Like Oil and Water: States and Feds Confront Environmental Self-Auditing

I.  Introduction

In 1993, Coors Brewing Company of Golden, Colorado, was issued a complaint seeking $1.05 million for violations of state air pollution laws that the company itself had disclosed to state regulatory officials.⁽¹⁾ Coors settled the case with the state by paying a penalty of $237,000 and implementing environmental improvements at their facility.⁽²⁾ The Colorado state legislature responded to the Coors case by enacting a law that prohibits the use of self-disclosed information as evidence to support state-initiated enforcement actions.⁽³⁾

This Note presents an anthology of the divergent views, laws and policies elevating environmental self-auditing from an industry practice to a complex issue. The Note begins with the genesis of the common law, policy-based evidentiary privilege for documentation of self-critical analyses and the reluctance of courts to apply the privilege when documents are sought by the government.⁽⁴⁾ State privileges for environmental audits and immunity for self-disclosed violations, enacted in response to the environmental regulated community's cry for liability protection from self-identified regulatory violations, coupled with the objective of encouraging industry to self-police compliance with environmental laws, is outlined.⁽⁵⁾ Then the Note reviews and explains federal policy intended to offer incentives for environmental self-auditing, while preserving access to audit reports and documents to investigate environmental violations and crimes and to ensure that violators do not benefit economically or otherwise over compliant facilities.⁽⁶⁾ The Note culminates in describing the conflict between state privilege and immunity laws and ensuring adequate state enforcement authority in the federal delegation and approval of state environmental programs.⁽⁷⁾

II.  Common Law Privilege for Self-Critical Analysis

The common-law privilege of self-critical analysis protects self-critical documents from discovery.⁽⁸⁾ "The Supreme Court and the circuit courts have neither definitively denied the existence of such a privilege, nor accepted it and defined its scope."⁽⁹⁾ The rationale for the doctrine is that critical self-evaluation supports an important public interest in regulatory compliance.⁽¹⁰⁾

The Reichhold court explained the reasoning behind the privilege:

The privilege protects an organization or individual from the Hobson's choice⁽¹¹⁾ of aggressively investigating accidents or possible regulatory violations, ascertaining the causes and results, and correcting any violations or dangerous conditions, but thereby creating a self-incriminating record that may be evidence of liability, or deliberately avoiding making a record on the subject (and possibly leaving the public exposed to danger) in order to lessen the risk of civil liability. The self-critical analysis privilege is analogous to, and based on the same public policy considerations as, Rule 407, Federal Rules of Evidence, which excludes evidence of subsequent remedial measures.⁽¹²⁾

Self-critical analysis was first identified as a privilege in Bredice v. Doctor's Hospital, Inc.,⁽¹³⁾ a medical malpractice case in which a federal court held that a hospital had a qualified privilege to withhold from discovery the records of meetings in which doctors critically evaluated medical care.⁽¹⁴⁾ The importance of the privilege for medical peer reviews was commented upon in the Reichhold decision.

The Bredice opinion noted that [a] retrospective review of the effectiveness and results of treatments were valuable in improving the quality of health care available to the general public, but that physicians would be unwilling to candidly critique the actions of their colleagues if such evaluations were subject to discovery and use as evidence in a subsequent malpractice action. Moreover, "`what someone at a subsequent date thought of these acts or omissions is not relevant to the case.'"⁽¹⁵⁾

The privilege as applied to medical peer reviews has been widely adopted by statute.⁽¹⁶⁾ In addition, the privilege has been extended to other contexts,⁽¹⁷⁾ including employment discrimination,⁽¹⁸⁾ securities law,⁽¹⁹⁾ and railroad safety.⁽²⁰⁾ A self-critical analysis privilege has been found to exist in cases in which confidentiality is "essential to the free flow of information and . . . the free flow of information is essential to promote recognized public interests."⁽²¹⁾ However, courts have refused to allow the privilege to be used to protect documents from disclosure to a government agency.⁽²²⁾

A.  Emerging Test for Application

Evidentiary privileges must promote interests that are sufficiently important to outweigh the need for probative evidence.⁽²³⁾ Guided by this charge, and considering the United States Supreme Court's declaration that "exclusionary rules and privileges contravene the fundamental principle that `the public . . . has a right to every man's evidence,'"⁽²⁴⁾ three courts deliberating the application of a self-critical analysis privilege have used the same test.⁽²⁵⁾ As described in Reichhold, the test is:

[P]arties asserting the privilege must generally demonstrate that the material satisfies at least three criteria: (1) the information must result from a critical self-analysis undertaken by the party seeking protection; (2) the public must have a strong interest in preserving the free flow of the type of information sought; (3) the information must be of a type whose flow would be curtailed if discovery was allowed.⁽²⁶⁾

In Dowling v. American Hawaii Cruises, Inc., the court also held that there must be an expectation of confidentiality at the time the document was prepared and the document must remain confidential.⁽²⁷⁾ This requirement was recently criticized on the grounds that designation of a self-audit as business confidential information does not guarantee that employees will be truthful.⁽²⁸⁾ A self-audit that is confidential as to outside parties may not inspire corporate employees to be truthful with their own management for fear of reprisal for acts that may be judged as sloppy or incompetent.⁽²⁹⁾ Also, because employees charged with conducting self-audits are often the same employees responsible for maintaining company regulatory compliance, such employees may skew audit results to indicate a greater compliance rate than was found to exist.⁽³⁰⁾

Several courts have held that self-audits are beneficial to a company whether they are kept confidential or not, and thus, confidentiality should neither encourage nor discourage the conducting of self-audits.⁽³¹⁾ Self-audits are beneficial because they can provide evidence of compliance with regulatory requirements and/or document a company's good faith efforts to comply.⁽³²⁾ They can also improve compliance rates by identifying deficiencies or corporate impediments to compliance.⁽³³⁾

B. Self-Critical Analysis and Government Regulation

The privilege has been rejected as a mechanism to protect from disclosure information required to be produced by regulation.⁽³⁴⁾ However, courts are split on whether a self-critical analysis privilege can apply when the parties are private litigants but the information being sought is in a heavily regulated area.⁽³⁵⁾ The courts that have found no privilege reason that "discovery of internal audits protects, not jeopardizes, the public interest since the company was engaged in a potentially dangerous venture and operated in a heavily regulated area."⁽³⁶⁾ The Reichhold court, finding the existence of a privilege, distinguished the kind of documents for which privilege was sought from those described in previous cases and found that "the self-critical analysis privilege [is] analogous to the rule on subsequent remedial measures, and . . . that an entity's retrospective self-assessment of its compliance with environmental regulations should be privileged in appropriate cases."⁽³⁷⁾

However, when the government has sought documents for which protection has been claimed through self-critical analysis privilege, the court has found that no common law privilege protects the documents.⁽³⁸⁾ The rationale supporting these holdings is that the strong public interest in encouraging compliance through self-audit is, in effect, canceled out by the public interest in enforcing federal and state laws.⁽³⁹⁾ Without the requisite public interest supporting the privilege, the second prong of the privilege applicability test fails.⁽⁴⁰⁾ Thus, courts have not upheld the privilege in the government context because they have been unable to find sufficient public-interest support for it.⁽⁴¹⁾

III.  State Statutory Self-Audit Privilege and Immunity Laws

With the advent of self-auditing and third-party-auditing trends in environmental compliance and systems management, the regulated community faced a problem: liability from self-auditing.⁽⁴²⁾ Although the instances in which information from a corporate environmental audit has been used as evidence have been few, industry coalitions advocated "for a guarantee of confidentiality for voluntary environmental audit reports."⁽⁴³⁾ Without significant protection from a common-law privilege,⁽⁴⁴⁾ companies and state business agencies lobbied federal and state legislatures for laws that would protect them from the liability created by their own audits.⁽⁴⁵⁾

In 1993, as part of legislation to establish state authority to enforce against criminal violations of state environmental laws, Oregon created the first statutory privilege for environmental audits.⁽⁴⁶⁾ One commentator has predicted that, if challenged, courts would uphold state statutory privileges for environmental audits, because making a bill into law establishes a clear intent by the people to support the subject of the legislation; thus, sufficient public support for an environmental self-critical analysis privilege exists in a state with such a statute.⁽⁴⁷⁾ South Carolina made the intent behind its privilege law explicit: "The General Assembly finds that . . . it is in the public's interest to encourage [regular self-evaluative] activities by assuring limited protection of audit findings. . . ."⁽⁴⁸⁾

As of May 1997, twenty-one states had followed Oregon's lead in providing statutory protection for environmental auditing by enacting legislation conferring an evidentiary privilege for environmental audits or some level of immunity for violations detected through such auditing, or both.⁽⁴⁹⁾ The states with statutory environmental audit privilege laws that do not also confer immunity are: Arkansas,⁽⁵⁰⁾ Illinois,⁽⁵¹⁾ Indiana,⁽⁵²⁾ and Oregon.⁽⁵³⁾ The laws of two states, New Jersey and South Dakota, address the problem of liability from environmental self-auditing, not by creating an evidentiary privilege, but by granting statutory immunity for violations detected.⁽⁵⁴⁾

The majority of states that have laws protecting those who undertake environmental self-audits incorporate an evidentiary privilege and an immunity provision into their state laws.⁽⁵⁵⁾ States creating a privilege and conferring some level of immunity are: Alaska,⁽⁵⁶⁾ Colorado,⁽⁵⁷⁾ Idaho,⁽⁵⁸⁾ Kansas,⁽⁵⁹⁾ Kentucky,⁽⁶⁰⁾ Michigan,⁽⁶¹⁾ Minnesota,⁽⁶²⁾ Mississippi,⁽⁶³⁾ Montana,⁽⁶⁴⁾ New Hampshire,⁽⁶⁵⁾ Ohio,⁽⁶⁶⁾ South Carolina,⁽⁶⁷⁾ Texas,⁽⁶⁸⁾ Utah,⁽⁶⁹⁾ Virginia,⁽⁷⁰⁾ and Wyoming.⁽⁷¹⁾ The privilege and immunity statutes in Colorado, Idaho, Minnesota, Montana, New Hampshire and Ohio will sunset unless re-enacted.⁽⁷²⁾

A.  The Privilege Laws

The Oregon privilege statute served as a model for many of the other states promulgating a statutory privilege for environmental audits.⁽⁷³⁾ The Oregon statute declares that "[a]n Environmental Audit Report shall be privileged and shall not be admissible as evidence in any legal action in any civil, criminal or administrative proceeding."⁽⁷⁴⁾ The statute provides for exceptions to the privilege: (a) express or implied waiver by the party asserting the privilege; or (b) in a civil or administrative proceeding, court-ordered disclosure after an in-camera review finding that the privilege has been asserted fraudulently, that the privilege does not apply to the material (the document is not an audit report), or failure to promptly initiate efforts toward compliance.⁽⁷⁵⁾ In a criminal proceeding, the statute provides for court-ordered disclosure upon the same findings in a civil matter or upon a showing that there is a "compelling need" and the information is "not otherwise available."⁽⁷⁶⁾ In this context, the statute instructs the court to restrict the disclosure to only those portions required to resolve facts at issue in the proceedings.⁽⁷⁷⁾

Oregon's statute established that the party asserting the privilege has the burden to prove applicability, while the party seeking the information has the burden to prove that an exception exists.⁽⁷⁸⁾ The statute also provides explicit procedural requirements in a criminal proceeding for in-camera review and, if supported by the court's finding, disclosure to allow state criminal enforcement officials the opportunity to review the material while preserving the privilege.⁽⁷⁹⁾

Oregon's statute concludes with identifying material that is not subject to the privilege: information (a) required by law to be reported to the government; (b) gathered by a regulatory agency by "observation, sampling or monitoring;" or (c) acquired through an independent source from the audit.⁽⁸⁰⁾ Finally, the statute makes clear that this environmental audit privilege does not affect other statutory or common-law privileges, "including the work product doctrine and the attorney-client privilege."⁽⁸¹⁾

Some states with statutory environmental audit privileges include unique provisions or requirements. The Illinois law extends the role of the court in applying the privilege to the Illinois Pollution Control Board, and Colorado extends the role to administrative law judges.⁽⁸²⁾ The Kansas statute does not include the provision that the audit privilege would not apply if the facility fails to promptly come into compliance; instead, the state substituted the requirement that the facility must implement a "management system to assure compliance with environmental laws."⁽⁸³⁾ The South Carolina statute requires facilities planning on claiming the privilege to notify state regulatory officials within 10 days of beginning an audit.⁽⁸⁴⁾ In addition, South Carolina's statute provides that the privilege does not apply in proceedings before the state workers' compensation commission, although that tribunal is instructed by the statute to protect such documents from release.⁽⁸⁵⁾

