The Occupational Safety and Health Administration announced Oct. 30 proposed fines of $87.43 million against BP Products North America, the largest penalty in the agency's history.

Of 709 alleged violations, 270 of them, totaling $56.7 million, were for violations of a settlement agreement between OSHA and BP after 15 workers died and another 170 were injured in an explosion at the company's Texas City, Texas oil refinery in March 2005 (35 OSHR 853, 9/29/05).

The remaining 439 citations, totaling $30.7 million in fines, were assessed for new willful violations of OSHA's process safety management standard related to deficiencies in BP's pressure release systems, Secretary of Labor Hilda Solis said Oct. 30.

“In order to achieve the necessary deterrent effect, the area director exercised his discretion in issuing the highest gravity-based penalty due to the employer's extensive knowledge of the hazards, OSHA regulations, and past events at the site,” OSHA said in an Oct. 30 statement.

The previous highest OSHA penalty was $21.36 million, levied against BP as part of the settlement agreement in 2005.

BP Told in August of “Failure to Comply.”

OSHA's Houston South Area Office Director Mark R. Briggs sent a letter to BP Products North America on Aug. 3, notifying the company that it still needed to make certain safety improvements at its Texas City, Texas, refinery (39 OSHR 830, 10/1/09).

“We believe that the failure to correct the issues addressed in this letter or outlined in the enclosed chart by Sept. 23, 2009, would constitute a failure to comply with the terms of the 2005 Settlement Agreement and/or a failure to abate,” Briggs wrote in the letter addressed to Keith Casey, business unit leader at the Texas City refinery.

In September, BP spokesman Daren J. Beaudo, told BNA the company continued to work with OSHA through the appropriate processes to resolve any expressed concerns regarding safety issues at the facility. Since 2005, the company has made substantial investments “in our people, our work processes, and in upgrading our facilities” at Texas City, Beaudo said.

BP Products has completed more than 550 OSHA citation requirements and process safety-related recommendations and has significantly reduced hazards on-site and off-site, he said. “We believe we are in full compliance with our commitments.”

BP Will Contest New Citations.

BP said it will contest the citations, saying in an Oct. 30 statement that it “strongly disagree[d]” with OSHA's findings.

“We continue to believe we are in full compliance with the settlement agreement, and we look forward to demonstrating that before the [Occupational Safety and Health] Review Commission,” BP said.

Under the 2005 settlement agreement, BP agreed to take actions to eliminate the hazards that triggered the fatal explosion. Those actions included determining the adequacy of pressure relief for individual pieces of equipment, hiring an independent auditor to evaluate BP's process safety management program, and implementing the auditor's recommendations.

Of the 270 violations of the settlement agreement, OSHA said, 242 are for failure to implement the International Society of Automation's standard for safety instrumented systems and 28 for failure to perform relief device studies.

“When BP signed the OSHA settlement from the March 2005 explosion, it agreed to take comprehensive action to protect employees,” Solis said. “Instead of living up to that commitment, BP has allowed hundreds of potential hazards to continue unabated.”

New Process Safety Violations.

The 439 citations for new violations consisted of 411 willful egregious process safety management violations, including failure to ensure that pressure release equipment complied with recognized and generally accepted good engineering practices and failure to correct deficiencies in pressure release equipment.

There also were 28 willful egregious violations, with penalties totaling $1.96 million, for failure to provide workers with operating limits related to pressure release systems.

“We believe our efforts at the Texas City refinery to improve process safety performance have been among the most strenuous and comprehensive that the refining industry has ever seen,” Keith Casey, manager of BP's Texas City refinery, said Oct. 30. “We remain committed to further enhancing our safety and compliance systems and achieving our goal of becoming an industry leader in process safety.”

OSHA has conducted 17 separate inspections at the Texas City refinery since the 2005 explosion, Dean McDaniel, OSHA's regional administrator in Dallas, said Oct. 30.

“This administration will not tolerate disregard for our laws,” Solis said. “Employers have a legal and moral responsibility to protect their workers, who ultimately are America's most important asset.”

“BP was given four years to correct the safety issues identified pursuant to the settlement agreement, yet OSHA has found hundreds of violations of the agreement,” Jordan Barab, acting assistant secretary of labor for occupational safety and health, said Oct. 30. “BP still has a great deal of work to do to assure the safety and health of the employees who work at this refinery.”

While announcing the penalty, Barab said, it is “no comment on [OSHA's] ability or willingness to also provide compliance assistance."

Union, Industry Lawyer React.

“We hope this serves as a wake-up call for the industry in general,” Mike Wright, safety and health director for the United Steelworkers, told BNA Oct. 30. “[BP] is not even the worst company with serious safety problems.”

Wright also said he expects OSHA to revisit refineries it inspected under the national emphasis program it launched June 8, 2007, under which it has been scrutinizing petroleum refineries for compliance with the process safety management standard (37 OSHR 531, 6/14/07).

“From what we've seen, they're likely to be hit with the same kind of failure-to-abate citations that BP got,” Wright said.

Baruch Fellner, an attorney with Gibson, Dunn, and Crutcher, called the penalty “a political statement as much as a legal statement.”

“It is going to create, in addition to all of the initial consternation in the employer community, an enormously adversarial atmosphere between the employer community and OSHA, one that has not been seen in 40 years,” Fellner told BNA Oct. 30. “And with an adversarial atmosphere comes a diminution of cooperation and compliance.”

Failure-to-abate violations historically have rarely been cited, Fellner said, because they require the agency to prove “an employer has looked at what he's agreed to do and literally turned his back” on those requirements.

“The notion that [OSHA] is opening the Pandora's box to failure to abate is a very sobering and foreboding notion,” Fellner said. “Employers have to be very concerned about that. They have to be concerned about agreeing to do anything.”

By Stephen Lee

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The Occupational Safety and Health Administration's citations against BP Products North America are available at http://www.osha.gov/dep/bp/bp.html.

Copyright 2009, The Bureau of National Affairs, Inc.