On August 12, 2010, the federal Occupational Safety and Health Administration announced that BP Products North America Inc. (BP) agreed to pay a record-breaking penalty amount of $50.6 million 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 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 it state that the recommendations had to be implemented on or before a date recommended by the auditor. The settlement agreement simply stated that the agreement would expire four 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 regarding 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, to abate certain citation items immediately and hire independent experts to monitor these efforts, to conduct regular meetings with OSHA and provide quarterly reports to the Agency, to allow OSHA to conduct frequent site inspections, and finally, to establish a liaison between its North America and London Board of Directors and OSHA.
BP has decided to contest 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 is currently 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.
Based on the recent BP citation items along with the record-breaking penalty amount, United States Secretary of Labor, Hilda L. Solis, is living up to her promise that there is “a new sheriff in town” and that OSHA is back in the business of enforcing workplace safety and health laws. 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.