KRS 224.1-040: Evidentiary privilege for environmental audit reports -- Exceptions --

Restriction on civil penalties.

(1) As used in this section:

(a) "Environmental audit" means a voluntary, internal, and comprehensive

evaluation of one (1) or more facil ities 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 identif y 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 aud it 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 e xhibits 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 di scovery 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 administrat ive 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; and

(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:

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 cr eated 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 p rovided 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 repo rt 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, sha ll 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 i nitiated 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, re gulation, 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 th e 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:

(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 dis covery, 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 long er 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 o f 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, noti ce 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 economi c 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 perso n to

recover actual damages resulting from any violation.