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12.17.2015 Legal News

North Carolina DENR is Now DEQ; New Audit Privilege and Limited Immunity Enacted

The Regulatory Reform Act of 2015 (the “Act”), passed by the North Carolina General Assembly in September and signed by Governor McCrory on October 22, made a number of significant changes to the state’s environmental laws.  Among other things, it changed the name of the North Carolina Department of Environment and Natural Resources to the North Carolina Department of Environmental Quality.  It also transferred certain functions of the department (but not its major environmental programs) to another state agency. 

The Act also added a new Part 7D, entitled “Environmental Audit Privilege and Limited Immunity,” to the state’s evidence statutes.  This newly-added section does two things:  First, it protects from disclosure an “environmental audit report” prepared in the course of a voluntarily-conducted environmental audit.  Second, it provides immunity from civil penalties (but not from criminal enforcement) for certain environmental violations discovered in the course of an environmental audit.  

If only things were that simple.  There are a number of exemptions and conditions to both the protected status of audits and immunity for certain environmental violations.  For example, to protect an environmental audit report from disclosure, an owner or operator of a facility that is inspected by NCDEQ must notify the agency within 10 days of completion of the inspection that the report exists and must provide the beginning and ending dates of the audit.  This article does not attempt to detail all the exemptions and provisions for one simple reason:  Part 7D is not yet effective and may never be.  The reason is that the Act required NCDEQ to submit Part 7D to EPA within 30 days after the Act became law and to request EPA’s approval to implement it in connection with the state’s “delegated, authorized or approved federal environmental programs,” i.e., almost all of the state’s air, water and waste laws and regulations.  Without that approval, the Act states that Part 7D does not become law.

We are not holding our breath.  Other states have passed sweeping audit privileges and immunities only to have EPA say no or require significant modifications.  For example, Virginia passed similar legislation in 1995, and EPA threatened to revoke delegation of its federal environmental programs because of it.  To prevent that from happening, the Virginia Attorney General was forced to provide written assurances to EPA in January 1998.  Those assurances said the state would interpret the law so that the privileges and immunities did not apply to violations of delegated federal environmental laws and regulations.  Result:  Virginia’s privileges and immunities don’t apply in the context of most of its environmental laws.

We’ll wait and see what EPA does before going into the details of North Carolina’s new audit privilege and enforcement immunities.  But, again, we are not holding our breath.