On October 12, 2016, the U.S. Department of Justice (“DOJ”) announced that four Texas companies agreed to plead guilty to criminal violations of the Clean Air Act at oil and chemical processing facilities, and to collectively pay $3.5 million in fines to the government. While Clean Air Act criminal prosecutions are no longer rare events, and the total fines imposed set no new records, these cases are noteworthy for three critical reasons:

  1. they confirm DOJ’s commitment to pursue the previously-announced Worker Endangerment Initiative;
  2. they demonstrate the ability of OSHA and EPA to coordinate on significant enforcement cases; and
  3. they reveal certain threshold factors that may trigger a criminal investigative response.

I. The Worker Endangerment Initiative

Based upon a desire to prioritize and elevate criminal investigations and prosecutions of worker safety violations, the DOJ issued a policy memorandum on December 17, 2015, entitled “Prosecutions of Worker Safety Violations,” that was accompanied by a MOU between DOJ and the Department of Labor (“DOL”). While these policy declarations received significant attention, many in the regulatory community remained uncertain about whether, and how much, actual worker endangerment enforcement would increase. Since this initiative was not accompanied by any increased funding, or any legislative or regulatory “teeth,” some viewed the announcement with skepticism. As noted in recent case announcements, the hype appears to be real. See www.justice.gov/enrd/worker-endangerment

II. The Underlying Facts of the Texas Cases

Based upon a review of the facts set forth in the Bill of Information, the Factual Basis, and DOJ’s detailed press release, a number of factors brought heightened investigative attention and an aggressive enforcement response. More specifically, these triggering facts included:

  • an explosion;
  • worker fatalities;
  • improper management of, or releases of hazardous substances;
  • falsified documents or records; and/or
  • a failure to comply with safety requirements.

More specifically, in one case involving KTX Limited and KTX Properties Inc., the underlying conduct involved the use of contractors to perform welding or “hot work” on the piping that was connected to a product storage tank at a chemical and petroleum processing plant in Port Arthur, Texas. According to DOJ, the companies falsified a hot work permit that was issued to the workers who were scheduled to conduct welding, and failed to properly drain, isolate and decontaminate the storage tank prior to the welding resulting in an explosion which caused a fatality and two serious injuries, and the release of the hazardous substances in violation of the Clean Air Act.

The other noted cases concerned the implementation of a leak detection and repair (“LDAR”) program at a chemical processing plant in Crosby, Texas, owned by Crosby LP and Ramsey Properties LP. In those cases, DOJ alleged, and the defendants reportedly admitted, falsification of LDAR records and reports required by the facility’s Clean Air Act Title V operating permit. DOJ alleged in its criminal information that the defendants failed to perform any LDAR monitoring of processing components for fugitive volatile compounds for four years. Despite involving facts and violations that did not appear to create the potential for significant worker endangerment, EPA and DOJ still took aggressive actions.

III. Lessons Learned In This New Enforcement Paradigm

1. OSHA and Environmental Violations Have Been Fused

In the months following the announcement of the Worker Endangerment Initiative, DOJ Assistant Attorney General Cruden spoke at two conferences to highlight the impact of the policy shift, and to list it among his Division’s top priorities. As these (and other) cases confirm, the government’s “bark” has a “bite,” and the emerging enforcement connections between OSHA and EPA’s air program administered under the federal Clean Air Act keep getting more interesting and more consequential. As noted above, the KTX criminal case arose from an OSHA investigation after a tank explosion, but was ultimately prosecuted as a criminal misdemeanor under Section 113(c)(4) of the Clean Air Act, which makes it a crime to “negligently” release certain hazardous air pollutants.

2. Worker Deaths Will Bring Heightened & Criminal Scrutiny

In justifying DOJ’s new prioritized focus on worker safety, Mr. Cruden recently noted that “we have long thought that those who mistreat their employees may also have environmental problems worth examining.” This dual focus appears to be a reality. Accordingly, it has become increasingly important to view OSHA and environmental risks as linked and presenting similar enforcement profiles, and to avoid a risk management approach that segregates or “siloes” the historically lower OSHA enforcement risks from the traditionally heightened environmental enforcement risks. Since the recent Initiative blends the two disciplines, it is prudent for companies to take a similar approach.

3. Be Aware of Your Paper Trails and Any False Statements

By shining a spotlight on regulatory violations that result in worker fatalities, DOJ has signaled with these cases that it won’t hesitate to pull its criminal enforcement trigger when it can link worker safety issues with environmental incidents, or when it discovers false information or deception in the course of its investigations. This includes any perceived false information within required company records, permit applications, voluntary reports, certifications, and statements made during inspections. As with any serious environmental investigation, when false statements exist, they can immediately transform a case into a criminal matter. As we have previously noted, allegations of false statements can be very powerful tools for the government since they: (1) help to establish intent; (2) fuel the jury’s interest and anger; (3) make the case more difficult to defend; and (4) increase the potential punishment to be imposed.