Many states with statutes conferring an environmental audit privilege failed to include express language negating the privilege in a criminal proceeding when there is a substantial need and the information is not available elsewhere.⁽⁸⁶⁾ Others, however, included language negating the privilege if the environmental audit shows evidence of imminent or substantial harm to the public or the environment⁽⁸⁷⁾ or if the audit was prepared in an attempt to hide information in anticipation of a pending inspection or an ongoing investigation.⁽⁸⁸⁾

B.  The Immunity Laws

Eighteen states provide some immunity for violations detected by an environmental audit that are voluntarily disclosed to a state environmental agency.⁽⁸⁹⁾ The New Jersey statute is unique in that it provides immunity for only some violations (those defined as "minor" by the statute), but it does not require that the violations themselves be identified by environmental self-auditing.⁽⁹⁰⁾

In South Dakota, the only other state with an immunity statute without a corresponding privilege for environmental audit, there is "a presumption against the imposition of civil or criminal penalties for violations" discovered by regulated entities through environmental audit and voluntarily disclosed to the state in writing within 30 days of discovery.⁽⁹¹⁾ The facility must correct the violations discovered within 60 days or in accordance with a compliance schedule negotiated with the state.⁽⁹²⁾ In addition, the statute provides that immunity is unavailable if the violations are knowing or the facility has repeatedly violated environmental law in the previous two years or has been assessed a civil penalty during that period.⁽⁹³⁾

Other immunity statutes define "voluntary disclosure" to ensure that facilities that benefit from the statute have disclosed only violations detected through audit and disclosed them quickly.⁽⁹⁴⁾ Some states, such as Ohio, South Dakota, and Texas, specifically require self-disclosures to be in writing;⁽⁹⁵⁾ others, such as New Hampshire and New Jersey, do not specify how the facility must "report" the violations to the state.⁽⁹⁶⁾

The level of immunity offered by states varies; however, some state immunity statutes provide no protection for criminal violations.⁽⁹⁷⁾ Others may provide protection for criminal negligence.⁽⁹⁸⁾ The Idaho statute provides immunity for environmental crimes, as long as they are voluntarily disclosed (which is "rebuttably presumed" by the statute), the disclosure arises from an environmental audit, efforts are made to come into compliance, and the person or facility has not "committed serious violations that constitute a pattern of continuous or repeated violations of environmental laws."⁽⁹⁹⁾

The Texas immunity statute contains a unique provision--a requirement to notify state authorities before initiating an environmental audit.⁽¹⁰⁰⁾ The Ohio immunity statute preserves the right of the government or injured persons to recover payment for damage to "persons, property, or the environment," restitution to the government for the cost of responding to disclosures, or environmental remediation costs.⁽¹⁰¹⁾ And the Kentucky and Virginia immunity statutes make clear that the immunity conferred by the state for self-disclosure of violations detected by an environmental audit does not extend to civil tort claims from private parties.⁽¹⁰²⁾

In drafting immunity laws, three states considered the impact of granting immunity for self-disclosed violations of state-delegated federal environmental programs.⁽¹⁰³⁾ The South Dakota law states that the immunity provisions do not apply if the state "is required in writing by a federal agency to assess penalties" for a violation of a federally-delegated environmental program.⁽¹⁰⁴⁾ The Wyoming immunity statute demotes a voluntary disclosure of an environmental violation arising from an environmental audit to a "mitigating factor" if failure to assess a penalty for a specific violation could threaten the state's authority to implement a federally-delegated environmental program.⁽¹⁰⁵⁾ Montana, passing one of the most recent audit privilege and immunity laws in May 1997, included specific language nullifying protection for self-audits when that protection would prevent the state from obtaining or maintaining a federal environmental program delegation.⁽¹⁰⁶⁾

IV. Federal Action Intended to Encourage Environmental Auditing

The federal government has authority to enforce against violations of federal environmental law⁽¹⁰⁷⁾ and concurrent jurisdiction with states to enforce when states have been delegated authority to implement federal environmental programs.⁽¹⁰⁸⁾ However, the state environmental audit privileges or immunities currently enacted in twenty-two states⁽¹⁰⁹⁾ likely do not affect the enforcement of a federal environmental law by the federal government.⁽¹¹⁰⁾

A. Federal Legislation

On February 24, 1995, the Voluntary Environmental Self-Evaluation Act, H.R. 1047, was introduced in the United States House of Representatives;⁽¹¹¹⁾ and on March 21, 1995, the Voluntary Environmental Audit Protection Act, S. 582, was introduced in the Senate.⁽¹¹²⁾ The House bill explained that the legislation was needed because compliance with environmental laws requires voluntary self-policing by the regulated community to be effective, and a privilege for self-evaluations as well as protection from liability is necessary to promote self-auditing.⁽¹¹³⁾

Both federal bills, like most of the state laws, provide that environmental audit reports cannot be used as evidence and are not subject to discovery in any legal action.⁽¹¹⁴⁾ In addition, the federal legislation joins the state audit privilege laws in providing that the privilege does not apply to (1) information required by law to be disclosed⁽¹¹⁵⁾ or (2) information gathered by an independent source.⁽¹¹⁶⁾ The federal legislation differs from most of the state laws in that both the Senate and House bills affirmatively disallow the privilege for the results of self-audits performed to avoid discovery by regulatory authorities.⁽¹¹⁷⁾

The Senate and House bills allow for complete immunity for voluntarily-disclosed violations; the bills further state that the disclosures are considered voluntary if (1) the disclosure arises out of an audit and is made promptly and (2) efforts are undertaken to correct the violations within a reasonable time.⁽¹¹⁸⁾

The proposed legislation, like some state environmental immunity laws, creates a "presumption of applicability" regarding the requirement that the disclosure of a violation to the government is voluntary, until the government proves that the disclosure was involuntary.⁽¹¹⁹⁾

The House and Senate bills were sent to committees and have not surfaced as of June 1997.⁽¹²⁰⁾ It was reported recently that, due to ongoing friction between federal environmental enforcers and states with privilege and immunity laws, the Senate is considering re-introducing a national bill.⁽¹²¹⁾

B.  Federal Agency Policy

In May 1994, United States Environmental Protection Agency (EPA) Administrator Carol Browner instructed EPA staff⁽¹²²⁾ to reassess the Agency's 1986 Environmental Auditing Policy (1986 Policy).⁽¹²³⁾ By issuing the 1986 Policy, EPA sought to encourage corporate environmental self-audits by promising not to review self-audit reports during regulatory inspections unless the information they contain cannot be secured through other investigatory techniques.⁽¹²⁴⁾

Subsequent EPA penalty policies implemented this position by providing for partial reductions in administrative and judicial penalties for violations of federal environmental regulation discovered through self-audit and voluntarily disclosed to EPA.⁽¹²⁵⁾ As such, changes in EPA enforcement response resulting from the 1986 Policy guaranteed that self-disclosure of regulatory violations to EPA would translate into assessment of a federal penalty, albeit reduced from that which EPA would impose upon detection of the violation through its own inspection.⁽¹²⁶⁾

Immediately preceding or during the period of reassessment called for by Administrator Browner,⁽¹²⁷⁾ ten states had enacted laws establishing an evidentiary privilege or both a privilege and immunity for violations arising from an environmental audit,⁽¹²⁸⁾ and federal bills had been introduced in the House and Senate.⁽¹²⁹⁾ In this political climate, on April 3, 1995, EPA issued a revised voluntary audit policy (Interim Policy).⁽¹³⁰⁾

C.  The Interim Policy

EPA's Interim Policy provided for elimination of gravity-based penalties⁽¹³¹⁾ if regulated entities comply with seven conditions: (1) voluntarily self-audit, (2) voluntarily disclose violations to all appropriate regulatory bodies, (3) promptly correct violations within 60 days of discovery, (4) remediate any imminent and substantial endangerment to public health or the environment, (5) remediate any harm caused by noncompliance and take steps to prevent repeat violations, (6) take all appropriate preventive measures, and (7) produce documentation in cooperation with EPA.⁽¹³²⁾ However, the Interim Policy also provided, "EPA will retain its full discretion to recover any economic benefit gained as a result of noncompliance to preserve a `level playing field' in which violators do not gain a competitive advantage through noncompliance."⁽¹³³⁾

EPA further sought to level the playing field by ensuring consistent enforcement of federal environmental violations by "scrutiniz[ing] enforcement more closely in states with audit privilege and/or penalty immunity laws."⁽¹³⁴⁾ The Interim Policy was offered by EPA as "a positive alternative to across-the-board privileges and immunities that could be used to shield criminal misconduct, drive up litigation costs and create an atmosphere of distrust between regulators, industry and local communities."⁽¹³⁵⁾ EPA argued that the Interim Policy was a superior alternative to privilege and immunity statutes for a number of reasons.⁽¹³⁶⁾ First, privileges, because they are based on secrecy, "run counter to efforts to open up environmental decisionmaking and encourage public participation."⁽¹³⁷⁾ Second, the United States Supreme Court has found that "`privileges are not lightly created nor expansively construed'"⁽¹³⁸⁾ and judicial decisions have rejected the self-critical analysis privilege when the government has sought documents.⁽¹³⁹⁾ In addition, EPA maintained that government-granted immunity can give violators an unfair advantage over those who comply, and for this reason, governments should retain their ability to recover monetary gain from noncompliance.⁽¹⁴⁰⁾

In response to issuance of the Interim Policy, industry expressed concern that the policy would not be consistently applied by EPA enforcement officials.⁽¹⁴¹⁾ Alternatively, environmental groups insisted that the Interim Policy failed to require full public disclosure of violations reported to EPA, which they maintained is not in the public interest.⁽¹⁴²⁾ Environmentalists also urged EPA to resist the lobbying efforts of industry to remove all fines for voluntarily disclosed violations.⁽¹⁴³⁾

Comments on the Interim Policy from state officials took exception to EPA's aggressive position on environmental law enforcement in states with audit privilege and immunity statutes.⁽¹⁴⁴⁾ Colorado and Idaho argued that EPA should defer to them on enforcement matters regarding environmental audits; meanwhile, an interstate environmental association commented that statements issued by EPA at odds with the position of states could perpetuate piecemeal policy-making and thwart efforts to achieve national consistency.⁽¹⁴⁵⁾

D.  The Final Policy

As intended,⁽¹⁴⁶⁾ by December 1995, EPA had revised and finalized its environmental audit policy (Final Policy).⁽¹⁴⁷⁾ EPA's Final Policy requires that eight conditions (as opposed to seven in the Interim Policy) be met for a company that self-audits to qualify for any penalty reduction and nine conditions for possible reduction of all penalties.⁽¹⁴⁸⁾ The nine conditions are: (1) discovery of violation through a management system, (2) voluntary discovery of violation, (3) prompt disclosure in writing to EPA, (4) discovery and disclosure independent of government and third parties, (5) correction of violation within 60 days or negotiation of a remediation agreement, (6) steps taken to prevent reoccurrence, (7) no repeat violations, (8) no violations causing serious actual harm or imminent and substantial endangerment or in violation of a consent agreement with EPA, and (9) cooperation with EPA.⁽¹⁴⁹⁾

From the Interim Policy to the Final Policy, EPA refined the conditions for application of penalty reductions and clarified its position most notably in the following contexts:

1. Revised EPA Statement on Consistent Application of the Policy.⁽¹⁵⁰⁾

2. Penalty Reductions Applied for Violations Discovered Outside Context of an Audit. EPA will apply penalty reductions or penalty elimination based on discovery of violation through a systematic procedure in effect at the facility, whether the procedure is an environmental self-audit or day-to-day "due diligence."⁽¹⁵¹⁾

3. Scope of Violations to Which the Policy Applies Redefined. The Final Policy clarifies that almost any violation "voluntarily discovered, regardless of whether the violation is required to be reported," would qualify for reduced enforcement response under the policy.⁽¹⁵²⁾ However, EPA will not apply the policy to violations detected through legally required sampling and monitoring, since such violations would not be voluntarily discovered.⁽¹⁵³⁾

4. Steps to Prevent Recurrence of Violation Required Only After Disclosure to EPA. Under the Interim Policy, EPA reserved the right to disallow application of the policy when there is evidence that a facility has failed to take steps to avoid repeat violations.⁽¹⁵⁴⁾ The Final Policy requires only that the facility agree to undertake measures to prevent recurrence of the violation after disclosure to EPA.⁽¹⁵⁵⁾

