On Aug. 12, OSHA announced that BP Products North America Inc. (BP) agreed to pay a record-breaking penalty amount of $50.6 million. The penalty was to resolve allegations that the BP Texas City Refinery failed to abate citation items that were issued as a result of the March 2005 explosion that killed 15 employees and injured 170 others.
In addition to this record-breaking penalty amount, BP agreed to allocate a minimum of $500 million to abate the citation items.
In September 2005, BP agreed to pay a penalty of $21 million, a record-breaking penalty amount at that particular time, to resolve the citation items that were issued as a result of the March 2005 explosion that killed 15 employees and injured 170 others. BP at that time also agreed, among other things, to implement feasible auditor recommendations. The settlement agreement did not specifically state, however, that the feasible auditor recommendations had to be implemented on or before a particular date, nor did the settlement agreement state that the feasible auditor recommendations had to be implemented on or before a date recommended by the auditor. The settlement agreement simply stated that the agreement would expire 4 years from the date in which the parties executed the agreement.
After the settlement agreement expired, OSHA allegedly found that the feasible auditor recommendations had not been implemented. OSHA claimed that the feasible auditor recommendations must have been implemented on or before the date in which the settlement agreement expired. As a result, OSHA issued 270 failure-to-abate citation items with a record-breaking penalty amount of $56.7 million. OSHA also issued 439 new willful citations with a total proposed penalty of $30.7 million.
OSHA rarely issues failure-to-abate citation items because the parties normally have a clear understanding of how the citation item may be abated and when the abatement must be completed. Regarding the latter, settlement agreements typically have a particular date in which abatement must be completed. In the alternative, settlement agreements may state that auditor recommendations must be implemented on or before a reasonable date recommended by the auditor.
Had the 2005 BP settlement agreement contained such language, the failure-to-abate citation items and the record-breaking penalty amount may have been avoided. In fact, the 2010 BP settlement agreement contains specific dates in which certain citation items must be completed.
In addition to paying a record-breaking penalty amount of $50.6 million and allocating a minimum of $500 million to abate the citation items, BP also agreed to perform safety reviews of the equipment and make permanent corrections. BP agreed to abate certain citation items immediately and hire independent experts to monitor these efforts. BP also agreed to conduct regular meetings with OSHA and provide quarterly reports to the agency. The company agreed to allow OSHA to conduct frequent site inspections and to establish a liaison between its North America and London board of directors and OSHA.
NEW FINES CONTESTED
BP has decided to contest, however, the 439 new willful citation items with a total proposed penalty of $30.7 million that were issued as a result of the same follow-up inspection. The matter currently is before the federal Occupational Safety and Health Review Commission, the administrative agency in charge of adjudicating workplace safety and health disputes between OSHA and private industry.
Companies should take note that when agreeing to accept citation items as part of a settlement agreement, the date in which abatement must be complete should be expressly stated in the settlement agreement in order to avoid failure-to-abate citation items and subsequent inspections.
Michael T. Taylor, of Arent Fox LLP, focuses on all aspects of occupational safety and health law. He represents employers and trade associations during federal and state OSHA enforcement litigation and rulemaking proceedings. Prior to joining Arent Fox, he previously served as acting general counsel of the federal Occupational Safety and Health Review Commission. He can be reached at 202-775-5718 or taylor.michael@arentfox.com.