Vol. 8, No. 2, Pg. 38. Self Audit Act: An Incentive for Voluntary Compliance?.

• Author: By Ronald E. Cardwell

South Carolina Lawyer

1996.

Vol. 8, No. 2, Pg. 38.

Self Audit Act: An Incentive for Voluntary Compliance?

38SELF AUDIT ACT: An Incentive for Voluntary Compliance?By Ronald E. CardwellIndustries and environmental agencies generally agree that voluntary environmental self audits are a useful tool for increasing a regulated company's compliance with environmental statutes and regulations. Despite this agreement, regulated companies have been reluctant in recent years to initiate self audits for fear that the results would be used against them in civil, criminal and administrative actions.

By creating a self audit privilege, the South Carolina General Assembly has taken an essential step to bolster regulatory compliance and environmental responsibility among the regulated community.

THE EARLY YEARS

As defined by the U.S. Environmental Protection Agency (EPA) in 1986, and reaffirmed in its final audit policy in December 1995, an environmental audit is a "systematic, documented, periodic and objective review by regulated entities of facility operations and practices related to meeting environmental requirements." The analytical results, conclusions and recommendations resulting from an environmental audit are often included in a document commonly known as the environmental audit report.

As early as 1986, the EPA encouraged industry to embrace the concept of voluntary environmental audits and supported the accelerated use of such audits to aid in meeting environmental standards protective of human health and the environment. Recognizing industry's need for privacy, the EPA announced that it would not routinely seek copies of environmental audit reports.

The EPA's encouragement and support did nothing to dispel industry's concern that environmental audit results would be used by prosecutors and private plaintiffs as the basis for enforcement actions, fines and penalties, criminal indictments and tort litigation. Without assurances of the confidentiality of self audit results and limited immunity from prosecution, many regulated companies determined that the benefits of a comprehensive environmental audit were outweighed greatly by the risks.

STATE LEGISLATURES TAKE THE INITIATIVE

Reacting to concerns of industry and pressure from the states, the EPA revised its 1986 audit policy by announcing a new interim policy in March 1995. The interim policy provided that the EPA would not request environmental audit reports during routine inspections unless it had reason to believe that a violation had occurred. Although the interim policy represented improvement, industry showed little enthusiasm for the interim policy. The EPA had steadfastly insisted that the possibility be left open for an environmental audit to be used against the company that performed it.

While the EPA dabbled in the areas of privilege and prosecutorial immunity associated with environmental audit reports, several state legislatures adopted self audit privilege laws in 1994. Ten additional states followed suit last year by adopting statutes that treat the results of environmental audits as privileged information protected from disclosure. Also in 1995, legislatures in 22 other states, including South...