April 5, 1996



MEMORANDUM

SUBJECT:  Effect of Audit Immunity/Privilege Laws on States  Ability to Enforce Title V     
              Requirements

FROM:       Steven A. Herman /s/
             Assistant Administrator, OECA

             Mary Nichols /s/
             Assistant Administrator, OAR

TO:            Jackson Fox
             Regional Counsel, Region X


I. INTRODUCTION

     A. Title V Requires States to Have Adequate Enforcement Authority

     This memorandum responds to your request for guidance as to whether certain
provisions of state audit immunity and privilege laws deprive the state of adequate authority
to enforce the requirements of Title V of the Clean Air Act.  The Clean Air Act (CAA), in
Section 502(d), authorizes States to implement operating permit programs pursuant to Title V
of that law.  Before a State s program can be approved, however, the Environmental
Protection Agency (EPA) must determine that the state s permit program meets the minimum
standards established under the law.  In particular, Section 502(b)(5) of the CAA requires
states to have  authority to enforce the terms and conditions of Title V permits.  These
requirements protect citizens from criminal conduct and violations that threaten public health
and the environment.  They also ensure citizens of the fair application of federal laws,
regardless of whether they are administered  by EPA or State agencies.

     This memorandum offers guidelines to assist the Region in determining whether
specific provisions of  State audit privilege or immunity laws would in fact deprive the State
of federally required authority to enforce Title V permits.  Because State laws differ in
important details, Regions should review laws or pending bills closely  in  applying these
guidelines, and consult  with both States and headquarters before making a determination. 
Where a State privilege or immunity law deprives the state of adequate enforcement
authority, as explained in these guidelines, it must be amended before final Title V approval
can be granted.  These guidelines are limited to enforcement authorities required for Title V
approval, and do not address other substantive program requirements.

      Recently, State  legislators, state officials,  and various environmental groups have
questioned whether proposed immunity and privilege bills would jeopardize a State s ability
to enforce federally delegated programs, including those administered under the Clean Water
and Resource Conservation and Recovery Acts.  While these statutes include requirements
similar to those of  the Clean Air Act concerning adequate authority, they may also impose
additional requirements not contemplated under Title V of the Clean Air Act.  For that
reason, these guidelines are limited to Title V, and the Office of Enforcement and
Compliance Assurance (OECA) will work with the Regions to prepare supplementary
guidance to address enforcement requirements of other statutes.       

     B.  EPA Support for Auditing

     EPA supports incentives which encourage responsible companies to audit to prevent
noncompliance, and to disclose and correct any violations that do occur.  Through its own
policy issued on December 18, 1995, EPA has agreed to reduce civil penalties and not
recommend criminal prosecution for certain types of violations discovered and corrected
through voluntary self-policing.  That policy was developed through an open process that
included extensive consultation with States, leading 16 State attorneys general to conclude:

     The consultative process used in developing the policy provides an excellent example
     of how EPA and the states work in harmony to encourage both voluntary compliance
     and effective law enforcement.

At the same time, EPA has consistently opposed blanket amnesties which excuse repeated
noncompliance, criminal conduct, or violations that result in serious harm or risk, as well as
audit privileges that shield evidence of violations from regulators and jeopardize the public s
right-to-know about noncompliance.
     
     C.  Consultation with States

     This document offers general guidelines to assist in the review of State audit privilege
and immunity legislation.  It should be noted that these State laws differ in important details:
while some will affect a State s ability to enforce provisions of Title V permits, others will
not.  Using the guidelines laid out in this memorandum, the Agency will need to evaluate the
impact of individual State statutes on Title V enforcement on a case-by-case basis.  EPA
believes that minimum statutory enforcement standards for federal programs will not
discourage innovation or jeopardize the strong working partnership the Agency is developing
with States.  The Agency will make every effort to work cooperatively with States to resolve
any problems that may arise due to conflict between federal and State law.