5. Repeat Violations, Very Serious Violations, and Violations of Consent Agreements Excluded. Under the Interim Policy, EPA allowed reduction of up to 75 percent of gravity-based penalties⁽¹⁵⁶⁾ for voluntarily disclosed violations involving imminent and substantial endangerment, but no reductions for violations involving serious actual harm.⁽¹⁵⁷⁾ This provision was revised to exclude these violations, as well as to exclude repeat violations and violations of a consent agreement, from penalty reduction under the Final Policy.⁽¹⁵⁸⁾

6. Public Disclosure Required. EPA requires public disclosure of (a) descriptions of management systems constituting "due diligence"⁽¹⁵⁹⁾ and (b) consent agreements negotiated under the Final Policy, including the nature of violations, remedies and compliance schedules.⁽¹⁶⁰⁾ All voluntary disclosures are required to be submitted to EPA in writing, and public access to those submissions will be guided by the Freedom of Information Act.⁽¹⁶¹⁾

7. Positive Attitude Toward State Approaches. Although EPA restated its opposition to state privilege and immunity laws, the Agency was silent on scrutinizing enforcement in states with such laws differently from other states.⁽¹⁶²⁾

8. Future Actions Intended by EPA. EPA promised to complete a study of the effectiveness of the policy within three years.⁽¹⁶³⁾

Many states offered immediate endorsement for the Final Policy by declaring that EPA achieved a balance of encouraging good-faith businesses to audit, penalizing bad actors, and supporting state environmental enforcement decisions.⁽¹⁶⁴⁾ An independent Washington, D.C. publisher reported positive reaction by environmentalists for public disclosure provisions of the Final Policy and support from industry for inclusion of systematic management systems as an acceptable mechanism for violation discovery.⁽¹⁶⁵⁾

E. The Economic Benefit Debate

In the Interim Policy, EPA stated its position that "[s]ources will not be allowed to gain an economic advantage over their competitors by delaying their investment in compliance."⁽¹⁶⁶⁾ At that time, EPA proposed that its environmental audit policy was a superior alternative to privilege and immunity statutes because "to maintain a level playing field, the federal and state governments must be able to recoup the economic benefit of violations."⁽¹⁶⁷⁾ According to public comments received by EPA on the Interim Policy, industry and states both argued that, to provide an incentive for companies to self-audit, the policy should remove penalties levied for economic benefit of noncompliance when self-audits are voluntarily disclosed to EPA.⁽¹⁶⁸⁾ Protection of the environment and public health is more important to some states than equity among regulated entities.⁽¹⁶⁹⁾

However, in the Final Policy, EPA maintained that retaining economic-benefit penalties is fair and offers an incentive to comply on time.⁽¹⁷⁰⁾ Although most state immunity statutes are silent on economic benefit, Mississippi and Utah allow recovery for economic benefit of noncompliance under their environmental audit immunity statutes.⁽¹⁷¹⁾

Judges have taken the position that no incentive at all is needed for compliance self-audits to be undertaken;⁽¹⁷²⁾ and at least one commentator has espoused that "the full economic benefit that violators derive through their noncompliance" should be recovered by the government.⁽¹⁷³⁾

From a different perspective, Congressional Representative Joel Hefley of Colorado, who introduced the House bill,⁽¹⁷⁴⁾ stated that EPA's "concern that a violator will derive an economic benefit [from noncompliance] is misplaced."⁽¹⁷⁵⁾ Representative Hefley argued that identifying and correcting non-compliance creates greater costs than maintaining compliance.⁽¹⁷⁶⁾

V.  State Privilege and Immunity Laws: Their Effect on Federal Approval of State Environmental Programs

In March 1995, EPA Administrator Carol Browner told a meeting of the National Association of Attorneys General that "environmental programs delegated to states by EPA could be endangered" by state environmental audit privilege and immunity laws.⁽¹⁷⁷⁾ At that time, there were ten states with audit privilege laws.⁽¹⁷⁸⁾ Two years later, there are twenty-two,⁽¹⁷⁹⁾ and federal delegation and approval of state environmental programs in some of those states is a problem.⁽¹⁸⁰⁾

Back in 1995, Colorado Attorney General Gale Norton contended that, without EPA interference, states could gather data to evaluate state privilege and immunity laws.⁽¹⁸¹⁾ In the wake of EPA concerns that some states may not legally possess adequate enforcement authority to fulfill minimum federal requirements for some programs, state attorneys general could use some of that data to show EPA that their state's authority is still sufficient, even with statutory privileges and immunity, to enforce new state programs ripe for federal approval.⁽¹⁸²⁾ In response to EPA's delegation-of-authority concerns, like Colorado two years earlier, states again requested that EPA refrain from interfering with the execution of state privilege and immunity laws to allow states to gather data on the impact of the state audit laws on enforcement of federal requirements.⁽¹⁸³⁾ EPA counterproposed to work with states to resolve the state-federal problem "`administratively or with the state attorney general opinion or with legislative changes, if that is what needs to be done.'"⁽¹⁸⁴⁾

Consider the problem in the context of federal review and approval of state operating air permit programs, as required by the federal Clean Air Act, Title V (Title V).⁽¹⁸⁵⁾ Under Title V, major sources of air pollutants are required to obtain operating permits, which must reflect emission limitations, emission monitoring requirements, reporting and other obligations of the Clean Air Act.⁽¹⁸⁶⁾ States are instructed by Congress to develop and issue these operating permits.⁽¹⁸⁷⁾ Title V requires states to submit to EPA for its approval a state permit program--a document setting forth a state air permitting program that conforms to requirements in the statute and regulations, including issuance of air permits, generation of permitting fees, and enforcement of permit requirements.⁽¹⁸⁸⁾ The federal statute also requires that, with their permit program submittal, states forward to EPA a legal opinion from the state attorney general (or equivalent authority) attesting that the laws of the state "provide adequate authority to carry out the program."⁽¹⁸⁹⁾ EPA is required by Title V to approve or disapprove state permit programs submitted for review.⁽¹⁹⁰⁾ The statute also allows EPA to grant interim approval of the state program if the program largely meets the requirements of Title V, but requires changes or additions to receive full approval.⁽¹⁹¹⁾

Title V also provides for sanctions against states that fail to submit programs or fail to revise programs that have been rejected by EPA.⁽¹⁹²⁾ Under the statute, the sanction that may be imposed is a prohibition on awarding federal grants or approving federal projects for interstate highway development or maintenance.⁽¹⁹³⁾

As a part of the state permit program required by Congress, states must possess adequate enforcement authority to "enforce permits, permit fee requirements and the requirement to obtain a permit."⁽¹⁹⁴⁾ In addition, EPA promulgated regulations pursuant to Title V that establish in more detail what constitutes adequate enforcement authority for purposes of a state operating air permits program.⁽¹⁹⁵⁾

On December 20, 1993, the Administrator of EPA delegated authority to review state air permit programs to the ten EPA Regional Administrators.⁽¹⁹⁶⁾ On February 14, 1997, EPA sent a guidance memorandum to the Regional Administrators to assist them in reviewing state requests for program approvals or delegations for sufficiency of enforcement authority in states with privilege and/or immunity laws.⁽¹⁹⁷⁾ The Statement of Principles Memorandum was sent to the EPA regions after EPA had received multiple petitions for program withdrawals due to citizen group concerns about the state privilege and immunity laws.⁽¹⁹⁸⁾ This was also after EPA had issued interim program approvals under Title V for Michigan, Idaho, and Texas that remain contingent upon reconciliation of the enforcement authority required by Title V and the privilege and/or immunity conferred by state law.⁽¹⁹⁹⁾

On January 10, 1997, EPA granted final interim approval for Michigan's Title V program.⁽²⁰⁰⁾ The interim approval requires Michigan to make a series of changes to its proposed program and/or laws to be granted full approval by EPA, including addressing EPA concerns regarding the impact of the state's audit privilege and immunity law on enforcement authority required by Title V and EPA regulation.⁽²⁰¹⁾

EPA explained the focus of the Michigan Title V program review in the context of the Michigan audit law:

[T]he issue is whether the Michigan audit law, in offering privilege and immunity to companies conducting environmental audits, so deprives the State of its authority to take enforcement action for violation of title V requirements such that the State does not have the necessary authority required for full title V approval.⁽²⁰²⁾

As explained by EPA, Michigan's immunity law can in certain circumstances eliminate all state "authority to recover any civil penalties."⁽²⁰³⁾ In addition, the audit privilege provision of Michigan law shields potential evidence of civil and criminal violations from state investigators, compromising "the State's fundamental enforcement authority."⁽²⁰⁴⁾

EPA reported that they received comments, including that "EPA's interpretation and application of the title V enforcement requirements improperly interferes with the States' role as independent sovereigns."⁽²⁰⁵⁾ However, the Agency maintained that, although it supports state flexibility in running federally approved state programs, this flexibility must be "within the bounds of the statutes enacted by Congress and the implementing regulations promulgated by EPA."⁽²⁰⁶⁾ In addition, in response to complaints that Congress did not intend EPA to use the Title V approval process to pressure states to change their audit privilege and/or immunity laws, EPA stated that its actions were in compliance with the statute.⁽²⁰⁷⁾

EPA's problems with the Idaho and Texas Title V permit programs were similar to those outlined in review of the Michigan program.⁽²⁰⁸⁾ In contrast, EPA's proposed interim approval of the New Hampshire Title V permit program discussed that state's privilege and immunity law but did not find a conflict.⁽²⁰⁹⁾

New Hampshire designed their Title V operating air permit program to require disclosure of self-identified violations of permits or permit regulations through a number of regulatory requirements proposed by New Hampshire.⁽²¹⁰⁾ In addition, the opinion of the New Hampshire Attorney General, submitted with the state air permit program, explained that there are already in existence in the state sufficient reporting obligations to identify if a facility has failed to apply for an air permit.⁽²¹¹⁾ So, according to New Hampshire, it would not be possible for a facility to self-disclose such a violation voluntarily, since there is a continuing obligation under state law to report the information to the state.⁽²¹²⁾ As such, the New Hampshire Title V air permit program results in no conflict with the state privilege and immunity law, because disclosures that are required by law are exempt from the eligible violations for which immunity is available.⁽²¹³⁾

However, the New Hampshire maneuver of "regulating around" its audit law may not be available to other states such as South Carolina and Texas.⁽²¹⁴⁾ Both South Carolina and Texas have incorporated in their audit immunity laws a provision that forbids promulgation of regulations to circumvent the immunity provided by the state statute.⁽²¹⁵⁾

South Dakota and Wyoming included language in their immunity statutes to accommodate issuance of a mandatory penalty for violation of a federally-delegated environmental program.⁽²¹⁶⁾ The two states have submitted Title V operating air permit programs to EPA and have both received final interim approvals that do not identify a deficiency of enforcement authority due to state audit laws.⁽²¹⁷⁾

Congress is concerned about the environmental audit conflict between EPA and states.⁽²¹⁸⁾ EPA's response to congressional concerns?--A directive: "As a first step, [regional EPA offices] should contact state attorneys general for an opinion regarding the effect of any audit privilege or immunity law on enforcement authority as discussed in these principles [for review of new state programs]."⁽²¹⁹⁾

EPA may ultimately be forced to back off by a pending sixth circuit court decision.⁽²²⁰⁾ A coalition of industry groups in Michigan have petitioned the sixth circuit to "review and modify EPA's interim approval" of the state's Title V program,⁽²²¹⁾ arguing that EPA's failure to grant final approval based on concerns about enforcement authority was "`arbitrary, capricious, an abuse of discretion, or not in accordance with the law'" because EPA had previously approved programs in other states with privilege and immunity laws.⁽²²²⁾ However, the petition to the sixth circuit could be dismissed if the court finds that the industry group, which is not directly involved in federal approval of state environmental programs, lacks standing because it cannot show that it has been affected by EPA's interim approval.⁽²²³⁾

Some states may ultimately be compelled to amend their privilege and/or immunity laws.⁽²²⁴⁾ In response to talks with EPA, Utah amended its environmental audit law in March 1997.⁽²²⁵⁾ The Utah amendment removed language in Utah's audit privilege statute that imposed liability on any person for all damages resulting from a disclosure of privileged audit material and criminal liability and fines upon a person for a wilful disclosure.⁽²²⁶⁾

