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OSHA Contemplates Expansion of Refinery National Emphasis Program to Cover Chemical Plants: Are You Prepared?

Labor and Employment Update

March 12, 2008

Recent news reports indicate that OSHA's broad investigation of occupational safety compliance in the petroleum refining sector, commenced in mid-2007, has been revealing major violations of federal safety regulations.  Significantly, a key OSHA enforcement official has disclosed that he would like to expand this initiative into the chemical manufacturing sector.  In our experience, carefully designed independent safety compliance self-audits are an essential ingredient for chemical manufacturers as they strive to achieve and maintain regulatory compliance in the health and safety arena, as well as preparing them to better document and demonstrate both their safety compliance status and their extensive good faith safety compliance efforts.  A properly managed audit effort with the close involvement of experienced legal counsel can help chemical manufacturers maintain relevant privileges and properly address potential findings while fully preparing those companies for heightened scrutiny from OSHA and others.  Is your company well-prepared for any expanded investigation by OSHA into the chemical industry?

As you are probably aware, since June 2007, OSHA has been conducting a "Petroleum Refinery Process Safety Management National Emphasis Program."  OSHA specifically targeted the refining industry for this new enforcement program because, according to the agency, since the Process Safety Management (PSM) standard was adopted by OSHA in 1992, no other industry sector has had as many fatal or catastrophic incidences related to the release of highly hazardous chemicals as petroleum refineries.  The inspections conducted under the emphasis program were originally scheduled to end after approximately two years.  An OSHA enforcement official now indicates (i) the duration of the program will be extended for refineries and (ii) its scope may be expanded to cover chemical plants.

During Congressional testimony, OSHA's Director of Enforcement, Rich Fairfax, has explained the program incorporated a new strategy for enforcing PSM that OSHA believed would "yield more effective results."  According to Fairfax's testimony, compliance officers "enter each facility with a list of items on which they will focus their attention during the visit."  These items represent the conditions OSHA believes are most likely to be significant hazards to workers in the facility.  According to Fairfax's testimony, the agency has planned to conduct enforcement inspections pursuant to the National Enforcement Program (NEP) at all 81 refineries under federal jurisdiction.  Further, OSHA has encouraged state occupational safety and health agencies, in those states in which OSHA has delegated enforcement authority to the state government, to launch a similar enforcement program.

Additionally, as part of the launch of this new aggressive enforcement program, OSHA conducted a specialized training program for many of its compliance officers on the PSM standard.

Results and Expansion of NEP Program

As recently reported in The Houston Chronicle, to date OSHA has only conducted NEP inspections at 17 of the 81 refineries it plans to visit.  OSHA, however, reports that while the agency has visited only a relatively small number of refineries, it has already identified numerous violations during those inspections and, in the case of some refineries, has issued six-figure fines.

As also reported by The Houston Chronicle, Fairfax has revealed that as a result of what he views as the poor level of compliance found during these inspections, the agency now has no intention of terminating the program after the two-year time frame originally planned.

Also, very significantly, Fairfax disclosed in the same interview that his agency is contemplating expanding the NEP to cover chemical plants in addition to refineries.

Importance of Self-Auditing Program

Given these developments, facilities subject to OSHA's PSM standard should carefully assess their self-auditing programs targeted at assuring compliance with PSM and other OSHA standards.

OSHA generally encourages employer self-audits.  In July 2000, OSHA adopted its final policy concerning voluntary employer self-audits and, under that policy, provides an employer with some, but not absolute, assurance that the agency generally will not seek to examine the employer's self-audit results in connection with OSHA inspections.  Because of the equivocal nature of OSHA's policy on self-auditing, many employers have also attempted to utilize the attorney-client privilege as a means of protecting self-audit results from use against the employer in subsequent OSHA enforcement actions.  Given the extension of the existing PSM emphasis program and its possible expansion to cover non-refinery chemical facilities, employers in these industries should carefully examine their auditing programs and consider intensifying those programs. 

Notably, when OSHA uses the term "self-audit," that refers to voluntary self-audits and not compliance audits mandated by the PSM regulations.

In working with employers to develop and execute voluntary self-audit programs, we have seen that an audit can help:

  • Determine what problems may exist to allow a company to address the problems before enforcement actions or litigation occurs
  • Encourage OSHA to consider less substantial penalties in the event violations of the agency standards are later identified
  • Create an opportunity for careful self-evaluation that may be protected from discovery, to some extent, in an agency enforcement action or in subsequent tort litigation

Notably, for those employers with facilities in Texas, the Texas Audit Privilege Act can be of value in conducting an occupational safety and health self-audit.  Unlike self-audit privilege laws in most states, Texas law not only covers environmental self-audits, but also provides some protection for self-audits of occupational safety and health concerns.  Significantly, however, that audit privilege may only help in coping with subsequent state court litigation and may not limit the authority of OSHA or other federal regulators or prosecutors to discover information. 

As a result, the attorney-client privilege remains the best vehicle for seeking to protect the results of occupational and safety self-audits from disclosure in subsequent enforcement actions or tort litigation.

Bracewell & Giuliani LLP is recognized for its work on occupational safety and health self-audits, as well as environmental audits, and audit privilege issues.  We regularly work with our clients' management, occupational safety and environmental personnel and with top independent occupational safety and environmental consulting firms to design and implement self-audit programs that can best help companies achieve and maintain compliance, appropriately manage and correct identified concerns and protect clients' legal interests with respect to privilege, enforcement and liability.  We believe that with the new emphasis from OSHA on PSM compliance, it is imperative that companies carefully consider well-designed self-audits as a tool to help prepare for that new scrutiny.