HALLIBURTON ENERGY SERV. v. Dept. of Labor

• Citation: 2 P.3d 41
• Decision Date: 07 April 2000
• Docket Number: No. S-8473., No. S-8453
• Parties: HALLIBURTON ENERGY SERVICES, Appellant and Cross-Appellee, v. STATE of Alaska, DEPARTMENT OF LABOR, Division of Labor Standards and Safety, Occupational Safety and Health Section, Appellee and Cross-Appellant.
• Court: Supreme Court of Alaska (US)

2 P.3d 41

HALLIBURTON ENERGY SERVICES, Appellant and Cross-Appellee, v. STATE of Alaska, DEPARTMENT OF LABOR, Division of Labor Standards and Safety, Occupational Safety and Health Section, Appellee and Cross-Appellant.

Nos. S-8453, S-8473.

Supreme Court of Alaska.

April 7, 2000.

Michael C. Geraghty and Sarah Diemer Moyer, DeLisio, Moran, Geraghty & Zobel, Anchorage, for Appellant/Cross-Appellee.

Toby N. Steinberger, Assistant Attorney General, Anchorage, and Bruce M. Botelho, Attorney General, Juneau, for Appellee/Cross-Appellant.

Before MATTHEWS, Chief Justice, EASTAUGH, FABE, BRYNER, and CARPENETI, Justices.

OPINION

BRYNER, Justice.

I. INTRODUCTION

A worker assembling a perforation gun at the Halliburton Energy Services plant in Kenai, Alaska, accidentally triggered a fatal explosion. The Alaska Department of Labor fined Halliburton for violating process safety management standards, finding these standards applicable because assembling perforation guns qualifies as manufacturing explosives. But the superior court reversed, ruling that the department could only enforce the safety standards prospectively, since their application to perforation gun assembly had previously been uncertain.

On appeal, Halliburton claims that the standards do not apply at all, even prospectively, because assembling perforation guns is not the manufacture of explosives, but falls instead within a regulatory exemption for "oil well servicing activities." Alternatively, it argues that the safety regulations are unenforceable because they are unconstitutionally vague. On cross-appeal, the state urges us to affirm the originally imposed fine, arguing that the safety standards unambiguously cover perforation gun assembly and that Halliburton had ample notice of their application. We agree that the standards apply and are sufficiently clear to withstand constitutional challenge. We thus affirm the department's order.

II. FACTS AND PROCEEDINGS

On April 2, 1994, a large explosion at Halliburton's Kenai facility killed Craig Bowen, a part-time Halliburton employee, and injured five others. At the time of the explosion the six employees were assembling perforation guns—devices used to crack oil well casings and thus enhance oil flow. A perforation gun consists of two cylinders with a pattern of holes in each. To assemble the devices, Halliburton employees would fit explosive charges into the holes in the inner cylinder, or charge holder, and align the charge with the holds of the larger outer gun carrier. Each charge rests against an inner detonator cord that runs through a tube centered in the charge holder and protrudes from an end plate. Halliburton would custom manufacture these guns for oil companies in its Kenai facility and then transport them to the customer's well site, where Halliburton employees would supervise the process of sending the guns downhole and exploding them.

The April 2 accident occurred while employee Bowen was trying to align the holes of a charge holder with those of a gun carrier. The accident investigation established that Bowen was probably using the common, although non-standard, Halliburton method of maneuvering the charge holder by pushing on it with the butt end of a pipe wrench. Bowen may have caused the explosion by accidentally striking the detonator cord on the top of the charge holder with the wrench.

The Alaska Department of Labor investigated the accident and ultimately cited and fined Halliburton $1,650 for violating occupational health and safety codes. Among other infractions, the department found that Halliburton had violated state process safety management standards. The department determined that assembling perforation guns amounted to the manufacture of explosives and that the Alaska Explosives Code required Halliburton to comply with the process safety management standards.

After Halliburton contested the citation, the department filed a formal complaint against the company with the state Occupational Safety and Health Review Board ("the board"). Halliburton moved to dismiss, arguing that its operations in Kenai were exempt from the state's process safety management standards, that the Alaska process safety management regulation only applies to operations using certain hazardous chemicals, that assembling perforation guns is not "the manufacture of explosives," and that, in any event, the process of assembling perforation guns falls within the process safety management regulation's exemption for "oil well servicing." The board denied Halliburton's motion.

