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On August 12, 2010, OSHA published a news release indicating “BP Products North America Inc will pay a full penalty of $50.6 million stemming from the 2005 explosion at its Texas City, TX, refinery that killed 15 workers and injured 170 others.”
Although the Texas City British Petroleum (BP) incident precedes the DeepWater Horizon offshore explosion, considering the demand for clean energy, there seems to be little doubt that the energy industry has become a current event on the minds of American society.
Enforcement emphasis
Safety in particular is no longer in the backseat of our minds. Events of 9/11 demonstrated the need for homeland security; Hurricane Katrina demonstrated the need for prompt federal action and the recent BP disasters have demonstrated the need for greater safety and environmental accountability.
In the author’s opinion, an enforcement emphasis in the oil and gas industry is justified considering the risk of this industry segment to potentially cause serious injury and death to workers and significant environmental and financial losses to the surrounding community.
OSHA has 13 national emphasis programmes (NEPs), which include one NEP that intensifies the focus on the industry through petroleum refinery process safety management (PSM), one proposed NEP on oil and gas drilling and several regional emphasis programmes. The safety record for the oil and gas industry is flaring up, if not permanently stained, and if you consider OSHA’s new direction for increasing enforcement, the oil and gas industry is directly in the crosshairs of OSHA’s emphasis.
According to the Association of Energy Service Companies, the industry is fighting a negative image, and even BP was reported to ‘toughen their safety culture’ by adding a new CEO and by creating a ‘safety and risk division’, but clearing the smoke may be a challenge.
One such challenge involves the potential implications of OSHA’s policy on flame-resistant clothing (FRC) announced in March 2010. This article discusses two broad implications – one that directly affects the oil and gas industry, and a second more philosophical implication as it relates to how safety professionals will identify and control hazards in the future.
PPE enforcement
The first implication affects the oil and gas industry. In March 2010, OSHA issued a memorandum as policy, which is intended to clarify enforcement for PPE under 29 CFR 1910.132(a), which concerned the failure to provide and use FRC in the oil and gas industry. The memorandum was apparently necessary, as the PPE standard was inconsistently used “among well drilling contractors, well servicing contractors, and oil and gas companies.”
OSHA creates emphasis for the policy by referencing a paper created by a task group that reviewed upstream onshore oil and gas fatalities between 1997 and 2003, where it was found that 16% of the fatalities occurring in the oilfield were related to fire and explosion, or roughly five times the national average.
The policy in summary is “(w)here FRC is not being used by workers in these operations, a citation under 29 CFR 1910.132(a) requires evidence that… a reasonable person familiar with the circumstances… would have recognised a hazardous condition warranting the use of that equipment.”
During an OSHA enforcement action, an employer’s rebuttal for any reasonable person who would not be wearing FRC PPE would then be to provide evidence that the person was unfamiliar with the circumstances. At first glance, the policy seems clear enough, where for most responsible employers the likelihood of an untrained or unskilled person working under a hazardous condition, such as a flash fire, would be unlikely; however, in reading the additional citation guidance, compliance safety and health officers (CSHOs) “shall cite 29 CFR 1910.132(a) for the failure to provide and ensure the use of FRC in oil and gas drilling, well servicing or production-related operations when there is a potential for flash fire hazards.”
The policy lists numerous activities for well drilling, servicing and operations, including tasks such as drilling into hydrocarbon zones, open hole work, startups, flow testing, stimulating, cementing, working with the wellhead under pressure and equipment maintenance. In fact, maintenance operations on production equipment are often a daily activity to ensure proper well operation, take measurements, collect data and make equipment adjustments. For those experienced in exploration and production, the policy covers essentially all well field operations.
The implication of the policy for oil and gas companies is, therefore, ‘workers must wear FRC’, which becomes a prima facie form of regulating this specific industry through the policy.
Identifying and controlling FRC hazards
The second implication affects safety professionals as to how they will identify and control FRC hazards in the future. Enforcement of FRC as stated in the March 2010 memorandum for the oil and gas industry seems to be different from an earlier OSHA interpretation for the petrochemical industry dated March 7, 2006, for a scenario involving PSM, where four years earlier, the OSHA Directorate of Enforcement Programs informed the Ashland Specialty Chemical Company that it could be cited when “…the employer has not conducted a hazard assessment” to determine the need to use FRC.
