UNITED STATES OF AMERICA OCCUPATIONAL SAFETY AND HEALTH ADMINISTRATION In Re Inspection of: ) ) BP PRODUCTS NORTH AMERICA INC., ) Inspection Nos. 308314640, and its Successors, ) 308314988, 308314632, 308316942, ) 308316322, 308316314, 308314996, ) 308315019, 308316751 )
SETTLEMENT AGREEMENT WHEREAS, the United States Depart ment of Labor, Secretary of Labor, Occupational Safety and Health Administra tion (“OSHA”) has issued citations in connection with Inspection Nos. 308314640 and 308314988 (the “cita tions”), and its investigation of an explosion and fire at the Refinery owned by BP Products North America Inc. (“BP Products”) located at Texas City, Texas (the “Texas City Refinery” or “Refinery”); WHEREAS, OSHA has other ongoi ng investigations at the Texas City Refinery identified by the Inspection Nos. 308314632, 308316942, 308316322, 308316314, 308314996, 308315019, and 308316751 (the “other inspections”); WHEREAS, OSHA has presen ted its findings concerning the other inspections to BP Products; and WHEREAS, OSHA and BP Products desire to resolve all issues involving the citations and matters connected with all of the identified inspections; OSHA and BP Products hereby agree as fo llows with respect to the Texas City Refinery: 1. PSM Expert: BP Products agrees, as a cond ition of settlement, to perform the following with respect to the Texas City Refinery:2 a. BP Products shall retain one or more firms with expertise in the field of process safety management, in cluding pressure relief systems, safety instrumented systems, human factor analysis and performing process safety audits and PSM system audits (“PSM Expert”) to conduct a comprehensive audit and analysis of the PSM Systems at BP Products’ Refinery and as sess the robustness of the PSM systems. BP Products shall nominate a firm or firms a nd shall provide credentials for the firm(s) and its principals to the OSHA office within sixty (60) days following the execution of this Settlement Agreement. If OSHA does not concur in the rete ntion of a firm, BP Products shall continue the search until it nom inates a firm which is accepted by OSHA. That firm(s) shall be retained by BP Products within thirty (30) days following OSHA’s concurrence. For purposes of this Agreement, the retained firm or firms is referred to as the “PSM Expert.” b. The audit and analysis shall be comprehensive, conducted in accordance with best practices in the industry, and shall include, but is not limited to, the following matters: (1) The safe location of pers onnel in relation to hazardous
processes; (2) The safe movement of ve hicles into process areas; (3) The construction of fired and unfired pressure vessels, particularly the relief of overpressures to a safe location, in accordance with 29 CFR 1910.106(i)(3) and the referenced ASME codes; (4) The classification of hazardous locations as defined in 293 CFR 1910.399; (5) The notification of contr actors and employees regarding potential hazards; (6) The inspection and maintenance of alarms providing personnel with notification of hazardous conditions that may be developing; (7) The standard operating proce dures (particularly start up and emergency shut down procedures); (8) The adequacy of pressure relief for individual pieces of equipment; (9) The adequacy of safety instrumented systems; (10) Human factor analysis; and (11) Lock out/Tag out programs, procedures, and applications. In conducting the audit and assessment, the PSM Expert shall seek input from BP Products’ authorized em ployee representative. c. The PSM Expert shall produce to BP Products, pursuant to the terms of this Agreement, his first audit report within six (6) months from the date of retention by BP Products. Thereafter, th e PSM Expert shall pr ovide two semi-annual progress reports and one final report (collectiv ely, the “Safety Reports”). The final report shall be submitted to BP Products two (2) y ears from the date BP Products retains the PSM Expert. Each Safety Report shal l include the deficiencies found and recommendations for correction. These reco mmendations shall be prioritized to place those recommendations first that address the most imminent hazards posed to personnel.4 Within ten days of BP Products’ receipt of a Safety Report, BP Products will provide the Report to OSHA’s Houston Sout h Area Office and to BP Pr oducts’ authorized employee representative for review and comment. S hould any Safety Report contain confidential business information (“CBI”), BP Products will provide that portion of the Report only to OSHA; BP Products will also provide that portion of the Report to any authorized employee representative that has executed a confidentiality agreement with BP Products in which the employee representative agrees not to disclose any CBI in the Report to third parties. BP Products shall implement all feasible recommendations in the Safety Reports. BP Products shall prepare and provi de a copy of a statement of action to be taken on the recommendations set forth in th e Safety Report (“statement of action”) to OSHA and the authorized employ ee representative within thirty days (30) of receipt of the Safety Report. If BP Products determines not to implement any recommendation(s) contained in the Safety Report, BP Products wi ll state in detail in the statement of action the reason(s) why the recommendation will not be implemented and an