OSHA Still Irrelevant

When a Greeley man working for an oil and gas company died, the Occupational Health and Safety Administration investigated, found that the death was caused by violations of federal safety rules by two companies working at the site, and . . . . fined one company $5,000 and the other company $9,800.  The original fines of $8,400 and $14,700 were reduced without explanation.

The death was part of a series of nine deaths under similar circumstances in Colorado recent years caused by safety violations by oil and gas companies.

But, they don't really care, and why should they, if they are being economically rational and loyal to their shareholders?

Economics works and firms respond to incentives or the lack thereof.  In the case of oil and gas worker safety, there are no economic incentives for companies to protect their workers.

The OSHA fines are pitifully small relative to the seriousness of the offense and the profits generated by the enterprise, and relative to the administrative and legal costs of investigating and pursuing the case.

The OSHA fines probably aren't even large enough to make it cheaper for the companies to comply with the safety regulations than to incur the fines.  It also is not uncommon for OSHA fines to go unpaid for years.

And, since the oil and gas industry is governed by OSHA, which has a tiny budget to cover almost every workplace in the United States, rather than by the Mine Safety and Health Administration, MSHA, which has a similar sized budget to cover the tiny number of high risk mine workplaces in the United States, OSHA lacks the resources to imposed more rigorous regulations or to enforce them with a frequency that amounts to anything more than random chance in the absence of a workplace death. Yet, oil and gas operations are every bit as dangerous or more so than other kinds of natural resource exploitation jobs governed by MSHA.

The family of the man who died can't sue his employer, even though OSHA has established that it violated safety laws, because worker's compensation pre-empts the right to sue in exchange for paying for the minimal medical expenses present in the case of a death, a four or five figure death settlement, and a very modest pension to his surviving wife and minor children if he has any (if this 57 year old man is single, and has no children or has adult children, worker's compensation doesn't have to pay any death benefits other than a meager sum that will barely pay for a funeral).

The company doesn't even pay a deductible when a worker's compensation claim is made by the man's family, and while its rates could go up based upon the employer's claims history, the reality is that most of the risk of regular deaths is already figured into the worker's compensation premium which sets races based upon occupation and industry, which are high for high risks like coverage for oil and gas workers.

Like most private sector workers in Colorado, he was not part of a union, so there was no one, from his union or OSHA, to effectively advocate to provide him with a safe workplace.

So long as the worker's compensation system is in place, the solution to making oil and gas companies respect worker safety is simple:

1. Increase the amount of fines imposed by MSHA and OSHA when a death or serious injury occurs, or there is a near miss that could have caused death or serious injury by roughly a factor of 100.  The fines in a case like this one should have been on the order of $500,000 and $980,000, not $5,000 and $9,800.

2. Transfer jurisdiction over oil and gas workers from OSHA to MSHA, and increase funding for MSHA by a factor of two or three so that it has the resources to investigate the oil and gas industry in addition to its existing responsibilities.

3. Vigorously insist upon collecting the fines that are imposed even if it shuts down non-compliant businesses.

4. Put someone who is willing to aggressively enforce the laws in charge of the agency which shows signs of industry capture.

5. Acknowledge that the model of having OSHA cover every workplace with the power to impose only minimal fines, when it lacks the resources to do so, has failed.  Instead, limit OSHA enforcement powers to high risk industries and cases of actual deaths or injuries, and create a private cause of action to enforce its regulations (even in the case of violations that don't lead to injuries), which it would continue to promulgate for all industries, in all other cases, on a model similar to the EEOC, the Colorado Consumer Protection Act, or the federal and state securities laws.  Arbitration of these claims should be prohibited and class action lawsuits to enforce these regulations should be permitted.

With reforms like that, worker injuries and deaths would plummet, and yet, it is very likely that the industry would remain profitable.