D.C. Circuit Drops Oral Arguments in Process Safety Case

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May 6 — The U.S. Court of Appeals for the District of Columbia Circuit has granted the parties' request to proceed with the agricultural industry's challenge to the Department of Labor's 2015 memorandum on the process safety management (PSM) rule without holding oral arguments, according to a court order issued May 5.

Also on May 5, the Department of Labor alerted the D.C. Circuit that it is launching Small Business Regulatory Enforcement Fairness Act proceedings to update the process safety management standard and incorporate the new definition of who must comply with it.

Gary H. Baise, with the law firm of Olsson Frank Weeda Terman Matz PC in Washington, which is representing a major plaintiff, the Agricultural Retailers Association, told Bloomberg BNA May 6 that he hopes that by eliminating oral arguments, which had been set for May 16, the court would render its decision sooner.

“We think we've made a straightforward legal argument and we want a very quick decision. It's just that simple,” he said.

Sept. 30 is the date under which retailers who had formerly not been required to comply with the standard will have to do so.

“We have people spending money to comply with the rule,” Baise said. “Sept. 30 isn't that far away, so we do want the court to make a decision.”

The association, which represents numerous parties, argues that the document the Labor Department calls a memorandum is, in fact, a new standard, imposed on industry without the administrative review process to which new standards must be subjected. The document attempts to define which entities are covered by the standard.

The department, meanwhile, calls the memorandum “prototypically interpretive.”

“Agency interpretations do not lose their interpretive status simply because they have practical implications for the regulated community,” it said in its brief to the D.C. Circuit.

SBREFA vs. Memorandum

In its May 5 SBREFA notice, the department says that its potential changes to the standard, which it said could take five years, don't change its interpretation of its memorandum as an interpretive rule and doesn't affect the Sept. 30 compliance deadline.

It said, “by codifying its interpretation of ‘retail' in the standard, OSHA can ensure that it has the force and effect of law and cannot be challenged on reasonableness grounds in individual enforcement proceedings.”

The Occupational Safety and Health Administration promulgated the process safety management standard (29 C.F.R. 1910.119) in 1992, requiring employers that use a wide variety of chemicals to undertake a process safety analysis to determine safe ways to prevent or minimize harm from catastrophic releases of these chemicals.

The standard doesn't apply to “retail facilities,” but the term isn't defined in the standard. However, OSHA issued an interpretive letter, also in 1992, setting out a retail exemption in which it said that any business that sold more than 50 percent of its chemicals directly to users was a retail facility. The agency's 50 percent interpretation didn't address retailer size, but the preamble to the standard provided the example of a gas station for cars and trucks as the type of retailer excluded.

Then, in July 2015, prompted by the agricultural grade ammonium nitrate blast at a fertilizer distribution center in West, Texas, in 2013, OSHA released its Retail Memorandum. The OSHA memorandum attempted to clarify which businesses were covered by the standard and which weren't (45 OSHR 743, 7/23/15).

The memorandum said that only companies defined in the Retail Trade Sector of the North American Industry Classification System could benefit from the retail exemption. The definition says, in part, “The retailing process is the final step in the distribution of merchandise; retailers are, therefore, organized to sell merchandise in small quantities to the general public.”

The memorandum discarded the 50 percent retail test, meaning that retail facilities of all sizes, except those selling in “small quantities,” would be required to comply with the standard after Sept. 30.

The association argues that agricultural retailers that were explicitly unregulated by the retail exemption for 23 years “are now compelled to comply with the Process Safety Management Standard's complex safety rules and procedures.” The association said that the likely cost for formerly unregulated entities to comply with the memorandum is between $20,000 and $30,000 (46 OSHR 334, 4/7/16).

Baize said that between 25 and 30 percent of small retailers could go out of business because of the costs they would incur complying with the new interpretation.

The parties jointly requested that the appellate court decide the case without oral arguments March 11.

To contact the reporter on this story: David Schwartz in Washington at dschwartz@bna.com

To contact the editor responsible for this story: Larry Pearl at lpearl@bna.com

For More Information

The Department of Labor's letter to the D.C. Circuit announcing its SBREFA proceedings is available at http://www.bloomberglaw.com/public/document/Agricultural_Retailers_Assoc_et_al_v_LABR_et_al_Docket_No_1501326/5.