, criminal subpoena, or discovery as allowed by the
   9-21  Code of Criminal Procedure and the Texas Rules of Criminal
   9-22  Procedure.
   9-23        (b)  On receipt of the audit or compliance management system
   9-24  report, the attorney representing the state shall seal the report
   9-25  and may not review or disclose the contents of the report.
   9-26        (c)  Not later than the 30th day after the date an audit or
   9-27  compliance management system report is received under Subsection
   10-1  (a), the owner or operator who prepared the report or for whom the
   10-2  report was prepared may file with a court of competent jurisdiction
   10-3  a petition requesting an in camera review to determine whether all
   10-4  or a portion of the report is privileged or is subject to
   10-5  disclosure under this Act.  An owner or operator who fails to file
   10-6  a petition under this subsection within the period specified by
   10-7  this subsection waives the privilege.
   10-8        (d)  On the filing of a petition under Subsection (c) of this
   10-9  section, the court shall issue an order that:
  10-10              (1)  schedules the in camera review for a date not
  10-11  later than the 45th day after the date the petition is filed; and
  10-12              (2)  authorizes the attorney representing the state to
  10-13  remove the seal from the report to review the report, subject to
  10-14  appropriate limitations on distribution or disclosure of the report
  10-15  that are specified in the order to protect against unnecessary
  10-16  disclosure.
  10-17        (e)  The attorney representing the state may consult with
  10-18  enforcement agencies regarding the contents of the report as
  10-19  necessary to prepare for the in camera review.
  10-20        (f)  Information used in preparation for the in camera review
  10-21  under Subsection (e) of this section:
  10-22              (1)  is confidential;
  10-23              (2)  may not be used in any investigation or legal
  10-24  proceeding; and
  10-25              (3)  is not subject to disclosure under Chapter 552,
  10-26  Government Code.
  10-27        (g)  Subsection (f) of this section does not apply to
   11-1  information a court finds to be subject to disclosure.
   11-2        (h)  On the motion of a party, a court or the appropriate
   11-3  administrative official shall suppress evidence offered in any
   11-4  civil, criminal, or administrative proceeding that arises or is
   11-5  derived from review, disclosure, or use of information obtained
   11-6  under this section if the review, disclosure, or use is not
   11-7  authorized under this section.  A party allegedly failing to comply
   11-8  with this section has the burden of proving that the evidence
   11-9  offered did not arise and was not derived from the unauthorized
  11-10  review, disclosure, or use.
  11-11        (i)  The parties may stipulate to entry of an order directing
  11-12  that specific information contained in an audit or compliance
  11-13  management system report is or is not subject to the privilege.
  11-14        (j)  A court may compel the disclosure of only those portions
  11-15  of an audit or compliance management system report relevant to
  11-16  issues in dispute in the proceeding.
  11-17        (k)  A person commits an offense if the person:
  11-18              (1)  discloses information in violation of Subsection
  11-19  (b) or (f) of this section; or
  11-20              (2)  knowingly discloses information provided to the
  11-21  person in violation of this section.
  11-22        (l)  An offense under Subsection (k) of this section is a
  11-23  Class B misdemeanor.
  11-24        (m)  A court may find a person who discloses information in
  11-25  violation of this section in contempt of court and may order other
  11-26  appropriate relief.
  11-27        SECTION 10.  VOLUNTARY DISCLOSURE; IMMUNITY.  (a)  Except as
   12-1  provided by this section, a person who makes a voluntary disclosure
   12-2  of a violation of an environmental or health and safety law is
   12-3  immune from an administrative, civil, or criminal penalty for the
   12-4  violation disclosed.
   12-5        (b)  A disclosure is voluntary only if:
   12-6              (1)  the disclosure was made promptly after knowledge
   12-7  of the information disclosed is obtained by the person;
   12-8              (2)  the disclosure was made to an agency that has
   12-9  regulatory authority with regard to the violation disclosed;
  12-10              (3)  the disclosure arises out of:
  12-11                    (A)  a voluntary environmental or health and
  12-12  safety audit; or
  12-13                    (B)  the operation of a compliance management
  12-14  system;
  12-15              (4)  the person who makes the disclosure initiates an
  12-16  appropriate effort to achieve compliance, pursues that effort with
  12-17  due diligence, and corrects the noncompliance within a reasonable
  12-18  time; and
  12-19              (5)  the person making the disclosure cooperates with
  12-20  the appropriate agency in connection with an investigation of the
  12-21  issues identified in the disclosure.
  12-22        (c)  A disclosure is not voluntary for purposes of this
  12-23  section if it is a report to a regulatory agency required solely by
  12-24  a specific condition of an enforcement order or decree.
  12-25        (d)  The immunity established by Subsection (a) of this
  12-26  section does not apply and a penalty may be imposed under
  12-27  applicable law in a civil or administrative proceeding if the
   13-1  disclosed violation was committed wilfully and intentionally by the
   13-2  person who made the disclosure.
   13-3        (e)  The immunity established by Subsection (a) of this
   13-4  section does not apply and a criminal penalty may be imposed under
   13-5  applicable law if:
   13-6              (1)  the person who made the disclosure intentionally
   13-7  committed or intentionally aided or abetted in the commission of
   13-8  the disclosed violation; or
   13-9              (2)  the offense was committed intentionally by a
  13-10  member of the person's management and the person's policies or lack
  13-11  of prevention actions or systems contributed materially to the
  13-12  occurrence of the violation.
  13-13        (f)  A penalty that is imposed under Subsection (e) of this
  13-14  section should, to the extent appropriate, be mitigated by factors
  13-15  such as:
  13-16              (1)  the voluntariness of the disclosure;
  13-17              (2)  efforts by the disclosing party to conduct
  13-18  environmental or health and safety audits;
  13-19              (3)  implementation of a compliance management system;
  13-20              (4)  remediation;
  13-21              (5)  cooperation with government officials
  13-22  investigating the disclosed violation;
  13-23              (6)  relative lack of harm or economic benefit; or
  13-24              (7)  other relevant considerations.
  13-25        (g)  In a civil, administrative, or criminal enforcement
  13-26  action brought against a person for a violation for which the
  13-27  person claims to have made a voluntary disclosure, the person
   14-1  claiming the immunity has the burden of establishing a prima facie
   14-2  case that the disclosure was voluntary. After a prima facie case of
   14-3  voluntary disclosure is established, the enforcement authority has
   14-4  the burden of rebutting the presumption by a preponderance of the
   14-5  evidence or, in a criminal case, by proof beyond a reasonable
   14-6  doubt.
   14-7        SECTION 11.  APPLICABILITY.  The privilege created by this
   14-8  Act applies to environmental or health and safety audits that are
   14-9  conducted, and to conduct associated with a compliance management
  14-10  system, on or after the effective date of this Act.
  14-12  This Act does not limit, waive, or abrogate the scope or nature of
  14-13  any statutory or common law privilege, including the work product
  14-14  doctrine and the attorney-client privilege.
  14-15        SECTION 13.  EMERGENCY.  The importance of this legislation
  14-16  and the crowded condition of the calendars in both houses create an
  14-17  emergency and an imperative public necessity that the
  14-18  constitutional rule requiring bills to be read on three several
  14-19  days in each house be suspended, and this rule is hereby suspended,
  14-20  and that this Act take effect and be in force from and after its
  14-21  passage, and it is so enacted.