Know when to hold 'em: minimizing disclosure of corporate environmental information.

• Author: Fiechtl, Rebecca
• Position: Corporate attorneys

1. INTRODUCTION

   Complying with the vast amount of environmental laws is a daunting task for a corporation today. A corporation may find it necessary to hire an environmental consulting company to conduct an environmental audit to assess its compliance with environmental laws and determine any appropriate adjustments in procedure. If the audit raises concerns regarding the corporation's compliance, the corporation may request environmental review status reports, prepared at certain intervals, to track the corporation's efforts to correct the concerns raised in the audit. (1) The corporation's officers may think the best course of action is to comply with environmental laws and keep their environmental matters confidential. Nevertheless, the corporation could be compelled to disclose the audit and reports if subsequent litigation arises. (2)

   Increases in the degree of sanctions and complexity of environmental laws, and the corresponding increases in prosecutions for violations of environmental laws, put pressure on corporations to comply with applicable laws and regulations. (3) To facilitate compliance, many corporations rely on in-house counsel, officers, and employees as well as outside counsel, experts, and consultants. (4) These actors generate various types of environmental information for the corporation. Some of this information may contain sensitive issues that the corporation would rather not disclose.

   This Comment examines the reasons for creating corporate environmental information, the available means for keeping certain types of information confidential, and the measures a corporation may utilize to avoid unnecessary disclosure of sensitive environmental reports. Part II provides a general overview of the reasons various actors generate environmental information on behalf of a corporation. This environmental information includes mandatory and voluntary environmental audits, internal environmental investigations (usually triggered by a government inquiry or initiation of a government investigation), statutory reporting requirements to regulatory agencies, and requests for information from regulatory agencies or lenders. This Part also details some of the corporate purposes for keeping certain environmental details confidential, and the incentives for corporations to voluntarily disclose their environmental analyses. Part III surveys the availability and applicability of state environmental self-audit privilege or immunity laws, and the opposition to these laws by the Environmental Protection Agency (EPA). Additionally, this Part summarizes the best practices to avoid waiver of the state self-audit privilege or immunity laws, while weighing the risk that EPA may preempt the state law and require disclosure of the self-audit. Part IV examines the attorney-client privilege, work product doctrine, and self-critical analysis privilege in the corporate environmental setting. Part IV also discusses the best practices to preserve these protections when the corporation has a variety of in-house and external actors creating sensitive environmental information. Part V concludes that, although a confidentiality guarantee is impossible, the best method to guard against unintentional and unnecessary disclosure of sensitive environmental reports is the careful forethought and planning of a knowledgeable attorney.

2. REASONS FOR ENVIRONMENTAL REPORTS

   Significant parts of environmental legislation enacted over the past two decades expanded the scope of civil and criminal environmental liability in an effort to deter environmental violations. (5) Currently, almost every federal environmental statute and most state environmental statutes authorize criminal penalties in addition to civil penalties. (6)

   The federal government has also increased its civil and criminal investigations and prosecutions based on these statutes. For example, during fiscal year 2000 (FY 2000), EPA issued a record number of administrative complaints, compliance orders, and field citations, almost double the number from the year before. (7) In FY 2000, EPA conducted 660 civil investigations, referred 368 civil judicial cases to the United States Department of Justice (DOJ), initiated 477 criminal cases, referred 236 criminal cases to DOJ, and charged 360 defendants. (8) Continuing this trend, EPA plans to conduct at least 15,000 inspections, 550 criminal investigations, and 150 civil investigations in 2001. (9) The gravity of the sanctions and the ardent enforcement by the federal government worries corporate officers who could incur criminal liability for the corporation's environmental violations. (10) These concerns about liability lead corporations to enlist the aid of their own employees and outside personnel to help them obtain or remain in compliance with environmental laws.

   1. Reasons to Produce Corporate Environmental Information

      Various reasons exist for creating environmental documents. One reason is public environmental information laws. The information laws require a regulated entity to provide specific reports, data, facts, and documents to certain regulatory audiences, and this information is normally freely available to the general public, with narrow exceptions. (11) Another reason is many commercial transactions, such as real estate transfers, lender requirements, mergers, and acquisitions, require an environmental due diligence report, which a third party environmental consultant may prepare. (12) Further, a corporation may conduct its own internal investigations, usually following a government inquiry or initiation of a government investigation. (13) In each of these settings it is important for corporate counsel (in-house or outside) to guard against avoidable disclosure of sensitive environmental documents.

   2. Reasons to Disclose Environmental Information

      In certain situations, a corporation may want to disclose its environmental information to the public or the government. Formal corporate environmental reports, similar to annual reports, are becoming popular for corporations that wish to demonstrate to the public that they operate in a socially and environmentally responsible manner. (14) Another reason to voluntarily disclose environmental information is to utilize EPA's Incentives for Self-Policing: Discovery, Disclosure, Correction and Prevention of Violations (15) final policy statement. EPA's policy encourages regulated entities to voluntarily discover, disclose, and correct violations of federal environmental requirements. (16) If the self-disclosing entity meets all the terms of the policy, which include prompt disclosure and expeditious correction of the environmental violations, EPA offers to eliminate or substantially reduce the gravity component of civil penalties. (17) In addition, EPA will not recommend criminal prosecution. (18) During FY 2000, "430 companies disclosed potential violations at nearly 2200 facilities, an increase over the previous year, when 260 companies disclosed violations at 989 facilities." (19) In the time between the audit policy's inception in January 1996 and Spring 1999, EPA reported that 470 companies disclosed environmental violations under the audit policy at more than 1880 facilities. (20) Of the 470 companies, EPA reduced or waived penalties for 166 companies, determined 80 of the companies were ineligible for audit policy relief, and continued to investigate the balance of the companies. (21)

   3. Reasons to Keep Environmental Information Confidential

      Although voluntary disclosure of corporate environmental information is the most favorable course of action in some circumstances, corporate counsel should also consider the detrimental effects disclosure could have on the corporation. If, after weighing the risks, the corporation decides to voluntarily disclose environmental reports, then the attorney must police the disclosure so the corporation only discloses the necessary environmental information. (22) For example, corporate environmental information may contain trade secrets or other confidential business or financial information. (23) Some environmental laws limit public disclosure of records that contain or relate to trade secrets. (24) The Freedom of Information Act (FOIA) (25) also exempts "trade secrets and commercial or financial information obtained from a person and privileged or confidential." (26) In addition, EPA stated it "will withhold the [audit policy] self-disclosures from release under [FOIA], assuming the self-disclosure qualifies for FOIA exemption, until ... the Agency and the self-discloser have formally settled the case." (27) However, in cases where EPA determines that release of the document poses no harm to on-going attempts to settle the case, it may choose to release a self-disclosure prior to settlement. (28) EPA will release the document only if the submitter did not make a Confidential Business Information (CBI) claim or the submitter made such a claim, EPA rejected it, and EPA consulted its headquarters on the decision to release. (29) Thus, a company that self-discloses environmental information containing trade secrets that qualify for an exemption under FOIA must still make a successful CBI claim to EPA before EPA will agree to withhold a self-disclosure under the audit policy. (30)

      At least one commentator expresses concern that the public disclosure limits in environmental laws and the FOIA exemption are not sufficient because the possibility of inadvertent disclosure by regulatory officials is still high. (31) Overall, any corporation that voluntarily self-discloses environmental information containing confidential business information or trade secrets takes a risk that the regulatory agencies will not withhold the information from the public.

      Although voluntary disclosure is sometimes advantageous for a corporation, counsel must guard against an overly broad disclosure. In addition, if the disclosure contains confidential...