indication of the action(s) to be taken to deal with the stat ed issue, including m easures BP Products will employ to protect employees from the stated issue. d. OSHA and the authorized employee representative shall have fifteen (15) business days to respond to BP Products’ statem ent of action. In the event OSHA and BP Products disagree, they will confer to resolv e such disagreement within a reasonable time after OSHA’s comments are r eceived. The responsibility to confer within a reasonable time does not waive BP Products’ right to file a petition for modification under 29 CFR 1903.14a, nor does it waive BP Products ’ obligations to comply with the time periods and posti ng requirements provided in 29 CFR 1903.14a.5 2. Organizational Expert: BP Products agrees to retain an expert who is qualified by education, experience and training in organizational communication, organizational behavior, or organizational analysis (“Or ganizational Expert”). The names and credentials of firms and their principals having this expertise that are under consideration shall be provide d to the OSHA office within sixty (60) days following the execution of this Settlement Agreement. If OSHA does not concur in the retention of a firm, BP Products shall continue the search un til it locates a firm with whose retention OSHA concurs. That firm shall be retained by BP Products within thirty (30) days following OSHA’s concurrence. a. The Organizational Expert’s focus and recommendations should address, at a minimum, the followi ng concepts and desired results: 1. Concepts: Management Commitment/Employee Involvement : Management commitment and employee involvement are complementary. Management commitment provides the motivating force and the resources for organizing and controlling activities within an organization. In any effective safety and health program, management regards workers’ safety and health as a fundamental core value of the organization and applies it s commitment to safety and health protection with as much vigor as to other organizational purposes. Employee involvement provides the means through which workers develop and/or express their own commitment to safety and health protection, for themselves and for their fellow workers. 2. Results: (a). State clearly a worksite policy on safe and healthful work and working conditions so that all personnel with responsibility at the site and personnel at other locations with responsibility for the si te understand the priority of safety and health protection in relation to other organizational values.6 (b). Provide visible top ma nagement involvement in developing and implementing the program, so that all will understand that management is committed to establishing safety and health as a core value of all company operations. (c). Strive to develop a process with represented organized labor, such as the Tr iangle of Prevention System (“TOPS Program”) or the Safety Training Operations Maintenance Process Program (“STOMP Program”), to encourage employee involvement in the structure and operation of the program and in decisions that affect their safety and health. (d). Provide adequate authority and resources to responsible parties, so that assigned responsibilities can be met. (e). Hold managers, supervis ors, and employees directly accountable for meeting their safety and health responsibilities, so that esse ntial tasks will be performed. b. The Organizational Expert will pr ovide a written interim and final assessment of the communication within BP Pr oducts’ Refinery with respect to safety and safety commitment (collectively the “Org anizational Reports”). The Organizational Reports shall be submitted to BP Products at si x months and at one (1) year from the date this Settlement Agreement is executed if the Organizational Expert has been previously retained by BP Products or, if that is not the case, from th e date BP Products retains the Organizational Expert. The Organizational Reports will include communication within and between the following groups: management employees, supervisors, authorized employee representatives and non-management employees, and will assess the impact of the communication on the implementation of safe ty practices and procedures. Within ten days of BP Products’ receipt of an Organizational Report, it shall provide that Report to OSHA’s Houston South Area Office and to BP Products’ authorized employee representative for their revi ew and comment. Should any Organizational Report contain7 CBI, BP Products will provide that portion of the Report only to OSHA; BP Products will also provide that portion of the Report to a ny authorized employee representative that has executed a confidentiality agreement with BP Products in which the employee representative agrees not to disclose any CBI in the Report to third parties. c. BP Products will implement all feasible recommendations in the Organizational Reports. BP Products shall prep are and provide a copy of a statement of action to be taken on the recommendations set forth in the Organizational Report (“statement of action”). In the event BP Products determines not to implement any recommendation(s) contained in the Organiza tional Report, BP Products will detail in the statement of action the reason(s) why the r ecommendation is not to be implemented and an indication of the action(s) to be taken to deal with