OSHA Considering Revisions to Process Safety Management Standard that Would Affect Oil and Gas Industry

On August 1, 2013, President Barack Obama issued Executive Order No. 13650 in the aftermath of an April 17, 2013 ammonium nitrate explosion that killed 15 people at a West Fertilizer Company facility in West, Texas.  Executive Order No. 13650 is aimed at improving safety and security at chemical facilities across the nation.  As part of that objective, the Executive Order requires the Secretary of Labor to review and suggest improvements to OSHA’s Process Safety Management (“PSM”) standard (29 C.F.R. §1910.119), which prescribes a comprehensive management program for hazardous chemicals in the workplace.

In compliance with Executive Order No. 13650, OSHA has announced a Request for Information (RFI) seeking public comment on potential revisions and/or updates to its PSM standard and other related standards such as its Explosives and Blasting Agents standard (29 C.F.R. §1910.109), Flammable Liquids Standard (29 C.F.R. §1910.106), and Spray Finishing Standard (29 C.F.R. §1910.107).   

The potential revisions/updates identified by OSHA in the RFI focus primarily upon increasing the coverage of the standards.  Two of the most significant actions being considered by OSHA would bring the oil and gas industry within the purview of the PSM standard when it is currently not subject to the same.  

Specifically, OSHA is seeking comment on whether to strike or retain the exemption contained within §1910.119(a)(2)(ii) for oil and gas well drilling and servicing operations.  

Additionally, OSHA is considering completion of a proper economic analysis of PSM standard coverage of oil and gas production facilities so that enforcement of the PSM standard can be resumed for these facilities.  Although oil and gas productions facilities have never been exempted from the PSM standard like oil and gas well drilling and servicing operations have, OSHA was forced to suspend enforcement of the PSM standard as to those facilities after objections from the American Petroleum Institute and a subsequent concession by OSHA that the original economic analysis for the PSM standard did not include oil and gas productions facilities.

Oil and gas firms are urged to consult Executive Order No. 13650 and OSHA’s RFI to develop a more complete understanding of the potential changes to the PSM standard and related standards under consideration by OSHA that could affect the inductry.  Those who wish to comment on the RFI can do so at www.regulations.gov when the RFI is published in the Federal Register.

Are Confidential Fracking Ingredients at Risk of Disclosure?

On April 12, 2013, the West Virginia Legislature passed Senate Bill 243 which promulgated the West Virginia Department of Environmental Protection’s (“DEP”) Rules Governing Horizontal Well Development (the “Rules,” codified at W.Va. C.S.R. § 35-8-1 et seq.). While the DEP’s Rules require well operators to report a list of all chemicals and additives used in the hydraulic fracturing process, a legislative amendment was added to the Rules which allowed the well operator to “designate the information regarding the specific identity or concentration or both of a chemical as a confidential trade secret not to be disclosed to the agency or anyone else except in the event of an investigation by the office, medical emergency, or for diagnostic or treatment purposes involving the designated chemical.” See W.Va.C.S.R. § 35-8-10.1.a. This amendment allows well operators to protect confidential trade secrets related to their fracking ingredients, even from the DEP under most circumstances.

A similar confidentiality provision is under attack in Wyoming. In November 2011, several environmental groups made a public records request for the identity of fracking ingredients which were designated as confidential by the oil service companies operating in Wyoming. Those requests were denied, and after several appeals, the issue is now before the Wyoming Supreme Court, which is set to hear argument on November 20, 2013. This blog post further describes the debate in Wyoming and links to the briefs filed by the parties and the live stream of the oral argument before the Wyoming Supreme Court.

The Wyoming Supreme Court’s ultimate decision will set a precedent on this issue which will undoubtedly be heard in the courtrooms of many other gas producing states, including West Virginia. This is one case worthy of some attention for the hydraulic fracturing industry operating in West Virginia.

Wood County Cracker Plant Announcement a Small but Important Step

Yesterday, Governor Earl Ray Tomblin, alongside officials from the Brazilian-based conglomerate Odebrecht, announced plans for the development of a state of the art petrochemical complex in Wood County. The complex was dubbed Project ASCENT – an acronym for Appalachian Shale Cracker Enterprise. The proposed petrochemical complex would include a much-discussed ethane cracker, along with three polyethylene plants and accompanying infrastructure. Governor Tomblin called the proposed development a “game changer” for West Virginia.

While yesterday’s announcement came with much fanfare, Odebrecht and its subsidiary company, Braskem, have had their eye on West Virginia for some time. In fact, West Virginia Commerce Secretary Keith Burdette announced back in July 2012 that the state signed a non-disclosure agreement with Braskem related to the company’s interest in building an ethane cracker plant in West Virginia. Yesterday’s announcement seems to take this ambition just one step closer to reality.

