Environmental & Safety Law Update

UPDATE – New OSHA Maximum Penalty Amounts Become More Clear – October, 2015 CPI Released

Posted in OSHA Enforcement

By James L. Curtis and Patrick D. Joyce

iStock_000065158991_Full.jpgAs we mentioned in our previous blog, the bipartisan budget signed by President Obama on November 2, 2015 contains provisions that will allow OSHA to raise maximum penalties for the first time in 25 years.

The maximum initial “catch up adjustment” will be based on the difference between the October 2015 Consumer Price Index (CPI) and the October 1990 CPI. The October 2015 CPI was released yesterday, November 17, 2015, and came in at 237.838.  Based on the October 1990 CPI of 133.500, the maximum catch up adjustment will be approximately 78.16% and the new maximum penalties could be:

  • Other than Serious violations: $12,471
  • Serious violations: $12,471
  • Willful violations: $124,709
  • Repeat violations: $124,709

As we previously mentioned, OSHA has the option to choose a lower catch up adjustment than the maximum allowable, but based on comments by Dr. Michaels, it is unlikely OSHA will implement anything but the maximum allowable catch up adjustment.

OSHA Recommended Practices for Employers for Preventing and Addressing Retaliation

Posted in OSHA Compliance, Whistleblower

By Meagan Newman and Craig B. Simonsen

shutterstock_144257470The Occupational Safety and Health Administration has published a draft document intended to “help employers” to develop a program to protect employees from retaliation when issues or concerns about workplace conditions or activities that could harm workers or members of the public are raised.

The draft, Protecting Whistleblowers: Recommended Practices for Employers for Preventing and Addressing Retaliation, the Agency believes, will assist employers in creating a “non-retaliatory environment” in the workplace by providing “practical guidance on protecting whistleblower rights for public, private, and non-profit employers.” The draft document contains sections on how to include leadership commitment, foster an anti-retaliation culture, respond to reports of retaliation, conduct anti-retaliation training, and monitor progress and program improvement.

OSHA prepared this draft document based on recommendations of the Whistleblower Protection Advisory Committee’s Best Practices for Protecting Whistleblowers and Preventing and Addressing Retaliation. The Agency indicates that it is especially interested in comments related to:

  • How anti-retaliation concepts are described;
  • Important features of an anti-retaliation program;
  • Challenges to implementation of the recommended practices; and
  • Issues specific to small businesses.

While the OSH Act prohibits employers from retaliating against employees for exercising their rights under the OSH Act, OSHA also enforces the whistleblower protection provisions of 21 other statutes relating to asbestos in schools, cargo container safety, aviation safety, commercial motor carrier safety, consumer product safety, environmental protection, consumer financial protection, food safety, health insurance reform, motor vehicle safety, nuclear safety, pipeline safety, public transportation safety, railroad safety, maritime safety, and securities laws.

Comments on the draft document will be accepted until Jan. 19, 2016. Comments should be submitted to Docket No. OSHA-2015-0025.

Attention Food Importers: New FDA Final Rule on Foreign Supplier Verification Programs

Posted in Food Regulation

By Ilana R. Morady

iStock_000045960778_MediumOn November 13, 2015, the FDA finalized its rule on Foreign Supplier Verification Programs (FSVP) for Importers of Food for Humans and Animals.

The rule is scheduled to be published in the Federal Register on November 27, 2015. The pre-publication version of the rule is available here. The linchpin of the rule is the requirement that importers implement a FSVP to verify that their foreign suppliers are producing food in a manner that provides the same level of public health protection as the preventive controls or produce safety regulations, and to ensure that the supplier’s food is not adulterated and is not misbranded with respect to allergen labeling.

Importers covered by the rule will need to:

