• Michael Kennedy Esq.

DC Circuit Backs Agriculture, Not OSHA in Process Safety Management Dispute


OSHA circumvented the required notice-and-comment procedure when it narrowed the retail exemption in its PSM standard following the 2013 West Fertilizer explosion

On September 23, 2016, the Occupational Safety and Health Administration (OSHA) lost a significant case curtailing their efforts to modify a 20-year-old interpretation of an OSHA standard without notice-and-comment rulemaking. The D.C. Circuit Court of Appeals unanimously decided in favor of the agricultural industry to exempt agricultural suppliers from the Process Safety Management (PSM) standard, which was designed for the chemical and oil and gas industry. The win relieved 4,800 facilities headed for a compliance deadline of October 1 and expensive PSM retrofits (estimated at $25,000 per facility).

The consequence of this decision will be debated for some time, but there are many ways this can play out.

First, OSHA can appeal this case to Supreme Court. The agency can also continue the removal of the exemption through PSM notice-and-comment rulemaking or just wait for the next administration.

Even more interesting is will it deter OSHA from aggressive interpretations that straddle the line of rulemaking? How will this case impact other administrative law decisions? And, will the next administration even take up this fight to?

For this blog, I provided some background, teased up a few issues and came up with some predictions.

Executive Order (EO) 13650 “Improving Chemical Storage Facility Safety and Security” & West Texas

In order to look at this case and its repercussions – look at the bigger picture here. On August 1, 2013, the President issued Executive Order (EO) 13650 “Improving Chemical Storage Facility Safety and Security” after the West fertilizer facility explosion, which was caused by an intentional fire that detonated 40 tons of ammonium nitrate fertilizer. The explosion killed 15 people, including 12 first responders. The EO directed OSHA, among other agencies (EPA, DHS, DOT) to look into a number of methods to “enhance the safety and security of chemical facilities”. Since West was an agricultural retailer, it made sense for the agency to enhance safety by “modernizing key policies, regulations, and standards”.

OSHA Memo on the Retail Exemption:

In spirit of the EO, OSHA issued a seemingly innocuous enforcement memorandum that redefining the exemption for agricultural retail facilities under the PSM program. The memo narrowed the scope of the exemption and broadened it to encompass all retailers that carry anhydrous ammonia fertilizer. Basically, the equivalent to same standard as an oil refinery. The 20-year-old exemption issued by OSHA under the Clinton administration was redefined to eliminate 'policy and regulatory gaps' so as to help “prevent incidents like the West Fertilizer explosion.” Even though the cause of the explosion was another fertilizer.

The issue before the court was: Whether OSHA’s memorandum amounted to issuance (or modification) of an occupational safety and health standard?

YES, the “memorandum amounted to issuance (or modification) of the standard”. When a memorandum “rescind[s] all prior policy documents, letters of interpretation, and memoranda related to the retail exemption and the 50 percent test” …the result is “directly contrary to OSHA’s original intent”. Modifying an enforcement memo is one thing - creating a standard that contradicts the original intent of the original document is another. The being subject to notice-and-comment rulemaking, as it should.

OSH Act Applied - not the Administrative Procedure Act

The court chose the narrower OSH Act law instead of the Administrative Procedure Act (APA). With that choice, which is slightly confusing, it narrowed the applicably of the ruling. If the court applied the APA then the ramifications of this case would be more widely felt, but that’s not what happened here.

The court explained: “The OSH Act and the APA prescribe different procedural requirements, and those requirements do not necessarily apply to the same subset of rules. Unlike some other statutes, the OSH Act does not adopt the “interpretive rule” terminology, but instead uses a vocabulary distinct from the APA’s.

To throw in additional speculation, the panel came down hard on using standards and interpretative rules after the Supreme Court case, Perez v. Mortgage Bankers. This case required agencies to use the notice-and-comment process before it can significantly revise an interpretive rule.

Bottom Line for Ag Retailers and OSHA:

  1. Obviously, OSHA would not be permitted to make a substantive change to an established interpretation of an OSHA standard without notice-and-comment rulemaking.

  2. Thus, retailers would not need to comply within the October 1st deadline.

  3. OSHA can and likely will submit a Petition for Certiorari to the U.S. Supreme Court.

  4. In the alternative, OSHA could just drop the appeal.

  5. OSHA could also continue its rulemaking quest on PSM, in which has started 0 and fuse the elimination of the retail exemption into the mix. Note, it takes OSHA over a decade to get rules finished from cradle to grave.

As always, keeping you posted on EHS&S stuff in and outside the beltway!

#OSHA #ARA #TFI #fertilizer #retailexemption #Agriculture #EHS #DCCircuit #PSM #ProcessSafetymanagement #AmmoniumNitrate #WestTexas #Transportation

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