the stated issu e. BP Products agrees to provide a copy of the statem ent of action to the company’s authorized representative at the same time OSHA is provided such statements. OSHA shall have fifteen (15) business days to respond to BP Products’ statemen t of action. In the event OSHA and BP Products disagree over any actions being or not being taken as a result of the recommendations, they will confer to resolv e such disagreement within a reasonable time after OSHA’s comments are received. The res ponsibility to confer within a reasonable time does not waive BP Products’ right to f ile a petition for modification under 29 CFR 1903.14a, nor does it waive BP Products’ obligati ons to comply with the time periods and posting requirements provided in 29 CFR 1903.14a. 3. Safety and Health Training: BP Products shall ensure that all employees (management and labor) and contractors (t o the extent training and communication is required for contractors by 29 CFR 1910.119) unde rstand the hazards to which they may8 be exposed and how to prevent harm to them selves and others from exposure to these hazards, so that employees accept and follow established safety and health protections, including safe operating procedures. a. So that supervisors will carry out their safety and health responsibilities effectively, en sure that they understand th ose responsibilities and the reasons for them. b. Supervisors shall reinforce the em ployee training on the nature of potential hazards in their work and on n eeded protective measures through continual performance feedback and, if necessary, through enforcement of safe work practices. 4. Occupational Injuries and Illnesses Logs: Every six (6) months, beginning six (6) months after the execution of this Agre ement, for a total period of three (3) years, BP Products agrees to submit to OSHA, and to BP Products’ authorized employee representative, its Logs of Occupational Injuries and Illnesses (“OSHA 300 Logs”) and all incident reports related to PSM i ssues that are required by 29 CFR 1910.119(m), including near misses. Copies of reports pr ovided pursuant to this paragraph (and any questions regarding such notic es) shall be directed to: Occupational Safety and Health Administration, c/o Charles Williams, Area Director, Houston South Area Office, 17625 El Camino Real, Suite 400, Housto n, Texas 77058. In addition, BP Products shall notify OSHA’s Houston South Area Office of any accident or injury involving PSM and/or Lock out/Tag out related issues at BP Produc ts’ Refinery that results in an employee losing work-time of one or more days during the three (3) year period following the date this Settlement Agreement is executed. Fu rther, BP Products agrees to permit OSHA access to the workplace at BP’s Products’ Refi nery to inspect and investigate any such9 accident or injury. 5. Enforcement of Agreement: BP Products agrees that the citations incorporate the abatement measures set fo rth in Paragraphs numbered 1 through 4 (including subparagraphs) of this Settlement Agreement and that these measures are required abatement of the cited conditions. BP Products waives its right to contest the Texas City Refinery citations and consen ts to the entry of a Final Order by the Occupational Safety and Health Review Commi ssion that incorporates the terms of this Settlement Agreement, the citations, penaltie s, and abatement dates. The failure to perform any measure required in this Agreemen t may be cited as a failure to abate under Section 10(b) of the Occupationa l Safety and Health Act (the “Act”), 29 U.S.C. § 659(b). BP Products agrees that this Settlement Agreement and its terms, including the abatement measures set forth in Paragraphs 1 thr ough 4 (including subpara graphs), shall be enforceable under Section 11(b) of the Act, 29 U.S.C. § 660(b). BP Products agrees that it will not oppose the filing of a petition for summary enforcement of this Agreement and citations under Section 11(b) of the Act, 29 U.S.C. § 660(b). Nor will BP Products oppose the entry of an order of enforcement in such a proceeding by the United States Court of Appeals. Nothing in this agreement limits BP Products’ defenses and arguments in an action for contempt or fa ilure to abate (other than the argument that the provisions of this Agreement are not required abatement). 6. Abatement: BP Products represents that hazardous conditions are, or will be, abated as follows: a. The citation items listed below are related to the Isomerization Unit (“ISOM unit”) itself and have been abated by the shutdown of the ISOM unit. If BP10 Products elects to restart the ISOM unit, BP Products will submit an abatement action plan addressing these items to OSHA at the Houston South Area Office at least ninety (90) days prior to restarting the ISOM unit. OSHA will then have thirty (30) days to review the plan and make requests or modifications to the plan by submitting them to the Texas City Refinery. BP Products will then have thirty (30) days to respond to OSHA’s requests or modifications and to discuss w ith OSHA any disagreements concerning the requests or modifications. Th e responsibility to confer with OSHA does not waive BP Products’ right to file a petition for modification under 29 CFR 1903.14a, nor does it waive BP Products’ obligations to comply w ith the time periods and posting requirements provided in 29 CFR 1903.14a.

