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AN ACT relating to environmental audits. 1
Be it enacted by the General Assembly of the Commonwealth of Kentucky: 2
SECTION 1. A NEW SECTION OF KRS CHAPTER 77 IS CREATED TO 3
READ AS FOLLOWS: 4
(1) As used in this section, "environmental audit" has the same meaning as in 5
Section 2 of this Act. 6
(2) Any person or facility subject to the requirements of this chapter or the rules, 7
orders, or administrative regulations promulgated hereunder that performs or 8
causes the performance of an environmental audit that complies with the 9
requirements of Section 2 of this Act shall be entitled to all of the benefits, 10
privileges, and protections afforded by that section. 11
Section 2. KRS 224.1-040 is amended to read as follows: 12
(1) As used in this section: 13
(a) "Environmental audit" means a voluntary, internal, and comprehensive 14
evaluation of one (1) or more facilities or an activity at one (1) or more 15
facilities regulated under KRS Chapter 77 or this chapter, or federal, regional, 16
or local counterparts or extensions thereof, or of management systems related 17
to that facility or activity, that is designed to identify and prevent 18
noncompliance and to improve compliance with statutory or regulatory 19
requirements. An environmental audit may be conducted by the owner or 20
operator, by the owner's or operator's employees, or by independent 21
contractors. 22
(b) "Environmental audit report" means a set of documents, each labeled 23
"environmental audit report: privileged document" and prepared as a result of 24
an environmental audit. An environmental audit report may include field 25
notes and records of observations, findings, suggestions, conclusions, drafts, 26
memoranda, drawings, photographs, computer-generated or electronically 27 UNOFFICIAL COPY 24 RS HB 136/VO
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recorded information, maps, charts, graphs, and surveys, provided the 1
supporting information is collected or developed for the primary purpose and 2
in the course of an environmental audit. An environmental audit report, when 3
completed, shall have three (3) components: 4
1. An audit report prepared by an auditor, which shall include the scope 5
and date of the audit and the information gained in the audit together 6
with exhibits and appendices, and may include conclusions and 7
recommendations; 8
2. Memoranda and documents analyzing part or all of the audit report and 9
discussing implementation issues; and 10
3. An audit implementation plan that addresses correcting past 11
noncompliance, improving current compliance, and preventing future 12
noncompliance. 13
(c) "Voluntary disclosure" means the prompt reporting to the air pollution 14
control district established under KRS Chapter 77 by the owner or operator 15
of a facility of the voluntary discovery of a violation of KRS Chapter 77 or 16
any rules, orders, or administrative regulations promulgated pursuant 17
thereto, or to the cabinet by the owner or operator of a facility of the 18
voluntary discovery of a violation of this chapter or the administrative 19
regulations promulgated pursuant thereto prior to: 20
1. The commencement of a federal, state, or local agency inspection or 21
investigation, or the issuance by that agency of an information request to 22
the owner or operator of the facility; 23
2. The filing of a notice of a citizen suit filed under federal or state law; 24
3. The filing of a complaint by a third party; 25
4. The reporting to a federal, state, or local agency of the violation by an 26
employee who is not authorized to speak on behalf of the facility; or 27 UNOFFICIAL COPY 24 RS HB 136/VO
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5. The imminent discovery of the violation by a regulatory agency. 1
(d) "Voluntary discovery" means the discovery of a violation of KRS Chapter 77 2
or this chapter or the administrative regulations promulgated pursuant thereto 3
by the owner or operator of a facility if: 4
1. The violation was discovered by an environmental audit; and 5
2. The violation was not identified through a legally mandated monitoring 6
or sampling requirement prescribed by statute, administrative regulation, 7
permit, judicial or administrative order, agreed order, consent decree, or 8
plea bargain. 9
(2) In order to encourage owners and operators of facilities and persons conducting 10
other activities regulated under KRS Chapter 77 or this chapter, or its federal, 11
regional, or local counterparts or extensions, both to conduct voluntary internal 12
environmental audits of their compliance programs and management systems and to 13
assess and improve compliance with statutory and regulatory requirements, an 14
environmental audit privilege is created to protect the confidentiality of 15
communications relating to voluntary internal environmental audits. 16
(3) An environmental audit report shall be privileged and shall not be admissible as 17
evidence in any civil or administrative proceeding, except as provided in subsection 18
(4) of this section. 19
(4) The privilege described in subsection (3) of this section does not apply to the extent 20
that: 21
(a) It is waived expressly or waived by implication by the owner or operator of a 22
facility or persons conducting an activity that prepared or caused to be 23
prepared the environmental audit report; 24
(b) The owner or operator of a facility or person conducting an activity seeks to 25
