Recent Critical PSM Enforcement Issues and OSHA Regulatory Update

Transcription

1 Recent Critical PSM Enforcement Issues and OSHA Regulatory Update Presented by Mark S. Dreux Arent Fox LLP 1717 K Street, N.W. Washington, D.C (o) (c) mark.dreux@arentfox.com Mark S. Dreux 2014 Blog: January 16, 2014

2 Overview Legal Issues OSHA Audit Policy A Promised Safe Harbor DOL v. BP Products North America ( BPP ) Misuse of the OSHA Audit Policy KEY PSM Issues RAGAGEP reasonably interpreted Recommendations in API guidance documents 3% IPD Should v. Shall Use of Internal Standards (Corporate Engineering Guidelines) Timing on PHA Recommendations Implications/Precedent General Duty Clause Use of Industry Standards for Enforcement Supervisor Misconduct 2

3 Overview (cont d) OSHA Regulatory Issues Proposed Electronic Reporting of Injury and Illness OSHA s Request for Information to revise the PSM Standard. 3

4 OSHA s Voluntary Audit Policy Long Debate: Punishment v. Encouraging Abatement Limits request for voluntary audit Limits on issuance of citation Limits safe harbor Defines a good faith penalty reduction 4

5 Misuse of Audits: A Roadmap for OSHA Treatment of Voluntary Safety and Health Self-Audits: The summary of the rule states, "[OSHA's] policy provides that the Agency will not routinely request self-audit reports at the initiation of an inspection, and the Agency will not use self-audit reports as a means of identifying hazards upon which to focus during an inspection. Employers should not have to fear that self-auditing will lead to selfincrimination. In many instances, the CSHOs did not otherwise verify the self-identified deficiencies or conduct independent hazard assessments. The majority of the items at issue were self-identified by BPP and BP-Husky in documentation provided to OSHA. OSHA's use of BPP and BP-Husky's self-audit reports is in blatant contravention of its Final Policy. I am not using the Middough reports as a basis for vacating the alleged violations self-identified in the reports. Implication: Credibility of OSHA affected. Why trust an agency which has blatantly violated its own policy? Anticipate that OSHA will ask for such audits. 5

6 PSI and Missing U-1 Form Audit identified that there was no U-1 for Isobutane Recycler Coalescer ( IRC ) BP produced all relevant PSI for the IRC in 30 minutes. Citation alleged that Section (d) of the PSM Standard concerning process safety information required a U-1. 6

7 PSI and Missing U-1 Form Judge rejected OSHA s position, reasoning: Section (d)(3)(i) provides: [T]he employer shall complete a compilation of written process safety information before conducting any process hazard analysis required by the standard. (3) Information pertaining to the equipment in the process. (i) Information pertaining to the equipment in the process shall include: (A) Materials of construction; (B) Piping and instrument diagrams (P&ID's); (C) Electrical classification; (D) Relief system design and design basis; (E) Ventilation system design; (F) Design codes and standards employed; (G) Material and energy balances for processes built after May 26, 1992; and (H) Safety systems (e.g. interlocks, detection or suppression systems). The cited standard requires only that the written information be available it does not specify the form the documentation should take. Section (d)(3)(i) does not mention the U-1 form. By couching the alleged violation in terms of the missing U-1 form, the Secretary impermissibly creates a significant requirement not found in the cited standard. The Secretary's focus on the U-1 form is misplaced. BPP and BP-Husky cannot be found in violation of a standard for not possessing a document the cited standard does not require. Implication: Narrowing the scope of PSI Interpretation of standard as written 7

8 Inlet Pressure Drop Issues: RAGAGEP and Deficiencies Twelve (12) PSV s with IPD s ranging from 3.2 to 8.8%. OSHA used the voluntary audit to find all of the IPD s in excess of 3%. OSHA did not verify any of the IPD s or conduct its own assessment. OSHA argued that IPD s greater than 3% violated (d)(3)(ii) concerning RAGAGEP and constitute a deficiency within the meaning of (j)(5). 8