While the announcement is exciting news for both legislative officials and the business community in West Virginia, the company took a conservative approach in disclosing details of the impact of the project. As discussed previously in this blog here and here, West Virginia officials have been excited and later ultimately disappointed with respect to other potential ethane cracker projects in West Virginia. The 2011 decision by Shell to locate its ethane cracker plant in Pennsylvania, despite the legislature’s hurried passage of a significant business tax incentive designed to lure Shell to West Virginia, was particularly disappointing.

Cracker plants break down complex organic molecules into simpler molecules. In the context of the natural gas industry, an ethane cracker plant, like the one proposed yesterday, creates ethylene, a compound used in plastic manufacturing. The raw material for the plant – ethane – is a byproduct of hydraulic fracturing in the Marcellus and Utica natural gas shale regions. After methane, ethane is the second-largest component of natural gas, roughly 1-6% by volume. In the past, the ethane was simply burnt away with the methane as fuel. Now, however, because of ethane’s value as an important petrochemical feedstock, it is captured during the fracking and refining process.

A plant located in West Virginia to convert this byproduct from the local natural gas industry to a valuable petrochemical has the potential to create countless jobs in the region, continue to spur the growth of the natural gas industry, and provide a needed spark to the sluggish petrochemical industry in the area. While Governor Tomblin and Odebrecht officials were notably hesitant to make any promises about the timeline or eventual economic impact of the proposed complex, it is clear that the public announcement is a major step in making this long-time initiative a reality.

MSHA Releases Third Quarter 2013 Fatality Data

The following was posted on Huddleston Bolen’s Blog: Safety and Health Connection.

The Mine Safety and Health Administration (MSHA) recently released its fatality data for the third quarter of 2013.  The agency announced that, sadly, nine miners lost their lives in workplace accidents between July 1st and September 30th.  Five of the fatalities occurred at coal mines and four occurred at metal/non-metal mines.  

While the loss of just one life is tragic, one positive to take from the fatality report is that there were two less fatalities in the third quarter of 2013 than in the third quarter of 2012.  Additionally, there have been three less fatalities (27) in first three quarters of 2013 than during the first three quarters of 2012 (30). Click here for more.

OSHA Taking Aim at Silica Exposure in Fracking Operations

The use of hydraulic fracturing in upstream oil and gas operations has increased significantly in the past several years as a result of new technologies that have provided increased access to oil and gas deposits located in deep rock formations.  Hydraulic fracturing operations inject a fracturing fluid into the ground, which contains “proppants” that help hold open fractures in the rock formations created by the fracturing fluid and force the gas into the well bore.  One of the primary proppants used in hydraulic fracturing fluids is sand, which can contain up to 99% silica. 

Workers who are exposed to high levels of silica dust can contract a disease called silicosis, which can lead to lung cancer and other disabilities and death.  OSHA, which has jurisdiction over upstream oil and gas operations, has always required employers to monitor their employees’ levels of exposure to silica and to ensure that such exposures do not exceed certain prescribed permissible exposure limits (“PEL”).  OSHA regulations that apply to silica exposure include 29 CFR 1910.1000 (Air Contaminants), 29 CFR 1910.1200 (Hazard Communication), and 29 CFR 1910.134 (Respiratory Protection). 

Because large amounts of sand are used in fracking operations, oil and gas workers employed in these operations can be exposed to high concentrations of silica.  With the discovery of the Marcellus Shale in the eastern United States, oil and gas exploration employing fracking technologies has dramatically increased.  Perhaps not coincidentally, OSHA and the related agency National Institute for Occupational Safety and Health (NIOSH) have recently been investigating worker safety and health hazards in upstream oil and gas operations.  NIOSH made safety and health in the upstream oil and gas industry a priority area of focus in 2005 when it created the National Occupational Research Agenda (NORA) Oil and Gas Extraction Council to address occupational safety and health issues in the industry.  Additionally, OSHA has begun using national, regional, and local emphasis programs to inspect oilfield work sites in the five OSHA regions located in areas of significant upstream activities.

In June of 2012, OSHA and NIOSH issued a Hazard Alert identifying exposure to airborne silica as a health hazard to workers performing certain jobs in the hydraulic fracturing process.  The Alert states that NIOSH collected 116 full shift air samples at 11 hydraulic fracturing sites in 5 states.  The results revealed that a large percentage of the samples showed silica exposures well in excess of the current OSHA PEL of roughly .1 milligrams per cubic meter (mg/m³) and the NIOSH recommended exposure limit (“REL”) of .05 mg/m³.  Many of the samples were more than 10 times the PELs/RELs.  The Alert warns that employers must monitor silica exposure levels and choose proper controls, such as engineering controls and respiratory protection, to protect workers who could be exposed to silica dust in excess of OSHA PELs.

