In 2010, OSHA fined BP $3 million for process safety management violations at its refinery near Toledo, Ohio. A review commission judge has thrown out many of the violations and reduced the fines to $80,000. How did this happen?
OSHA cited BP North American and BP-Husky Refining with 42 willful violations and 20 serious violations for a grand total of $3,042,000 in fines. The agency initiated the inspection in 2009 as a follow-up to a 2006 inspection and a subsequent 2007 settlement agreement between OSHA and BP at this location.
The inspection found BP complied with the settlement but violated other regulations not covered by the agreement.
OSHA said workers were exposed to serious injury and death in the event of a release of flammable and explosive materials in the refinery because of numerous violations of its process safety management (PSM) standard.
BP and OSHA came to an agreement regarding the 20 serious violations which originally totaled $102,000. Some of the violations were thrown out, and fines for the remaining violations were set at $45,000.
The willful violations carried penalties of $2,940,000. The two sides couldn’t come to an agreement regarding these violations, so the case went to an administrative law judge (ALJ) at the Occupational Safety and Health Review Commission (OSHRC).
‘Blatant contravention of policy’
On the first day of the hearing before the ALJ, OSHA withdrew one of the remaining 42 violations. The total fine for the remaining alleged errors by BP now totaled $2,870,000.
Here is a summary of the problems the ALJ found with OSHA’s inspection that eventually knocked the number of violations down to seven and the fines to just $35,000:
- Specific form not required in standard. OSHA cited BP for a missing U-1 Form for a particular piece of equipment. OSHA’s standard says, “The employer shall complete a compilation of written process safety information before conducting any process hazard analysis required by the standard.” The American Society of Mechanical Engineers developed the U-1 Form which contains important information relating to the safe use of a pressure vessel. The problem: This isn’t an OSHA form. OSHA’s regulation doesn’t specify the type of written documentation a company needs to comply. The document just has to have the required information. The ALJ noted that, during the inspection, a BP manager was able to provide this information … it just wasn’t on a U-1 Form. OSHA “impermissibly creates a significant requirement not found in the cited standard,” the ALJ wrote in her opinion. BP “cannot be found in violation of a standard for not possessing a document the cited standard does not require.”
- Industry standard not incorporated in OSHA standard. OSHA said BP didn’t document that a pressure safety valve complied with recognized and generally accepted good engineering practices in that it has an inlet pressure drop greater than 3%. The ALJ noted that PSM is a performance standard, not a prescriptive standard. In other words, it requires a degree of safety, but it doesn’t mandate how employers should meet the standard. The ALJ said OSHA adopted an industry standard (3%) that wasn’t included in its PSM regulation. For that reason, violations related to this were also thrown out.
- Improper use of BP internal self-audit. Before OSHA’s inspection, BP hired a safety consultant to conduct an extensive audit for the refinery. The audit started in 2008 and was still in process when the inspections occurred. OSHA requested copies of the safety consultant’s draft reports from BP. The company provided copies of three drafts: one released by the consultant before the inspection and two released after. In 2000, OSHA published a policy on “treatment of voluntary safety and health self-audits.” The policy stated, “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.” The ALJ found OSHA made “extensive use” of the safety consultant’s reports during its inspection. “The majority of the items at issue were self-identified” by BP. While this wasn’t used by the ALJ as the reason to vacate all the violations, some were vacated because OSHA didn’t independently confirm them. Instead, it just relied on the audit report. The ALJ called OSHA’s action a “blatant contravention of its policy.”
- Lack of employer knowledge. To make a citation stick, OSHA has to show an employer had knowledge or should have had knowledge of the violation. The ALJ said OSHA failed to show BP had knowledge of the violations. The inspection began in October 2009. BP didn’t receive a report pointing out some of the problems from its consultant until December 2009. For that reason, the ALJ vacated even more of the violations.
Not only did the ALJ throw out 36 of the 41 violations, she downgraded their severity from willful to serious.
A willful violation is one “committed with intentional, knowing or voluntary disregard.” In its policy on self-audits, OSHA includes a “safe harbor” provision. “If the employer is responding in good faith to a violative condition discovered through a voluntary self-audit and OSHA detects the condition during an inspection, OSHA will not use the voluntary self-audit report as evidence that the violation is willful.”
Since OSHA discovered all five of the affirmed violations by reviewing the safety consultant’s draft report, the ALJ reduced their severity from willful to serious. OSHA originally issued fines at the willful violation maximum: $70,000 each. The ALJ set the fines at the maximum for a serious violation: $7,000 each, or a total of $35,000.
Add the agreed-upon settlement amount of $45,000, and the $3 million dollar fine to BP was reduced to $80,000. That’s a 97% reduction.
What were the real savings for BP here? We’ll never really know, given what lawyers’ fees are.
But BP is a big enough company to fight this case on principle. The company had reason to believe it was doing the right thing: It was engaged in resolving previously found OSHA violations at the time of this inspection through an extensive self-audit by a safety consultant.
(Secretary of Labor v. BP Products North America & BP-Husky Refining, OSHRC Docket No. 10-0637)