  • Determine known or reasonably foreseeable hazards with each food. These can include biological hazards such as parasites, chemical hazards such a pesticide residue, and/or physical hazards such as glass. The importer’s analysis must assess the probability of these hazards and that the severity of the illness or injury that could potentially occur by evaluating factors such as how the food is harvested or manufactured, how the food is packaged, how it is transported, etc. The importer can also rely on another entity to conduct this hazard analysis as long as the importer reviews and assesses all relevant documentation related to the analysis.
  • Evaluate the risk posed by a food, based on the hazard analysis, and the foreign supplier’s performance. Factors that importer’s must consider in the evaluation can include the foreign supplier’s procedures, processes, and practices related to food safety, and any information that FDA may have regarding the foreign supplier’s compliance. The importer can also rely on another entity to perform the risk evaluation under certain circumstances.
  • Use that evaluation to approve suppliers and determine appropriate supplier verification activities. Based upon the evaluation of risk conducted, the importer must establish and follow written procedures to ensure that it only imports from approved foreign suppliers. Appropriate supplier verification activities may include annual on-site audits of the supplier’s facility, sampling and testing, or a review of the supplier’s relevant food safety records. The importer can also rely on another entity to determine and perform appropriate supplier verification activities under certain circumstances.
  • Conduct corrective actions. If something goes wrong and an importer determines that its foreign supplier has not used safe processes and procedures, the importer must take immediate corrective action. The appropriate action will depend on the circumstances, but can include discontinuing use of the foreign supplier until the cause of noncompliance, adulteration or misbranding has been adequately addressed.

Some key points about the FSVP rule are:

  • Very small importers are subject to modified requirements. The definition of very small importer is an importer with a sales ceiling of $1 million for human food and $2.5 million for animal food.
  • Importers of certain small foreign suppliers are also subject to modified requirements, e.g. farms that are not covered farms under the produce safety rule because they average $25,000 or less in annual produce sales.
  • Certain foods are not covered by FSVP, including (1) juice and fish that complies with FDA’s Hazard Analysis and Critical Control Point (HACCP) regulations; (2) food for research or evaluation; (3) food for personal consumption; (4) alcoholic beverages; (5) food that is imported for processes and future export; (6) low-acid canned foods; and (7) certain meat, poultry, and egg products that are regulated by the U.S. Department of Agriculture at the time of import.
  • If an importer is subject to FSVP rules, the general compliance deadline will be within 18 months of the anticipated November 27, 2015 publication date.

In light of this new rule, it is important for companies to determine whether they are subject to FSVP requirements, and, if so, to begin taking steps to ensure compliance.

It’s the PITs! Employer Guide to Forklift Liability in the Workplace

Posted in OSHA Compliance

By Mark A. Lies, II and Patrick D. Joyce

iStock_000059911458_Large.jpgTake a look around you. There’s a good chance you work at a facility that uses a Powered Industrial Truck (PIT).

OSHA defines a PIT as “any mobile power-propelled truck used to carry, push, pull, lift, stack or tier materials.” Most people think of PITs as forklifts.  Though forklifts come in many shapes and sizes, they are all regulated under OSHA’s PIT standard, 29 CFR § 1910.178. PITs also include manlifts, scissor lifts, boom lifts and motorized hand trucks.  Though this article will often refer to forklifts, the requirements apply to all PITs.  Earth moving and over the road haulage trucks are not included in the definition of PIT. Equipment that was designed to move earth but has been modified to accept forks are also not included.

Forklifts present many potential hazards: a pedestrian can be struck by a forklift; a load can fall off a forklift onto a person or the operator; the forklift can fall off a ledge or tip if driven on an uneven surface; a forklift can fall between a loading dock and a truck trailer. Frequently, an accident involving a forklift results in serious injury or a fatality.  To address these hazards, OSHA sets out a comprehensive set of standards for training, maintenance, and operation of forklifts.  OSHA also requires initial certification and recertification of forklift drivers every three years.  If forklift certifications or maintenance records are falsified, OSHA has a history of seeking criminal sanctions to enforce its standards.

This article will briefly outline OSHA’s requirements for use of forklifts in the workplace and will discuss a case where an employer falsified forklift maintenance records, resulting in criminal sanctions.


OSHA’s Powered Industrial Trucks Standard requires that “The employer shall ensure that each powered industrial truck operator is competent to operate a powered industrial truck safely…” The Standard also requires that operators receive training in the topics which are applicable tothe safe operation of the truck in the employer’s workplace. Employees must be trained separately for each different type of forklift they will be using, but they do not need to complete separate training for the same type of forklift made by a different manufacturer.

The Standard further requires an employer to develop a written program to train all employees who will be required and authorized to operate forklifts as to the hazards of such equipment. Employers must conduct classroom-type training and actually observe the employee operating the equipment under the physical conditions at the workplace, such as aisles, ramps, and loading docks.  The employer must provide a certificate stating the employee has completed the training.  The employee must be retrained and recertified every three years, at a minimum, or after an accident or “near miss” which resulted from an unsafe act.

