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OSHA Levies a Record Fine against Oil Giant BP

November 12, 2009, 9:37 am

On Oct. 30, the U.S. Occupational Safety and Health Administration (OSHA) announced it was issuing a proposed $87.4 million fine against BP Products North America Inc. (BP) for failure to remedy workplace hazards. The proposed fine is the largest ever issued by the agency and results from a 2005 explosion at an oil refinery that killed 15 workers.

In March 2005, safety violations at BP's Texas City, TX, refinery caused a massive explosion that killed 15 and injured 170 people, according to an OSHA press release announcing the fine. BP and OSHA agreed to a settlement in September 2005 that required the company to correct potential hazards to employees like those that had led to the explosion.

According to an Oct. 30 New York Times article, investigations of the cause of the explosion concluded BP drastically cut costs on safety, had antiquated equipment, and did not rest fatigued employees who had worked 29 days straight to meet production schedules. BP has settled more than 4,000 civil claims since the explosion and agreed to pay more than $21 million in penalties as part of the settlement with OSHA, according to the Times.

The announcement of the fine comes after a six-month investigation. OSHA issued the refinery 270 "notifications of failure to abate" the hazards that were part of the settlement, resulting in $56.7 million in proposed penalties. According to the press release, the agency found another 439 new "willful violations" of industry standards for safety management processes and systems. OSHA assessed another $30.7 million in proposed penalties for these additional violations.

Acting Assistant Secretary of Labor for OSHA Jordan Barab said, "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 and hundreds of new violations. BP still has a great deal of work to do to assure the safety and health of the employees who work at this refinery."

BP has appealed the fine to the Occupational Safety and Health Review Commission, an independent administrative court that hears appeals of OSHA citations and penalties, according to a BP press release issued Oct. 30. The refinery manager said, “We continue to believe we are in full compliance with the Settlement Agreement, and we look forward to demonstrating that before the Review Commission. While we strongly disagree with OSHA’s conclusions, we will continue to work with the agency to resolve our differences.”

According to a Dallas Morning News article, criminal charges were sought against BP by blast victims in a separate action. As part of a plea agreement between BP and the Department of Justice (DOJ), the criminal charges against BP were settled if the company met the terms of the agreement with OSHA. In addition, BP pleaded guilty to one violation of the Clean Air Act, was sentenced to three years probation, and was fined $50 million. The criminal plea agreement was approved in March by a federal court.

Brent Coon, an attorney for those injured, said that a finding by the review commission that BP did not comply with the OSHA agreement would mean that BP is not in compliance with the criminal settlement. According to the Morning News article, the attorney plans to ask DOJ to revoke BP's probation and allow the criminal cases to proceed.

The criminal plea agreement was reached over the objections of many of the blast victims. In July 2008, a safety investigation report filed as part of the criminal action against BP concluded that the safety violations at the plant "remain so serious that they could result in another major accident," according to a July 30, 2008, BNA article (subscription required). BNA quotes the report as arguing, "[t]here is not a valid engineering or practical excuse for such continued violations." The violations "include the same violations which caused the March 2005 explosion, 15 deaths and hundreds of injuries." The victims of the explosion were pressing for a $1 billion fine instead of the $50 million the DOJ agreed to in the plea agreement.

The 2005 explosion has already resulted in about $71 million in penalties against BP and even more in claims settlements. The most recent proposed penalties may be reduced by the review commission, and it is possible that BP will contest the resulting fines in court after the review. BP also incurs the costs of rebuilding the Texas City plant. These substantial costs make one wonder if BP made good business choices by not taking the time and effort to put in place programs to protect its workers and to comply with OSHA's health and safety requirements.

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