OSHA also published a Notice of Proposed Rulemaking (NPRM) for Occupational Exposure to Respirable Crystalline Silica in the Federal Register on September 12, 2013.  The NPRM seeks to decrease the OSHA PELs for silica exposure to 50 micrograms per cubic meter of air (μg/m³) on an 8-hour time-weighted average.   The new rule would also include new provisions governing the measurement of silica exposure, limiting workers' access to areas where silica exposures are high, methods for reducing exposures, provision of medical exams to workers with high silica exposures, and provision of training for workers regarding silica-related hazards. The new rules would apply to all OSHA industry standards, including the General Industry Standards that govern upstream oil and gas activities.  The proposed new regulation is open for comment until December 11, 2013.

What should employers in the upstream oil and gas industry take from these recent actions by OSHA and NIOSH?  They should know that OSHA will be focusing on health and safety hazards in their industry, especially including chemical and silica exposures.  Employers in the industry should be prepared for increased inspections that target excessive silica exposures. They should also monitor and stay ahead of these new proposed rules regarding silica exposure by consulting OSHAs Crystalline Silica Rulemaking Page.  Employers should also consult the OSHA Hazard Alert discussed above for insight on which occupations in the industry that OSHA believes are most likely to suffer excessive silica exposures and the controls that OSHA believes to be most effective in limiting exposures.

Addressing the EPA’s New Carbon Emission Standards for New Power Plants

by Jason Roma, Partner, Huddleston Bolen LLP

On September 20, 2013, the Environmental Protection Agency (“EPA”) proposed Clean Air Act standards to cut carbon emission from new power plants.[1]  This action was taken as part of President Obama’s Climate Action Plan as outlined in the President’s June 2, 2013 Memorandum to the EPA.  According to President Obama’s Climate Action Plan the power industry accounted for 33% of the total greenhouse gas emissions in the United States in 2011, and 84% of the total greenhouse gas emissions comes from Carbon Dioxide.[2]  Until the recent EPA proposal, carbon dioxide emissions were not regulated.  This new proposal applies to newly built power plants.  A separate carbon dioxide emission proposal applicable to existing power plants is set to issue on June 1, 2014.

The West Virginia power and coal industries have reason to be concerned about these new EPA regulations.  Most of the power plants in West Virginia are coal-fired.  The current proposal for new coal-fired units limits CO2 emissions to 1,100 pounds of CO2 per megawatt-hour.  To put this into perspective, according to data collected by Carbon Monitoring for Action (CARMA), the John Amos coal-fired power plant in St. Albans, West Virginia produced 2358 pounds of CO2 per megawatt hour in 2009, which is more than twice the newly proposed limit of CO2 emissions from new power plants.[3] 

Compliance with the new proposal will likely be very burdensome and expensive for power companies, and may not even be economically feasible. The first project to capture and store CO2 from an existing coal-fired power plant occurred at Mountaineer Power Plant in New Haven, West Virginia.  Chilled ammonia technology was employed to trap the CO2[4]by creating a “slipstream” of the plant’s exhaust “flue gas.”[5]  The gas was then chilled and combined with ammonium carbonate to absorb the CO2.  The ammonium bicarbonate solution was then pressurized and heated to separate the CO2.  The liquid CO2 was then pumped 1.5 miles underground for storage.[6] 

The Mountaineer project was scheduled to take 10 years. The total costs were estimated to be $668 million dollars, with the Department of Energy (“DOE”) paying half the bill and Alstom (the company that patented the carbon capture technology employed at the plant) and AEP paying the other half.[7]  During the initial phase of the project the DOE contributed $7.2 million and Alstom and AEP contributed $1.4 million combined.  50,000 metric tons of CO2 were captured and 37,000 metric tons of it were stored during the project validation period of September of 2009 to May of 2011.[8]   Alstom reported the project to be a success, as they were able to capture between 75% and 90% of the CO2 emitted from the unit.[9]  Nevertheless, AEP halted the project due to the “uncertain status of the U.S. climate policy and the continued weak economy.”[10]

The Mountaineer pilot project has been the largest carbon-capture project to date.  According to Nicholas K. Akins, AEP’s Chairman and Chief Executive, equipping the whole plant with the carbon capture technology would have cost $1 billion, which would have increased the commercial costs of electricity by 60% to 80% per kilowatt-hour .[11]  Furthermore, the injection of carbon dioxide into the earth was only possible because the project was classified as a research project.  According to Revis W. James, director of the Energy Technology Assessment Center at the Electric Power Research Institute, this type of carbon capture technology could not be competitive unless natural gas prices jump by 100 to 150% and building new nuclear plants was off the table.[12] 

The Mountaineer pilot project demonstrated the extreme costs and difficulties associated with Carbon capture technologies.  The soon to be implemented EPA carbon emission requirements for new coal-fired power plants are unrealistic and will likely make the construction of new coal-fired power plants economically infeasible.  As a result, it is not likely that any new coal-fired power plants will be built unless they are pilot projects like the Mountaineer project and receive considerable federal funding to support the exorbitant costs.  The hope from here is that the EPA will be less stringent when proposing recommendations for existing coal-fired power plants in June of 2014.  If not, the coal and power industries will be scrambling for solutions and reprieves from the courts. 