OSHA’s response to Ashland was supported by expertise offered from two recognised third-party organisations; one from the National Fire Protection Association (NFPA) and another from the Center of Chemical Process Safety (CCPS) under The American Institute of Chemical Engineers AIChE). In the much earlier Ashland FRC interpretation, OSHA states that enforcement of “the specific standards related to when industrial personnel must use flame-resistant garments/FRC are found in Chapter 4 (referring to Annex A of NFPA 2113) and include mandatory requirements for the selection process and a workplace hazard assessment.” Most safety professionals would agree that the Ashland interpretation is consistent with methods applied by general industry (e.g. the use of a hazard assessment).
In the Ashland FRC interpretation, OSHA refers guidance from CCPS (quoting OSHA): “…PPE is not a primary defence against hazards. They state that direct hazard control through engineering and administrative controls must come first. PPE is then used as a supplemental measure against hazards.”
Both NFPA and AIChE offer methods produced by committees and professionals that are technically sound and often reflect participation from a wide cross-section of industry (e.g. manufacturer, employer/users, installer/maintainer, labour representatives, applied researchers/test labs, enforcing authority, insurers, consumers and special experts).
From these organisations and others, consensus standards emerge, such as ANSI/API RP 754, ‘Process Safety Performance Indicators for the Refining and Petrochemical Industries’, which was issued in April 2010 in part as a result of the US Chemical Safety and Hazard Investigation Board investigation of the 2005 BP Texas City incident.
The oil and gas industry is not only an active participant in such standards, but is often the leader in process safety. Numerous standards pertaining to safety and environmental protection exist through the American Petroleum Institute (API). Hazard assessment is a standardised approach used to identify and control risk and is advocated by not only the higher risk industries to which OSHA enforcement efforts are directed, but also by internationally recognised consensus organisations (e.g. the subject matter experts).
OSHA continues to validate the hazard assessment approach where in the most recent interpretation on the matter a response is given to the International Association of Drilling Contractors (IADC), dated October 19, 2010, which states: “When an employer conducts a hazard assessment (HA) per NFPA 2113, Chapter 4, or uses some other method to determine the need for wearing FRC as protection against flash fire hazards, OSHA CSHOs will evaluate the adequacy of the HA or other methods in determining whether to issue citations where employees are not provided with, or wearing FRC during drilling, well-servicing and production-related operations. OSHA expects employers’ HAs or other methods used to determine the need for FRC to be comprehensive and robust.”
IADC’s interpretation lists multiple factors for consideration of a “comprehensive and robust” hazard assessment, and in particular, this one comment: “Note low-probability/high-consequence events can occur when engineering and administrative controls fail. The recent DeepWater Horizon off-shore drilling platform event resulted in a massive well blowout, explosion/fire resulting in the death of 11 workers, injuries to other workers and immense environmental damage. Even though several investigations are still ongoing, preliminary findings show that a number of engineering and administrative controls failed leading to the incident.”
There is no question that protection of people, our communities and the environment is of paramount importance. The question is, rather, ‘What is the appropriate basis of safety in which we can work and live’? Intuitively, decisions need to be based on “providing an environment that is free from recognised hazards”; however, it is the author’s opinion that recognising a hazard and the associated severity and likelihood (e.g. risk) of the outcome is not understood by most organisations and requires specific skills.
Management systems
Management systems, which advocate hazard identification and control (e.g. OHSAS 18001, ANSI Z71, RC14001 or ISO14001), are tools that organisations can use to limit risk. Subsequent to the events in Alaska’s Prince William Sound during the Exxon Valdez spill in 1989, Exxon implemented an operations integrity management system, a framework similar to Responsible Care® 14001, which consists of 11 elements that create a system to implement safety, security, health, environment and product safety policies.
Exxon has reported that its incident rate per 200,000 work hours dropped to 0.35 in 2009 from 0.43 the year before; however, risk management to reduce every injury, all hazards and even residual risk requires advanced expertise often combining multiple disciplines (e.g. finance, safety, risk, insurance, security or environment).