9 Inlet Pressure Drop Issues: RAGAGEP and Deficiencies OSHA s Expert: Hamlin was emphatic that the 3% rule is both the industry standard and the only possible RAGAGEP a reasonably prudent employer could consider with regard to a pressure relief valve: it's like when Moses came down off of Mount Sinai, the engineering law is going to limit the pressure to 3%[.] BP had conducted its own analysis. Based on its analysis, BPP developed internal IPD guidelines in a document referred to as GP 44-70, which was first implemented in April 2006 BPP engineer Edward Zamjec modeled GP on API's methodology. Based on Zamjec's research, BPP originally implemented a requirement for existing relief valves to maintain an IPD of 7%, while new installations were required to follow the 3% rule (Tr. 2825). Later, BPP revised GP to require an IPD of 5% for existing relief valves. 9

10 Inlet Pressure Drop Issues: RAGAGEP and Deficiencies Judge s Resolution: As a performance standard, (d)(3)(ii) allows the employer the flexibility to achieve compliance by use of appropriate internal standards, as well as by adhering to industry codes and standards. By insisting compliance with (d)(3)(ii) can only be achieved by following the 3% rule (which is not mandatory even under the cited codes), the Secretary has impermissibly adopted a prescriptive standard. The Secretary's interpretation contradicts the terms of the cited standard. Area director Yoksas insisted, "[W]e do not enforce consensus standards" (Tr. 110). However, the Secretary is attempting do so here. Implications: Should means should Performance standard remains flexible Internal standards valid RAGAGEP - API documents reasonably construed 10

11 Undersize Valves and RAGAGEP Three valves were undersized and all identified in the voluntary audit. BP followed its Relief System Guidelines Verified calculations Implemented interim actions One vessel was taken out of service and drained of HC s Other vessels had car seals installed and administrative procedures implemented Scheduled to be addressed during next T/A 11

12 Undersize Valves and RAGAGEP Judge s Resolution: Section (j)(5) did not require BPP to immediately shut down and completely correct the undersized valves before further use. It is within the parameters of the standard, as articulated in the Preamble, for the employer to take interim measures to ensure safe operation of the equipment until such time the equipment can be corrected safely. Implications: Validation of interim measures No requirement for immediate shut down 12

13 Inadequate Pressure Relief and RAGAGEP 9 shell and tube exchangers All had open paths to relief under normal operating procedures BP issued new guidelines and toward end of the inspection, voluntary audit identified the nine as potentially needing additional direct relief protection. BP performed a risk assessment Interim measures Car seals Bypasses Administrative Procedure to drain vessels if blocked in Plan to install permanent relief valves at next T/A Resolution Again, (j)(5) does not require an employer to immediately shut down an operation and replace a deficient piece of equipment. The standard allows an employer to take interim measures to ensure safe operation of the equipment. The Secretary has adduced no evidence that BPP and BP-Husky's interim measures failed to ensure safe operation of the equipment until the PVDs could be installed during turnaround. 13

14 Furnaces and RAGAGEP OSHA inspected the furnaces, applying Table 1 Typical Alarms and Shutdown Initiators Fire Heaters from RP 556. Table 1 lists 22 recommended safeguards to consider. OSHA alleged that BP did not comply with RP 556 because it did not have automatic shutdown devices and it did not implement all 22 recommended safeguards. OSHA s compliance officer testified that automatic shutdown required no human intervention; that board operators giving radio commands to manually close valves is non-compliance and that a computer would take over during an upset and bring the furnace to a safe condition independent of the control room operator. 14

15 Furnaces and RAGAGEP BP s Expert Testified many types and sizes of furnaces all with different design parameters and RP 556 provides flexibility to determine the safeguards for a particular furnace, that he would never install all 22 recommended safeguards, that the safeguards were adequate, and that automatic shutdown is one that works without human intervention at the valve. Judge s Resolution: [BP s experts] testimony regarding combustion safeguards is accorded more weight. The Secretary, through CSHO Jensen, is attempting to enforce as mandatory the recommended practices found in RP 556. The Secretary also is incorrectly interpreting RP 556 to require employers to install all of the safeguards listed in Table 1, rather than to select the individual safeguards best suited to the individual furnaces. Items 28, 29, and 30 are vacated. Implications: Should means should Recommendations are just that Interpretation of automatic shutdown 15

