TESTIMONY OF MARK WOODALL
SIERRA CLUB GEORGIA CHAPTER, CHAIR
regarding ENVIRONMENTAL AUDIT PRIVILEGE LAWS
before the UNITED STATES SENATE
COMMITTEE ON ENVIRONMENT AND PUBLIC WORKS
CO-SUBMITTED BY U.S. PUBLIC INTEREST RESEARCH GROUP (U.S. PIRG)

I.INTRODUCTION

Mr. Chairman and members of the committee, thank you for allowing me to make a statement on behalf of the 550,000 members of the Sierra Club. My name is Mark Woodall and I serve as the volunteer chair of the Georgia Chapter's Legislative Committee and as chair of the Sierra Club's Audit Privilege Task Force. I'm a commercial tree farmer by occupation. I am also co-submitting this testimony on behalf of the U.S. Public Interest Research Group (U.S. PIRG).

The Sierra Club and U.S. PIRG, as organizations that have brought numerous citizen enforcement actions under our national environmental laws, are committed to preserving the legal tools ordinary citizens have fought for and need to protect themselves from harmful pollution practices in their communities. That is why Sierra Club and U.S. PIRG bitterly oppose the creation of any secrecy privileges or immunity rights for entities undertaking environmental self-audits, at either the state or federal level. In particular, we strongly oppose S.866, as well as any bill that would restrict the U.S. Environmental Protection Agency's (U.S. EPA's) ability to administer its delegated programs in states with audit privilege and immunity laws.

II.. S. 866 HURTS OUR RIGHT TO KNOW AND UNDERCUTS ENFORCEMENT

The creation of a federal audit privilege is a radical measure that would create a vast dumping ground for corporate polluter's dirty secrets. Allowing polluters to withhold vitally important information on pollution practices that effect the health and property rights of their neighbors, and letting environmental law breakers escape accountability for serious, chronic, and even criminal violations is bad policy: it would undermine the public's right to know, tie the hands of law enforcement officials, eviscerate the right of citizens to protect themselves, and silence whistle blowers. What is more, Sierra Club and U.S. PIRG are not alone in our opposition to S. 866; last month 120 environmental, public interest, labor, and business groups, representing millions of Americans, sent a letter to every U.S. Senator denouncing S. 866. That letter in attached to my statement as Appendix II.

III.STATE SECRECY AND IMMUNITY LAWS ARE HAVING A NEGATIVE IMPACT, AND A STRONG EPA OVERSIGHT ROLE MUST BE MAINTAINED

Many of the arguments we offer against federal pollution secrecy and immunity proposals apply also to similar proposals enacted at the state level: they hurt our right to know, undercut enforcement, infringe on citizen enforcement rights, silence whistle blowers, allow lawbreakers to escape accountability and keep the profits they have gained from avoiding compliance, and disadvantage regulated entities that take their environmental responsibilities seriously. For these reasons, citizen groups in Idaho, Ohio, Colorado, Michigan, and Texas have petitioned the U.S. EPA to withdraw these states' authority to enforce federal environmental laws in light of the obstacles these audit laws pose to enforcement, right to know, and victim compensation.

Nonetheless, U.S. EPA has entered into agreements with the states of Texas and Michigan, and is pursuing similar agreements in Ohio and other states, that have led to improvements in the respective states' self-audit laws, but, in the end, have given EPA's blessing to the existence of corporate secrecy rights in a state civil proceeding. In our view, the Texas and Michigan deals have the alarming result of allowing those states to continue implementing federal programs despite serious constraints on the ability of the state and citizens to enforce those programs. Grassroots letters to EPA Administrator Carol Browner and President Bill Clinton outlining concerns with EPA's policy and recommending additional steps the administration should take are attached as Appendix III.

