The Occupational Safety and Health Administration (“OSHA”) published a Request for Information (“RFI”)  on December 9, 2013 concerning possible changes to the Process Safety Management (“PSM”) program codified at 29 C.F.R. 1910.119.  See 78 Fed. Reg. 73756 (Dec. 9, 2013).  Likewise, the Environmental Protection Agency (“EPA”) published an RFI on July 31, 2014 relating to possible changes to the similar Risk Management Program (“RMP”) rules codified at 40 C.F.R. Part 68.  See 79 Fed. Reg. 44604 (July 31, 2014).  At the time of this writing, the respective comment periods have closed and we are waiting to see new proposed regulations. This is the fourth article in a series of articles concerning these potential rulemaking actions.

OSHA and the EPA requested comments concerning applying PSM and RMP regulation to the Oil and Gas Sector.  Comments received by OSHA and the EPA requests were similar in nature. Separate questions were asked in reference to Oil and Gas Well Drilling and Servicing (hereafter “Drilling/Servicing”) and Oil and Gas Production Facilities (hereafter “Production Facilities”).  Although many comments addressed regulations of these two oil and gas sectors, this article will compare comments from four organizations:  the Domestic Energy Producers Alliance (“DEPA”), the American Petroleum Institute (“API”), the Mary Kay O’Conner Process Safety Center (“MKOPSC”) at the Texas A&M Engineering Experimental Station, and the U.S. Chemical Safety Board (“CSB”).

Although the EPA and OSHA arrived at approximately the same point concerning the current regulation of the Oil and Gas Industry, they each arrived there in a different manner.  As such, EPA’s basis for excluding much of the oil and gas sector is somewhat different from OSHA’s basis.  Generally speaking, these two agencies initiate jurisdiction at a gas plant not otherwise regulated by pipeline safety agencies.[1] RMP begins at a gas plant as that is where the naturally occurring hydrocarbon exemption ends. See 40 C.F.R 68.115(b)(2)(iii).  Although not explicit in the rule, subsequent determinations indicate that “OSHA believes that gas plants are appropriately covered by the process safety management standard.”[2]  Gas plants are facilities that remove natural gas liquids (ethane, propane, butanes, and pentanes)[3] from natural gas (methane):

Natural gas processing plant (gas plant) means any processing site engaged in the extraction of natural gas liquids from field gas, fractionation of mixed natural gas liquids to natural gas products, or both, classified as North American Industrial Classification System (NAICS) code 211112 (previously Standard Industrial Classification (SIC) code 1321).

40 C.F.R 68.3

RMP regulation is limited to “stationary sources” and thereby excludes transportation facilities, including storage incident to transportation.  See 40 C.F.R. 68.3.  Additionally, naturally occurring hydrocarbons upstream of a natural gas processing plant or petroleum refinery are not considered when determining if a facility contains a threshold inventory.  “Naturally occurring hydrocarbon mixtures include any combination of the following: condensate, crude oil, field gas, and produced water.”  40 C.F.R. 68.115(b)(2)(iii).  Flammable materials that are heavier than pentane (hexane and heavier) are not covered by the rule. As a result, RMP does not currently apply to much of the oil & gas sector.

OSHA likewise exempts facilities that fall under Department of Transportation jurisdiction.  See, 57 Fed. Reg. 6356, 6372 (Feb. 24, 1992).  Other OSHA exemptions interrelate with the subject exclusions:  the atmospheric storage tank exemption and the remote facility exemption.  See 29 C.F.R. 1910.119(a)(1)(ii)(B) and (2)(iii).  Often the greatest quantity of flammable materials (condensates or crude oil) at oil and gas facilities is stored in atmospheric tanks.  Similarly, many oil and gas facilities are remote and normally unoccupied.

PSM specifically exempts oil or gas well drilling or servicing operations.  See 29 C.F.R.119(a)(2)(ii).  OSHA exempted this sector because OSHA “believe[d] that oil and gas well drilling and servicing operations should be covered in a standard designed to address the uniqueness of that industry.”  57 Fed. Reg. at 6369.  At the time of promulgating the 1992 rule, OSHA stated it planned to follow through with a proposed Well Drilling and Servicing rule: this never occurred.[4]   The 1983 proposal focused on unique drilling/servicing concerns (rig siting, emergency escape, safe handling of drilling fluids, respiratory protection for hydrogen sulfide, confined space as in cellars or pits, etc.) and did not contain PSM type elements.