Consider the effect of the Utah environmental audit privilege law, before and after the March amendment, on application of Section 322 of the Clean Air Act, which provides protection from discharge for employees who disclose violations to the government.⁽²²⁷⁾ Before amendment, Utah's privilege law imposed liability and punishment on potential whistleblowers; section 322 of the Clean Air Act protected whistleblowers from punishment to encourage them to come forward.⁽²²⁸⁾ Utah's privilege law was in conflict with the whistleblower protection afforded by the Clean Air Act, but since amendment, the problem is gone.⁽²²⁹⁾

VI.  Conclusion

Self-evaluative auditing by industry is an invaluable tool to ensure compliance with regulatory requirements.⁽²³⁰⁾ The use of audit reports as evidence by government law enforcement officials is uncommon but has occurred.⁽²³¹⁾ No common law privilege or doctrine exists that provides complete protection against the use of self-evaluative documents.⁽²³²⁾ The rarely-recognized common law privilege of self-critical analysis, supported by the contention that fostering of remediation through self-analysis is in the public interest, has been found by courts to be unavailable to companies when the government is seeking self-evaluative documents.⁽²³³⁾

Industry lobbied for and many states have created a statutory privilege for environmental audits and state-conferred immunity for violations identified and disclosed to state officials.⁽²³⁴⁾ A number of the state laws explain that the laws were enacted to encourage companies to police their own compliance with environmental laws.⁽²³⁵⁾ In 1995, however, proposed federal legislation to establish similar privilege and immunity protection at the federal level for environmental self-auditing did not succeed.⁽²³⁶⁾ EPA has voiced strong opposition to the state statutes because they restrict access to evidence of environmental violations and crimes by law enforcers.⁽²³⁷⁾ EPA also opposes the state laws because many confer immunity, which can create a competitive advantage for companies that fail to comply but later self-disclose over companies that timely comply with environmental laws.⁽²³⁸⁾ However, to encourage self-policing, which state and federal regulators universally agree is good, EPA issued an Interim Policy, followed by a Final Policy, delivering the promise that EPA will not routinely request access to audit reports during investigations and that EPA will reduce or eliminate gravity-based penalties for self-identified, self-disclosed violations if certain criteria are met.⁽²³⁹⁾ With the Final Policy and state privilege and immunity laws, the problem arises that they do not together establish separate non-conflicting approaches to industry environmental self-auditing when states run federal environmental programs.⁽²⁴⁰⁾

Delegation to states of federal environmental programs requires states to possess adequate enforcement authority to undertake the program.⁽²⁴¹⁾ Recently, full federal approval of state air permitting programs, which the states are required to implement by the federal Clean Air Act, has been denied by EPA due to concerns over insufficient enforcement authority in some states with environmental audit privilege and immunity laws.⁽²⁴²⁾ States, in response, have asked EPA to hold back on the issue for two years to allow the states to gather data on the actual impact of their privilege and immunity laws on environmental law enforcement.⁽²⁴³⁾

In the context of the Clean Air Act, Title V, state air permitting program approval process, for states previously granted an interim approval, EPA could not give the two-year hiatus requested by the states due to congressional constraints imposed by the statute itself.⁽²⁴⁴⁾ If states cannot guarantee that privilege and immunity statutes do not impair their ability to enforce the Title V program, EPA is restricted from granting approval.⁽²⁴⁵⁾

To resolve the problem, in the absence of congressional action granting EPA the power to depart from previous congressional mandates, states will have to amend their state law to resolve the enforcement authority problem⁽²⁴⁶⁾ or other conflict with federal law.⁽²⁴⁷⁾ The bottom line: states do not have the authority to give away the federally-regulated farm.

Suzanne M. Parent^(*)

1. See Mark Obmascik, Coors Is Fined $1.05 Million, DENV. POST, July 22, 1993, at B3.

2. See Mark Obmascik, Score It This Way: Big Business 2, Outgoing Health Chief 0, DENV. POST, Dec. 17, 1994, at B1.

3. See id.; see also COLO. REV. STAT. § 13-25-126.5 (1994).

4. See infra Part II.

5. See infra Part III.

6. See infra Part IV.

7. See infra Part V.

8. See Reichhold Chemicals, Inc. v. Textron, Inc., 157 F.R.D. 522, 524 (N.D. Fla. 1994). In Reichhold, a landowner, seeking compensation from past owners and tenants for environmental clean up, withheld from discovery documents summarizing "retrospective analyses of past conduct, practices, and occurrences, and the resulting environmental consequences." Id. at 527.

9. In re Grand Jury Proceedings, 861 F. Supp. 386, 387 (D. Md. 1994).

10. See Reichhold, 157 F.R.D. at 524.

11. A Hobson's choice is "an apparently free choice that offers no actual alternative"; the paradox was named after a seventeenth century liveryman who insisted that customers take the horse nearest the stable door or none at all. WEBSTER'S II NEW RIVERSIDE DICTIONARY 585 (1994).

12. Reichhold, 157 F.R.D. at 524 (footnote omitted); see also infra note 37.

13. 50 F.R.D. 249 (D.D.C. 1970), aff'd, 479 F.2d. 920 (D.C. Cir. 1973).

14. See id. at 250-51.

15. Reichhold, 157 F.R.D. at 525 (quoting Bredice v. Doctor's Hospital, 50 F.R.D. 249, 251 (quoting Richards v. Maine Central R.R., 21 F.R.D. 590, 592 (D. Me. 1957))). Richards was a wrongful death case, arising from a railroad accident, in which the plaintiff sought discovery of post-accident disciplinary measures the railroad may have taken against the train conductor. See Richards, 21 F.R.D. at 590.

16. See David P. Leonard, Codifying a Privilege for Self-Critical Analysis, 25 HARV. J. ON LEGIS. 113, 119-20 (1988) (indicating that only Maryland and Oregon lack such statutes). Since publication of Leonard's article, Maryland and Oregon have both passed and codified legislation providing discovery and immunity protection for medical reviews. See MD. CODE ANN., HEALTH OCC. § 14-502 (1994); OR. REV. STAT. § 41.685 (1995).

As an example, the Massachusetts statute protecting the proceedings of medical peer reviews reads:

[P]roceedings, reports and records of a medical peer review committee shall be confidential and shall not be subject to subpoena or discovery, or introduced into evidence, in any judicial or administrative proceeding, . . . and no person who was in attendance at a meeting of a medical peer review committee shall be permitted or required to testify in any such judicial or administrative proceeding . . . .

MASS. GEN. LAWS ch. 111, § 204 (1994).

17. See John Calvin Conway, Self-Evaluation Privilege and Corporate Compliance Audits, 68 S. Cal. L. Rev. 621, 642-50 (1995) for a more comprehensive review.

18. See O'Connor v. Chrysler Corp., 86 F.R.D. 211, 212-13 (D. Mass. 1980) (regarding plaintiffs who asserted sex discrimination in violation of Title VII of the 1964 Civil Rights Act and sought "Affirmative Action Plans," which included self-evaluation); Banks v. Lockheed-Georgia Co., 53 F.R.D. 283, 285 (N.D. Ga. 1971) (regarding a former employee who sought a report produced by the former employer on equal employment opportunity problems within the company).

19. See In re Crazy Eddie Security Litigation, 792 F. Supp. 197, 205 (E.D.N.Y. 1992) (holding that the analysis is privileged but the underlying facts are not).

20. See Richards, 21 F.R.D. at 590.

21. Note, The Privilege of Self-Critical Analysis, 96 HARV. L. REV. 1083, 1087 (1983) (footnote omitted).

22. See, e.g., United States v. Dexter Corp., 132 F.R.D. 8, 9 (D. Conn. 1990).

23. See Trammel v. United States, 445 U.S. 40, 51 (1980).

24. Id. at 50 (quoting United States v. Bryan, 339 U.S. 323, 331 (1950)).

25. See Dowling v. American Haw. Cruises, Inc., 971 F.2d 423, 424-25 (9th Cir. 1992) (regarding an injured First Mate seeking the minutes of periodic meetings evaluating cruiseship safety); In re Grand Jury Proceedings, 861 F. Supp. 386, 386 (D. Md. 1994) (discussing the production of a self-audit conducted by an outside consultant and resisted by a company in proceedings investigating the alleged violation of Food and Drug Administration regulations); Reichhold Chemicals, Inc. v. Textron, Inc., 157 F.R.D. 522, 527 (N.D. Fla. 1994) (privileging a self-audit describing "retrospective analysis of past conduct").

26. Reichhold, 157 F.R.D. at 527 (citing Dowling, 971 F.2d at 425-26).

27. See Dowling, 971 F.2d at 426.

28. See Conway, supra note 17, at 628-30. Conway argues that employees are not likely to report their own intentional bad acts, and thus, self-critical audits will reveal only inadvertent wrongs. See id.

29. See O'Connor v. Chrysler Corp, 86 F.R.D. 211, 217 (D. Mass. 1980). In O'Connor, an employment discrimination case in which company self-evaluative documents were sought, the court reasoned that subjecting the documents to discovery may not affect the future truthfulness of employees since "[a]n employee's interest in protecting himself and his fellow employees from discipline is likely to be at least as great as his interest in protecting his employer from suit [by truthfully participating in a company self-audit]." Id.

30. See Williams v. Vulcan-Hart Corp., 136 F.R.D. 457, 459 (W.D. Ky. 1991).

31. See Conway, supra note 17, at 635, 635 n.67 (footnoting Williams, 136 F.R.D. 457; United States v. Dexter Corp., 132 F.R.D. 8 (D. Conn. 1990); Hardy v. New York News, Inc., 114 F.R.D. 633 (S.D.N.Y. 1987)).

32. See Williams, 132 F.R.D. at 459.

33. See Hardy, 114 F.R.D. at 642.

34. See Tharp v. Sivyer Steel Corp., 149 F.R.D. 177, 178 (S.D. Iowa 1993); O'Connor v. Chrysler Corp., 86 F.R.D. 211, 212-13 (D. Mass. 1980). In both cases, an employer sought to withhold self-evaluative affirmative action plans from discovery in sex discrimination litigation. See Tharp, 149 F.R.D. at 178; O'Connor, 86 F.R.D. at 212-13.

35. Finding no privilege, see Koppers v. Aetna Cas. & Sur. Co., 847 F. Supp. 360, 364 (W.D. Pa. 1994) (concerning self-evaluative documents of a company seeking court intervention to compel indemnification by insurer for environmental liability); Tharp, 149 F.R.D. at 178 (stating that protection of self-evaluative report prepared under federal equal employment opportunity law does not promote equal opportunity objective); CPC Int'l, Inc. v. Hartford Accident and Indem. Co., 620 A.2d 462, 467 (N.J. Super. 1992) (addressing the same situation presented in Koppers). But see Reichhold Chemicals, Inc. v. Textron, Inc., 157 F.R.D. 522, 527 (N.D. Fla. 1994) (discussing an environmental liability suit among private parties in which the court found a self-critical analysis privilege).

36. CPC Int'l, Inc. v. Hartford, 620 A.2d 462, 467 (N.J. Super. Ct. App. Div. 1992) (citing State ex rel. Celebrezze v. CECOS Int'l, Inc., 583 N.E.2d 1118, 1120 (Ohio Ct. App. 1990)). At issue in Celebrezze was disclosure of performance evaluations of a hazardous waste treatment, storage, and disposal facility. See id. at 465. The New Jersey court in CPC followed the Celebrezze court in deciding that the public's strong interest in the issue at stake (proper handling of hazardous waste) compelled disclosure. See id. at 467.

37. Reichhold, 157 F.R.D. at 526 (footnote omitted). The court outlined the test for self-critical analysis privilege and, thereby, implied that appropriate cases would be those for which documents in question pass the test. See id. at 527; see also supra notes 25-25 and accompanying text. The court later qualified the finding:

Such reports are privileged only if they were created with the expectation that they would be confidential, and they if [sic] have in fact been kept confidential. Moreover, this is a qualified privilege which can be overcome if one of more of the defendants can demonstrate extraordinary circumstances or special need.

Reichhold, 157 F.R.D. at 527; see also Fed. R. Evid. 407. The rule sets out a privilege for evidence of corrective action taken after an accident or incident that forms the basis of litigation. See Fed. R. Evid. 407. The privilege is supported by the logic that parties are more likely to act quickly to correct unsafe situations if such an act cannot be used as evidence of an admission that an unsafe situation existed at the time of the accident or incident. See Fed. R. Evid. 407 advisory committee's notes (citing Falknor, Extrinsic Policies Affecting Admissibility, 10 Rutgers L. Rev. 574, 590 (1956)).