16 TML s and Testing Point and RAGAGEP BP had API-certified pressure vessel and pipe inspectors. Its isometric drawings showed the locations of TML s. OSHA s View: Pipes and vessels needed to be marked so that accurate readings would be taken from precisely the same locations each time. Isometric drawings with TML s alone were inadequate. Judge s Resolution: API 570, Section 3.46 defines TML and test points and shows OSHA misunderstands the two concepts. The Secretary's belief is mistaken.... Taking thickness readings at the exact same test point is not required by API 570, or any other publications purported to be RAGAGEP. 16

17 Adequacy of PHA Should the Fire Water System and Its Cross Connections Have Been Considered? Fire water built in 1919 with one single water circuit throughout plant. Seven cross connections over five units. OSHA did not examine the cross connections and at trial could not provide a credible scenario for contamination. BP s expert testified no credible hazard of contaminations in the cited areas; no credible risk of reverse flow did not violate industry standards. Judge: There is no credible risk of hazard, there was no need for BPP s PHA team to address the hazards of the process. Implication: Conducting PHA s Future litigation over PHA s 17

18 PHA Failure to Timely Address Facility Siting Since 2006, BP had a facility siting program in place. Facility siting program included: inside-out strategy highest-risk buildings closest to process addressed first BP spent $70MM between on facility siting. 435 employees relocated to hardened buildings. Nine buildings located outside the process block. The nine buildings were: WGI Insulators Building Blender control room Boiler Shop E&I Shop HSEQ Building Laboratory Main Office Building WGI Administrative Offices WGI Electricians Building 18

19 PHA Failure to Timely Address Facility Siting OSHA s Position: the Secretary's primary issue with BPP and BP- Husky's facility siting PHA recommendations is that they were not resolved on the Secretary's timetable. Timely means in this context, at most one to two years depending on the scope and complexity of the issue analyzed, and the risk posed by the hazard. resolution of the PHA recommendations and hazard control must be completed within the five-year PHArevalidation cycle. 19

20 PHA Failure to Timely Address Facility Siting BP s Expert: BP s facility siting program is reasonable: Ranked risks per occupied building Addressed higher risks first Implemented a range of interim measures: hardened walls and doors film on windows re-assigned field duties PODs relocated functions and employees Judge s Resolution: The Secretary failed to show that the refinery's extensive project for building, moving, and remodeling its facility, using the inside-out strategy for risk assessment, was not done in a timely manner. Implication: Methodology of inside-out validated Timely can extend for years 20

21 BPP Case: Appeal of BP Decision Amicus Brief Critical Issues Should means should Recommendations in API RPs are not mandatory RAGAGEP reasonably construed Internal standards are RAGAGEP (internal engineering standards) Interim measures Timing for PHA recommendations Appeals Process OSHA has appealed 51 citations and 5 characterization issues OSHRC granted the PDR The Briefing Order issued on November 1, 2013 DOL s brief is currently due January 17, 2014 Right to appeal to Court of Appeals remains Finality is still years away ALJ s decision persuasive authority Critical consider Amicus 21

22 Protecting Companies from OSHA Liability for Supervisor Misconduct Facts of Comtran Group Inc. v. DOL, 722 F3rd 1304 (11 th Cir. 2013) Supervisor and one trainee working on a utility project. Supervisor alone dug 6 trench and piled loose soil by edge of a trench. Cave-in hazard. Supervisor knew better but just got lost in work. Four elements of a violation: In order to establish an OSHA regulation has been violated, the Secretary of Labor must show four elements: 1) the regulation applied, 2) it was violated, 3) an employee was exposed to the hazard that was created and, at the heart of this case, 4) the employer knowingly disregarded the Occupational Safety and Health Act's requirements. 22

23 Protecting Companies from OSHA Liability for Supervisor Misconduct The general rule has been the knowledge of a supervisor is imputed to the employer. So if the supervisor knew or should have known of the violation, his knowledge is imputed to the employer and the Secretary of Labor can use this fact to show the employer had knowledge of the violation. exception to the general rule: When a supervisor knows he himself has violated an OSHA regulation, his knowledge of his own violation is not imputed to his employer unless it was foreseeable. Foreseeability Evidence of lax safety standards [program] Prior similar conduct Rationale: Fairness 3, 4, 5 and 10 th circuits have articulated the same rule as the 11 th circuit. 6 th circuit has rejected this exception. 23