If contract or temporary workers who are not employed by the host employer are required to operate forklifts, the host employer must take steps to assure that these individuals are properly trained before they are permitted to operate forklifts at the facility. At a minimum, the host employer is responsible for the safety of its own employees. If the operation of forklifts could endanger the host employer’s employees, the host employer would be obligated to prevent such danger by satisfying itself that all forklift operators have been properly trained. This does not mean that a host employer is required to train forklift drivers who are not its employees. It must, however, ensure that such individuals have been trained in accordance with the PIT standard before they are permitted to operate forklifts at its workplace.

Because OSHA takes training requirements so seriously, it is a good practice that all contract and temporary employees be trained and certified by the host employer before being allowed to operate a forklift, even if they received training and certification from another employer. In addition, the host employer should obtain the training and certification documentation from the contract or temporary staffing service company to confirm that it exists and is current if it intends to rely upon it and before allowing the contract or temporary worker to operate the PIT.

The PIT Standard does not specify how long training certifications must be retained after the initial certification or the recertification required every three years or after a “near miss”. Some employers retain the training certifications for the duration of employment for each employee.

If OSHA can establish that training was not provided or that the employees did not understand it because the training is in writing and the employee is illiterate or the training was conducted verbally in a language the employee could not understand, the agency may claim that the certifications are false, resulting in citations or potential criminal liability for the individual who signed the certification as well as the employer.


OSHA prohibits operation of forklifts if they are not in safe operating condition. It is recommended that employers conduct an inspection of each forklift at the beginning of each shift and after any maintenance has been done or an accident has occurred.  At a minimum, forklifts are required to be inspected daily.  While not required, the employer should consider developing and using a written daily checklist to confirm that the operator conducted the daily PIT inspection.  The checklists should be reviewed periodically to assure that they are being utilized.  In addition, is a best practice to maintain inspection and maintenance records for at least the duration of the time they own the specific forklift.  For a detailed inspection checklist for a PIT see OSHA’s checklist.

The PIT Standard lists a number of conditions under which a forklift must be removed from service. If the operator notes these conditions while driving, the operator must stop, park the vehicle and get assistance:

  • If the forklift is not in safe operating condition.
  • If the forklift emits hazardous sparks or flames from the exhaust system.
  • If the temperature of any part of any forklift is found to be in excess of its normal operating temperature.
  • If the forklift has a leak in the fuel system.

(Source: https://www.osha.gov/SLTC/etools/pit/operations/servicing.html)

If there is a question regarding the safe operation of a forklift, the vehicle must be immediately removed from service until it can be thoroughly inspected and any repairs are made. Similar to falsification of employee training certifications, any falsification of inspection or maintenance records can result in citation by OSHA and possible criminal liability.

The employer must also consider whether the forklift is properly rated to be operated in certain workplace environments, for example, is it rated to operate in an area where flammable or combustible materials are being utilized or stored, to insure that the forklift does not create a source of ignition for flammable or combustible materials.


As employers should know, there is a duty to enforce compliance with the PIT regulation with discipline for violations, including unsafe operation, failure to inspect, etc. This discipline needs to be in writing in order to remove a non-compliant operator and also to be able to establish the unavoidable employee misconduct defense to a citation. Finally, the employer must monitor whether an operator is fit to operate a PIT because of physical conditions, including vision, hearing and motor skills if there is objective evidence that these conditions are rendering the operator unfit to operate the equipment in a safe manner. In making this determination, the employer must consider the requirements of the Americans with Disabilities Act regarding assessment of the operator’s ability to perform the essential functions of the job.

In addition, the employer needs to be observant as to whether the operator is impaired by drugs or alcohol. This can be done by training supervisors on the objective signs of drug or alcohol impairment including speech, coordination, bodily odors, etc. If they are observed, the operator should be taken out of service and the employer should consider sending the employee to be tested for drugs or alcohol. Further, if there has been an accident involving personal injury or property damage, the employer should consider a post-accident drug and alcohol test. In either event, the employer should consider establishing a written drug and alcohol testing policy to be able to ensure that the operator is not impaired and creating a safety hazard.


As previously mentioned, OSHA will seek criminal prosecution if an employer falsifies employee training certifications, inspection records, or maintenance records. In United States v. Atlantic States Cast Iron Pipe Company, No. 03-852, 2007 WL 2282514 (D.N.J. Aug. 2, 2007) aff’d sub nom. United States v. Maury, 695 F.3d 227 (3d Cir. 2012), the conviction of an employer on multiple criminal counts involving EPA and OSHA violations demonstrates how an employer can be exposed to this liability for a conspiracy to defraud OSHA during an inspection.