• Inspection Number 308314640:

• Citation 1, Items 1, 2a, 2b, 2c, 2d, 3, 4, 6, 7a, 7b, 8, 9, 10, 11, 12 and 13;

• Citation 2, Items 2, 3, 4, 5, 6, 7, 8;

• Citation 2, Items 10 through 39;

• Citation 2, Items 41 through 109;

• Citation 2, Item 110 and 116. b. The citation items related to the blowdown stack in the ISOM unit, as listed below, are hereby abated by BP Products’ representation that the ISOM unit blowdown stack system has been permanently removed from service, other than for use required to de-inventory the ISOM process un it as part of the ongoing investigation by governmental agencies. Deinventory will be done in a manner that avoids exposing employees to hazards.11 • Inspection Number 308314640:

• Citation 1, Item 5;

• Citation 2, Items 1, 40 and 111 through 115. c. BP Products represents that the citation items listed below have been abated as of the signing of this Agreemen t. Specifically, BP Products states that it has moved the contractor trailers and the el ectrical equipment conne cted to and added on to the contractor trailers, to a location a safe distance from any process units and other hazards of the work site.

• Inspection Number 308314640:

• Citation 2, Items 117 through 134 and Items 147 through 301. d. The items listed below will be deemed to be abated when BP Products notifies OSHA of the completion of the work of the Organizational Expert and the PSM Expert(s), as outlined previously in this Agreement. Each notice shall be submitted within thirty (30) days of the completion of the experts’ work.

• Inspection Number 308314640:

• Citation 2, Item 9;

• Abatement specified in Paragr aphs 1, 2, 3 and 4 of this Agreement. e. BP Products agrees that it wi ll notify OSHA how it intends to abate the items listed below in an abatement action plan to be submitted to OSHA, pursuant to 29 CFR 1903.19(e), within sixty (60) days of the execution of this Agreement. OSHA will then have thirty (30) days to review the plan and make requests or modifications to the plan by submitting them to the Texas City f acility. BP will then12 have thirty (30) days to respond to OSHA’s re quests or modifications and to discuss with OSHA any disagreements concerning the request s or modifications. The responsibility to confer with OSHA does not waive BP Products ’ right to file a petition for modification under 29 CFR 1903.14a, nor does it waive BP Pr oducts’ obligations to comply with the time periods and posting requireme nts provided in 29 CFR 1903.14a.

• Inspection Number 308314640:

• Citation 2, Items 135 through 146.

• Inspection Number 308314988 (The Health Inspection):

• Citation 1, Items 1 through 9;

• Citation 2, Items 1 through 2;

• Citation 3, Items 1a, 1b and 2. f. The items addressed in this se ction 6(f) relate to the other inspections at the Texas City Refinery listed below. To the extent such items are not addressed in this Agreement or have not alr eady been abated, BP Products agrees that it will notify OSHA how it intends to abate the items listed below in an abatement action plan to be submitted to OSHA, pursuant to 29 CFR 1903.19(e), within sixty (60) days of the execution of this Agreement. OSHA will th en have thirty (30) days to review the plan and make requests or modi fications to the plan by submitt ing them to the Texas City Refinery. BP Products will then have thirty (30) days to respond to OSHA’s requests or modifications and to discuss with OSHA any disagreements concerning the requests or modifications. The responsibil ity to confer with OSHA does not waive BP Products’ right to file a petition for modificati on under 29 CFR 1903.14a, nor does it waive BP Products’ obligations to comp ly with the time periods an d posting requirements provided13 in 29 CFR 1903.14a. Under BP Products’ siting procedures , BP Products has examined the location of all temporary and pe rmanent occupied structures, in particular trailers and satellite control rooms, in the Texas City Re finery, and will re-examine these structures in compliance with the findings of the PSM Expert. Pursuant to its examination, BP Products has either evacuated or removed all trailers with in 500 feet of blowdowns and flares, moved approximately 190 people from tr ailers to other buildings and has leased offsite space for further movement of personnel. Additionally, as to the Satellite Control Room (“Pump Room”) in the Fluid Catalyst Cracking Unit No. 1, BP Products has relocated resident employees from that room to the Central Control Room. In the future, BP Products will construct a substitute Satellite Control Room that is properly placed pursuant to BP Products’ policie s and procedures on the siting of permanent facilities. Further, as part of the audit by the PSM expert, BP Products will address a positive material identification program for its piping system and the use of safety integrity levels (“SILs”) in its PHAs.

