75R10659 MI-F                           

         By Chisum                                             H.B. No. 3459

         Substitute the following for H.B. No. 3459:

         By Talton                                         C.S.H.B. No. 3459

                                A BILL TO BE ENTITLED

 1-1                                   AN ACT

 1-2     relating to environmental and health safety audits.

 1-3           BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF TEXAS:

 1-4           SECTION 1.  Section 5(b), Texas Environmental, Health, and

 1-5     Safety Audit Privilege Act (Article 4447cc, Vernon's Texas Civil

 1-6     Statutes), is amended to read as follows:

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

 1-8     this Act, any part of an audit report is privileged and is not

 1-9     admissible as evidence or subject to discovery in:

1-10                 (1)  a civil action, whether legal or equitable; or

1-11                 (2)  [a criminal proceeding; or]

1-12                 [(3)]  an administrative proceeding.

1-13           SECTION 2.  Section 6, Texas Environmental, Health, and

1-14     Safety Audit Privilege Act (Article 4447cc, Vernon's Texas Civil

1-15     Statutes), is amended by amending Subsection (b) and adding

1-16     Subsection (e) to read as follows:

1-17           (b)  Disclosure of an audit report or any information

1-18     generated by an environmental or health and safety audit does not

1-19     waive the privilege established by Section 5 of this Act if the

1-20     disclosure:

1-21                 (1)  is made to address or correct a matter raised by

1-22     the environmental or health and safety audit and is made only to:

1-23                       (A)  a person employed by the owner or operator,

1-24     including temporary and contract employees;

 2-1                       (B)  a legal representative of the owner or

 2-2     operator;

 2-3                       (C)  an officer or director of the regulated

 2-4     facility or operation or a partner of the owner or operator; or

 2-5                       (D)  an independent contractor retained by the

 2-6     owner or operator;

 2-7                 (2)  is made under the terms of a confidentiality

 2-8     agreement between the person for whom the audit report was prepared

 2-9     or the owner or operator of the audited facility or operation and:

2-10                       (A)  a partner or potential partner of the owner

2-11     or operator of the facility or operation;

2-12                       (B)  a transferee or potential transferee of the

2-13     facility or operation;

2-14                       (C)  a lender or potential lender for the

2-15     facility or operation;

2-16                       (D)  a governmental official of [or] a state [or

2-17     federal agency]; or

2-18                       (E)  a person or entity engaged in the business

2-19     of insuring, underwriting, or indemnifying the facility or

2-20     operation; or

2-21                 (3)  is made under a claim of confidentiality to a

2-22     governmental official or agency by the person for whom the audit

2-23     report was prepared or by the owner or operator.

2-24           (e)  Nothing in this section shall be construed to circumvent

2-25     the protections provided by federal or state law for individuals

2-26     that disclose information to law enforcement authorities.

2-27           SECTION 3.  Section 7(a), Texas Environmental, Health, and

 3-1     Safety Audit Privilege Act (Article 4447cc, Vernon's Texas Civil

 3-2     Statutes), is amended to read as follows:

 3-3           (a)  A court or administrative hearings official with

 3-4     competent jurisdiction may require disclosure of a portion of an

 3-5     audit report in a civil[, criminal,] or administrative proceeding

 3-6     if the court or administrative hearings official determines, after

 3-7     an in camera review consistent with the appropriate rules of

 3-8     procedure, that:

 3-9                 (1)  the privilege is asserted for a fraudulent

3-10     purpose;

3-11                 (2)  the portion of the audit report is not subject to

3-12     the privilege under Section 8 of this Act; or

3-13                 (3)  the portion of the audit report shows evidence of

3-14     noncompliance with an environmental or health and safety law and

3-15     appropriate efforts to achieve compliance with the law were not

3-16     promptly initiated and pursued with reasonable diligence after

3-17     discovery of noncompliance.

