New CA Law Gives Refineries Broad Authority to Designate Maintenance Records Trade Secrets

Ah, what would corporations give to be able to have trade secret protections for their information simply by declaring it a trade secret? For oil refineries in California, that dream may now be a reality.

On September 20, 2014, Governor Brown signed Senate Bill 1300 into law. The bill requires oil refineries in California to report information about all scheduled shutdowns and other maintenance for the upcoming calendar year to the Division of Occupational Safety and Health by September 15 of each year. The bill also expands the definition of trade secrets as it applies to oil refineries and permits oil refineries to identify as trade secrets “all or a portion of the information submitted” under the bill if they believe that the information “may involve the release of a trade secret.”

The bill’s definition of “trade secret” is consistent with the California Uniform Trade Secrets Act (California Civil Code Section 3426.1). But the bill doesn’t expressly require that the oil refineries claim that the information they identify as “trade secret” meets those statutory definitions. Moreover, the bill expressly provides that the phrase “trade secret” “shall include” the schedule and plans for the shutdowns and maintenance reported by the oil refineries.

This is not without immediate consequence. In addition to allowing oil refinery owners to designate information a “trade secret,” SB 1300 requires the Division of Occupational Safety and Health to defer to the oil refineries’ designation of their shutdown and maintenance information as “trade secrets.” Once an oil refinery identifies its information as a trade secret, the division can’t release any of that information to the public, even if it believes the designation is inappropriate. This prohibition does have bite – the bill provides that any employee or officer of the division who “knowingly and willfully discloses the information in any manner to a person he or she knows is not entitled to receive it, is guilty of a misdemeanor.”

So is the public completely cut out? Technically, no.

The bill painstakingly sets up a process for handling California Public Records Act requests (the state’s version of FOIA) that implicate information the oil refinery has designated as trade secrets. First, the division must notify the oil refinery of the request in writing. Then, the oil refinery has 30 days after receiving the division’s notice to file an action for a declaratory judgment that the information is a trade secret – and it must name the person making the CPRA request as a party to that action. If the oil refinery does not do this within the 30 days, then the division must release the requested information to the public. If the oil refinery does file this action within the 30 days, then it must obtain an order prohibiting disclosure of the information to the public and notify the division about it within 120 days after receiving the division’s notice. If the refinery does not obtain such an order within the 120 days, then the division must release the information to the public. The bill also provides that the court must award costs and reasonable attorneys’ fees to the prevailing party in the action, but that the public agency will not bear any court costs – this presumably leaves the oil refinery or the person requesting the information on the hook for attorneys’ fees and costs.

But the practical effect of this process is that anyone filing a CPRA request for oil refinery information (say, for example, someone who lives downwind of a refinery and wants to know if their family is safe), now no longer has the option to walk away if their request is denied. Instead, unlike people requesting any other information under the CPRA, those requesting oil refinery information may face a lawsuit by the oil refinery in opposition to their request. This may deter individuals and organizations from filing such requests in the first place.

Responding to public pressure, including letters from the California Newspaper Publisher’s Association and the First Amendment Coalition urging him to either veto SB 1300 or include a strong signing message asking the Legislature to amend it, Governor Brown included a signing message with his signature of the bill. In his signing message, the Governor noted that the bill’s author , state Sen. Loni Hancock, D-Oakland, “has committed to introduce clean up legislation next year and work with stakeholders to ensure that this law does not authorize petroleum refineries to collect attorney’s fees from individuals or organizations seeking those records.” The governor also noted that the first reporting under the law is not due until September 15, 2015 and so there is time to make the changes.

This bill could become an example followed by other industries in California or by other states. It’s a safe bet that legislatures will be lobbied extensively for similar statutes.