24 Protecting Companies from OSHA Liability for Supervisor Misconduct Develop a comprehensive set of safety procedures. Circulate the procedures to employees and require them to sign an acknowledgement they have read the procedures and will adhere to them. Keep these acknowledgements on file. Develop a comprehensive training program on safety procedures and test employee comprehension of the procedures. Keep employee test results on file. Repeat training periodically to ensure employees remember what they have learned and are made aware of any changes. Enforce any violations of safety procedures with appropriate discipline and do so in a consistent manner. Keep paperwork associated with enforcement on file. 24

25 Regulatory Update: OSHA s Proposed Changes to the Recordkeeping Rule Require establishments that are required to keep injury and illness records under the Recordkeeping Rule, and had 250 or more employees in the previous calendar year to electronically submit information from those records quarterly. Require employers in designated industries that are subject to the Recordkeeping Rule and had 20 or more employees in the previous calendar year to electronically submit the information from the OSHA annual summary form (Form 300A) on an annual basis. Require all employers who receive notification from OSHA to electronically submit specified information from their injury and illness records. 25

26 Regulatory Update: How Can You Ensure Your Concerns About These Changes Are Heard? The public will have until March 8, 2014 to submit written comments on the proposed rule. Use this opportunity to write a detailed impact statement to OSHA, explaining in detail the burdens and threats that these proposed rules pose for your industry. 26

27 Regulatory Update: Executive Order and OSHA s Request for Information On August 1, 2013 the president signed Executive Order ordering OSHA, EPA and DHS to improve the safety and security of the chemical industry in the U.S. On December 3, 2013, OSHA published a Request for Information (RFI) soliciting comments on 17 areas of possible revision to the PSM Standard. 27

28 Regulatory Update: Executive Order and OSHA s Request for Information (cont d) A brief description of each request for information follows: 1. Eliminating the PSM Exemption for Atmospheric Storage Tanks The PSM standard applies to processes involving a flammable liquid or gas on site in one location in a quantity of 10,000 pounds or more. But the so-called atmospheric storage tank exemption exempts flammable liquids stored in atmospheric tanks, or in transfer to or from storage, which are kept below their normal boiling point without benefit of chilling or refrigeration. OSHA would like to revise paragraph (a)(1)(ii)(b) to include flammable liquids in atmospheric storage tanks within or connected to a PSM covered process. 2. Oil and Gas-Well Drilling and Servicing The PSM standard exempts oil and gas-well drilling and servicing operations. According to the preamble of the final rule, this was because OSHA had already begun a separate rulemaking for these types of operations. It had published a draft standard in

29 Regulatory Update: Executive Order and OSHA s Request for Information (cont d) 3. Resuming Enforcement for PSM-Covered Oil and Gas Production Facilities In 1999, OSHA attempted to bring such facilities within coverage of the standard. Industry objected, stating the PSM coverage of oil and gas production facilities was invalid. OSHA agreed with industry and admitted it in a letter in March 2000, stating that OSHA would suspend enforcement of the PSM standard for oil and gas production operations until it performed the analysis. 4. Expanding PSM Coverage and Requirements for Reactive Hazards OSHA has frequently faced criticism for not including certain reactive compounds in the list of highly hazardous chemicals found in Appendix A of the PSM standard. OSHA s challenge to date has been to develop a workable definition of a reactive compound. 29

30 Regulatory Update: Executive Order and OSHA s Request for Information (cont d) 5. Updating the List of Highly Hazardous Chemicals in Appendix A of the PSM Standard The list of highly hazardous chemicals provided in Appendix A of 29 C.F.R has remained unchanged since the PSM standard s promulgation in OSHA is seeking public comment on Appendix A in two regards: (1) whether any chemicals should be added to Appendix A, and (2) methods for updating Appendix A with new chemicals in the future. 6. Revising the PSM Standard to Require Additional Management- System Elements OSHA is additionally seeking public comment on any additional management-system elements not already included in the PSM standard. Systems mentioned include: CCPS Risk Based Process Safety which includes 20 management systems like process safety competency and SEMS elements like stopwork authority and ultimate work authority 7. Re-evaluation of Equipment Based on Evolving RAGAGEP The Agency is inviting comments on how to ensure evolving updates to RAGAGEP are also implemented by employers after the process has already been designed and constructed. 30