In Atlantic States, the employer was indicted for defrauding OSHA by altering existing conditions at the employer’s foundry to conceal safety hazards to which employees were exposed.  In March 2000, an employee died after he was run over by the employer’s forklift.  In the indictment, the government charged that the employer ignored hazards involving forklifts, including brake problems and allowing untrained employees to operate the forklifts.

In addition, after the fatality, the employer took action to deliberately conceal what had occurred from OSHA (perhaps to avoid OSHA citations). The concealment was alleged to include:

Repairing the forklift brakes after the accident but shortly before OSHA commenced its inspection (after a workplace fatality OSHA must be notified within eight (8) hours and the accident scene cannot be disturbed until the OSHA inspector has an opportunity to commence the inspection and releases the scene).

Conducting a demonstration of the forklift for the compliance officer that was misleading (since the brakes had been surreptitiously repaired after the accident but before the inspector arrived).

Instructing employees to provide false information to the inspector as to how the fatality occurred.

Creating a false written inspection report after the accident which indicated that the forklift had been inspected prior to the accident and was in “perfect operating condition.”

As a result of its inspection, OSHA identified employees who were willing to testify against the employer as to the foregoing actions, resulting in felony convictions. It is important to note that if the employer had not engaged in these post-accident wrongdoings and OSHA had decided to proceed with its limited criminal prosecution authority under the Act, the employer’s liability would have likely been limited to a misdemeanor; the concealment resulted in much greater liability than the underlying violation.


The Powered Industrial Truck Standard is not the most complex or the longest of the OSHA Standards.  However, the requirements contained in the PIT standard are often the subject of OSHA Citations and can expose an employer to potential criminal liability if they are not followed.  If your company owns a forklift, or any other type of PIT, take a look at your program to ensure all of OSHA’s requirements are satisfied: training and certification of employees, inspection and maintenance of PITs, and accurate recordkeeping.  OSHA is not shy about making sure employers follow the PIT Standard; stay one step ahead of OSHA and make sure you are following the rules.

New Budget Deal to Significantly Increase OSHA Fines for the First Time in Twenty-Five Years

Posted in OSHA Enforcement

By James L. Curtis and Patrick D. Joyce

iStock_000065158991_Full.jpgEmployers beware! The new bipartisan budget, passed by both the House and the Senate and signed by President Obama on November 2, 2015, contains provisions that will raise OSHA penalties for the first time in 25 years.

The budget allows for an initial penalty “catch up adjustment,” which must be in place by August 1, 2016. The catch up adjustment is tied to the percentage difference between the October 2015 Consumer Price Index (CPI) and the October 1990 CPI.

Because the October 2015 CPI will not be available until November 17, 2015, the actual percentage increase is unknown at this time. However, based on recent CPI trends, the increase will likely be in the range of 70% – 80% over current penalty amounts.  OSHA would be required to pass an interim final rulemaking to finalize the “catch up” increase.

Assuming an 80% catch up adjustment, starting in August 2016, new maximum penalties would be as follows:

  • Other than Serious violations: $12,600
  • Serious violations: $12,600
  • Willful violations: $126,000
  • Repeat violations: $126,000

After the initial catch up adjustment, OSHA will be required to implement annual cost of living increases, with the adjustment tied to the year over year percentage increase in the CPI. Adjustments must be made by mid-January each subsequent year.

OSHA has the option to implement a catch up adjustment less than the maximum if the Agency determines increasing penalties by the maximum amount would (1) have a “negative economic impact” or the social costs of the increase outweigh the benefits and (2) the Office of Management and Budget agrees. However, OSHA Chief Dr. David Michaels has long advocated for a substantial increase in penalties so it is difficult to envision the Agency seeking anything other than the maximum increase.

The changes in the budget go into effect on July 1, 2016, with the new penalties coming into effect by August 1, 2016.

Such a large increase in penalties along with the yearly cost of living increases will require employers to change how they handle OSHA inspections and the financial ramifications of citations. Contact your Seyfarth Shaw attorney for more information.

NIOSH and Older Workers in the Workplace

Posted in OSHA Compliance

By Brent I. Clark and Craig B. Simonsen

iStock_000059644066_DoubleThe National Institute for Occupational Safety and Health (NIOSH) has recently launched its National Center for Productive Aging and Work (Center).

