ACG C.S.H.B. 3459 75(R)BILL ANALYSIS ENVIRONMENTAL REGULATION C.S.H.B. 3459 By: Chisum 4-3-97 Committee Report (Substituted) BACKGROUND The Texas Environmental Health and Safety Audit Privilege Act, passed in 1995, created a system intended to encourage companies to conduct voluntary audits of their compliance with environmental and health and safety requirements. The law provides two types of incentives: a limited privilege for voluntarily compiled information, and penalty immunity for certain violations that are selfdisclosed. Neither the privilege nor the immunity applies if an audit was conducted in bad faith to cover a known violation, or if appropriate action to achieve compliance is not taken in a timely manner. Since its implementation in 1995, approximately 450 entities have given notice of intent to conduct a voluntary audit. Approximately 65 self-disclosures have been made to the Texas Natural Resource Conservation Commission. The Senate Natural Resources Interim Report to the 75th Legislature reports that many of the self-disclosed violations would not have been detected in an ordinary inspection, and would have therefore gone unnoticed without the presence of the Audit Privilege Act. The Environmental Protection Agency (EPA) has expressed a reluctance to grant delegation of federal environmental programs to Texas, in part based on opposition to the states Audit Privilege Act. However, the EPA concedes that the audit law will not conflict with delegation of federal programs if several changes are made to the law. PURPOSE To enact the changes requested by the EPA in order to obtain delegation of federal environmental programs. RULEMAKING AUTHORITY It is the committee's opinion that this bill does not expressly grant any additional rulemaking authority to a state officer, department, agency or institution. SECTION BY SECTION ANALYSIS SECTION 1. Amends Section 5(b), Texas Environmental, Health, and Safety Audit Privilege Act (Article 4447cc, Vernon's Texas Civil Statutes) to eliminate applicability of an audit report privilege from criminal proceedings. SECTION 2: Amends Section 6, Texas Environmental, Health, and Safety Audit Privilege Act (Article 4447cc, Vernon's Texas Civil Statutes) to delete federal agencies from the list of persons to whom certain audit disclosures can be made without waiving an audit privilege; provides that the audit statute does not circumvent protections provided by federal or state law for an individual who discloses information to law enforcement authorities. SECTION 3: Amends Section 7(a), Texas Environmental, Health, and Safety Audit Privilege Act (Article 4447cc, Vernon's Texas Civil Statutes) to eliminate the applicability of disclosure provisions for audit materials in criminal proceedings, since the privilege is not applicable to them. SECTION 4: Amends Section 9, Texas Environmental, Health, and Safety Audit Privilege Act (Article 4447cc, Vernon's Texas Civil Statutes) by deleting provisions expressly allowing an audit report to be obtained pursuant to the Code of Criminal Procedure, deletes requirements that such a report be placed under seal of the court, and deletes provisions for in-camera review of audit materials. Further changes are made as follows: (a) Requires that if an audit report is used in a criminal proceeding, the civil and administrative privilege are not otherwise affected. (b) Allows a regulatory agency to review the information in the audit report that is required to be reported under state or federal law, but provides that such a review does not waive or eliminate the privilege. (c) Requires that if information in an audit report is required to be made available to the public, the person claiming the privilege must be notified of the potential for public disclosure by the applicable governmental authority. (d) Modifies the process for suppressing evidence of certain privileged information from disclosure in a judicial or administrative setting and eliminates application of the process to criminal proceedings. SECTION 5: Amends Section 10(a), (b), (d), (f), and (h), Texas Environmental, Health, and Safety Audit Privilege Act (Article 4447cc, Vernon's Texas Civil Statutes) as follows: (a) Eliminates the application of immunity provisions to criminal activities. (b) Modifies the requirement that a disclosure is voluntary only if a violation did not result in imminent and substantial risk of serious injury or substantial actual harm or imminent and substantial risk of harm to persons, property, or the environment. (d) Eliminates the application of immunity provisions to criminal proceedings. Adds a provision that the immunity does not apply if a violation has resulted in a substantial economic benefit which gives the violator a clear advantage over its business competitors. (f) Clarifies that immunity provisions are not applicable in criminal proceedings. (h) Eliminates the application of immunity provisions to certain "significant", rather than "serious", violations. SECTION 6: Effective date of September 1, 1997; applicable only to an audit performed on after that date. SECTION 7. Emergency clause. COMPARISON OF ORIGINAL TO SUBSTITUTE Both the filed version and the substitute eliminate audit protections in certain criminal proceedings. Provisions relating to the elimination of audit and immunity protections for criminal proceedings are expanded in the substitute. Changes to certain reviews of audit materials and applicable procedures are included in the substitute but not the filed version. The filed version includes the following provisions which are not included in the substitute: _ a requirement is included that certain audit protections will not apply if material or information in an audit cannot be reproduced through independent means and the State demonstrates a compelling need for the information; and _ a provision is included which allows a penalty for voluntarily disclosed violations if certain state officials agree. The substitute includes the following provisions which are not included in the filed version: _ federal agencies are deleted from the list of persons to whom certain audit disclosures can be made without waiving an audit privilege; _ a stipulation that audit statutes may not circumvent protections provided by federal or state law for an individual who discloses information to law enforcement authorities; and _ changes to what constitutes "voluntary disclosure" and when the immunity provisions do not apply.