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The Privileged Class:
Bush pushes secrecy
for environmental audits

Two themes of George W. Bush's environmental policy in Texas have been declining public information about environmental enforcement and diminished accountability for polluters. A glaring example was the 1995 Texas Environmental, Health and Safety Audit Privilege Act -- a flagrant bone thrown to Texas polluters during Governor Bush's first year in office.

The most extreme of a number of state "audit privilege" or polluter immunity laws, much of the original Texas legislation (HB 2473, 74th session) was written by Bush supporter and Texas Chemical Council lobbyist Kinnan Goleman.(1) The law created sweeping protections for polluters who performed internal environmental or safety audits at their businesses. Texas' law made such audits "privileged" even from use in criminal prosecutions, and polluters could not be held responsible for violations discovered in these privileged audits. (2)

Governor Bush signed the legislation in May 1995. As of this writing, Texas companies have conducted 1040 such "privileged" audits, and have received immunity for (usually multiple) violations of Texas environmental laws on 246 occasions.

Polluter immunity legislation represented a high legislative priority of many of Governor Bush's close supporters in the oil, natural gas, chemical, electronics, electric utility, manufacturing and factory farming industries. Corporate interests represented by groups lobbying for audit privilege legislation contributed more than $4 million to Bush's two gubernatorial campaigns -- more than 20 percent of his pre-presidential fundraising total.(3)   (See part three of "The Privileged Class," forthcoming.)

Proponents of polluter immunity laws argued that granting immunity and privilege for internal audits provides incentives for companies to clean up their act without intervention by regulators. They claimed that fear of potential liability created by the existence of the audits had a chilling effect, and that more companies would conduct audits if they didn't fear these repercussions. What's more, when companies were required to perform audits -- for example, during high-dollar property sales of polluted land -- fear of prosecution might (always hypothetically) cause companies to whitewash actual problems. Here is a link to a copy of the bill analysis of C.S.H.B. 2473.(4)

The sponsors built in certain protections stating that companies couldn't claim privilege if they intentionally concealed illegal activity, or if they took too long to clean up. The ultra-conservative bill-sponsor Republican Warren Chisum of Pampa repeatedly stated that the purpose of the bill wasn't "to protect bad actors," but others weren't so sure.(5)

Prosecutors and environmentalists criticized the bill for setting bad precedents. Environmental groups argued that HB 2473 would let polluters escape accountability when they violate environmental or health and safety laws by allowing them to keep audit findings secret. Moreover, it would reward polluters for complying with state law when they are currently required to do so.

Kate Kelley of the Travis County Attorney's office testified before the House Environmental Affairs Committee that by extending Fifth Amendment rights to corporations and expanding the exclusionary rule to include cases where there was no misconduct by regulators, the bill gave polluters more rights than other criminal defendants.

A representative of the Harris County District Attorney's Office expressed fears that companies would use the law as a shield, performing an audit conveniently immediately after any serious pollution event to provide immunity in advance. Noting that neither of the two cases where prosecutors used voluntary audits were in Texas, she added that Texas prosecutors already took into account good faith efforts to comply with environmental laws.

Adding injury to insult, the law denied information in audits not only to prosecutors, but also to victims of environmental negligence who may have suffered damages from illegal pollution. In other words, people harmed by violation of an environmental law might sue for damages only to find that a privileged audit report contained the only direct evidence of a violation.(6)

It's not a stretch to think that environmental audits might make information secret that the public has an interest in knowing. After all, many of the companies that have taken advantage of these immunity statutes are among the largest companies and pollution generators in the state -- ALCOA, ARCO Permian, Sterling Chemicals, Bell Helicopters, Chemical Waste Management, Enron, Exxon, Union Carbide, Texas Instruments, Elf Atochem, and many others.

Even as Texas companies indulged in their newly won rights to secrecy and immunity, the federal Environmental Protection Agency stepped in to tighten up the loopholes.