38. See In re Grand Jury Proceedings, 861 F. Supp. 386, 391 (D. Md. 1994); United States v. Dexter Corp., 132 F.R.D. 8, 10 (D. Conn. 1990); State ex rel. Celebrezze v. CECOS Int'l, Inc., 583 N.E.2d 1118, 1121 (Ohio Ct. App. 1990).

39. See Dexter, 132 F.R.D. at 9-10. In Dexter, the defendant corporation moved to protect documentation of environmental self-audits from disclosure to the United States Department of Justice in an action to enforce the Clean Water Act. See id. at 9. In a short, direct decision, the court stated that "the application of the `self-critical' privilege in this action would effectively impede the Administrator's ability to enforce the Clean Water Act, and would be contrary to stated public policy." Id. at 10.

40. See supra text accompanying note 26.

41. See generally In re Grand Jury Proceedings, 861 F. Supp. 386 (D. Md. 1994) (finding that public interest support for the privilege is lacking when self-critical analysis documents are sought by the government). In the context of a grand jury investigation pursuant to the authority of the Food and Drug Administration, the court found:

Whatever may be the status of the "self-evaluative" privilege in the context of private litigation, courts with apparent uniformity have refused its application where, as here, the documents in question have been sought by a governmental agency. As a general matter, this conclusion makes sense in the light of the roots of the privilege in the public interest, and the strong public interest in having administrative investigations proceed expeditiously and without impediment.

Id. at 388.

42. See Conway, supra note 17, at 622.

43. Mia Anna Mazza, The New Evidentiary Privilege for Environmental Audit Reports: Making the Worst of a Bad Situation, 23 ECOLOGY L.Q. 79, 89 (1996). Mazza indicates that her own search for federal cases using audit information as evidence failed to identify more than two cases. See id. at 89 n.57 (citing Robert W. Darnell, Note, Environmental Criminal Enforcement and Corporate Environmental Auditing: Time for a Compromise?, 31 AM. CRIM. L. REV. 123, 133 (1993); Michael J. Walker, Trust in Auditing, But Verify, ENVTL. F., Jan.-Feb. 1992, at 41). The cases cited by Mazza are United States v. Dexter Corp., 132 F.R.D. 8 (D. Conn. 1990) and United States v. Weyerhaeuser Co., No. CR90-298S (W.D. Wash. Nov. 16, 1990). See Mazza, supra, at 89 n.57.

44. See supra notes 38-41 and accompanying text (explaining why self-critical analysis privilege has not been applied by courts to protect environmental audits from disclosure). See generally Peter A. Gish, The Self-Critical Analysis Privilege and Environmental Audit Reports, 25 ENVTL. L. 73 (1995).

45. See Gish, supra note 44, at 89.

46. For details of the Oregon law as a whole, see Holly Duncan, The 1993 Environmental Crimes Act, OR. ENVTL. & NAT. RESOURCES L. NEWS (Or. State B. Ass'n), Aug. 1993, at 1, cited in Mazza, supra note 43, at 90 n.61; see also OR. REV. STAT. § 468.963 (1995) for Oregon's environmental audit privilege. The Oregon code explains that the privilege was created "to encourage . . . facilities . . . to conduct voluntary internal environmental audits of their compliance programs and management systems and to assess and improve compliance with [environmental laws]." Id. § 468.963(1). The privilege statutes in Arkansas, Idaho, Illinois, Kentucky, and South Carolina borrow this same intent language. See ARK. CODE ANN. § 8-1-303 (Michie Supp. 1995); IDAHO CODE § 9-802(1)(a) (Supp. 1996); ILL. COMP. STAT. ANN. ch. 415, para. 5/52.2(a) (West Supp. 1996); KY. REV. STAT. ANN. § 224.01-040(2) (Banks-Baldwin Supp. 1996); S.C. CODE ANN. § 48-57-10(a) (Supp. 1996). The intent language in Colorado's and New Hampshire's privilege statutes is substantially similar. See COLO. REV. STAT. Ann. § 13-25-126.5(1) (West Supp. 1996); 1996 N.H. Laws 4:1(II).

47. See Conway, supra note 17, at 648; see also supra notes 38-41 and accompanying text (explaining how competing public interests have defeated a common law self-analysis privilege when the government seeks documents).

48. S.C. CODE ANN. § 48-57-10(A) (Supp. 1996).

49. See infra notes 50-52, 54, 56-71 and accompanying text (citing the state statutes).

50. See ARK. CODE ANN. §§ 8-1-301 to -312 (Michie Supp. 1995). A federal magistrate recently decided that the privilege would not be available to protect an audit conducted before the enactment of the statute. See Carr v. El Dorado Chem. Co., Civ. No. 96-1081, slip op. at 7 (W.D. Ark. Apr. 14, 1997) (on file with the New England Law Review).

51. See ILL. COMP. STAT. ANN. 5/52.2 (West Supp. 1996).

52. See IND. CODE §§ 13-28-4-1 to -10 (1996).

53. See OR. REV. STAT. § 468.963 (1996).

54. See N.J. STAT. ANN §§ 13:1D-125 to -132 (Supp. 1996). The New Jersey law does not require that the environmental violations are discovered through a facility self-audit, and the state restricts granting immunity to "minor violations" only. Id. § 13:1D-127. For criteria defining a minor environmental violation. See id. § 13:1D-129

South Dakota law, however, does restrict the state environmental agency from requesting an environmental audit report during routine investigations, although such reports are discoverable during court proceedings in accordance with procedural rules. See S.D. CODIFIED LAWS § 1-40-35 (Michie Supp. 1996). South Dakota also allows facilities disclosing violations to the state to summarize such violations in writing to the regulatory agency, instead of disclosing the environmental audit report itself. See id.

55. See infra notes 56-71.

56. See 1997 Alaska Sess. Laws 29 (to be codified at ALASKA STAT. §§ 09.25.450-490). Alaska's Legislature overrode the governor's veto on May 11, 1997, to enact the law, which becomes effective on August 9, 1997. See id.

57. See COLO. REV. STAT. ANN. § 13-25-126.5 (West Supp. 1996) (privilege); see id. § 25-7-122 (immunity).

58. See IDAHO CODE §§ 9-801 to -811 (Supp. 1996).

59. See KAN. STAT. ANN. §§ 60-3333 to -3339 (Supp. 1996).

60. See KY. REV. STAT. ANN. § 224.01-040 (Banks-Baldwin Supp. 1996).

61. See MICH. STAT. ANN. §§ 13A.14801-14810 (Law. Co-op. Supp. 1996).

62. See MINN. STAT. §§ 114C.20-.31 (1997). Minnesota defines the statute as a "pilot program." Id. § 114C.20. To participate in the "pilot," regulated facilities must conduct an environmental audit, submit a report to regulatory officials disclosing violations detected within 45 days of completing the audit, and bring the facility into compliance within 90 days of submitting the report or within the time confines of a negotiated performance schedule. See id. § 114C.22-23. If the facility complies with these requirements, enforcement penalties will be waived, and more, the facility may display for two years a "`green star' emblem," designed by the commissioner of the state pollution control agency. Id. § 114C.25.

63. See MISS. CODE ANN. § 49-2-71 (Supp. 1996).

64. See H.B. 293, 55th Leg., Reg. Sess. (Mont. 1997). The Montana statute emphasizes immunity for self-disclosed violations discovered through a self-audit; however, the statute also creates a limited privilege in that audits are discoverable by law enforcement, but not admissible as evidence. See id. The Montana Voluntary Environmental Audit Act was signed by the governor on May 5, 1997. See id.

65. See 1996 N.H. Laws 4:1-4:5 (to be codified at N.H. REV. STAT. ANN. § 147-E).

66. See OHIO REV. CODE ANN. §§ 3745.70-.73 (Banks-Baldwin Supp. 1996).

67. See S.C. CODE ANN. §§ 48-57-10 to -110 (Law. Co-op. Supp. 1996).

68. See TEX. REV. CIV. STAT. ANN. art. 4447cc (West 1996).

69. See UTAH CODE ANN. §§ 19-7-101 to -108 (1995) (privilege); see id. § 19-7-109 (Supp. 1996) (immunity).

70. See VA. CODE ANN. §§ 10.1-1198 to -1199 (1995).

71. See WYO. STAT. §§ 35-11-1105 to -1106 (Supp. 1996).

72. See COLO. REV. STAT. ANN. § 13-25-126.5 (West Supp. 1996) (providing a privilege that is effective until June 30, 1999); see id. § 25-7-122 (providing immunity that is effective until June 30, 1999); IDAHO CODE §§ 9-801 to -811 (Supp. 1996) (effective until Dec. 31, 1997); Minn. Stat. §§ 114C.20-.31 (1997) (effective until July 1, 1999); H.B. 293, 55th Leg., Reg. Sess. (Mont. 1997) (effective until Oct. 1, 2001); 1996 N.H. Laws 4:4-4:5 (effective until July 1, 2002); OHIO REV. CODE ANN. §§ 3745.71-.72 (Banks-Baldwin Supp. 1996) (effective until Jan. 1, 2001).

73. Compare ARK. CODE ANN. §§ 8-1-301 to -312 (Michie Supp. 1995) and Ill. Comp. STAT. ANN. 5/52.2 (West Supp. 1996) with OR. REV. STAT. § 468.963 (1996).

74. OR. REV. STAT. § 468.963(2) (1996).

75. See id. § 468.963(3).

76. Id. § 468.963(3)(c).

77. See id.

78. See id. § 468.963(3)(d).

79. See id. § 468.963(4). In essence, these procedures require disclosure of the audit report to the district attorney or the state attorney general upon finding of probable cause to believe that evidence of criminal conduct will be found there. See id. The prosecutor must hold the documents under seal, breaking the seal to review only in preparation for a scheduled in-camera hearing on the privilege. See id.

80. OR. REV. STAT. § 468.963(5)(b) (1996).

81. Id. § 468.963(7). Application of the attorney-client privilege and work-product doctrine are beyond the scope of this note. See Christina Austin, State Environmental Audit Privilege Laws: Can EPA Still Access Environmental Audits in Federal Court?, 26 ENVTL. L. 1241, 1250-52 (1996) (explaining that the attorney-client privilege and work-product doctrine do not effectively protect environmental self-audits); Brent T. Carney, Environmental Audits: It's Time to Encourage Private Industry to Self-Police, 3 NEW ENG. ENVTL. L.F. 33, 36-39 (1996) (on file with the New England Law Review) (explaining that the attorney-client privilege and work-product doctrine do not effectively protect environmental self-audits); cf. Mia Anna Mazza, The New Evidentiary Privilege for Environmental Audit Reports: Making the Worst of a Bad Situation, 23 ECOLOGY L.Q. 79, 126 (1996) (suggesting alternatives to a statutory privilege to protect environmental audits including use of the attorney-client privilege).

82. See COLO. REV. STAT. ANN. § 13-25-126.5 (West Supp. 1996); ILL. COMP. STAT. ANN. 5/52.2 (West Supp. 1996).

83. KAN. STAT. ANN. § 60-3334 (Supp. 1996). The statute provides nine characteristics of an acceptable management system for purposes of maintaining a privilege claim. See id. In substance, the characteristics describe an organization-wide system that incorporates automatic feedback loops to multiple levels of management, so ultimately, environmental violations are detected as they arise and responded to quickly. See id.

84. See S.C. CODE ANN. § 48-57-45 (Law. Co-op. Supp. 1996). However, the statute does not expressly include failure to provide notice as grounds to defeat the privilege. See id. § 48-57-30. The statute reads: "An environmental audit report . . . is privileged and, therefore, immune from discovery and is not admissible as evidence in a legal action, except as provided in Sections 48-57-40, 48-57-50, and 48-57-60." Id.

Alaska's law also includes a notice provision; self-auditors must give the state 15 days notice before commencing an audit to claim the audit results as privileged. See 1997 Alaska Sess. Laws 29 (notification requirement to be codified at ALASKA STAT. § 09.25.450(b)); see also infra note 100 and accompanying text for a similar notice provision of the Texas immunity statute.

85. See S.C. CODE ANN. § 48-57-30(C). Alaska's statute also carves out an exception to the privilege for workers' compensation proceedings. See 1997 Alaska Sess. Laws 29 (exception to be codified at ALASKA STAT. § 09.25.450(a)(2)).