3-18           SECTION 4.  Section 9, Texas Environmental, Health, and

3-19     Safety Audit Privilege Act (Article 4447cc, Vernon's Texas Civil

3-20     Statutes), is amended to read as follows:

3-21           Sec. 9.  [Court] Review OF PRIVILEGED DOCUMENTS BY

3-22     GOVERNMENTAL AUTHORITY [and Disclosure].  (a)  Where an audit

3-23     report is obtained, reviewed, or used in a criminal proceeding, the

3-24     administrative or civil evidentiary privilege created by this Act

3-25     is not waived or eliminated for any other purpose [If there is

3-26     reasonable cause to believe a criminal offense has been committed

3-27     under an environmental or health and safety law, the attorney

 4-1     representing the state may obtain an audit report for which a

 4-2     privilege is asserted under this Act under a search warrant,

 4-3     criminal subpoena, or discovery as allowed by the Code of Criminal

 4-4     Procedure and the Texas Rules of Criminal Procedure].

 4-5           (b)  Notwithstanding the privilege established under this

 4-6     Act, a regulatory agency may review information that is required to

 4-7     be available under a specific state or federal law, but such review

 4-8     does not waive or eliminate the administrative or civil evidentiary

 4-9     privilege where applicable [On receipt of the audit report, the

4-10     attorney representing the state shall seal the report and may not

4-11     review or disclose the contents of the report].

4-12           (c)  If information is required to be available to the public

4-13     by operation of a specific state or federal law, the governmental

4-14     authority shall notify the person claiming the privilege of the

4-15     potential for public disclosure prior to obtaining such information

4-16     under Subsection (a) or (b) [Not later than the 30th day after the

4-17     date an audit report is received under Subsection (a), the owner or

4-18     operator who prepared the report or for whom the report was

4-19     prepared may file with a court of competent jurisdiction a petition

4-20     requesting an in camera review to determine whether all or a

4-21     portion of the report is privileged or is subject to disclosure

4-22     under this Act.  An owner or operator who fails to file a petition

4-23     under this subsection within the period specified by this

4-24     subsection waives the privilege].

4-25           (d)  If privileged information is disclosed under Subsection

4-26     (b) or (c), on [On the filing of a petition under Subsection (c) of

4-27     this section, the court shall issue an order that:]

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

 5-2     later than the 45th day after the date the petition is filed; and]

 5-3                 [(2)  authorizes the attorney representing the state to

 5-4     remove the seal from the report to review the report, subject to

 5-5     appropriate limitations on distribution or disclosure of the report

 5-6     that are specified in the order to protect against unnecessary

 5-7     disclosure.]

 5-8           [(e)  The attorney representing the state may consult with

 5-9     enforcement agencies regarding the contents of the report as

5-10     necessary to prepare for the in camera review.]

5-11           [(f)  Information used in preparation for the in camera

5-12     review under Subsection (e) of this section:]

5-13                 [(1)  is confidential;]

5-14                 [(2)  may not be used in any investigation or legal

5-15     proceeding; and]

5-16                 [(3)  is not subject to disclosure under Chapter 552,

5-17     Government Code.]

5-18           [(g)  Subsection (f) of this section does not apply to

5-19     information a court finds to be subject to disclosure.]

5-20           [(h)  On] the motion of a party, a court or the  appropriate

5-21     administrative official shall suppress evidence offered in any

5-22     civil[, criminal,] or administrative proceeding that arises or is

5-23     derived from review, disclosure, or use of information obtained

5-24     under this section if the review, disclosure, or use is not

5-25     authorized under Section 8 [this section].  A party having received

5-26     information under Subsection (b) or (c) [allegedly failing to

5-27     comply with this section] has the burden of proving that the

 6-1     evidence offered did not arise and was not derived from the

 6-2     [unauthorized] review of privileged information[, disclosure, or

 6-3     use].

 6-4           [(i)  The parties may stipulate to entry of an order

 6-5     directing that specific information contained in an audit report is

 6-6     or is not subject to the privilege.]

 6-7           [(j)  A court may compel the disclosure of only those

 6-8     portions of an audit report relevant to issues in dispute in the

 6-9     proceeding.]

6-10           [(k)  A court may find a person who discloses information in

6-11     violation of this section in contempt of court and may order other

6-12     appropriate relief.]

6-13           SECTION 5.  Sections 10(a), (b), (d), (f), and (h), Texas

6-14     Environmental, Health, and Safety Audit Privilege Act (Article

6-15     4447cc, Vernon's Texas Civil Statutes), are amended to read as

6-16     follows:

6-17           (a)  Except as provided by this section, a person who makes a

6-18     voluntary disclosure of a violation of an environmental or health

6-19     and safety law is immune from an administrative or[,] civil[, or

6-20     criminal] penalty for the violation disclosed.