A low-probability/high-consequence risk resulting in catastrophic proportions, such as the Deep Water Horizon event, is not something that most safety professionals, risk managers and loss prevention professionals could prevent without a concerted effort among many subject matter experts having vast resources and time at their disposal.
Challenges
The American Clean Energy and Security Act of 2009 brought to light some controversial challenges to the US petrochemical industry. Refineries around the world can produce identical grades of gasoline and diesel fuel for export to the US, which is in direct competition with producers; however, measures of operational safety abroad do not reflect codes and standards found within organisations such as EPA, OSHA, NFPA, ANSI or API. The National Petrochemical and Refiners Association’s (NPRA) message to the US Congress brings to mind that we may not be pursuing as a nation affordable and economically sensible clean energy policies if we continue in the same direction.
As we pursue our national goals for clean energy technology and renewable energy growth, we need to remain both competitive and safe so that our children may grow up working in the same community in which they live and not having to service other countries that make our goods and produce our resources.
We cannot talk about lowering risk without talking about cost. The author recently completed a risk assessment for a smaller upstream natural gas exploration and production firm using a failure mode and effect analysis for approximately 100 activities. The firm had 10 employees and roughly 100 contract operators servicing approximately 1,500 wells.
This activity involved roughly half a dozen subject matter experts who know the business and consumed more than 100 hours of time just to identify a handful of “more critical risks.” This cost was ( $10,000 at $100/hour) to identify a handful of risks and to keep the math simple. The goal was to prevent “one in a million” or one death in a population of a million or a million dollars in property or environmental damage (e.g. a low-probability, severe-consequence event). The dollars of revenue required to pay for the risk identification and control would vary based on the profit margin, but let us say just one risk existed.
For example, let us consider a risk concerning a well site where the lease operator would need to enter an area during drilling and completion and where there was the potential to hit a pressurised zone involving a gas release (e.g. a blowout or kick).
The risk management to implement just one control was to require a mandatory use for all operators to use a hazardous gas detector upon entry to the facility. In looking at a hypothetical cost to control the risk for this small company, developing the policies and procedures to properly use the gas detector would run to, say, $5,000, acquiring 100 gas detectors at $500/each would run $50,000, performing training for 100 people would run $5,000 and maintaining the programme annually would be, say, $5,000.
According to API, profit margins or earnings per dollar of sales were 7.3 cents in the first quarter of 2010 for the oil and natural gas industry7. The hypothetical cost to control one risk for a small operator would be, say, $75,000 in the first year and require roughly $1.02 million dollars in sales to cover the cost of the programme; note that the cost will vary depending on the profit margin.
As safety professionals know, however, multiple failure modes (vectors or root causes) may need to be mitigated to prevent a catastrophic failure, and for each failure mode, a handful of controls may be necessary for any one risk (e.g. FRC, improved intrinsically safe design, improved bleed and block methods, improved down-hole monitoring or improved training and emergency methods). Having said this, the oil and gas industry has multiple low-probability/severe-consequence events which equate to millions of dollars in cost annually for every small company.
Small employers should do their share for preventing risk, but is preventing a one-in-a-million event robust enough? Were we qualified to perform the hazard assessment?
OSHA’s March 2010 enforcement policy may leave a safety professional thinking, ‘When can FRC not be worn and who will decide if a hazard assessment is comprehensive and robust enough’? There does not seem to be any independent judgment by the experts, such as fire protection professionals, process safety experts or the oil and gas industry, when it comes to flash fire risk when viewed through the lens of the OSHA 2010 interpretations.
The March 2010 policy almost deviates from the enforcement of the long-established, performance-based process of a hazard assessment using recognised expertise and competence under the authority of 1910.132(a) by listing numerous activities for which FRC is expected, and the October 2010 interpretation presents clear doubt as to whether the oil and gas industry can implement comprehensive and robust process controls. Therefore, the interpretations take on a more prescriptive approach to regulating oil and gas well drilling, servicing and production-related operations.