86. See COLO. REV. STAT. ANN. § 13-25-126.5 (West Supp. 1996); IDAHO CODE §§ 9-801 to -811 (Supp. 1996); ILL. COMP. STAT. ANN. 5/52.2 (West Supp. 1996); KAN. STAT. ANN. §§ 60-3333 to -3339 (Supp. 1996); MICH. STAT. ANN. §§ 13A.14801-14810 (Law. Co-op. Supp. 1996); MISS. CODE ANN. § 49-2-71 (Supp. 1996); S.C. CODE ANN. §§ 48-57-10 to -110 (Law. Co-op. Supp. 1996); TEX. REV. CIV. STAT. ANN. art. 4447cc (West 1996); UTAH CODE ANN. §§ 19-7-101 to -108 (1995); VA. CODE ANN. §§ 10.1-1198 to -1199 (Michie 1995).

87. See 1997 Alaska Sess. Laws 29 (to be codified at ALASKA STAT. § 09.25.465(a)(2)); 1996 N.H. Laws 4:2 (to be codified at N.H. REV. STAT. ANN. § 147-E:4III); VA. CODE ANN. § 10.1-1198 (Michie 1995); WYO. STAT. ANN. § 35-11-1105 (Michie Supp. 1996).

88. See 1997 Alaska Sess. Laws 29 (to be codified at ALASKA STAT. § 09.25.465 (a)(4)); COLO. REV. STAT. ANN. § 13-25-126.5(3)(d) (West Supp. 1996); 1996 N.H. Laws 4:2 (to be codified at N.H. REV. STAT. ANN. § 147-E:4IV). The Virginia statute includes a more general statement canceling the privilege if an audit was prepared in "bad faith." Va. CODE ANN. § 10.1-1198 (Michie 1995). The Utah immunity statute has a similar provision negating immunity if violations are disclosed after the state has initiated an inspection. See UTAH CODE ANN. § 19-7-109 (Supp. 1996).

89. See supra notes 54, 56-71 and accompanying text.

90. See N.J. STAT. ANN §§ 13:1D-125 to -132 (Supp. 1996). The New Jersey Legislature declares at the beginning of the statute that: "[e]nvironmental enforcement policies should promote and encourage the initiation of environmental audits, the diligent remediation of violations so discovered and the immediate and voluntary disclosure of such violations to the [state]." Id. § 13:1D-125. However, much of the statute is devoted to providing a grace period of 30 to 90 days for facilities to correct minor violations identified by the government (presumably through inspection or review of monitoring data). See id. § 13:1D-127. If the facility corrects the minor violations, the statute prohibits issuance of a penalty. See id. The statute also provides that, if minor violations are voluntarily disclosed to the government within 30 days of discovery, no penalty will be issued if the facility corrects the violations in accordance with § 13:1D-127 (the section governing the minor violations discovered by the government). See id. § 13:1D-130. It is unclear how the statute will encourage self-policing if a grace period with no penalty is provided by statute when the New Jersey government does its own policing.

91. S.D. CODIFIED LAWS ANN. §§ 1-40-34 to -37 (Michie Supp. 1996). The self-audit cannot be initiated if the regulated facility knows that the violations will be imminently discovered by a policing agency. See id. § 1-40-37; see supra note 88 and accompanying text for a similar provision negating audit privilege in some states.

92. See S.D. CODIFIED LAWS ANN. § 1-40-34 (Michie Supp. 1996).

93. See id. § 1-40-36. This restriction is common among immunity statutes. See, e.g., KY. REV. STAT. ANN. § 224.01-040(10) (Banks-Baldwin Supp. 1996); TEX. REV. CIV. STAT. ANN. art. 4447cc, § 10(5) (West 1996).

94. See, e.g., TEX. REV. CIV. STAT. ANN. art. 4447cc, § 10(5) (West 1996). The Texas statute defines a disclosure to a regulatory agency to be voluntary only if seven criteria are met. See id. The gist of these criteria are that the disclosure must be prompt, in writing, and sent by certified mail; the violations disclosed must be discovered through a self-audit, not imminently discoverable by the government, and not resulting in injury to people or the environment; and the facility must cooperate with government officials and be diligent about coming into compliance. See id.

95. See OHIO REV. CODE ANN. § 3745.72(C) (Banks-Baldwin Supp. 1996); S.D. Codified Laws § 1-40-34 (Michie Supp. 1996); TEX. REV. CIV. STAT. ANN. art. 4447cc, § 10(b) (West 1996). Alaska requires self-disclosure to be in writing and sent to the state or local enforcement officials by certified mail. See 1997 Alaska Sess. Laws 29 (to be codified at ALASKA STAT. § 09.25.475(c)(2)).

96. See 1996 N.H. Laws 4:2 (to be codified at N.H. REV. STAT. ANN. § 147-E:9); N.J. STAT. ANN. §§ 13:1D-130 (West Supp. 1996).

97. See Minn. Stat. § 114C.24 (1997); 1996 N.H. Laws 4:2 (to be codified at N.H. REV. STAT. ANN. § 147-E:9); N.J. STAT. ANN. §13:1D-129 (West Supp. 1996); S.C. CODE ANN. § 48-57-10 (Law. Co-op. Supp. 1996) ("Nothing in this chapter shall be construed to protect individuals, entities, or facilities from a criminal investigation and/or prosecution . . . ."); Va. CODE ANN. § 10.1-1199 (Michie 1995) (expressly states that immunity is available only for administrative and civil penalties); Wyo. STAT. ANN. § 35-11-1105 (Michie Supp. 1996).

98. See, e.g., MICH. STAT. ANN. § 13A.14809 (Law. Co-op. Supp. 1996).

99. IDAHO CODE § 9-809 (Supp. 1996). The statute states: "Any person that makes a voluntary disclosure of an environmental audit report . . . shall be immune from state prosecution, suit or administrative action for any civil or criminal penalties or incarceration for acts associated with the issues disclosed." Id. In addition, the statute invites but does not require self-confessors to enter into a consent agreement with the state to achieve compliance. See id.

100. See TEX. REV. CIV. STAT. ANN. art. 4447cc, § 10(g) (West 1996); see also supra note 84 and accompanying text for similar provisions of the Alaska and South Carolina privilege laws. Failure to comply with the Texas notification requirement seems to clearly result in loss of immunity. See TEX. REV. CIV. STAT. ANN. art. 4447cc, § 10(g) (West 1996). "In order to receive immunity under this section, a facility . . . must give notice." Id.

101. OHIO REV. CODE ANN. § 3745.72(D) (Banks-Baldwin Supp. 1996). The Michigan immunity statute has a similar provision. See MICH. STAT. ANN. §13A.14809(6) (Law. Co-op. Supp. 1996).

102. See KY. REV. STAT. ANN. § 224.01-040(11) (Banks-Baldwin Supp. 1996); Va. CODE ANN. § 10.1-1199 (Michie 1995).

103. See H.B. 293, 55th Leg., Reg. Sess. (Mont. 1997); S.D. CODIFIED LAWS ANN. § 1-40-34 (Michie Supp. 1996); WYO. STAT. ANN. § 35-11-1106 (Michie Supp. 1996); see also infra notes 185-95 and accompanying text for an explanation of the mechanics of federal approval of a state environmental program, illustrated in the context of the federal Clean Air Act, Title V operating permit program.

104. S.D. CODIFIED LAWS ANN. § 1-40-34 (Michie Supp. 1996).

105. WYO. STAT. ANN. § 35-11-1106(a) (Michie Supp. 1996). The statute explains that the problem results when "waiver of penalty authority would result in a state program less stringent than the federal program or the waiver would violate any federal rule or regulation required to maintain state primacy." Id.

106. See H.B. 293, 55th Leg., Reg. Sess. (Mont. 1997).

107. See, e.g., general federal authorities to enforce the requirements imposed by the following federal environmental laws: 33 U.S.C.A. § 1319 (1986 & Supp. 1997) (Clean Water Act); 42 U.S.C.A. § 6928 (1995) (Resource Conservation and Recovery Act and Hazardous and Solid Waste Amendments); 42 U.S.C.A. § 7413 (1995) (Clean Air Act).

108. See Austin, supra note 81, at 1248 ("EPA, which exercises concurrent jurisdiction, can step in and assert its authority in federal court.").

109. See supra notes 50-52, 54, 56-71 and accompanying text for states with such laws.

110. See Austin, supra note 81, at 1249 ("[F]ederal judges are not bound by state privilege law." (footnote omitted)); see also Carney, supra note 81, at 43 ("[T]hese statutes are ineffective against [federal enforcement of] federal environmental laws." (footnote omitted)). Discussing the Oregon audit privilege law, one commentator makes the point that federal courts "are not bound, nor does Oregon's codified policy override the federal government's own declared policies." Conway, supra note 17, at 648 n.131.

111. See H.R. 1047, 104th Cong. (1995).

112. See S. 582, 104th Cong. (1995).

113. The bill states:

Congress finds that--

(1) enhanced and efficient protection of public health and welfare under Federal environmental laws depends principally on voluntary compliance by the general public, rather than enforcement;

(2) both a limited privilege from disclosure and a limited expansion of the protection [for individuals who] voluntarily disclose [the outcome of] voluntary self-evaluation is necessary to encourage voluntary compliance with Federal environmental laws . . . .

H.R. 1047, 104th Cong., § 2 (1995).

114. See H.R. 1047, 104th Cong. (1995); S. 582, 104th Cong. (1995).

115. As an example, if the federal legislation were to become law, estimates of facility chemical emissions required to be submitted annually to EPA and the state under the federal Emergency Planning and Community Right-to-Know Act, 42 U.S.C. § 11023, regulations codified at 40 C.F.R. Part 372, could not be claimed as privileged. Compare 42 U.S.C.A. § 11023 (1995) with H.R. 1047, 104th Cong. (1995) and S. 582, 104th Cong. (1995).

116. See H.R. 1047, 104th Cong. (1995); S. 582, 104th Cong. (1995); see also COLO. REV. STAT. ANN. § 13-25-126.5(4) (West Supp. 1996).

117. See H.R. 1047, 104th Cong. (1995); S. 582, 104th Cong. (1995); see also supra note 88 and accompanying text (explaining that only the Alaska, Colorado, and New Hampshire privilege laws explicitly include this provision).

118. See H.R. 1047, 104th Cong. (1995); S. 582, 104th Cong. (1995). The immunity provisions from the two federal bills are almost identical. The Senate bill states: "If a person or government entity makes a disclosure . . . of a covered federal law to an appropriate official of a federal agency responsible for administering the covered federal law . . . the person or government entity shall be immune from any administrative, civil, or criminal penalty for the violation." S. 582, 104th Cong., § 2 (1995).

119. See H.R. 1047, 104th Cong. (1995); S. 582, 104th Cong. (1995); see also supra text accompanying note 99 (explaining that Idaho's immunity statute includes the rebuttable presumption that disclosure is voluntary).

120. See H.R. 1047, 104th Cong. (1995); S. 582, 104th Cong. (1995).

121. See States Ask Browner to Relax EPA Opposition to Audit Laws, INSIDE EPA'S ENVTL. POL'Y ALERT, Mar. 12, 1997, at 34. The article states that "[s]enate sources say the bill would need to undergo substantial revisions to garner more support in the current political climate." Id.

122. See 141 CONG. REC. S4262-05, S4272 (daily ed. Mar. 21, 1995) (statements on introduced bills and joint resolutions) (letter from Steven Herman, Assistant Administrator for Enforcement and Compliance Assurance, U.S. EPA, to Hon. Joel Hefley, U.S. Congressional Representative from Colorado (Mar. 1, 1995)).

123. Two months after Administrator Browner's instruction, EPA restated much of the 1986 Policy and announced its intention to "re-examine these policies comprehensively and remain[] open to suggestions for changes and improvements." Restatement of Policies Relating to Environmental Auditing, 59 Fed. Reg. 38,455, 38,459-60 (1994) [hereinafter Restatement of Policies].

124. See generally 1986 Policy, 51 Fed. Reg. 25,004 (1986). The 1986 Policy stated "as a matter of policy, EPA will not routinely request environmental audit reports." Id. at 25,007.

125. See Restatement of Policies, supra note 123, at 38,458.

126. For example, EPA's Toxic Substances Control Act (TSCA) Section 5 Enforcement Response Policy, which provides guidance on determining appropriate penalties for violation of chemical manufacturing requirements, allows for a 25% reduction in penalty for voluntary self-disclosure, another 25% reduction if the disclosure is within 30 days of discovery, and an additional 15% reduction if the company takes all steps reasonably expected to mitigate any harm caused by the violation. See U.S. Environmental Protection Agency, TSCA Section 5 Enforcement Response Policy 17-18 (Aug. 5, 1988) (unpublished EPA policy on file with the New England Law Review). The TSCA Section 5 policy also allows for a reduction of up to 15% for "attitude" in any administrative case filed by EPA for violation of TSCA Section 5. Id. at 19. Thus, the policy allows for a total reduction of up to 80% (or guarantees a required payment of at least 20%) of the penalty. See id. at Appendix 1, Examples 1-2 (illustrating an up-to-80% reduction).