introduce an environmental audit report as evidence. Seeking to introduce any 26
part of the report shall constitute waiver of the privilege described in 27 UNOFFICIAL COPY 24 RS HB 136/VO
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subsection (3) of this section for the entire report; 1
(c) In a civil or administrative proceeding, a court of record, after a private 2
review consistent with the Kentucky Rules of Civil Procedure, shall require 3
disclosure of material for which the privilege described in subsection (3) of 4
this section is asserted, if the court determines that: 5
1. The privilege is asserted for a fraudulent purpose; 6
2. The material is not subject to the privilege; or 7
3. Even if subject to the privilege, the material shows evidence of 8
noncompliance with KRS Chapter 77 or this chapter, or with the 9
federal, regional, or local counterparts or extensions thereof, and 10
appropriate efforts to achieve compliance were not promptly initiated 11
and pursued with reasonable diligence. 12
(d) A party asserting the environmental audit privilege in subsection (3) of this 13
section has the burden of proving the privilege, including, if there is evidence 14
of noncompliance with KRS Chapter 77 or this chapter, or the federal, 15
regional, or local counterparts or extensions thereof, proof that appropriate 16
efforts to achieve compliance were promptly initiated and pursued with 17
reasonable diligence. A party seeking disclosure under subsection (4)(c)1. of 18
this section has the burden of proving that the privilege is asserted for a 19
fraudulent purpose. 20
(5) The privilege described in subsection (3) of this section shall not extend to: 21
(a) Documents, communications, data, reports, or other information required to 22
be collected, developed, maintained, reported, or made available to the public 23
or a regulatory agency pursuant to KRS Chapter 77 or this chapter, or 24
administrative regulations promulgated pursuant thereto, or other federal, 25
state, or local law, ordinance, regulation, permit, or order, and any 26
information developed relating to any release subject to KRS 224.1-400(19); 27 UNOFFICIAL COPY 24 RS HB 136/VO
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(b) Information obtained by observation, sampling, or monitoring by any 1
regulatory agency; 2
(c) Information obtained from a source independent of the environmental audit; 3
or 4
(d) Any criminal proceeding. 5
(6) Nothing in this section shall limit, waive, or abrogate the scope or nature of any 6
statutory or common-law privilege, including the work-product doctrine and the 7
attorney-client privilege. 8
(7) Nothing in this section shall limit, waive, or abrogate any reporting requirement in 9
accordance with KRS Chapter 77 or this chapter or permit conditions. 10
(8) The cabinet shall not seek a civil penalty against a facility for a violation of this 11
chapter or the administrative regulations promulgated pursuant thereto and an air 12
pollution control district shall not seek a civil penalty against a facility for a 13
violation of KRS Chapter 77 or the rules, orders, or administrative regulations 14
promulgated pursuant thereto if: 15
(a) The owner or operator has made voluntary disclosure to the cabinet or the air 16
pollution control district of the voluntary discovery of the violation; 17
(b) The owner or operator has corrected the violation within sixty (60) days of 18
voluntary discovery, unless a shorter period of time is necessary to protect 19
human health, safety, or the environment, or the cabinet or the air pollution 20
control district determines that a longer period of time is necessary to correct 21
the violation and approves a longer period of time and the owner or operator 22
is taking the steps necessary to correct the violation as soon as possible; 23
(c) The owner or operator has agreed in writing to take steps to prevent a 24
recurrence of the violation; 25
(d) The specific violation, or closely related violation; 26
1. Has not occurred within the past three (3) years at the facility; 27 UNOFFICIAL COPY 24 RS HB 136/VO
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2. Is not part of a pattern of violations of federal, state, or local law 1
occurring within the past five (5) years at a facility or facilities owned 2
or operated by the same entity, as identified in a judicial or 3
administrative order, consent agreement, or agreed order, complaint, 4
notice of violation, conviction, or plea agreement; and 5
3. Is not an act or omission for which the facility has received penalty 6
mitigation from a federal, state, or local agency; 7
(e) The violation is not one which resulted in serious actual harm, or presented an 8
imminent and substantial endangerment to human health or the environment, 9
or violated the terms of a judicial or administrative order, consent decree or 10
agreed order, or plea agreement; 11
(f) The violation is not one which resulted in significant economic benefit which 12
gives to the violator a clear advantage over its business competitors; and 13
(g) The owner or operator of the facility cooperates as requested by the cabinet or 14
the air pollution control district and provides information as necessary to 15
determine the applicability of this section. 16
(9) The condition contained in subsection (8)(f) of this section shall not apply to 17
voluntary disclosures made prior to June 21, 2001. 18
(10) Nothing in this section shall be construed to abridge the right of any person to 19
recover actual damages resulting from any violation. 20