     D. Principles

     The following principles should guide EPA s analysis of State audit privilege and/or
immunity legislation with respect to Clean Air Act Title V program approval:

    EPA's review should be focused upon those few provisions that conflict with specific
     federal requirements for adequate enforcement authority.

    Some provisions in State laws may be ambiguous.  EPA may accept reasonable
     opinions from the State Attorney General which interpret the statute as providing the
     State with the required authority.

    EPA will consult closely with States, and provide them with ample opportunity to
     correct specific problems.  Pursuant to Clean Air Act Section 502(g), EPA has and
     will generally continue to grant interim approval to States with audit legislation, but
     will identify whether specific provisions must be changed before final approval can be
     granted.


II.  SPECIFIC ENFORCEMENT AUTHORITIES REQUIRED FOR TITLE V
     DELEGATION

     A.   Emergency Orders/Injunctive Relief

     Emergency Orders: The State must have authority to bring suit to restrain responsible
persons where a pollution source or sources is presenting an "imminent and substantial
endangerment" to public health or welfare or the environment.  The Clean Air Act, at
Section 110(a)(2)(G), requires such authority for state implementation plans, the provisions of
which must be incorporated into Title V permits.  The Title V regulations, at 40 C.F.R.
70.11(a)(1), also expressly require States to have the authority to seek emergency orders. 
This authority should be clear, and not constrained by express or implied limitations in State
immunity laws.

     Injunctive Relief:  The State must have clear authority to seek injunctive relief where
needed to stop a violation, correct noncompliance, and prevent its recurrence.  Injunctive
authority is essential to the State s ability to assure compliance and enforce permits under
Section 502 of the Clean Air Act.  The Title V regulations, at 40 C.F.R. Section 70.11(a)(2),
explicitly require States to have such authority, which should be clear and unfettered by
either express or implied limitations in State immunity laws.
     
     B. CRIMINAL ENFORCEMENT AUTHORITY

     Knowing Criminal Conduct:  Section 502 of the Clean Air Act requires states to have
authority to recover "appropriate" penalties for criminal conduct, which in the Title V
regulations (40 C.F.R. Section 70.11(a)(3)(ii)) includes "knowing" criminal conduct.  Any
legislation that immunizes willful, intentional, or knowing criminal conduct conflicts with this
requirement, and must be amended before final Title V approval may be granted. 

     Burden of Proof:  The Title V regulations, at 40 C.F.R. Section 70.11(b), prohibit the
burden of proof and degree of knowledge or intent required under State law for establishing
civil or criminal liability to be greater than is required under federal law.  State immunity
laws that, for example, require a showing of specific intent or  harm to the environment to
establish criminal liability, are inconsistent with this requirement and must be amended before
final Title V approval can be granted.

     C. CIVIL PENALTY AUTHORITY

     Section 502 of the Clean Air Act requires States to have authority to recover civil
penalties of at least $10,000 per day for violations of Title V permit conditions (see also 40
C.F.R. 70.11).  States must exercise that authority by collecting penalties appropriate to the
violation.

     Section 113(e) of the Clean Air Act, which addresses  Penalty assessment criteria,  
mandates that the Administrator or the court  shall take into consideration  certain factors in
assessing penalties.  To the extent that state laws provide an immunity from civil penalties
that does not permit any consideration of these factors, appropriate civil penalties cannot be
assessed, and a State s Title  V permit program should not be approved.  Factors that must
be considered in determining an appropriate penalty pursuant to Section 113(e) of the Clean
Air Act include:  the violator s full compliance history and good faith efforts to comply, the
duration of the violation ..., payment by the violator of penalties previously assessed for the
same violation, the economic benefit of noncompliance, and the seriousness of the violation. 


