By Chisum                                             H.B. No. 3459

                                A BILL TO BE ENTITLED

 1-1                                   AN ACT

 1-2     relating to environmental and health and safety audits; providing a

 1-3     penalty.

 1-4           BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF TEXAS:

 1-5           SECTION 1.  Section 5(b), Texas Environmental, Health, and

 1-6     Safety Audit Privilege Act (Article 4447cc, Vernon's Texas Civil

 1-7     Statutes), is amended to read as follows:

 1-8           (b)  Except as provided in Sections 6, 7, and 8[, and 9] of

 1-9     this Act, any part of an audit report is privileged and is not

1-10     admissible as evidence or subject to discovery in:

1-11                 (1)  a civil action, whether legal or equitable; or

1-12                 (2)  [a criminal proceeding; or]

1-13                 [(3)]  an administrative proceeding.

1-14           SECTION 2.  Section 6, Texas Environmental, Health, and

1-15     Safety Audit Privilege Act (Article 4447cc, Vernon's Texas Civil

1-16     Statutes), is amended by amending Subsection (b) and adding

1-17     Subsection (e) to read as follows:

1-18           (b)  Disclosure of an audit report or any information

1-19     generated by an environmental or health and safety audit does not

1-20     waive the privilege established by Section 5 of this Act if the

1-21     disclosure:

1-22                 (1)  is made to address or correct a matter raised by

1-23     the environmental or health and safety audit and is made only to:

1-24                       (A)  a person employed by the owner or operator,

 2-1     including temporary and contract employees;

 2-2                       (B)  a legal representative of the owner or

 2-3     operator;

 2-4                       (C)  an officer or director of the regulated

 2-5     facility or operation or a partner of the owner or operator; or

 2-6                       (D)  an independent contractor retained by the

 2-7     owner or operator;

 2-8                 (2)  is made under the terms of a confidentiality

 2-9     agreement between the person for whom the audit report was prepared

2-10     or the owner or operator of the audited facility or operation and:

2-11                       (A)  a partner or potential partner of the owner

2-12     or operator of the facility or operation;

2-13                       (B)  a transferee or potential transferee of the

2-14     facility or operation;

2-15                       (C)  a lender or potential lender for the

2-16     facility or operation;

2-17                       (D)  a governmental official of [or] a state [or

2-18     federal agency]; or

2-19                       (E)  a person or entity engaged in the business

2-20     of insuring, underwriting, or indemnifying the facility or

2-21     operation; or

2-22                 (3)  is made under a claim of confidentiality to a

2-23     governmental official or agency by the person for whom the audit

2-24     report was prepared or by the owner or operator.

2-25           (e)  Nothing in this section shall be construed to circumvent

2-26     the protections provided by federal or state law for individuals

2-27     that disclose information to law enforcement authorities.

 3-1           SECTION 3.  Section 6(d), Texas Environmental, Health, and

 3-2     Safety Audit Privilege Act (Article 4447cc, Vernon's Texas Civil

 3-3     Statutes), is amended to read as follows:

 3-4           (d)  Information that is disclosed under Subsection (b)(3) of

 3-5     this section is confidential and is not subject to disclosure under

 3-6     Chapter 552, Government Code.  A public entity, public employee, or

 3-7     public official who discloses information in violation of this

 3-8     subsection is subject to any penalty provided in Chapter 552,

 3-9     Government Code [commits an offense.  An offense under this

3-10     subsection is a Class B misdemeanor].  It is an affirmative defense

3-11     to the clerical dissemination of a privileged audit report that the

3-12     report was not clearly labeled "COMPLIANCE REPORT:  PRIVILEGED

3-13     DOCUMENT" or words of similar import.  The lack of labeling may not

3-14     be raised as a defense if the entity, employee, or official knew or

3-15     had reason to know that the document was a privileged audit report.

3-16           SECTION 4.  Section 7(d), Texas Environmental, Health, and

3-17     Safety Audit Privilege Act (Article 4447cc, Vernon's Texas Civil

3-18     Statutes), is amended to read as follows:

3-19           (d)  A person claiming the privilege is subject to sanctions

3-20     as provided by Rule 215 of the Texas Rules of Civil Procedure or to

3-21     a fine not to exceed $10,000 if the court finds, consistent with

3-22     fundamental due process, that the person intentionally or knowingly

3-23     claimed the privilege for unprotected information as provided in

3-24     Section 8 of this Act.