6-21           (b)  A disclosure is voluntary only if:

6-22                 (1)  the disclosure was made promptly after knowledge

6-23     of the information disclosed is obtained by the person;

6-24                 (2)  the disclosure was made in writing by certified

6-25     mail to an agency that has regulatory authority with regard to the

6-26     violation disclosed;

6-27                 (3)  an investigation of the violation was not

 7-1     initiated or the violation was not independently detected by an

 7-2     agency with enforcement jurisdiction before the disclosure was made

 7-3     using certified mail;

 7-4                 (4)  the disclosure arises out of a voluntary

 7-5     environmental or health and safety audit;

 7-6                 (5)  the person who makes the disclosure initiates an

 7-7     appropriate effort to achieve compliance, pursues that effort with

 7-8     due diligence, and corrects the noncompliance within a reasonable

 7-9     time;

7-10                 (6)  the person making the disclosure cooperates with

7-11     the appropriate agency in connection with an investigation of the

7-12     issues identified in the disclosure; and

7-13                 (7)  the violation did not result in injury or imminent

7-14     and substantial risk of serious injury to one or more persons at

7-15     the site or [substantial] off-site substantial actual harm or

7-16     imminent and substantial risk of harm to persons, property, or the

7-17     environment.

7-18           (d)  The immunity established by Subsection (a)  of this

7-19     section does not apply and an administrative or [,] civil[, or

7-20     criminal] penalty may be imposed under applicable law if:

7-21                 (1)  the person who made the disclosure intentionally

7-22     or knowingly committed or was responsible within the meaning of

7-23     Section 7.02, Penal Code, for the commission of the disclosed

7-24     violation;

7-25                 (2)  the person who made the disclosure recklessly

7-26     committed or was responsible within the meaning of Section 7.02,

7-27     Penal Code, for the commission of the disclosed violation and the

 8-1     violation resulted in substantial injury to one or more persons at

 8-2     the site or off-site harm to persons, property, or the environment;

 8-3                 (3)  the offense was committed intentionally or

 8-4     knowingly by a member of the person's management or an agent of the

 8-5     person and the person's policies or lack of prevention systems

 8-6     contributed materially to the occurrence of the violation; [or]

 8-7                 (4)  the offense was committed recklessly by a member

 8-8     of the person's management or an agent of the person, the person's

 8-9     policies or lack of prevention systems contributed materially to

8-10     the occurrence of the violation, and the violation resulted in

8-11     substantial injury to one or more persons at the site or off-site

8-12     harm to persons, property, or the environment; or

8-13                 (5)  the violation has resulted in a substantial

8-14     economic benefit which gives the violator a clear advantage over

8-15     its business competitors.

8-16           (f)  In a civil or[,] administrative[, or criminal]

8-17     enforcement action brought against a person for a violation for

8-18     which the person claims to have made a voluntary disclosure, the

8-19     person claiming the immunity has the burden of establishing a prima

8-20     facie case that the disclosure was voluntary.  After the person

8-21     claiming the immunity establishes a prima facie case of voluntary

8-22     disclosure, other than a case in which under Subsection (d) of this

8-23     section immunity does not apply, the enforcement authority has the

8-24     burden of rebutting the presumption by a preponderance of the

8-25     evidence or, in a criminal case, by proof beyond a reasonable

8-26     doubt.

8-27           (h)  The immunity under this section does not apply if a

 9-1     court or administrative law judge finds that the person claiming

 9-2     the immunity has, after the effective date of this Act, (1)

 9-3     repeatedly or continuously committed significant [serious]

 9-4     violations, and (2) not attempted to bring the facility or

 9-5     operation into compliance, so as to constitute a pattern of

 9-6     disregard of environmental or health and safety laws.  In order to

 9-7     be considered a "pattern," the person must have committed a series

 9-8     of violations that were due to separate and distinct events within

 9-9     a three-year period at the same facility or operation.

9-10           SECTION 6.  This Act takes effect September 1, 1997, and

9-11     applies only to an environmental or health and safety audit

9-12     prepared on or after that date.

9-13           SECTION 7.  The importance of this legislation and the

9-14     crowded condition of the calendars in both houses create an

9-15     emergency and an imperative public necessity that the

9-16     constitutional rule requiring bills to be read on three several

9-17     days in each house be suspended, and this rule is hereby suspended.