More on Fracking, Chemical Disclosure and Trade Secrets

The Mining and Energy Commission’s Environmental Standards Committee meets again next Thursday and returns to discussion of draft rules on disclosure of fracking chemicals.   As discussed here,  the  draft rule presented in January   did not require disclosure of trade secret information to state regulators except in response to a spill or other environmental harm.    Comments  in  committee  suggested that the proposal to allow drilling operators to withhold trade secret information  from  regulators (at least until there is actual environmental damage) arose out of  concern that the MEC  does not have authority to prevent public disclosure of trade secrets.

Confidentiality provisions in the  N.C.  Public Records Act  should  address that concern.  The Public Records Act  broadly  requires state agencies to  allow public access to information received in carrying out the public’s business.  But one section of the Public Records Act  creates  exceptions to  the general rule; G.S. 132-1.2  requires state agencies to keep confidential  certain  types of information including trade secrets, bank account information, and  personal identifying data. The section of the law concerning trade secrets appears below:

§ 132‑1.2.  Confidential information.

Nothing in this Chapter shall be construed to require or authorize a public agency or its       subdivision to disclose any information that:

(1)        Meets all of the following conditions:

a.         Constitutes a “trade secret” as defined in G.S. 66‑152(3).

b.         Is the property of a private “person” as defined in G.S. 66‑152(2).

c.         Is disclosed or furnished to the public agency in connection with the owner’s  performance of a public contract or in connection with a bid, application, proposal, industrial development project, or in compliance with laws, regulations, rules, or ordinances of the United States, the State, or political subdivisions of the State.

d.         Is designated or indicated as “confidential” or as a “trade secret” at the time of its initial disclosure to the public agency.

There are two important things about G.S. 132-1.2 :

— The law applies to all state agencies; it is not necessary for each state board, commission or department to have individual authority to  keep  information  protected by the statute confidential.  In fact, many (if not most ) state agencies operate under  statutes that do not address these confidentiality requirements at all.  State agencies simply apply the criteria in G.S. 132-1.2 to identify information that must be kept confidential and  withhold the information from disclosure.

— The law  specifically says that the Public Records Act not only does not require release of trade secret information, it does not authorize its release by any state agency.

A 1999 North Carolina Court of Appeals decision  interpreting  G.S. 132-1.2, concluded that the law  requires state agencies to keep information meeting the “trade secret” definition confidential unless the General Assembly has created a specific exception allowing its  disclosure.  In  MCI v. N.C. Utilities Commission,   telecommunications companies challenged a decision by the state  Utilities Commission  to release  data that  the industry considered to be trade secret information.  The N.C. Court of Appeals agreed that the data met the definition of a “trade secret”  and ruled that the Utilities Commission did not have authority to disclose the  data  because  the General Assembly had not created an exception to G.S. 132-1.2 allowing its disclosure.

In short, state agencies do not need individual authority to comply with the confidentiality requirements of G.S. 132-1.2.  Instead, agencies need specific authority to disclose information  that the statute makes confidential.   As a result,  G.S. 132-1.2 gives DENR and the MIning and Energy Commission   all of the authority needed to keep trade secret information  confidential. It seems that North Carolina could require disclosure of  trade secret information to  regulators with the assurance that the state Public Records Act would protect that information from public disclosure.

Note: There are a few state laws that affect how G.S. 132-1.2 applies to individual agencies.   For example, the Environmental Management Commission operates under a law, G.S. 143-215.3,  that both creates exceptions to the confidentiality requirements of G.S. 132-1.2 and provides a specific process for resolving conflicts over disclosure.   G.S. 143-215.3(b) allows the EMC to disclose air emissions data and effluent data  even if  the data  meets the definition of a trade secret under the Public Records Act —  because federal law requires public disclosure of that information. The statute also allows the EMC to disclose trade secret information to other state and federal agencies if necessary to carry out the  EMC’s  responsibilities. G.S. 143-215.3(d) creates a process for resolving disputes about disclosure of information by declaratory ruling.  The statute wasn’t needed, however, to give the EMC and DENR authority to comply with the basic  confidentiality requirements of G.S. 132-1.2.