3-25           SECTION 5.  Section 7(a), Texas Environmental, Health, and

3-26     Safety Audit Privilege Act (Article 4447cc, Vernon's Texas Civil

3-27     Statutes), is amended to read as follows:

 4-1           (a)  A court or administrative hearings official with

 4-2     competent jurisdiction may require disclosure of a portion of an

 4-3     audit report in a civil[, criminal,] or administrative proceeding

 4-4     if the court or administrative hearings official determines, after

 4-5     an in camera review consistent with the appropriate rules of

 4-6     procedure, that:

 4-7                 (1)  the privilege is asserted for a fraudulent

 4-8     purpose;

 4-9                 (2)  the portion of the audit report is not subject to

4-10     the privilege under Section 8 of this Act; or

4-11                 (3)  the portion of the audit report shows evidence of

4-12     noncompliance with an environmental or health and safety law and

4-13     appropriate efforts to achieve compliance with the law were not

4-14     promptly initiated and pursued with reasonable diligence after

4-15     discovery of noncompliance.

4-16           SECTION 6.  Section 9, Texas Environmental, Health, and

4-17     Safety Audit Privilege Act (Article 4447cc, Vernon's Texas Civil

4-18     Statutes), is amended to read as follows:

4-19           Sec. 9.  [Court] Review OF PRIVILEGED DOCUMENTS BY

4-20     GOVERNMENTAL AUTHORITY [and Disclosure].  (a)  Where an audit

4-21     report is obtained, reviewed, or used in a criminal proceeding, the

4-22     administrative or civil evidentiary privilege created by this Act

4-23     is not waived or eliminated for any other purpose [If there is

4-24     reasonable cause to believe a criminal offense has been committed

4-25     under an environmental or health and safety law, the attorney

4-26     representing the state may obtain an audit report for which a

4-27     privilege is asserted under this Act under a search warrant,

 5-1     criminal subpoena, or discovery as allowed by the Code of Criminal

 5-2     Procedure and the Texas Rules of Criminal Procedure].

 5-3           (b)  Notwithstanding the privilege established under this

 5-4     Act, a regulatory agency may review information that is required to

 5-5     be available under a specific state or federal law, but such review

 5-6     does not waive or eliminate the administrative or civil evidentiary

 5-7     privilege where applicable [On receipt of the audit report, the

 5-8     attorney representing the state shall seal the report and may not

 5-9     review or disclose the contents of the report].

5-10           (c)  If information is required to be available to the public

5-11     by operation of a specific state or federal law, the governmental

5-12     authority shall notify the person claiming the privilege of the

5-13     potential for public disclosure prior to obtaining such information

5-14     under Subsection (a) or (b) [Not later than the 30th day after the

5-15     date an audit report is received under Subsection (a), the owner or

5-16     operator who prepared the report or for whom the report was

5-17     prepared may file with a court of competent jurisdiction a petition

5-18     requesting an in camera review to determine whether all or a

5-19     portion of the report is privileged or is subject to disclosure

5-20     under this Act.  An owner or operator who fails to file a petition

5-21     under this subsection within the period specified by this

5-22     subsection waives the privilege].

5-23           (d)  If privileged information is disclosed under Subsection

5-24     (b) or (c), on [On the filing of a petition under Subsection (c) of

5-25     this section, the court shall issue an order that:]

5-26                 [(1)  schedules the in camera review for a date not

5-27     later than the 45th day after the date the petition is filed; and]

 6-1                 [(2)  authorizes the attorney representing the state to

 6-2     remove the seal from the report to review the report, subject to

 6-3     appropriate limitations on distribution or disclosure of the report

 6-4     that are specified in the order to protect against unnecessary

 6-5     disclosure.]

 6-6           [(e)  The attorney representing the state may consult with

 6-7     enforcement agencies regarding the contents of the report as

 6-8     necessary to prepare for the in camera review.]

 6-9           [(f)  Information used in preparation for the in camera

6-10     review under Subsection (e) of this section:]

6-11                 [(1)  is confidential;]

6-12                 [(2)  may not be used in any investigation or legal

6-13     proceeding; and]

6-14                 [(3)  is not subject to disclosure under Chapter 552,

6-15     Government Code.]

6-16           [(g)  Subsection (f) of this section does not apply to

6-17     information a court finds to be subject to disclosure.]

6-18           [(h)  On] the motion of a party, a court or the  appropriate

6-19     administrative official shall suppress evidence offered in any

6-20     civil[, criminal,] or administrative proceeding that arises or is

6-21     derived from review, disclosure, or use of information obtained

6-22     under this section if the review, disclosure, or use is not

6-23     authorized under Section 8 [this section].  A party having received

6-24     information under Subsection (b) or (c) [allegedly failing to

6-25     comply with this section] has the burden of proving that the

6-26     evidence offered did not arise and was not derived from the

6-27     [unauthorized] review of privileged information[, disclosure, or

 7-1     use].

 7-2           [(i)  The parties may stipulate to entry of an order

 7-3     directing that specific information contained in an audit report is

 7-4     or is not subject to the privilege.]

 7-5           [(j)  A court may compel the disclosure of only those

 7-6     portions of an audit report relevant to issues in dispute in the

 7-7     proceeding.]

 7-8           [(k)  A court may find a person who discloses information in

 7-9     violation of this section in contempt of court and may order other

7-10     appropriate relief.]