127. See supra notes 122-23 and accompanying text.

128. See States With Audit Privilege, Immunity Laws Could Lose Delegated Authority, Browner Says, ENV'T REP. (BNA), Mar. 31, 1995, at 2378. The ten states were: Arkansas, Colorado, Kentucky, Idaho, Illinois, Indiana, Oregon, Utah, Virginia, and Wyoming. See id. Three of the statutes were enacted in the month immediately prior to EPA issuing its Interim Policy. See id.; see also infra note 130 and accompanying text.

129. See H.R. 1047, 104th Cong. (1995); S. 582, 104th Cong. (1995).

130. Voluntary Environmental Self-Policing and Self-Disclosure Interim Policy Statement, 60 Fed. Reg. 16,875 (1995) [hereinafter Interim Policy].

131. Described as "punitive" penalties in the Interim Policy. See id. at 16,875. Gravity-based penalties (penalties based on the severity of the violation and the culpability presented by the circumstances) should be distinguished from the government's recovery, through assessment of a monetary penalty, of economic benefit gained by the violator from non-compliance. See id. at 16,877.

132. See id. at 16,877.

133. Id.

134. Id. at 16,878. EPA made the point that it "may find it necessary to increase federal enforcement" in states where audit privilege laws get in the way of documenting violations of federal environmental law. Id.

135. Id.

136. See Interim Policy, supra note 130, at 16,878.

137. Id.

138. Id. (quoting United States v. Nixon, 418 U.S. 683, 710 (1974)).

139. See id.; see also supra note 38 and accompanying text.

140. See Interim Policy, supra note 130, at 16,878.

141. See Cheryl Hogue, States, Industry, Environmentalists Call for Changes in EPA Policy, CHEM. REG. REP. (BNA), Aug. 11, 1995, at 498-99 (summarizing the comments received by EPA in response to issuance of the Interim Policy). Compare Interim Policy, supra note 130, at 16,875 ("This interim policy . . . will be applied uniformly by the Agency's enforcement programs.") with id. at 16,879 ("EPA officials may decide to follow the guidance provided in this interim policy or to act at variance with the guidance based on analysis of case-specific facts and circumstances.").

142. See Hogue, supra note 141, at 498-99. Commenting on the Interim Policy, a citizen's group stated that public access to audit information submitted to EPA is important to ensure that local emergency response staff and the public in general will be aware of "pollution concerns." Id. at 499. The Environmental Defense Fund (EDF) commented that public disclosure of information was important so the public could be sure that all violations self-identified were also corrected. See id.

143. See id. at 499. EDF commented on the Interim Policy that "[a]uditing in and of itself should NOT be rewarded. Auditing is only a means to an end, not the desired end in itself." Id. EDF further contended that industry should be rewarded for changing its behavior toward environmental compliance, not merely for auditing. See id.

144. See id. at 500.

145. See id. Colorado Attorney General Gale Norton commented, "[i]f EPA would allow states to implement their laws without interference, we might have data sufficient to adequately evaluate such laws." Id. Colorado's environmental audit privilege and partial immunity law has a sunset provision rendering it ineffective after June 30, 1999. See supra note 72 and accompanying text.

146. See Interim Policy, supra note 130, at 16,875. The Interim Policy explained that EPA's intention was to, "continue a dialogue with stakeholders and consider further refinements to this interim policy." Id.

147. See generally Incentives for Self-Policing: Discovery, Disclosure, Correction and Prevention of Violations, 60 Fed. Reg. 66,706 (1995) [hereinafter Final Policy]. EPA stated that the Final Policy was a revision based on insight gained through comments received on the Interim Policy; five days of discussions with industry, states, and the public hosted by the American Bar Association during June and September 1995; and experience gained by implementing the Interim Policy. See id. at 66,706.

148. See id. at 66,711-12. By comparison, the Final Policy lists only four incentives for companies to self-police, which boil down to reduced penalties, no recommended criminal prosecution, and no routine requests for audit reports. See id. at 66,711.

149. See id. at 66,711-12.

150. The Final Policy states: "This policy . . . will be applied uniformly by the Agency's enforcement programs." Id. at 66,706. The Final Policy later reaffirms that "EPA employees will be expected to follow this policy, and the Agency will take steps to assure national consistency in application." Id. at 66,711; see also supra note 141 (explaining the ambiguity in the Interim Policy on this point).

151. "Due diligence" is defined by a list of six systematic efforts that, in relation to the nature and size of the business, should, in EPA's view, ensure day-to-day compliance with environmental requirements. See id. at 66,710-11. The list includes company compliance policies, communication feedback systems, employee incentives, and procedures for swift correction of violations. See id.

152. Id. at 66,708.

153. See Final Policy, supra note 147, at 66,711. Such mandated monitoring is typically required as part of an air or water permit or under a consent agreement with EPA. See id.

154. See Interim Policy, supra note 130, at 16,877.

155. See Final Policy, supra note 147, at 66,709 ("In the interest of both clarity and fairness, the Agency has decided . . . to keep the focus prospective . . . .").

156. See supra note 131 (explaining gravity-based penalties versus recovery of economic benefit).

157. See Interim Policy, supra note 130, at 16,877.

158. See Final Policy, supra note 147, at 66,709. EPA purports to better protect the public and responsible companies by guaranteeing that penalties will not be reduced for violations repeated within the preceding three years or that form a "pattern of violations" over the preceding five years. Id. Regarding violation of consent agreements, EPA maintains that there would be "little incentive to comply with a consent agreement" if penalties for violation could be avoided. Id.

159. See supra note 151 and accompanying text (explaining due diligence).

160. See Final Policy, supra note 147, at 66,709, 66,712.

161. See id. at 66,708-09. Material qualifying as confidential business information under EPA regulations could be protected from public disclosure. See id. (citing 40 C.F.R. §§ 2.201-2.311 (1996)).

162. See id. at 66,710 ("Where a state has obtained appropriate sanctions needed to deter such misconduct, there is no need for EPA action."); see also supra note 134 and accompanying text (noting EPA's more aggressive position in the Interim Policy).

163. See Final Policy, supra note 147, at 66,712.

164. See State Officials Offer Support for EPA's Final Audit Policy, Inside EPA, Jan. 12, 1996, at 5. The publication recounted a Dec. 19, 1995 letter from fourteen attorneys general and three other state officials to EPA Administrator Carol Browner offering praise for the policy. See id.

165. See EPA Wins Broad-Based Support for Final Audit Policy, Envtl. Pol. Alert, Jan. 3, 1996, at 31.

166. Interim Policy, supra note 130, at 16,876.

167. Id. at 16,878.

168. See Hogue, supra note 141, at 498-99.

169. See id. at 498 (reporting that comments from the Maryland Department of the Environment on the Interim Policy urged EPA to allow waiver of economic-benefit penalties because "`[t]he need to recover the economic benefit to maintain a level playing field should be weighed against an audit's potential benefit to the environment.'" (quoting the Maryland Department of the Environment)).

170. See Final Policy, 60 Fed. Reg., supra note 147, at 66,707. EPA illustrated by analogy the point that preserving the discretion to recover for economic benefit provides an incentive: "Taxpayers expect to pay interest or a penalty fee if their tax payments are late; the same principle should apply to corporations that have delayed their investment in compliance." Id.

171. See MISS. CODE ANN. §§ 17-17-29, 49-17-43 to -427 (1995 & Supp. 1996). All three of the Mississippi immunity statutes (which apply to different sets of environmental regulations) state "the commission shall, to the greatest extent possible, reduce a penalty, if any, determined by the commission, except for economic benefit as a result of noncompliance." See id.; see also UTAH CODE ANN. § 19-7-109(4) (Supp. 1996). In addition, the Alaska statute nullifies immunity for intentional economic benefit by specifying that immunity does not apply to financial benefit gained "after taking into account the cost of completing corrective and remedial measures" and then "not complying with the requirement." 1997 Alaska Sess. Laws 29 (to be codified at ALASKA STAT. § 09.25.480(a)(3)).

172. See, e.g., Williams v. Vulcan-Hart Corp., 136 F.R.D. 457, 459 (W.D. Ky. 1991); Hardy v. New York News, Inc., 114 F.R.D. 633, 642 (S.D.N.Y. 1987); see also supra notes 31-33 and accompanying text.

173. Craig N. Johnston, An Essay on Environmental Audit Privileges: the Right Problem, the Wrong Solution, 25 Envtl. L. 335, 340 (1995) ("Fair is fair.").

174. See supra note 111.

175. 141 CONG. REC. S4262-05, S4272 (daily ed. Mar. 21, 1995) (statements on introduced bills and joint resolutions) (letter from Hon. Joel Hefley to Steven Herman, Assistant Administrator for Enforcement and Compliance Assurance, EPA (Mar. 20, 1995)).

176. See id. The letter continues, "any economic benefit that [violators] may have derived will surely be cancelled out--and then some--by having to quickly retrofit their plants to come into compliance." Id.

177. States With Audit Privilege, Immunity Laws Could Lose Delegated Authority, Browner Says, ENV'T REP. (BNA), Mar. 31, 1995, at 2378; see also infra note 202 for a particularly clear explanation of the conflict between delegated programs and audit laws.

178. See id.; see also supra note 128 (listing the states).

179. See supra text accompanying note 49 and notes 50-52, 54, 56-71.

180. See EPA/Texas Reach Accord That Resolves Differences Over State Audit Law, Inside EPA, Mar. 28, 1997, at 15 ("Environmentalists" petitioned EPA to rescind Texas Underground Injection Program due to privilege and immunity law). Michigan Environmental Council petitioned EPA to withdraw multiple Michigan-delegated program. See EPA Plans to Review RCRA Delegation in Ohio and Michigan, INSIDE EPA'S RCRA REP., Mar. 7, 1997, at 7. EPA received six petitions calling for withdrawal of Ohio's Resource Conservation and Recovery Act program. See id. at 8. EPA received petitions from environmental groups in Colorado and Ohio asking for federal withdrawal of programs because state audit laws "make it impossible for USEPA or citizens to get access to information necessary to ensure environmental laws are being enforced." Environmentalists Wield Petitions to Guard Delegated Programs, STATE ENVTL. MONITOR, Feb. 3, 1997, at 26.

181. See Hogue, supra note 141, at 500; see also supra note 145 for Norton quote.

182. See Michigan's Final Interim Approval, 62 Fed. Reg. 1387, 1391 (1997) (requesting a revised state attorney general opinion to be submitted to EPA to address Agency concern that Michigan's privilege and immunity law renders the state without adequate enforcement authority to undertake the federal Clean Air Act Title V permit program); Idaho's Final Interim Approval, 61 Fed. Reg. 64,622, 64,631 (1996) ("Idaho must demonstrate to EPA's satisfaction, through an Attorney General's opinion that these required enforcement authorities are not impaired by the Idaho Audit Act"); see also supra notes 58 and 61 for citations to privilege and immunity laws in Idaho and Michigan, respectively; cf. Virginia's Proposed Interim Approval, 62 Fed. Reg. 12,778, 12,785 (1997) (indicating that the attorney general opinion satisfied EPA that the state's audit law will not interfere with enforcement authority for Title V permit program); New Hampshire's Proposed Interim Approval, 61 Fed. Reg. 42,222, 42,224 (1996) (indicating the same as the Virginia notice).

183. See Trial of Audit Laws Without Interference Sought by States; EPA to Counter Proposal, ENV'T REP. (BNA), Mar. 3, 1997, at 2248-49. As a part of the request, the states offered to produce state attorney general certifications to EPA regarding the impact of the state laws on enforcement ability. See id. at 2249.

184. Agency Enforcement Chief Acknowledges "Serious Disconnects" in State Collaboration, ENV'T REP. (BNA), Mar. 31, 1997, at 2320 (quoting Steven Herman, EPA Assistant Administrator for Enforcement and Compliance Assurance).

EPA's position that certain states may lack sufficient enforcement authority due to breaks given to environmental self-auditors, may seem contentious given that EPA's Final Policy also gives breaks in penalties to voluntary self-disclosures of environmental violations. See supra note 147 and accompanying text. However, in a recent administrative decision, EPA's Environmental Appeals Board held that, upon adjudication, EPA need not assess penalties in accordance with the Agency's policy on self-policing because the policy is settlement guidance and not criteria for assessment of penalties. See In re: Harmon Electronics, Inc., RCRA Appeal No. 94-4, slip op. at 57 (E.A.B., Mar. 24, 1997) (to be published in Environmental Administrative Decisions (E.A.D.)) (citing Final Policy, supra note 147, at 66,712).

