CHAPTER 178
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CHAPTER 178
( HB 136 )
AN ACT relating to environmental audits.
Be it enacted by the General Assembly of the Commonwealth of Kentucky:
SECTION 1. A NEW SECTION OF KRS CHAPTER 77 IS CREATED TO READ AS FOLLOWS:
(1) As used in this section, "environmental audit" has the same meaning as in Section 2 of this Act.
(2) Any person or facility subject to the requirements of this chapter or the rules, orders, or administrative
regulations promulgated hereunder that performs or causes the performance of an environmental audit
that complies with the requirements of Section 2 of this Act shall be entitled to all of the benefits, privileges,
and protections afforded by that section.
Section 2. KRS 224.1-040 is amended to read as follows:
(1) As used in this section:
(a) "Environmental audit" means a voluntary, internal, and comprehensive evaluation of one (1) or more
facilities or an activity at one (1) or more facilities regulated under KRS Chapter 77 or this chapter, or
federal, regional, or local counterparts or extensions thereof, or of management systems related to that
facility or activity, that is designed to identify and prevent noncompliance and to improve compliance
with statutory or regulatory requirements. An environmental audit may be conducted by the owner or
operator, by the owner's or operator's employees, or by independent contractors.
(b) "Environmental audit report" means a set of documents, each labeled "environmental audit report:
privileged document" and prepared as a result of an environmental audit. An environmental audit report
may include field notes and records of observations, findings, suggestions, conclusions, drafts,
memoranda, drawings, photographs, computer-generated or electronically recorded information, maps,
charts, graphs, and surveys, provided the supporting information is collected or developed for the
primary purpose and in the course of an environmental audit. An environmental audit report, when
completed, shall have three (3) components:
1. An audit report prepared by an auditor, which shall include the scope and date of the audit and
the information gained in the audit together with exhibits and appendices, and may include
conclusions and recommendations;
2. Memoranda and documents analyzing part or all of the audit report and discussing
implementation issues; and
3. An audit implementation plan that addresses correcting past noncompliance, improving current
compliance, and preventing future noncompliance.
(c) "Voluntary disclosure" means the prompt reporting to the air pollution control district established
under KRS Chapter 77 by the owner or operator of a facility of the voluntary discovery of a violation
of KRS Chapter 77 or any rules, orders, or administrative regulations promulgated pursuant thereto,
or to the cabinet by the owner or operator of a facility of the voluntary discovery of a violation of this
chapter or the administrative regulations promulgated pursuant thereto prior to:
1. The commencement of a federal, state, or local agency inspection or investigation, or the
issuance by that agency of an information request to the owner or operator of the facility;
2. The filing of a notice of a citizen suit filed under federal or state law;
3. The filing of a complaint by a third party;
4. The reporting to a federal, state, or local agency of the violation by an employee who is not
authorized to speak on behalf of the facility; or
5. The imminent discovery of the violation by a regulatory agency.
(d) "Voluntary discovery" means the discovery of a violation of KRS Chapter 77 or this chapter or the
administrative regulations promulgated pursuant thereto by the owner or operator of a facility if: ACTS OF THE GENERAL ASSEMBLY 2
1. The violation was discovered by an environmental audit; and
2. The violation was not identified through a legally mandated monitoring or sampling requirement
prescribed by statute, administrative regulation, permit, judicial or administrative order, agreed
order, consent decree, or plea bargain.
(2) In order to encourage owners and operators of facilities and persons conducting other activities regulated
under KRS Chapter 77 or this chapter, or its federal, regional, or local counterparts or extensions, both to
conduct voluntary internal environmental audits of their compliance programs and management systems and to
assess and improve compliance with statutory and regulatory requirements, an environmental audit privilege is
created to protect the confidentiality of communications relating to voluntary internal environmental audits.
(3) An environmental audit report shall be privileged and shall not be admissible as evidence in any civil or
administrative proceeding, except as provided in subsection (4) of this section.