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[1] See, Environmental Protection Agency, Regulatory Impact Analysis for the Proposed Standards of

Performance for Greenhouse Gas Emissions for New Stationary Sources: Electric Utility Generating Units Publication No. EPA-452/R-13-003 (September 2013)

[2] See, President’s Memorandum of June 25, 2013 for the Administrator of the Environmental Protection-Power Sector Carbon Pollution Standards, 78 Fed. Reg. 126 (July 1, 2013).

[3] Id. 

[4] Id.

[5] See, Alstom, Alstom Announces Successful Results of Mountaineer Carbon Capture and Sequestration (CCS) Project, (January 31, 2012) <http://www.alstom.com/press-centre/2011/5/alstom-announces-successful-results-of-mountaineer-ccs/>.

[6] Id.

[7] See, Massachusetts Institute of Technology, Mountaineer Fact Sheet: Carbon Dioxide Capture and Storage Project (visited September 30, 2013) <http://sequestration.mit.edu/tools/projects/aep_alstom_mountaineer.html>.

[8] See. AEP, Carbon Capture & Storage (visited September 30, 2013) <http://www.aep.com/environment/climatechange/carboncapture.aspx>.

 

[9] See, Alstom, Alstom Announces Successful Results of Mountaineer Carbon Capture and Sequestration (CCS) Project, (January 31, 2012) < http://www.alstom.com/press-centre/2011/5/alstom-announces-successful-results-of-mountaineer-ccs/>.

[10] See. AEP, Carbon Capture & Storage, (visited September 30, 2013) <http://www.aep.com/environment/climatechange/carboncapture.aspx>.

[11] Wald, Matthew L. and Shear, Michael D., Challenges Await Plan to Reduce Emissions, N.Y. Times, September 20, 2013 <http://www.nytimes.com/2013/09/21/business/energy-environment/challenges-await-plan-to-reduce-emissions.html?pagewanted=all&_r=1&>.

[12] Id.

MSHA Announces Results of June 2013 Impact Inspections

The Mine Safety and Health Administration ("MSHA") announced shortly after the massive explosion that killed 29 coal miners at the Upper Big Branch Mine in Montcoal, West Virginia that the Agency would begin conducting "impact inspections" of mines that merit increased enforcement activities due to poor compliance histories or particular compliance concerns.  The following characteristics will typically place a mine on MSHA's radar for impact inspections:  high numbers of violations or closure orders; frequent hazard complaints or hotline calls; plan compliance issues; inadequate workplace examinations; a high number of accidents, injuries, or illnesses; fatalities; adverse conditions such as increased methane liberation, faulty roof conditions, inadequate ventilation, and problems with respirable dust. 

Impact inspections do not mean only increased numbers of inspections at a particular mine.  Enforcement practices are also stepped up to include inspections during "off hours", such as evenings and weekends.  MSHA will deploy additional inspectors on impact inspections to ensure that the mine is more thoroughly inspected.  MSHA may even take control of the operator's phone and other lines of communication to prevent advance notice of the inspectors' presence. 

MSHA has released the results of its impact inspections for the month of June 2013.  Nine coal mines and four metal/nonmetal mines were subjected to impact inspections in June.  These mines were collectively issued 157 citations, 10 orders, and one safeguard. 

MSHA has conducted 629 impact inspections since April of 2010, issuing 10,640 citations, 980 orders and 45 safeguards as a result.  According to MSHA, the impact inspections have led to improved compliance.  The Agency's statistics purport to show that, since April 2010, total violations have decreased 18 percent in both coal and metal/nonmetal mines.  Significant and substantial violations have decreased by 23 percent in coal mines and 37 percent in metal/nonmetal mines.  Unwarrantable failure violations have seen an even sharper decrease, down 45 percent in coal mines and 65 percent in metal/nonmetal mines.  Operator-reported lost-time injuries have also decreased 9 percent in coal mines and 26 percent in metal/nonmetal mines.

The last place that an operator wants to find itself is on MSHA's radar for impact inspections.  Accordingly, it is important for operators to closely monitor its compliance history, challenge questionable citations and orders, and ensure that its safety practices meet industry regulations.