31 Regulatory Update: Executive Order and OSHA s Request for Information (cont d) 8. Defining RAGAGEP for Employers The phrase recognized and generally accepted good engineering practices is currently undefined by the PSM standard making its meaning unclear to many employers. OSHA is seeking feedback as to whether the phrase should be expressly defined and if so, what the definition should be. 9. Expansion of Mechanical Integrity to Any Safety-Critical Equipment Currently the PSM standard s Mechanical Integrity provisions apply only to the following items: pressure vessels, storage tanks, piping systems, relief and vent systems and devices, emergency shutdown systems, controls and pumps. The Agency is inviting public comment as to whether safety-critical equipment should also be included. 10. Clarifying Paragraph (l) of the PSM Standard with an Explicit Requirement that Employers Manage Organizational Changes Paragraph (l) of the PSM standard does not require a Management of Change (MOC) for organizational changes. In OSHA s view, [s]ince the original promulgation of the PSM rule, it has become well established in the safety community that organizational changes can have a profound impact on worker safety and, therefore, employers should evaluate organizational change like any other change. 31

32 Regulatory Update: Executive Order and OSHA s Request for Information (cont d) 11. Requiring Coordination of Emergency Planning with Local Emergency-Response Authorities Paragraph (n) of the PSM standard requires employers to establish and implement an Emergency Action Plan, but it does not currently require employers to coordinate with local emergency-response authorities. OSHA believes that revising the PSM standard to require facilities to coordinate emergency planning with local emergency response authorities could help prevent or mitigate similar incidents. 12. Overhauling the Auditing Requirements in Paragraph (o) of the PSM Standard Paragraph (o) requires employers to conduct triennial audits of their facilities for compliance. These audits must be conducted by at least one person knowledgeable in the process. OSHA seeks comment on whether revising paragraph (o) of the PSM standard to require employers to use a qualified third party for compliance audits would increase worker protection through a more objective PSM auditing process. 32

33 Regulatory Update: Executive Order and OSHA s Request for Information (cont d) 13. Expansion of to Cover the Dismantling and Disposal of Explosives, Blasting Agents and Pyrotechnics Currently the standard only applies to the manufacture, keeping, having, storage, sale, transportation, and use of explosives, blasting agents, and pyrotechnics presumably because it was assumed the use of the items would be the final step in the life cycle. OSHA is seeking public comment on developing regulations to cover the dismantling and disposal of these materials. Major incident in Hawaii in Updating the Flammable Liquid and Spray Finishing Standards These standards ( and.107) were first published almost 40 years ago and even then, the standards were based on 1960s-era NFPA consensus standards. 15. Updating the Regulations Addressing the Storage, Handling and Management of Ammonium Nitrate In light of the recent tragedy at the West Fertilizer Company storage and distribution facility, OSHA is inviting comment on how to update its regulatory requirements regarding the safe storage, handling and management of ammonium nitrate. 33

34 Regulatory Update: Executive Order and OSHA s Request for Information (cont d) 16. Application of PSM Standard to Retailers that Sell Large or Bulk Quantities of Highly Hazardous Chemicals The PSM standard has an exemption from coverage for retail facilities at 29 C.F.R (a)(2)(i). But the term retail facility is not defined anywhere within the standard. OSHA urges that facilities selling large or bulk quantities of materials not be considered retail facilities. Only retail facilities that sell highly hazardous chemicals in small containers would qualify. 17. Changing Enforcement Policy for Highly Hazardous Chemicals Listed in Appendix A of the PSM Standard without Specific Concentrations Eleven of the 137 chemicals listed in Appendix A provide specific concentrations to establish PSM coverage. For the remaining 126 without, OSHA s policy is that the chemical is covered if there is a threshold quantity present at commercial grade. OSHA is now seeking public comment whether it should use EPA s approach provided in its Risk Management Program (RMP) for mixtures (>1%). 34

35 Stakeholder Participation The RFI contains a list of 85 questions that OSHA intends to use to collect data, information, and comments on the options discussed in the RFI and invites the public to respond to any questions for which they have specific knowledge, data, or information. OSHA is seeking as much detailed information as possible and encourages stakeholders to submit documentation supporting their comments (such as scientific research and surveys) along with their comments if possible. All comments must be submitted to OSHA by March 10,