June 29, 1994

Mr. Jeffrey D. Jefferson
Nordstrom Steele & Jefferson
215 Fidalgo Avenue, Suite 201
Kenai, Alaska 99611

Dear Mr. Jefferson:

This is in response to your letter of May 11 and follow-up to a telephone conference with you on June 9 initiated by Rolland Stroup of our staff, regarding the applicability and requirements of the Process Safety Management of Highly Hazardous Chemicals (PSM) standard, 29 CFR 1910.119.

You stated in your letter you are specifically trying to determine whether an employer in a specific factual setting has the obligation to obtain and evaluate information regarding the contract employer's safety performance and programs as required by 1910.119(h)(2). You portrayed the specific factual setting as follows:

1. The employer is a large oil company engaged in the drilling, transportation and refining of oil and gas products.

2. The oil company utilizes oil service contractors (independent contractors) to accomplish various activities in the drilling and construction phases of its operations.

3. The oil company retains an oil field service contractor to construct several thousand lineal feet of perforation guns. This undertaking, by its nature, involves the manufacture of explosives as defined by 29 CFR 1910.119.

4. The assembly of the perforation guns occurs at the contract employer's shop, and then another subcontractor's employees transport the perforation guns to the oil platform. Thereafter an employee of the contractor who assembled the guns travels to the platform to actually carry out the detonation once the perforation guns have been placed into the well hole by a third subcontractor's employees.

5. One day while at the contractor's shop, during the assembly process, the guns detonated, killing one employee and injuring various others.

6. Following the investigation it was determined that (1) the contractor was not complying with federal regulations in the storage of explosives at the facility, (2) the facility had not been issued a certificate of occupancy by the State Fire Marshall for the explosive manufacturing process (and in fact would not have been issued such a certificate due to the building location), (3) the contractor was found to have provided no training to some of the employees engaged in the assembly of the guns, and (4) was found to have new procedures in place as required by the State's process safety management OSHA regulations.

You state in you letter: "My question quite simply is this, when the oil company undertook to retain the contractor to assemble the perforation guns specific for the well job it was undertaking, does 29 CFR 1910.119(h) view the oil company as an employer who is selecting a subcontractor performing specialty work on a covered process, and who therefore has an obligation to obtain and evaluate information regarding the contractor employer's safety performance and programs?"

Our answer to your question follows:

The PSM standard at paragraph .119(a)(2)(ii) specifically excludes oil or gas well drilling or servicing operations from coverage. The reason for the exclusion is stated on page 6369 of the preamble to the PSM standard, as follows:

OSHA also proposed to exclude oil and gas well drilling and servicing operations because OSHA had already undertaken rulemaking with regard to these activities (48 FR 57202). OSHA continues to believe that oil and gas well drilling and servicing operations should be covered in a standard designed to address the uniqueness of that industry. This exclusion is retained in the final standard since OSHA continues to believe that a separate standard dealing with such operations is necessary.

The Proposed Rule on Oil and Gas Well Drilling and Servicing, designated 1910.270, states in paragraph (a)(1) Scope and application (copy enclosed):

This section contains requirements for drilling, servicing and related operations performed on, or in support of, potential and actual oil and gas wells, including injection wells and water supply wells. The standard addresses hazards associated with assembling and disassembling rigs, rotary drilling, well servicing, cementing, drill stem testing, well completion, wireline services, and acidizing.

The passages quoted above from 1910.119 and proposed 1910.270 indicate that, in the factual setting you described, the oil company is not considered by OSHA to be responsible for 1910.119(h)(2)(i) obligations to the extent the contractor is retained exclusively to do work for an oil or gas well drilling or servicing operation. The basis for that obligation, to assure that employers do not introduce additional hazards to covered processes, would not apply if the contractor has contact only with employees working in processes excepted from coverage under the PSM standard. See the Preamble discussion on page 6387 on the Final Rule, a copy of which is enclosed for your use. However, the oil company still has the responsibility to be in compliance with all other OSHA standards that apply to its operations and, with regard to operations under OSHA jurisdiction and not covered by other OSHA standards, with Section 5(a)(1), the general duty clause, of the Occupational Safety and Health Act, which requires each employer to furnish to each of his employees employment and a place of employment which are free from recognized hazards that are causing or are likely to cause death or serious physical harm to his employees.

We appreciate your interest in occupational safety and health. If we can be of further assistance, please do not hesitate to contact us.

Sincerely,



John B. Miles, Jr., Director
Directorate of Compliance Programs

Enclosures