7-11           SECTION 7.  Sections 10(a), (b), (d), (f), and (h), Texas

7-12     Environmental, Health, and Safety Audit Privilege Act (Article

7-13     4447cc, Vernon's Texas Civil Statutes), are amended to read as

7-14     follows:

7-15           (a)  Except as provided by this section, a person who makes a

7-16     voluntary disclosure of a violation of an environmental or health

7-17     and safety law is immune from an administrative or[,] civil[, or

7-18     criminal] penalty for the violation disclosed.

7-19           (b)  A disclosure is voluntary only if:

7-20                 (1)  the disclosure was made promptly after knowledge

7-21     of the information disclosed is obtained by the person;

7-22                 (2)  the disclosure was made in writing by certified

7-23     mail to an agency that has regulatory authority with regard to the

7-24     violation disclosed;

7-25                 (3)  an investigation of the violation was not

7-26     initiated or the violation was not independently detected by an

7-27     agency with enforcement jurisdiction before the disclosure was made

 8-1     using certified mail;

 8-2                 (4)  the disclosure arises out of a voluntary

 8-3     environmental or health and safety audit;

 8-4                 (5)  the person who makes the disclosure initiates an

 8-5     appropriate effort to achieve compliance, pursues that effort with

 8-6     due diligence, and corrects the noncompliance within a reasonable

 8-7     time;

 8-8                 (6)  the person making the disclosure cooperates with

 8-9     the appropriate agency in connection with an investigation of the

8-10     issues identified in the disclosure; and

8-11                 (7)  the violation did not result in injury or imminent

8-12     and substantial risk of serious injury to one or more persons at

8-13     the site or [substantial] off-site substantial actual harm or

8-14     imminent and substantial risk of harm to persons, property, or the

8-15     environment.

8-16           (d)  The immunity established by Subsection (a)  of this

8-17     section does not apply and an administrative or [,] civil[, or

8-18     criminal] penalty may be imposed under applicable law if:

8-19                 (1)  the person who made the disclosure intentionally

8-20     or knowingly committed or was responsible within the meaning of

8-21     Section 7.02, Penal Code, for the commission of the disclosed

8-22     violation;

8-23                 (2)  the person who made the disclosure recklessly

8-24     committed or was responsible within the meaning of Section 7.02,

8-25     Penal Code, for the commission of the disclosed violation and the

8-26     violation resulted in substantial injury to one or more persons at

8-27     the site or off-site harm to persons, property, or the environment;

 9-1                 (3)  the offense was committed intentionally or

 9-2     knowingly by a member of the person's management or an agent of the

 9-3     person and the person's policies or lack of prevention systems

 9-4     contributed materially to the occurrence of the violation; [or]

 9-5                 (4)  the offense was committed recklessly by a member

 9-6     of the person's management or an agent of the person, the person's

 9-7     policies or lack of prevention systems contributed materially to

 9-8     the occurrence of the violation, and the violation resulted in

 9-9     substantial injury to one or more persons at the site or off-site

9-10     harm to persons, property, or the environment; or

9-11                 (5)  the violation has resulted in a substantial

9-12     economic benefit which gives the violator a clear advantage over

9-13     its business competitors.

9-14           (f)  In a civil or[,] administrative[, or criminal]

9-15     enforcement action brought against a person for a violation for

9-16     which the person claims to have made a voluntary disclosure, the

9-17     person claiming the immunity has the burden of establishing a prima

9-18     facie case that the disclosure was voluntary.  After the person

9-19     claiming the immunity establishes a prima facie case of voluntary

9-20     disclosure, other than a case in which under Subsection (d) of this

9-21     section immunity does not apply, the enforcement authority has the

9-22     burden of rebutting the presumption by a preponderance of the

9-23     evidence or, in a criminal case, by proof beyond a reasonable

9-24     doubt.

9-25           (h)  The immunity under this section does not apply if a

9-26     court or administrative law judge finds that the person claiming

9-27     the immunity has, after the effective date of this Act, (1)

 10-1    repeatedly or continuously committed significant [serious]

 10-2    violations, and (2) not attempted to bring the facility or

 10-3    operation into compliance, so as to constitute a pattern of

 10-4    disregard of environmental or health and safety laws.  In order to

 10-5    be considered a "pattern," the person must have committed a series

 10-6    of violations that were due to separate and distinct events within

 10-7    a three-year period at the same facility or operation.

 10-8          SECTION 8.  This Act takes effect September 1, 1997, and

 10-9    applies only to an environmental or health and safety audit

10-10    prepared on or after that date.

10-11          SECTION 9.  The importance of this legislation and the

10-12    crowded condition of the calendars in both houses create an

10-13    emergency and an imperative public necessity that the

10-14    constitutional rule requiring bills to be read on three several

10-15    days in each house be suspended, and this rule is hereby suspended.