● The other inspections: OSHA Inspection Nos. 308314632, 308316942, 308316322, 308316314, 308314996, 308315019, and 308316751. 7. Abatement Verification: BP Products will comply with all applicable abatement verification provisions of 29 C. F.R. 1903.19, including but not limited to, all certification, documentation, and posting requirements. Abat ement certification shall be accomplished within 45 calendar days after the abatement da tes specified in the OSHAapproved abatement plan, by mailing a letter to Occupational Safety and Health Administration, c/o Charles Williams, Area Director, Occupational Safety and Health14 Administration, Houston South Area Office, stating that abatement has been completed, the date and method of abatement, and that affected employees and their representatives have been informed, in writing, of the abatement. Any required abatement documentation shall be submitted along with the abatement certification. 8. Abatement Monitoring: BP Products shall permit OSHA, including its experts, to have access to the workplace at BP Products’ Refinery subsequent to the dates fixed for abatement for the specific and limite d purpose of determining if the conditions described in the citations a nd this Agreement have been corrected. BP Products also agrees to allow OSHA (including its expert s) access to the Texas City Refinery to determine progress and compliance with this Agreement. Any expe rts retained by OSHA to assist in the monitoring effort shall execu te a confidentiality agreement which prohibits such experts from disclosing to third parties any information related to the operation of the Texas City Refinery learned in connec tion with the monitoring. OSHA shall provide such confidentiality agreement(s) to BP Products prior to any such expert’s entry onto the Texas City Refinery. Nothing in this Agr eement shall be construed as limiting OSHA’s authority to conduct any type of inspection authorized by the Act. 9. Settlement Payment: BP Products shall pa y the total penalty of $21,361,500.00 within forty five (45) days after the date this Settlement Agreement is executed. BP Products shall tender payment to: U.S. Department of Labor, Occupational Safety and Health Administr ation, c/o Charles Williams, Area Director, Houston South Area Office, 17625 El Camino Real, Suite 400, Houston, Texas 77058. The check shall be made payable to “U. S. Department of Labor - OSHA.” 10. Compliance with OSH Act: BP Products shall comply with the15 Occupational Safety and Health Act. 11. Authorized Employee Representative(s): BP Products certifies that the names and addresses of all au thorized employee representatives of affected employees are: Joe Bilancich, Chairman, United Stee lworkers of America, 2327 Texas Avenue, Texas City, Texas 77590-8341. 12. No Other Au thorized Employee Representative(s): BP Products further certifies that there are no other unions representing affected employees except those set forth above. 13. Service on Authorized Employee Representative(s): OSHA certifies that service of the fully executed Settlement Agreement was made on the authorized employee representative(s) on the _____ day of _______________________, 2005. 14. Non-Admissions: Neither this Settlement Agreement nor BP Products’ consent to entry of a final order by th e Commission pursuant to this Agreement constitutes any admission by BP Products, it s parents, subsidiaries, affiliates, representatives, agents, officers, directors, or employees (the “BP Products Parties”) of violation of the Occupational Safety and H ealth Act (“OSH Act”) or regulations or standards promulgated there und er. Neither this Settlement Agreement nor the Texas City Refinery citations, related reports or any order entered pursuant to this Agreement (collectively, the “Enforcement Documents”) is intended to be offered, used or admitted in evidence against any BP Products Parties in any proceeding or litigation, except for proceedings and matters brought by the Unite d States Government. This does not preclude any BP Products Party from arguing the admissibility or non-admissibility of the Enforcement Documents under applicable rules of evidence in any subsequent proceedings, other than in proceedings brought by the Secretary of Labor to enforce this16 Agreement. BP Products is en tering into this Agreement wi thout any prejudice to the BP Products Parties’ rights to raise any defense or argument in any