Dep't of Labor & Indus. of Wash. v. Phillips 66 Co.

489 P.3d 1153

DEPARTMENT OF LABOR AND INDUSTRIES of the State of Washington, Appellant,

v.PHILLIPS 66 COMPANY dba Phillips 66 Company Refinery, Respondent.

No. 80685-8-I

Court of Appeals of Washington, Division 1.

FILED June 28, 2021

Valerie Kay Balch, Paul Michael Crisalli, Anastasia R. Sandstrom, Office of the Attorney General, Brian Lamar Dew, Attorney General of Washington, William Henry, Attorney at Law, 800 Fifth Ave. Ste. 2000, Seattle, WA, 98104-3188, Michael King Hall, Office of the Attorney General, P.O. Box 40121, Olympia, WA, 98504-0121, for Appellant.

Timothy J. O'connell, Karin Dwelle Jones, Stoel Rives LLP, 600 University St. Ste. 3600, Seattle, WA, 98101, for Respondent.

PUBLISHED OPINION

Mann, C.J. ¶1 The Washington Legislature created the Washington Industrial Safety and Health Act (WISHA), ch. 49.17 RCW, "in order to assure, insofar as may reasonably be possible, safe and healthful working conditions for every man and woman working in the state of Washington." In furtherance of WISHA, the Department of Labor and Industries (Department) promulgated the Process Safety Management of Highly Dangerous Chemicals rules (PSM rules) "for preventing or minimizing the consequences of catastrophic releases of toxic, reactive, flammable, or explosive chemicals [that] may result in toxic, fire, or explosion hazards." WAC 296-67-001(1). The PSM rules include the mechanical integrity regulation, WAC 296-67-037, and process hazard analysis regulation, WAC 296-67-017.

¶2 The Department cited Phillips 66 for violating both the mechanical integrity and process hazard analysis regulations by failing to inspect and analyze risks to its fire water system at the company's Ferndale refinery. The Department appeals a superior court's decision affirming the Board of Industrial Insurance Appeal's (Board) ruling that the PSM rules do not apply to Phillips 66's fire water system. Because Phillips 66's fire water system is integral to preventing or minimizing the consequences of catastrophic releases at the Ferndale refinery, we hold that the system falls within the plain language and intent of the PSM rules, as well as the overall purpose of WISHA. We reverse the Board's conclusion that the PSM rules do not apply to Phillips 66's fire water system. Because the PSM rules do apply, we remand to the Board to reexamine whether Phillips 66's fire water system complies with the mechanical integrity and process hazard analysis regulations.

FACTS

A. Background

¶3 Phillips 66 operates a refinery in Ferndale, Washington, where it refines crude oil into gasoline, diesel, and liquefied petroleum gas. The refinery boils the crude oil in a 100-foot-high cylindrical tower, removing impurities and separating the raw material into its component parts. Specialized equipment diverts the separated hydrocarbon products to other areas of the refinery for storage, shipment, or additional processing.

¶4 The refinery contains an elaborate fire water system. The system consists of a one-million-gallon primary water tank, freshwater ponds, underground and above ground piping, hydrants, and water cannons. The system was designed with redundancies, including back-up pumps, back-up water sources, and multi-route piping segments. The piping is laid out in a grid fashion around the refinery; if one section fails, water could be routed in different ways to reach the necessary areas. The fire water system has the capacity to pump over 30,000 gallons per minute. If the primary tank's water were exhausted, the system could switch to freshwater ponds and, if needed, the Pacific Ocean.

¶5 Phillips 66 uses the fire water system to fight potential gas and oil fires, suppress acid vapor releases, and protect process piping and equipment. In the event of a catastrophic release, response teams would use the fire water system to put out any fires and cool the surrounding pipes and equipment to prevent further release or damage. Phillips 66 has also used the fire water system to control some of the refinery's operations. In hot summer months, the company used the system to run "Ferndale coolers," which are large sprinklers used to cool condenser units. The fire water system contains no highly hazardous chemicals and is not directly connected to any of the equipment used to refine the crude oil.

¶6 Because the refinery's processes involve high volumes of highly hazardous chemicals, it is subject to the Department's PSM rules. WAC 296-67-001.

¶7 In April 2014, Department inspector Sally Buckingham began an inspection at Phillips 66's Ferndale refinery. Buckingham observed leaks in the fire water system, with water bubbling from underground piping and water pooling near the fire equipment. Buckingham also found a leaking hydrant. Phillips 66 provided the Department with its Policy E-4 Inspection and Testing of Fire and Safety Equipment. Although the Policy had standards for inspection of above-ground systems, including fire sprays, fire pumps, and hydrants, it did not have standards for inspecting the underground pipes or tank.