According to RFI, OSHA always intended PSM to cover oil and gas processing facilities.  78 Fed. Reg. at 73758-59. Specifically, in 1999, OSHA informed Regional Administrator of the intent to enforce PSM at oil and gas production facilities. According to the December 1999 memo, OSHA believes that a covered process starts at the top of the well (i.e., upstream of the Christmas tree).[5]  Subsequent to a challenge from the API, OSHA withdrew its determination until such time that they conducted an economic analysis to support rule making.[6] To wit, as part of the RFI, “the Agency requests public comment on completing an economic analysis and possibly resuming enforcement for PSM-covered oil and gas production facilities.”  78 Fed. Reg. at 73759.  Although the distinction is fine, subsequent determinations indicate that “OSHA believes that gas plants are appropriately covered by the process safety management standard.”[7]

The CSB combined comments for the Production Facilities and Drilling/Servicing sectors into a single response.  In providing its comments, the CSB provided four examples of incidents that it investigated.  A summary of an incident that occurred over sixteen years ago (Sonat Exploration Company) was repeated in the RFI.  According to the CSB, the incident occurred while purging air out of a pipeline between the well and the newly constructed separation facility.  See CSB Investigation Report, Catastrophic Vessel Overpressurization, Report No. 1998-002-I-LA., p. 2 (Sept. 21, 2000). Ultimately, the incident occurred due to the failure to maintain an open path to the atmosphere (valves intended to be open were instead closed) resulting in overpressuring equipment.  Id. at 21.  The CSB concluded that the incident could have been prevented by conducting pre-construction hazard analysis, inclusion of overpressure protection, and better operating procedures. Id. at 33-34.

The other three incidents cited were related to “hot work” errors.  Hot work practices include welding, cutting, and brazing and are regulated by OSHA at 29 CFR 1910.252.  Interestingly, the only substantive comment made by the CSB concerning the Drilling/Servicing sector involved hot work.

One ubiquitous hazard that the CSB has encountered in the Oil and Gas Well Drilling and Servicing facilities is hot work type activities where explosions and fires occur from the ignition of flammable vapors in a confined area, such as a tank, typically during maintenance.[8]

CSB Comments to OSHA, p. 5.

In addition the CSB reviewed media reports over a five year period.  Based on this review, the CSB concluded that approximately 8% of “high consequence” incidents occurred in the oil and gas sector. The CSB’s comments fail to define the nature of the data set (8% of what), nor any indicator to rationalize the observation (number of workers, hours worked, portion of the economy, etc), nor any indication that the incidents were related to process safety issues.  Although the CSB appears to conclude that 8% was significant, the CSB did not provide any information that indicated that 8% was statistically significant compared to other similar sectors of the economy.  It should also be noted that the CSB did not review the incidents beyond the information provided in the media reports.  Finally, at least one of the oil and gas sectors included, natural gas liquid extraction, may be already regulated under PSM and RMP and some of the pipeline incidents counted may be regulated under pipeline safety rules.  As such, the numerator of the faction may include regulated and unregulated facilities.

According to the DEPA, exploration and production (“E&P”) activities are not the type of activity intended to be regulated by PSM or RMP.  The DEPA points to the legislative history of the Clean Air Act Amendments of 1990 noting that “oil and gas wells, and associated equipment and gas processing, have generally very low levels of air toxics” and that “it is very unlikely that oil and gas sources would present a significant risk to human health.”  DEPA Comments to OSHA, p. 2 (Mar. 31, 2014).  The DEPA also cites OSHA’s prior determination that Drilling/Servicing activities are unique and concludes that if anything “E&P drilling and servicing operations are even more unique today” and that OSHA should preserve the exemption.

The DEPA then extrapolates the uniqueness argument to Production Facilities noting that there are over a million oil and gas wells across the country that are “inherently variable (to address the unique factors associated with each different well)”  compared to a relatively limited number of chemical plants.  See DEPA comment to OSHA, p. 3.  The DEPA further cites that in contrast to chemical plants, that “E&P operations pose only a negligible risk of catastrophic release.”  Id.  Finally, “the already negligible risk of a catastrophic release is further dismissed by the fact that personnel engaged in production operations are very rarely permanently stationed at a particular oil and/or gas well in the same way that personnel who work in other industrial sectors.” Id.

The API submitted separated comments relative to the Drilling/Servicing and Production Facilities sectors.  Comments from the API concerning Drilling/Servicing fall into two main areas:  lack of sufficient data and the sector does not involve a process.  Specifically according to the API:

Since oil and gas well drilling or servicing operations are transient (temporary), are inherently variable (to address unique factors associated with each well) and are not “processes” that typically handle covered substances, they are not the type of operation intended to be regulated under the PSM standard.

API comments to OSHA, p. 6 (Mar. 31, 2014).

The API also believes that:

OSHA has not provided sufficient data or evidence that onshore exploration facilities and related servicing activities have experienced a significant number of catastrophic releases of the type that the PSM standard is meant to address.  There is little performance data showing there is a safety problem at these facilities.  The risk is not high and the safety incidents are not process safety problems but are more occupational safety and thus covered by other regulatio

Id.

As discussed previously, OSHA does not currently enforce PSM regulations in Production Facilities (excepting gas plants).  OSHA reversed its intention to enforce PSM at Production Facilities in response to a 2000 letter from the API that it still feels is relevant.  “API’s position on oil and gas production coverage was well-defined in our 2000 letter to OSHA.”  API comments to OSHA, p. 7.  Further, the API believes that process safety risk in Production Facilities is low and that regulatory cost would exceed the benefit.  Finally, the API recommends that OSHA concentrate on using its “existing regulation, enforcement actions, safety alerts, operator education, etc. to support enhanced oil and gas production facility sector-specific safety performance.”  Id. 