185. See 42 U.S.C.A. § 7661a(d) (1996).

186. See id. §§ 7661a, 7661c.

187. See id. § 7661a(d).

188. See generally 42 U.S.C.A. § 7661 (1996); 40 C.F.R. § 70 (1996).

189. 42 U.S.C.A. § 7661a(d)(1) (1996).

190. See id. § 7661a(d).

191. See id. § 7661a(g).

192. See id. § 7661a(d)(2)(B). The state is allowed 180 days after EPA disapproval to revise the plan. See id. § 7661a(d)(1). The state is also required to promulgate regulations requiring permitted sources to pay permit fees that in the aggregate will be sufficient to pay for the cost of the permit program. See id. § 7661a(d)(1), (b)(3)(A).

193. See id. § 7509(b)(1)(A) ("The Administrator may impose a prohibition . . . on the approval by the Secretary of Transportation of any projects or the awarding by the Secretary of any grants . . . ."). Funding required for "improvement in safety to resolve a demonstrated safety problem" are exempt from the Clean Air Act sanctions provision. Id.

194. Id. § 7661a(b)(5)(E). The state enforcement authority required by federal statute also includes the "authority to recover civil penalties in a maximum amount of not less than $10,000 per day for each violation, and provide appropriate criminal penalties." Id.

195. See 42 U.S.C.A. § 7661a(b) (1996) (instructing EPA to promulgate regulations establishing the minimal elements of a permit program); see also 40 C.F.R. § 70.11 (1996) for the regulations detailing the enforcement authority element of Title V.

196. See Delegation of Approval of State Operating Permit Programs, Delegation 7-136 (Dec. 20, 1993) (on file with the New England Law Review).

197. See Memorandum from Steven Herman, Assistant Administrator, OECA, Robert Perciasepe, Assistant Administrator, OW, Mary Nichols, Assistant Administrator, OAR, and Timothy Fields, Acting Assistant Administrator, OSWER, to the Regional Administrators (Feb. 14, 1997) [hereinafter Statement of Principles Memorandum] (on file with the New England Law Review). The guidance offered by the memorandum pertains to all state delegations and approvals and is not specific to Title V approval. See id. The Statement of Principles Memorandum has also been reprinted in a number of publications. See, e.g., USEPA Principles for Reviewing State Audit Laws, State Envtl. Monitor, Mar. 3, 1997, at 5-6.

198. See supra note 180.

199. See generally Michigan's Final Interim Approval, 62 Fed. Reg. 1387 (1997); Idaho's Final Interim Approval, 61 Fed. Reg. 64,622 (1996); Texas's Final Interim Approval, 61 Fed. Reg. 32,693 (1996). The Statement of Principles Memorandum was also issued after Oregon (which has a privilege law) and Colorado and Kansas (which have privilege and immunity laws) had been issued final interim or full approvals for Title V programs that were not contingent upon addressing any audit law problem. See generally Kansas's Final Full Approval, 61 Fed. Reg. 2938 (1996); Colorado's Final Interim Approval, 60 Fed. Reg. 4563 (1996); Oregon's Final Interim Approval, 59 Fed. Reg. 61,820 (1995).

200. See Michigan's Final Interim Approval, 62 Fed. Reg. 1387, 1387 (1997).

201. See id. at 1397-98. Specifically, EPA's final interim approval requires Michigan to narrow the scope of its environmental audit privilege law and limit the immunity provided by Michigan law for voluntary self-disclosures. See id.; see also MICH. STAT. Ann. §§ 13A.14801-14810 (Law. Co-op. Supp. 1996) (providing privilege and immunity). In the alternative, EPA required a revised opinion from the Michigan Attorney General certifying that the state's privilege and immunity law would not hamper Title V enforcement, as required by 40 C.F.R. §§ 70.4, 70.11. See Michigan's Final Interim Approval, 62 Fed. Reg. 1387, 1398 (1997).

202. Michigan's Final Interim Approval, 62 Fed. Reg. 1387, 1394 (1997). EPA further explained: "State audit privilege and/or immunity laws, such as the Michigan audit law, . . . constrain enforcement discretion as a matter of law, impermissibly surrendering the underlying statutory and regulatory enforcement authorities required for Federal approval of the State programs." Id. at 1395.

203. Id. at 1391; see also 40 C.F.R. § 70.11(a)(3) (1996), which requires states to have sufficient enforcement authority to assess and "recover in court civil penalties and to seek criminal remedies."

204. Michigan's Final Interim Approval, 62 Fed. Reg. 1387, 1391 (1997).

205. Id. at 1392.

206. Id.

207. See id. at 1393. EPA stated:

As an initial matter, EPA disagrees that it is using the title V approval process to "force" States to modify their audit legislation. Instead, . . . EPA is simply analyzing to what extent the audit privilege and/or immunity laws of a particular State compromise the enforcement authorities required by Congress in title V . . . ."

Id.

208. See generally Idaho's Final Interim Approval, 61 Fed. Reg. 64,622 (1996); Texas's Final Interim Approval, 61 Fed. Reg. 32,693 (1996).

209. See generally New Hampshire's Proposed Interim Approval, 61 Fed. Reg. 42,222 (1996).

210. See id. at 42,224.

211. See id.

212. See id. at 42,224-25.

213. See id. at 42,225; see also 1996 N.H. Laws 4:2 (to be codified at N.H. REV. STAT. ANN. § 147-E:9).

214. Compare 1996 N.H. Laws 4:1-4:5 (to be codified at N.H. REV. STAT. ANN. §147-E with S.C. CODE ANN. § 48-57-110 (Law. Co-op. Supp. 1996) and Tex. Rev. Civ. STAT. ANN. art. 4447cc (Sec. 11) (West 1996).

215. See S.C. CODE ANN. § 48-57-110 (Supp. 1996) ("No state of local governmental rule, regulation, guidance, policy, or permit condition may circumvent of limit the privileges established . . . or the presumption of immunity establish by this chapter."); TEX. REV. CIV. STAT. ANN. art. 4447cc, § 11 (West 1996) ("A regulatory agency may not adopt a rule of impose a condition that circumvents the purpose of this Act."). Note, however, that the conflict between state enforcement of federally-delegated programs and the Texas audit law may have been ameliorated by a recent revision to the Texas law that exempts criminal violations from immunity. See infra note 229.

216. See supra note 103-05 and accompanying text (outlining the language in the state laws and explaining that the immunity provisions may be nullified if required by federal delegation or federal approval requirements).

217. See generally South Dakota's Final Interim Approval, 60 Fed. Reg. 15,066 (1995); Wyoming's Final Interim Approval, 60 Fed. Reg. 3766 (1995).

218. See States Ask Browner to Relax EPA Opposition to Audit Laws, Inside EPA's ENVTL. POL. ALERT, Mar. 12, 1997, at 33, 34 (reporting that, in recent EPA funding bills, Congress has instructed EPA to resolve the "audit disputes" with the states).

219. See Statement of Principles Memorandum, supra note 197, at 4.

220. See Michigan Environmental Compliance Coalition v EPA, No. 97-3221 (6th Cir. filed Mar. 11, 1997), cited in Court Asked to Stop EPA from Basing Air Program Approval on Michigan Law, ENV'T REP. (BNA), Mar. 28, 1997, at 2321.

221. See generally Michigan's Final Interim Approval, 62 Fed. Reg. 1387 (1997).

222. Court Asked to Stop EPA from Basing Air Program Approval on Michigan Law, ENV'T REP. (BNA), Mar. 28, 1997, at 2321 (quoting Michigan Environmental Compliance Coalition v EPA, No. 97-3221 (6th Cir. filed Mar. 11, 1997)). The states with audit laws receiving final full approval (or interim approval that was not contingent upon resolution of an audit law problem) from EPA for implementation of Title V programs were Colorado, Kansas, and Oregon. See generally Colorado's Final Interim Approval, 60 Fed. Reg. 4563 (1995); Kansas's Final Full Approval, 61 Fed. Reg. 2938 (1996); Oregon's Final Interim Approval, 59 Fed. Reg. 61,820 (1994).

223. See Industry to Challenge EPA Stance on Michigan Audit Privilege Law, INSIDE EPA's ENVTL. POL. ALERT, Mar. 12, 1997, at 37. Michigan's Final Interim Approval grants the state the authority to implement the Title V program, pending resolution of a number of matters including interpreting the effect of Michigan's privilege and immunity statute on authority to enforce federally mandated programs. See generally Michigan's Final Interim Approval, 62 Fed. Reg. 1387 (1997).

224. See supra text accompanying note 184; see also Idaho to Become First State to Revoke Environmental Audit Law, STATE ENVTL. MONITOR, Feb. 3, 1997, at 4-5 (explaining that Idaho will not renew its audit privilege and immunity law, without revision, when it sunsets at the end of 1977 due to the "serious questions" it has created).

225. See 1997 Utah Laws 387, which was approved on Mar. 21, 1997, available on WESTLAW, UT-Legis database.

226. See UTAH CODE ANN. § 19-7-104 (1995) (amended Mar. 21, 1997). The amendment also added language to convert that section of the statute to preserve the evidentiary privilege in the event of disclosure. See 1997 Utah Laws 387, available on WESTLAW, UT-Legis database.

227. See 42 U.S.C.A. § 7622 (1996). This is called "whistleblower protection." See Idaho's Final Interim Approval, 61 Fed. Reg. 64,622, 64,630 (1996).

228. Compare UTAH CODE ANN. § 19-7-104 (1995) with 42 U.S.C.A. § 7622 (1996).

229. See supra notes 224-25 and accompanying text; see also Utah Bill Would Change Audit Law, ENV'T REP. (BNA), Mar. 14, 1997, at 2254 (reporting that "in exchange for Utah's [amendment], EPA has agreed to stop `holding up' delegation to the state on various environmental programs." (quoting Brent C. Bradford, Deputy Director of the Utah Department of Environmental Quality)).

Texas is following Utah's lead in amending the state privilege and immunity law. See H.B. 3459, 75th Leg., Reg. Sess., (Tex. 1997). The Texas House Bill passed the House on Apr. 29, 1997, passed the Senate (in the form of Texas Senate Bill 1585) on May 10, 1997, and was forwarded to the Governor for signature on May 12, 1997. See id. In essence, the Texas amendment deletes the privilege for evidence of criminal violations in environmental audits and removes immunity extended for criminal violations discovered through environmental self-auditing. See id.

230. See Conway, supra note 17, at 622.

231. See Mazza, supra note 43, and accompanying text.

232. See supra notes 38-41, 81 and accompanying text.

233. See In re Grand Jury Proceedings, 861 F.Supp. 386, 391 (D. Md. 1994); United States v. Dexter Corp., 132 F.R.D. 8, 10 (D. Conn. 1990); State ex rel. Celebrezze v. CECOS Int'l, Inc., 583 N.E.2d 1118, 1121 (Ohio Ct. App. 1990).

234. See Mazza, supra note 43 and accompanying text; see also supra notes 50-52, 54, 56-71 and accompanying text for state laws.

235. See, e.g., S.C. CODE ANN. § 48-57-10(A) (Law. Co-op. Supp. 1996); see also ARK. CODE ANN. § 8-1-303(a) (Michie Supp. 1995); IDAHO CODE § 9-802 (Supp. 1996).

236. See H.R. 1047, 104th Cong. (1995); S. 582, 104th Cong. (1995); see also supra note 120.

237. See text accompanying note 135.

238. See Interim Policy, supra note 130, at 16,878 (1995); see also supra text accompanying note 140.

239. See generally Interim Policy, supra note 130; Final Policy, supra note 147.

240. See supra Part V.

241. See supra note 189 and accompanying text.

242. See supra note 182. Under Title V, EPA has the option of granting an interim approval pending resolution of outstanding issues. See supra note 191 and accompanying text.

243. See supra note 183 and accompanying text.

244. See 42 U.S.C.A. § 7661a(g) (1996) (indicating that interim approval expires not more than 2 years after issuance, without the option of renewal).

245. See supra text accompanying note 189-90.

246. See note 189 and accompanying text.

247. See notes 227-28 and accompanying text.

* Warm thanks to Ira and Sam for the slack and to my swell daytime colleagues for the cover.