Although we are not satisfied with EPA's position regarding these states' audit laws, we strongly assert that there, is, nevertheless a critical need to preserve a federal oversight role for EPA. The "safe harbor" concept that Senator Enzi is proposing would unduly limit EPA's authority to oversee its programs and would substantially undo many of the improvements EPA succeeded in obtaining from Michigan and Texas. Most notably, pursuant to agreements with EPA, Texas and Michigan have amended or agreed to amend their laws to ensure that secrecy privileges or immunity are not available with respect to criminal violations. Under Senator Enzi's approach, the standard for environmental criminal liability would be compromised, and reckless environmental violations currently considered criminal would be potentially subject to audit privilege and immunity protection.

In addition, the Enzi approach is misguided because it ties EPA's hands. As these new laws are played out in the courts, their impact on citizen suit rights and law enforcement will become more clear. EPA needs the flexibility to revisit its agreements regarding state audit laws into order to ensure the integrity of the programs it administers.

IV.INDUSTRY WANTS POLLUTION SECRECY AND IMMUNITY RIGHTS IN ORDER TO AVOID LIABILITY, NOT AS AN INCENTIVE FOR VOLUNTARY COMPLIANCE

As we observe the 25th anniversary of the Clean Water Act, we should consider the motivation for its passage and the passage of the other landmark environmental and health laws. These laws were not established because industry was doing a great job of voluntarily finding and eliminating pollution. These laws passed because the Cuyahoga River burned. The air in Chattanooga was not safe to breathe, the drinking water of New Orleans was

filled with carcinogens and the people of Love Canal were sickened by toxic waste.

So why is it today that pollution is rarely just dumped untreated into rivers or unlined pits? After all, it is cheaper in the near term for a corporation or federal facility to just dump its effluent and thereby externalize its disposal costs. We maintain, therefore, that it is fear of liability, fear of enforcement (federal, state or citizen) and fear of adverse publicity that drives corporate behavior in the area of public health and the environment.

Our understanding of the current incentives which tend to keep corporations from just dumping it in the river is confirmed by the words of industry lawyers. An Arthur Anderson survey of corporate counsel published in the National Law Journal in 1992 states "the relatively new threat of jail for corporate executives for environmental violations is an overwhelming concern for general counsel."

Likewise, the advent of environmental pollution secrecy and immunity rights represents a sophisticated and superficially appealing new way to evade the threat of enforcement and avoid liability. Proponents of these new rights claim they provide necessary incentives to encourage companies to conduct internal audits of their environmental performance. However, as industry lawyer Roger Marzulla stated at a recent seminar on environmental crime hosted by the publication Corporate Crimes Reporter, the (real) purpose of self-audit laws is to provide "an obstruction to prosecution."

A.The Waste Management, Inc. Cincinnati Case

Industry's arguments in favor of corporate pollution secrecy and immunity rights are all based upon an assumption of corporate good faith. They ignore the vast potential for abuse inherent under rules that encourage concealment of information. The story of a small, Cincinnati, Ohio community group's fight to protect themselves from toxic gas emissions emanating from a nearby landfill operated by the corporate giant Waste Management, Inc. presents a compelling example of the various ways a corporation can and will attempt to use and abuse the right to withhold self-audit information under an audit privilege law. That story, as told by two community members who have led the fight against Waste Management, is attached as Appendix I.

B.Corporations Have Historically Used Attorney-Client and Work Product Doctrines To Hide Information and Escape Liability

The concept of the environmental audit privilege, then, emerges from industry think tanks and corporate law firms, not as an innovative compliance tool, but as a means of hiding the ball - a tactic that industrial polluters, especially large corporations that can afford extensive litigation, have pursued for years. Corporations have long attempted, with little success, to use the doctrines of attorney-client privilege and attorney client work product as a means of shielding themselves from accountability for activities harmful to the environment and public health. However, the courts have placed limitations on concealment via these doctrines, in order to safeguard the public's recourse. Now, the trend toward environmental privilege seems to be designed to open the door to many more environmentally important documents becoming concealable.