The MKOPSC provided data that indicated that oil and gas worker fatalities were significantly higher (per hour worked) than the Chemical Manufacturing[9] sector, however the data also indicated that oil and gas related fatalities were far more likely to be caused by non-PSM/RMP type incidents.  As indicated below, four-out-of-five oil and gas related fatalities were caused by incidents not related to flammable or toxic materials.  Presumably many of these non-PSM issues were addressed by the rule proposed back in 1983.

MKOPSC Comment to OSHA, p. 11 (Mar. 31, 2014).

As a result, the MKOPSC’s recommendations were somewhere in between the CSB and the trade groups.

MKOPSC recommends that OSHA revert back to the original plan for considering a separate rule-making process for drilling and servicing operations.  The original rationale for the separate rule-making was that oil and gas well drilling and servicing operations were only governed by OSHA’s general industry standards.  In addition, drilling and service operations are quite different in nature from typical process operations and as such implementing a PSM program for these facilities may not yield any benefits.

Id. at 10.

The MKOPC recommended that OSHA consider “resuming enforcement of PSM to oil and gas production facilities only after economic analysis show a positive cost-benefit for such a program.”  Id. at 14.  If the economic analysis indicates a positive economic impact, the MKOPC also recommended that OSHA “consider the implementation of a tiered process safety management program similar to the tiered Prevention Program required under the EPA risk management program.”  Id. at 15.

In conclusion, commenters believe that OSHA must conduct an economic analysis to support any effective change in the current rule (as applied).  Any economic analysis will compare the benefit of the rule to the cost.  It would appear that insufficient data exists to define the potential benefit.  Although the CSB has provided information concerning a number of significant incidents involving oil and gas, this information is illustrative at best and the underlying facts have not been confirmed.  Whereas MKOPC provided data indicating a relatively high oil and gas worker fatality rate, most of the fatalities were related to non-PSM/RMP events.  As such, any rule change could require a substantial fact finding effort.

MKOPC’s data indicates that the vast majority of oil and gas sector fatalities are related to non-PSM issues.  Perhaps related, the bulk of the CSB comments indicate a concern about improper hot work.  As a result, MKOPC recommends that OSHA return to developing a unique rule applicable to Drilling/Servicing.  Consistent with the API comments, other issues (such as hot work) may be a fertile area for increased scrutiny under existing (or updated as needed) rules.

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[1] EPA and OSHA defer to the Pipeline and Hazardous Materials Safety Administration (“PHMSA”) or the Louisiana Department of Natural Resources (“La. DNR”) where they maintain jurisdiction.

[2] OSHA Standard Interpretation No. 25058, Evaluation of scenarios regarding PSM requirements related to normally unoccupied remote facilities and natural gas processing plants (gas plant) (Feb. 16, 2005), found at https://www.osha.gov/pls/oshaweb/owadisp.show_document?p_table=INTERPRETATIONS&p_id=25058 (last visited Mar. 17, 2015).

[3]What are natural gas liquids and how are they used?, U.S. Energy Information, Adm., found at http://www.eia.gov/todayinenergy/detail.cfm?id=5930 (last visited Mar. 18, 2015).

[4]For more information on the proposed rule, see 48 C.F.R 57202 (Dec. 28, 1983).

[5] Memo from Richard Fairfax, to Reg. Adm., PSM Applicability to Oil/Gas Production Facilities (Dec. 20, 1999), found at https://www.osha.gov/pls/oshaweb/owadisp.show_document?p_table=INTERPRETATIONS&p_id=22839 (last visited Mar. 17, 2015); also reproduced in RFI, see 78 Fed. Reg. at 73759.

[6] Memo from Richard Fairfax to reg. Adm., Enforcement of PSM at Oil and Gas Production Facilities and Withdrawal of December 20, 1999 Memorandum (Apr. 11, 2000), found at https://www.osha.gov/pls/oshaweb/owadisp.show_document?p_table=INTERPRETATIONS&p_id=23727 (last visited Mar. 17, 2015); according to comments provided by DEPA, OSHA assumed in its economic analysis of the 1992 rule, that PSM would only apply to 24,939 establishments. Given that fact that there were over 500,000 producing wells at the time, DEPA concludes that OSHA could not have considered each well as subject to PSM.   DEPA comments to OSHA, p. 8.

[7] OSHA Standard Interpretation No. 25058, Evaluation of scenarios regarding PSM requirements related to normally unoccupied remote facilities and natural gas processing plants (gas plant) (Feb. 16, 2005), found at https://www.osha.gov/pls/oshaweb/owadisp.show_document?p_table=INTERPRETATIONS&p_id=25058 (last visited Mar. 17, 2015).

[8] It should be noted that “confined space” is an issued addressed outside of PSM or RMP.  See 29 C.F.R. 1910.146.  The sector specific 1983 proposed rule also included confined space requirements.  Whereas testing and inspection of equipment is covered by PSM and RMP, most maintenance activities are not.

[9] It would likely be helpful to compare the results to other sectors.  Much of the activity during well drilling and servicing is more related to construction or chemical plant maintenance that it is to chemical plant operations.