(4) The privilege described in subsection (3) of this section does not apply to the extent that:
(a) It is waived expressly or waived by implication by the owner or operator of a facility or persons
conducting an activity that prepared or caused to be prepared the environmental audit report;
(b) The owner or operator of a facility or person conducting an activity seeks to introduce an environmental
audit report as evidence. Seeking to introduce any part of the report shall constitute waiver of the
privilege described in subsection (3) of this section for the entire report;
(c) In a civil or administrative proceeding, a court of record, after a private review consistent with the
Kentucky Rules of Civil Procedure, shall require disclosure of material for which the privilege
described in subsection (3) of this section is asserted, if the court determines that:
1. The privilege is asserted for a fraudulent purpose;
2. The material is not subject to the privilege; or
3. Even if subject to the privilege, the material shows evidence of noncompliance with KRS
Chapter 77 or this chapter, or with the federal, regional, or local counterparts or extensions
thereof, and appropriate efforts to achieve compliance were not promptly initiated and pursued
with reasonable diligence.
(d) A party asserting the environmental audit privilege in subsection (3) of this section has the burden of
proving the privilege, including, if there is evidence of noncompliance with KRS Chapter 77 or this
chapter, or the federal, regional, or local counterparts or extensions thereof, proof that appropriate
efforts to achieve compliance were promptly initiated and pursued with reasonable diligence. A party
seeking disclosure under subsection (4)(c)1. of this section has the burden of proving that the privilege
is asserted for a fraudulent purpose.
(5) The privilege described in subsection (3) of this section shall not extend to:
(a) Documents, communications, data, reports, or other information required to be collected, developed,
maintained, reported, or made available to the public or a regulatory agency pursuant to KRS Chapter
77 or this chapter, or administrative regulations promulgated pursuant thereto, or other federal, state, or
local law, ordinance, regulation, permit, or order, and any information developed relating to any release
subject to KRS 224.1-400(19);
(b) Information obtained by observation, sampling, or monitoring by any regulatory agency;
(c) Information obtained from a source independent of the environmental audit; or
(d) Any criminal proceeding.
(6) Nothing in this section shall limit, waive, or abrogate the scope or nature of any statutory or common-law
privilege, including the work-product doctrine and the attorney-client privilege.
(7) Nothing in this section shall limit, waive, or abrogate any reporting requirement in accordance with KRS
Chapter 77 or this chapter or permit conditions.
(8) The cabinet shall not seek a civil penalty against a facility for a violation of this chapter or the administrative
regulations promulgated pursuant thereto and an air pollution control district shall not seek a civil penalty
against a facility for a violation of KRS Chapter 77 or the rules, orders, or administrative regulations
promulgated pursuant thereto if: CHAPTER 178
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(a) The owner or operator has made voluntary disclosure to the cabinet or the air pollution control district
of the voluntary discovery of the violation;
(b) The owner or operator has corrected the violation within sixty (60) days of voluntary discovery, unless
a shorter period of time is necessary to protect human health, safety, or the environment, or the cabinet
or the air pollution control district determines that a longer period of time is necessary to correct the
violation and approves a longer period of time and the owner or operator is taking the steps necessary to
correct the violation as soon as possible;
(c) The owner or operator has agreed in writing to take steps to prevent a recurrence of the violation;
(d) The specific violation, or closely related violation;
1. Has not occurred within the past three (3) years at the facility;
2. Is not part of a pattern of violations of federal, state, or local law occurring within the past five
(5) years at a facility or facilities owned or operated by the same entity, as identified in a
judicial or administrative order, consent agreement, or agreed order, complaint, notice of
violation, conviction, or plea agreement; and
3. Is not an act or omission for which the facility has received penalty mitigation from a federal,
state, or local agency;
(e) The violation is not one which resulted in serious actual harm, or presented an imminent and substantial
endangerment to human health or the environment, or violated the terms of a judicial or administrative
order, consent decree or agreed order, or plea agreement;
(f) The violation is not one which resulted in significant economic benefit which gives to the violator a
clear advantage over its business competitors; and
(g) The owner or operator of the facility cooperates as requested by the cabinet or the air pollution control
district and provides information as necessary to determine the applicability of this section.
(9) The condition contained in subsection (8)(f) of this section shall not apply to voluntary disclosures made prior
to June 21, 2001.
(10) Nothing in this section shall be construed to abridge the right of any person to recover actual damages
resulting from any violation.
Veto Overridden April 12, 2024.