Governor Brewer Signs Environmental Audit Privilege Law amid Diverse Opinions on its Impact

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On April 12, 2012, Governor Brewer signed H.B. 2199 creating the Arizona Environmental Privilege Law. The commentary on the law’s impact ranges from accolades that it will encourage Arizona companies to discover and correct environmental problems to dire warnings that the law will allow companies to keep violations of environmental laws secret. In fact, the law may not be as significant as some would have you believe.

The law provides that an environmental audit report is privileged and not admissible as evidence or subject to discovery in a state civil or administrative proceeding. Protected information includes data and analyses generated during the audit. Click here for more details regarding audit reports. A person who conducted the audit or who has knowledge of the audit results generally cannot be compelled to testify or to produce documents related to any part of the audit report. Click here for more details on permissible disclosure of audit report and results. A person who has actually observed physical events can be compelled to testify regarding those events, but may not testify about or produce documents concerning any privileged part of an audit or the audit report.

The privilege does not apply to:

  • Documents, communications, data, reports or other information required by a regulatory agency to be collected, developed, maintained or reported under an environmental law
  • Information obtained by observation, sampling or monitoring by a regulatory agency
  • Information obtained from a source not involved in the preparation of the audit report

How Your Business May be Affected

Before rushing out to perform an environmental audit, businesses should consider the law’s limitations:

  • The law does not apply to the multitude of data and information required to be collected, developed, maintained, or disclosed under the various local, state or federal environmental laws, including permits issued pursuant to such laws.
  • The law impacts civil litigation and administrative actions. A body of case law already exists in Arizona to protect audit reports from disclosure where that evaluation was conducted upon the advice of and under the direction of counsel.
  • The law does not apply in judicial or administrative actions by the federal government or private plaintiffs in federal court.
  • The law does not provide immunity from violations of local, state, or federal law. Even if a company, as a result of an audit, promptly identifies and corrects a possible violation, the state or a local government may still seek penalties for the violation if it has independent evidence of the violation.
  • It would be highly unusual for the Arizona Department of Environmental Quality to seek disclosure of environmental audits outside of an administrative enforcement or litigation action.
  • The law does not apply in criminal proceedings.

While this law promotes responsible business practices and protection of the environment, its ultimate impact on a company’s decision regarding whether to move forward with an environmental audit is uncertain. The informed practice by industry has been and should continue to be that the decision to conduct and the methodology of proceeding with an environmental audit should be carefully considered with the advice of legal counsel. Whether this new law adds meaningful protection in particular circumstances can be further assessed at that time.

For More Information

For further information as to your specific concerns, please contact a member of Polsinelli Shughart's Environmental and Natural Resources group.