¶8 In September 2014, the Department issued Phillips 66 a citation for violating three provisions of the PSM rules.¹ The citation asserted that Phillips 66: (1) failed to conduct inspections and testing on its fire water system in violation of the mechanical integrity rule under WAC 296-67-037(4)(a) ; (2) failed to follow "recognized and generally accepted good engineering practices" during the inspections and testing of the fire water systems under WAC 296-67-037(4)(b) ; and (3) failed to perform a process hazard analysis on the fire water system under WAC 296-67-017(3)(g).

B. Procedural History

¶9 Phillips 66 appealed the citation. The Board's Industrial Appeals Judge (IAJ) presided over 13 days of hearings in October and November 2016. Thirty-one witnesses testified and 103 exhibits were admitted.² Phillips 66's primary argument was that because the fire water system did not contain highly hazardous chemicals, it was not a "process" covered under the PSM rules.

¶10 In May 2018, the IAJ issued a proposed decision and order vacating the citations. The IAJ found that the Department failed to establish that the fire water system was part of a system of vessels, tanks, and piping that hold or carry highly hazardous chemicals and therefore was not a "process" or "process equipment" subject to the PSM rules. As a result, the IAJ found that the Department failed to demonstrate that the inspection requirements in WAC 296-67-037, and process hazard analysis requirements in WAC 296-67-017, applied to the fire water system at the Phillips 66 refinery. The Department petitioned for review of the IAJ's proposed decision to the Board.

¶11 The Board agreed with the IAJ that the Department failed to establish that the fire water system was part of the process or process equipment subject to the PSM rules. Consequently the Board concluded that the inspection requirements in WAC 296-67-037, and process hazard analysis requirements in WAC 296-67-017, did not apply to the fire water system at the Phillips 66 refinery. The Board also found that Phillips 66 regularly inspected the exterior of the fire water tank, and that the inspections followed recognized and generally accepted good engineering practices (RAGAGEP).

¶12 The Department appealed the Board's decision to the Whatcom County Superior Court. The superior court affirmed the Board's decision.

¶13 The Department appeals.

ANALYSIS

A. Standard of Review

¶14 WISHA governs judicial review of decisions issued by the Board. Erection Co., v. Dept. of Labor & Indus., 160 Wash. App. 194, 201, 248 P.3d 1085 (2011). An appellate court reviews "a decision by the Board directly, based on the record before the agency." Erection Co., 160 Wash. App. at 202, 248 P.3d 1085.

¶15 We review challenged Board findings for substantial evidence.

Erection Co., 160 Wash. App. at 202, 248 P.3d 1085. Evidence is substantial if it is enough to convince a fair-minded person of the truth of the asserted fact. Mowat Constr. Co. v. Dep't of Labor & Indus., 148 Wash. App. 920, 925, 201 P.3d 407 (2009). We view the evidence and reasonable inferences in the light most favorable to the party that prevailed in the administrative proceeding. Frank Coluccio Constr. Co. v. Dep't of Labor & Indus., 181 Wash. App. 25, 35, 329 P.3d 91 (2014).

We review questions of law de novo and interpret agency regulations as if they were statutes. We construe WISHA statutes and regulations "liberally in order to achieve their purpose of providing safe working conditions for every worker in Washington." Substantial weight is given to the Department's interpretation of WISHA. In interpreting WISHA we may look to federal decisions that interpret WISHA's federal analogue, the Occupational Safety and Health Act of 1970 (OSHA), but will not resort to federal case law when Washington law provides controlling precedent.

Shimmick Constr. Co. Inc. v. Dep't of Labor & Indus., 12 Wash. App. 2d 770, 778, 460 P.3d 192 (2020) (internal citations omitted) (quoting Erection Co., 160 Wash. App. at 202, 248 P.3d 1085 ).

¶16 If a regulation is unambiguous, courts will not look beyond the plain meaning of the words in the regulation. Mader v. Health Care Auth., 149 Wash.2d 458, 473, 70 P.3d 931 (2003). In determining the plain meaning of the regulation, courts may also look to the statutory scheme as a whole. Mader, 149 Wash.2d at 473, 70 P.3d 931. In doing so, the court "will not add to or subtract from the clear language of [the] statute, rule, or regulation." Dep't of Licensing v. Cannon, 147 Wash.2d 41, 57, 50 P.3d 627 (2002).

B. Background - WISHA and the PSM Rules

¶17 The Department derives its authority to promulgate the PSM rules from WISHA. RCW 49.17.040. The Washington Legislature created WISHA "in the public interest for the welfare of the people of the state of Washington and in order to assure, insofar as may reasonably be possible, safe and healthful working conditions for every man...