Environmental Audit Law

October 01, 1996-On March 15, 1996, Governor Engler signed Public Act 132. The new law offers two principal protections for companies which conduct voluntary environmental audits: a privilege against disclosure, and immunity from criminal prosecution, civil fines and penalties. Thus, a person cannot be compelled to testify in any civil, administrative or criminal case or be subjected to criminal proceedings based upon any privileged portion of a report containing information obtained through a qualifying environmental audit.

The audit must be designed to identify historical or current noncompliance, identify an adverse environmental condition, or improve an environmental management system. Any report containing information from an audit should be clearly labelled: "ENVIRONMENTAL AUDIT REPORT: PRIVILEGED DOCUMENT".

The new law does contain potential pitfalls for the unwary. For example, the privilege does not protect certain specified information such as the reporting documentation required by many environmental laws. The privilege is not absolute and can be waived. It can also be abrogated if enforcement authorities demonstrate that the company claiming privilege is doing so for a fraudulent purpose, if the company has a recent history of serious violations, or if it fails to remedy environmental violations discovered in the audit within a reasonable time. Moreover, any immunity granted by the statute does not absolve one of responsibility for correcting a violation, conducting necessary remediation, or paying damages.

The new law binds only Michigan enforcement authorities. USEPA enforcement authority and certain federal environmental law citizen suits remain unencumbered by this legislation. However, EPA does have an environmental audit policy in place that mirrors many features of the new Michigan law. EPA's position is that it will not request audits to initiate enforcement activity and companies are eligible for penalty reductions if certain conditions are met. In light of EPA's stated position and the audit bills pending before the U.S. Congress, it would seem unlikely that EPA would feed the anti-regulatory fire by engaging in heavy-handed enforcement in states that have enacted privilege laws.

(We are hopeful that this new law is an initial step in a shift in focus away from the "command and control" enforcement-oriented attitude that has dominated environmental regulation, towards an emphasis on self-policing and voluntary compliance. The legislation creates an incentive for companies to conduct environmental audits of their facilities and operations, and to implement compliance management systems without undue fear of liability and governmental reprisals because of a paperwork trail which the company has itself created.