OSHA is within its right to enforce and clarify policy when appropriate; however, both the March and October 2010 interpretations imply an expansion of OSHA’s charter beyond simply performing a public service. It is here where the second implication exists: ‘Is it OSHA’s role to become a subject matter expert when it comes to identifying a risk and controlling hazards for a specific industry?’
Codifying measures to protect workers and the community for potential risks is clearly warranted, but where is the due process of rulemaking? The role of the safety professional in guiding employers to a successful outcome to prevent risk becomes less clear if the experts for specific industry segments become those who write and enforce the rules – it is like having the fox watch the henhouse.
Conclusion
This article is not intended to criticise the agency, but is intended to present a perspective of potential unintended consequences of the recent interpretations relative to policy. At a minimum, these more recent interpretations leave little room for the oil and gas industry to control risk using a hazard assessment and process knowledge, which becomes not only troublesome for safety professionals, but also limits the ability for an organisation to manage resources and control cost.
In summary, the author is concerned about two implications regarding the 2010 OSHA interpretations on the use of FRC. The first is that there may be a prima facie form of regulating the oil and gas industry without stakeholder consensus or due process, and the second is that identification and control of hazards have become more difficult for the American industry in which to demonstrate a comprehensive and robust assessment to achieve compliance.
As OSHA turned 40 last year, Assistant Secretary David Michaels’s and Department of Labor Secretary Hilda Solis’s strategies focus on stronger enforcement, whereas some employers need incentives to do the right thing (OSHA, 2010). The author believes in stronger enforcement and penalties to deter complacent employers; however, let us reflect on where the energy industry is going as safety professionals, for where it came has been through programmes, such as PSM, hazard communication, safety by committee and performance-based methods, which have matriculated in numerous voluntary protection programmes and management systems certifications where companies have been recognised for a job well done.
These programmes motivate consensus building and create the best companies in theworld.
This is an industry built on ‘roughnecks’ and ‘roustabouts’ who have a ‘git-r-dun’ work ethic, who are not only ‘pencil pushers’ or ‘white-collar workers’, but are ‘salt-of-the-earth’ people, Americans who work in some of the most wild and remote areas on earth.
We should always keep in mind what the President said in a recent State of theUnion address: “…to help our companies compete, we also have to knock down barriers that stand in the way of their success.” All government regulations are by the people and for the people – maybe it is time to consider giving some back to the people (State of the Union Address, 2011).
References
American Institute of Chemical Engineers. (1992, April). Guidelines for hazard evaluation procedures (2nd ed.). With worked examples, Center ofChemical Process Safety, Appendix B-Supplemental questions for hazard evaluations.
American Petroleum Institute. (2010, Sept. 20). Energizing America: Facts for addressing energy policy. American Petroleum Institute. (2011, Feb. 17). Energizing America: Facts for addressing energy policy. Curlee, CK, Broulliard, SJ, Marshall, ML, et al. (2005). Upstream onshore oil and gas fatalities: A review of OSHA’s database and strategic direction for reducing fatal incidents. Prepared for the 2005 SPE/EPA/DOE Exploration and Production Environmental Conference, Galveston, TX, March. 7-9, 2005. Engineering News Record. (2010). BP toughens safety culture. Retrieved Nov. 16, 2010, from http://enr.construction.com/. Fairfax, R & Witt, S (2010, March19). Enforcement policy for flame-resistant clothing in oil and gas drilling, memorandum to regional administrators state designees. Washington, DC: US Department of Labor, OSHA. Maslowski, A. (2010, March/April). The petroleum industry’s public image. Well Servicing Magazine. Michaels, D (2010, Jul. 19). OSHA at 40: New challenges and new directions. Comments by the Assistant Secretary, OSHA, US Department of Labor. National Petrochemical & Refiners Association. (2010, April 28). Written statement as submitted to the Subcommittee on Energy and the Environment, US House ofRepresentatives Committee on Energy and Commerce on clean energy policies that reduce our dependence on oil. Neuman, M. (2011, Jan.). New OSHA sheriff in town. Professional Safety, 8. The White House. (2011, Jan. 25). State of the union address. Washington, DC: Office of the Press Secretary, US Capitol.
Published: 02nd Mar 2012 in Health and Safety Middle East