The attorney-client privilege relates to communication made by the client (or the client's agent) to an attorney, in confidence, for the purpose of obtaining legal advice. The privilege allows the client (either individually, or through his attorney) to decline a forced disclosure. The work-product doctrine protects against forced disclosure materials prepared specifically in anticipation of litigation. However, in such a case, the party seeking discovery may gain access if it can demonstrate a substantial need for them and inability to obtain the substantial equivalent elsewhere without undue hardship.

Corporations have often attempted, especially in recent cases, to stretch these doctrines so as to conceal factual information from those seeking accountability in enforcement cases and other contexts. The environmental audit laws represent an opportunity for corporations to conceal much more information, by characterizing a great many of the studies they wish to

conceal, not as legal advice, but as "environmental audits."

There are numerous examples of corporations attempting to stretch attorney client doctrines to avoid environmental accountability. A look at just a few examples demonstrates how much is at stake with environmental audit privilege:

Phelps Dodge Corporation. Phelps Dodge Inc. sold property to the US Postal Service in Maspeth (Queens), New York, in the mid-1980's for construction of a postal distribution building. Phelps Dodge agreed to clean up the former copper refining site, but as the cleanup process continued it became apparent to Phelps Dodge and its contractors that heavy metal contaminants onsite - (e.g. arsenic, cadmium and lead) were more widespread and it would be much more expensive to clean up the site than anticipated. In response, Phelps Dodge officials -- under the leadership of the company president -- apparently employed a strategy of concealment to attempt to strap the Post Office and the US taxpayers with the costs of cleanup. One major strategy was to claim attorney-client privilege for extensive studies conducted by consultants documents revealing information relevant to the extent of

contamination and costs of cleanup. In 1994 the court reviewed these attorney-client privilege claims, document by document, and found that about 80% of the documents were ineligible for such treatment. The court issued an explicit ruling, with a six page long list showing the numerous studies, letters and evaluations that the company inappropriately attempted to keep out of government hands.

The lengthy list of documents which the company had attempted to cover as "privileged" included many documents which had merely been copied to attorneys, and others in which attorneys had no real role. US Postal Service v. Phelps Dodge Refining Corp. 852 F Supp. 156 (E.D.N.Y. 1994). he court noted that the data were "generated through studies and collected through observation of the physical condition of the Property... Such underlying factual data can never be protected by attorney-client privilege and neither can the resulting opinions and recommendations."

In contrast, many of the state environmental audit laws allow precisely such onsite observations, resulting opinions and recommendations to be given privileged treatment at great detriment to public accountability. Had these documents remained out of public view in the Phelps Dodge matter the government may have been incapacitated from winning the later court decision, in 1997, finding that Phelps Dodge had breached its contract with the US Postal Service by delaying and declining its contractual responsibility to excavate all of its contamination." The court might not have had enough information before it on the scope of contamination to rescind the contract, ordering the corporation to take back the tainted

property sold to the Postal Service. US Postal Service v. Phelps Dodge refining Corporations 950 F Supp. 504 (E.D. NY, 1997).

Summitville Mine. Summitville Consolidated Mining Company filed for bankruptcy in 1992, leading to an emergency takeover of cleanup of its cyanide leach gold mine near Del Norte, Colorado by the US EPA. After the federal Environmental Protection Agency (EPA) examined the situation, the site became the state's best known Superfund cleanup project. According to an article in the Denver Post on May 15, 1997, some of Summitville's officers filed a lawsuit in Canada to keep about 1,800 documents related to the operation of the Mine from a grand jury, claiming the cover of attorney-client privilege. The documents sought include details of discussions with regulators and mine consultants, records discussing

"drainage, flows, discharges, seeps, spills or runoff" as well as finances. At stake is liability for an estimated $120 million cleanup.