future or pending cases, proceeding, or litigation. The BP Products Pa rties retain the right to assert in any subsequent action or proceeding that any future existing conditions identical or similar to those alleged in the Texas City Refinery ci tations do not violate th e Occupational Safety and Health Act or any standard promulgated th ere under. By BP Products’ entry into this Agreement, the BP Products Parties do not admi t, and in fact specifically deny, the truth of any alleged facts, any of the characterizat ions of BP Products Parties' alleged conduct or any of the conclusions set forth in the Texas City Refinery citations or amended citations issued in this matter. The partie s acknowledge that the agreements, statements, stipulations, and actions here in are made solely for the purpose of settling this matter economically and without litig ation or further expense. 15. Compliance with this Agreement: The parties agree that OSHA reserves the right to take appropriate action in the event it deems BP Products has not appropriately complied with this Agreement in good faith. 16. Resolution of Other OSHA Inspections: Since the abatement contained in this Agreement is extensive and Refinery-wide, this Agreement resolves all pending issues in OSHA Inspection Nos. 308314640, 308314988, 308314632, 308316942, 308316322, 308316314, 308314996, 308315019 and 308316751.
17. Costs: Each party agrees to pay its ow n attorney’s fees, costs, and other expenses incurred by such part y in connection with any st age of the above-referenced proceeding including, but not limited to, attorney’s fees which may be available under the Equal Access to Justice Act, as amended.17 18. Expiration: This Agreement shall expire four years from the date of execution of this Agreement or 45 days after BP Products certifies that it has completed the abatement actions required by Paragra phs 1-6 and 7, whichever is earlier. 19. Notice or Communication to Texas City Refinery: When notice or communication to the Texas City Refinery is required herein, such notification will be accomplished by notifying all of the following:
Pat Gower Refining Vice-President, U.S. Region BP Products North America Inc. Naperville Complex 150 West Warrenville Road Mail Station 605-1E Naperville, IL 60563 James Pickett BP Legal Department BP America Inc. Mail Code 4 West 4101 Winfield Road Warrenville, IL 60555 Paul Kaufman HSSE Compliance Manager, Texas City Refinery BP Products North America Inc. 2401 5th Avenue South P. O. Box 401 Mail Code NOB-4A Texas City, TX 77590-0401 Should there be a change in the person(s) o ccupying the above positions during the term of this Agreement, BP Products will provide OSHA with the name of the new person. 20. Force Majeure: No BP Products Party sha ll be sanctioned or otherwise held liable for any failure to perform the obligations in connection with any actions described in this Agreement, if such failure results from any act of God, riot, war, civil unrest, terrorism, hurricane, flood, earthquake or other cause beyond BP Products Party’s18 control. Nothing in this Agreement shall be construed as any type of limitation of OSHA’s authority or ability to conduct any type of inspection authorized by the Act. 21. Construction: The headings in this Agreement are for convenience and are not intended to affect construction or in terpretation. The plural includes the singular and the singular includes the plural; “and” and “or” are each used both conjunctively and disjunctively; “any” and “all” each mean “any and all”; “each” a nd “every” each mean “each and every”; and “including” and “inc ludes” are each “without limitation.”

Respectfully submitted,
BP PRODUCTS NORTH AMERICA INC.

BY:

___________________________________ _ PATRICK E. GOWER Refining Vice-President, U. S. Region
Signed this ______________ day of , 2005.

BP Products North America, Inc. Naperville Complex 150 West Warrenville Road Mail Station 605-1E Naperville, Illinois 60563 Authorized Representa tive of Respondent. UNITED STATES DEPARTMENT OF LABOR, OCCUPATIONAL SAFETY AND HEALTH ADMINISTRATION
BY:

____________________________________ JOHN B. MILES, JR. OSHA Regional Administrator, Region VI
Signed this________________ day of __________________________, 2005.
U. S. Department of Labor Occupational Safety & Health Administration Region VI Office 525 S. Griffin Street, Suite 602 Dallas, Texas 75202 Representative for OSHA.