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01.14.2016 Legal News

OSHA Extends Process Safety Management Standard Compliance Date for Bulk Chemical Distributors

OSHA has come full circle…almost.  In a December, 2015 revised interim enforcement memorandum, the agency indicated it will not enforce the Process Safety Management (PSM) Standard for “highly hazardous chemicals” (HHC) against sellers or distributors of large, bulk quantities of HHCs until September 30, 2016.  The extension came after intense lobbying by those sellers and distributors who complained they had been whip-sawed by the agency’s inconsistent interpretation of its own regulations.           

Under OSHA’s PSM Standard at 29 CFR 1910.119, a facility storing or using in process vessels more than a threshold amount of certain “highly hazardous chemicals” must comply with a rigorous set of management and emergency response requirements in the event of a sudden, catastrophic release.  Covered operations must also develop risk management plans to respond in the event of an emergency.  Most HHCs are reactive or flammable substances, so fires or explosions are a genuine concern.

The PSM Standard contains an exemption for retail operations, such as gas stations and propane suppliers (Retail Exemption).  The rationale for the Retail Exemption is not complicated:  OSHA did not believe the PSM Standard was necessary for those small businesses only retailing small quantities of an HHC for use by the general public.  The problem is the term “retail facility” is not defined in the regulations.  To address this discrepancy, OSHA adopted a policy to allow any facility to meet the Retail Exemption as long as it derived at least 50% of its income from direct sales of HHCs to an “end user.”  OSHA Compliance Directive No. CPL-02-02-045 (50% Test).

The 50% Test lost favor at OSHA shortly after it was announced because it allowed distributors selling bulk quantities of a covered HHC to avoid the PSM requirements.  They were able to do so by claiming commercial purchasers of bulk quantities were “end users” under the policy.  OSHA believed this was contrary to the intent of the agency, so this past July it invalidated the 50% Test and introduced a revised approach for bulk distributors.  The revised approach limited the Retail Exemption to “those facilities involved in retail trade [listed in] sections 44 and 45 of the North American Industry Classification System (NAICS).”  Neither of these sections includes bulk distribution facilities.  Memorandum: Glassi to Regional Administrators (July 22, 2015).

In October, 2015, OSHA provided a grace period until July 22, 2016 for companies that distribute large, bulk quantities of HHCs to come into compliance with the PSM Standard.  PSM Retail Exemption Interim Enforcement Policy (October 20, 2015).  The only exception to this policy was if OSHA discovered conditions at a facility that exposed workers to an immediate and severe danger, and OSHA determined that the employer had not made a reasonable good faith effort to eliminate or substantially control the hazard.          

After intense lobbying, the grace period for companies that sell or distribute large, bulk quantities of HHCs to meet the PSM Standard has been changed again, and OSHA discretion has been curtailed severely.  Under Interim Enforcement Policy, Rev. 1 (December 23, 2015), OSHA extended the date to September 30, 2016.  Of more concern, however, this new policy removed the discretion OSHA gave itself for those facilities found to have exposed workers to an immediate and severe danger, but that made a good faith reasonable effort to eliminate it.  Thus, the Interim Policy says:

Through September 30, 2016, OSHA will not cite employers for violations of the PSM

Standard at facilities that it would not have cited applying the interpretation of “retail” that was in place prior to July 22, 2015.

The revised Interim Policy provides a window of opportunity for bulk distribution firms to come into compliance with a very tough PSM Standard.  Covered companies may want to take the following approach to be sure OSHA does find PSM deficiencies:

Step No. 1:  Audit bulk distribution terminals to determine if the terminals may be covered by the Retail Exemption, evaluating whether the goods it sells are in “small quantities” suitable for retail and whether the purchasers are more like the general public or commercial employers.

Step No. 2:  If the customers have characteristics of a business rather than the general public and the goods moved through the terminal are packaged in bulk rather than small quantities, the terminal should comply with the PSM Standard if the threshold quantity of an HHC is exceeded.

Step No. 3:  If a bulk distribution facility is covered by the PSM Standard, the facility should “make a reasonable good faith effort” between now and September 30, 2016 to eliminate elevated risks to all employees from exposure to HHCs.