     Thus, a State Title V program should not be approved if State law provides immunity
from civil penalties for repeat violations, violations of previous court or administrative
orders, violations resulting in serious harm or risk of harm, or violations resulting in
substantial economic benefit to the violator.  These considerations are also reflected in
EPA s policy on Incentives for Self-Policing. EPA should approve state programs which
include conditions substantially equivalent to those reflected in the Clean Air Act and
regulations, and adopted in EPA s policies.

     D. PRIVILEGE                                                             
     
     The regulations governing program approval do not specifically address the scope of
privileges available in State enforcement actions.  Minor variations among States with regard
to generally available privileges (e.g., attorney-client communication) would not affect
program approval.  However, where a State adopts a very broad privilege law, specifically
directed at evidence related to environmental violations, that privilege could go so far as to
render the overall State enforcement program inadequate even if other authorities (e.g.,
injunctive relief and penalties) were nominally available.  An excessively broad privilege
could so interfere with the exercise of these authorities as to render them largely meaningless
by depriving the State of the ability to gather evidence needed to establish a violation.

     The point at which a privilege law goes too far is difficult to define in general terms,
and such laws will  have to be evaluated on a case-by-case basis.  However, certain types of
provisions are particularly likely to raise this concern and will generally lead to a finding that
the enforcement program is inadequate.  

     Information Required by Law, Regulation, or Permit:  In order to assure compliance
effectively, as required by Section 502(b)(5)(A) of the Clean Air Act, the State must have
access to evidence to determine whether violations have, in fact, been corrected.  At a
minimum, State law must not limit an Agency's access to information that federal or state
laws or regulations require to be collected, maintained, reported, or otherwise made
available.  These include, for example, compliance plans, emissions or monitoring reports,
and compliance certification under Title V, which are also required to be publicly available.  

     State Access Needed to Verify Compliance:  Where an audit produces evidence of
noncompliance, but State law prevents the enforcing agency from reviewing that evidence to
determine whether the violation will be corrected, the State is unable to assure compliance. 
Such provisions must be addressed prior to any final Title V approval.  

     Audit Presents Evidence of Criminal Conduct:  Similarly, where an audit reveals
evidence of prior criminal conduct on the part of managers or employees, but the State is
barred from using such information, the State lacks the ability to obtain appropriate criminal
penalties as required by Section 502(b)(5)((E) of the Clean Air Act.

     Sanctions for Disclosure of Privileged Information:  Another area of concern is laws
that impose special sanctions upon persons who disclose privileged information.  Courts have
effectively exercised control over such disclosures in other areas protected by privileges (such
as the attorney-client and doctor-patient privileges) through inherent powers to exclude
evidence and other general sanctions.  Special sanctions in this area are unwarranted and,
especially where the potential for liability is broad and the privilege is not clearly defined,
would have a chilling effect upon disclosures well beyond the intended reach of the privilege. 
Confidential informants are a critical source of leads for EPA s criminal enforcement
program, as they are for enforcement programs throughout federal and State governments. 
Indeed, the Clean Air Act specifically protects  whistle blowers  from retaliation (Section
322) and also provides awards for persons who furnish information that leads to a criminal
conviction or a civil penalty (Section 113(f)).  Therefore, provisions that penalize those who
disclose information related to a possible violation of the Clean Air Act may be inconsistent
with an adequate enforcement program.

     This list is not intended to be exhaustive, and other factors may also cause a privilege
law to be excessively broad.  For example, laws that define the term "audit" loosely may
shield so much information as to significantly impede enforcement efforts, or may lead to
very broad assertions of privilege that consume inordinate time and resources to resolve.

cc:  Sylvia Lowrance, Deputy Assistant Administrator, OECA
     Scott C. Fulton, Deputy General Counsel, OGC
     Richard Wilson, Deputy Assistant Administrator, OAR
     Regional Administrators
     Regional Counsels
     OECA Office Directors
     Regional Air Division Directors
          OAQPS
     Lydia Wegman, Deputy Director, OAQPS
     Lois J. Schiffer, Assistant Attorney General, U.S. Department of Justice