The new “virtual center,” will focus on worker safety at all ages, promoting lifelong well-being, and will advance the concept of “productive aging.” The NIOSH news release about the Center indicates that today one in every five American workers is over 65. “In 2020 one in four American workers will be over the age of 55, many of them with no intention to retire anytime soon.”

The stated mission of the Center is to:

  • Develop a research plan for improving the safety and health of workers of all ages;
  • Facilitate collaboration among researchers and partners;
  • Develop new interventions; and
  • Highlight best practices for creating “aging-friendly” workplaces.

Additionally, the Center will work with NIOSH to draft “national policies” related to the concept of “aging-friendly” work. The Center will also work to advance the concept of “productive aging” — that is “providing a safe and healthy work environment for all workers, and creating conditions that allow workers to function optimally and thrive from their first day on any job until the last day before full retirement.”

The Center provides links and information to assist employers in meeting this need. For instance, the Designing the Age Friendly Workplace reference is a website that provides “practical tools, insightful videos, and digital stories for helping organizations take action in preparing for the aging workforce.” Particularly the healthcare and the wholesale/retail areas on this site provides informative sections on “Fall Prevention,” “Patient Handling,” and “Universal Design.”

Another example of Center links and information is the 2015 White House Conference on Aging. The site provides President Obama’s address, a video timeline of the conference, information about regional forums, and policy briefs.

The Center is a new resource that employers may find useful in planning for and reacting to having an older workforce. The Center will also provide insight into how NIOSH and OSHA may view workplace safety and health issues that concern “older” workers.

ATF Explosives Compliance Inspection Enforcement Facts and Figures

Posted in ATF, Explosives, Investigations/Inspections

By Brent I. Clark, James L. Curtis, and Craig B. Simonsen

iStock_000011654038_LargeThe Bureau of Alcohol, Tobacco, Firearms and Explosives (ATF), has posted its Fiscal Year (FY) 2014 enforcement Facts and Figures.

During FY 2014 the Bureau conducted 4,006 explosives compliance inspections. Of those, ninety percent were either “no violations” (69.4%) or “other” (19.6). “Other” was defined as “out of business, etc.”

Of the remaining explosives compliance inspections, there were reports of violation in just 7.2%, a total of 287 cases. Warning letters issued in 2.7% of the inspections, representing 109 cases. Only in 0.8% of the inspections, just 34 cases, were there warning conferences held. Ten cases involved revocation of explosive licenses being sought, in only 0.2% of the inspections.

These statistics show that while the industry overall is doing pretty well in explosives compliance inspections, there remain some issues that employers need to stay on top of. Make the effort to stay in compliance and avoid an ATF enforcement action.

ATF Institutes a Voluntary Magazine Identification-Labeling Program

Posted in ATF, Explosives, Investigations/Inspections

By Brent I. Clark, James L. Curtis, and Craig B. Simonsen

iStock_000011654038_LargeThe Bureau of Alcohol, Tobacco, Firearms and Explosives (ATF), in its recent ATF EXPLOSIVES Industry Newsletter, informed the industry of a new voluntary “process to better track industry-owned explosives storage magazines.”

The Bureau noted that during natural disasters, local emergencies, and civil unrest, the ATF assists emergency responders in securing nearby explosives. In these situations, the ATF provides information on the location of explosives magazines within an affected area. According to the ATF, with the current processes, “it is difficult to identify industry-owned magazines across the country in a timely manner for emergency notifications.”

The ATF indicates that a significant obstacle to emergency responder notification is the lack of a unique identifier for each industry magazine. Although the ATF maintains GPS coordinates for magazines, the coordinates “can’t be used as unique identifiers since readings can vary slightly from one inspection to another, and the coordinates sometimes refer to groups of magazines.”

The ATF has announced that after consulting with explosives industry members and associations, it will, with the “voluntary participation of industry members,” have Industry Operations Investigators affix “small labels with unique numbers to interior magazine walls during routine inspections.” The ATF will also replace damaged, missing, or destroyed labels during subsequent inspections. The ATF states that this program will not place any burden or responsibility upon industry members or change their internal magazine designations.

The labels, as shown in the sample below, “will not contain other information or electronically track the magazines.”

ATF Label

While the new labeling program is voluntary, the ATF is encouraging licensees and permittees to participate to ensure the success of the program.

