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By Lee Vail, Ph.D., J.D.

On March 14, 2016, Environmental Protection Agency (“EPA”) proposed changes to the Risk Management Plan Program (“RMP”) Rule.  On January 13, 2017, the EPA published a new final rule.  This a second in a planned series that will address five major changes:  root cause analysis for near misses, third-party audits, inherently safer technology, emergency response, and availability of information.  The third party audit provisions are so significant that I must split it up into two topics, starting with privilege.

The proposed rule contained several provisions that reminded me of the poster hung for all to see in George Orwell’s 1984:  Big Brother Is Watching You.  Promulgation of the proposal would have resulted in submission of potentially flawed draft reports prepared by individuals with no prior knowledge of the facility that would end up in the regulating agency’s hands no later than the facilities; draft reports had to be retained.  For some reason, the EPA believed it was necessary to receive raw, unfiltered, and potentially incorrect conclusions.  Fortunately, all of this was dropped.  Interestingly, and to the alarm of many, the EPA also proposed to add:

The audit report and related records shall not be privileged as attorney-client communications or attorney work products, even if written for or reviewed by legal staff.  81 FR, 13638, 13707 (Mar 14, 2016)

In the final rule, the EPA deleted this provision limiting attorney-client privilege.  Ultimately, the EPA dropped this provision as they:

recognizes that the ultimate decision maker on questions of evidentiary privileges are the courts. Therefore, this rule does not contain a specific regulatory provision prohibiting assertion of these privileges.  81 Fed. Reg. at 4614.

I expect that the EPA did not remove the provision because they found public comments persuasive.  Ultimately they probably received good counsel that inclusion of the provision would have help naysayers strike down the rule. The EPA added, in no uncertain terms how they feel above screening internal deliberations based on privilege:

With regard to information that arguably should be protected under evidentiary privileges, EPA’s view is that the third-party audit reports and related records under this rule, like other documents prepared pursuant to part 68 requirements, such as process safety information, PHAs, operating procedures and others, are not documents produced in anticipation of litigation. With respect to the attorney-client communication privilege specifically, the third-party auditor is arms-length and independent of the stationary source being audited. The auditor lacks an attorney-client relationship with counsel for the audited entity. Therefore, in EPA’s view, neither the audit report nor the records related to the audit report provided by the third-party auditor are attorney-client privileged (including documents originally prepared with assistance or under the direction of the audited source’s attorney).  Id.

Given our litigious society, I would always consider conducting an incident investigation under attorney-client privilege.  I see no reason not to conduct future audits under privilege, but there is no certainty that a court would uphold the privilege (is there ever?).  The EPA reminds us in footnote #32 that they have authority to demand records under Section 114 of the CAA.  If maintaining control of a draft report is important to you (which it should), make sure you have and follow a retention policy that requires destruction of all draft reports.  Make sure to keep the support for the final report.  Contracts with third parties should include the return of all information, materials and drafts.

Next week:  the rest on third-party audits!