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The Privileged Class II:
Promoting compliance or
facilitating a cover-up?

Last week PEER examined Texas' "Audit Privilege" or "Polluter Immunity" law, enacted by Governor Bush in 1995, and the tumultuous legislative history of the statute. This week we examine the industries' motivations behind this legislation, and look at examples of how this immunity and privilege plays out in the real world.

The Texas Audit privilege law created sweeping protections for polluters who perform internal environmental or safety audits at their businesses, allowing audit documents to become confidential and polluters to escape responsibility for violations discovered in the audits.

Why did Governor Bush embrace "audit privilege" legislation, and what have been the consequences of that decision? Simply put, polluter immunity legislation was immensely popular among many of the biggest Texas companies, and its provisions have been widely used. As of this writing, 242 companies have notified the TNRCC of 1,040 different privileged audits. Constituents from polluting industries that supported the legislation were key supporters of both Bush gubernatorial campaigns, collectively giving more than $4 million in 1994 and 1998, more than 20 percent of all his campaign contributions.(1) (See part three of The Privileged Class, next week.)

As it turns out, companies affiliated with Governor Bush's contributors utilized the law's immunity provisions far more frequently than did other Texas companies. Of the 242 companies that submitted privileged audits, 45 (or 19 percent) are companies whose political action committees or employees contributed to Bush gubernatorial campaigns. However, that same group accounted for a whopping 48 percent of all requests for immunity from violations of environmental laws. In other words, the politically active companies pushing the legislation were collectively among the worst environmental actors with the most to gain by concealing their polluting activities. (2)

Still, one might argue, that such an outcome is okay as long as the legislation causes these companies to clean up problems that would have gone unfixed. But that turns out not to be the case. In October 1998, the National Conference of State Legislatures published an evaluation of "audit privilege" laws -- including Gov. Bush's Texas law -- which concluded that the predicted environmental boon from greater voluntary corporate self-monitoring never materialized. The study concluded that while 75% of manufacturing facilities with environmental permits conduct voluntary audits, the existence of audit privilege or immunity legislation "does not appear to be a significant factor in the decision to audit. Facilities conduct audits because they make sense." (3)

So, if granting polluters immunity and privilege from disclosure fails to increase the number of voluntary audits -- the alleged environmental impulse for the policy -- why would the Governor and polluting industries fight so hard for this legislation? The obvious answer: to gain immunity and privilege from disclosure for polluters.

Indeed, in public testimony, industry lobbyists -- in many cases representing generous supporters of Governor Bush's campaign the previous year -- openly voiced often-crass motivations for supporting polluter immunity legislation. Thomas Cooke, representing a number of influential, pro-Bush oil industry groups, pointed out that the audits "complicated things dramatically" for the independent oil production industry.

The problem this bill would address, Cooke frankly told legislators in 1995, comes when auditors "find something and it turns out we've got something that could be economically disastrous for us to address immediately" so the polluter hesitates to share the information with regulators.(4)   In other words, the problem comes when a company identifies an environmental problem and doesn't want to pay to clean it up!

Besides their unwillingness to bear the expense of environmental cleanup, polluters cited avoiding public criticism as a chief goal the bill would address. Donald Legg of Bell Helicopter, testifying in the House on behalf of the Texas Association of Business and Chambers of Commerce, cited the "potential for adverse community reaction," along with the "potential for self-incrimination," as the main reasons he supported the legislation.

General Motors lobbyist Bud McMullen testified that his company was pushing audit privilege legislation in multiple states primarily to avoid public outcry over their environmental and manufacturing practices. In Oklahoma, for example, McMullen said; "we voluntarily [sic] disclose our air toxics tonnage every year, and if we had a confidential privilege bill like this the the state of Oklahoma, which we're working on right now, we wouldn't have to release that and the air toxics groups wouldn't use it -- even though they were in legitimate time frames and legitimate tonnage ranges -- they used it against us as being a major polluter in the state."

The audit privilege law does not only apply to private facilities. We may view the outcomes of this legislation in two cases where public institutions attempted to shield their activities from scrutiny.

In the first instance, Mason and Hanger Corp. -- the corporate contractor managing the Pantex nuclear weapons facility in Amarillo -- attempted to claim privilege and immunity for an audit performed at the Pantex plant. A Mason and Hanger attorney told reporters that the audit privilege law is "a tool available to the regulated industry that is subject to these rules. We are part of that group and thought we would take an opportunity to use the same tools that other people in Texas use."

But the Clinton Administration quashed the Pantex bid for secrecy when the Department of Energy informed Mason and Hanger that it would "not be able to take advantage of this law in Texas. From an EPA standpoint, they [audit privilege laws] just are not always consistent with an expressed desire certainly by DOE and others to be open about environmental issues."(5)

A second example demonstrates that the polluter immunity law affords secrecy in cases where it clearly conflicts with the public interest.

In summer 1995, a whistleblower at the University of Texas at Arlington alleged that the university violated state and federal environmental laws, and endangered the health of building occupants in the process. (6)   In response to these allegations, UT conducted an audit and investigation to determine whether students, faculty and staff had been exposed to air-borne asbestos fibers in campus buildings.(7)   Asbestos has been strongly linked to specific types of cancer and other health hazards.

UT should not have been able to claim privilege for auditing where they already knew a problem existed. But then-Attorney General Dan Morales' open records division ruled that the law allowed UT to keep the information secret from requestors under the Texas Public Information Act. Incredibly, the law could allow documentation of the asbestos violations to be kept secret even in civil lawsuits over health problems resulting from the university's error.

What will be the effect of Texas' audit privilege law on the environment and Texas citizens? Texans may never see most of the 1,000-plus audits performed at private businesses under this law, nor will they know the details about hundreds of environmental violations pardoned under generous immunity policies.

In hearings leading to the enactment of polluter immunity legislation, bill sponsor Warren Chisum, chair of the Texas House of Representatives' Environmental Regulation Committee, consistently held that the audit privilege law would not protect "bad actors" and that polluters would not be able to perform an audit after the fact in order to cover up bad acts. But that's exactly what happened almost immediately thereafter, at both public and private facilities. In the final analysis, the Texas audit privilege laws do little more than provide leeway for Texas polluters to evade public disclosure and potential prosecution.

Next week: Texas PEER will examine the connection between Bush' gubernatorial fundraising and the audit privilege law.


  1. PEER/Public Research Works analysis of Bush contributors.
  2. Source of information on audits and disclosures by company: TNRCC Environmental Audit Log, 10-1-99. Source for Bush contributors: analysis performed by PEER and Public Research Works.
  3. Morandi, Larry, State Environmental Audit Laws and Policies: An Evaluation, National Conference of State Legislators, October 1998, p.32.
  4. All quotes of positions of proponents and opponents of the legislation were transcribed from tapes of a 3/21/95 House Environmental Regulations Committee hearing.
  5. Quotes from Mason and Hanger and the Department of Energy both come from McBride, Jim, "Pantex told to release study," Amarillo Globe News, 1-17-97.
  6. Payne, Chris, "Controversial law employed by UTA: Cover of secrecy allowed for audits," Fort Worth Star Telegram, 2/16/96. Fort Worth Star Telegram Archives Info
  7. Payne, Chris, "Controversial law employed by UTA: Cover of secrecy allowed for audits," Fort Worth Star Telegram, 2/16/96. Fort Worth Star Telegram Archives Info

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