Eighth Circuit Rejects OSHA’s Attempt to Expand the Scope of its Machine Guarding Standard

Posted in OSHA Litigation

By Brent I. Clark, James L. Curtis, Adam R. Young, and Craig B. Simonsen

In a review of an Occupational Safety & Health Review Commission (OSHRC) decision, the U.S. Court of Appeals for the Eighth Circuit ruled this week to vacate a $490,000 penalty for failure to employ machine guards to prevent the ejection of a workpiece in a catastrophic breakdown of a lathe. Perez v. Loren Cook Company, No. 13-1310, __ F.3rd __ (8th Cir. October 13, 2015).

In its decision, the Court agreed with the OSHRC and its Administrative Law Judge (ALJ), which concluded that 29 CFR § 1910.212(a)(1) focuses on “point-of-contact risks and risks associated with the routine operation of lathes, such as flakes and sparks,” but the rule does not contemplate the catastrophic failure of a lathe that would result in a workpiece being thrown out of the lathe. The ALJ vacated the Occupational Safety & Health Administration’s (OSHA’s) citation issued against Loren Cook Company, and the OSHRC adopted the unmodified recommendation of the ALJ. Disagreeing, the Secretary of Labor petitioned the Court for review of the OSHRC order arguing that the Court should defer to OSHA’s interpretation of the standard. The Court denied the Secretary’s petition for review and affirmed the OSHRC’s order.

In its discussion, the Court noted that “we generally afford substantial deference to the Secretary’s interpretation of his own regulations.” “But deference to the Secretary’s interpretation is only appropriate when both the interpretation itself and the manner in which the Secretary announces the interpretation are reasonable.” The Court relied on and cited to Martin v. Occupational Safety & Health Review Comm’n, 499 U.S. 144, 157-58 (1991). The Court cited Supreme Court precedent that deference to an Agency’s interpretation is inappropriate when the interpretation is “‘plainly erroneous or inconsistent with the regulation.’” Auer v. Robbins, 519 U.S. 452, 461 (1997) (quoting Robertson v. Methow Valley Citizens Council, 490 U.S. 332, 359 (1989)). Also, deference is inappropriate “when there is reason to suspect that the Agency’s interpretation ‘does not reflect the agency’s fair and considered judgment on the matter in question.’” Christopher v. SmithKline Beecham Corp., 132 S. Ct. 2156, 2166 (2012) (quoting Auer, 519 U.S. at 462).

The Court noted that in Perez v. Loren Cook Company, OSHA’s position conflicted with prior interpretations, and evidenced a position as nothing more than a litigating position, or using the interpretation as “a post hoc rationalization for a prior action.”

The Court also had its own precedent for parameters under which it should afford an Agency’s interpretation deference:

[D]eference is due when an agency has developed its interpretation contemporaneously with the regulation, when the agency has consistently applied the regulation over time, and when the agency’s interpretation is the result of thorough and reasoned consideration.” Solis v. Summit Contractors, Inc., 558 F.3d 815, 823 (8th Cir. 2009) (quoting Advanta USA, Inc. v. Chao, 350 F.3d 726, 728 (8th Cir. 2003)).

As such, the Court concluded that having determined that the Secretary’s interpretation of section 1910.212(a)(1) was not entitled to deference, and found that the section did not cover the conduct for which the Secretary cited Loren Cook.

OSHA Compliance Safety and Health Officers (CSHOs) and Area Directors often apply their own interpretations of the OSHA standards. This Eighth Circuit decision is a clear reminder that there are limits to OSHA’s ability to adopt new interpretations of its standards.

Energy Insights: An Update from the Third Quarter of 2015

Posted in Alternative Energy, CAA, Environmental Compliance, Mexico, OSHA Compliance

By Joshua L. Ditelberg and Robert S. Winner

In this edition of Seyfarth Shaw’s Energy Insights Newsletter our Energy and Clean Technologies team covers important developments in Q3 2015 for the energy industry including 1) the latest initiatives from the Environmental Protection Agency on clean power, climate and chemical regulation, 2) the National Labor Relations Board’s major shift on joint-employer status impacting contractor relationships, and 3) the surprising results upon Mexico opening its energy markets.

The EPA Has a Very Busy Third Quarter

In a flurry of activity in this past quarter, the Environmental Protection Agency (EPA) issued its final version of the Clean Power Plan (CPP), proposed new regulations to reduce methane emissions under the Climate Action Plan (CAP), and tightened chemical regulations for safe use, ahead of the proposed changes to the Toxic Substances Control Act of 1976 (TSCA).

