October 8, 2015

Agribusiness Groups Fight OSHA’s Process Safety Retail Interpretation; GOP Escalates Feud

A powerful coalition of agribusiness trade groups urged House lawmakers Wednesday (Oct. 7) to pressure OSHA into reversing course on a controversial interpretation of the agency’s rule to prevent chemical process disasters, just as congressional Republicans took OSHA to task for a field guidance they say vastly expands the rule’s reach without any formal avenue for public feedback.

OSHA chief David Michaels defended the interpretation, which changes the test for a “retail” exclusion under the rule, before a House subcommittee Wednesday, pointing out that OSHA issues scores of guidance documents every year and that the agency sought extensive public input on the new interpretation. The change arises from OSHA’s role in federal interagency efforts to close purported gaps in chemical safety regulations after the West, TX, fertilizer plant explosion.

The retail exemption memorandum is one of several related to the process safety management (PSM) rule that are the subject of federal lawsuits against OSHA, and Senate Republicans have also latched onto the issue of PSM guidance documents issued without notice-and-comment rulemaking. A Senate panel has formally asked OSHA to rescind the documents in favor of proposing them as rules.

OSHA in the retail exclusion memo effectively extended the PSM rule to numerous additional sites, costing tens of millions dollars in new compliance burdens, agriculture trade groups say. The contested memo, issued in July, indicated that OSHA in analyzing the PSM rule pursuant to the West, TX, response found that it had been wrongly interpreting the exemption by using a so-called 50 percent test, which classified establishments as “retail” if at least half their income came from end users. OSHA found that test was flawed because many businesses that sold chemicals in high volumes did not get covered. The agency changed policy so the exemption only covered sites that fall under the North American Industrial Classification System codes for retail employers.

That move caused an uproar, not only because of the impact of expanding covered employers, but by the way OSHA handled the policy change.

Agriculture groups — at least two of which are already suing over the new interpretation — are taking their case directly to Congress while the issue awaits judicial review.

“This change significantly expands the scope, complexity and costs for agricultural retail facilities that store or handle anhydrous ammonia, a critical nitrogen fertilizer,” the group of seven agribusiness groups tell lawmakers. “Any disruption in the supply of anhydrous ammonia at agricultural retail facilities will directly impact farmers’ operations as well as their ability to ensure adequate fertilization of their crops.”

“We believe that the failure of OSHA to properly consider the full impact on the agriculture sector dictates that this memorandum be withdrawn and subject to a formal notice and comment rulemaking,” they say.

The groups say more than 3,800 out of 6,500 agricultural retail facilities in the United States manage anhydrous ammonia and are now subject to PSM, but aside from a request for information under executive order, the agricultural sector was not formally consulted in advance of the policy change. “Additionally, OSHA failed to notify the agricultural industry once the rule change went into effect.”

Industry groups contend that taken together the costs to implement the change easily exceed the $100 million threshold to determine whether a regulatory action is “major,” thus requiring review.

“These significant costs come at a time of very low commodity prices, which affect both agricultural retailers and their farm customers’ business and bottom line,” they say. “Retailers are committed to compliance with all federal laws, and not only want to do the right thing but also want to do it in the right way. As such many will need several years to budget for facility upgrades of this magnitude.”

The six-month compliance period provided by OSHA “coincides with the busy harvest season and ammonia application season,” according to the coalition. “Many agricultural retailers also operate grain handling facilities and will have all available staff completely occupied with either harvest or grain handling operations. Harvest is quickly followed by the on-farm ammonia application season, when it is also nearly impossible to make upgrades. Under normal circumstances, upgrades to retailers’ ammonia systems are scheduled well in advance to ensure they do not interrupt important business operations.”

The groups say agricultural retail facilities that store or handle more than 10,000 pounds of anhydrous ammonia are already highly regulated under many federal and state programs.

Signatories to the letter, addressed to the chair and ranking member of the House workforce protections subcommittee, include: Agricultural Retailers Association (ARA); American Farm Bureau Federation; The Fertilizer Institute; National Association of Corn Growers; National Association of State Departments of Agriculture; National Council of Farmer Cooperatives; and National Grain and Feed Association.

A lawsuit pending in the federal D.C. Circuit Court of Appeals by ARA and The Fertilizer Institute challenges the validity of OSHA’s interpretation, calling it actually a legislative rule that did not go through notice-and-comment rulemaking under the Administrative Procedure Act. OSHA is not commenting on the suit.

The retail exclusion issue show no signs of subsiding, with not only the pending litigation, but lawmakers in both houses closely examining it. A Labor Department official recently defended OSHA’s process for interpreting the standard during a Senate hearing, and concern over the memo also arose during Wednesday’s House hearing, which was geared broadly toward OSHA priorities and performance.

Rep. Tim Walberg (R-MI), chair of the workforce protections panel, pressed Michaels on why the agency chose to characterize the document as a clarification of the standard. “Fundamentally these documents have changed the type of entities and drastically expanded, at least as I read them, the number of entities that are covered by the regulation,” Walberg said.

Michaels directly tied the interpretation to work carried out in the public domain after the West disaster. “The basis of this is understanding that after the explosion at the West fertilizer plant, President Obama issued a directive, an executive order, telling us to look at these issues and make sure workers are protected.”

“When you go back and look at the process safety management standard, it’s clear to us the standard was being misinterpreted,” he said. “Essentially what the standard said was that retailers were really identified as, for example, gas stations, entities that sell small amounts, keep small amounts of a material on site [and] should be exempted. But when we looked back at how that was being interpreted in one of our policies … the way we were doing this was clearly wrong.”

Michaels said the agency had received “tremendous public input” on the PSM standard and what the retail exemption means. “So it was no surprise when we put out this memorandum changing this interpretation.”

He said all three recent memoranda on how to interpret the PSM standard (two other documents, also under litigation, explain the standard’s applicability regarding chemical concentrations and use of generally accepted engineering practices) “follow the law very carefully.” — Christopher Cole ()

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