Tobacco Cases. Outside of the environmental field, we can see the damage that "audit privilege" could do in the high profile tobacco cases. In those matters, attorneys attempted to bring all potentially damaging internal scientific documents under attorney work product and attorney- client privilege to avoid discovery. One witness reported that Brown and Williamson's assistant general counsel routinely marked scientific research papers "attorney work product" even when they had not been created for use in litigation.

Finally, some other examples of demonstrating the history of corporate attempts to withhold information regarding environmental problems include:

According to the August 22, 1995, Columbus, Georgia, Ledger-Enquirer, "The DuPont Co. was slapped with sanctions totaling almost $115 million on Monday by U.S. District Judge K. Robert Elliott of Columbus, who ruled the chemical company systematically lied, cheated and withheld evidence in efforts to protect itself during lawsuits over its fungicide Benlate." Unfortunately, Judge Elliott was reversed on appeal and the growers are still fighting to

recover.

According to the Associated Press on July 15, 1997, "the man investigating the Texaco tapes said Monday he found a file - carefully labeled - containing documents company executives allegedly withheld from lawyers in a race discrimination case...the folder had a yellow note on it labeled `documents withheld from legal'."

C.Editorial Boards, District Attorneys, and Others Oppose Secrecy and Immunity Laws As Industry Campaign To Hide Dirty Secrets

Most people who review this corporate campaign for secrecy and immunity see it for what it really is. Dozens of editorial writers have railed against the concept calling it a `Polluter Protection Act', `Polluters Relief Act', `Dirty Secrets' and the `Bhopal Bill'. A few of those editorials are included in Appendix IV.

In a June 7, 1996 letter, to Congressman Condit, the Co-Chairs of the National District Attorneys Association wrote, "it is our view that the adoption of a self-audit privilege is an extreme measure far beyond any remedy necessary. Furthermore, that if the congress enacts a self-audit privilege you will be doing a vast disservice to law enforcement efforts not only in the realm of environmental law, but across the spectrum of `white collar' crime."

The Charleston, West Virginia Gazette observed, more than 4,000 people were killed in Bhopal, India by a leak at the Union Carbide plant in 1984. If such a tragedy ever occurred at a Carbide plant in West Virginia - God forbid - we're sure the company would loved to be able to hide information about conditions leading up to the accident."

Stephanie Kessler of the Wyoming outdoor Council said, "This bill is about big companies that already do environmental audits to now legally hide the information they discover from the public...They get the privilege even if they don't do a thing." Jack McGraw, acting EPA Regional Administrator in Denver, "The Colorado bill is the worst of the worst. It has all kinds of abuse."

D.Pollution Secrecy and Immunity Laws Are Completely Unnecessary To Accomplish Their Purported Goals

Finally, having shown that bad actors can and will abuse environmental audit privileges and immunity rights, it worth noting in conclusion that the legitimate purported goals of these audit privilege proposals -- namely to encourage self-audits and voluntary compliance while providing some measure of protection for those who self-disclose violations -- are already being accomplished by EPA's self-audit/self-policing policy with notable success. EPA's policy, which was the developed through a lengthy and exhaustive multi-stakeholder process, contains NO secrecy privilege, NO immunity for criminal violations, and NO automatic immunity for civil violations, but does allow for significant mitigation of civil penalties for self-disclosed violations in appropriate cases. Under the policy, hundreds of companies have disclosed violations, and EPA has waived penalties in most cases.

V.CONCLUSION

Thus, the conclusion is clear. Pollution secrecy and immunity laws are an unnecessary attack on environmental law enforcement and the public's right to know about pollution. Such proposals present numerous opportunities for abuse, and law-breaking companies have a demonstrated track record of using any and every tool available to hide information and avoid responsibility. Therefore, Sierra Club and U.S. PIRG strongly urge members of the Senate to oppose S. 866 and any proposal that would limit EPA's oversight authority with regard to state pollution secrecy laws.

Thank you for the opportunity to testify today.