The CPP is specifically geared towards the reduction of carbon emissions from power plants and energy producing facilities.  In the final rules the Clean Power Plan call for a reduction in greenhouse gas emissions from their 2005 levels by 32% by the year 2030, but the deadline for commencing reduction has been pushed back to 2022.  Opponents are already challenging the right of the EPA under the Clean Air Act to implement and enforce such rules and it is expected that the legal challenge will reach all the way to the Supreme Court, potentially further delaying implementation.

Similar to the Clean Power Plan, the EPA’s proposed regulations under the Climate Action Plan announced back in 2013 to reduce methane gas emissions from oil and gas producing activities, such as hydraulic fracking, also has its sights on reduction in such emissions by 45% by the year 2025.

Finally, the EPA took the lead in identifying a list of 83 “Work Plan” chemicals for further risk assessments and potential regulation. The TSCA grants the EPA the power to regulate the manufacture and sale of chemicals that may be a risk to the public.  Congress is expected to finally pass The Toxic Substance Control Modernization Act, which will, among other things, significantly overhaul some outdated methods, provide for a shift in expense towards the chemical companies, and set safety standards for thousands of chemicals currently unregulated.

The often maligned EPA may be hitting its stride in the twilight of Obama’s second term and ahead of the UN Climate Change Conference set for Paris in November.

The Browning-Ferris Decision and Potential Implications on Energy Industry

In a ruling that will affect most business relationships and extends far beyond either labor law or the concept of employment generally, the National Labor Relations Board (NLRB) recently issued a much awaited decision, Browning-Ferris Industries of California (Browning-Ferris), that expansively broadened the definition of who is a joint employer — an unrelated entity that arguably does not determine matters governing essential employment terms of another employer’s employees but that nevertheless is found to bear responsibilities to those employees under the National Labor Relations Act (NLRA).

Under the NLRB’s newly expanded test, two or more otherwise unrelated employers may be found to be a joint employer of the same employees under the NLRA “if they ‘share or codetermine those matters governing the essential terms and conditions of employment.’ In determining whether a putative joint employer meets this standard, the initial inquiry is whether there is a common-law employment relationship with the employees in question. If this common-law employment relationship exists, the inquiry then turns to whether the putative joint employer possesses sufficient control over employees’ essential terms and conditions of employment to permit meaningful collective bargaining.” Affecting both unionized and non-union companies (and even entities that have no employees of their own) alike, the decision has broad implications for other employment laws and government agencies such as the Department of Labor, EEOC and OSHA.

For the energy industry, which heavily relies on staffing companies, subcontractors and outsourcing to perform services such as well drilling, well-head services, equipment operation and services, and water and oil and gas transportation, to name just a few, the implications can be far reaching and potentially crippling.  Employers will need to reevaluate their relationships and protections against unintended liability or consequences.

A Tale of Two Energy Markets in Mexico: Renewables Ramp Up While Oil Falters 

In August of 2014, Mexico passed sweeping legislation opening up its largely closed energy markets, breaking up the government’s 70+ year monopoly in the areas of oil and gas, electricity and other power segments.  Large oil and gas blocks would now be available and auctioned off for foreign investment and lease, and changes in the electricity market would cause new competition with longer fixed price power purchase contracts, with a clearly defined push towards clean energy / renewable power generation of 35% by 2024.

A year after that legislation passed, Mexico held its first auction for oil and gas reserve blocks and by all accounts, the auction was a “disappointment”, with only two of the fourteen block up for auction actually sold.  Some blamed the oil market in general, others blamed minimum prices, the terms and conditions of the auction.  Whatever the circumstance or reasoning, Mexico is finding it difficult to offload large oil and gas reserves to foreign investment.

Conversely, the first auction for renewable energy projects will be held later this year and interest is strong, in particular for solar energy projects.  5-10 GW of solar power projects have already been permitted in 2015 and if proposed goals are to be met, much more will be required.  The longer term 15 year PPAs at fixed price with clean energy certificate obligation lasting 20 years, and solar prices on par with other power generating facilities, the conditions are ripe for Mexico to take advantage of the opportunity.

Let’s hope officials learned from their mistakes at the oil and gas auction and listen to the bidding public on what they need to make projects financially attractive.

Energy Insights: An Update from the Third Quarter of 2015