After Governor Bush signed the polluter-immunity act, polluting industries responded to the generous offer with fire-sale alacrity. In the two years after the law took effect, polluters submitted 640 audit notices to the Texas Natural Resources and Conservation Commission.(7) Only 400 audit notices were filed in the following two years,(8) perhaps in part because the federal government required Texas to retract certain parts of the immunity and privilege.

The EPA had a big club with which to threaten Texas environmental officials, and at the urging of Texas environmental groups, the Clinton Administration threatened to use it. Texas administers several licensing and enforcement functions on behalf of the federal government, so the EPA threatened to take away that authority if Texas did not rescind parts of the law. The EPA demanded, among others, the following changes. Texas must:

  • Eliminate application of immunity and privilege provisions to criminal actions;
  • Eliminate application of immunity where a violation results in a serious threat to health or the environment, or where the violator has obtained a substantial economic benefit that gives it a competitive advantage;
  • Clarify that the privilege does not impair access to information required to be made available under federal or state law.

Under pressure from the EPA, the Legislature and the Governor entered closed-door negotiations over the legislation with the EPA that reached a denouement in March 1997, two months into the legislative session.(9) An attorney who has litigated this issue on behalf of the Environmental Defense Fund said that on some issues the EPA had cratered -- declining to insist on enforcement of several significant EPA rules -- but that "2/3 of the problem" was rectified.(10)

Bush appointees at the Texas Natural Resources Conservation Commission, Texas' chief environmental-enforcement agency, were furious that the EPA had tinkered with their pet program. TNRCC Director Barry McBee took a junket to Washington D.C. to attack the EPA's demands for changes to Texas' polluter immunity legislation before the U.S. Senate.

McBee complained bitterly to senators of a "paternalistic parent child relationship" between the EPA and the states, which "is not healthy." Citing a report from the Washington Legal Foundation, a right-wing think tank, he accused the EPA of overstepping its regulatory authority and called on Congress to enact federal polluter immunity legislation. (11). This was Barry McBee's testimony before the United States Senate Committee on the Environment and Public Works.

The Bush Administration's protests aside, both the EPA and "the Department of Justice remain deeply opposed to audit privileges in any form," and EPA administrators warned that the 1997 changes did "not completely" eliminate federal concerns with the Texas law.(12)

Next week we will explore, in The Privileged Class, Part Two, Texas polluters' motives for promoting audit privilege legislation, and look at examples of how the law plays out in the real world. The following week, Part Three of this series will examine the campaign contributions that the effected regulated industries contributed to George W. Bush's two gubernatorial campaigns.

Sources:

  1. Goleman acknowledged his role in Payne, Chris, "Controversial law employed by UTA: Cover of secrecy allowed for audits," Fort Worth Star Telegram, 2/16/96.
  2. TNRCC Environmental Audit Log. Computer printout received from the agency 10-29-99.
  3. Bush fundraising totals are derived from a database of Texas lobby donors compiled by Public Research Works Since these only include donations $1,000 and up, this total is likely an understatement.
  4. House Research Organization, Bill Analysis: HB 2473, Chisum et al., 4/25/95.
  5. All quotes and paraphrases of positions of proponents and opponents of the legislation were transcribed from tapes of a 3/21/95 House Environmental Regulations Committee hearing.
  6. Unattributed criticisms of or arguments for the law were paraphrased from House Research Organization, Bill Analysis: HB 2473, Chisum et al., 4/25/95.
  7. Morandi, Larry, State Environmental Audit Laws and Policies: An Evaluation, National Conference of State Legislators, October 1998, p. 28.
  8. TNRCC Environmental Audit Log, 10-29-99.
  9. Letter from Texas Natural Resources and Conservation Commission Chairman Barry McBee to EPA Assistant Administrator Steven Herman, 3-17-97.
  10. Interview with Rick Lowerre, 9-22-97.
  11. Testimony of Barry McBee, TNRCC Chair, to the U.S. Senate Committee on the Environment and Public Works, 10-30-97.
  12. Letter from EPA Assistant Administrator Steven Herman to Barry McBee, TNRCC chief, March 19, 1997.

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