At a subsequent hearing, Halliburton renewed these arguments and also maintained that the process safety management regulation was vague and failed to give Halliburton adequate notice that the process safety management standards applied to its Kenai operations. The board concluded that the regulation did apply to Halliburton's Kenai operations, affirming the citation and penalty.

Halliburton appealed this ruling to the superior court. The court upheld the board's conclusion that the process safety management standards apply to Halliburton's Kenai facility but concluded that the process safety management regulation was too vague to enforce retroactively. The court thus reversed the board's decision as to the challenged penalty. At the same time, the court ruled that the board's decision gave Halliburton adequate notice that the process safety management standards will apply prospectively to its Kenai operations.

Halliburton appeals the court's finding that the process safety management standards can be prospectively applied to its manufacture of perforation guns. The state cross-appeals the court's conclusion that the process safety management standard was too vague to apply retroactively.

III. DISCUSSION¹

A. The Legal Context: Occupational Safety and Health Regulation

The federal Occupational Safety and Health Act² (OSHA) provides that a state may implement its own occupational safety and health program upon approval by the United States Department of Labor.³ State standards must be "at least as effective" as federal standards.⁴ Alaska has an approved OSHA program.⁵

Under the federal OSHA regulation, 29 C.F.R. § 1910.119 (1999) ("PSM regulation"), certain employers must implement a process safety management program.⁶ Among other things, the process safety management regulation requires covered employers to thoroughly evaluate the safety of their processes and to train employees in safe procedures. Before the Kenai explosion occurred, Alaska had adopted the federal process safety management standards by reference.⁷

The federal standards apply to processes involving certain chemicals at specified threshold levels.⁸ A separate federal regulation, 29 C.F.R. § 1910.109(k)(2) (the "explosives regulation"), provides that the manufacture of certain explosives is also subject to process safety management standards.⁹ This regulation defines explosives as "any chemical compound, mixture or device, the primary and common purpose of which is to function by explosion."¹⁰ Like the federal law, the Alaska Explosive Code required manufacturers of certain explosives to meet the process safety management standards¹¹ and defined "explosives" to include "explosive devices ... the primary or common purpose of which is to function by explosion."¹² [Ae. Br. 7-8; Exc. 352]

B. The Process Safety Management Regulation, 29 C.F.R. § 1910.119, Applies to Halliburton's Assembly of Perforation Guns.

1. The process safety management regulation applies to all manufacturers of explosives.

Halliburton argues that the process safety management regulation, 29 C.F.R. § 1910.119, does not apply to its assembly of perforation guns because the language of the regulation expressly limits its application to operations using certain toxic chemicals or large quantities of flammable liquid or gas. But while the process safety management regulation itself does not apply directly to Halliburton's operations, the federal explosives regulation incorporates it by reference.¹³

The Federal Register discussion accompanying the final version of the process safety management regulation reveals OSHA's clear intention to require that the manufacture of explosives comply with process safety management standards:

OSHA remains convinced that the hazards associated with the manufacture of explosives and pyrotechnics have the potential of resulting in a catastrophic incident, and pose a significant risk to employees and that the manufacture of explosives and pyrotechnics should be covered by the provisions of the final process safety management rule.

However, the Agency has been persuaded by those participants who suggested that OSHA delete the manufacture of explosives and pyrotechnics from proposed § 1910.119, and incorporate the provisions of the process safety management standard into 29 CFR 1910.109, "Explosives and Blasting Agents." This will have the effect of referencing in one place, the specific and significant OSHA requirements pertaining to explosives and blasting agents.[¹⁴]

The official summary to the final process safety management regulation also indicates that "[t]his rule is being referenced in OSHA's Explosives and Blasting Agents standard, 29 CFR [§ ] 1910.109."¹⁵ Thus, by incorporating the process safety management regulation, the explosives regulation would apply the process safety management requirement to Halliburton if Halliburton "manufacture[d] explosives."¹⁶

2. Halliburton "manufactures" perforation guns.

Halliburton argues that it does not "manufacture" the perforation guns within the meaning of the explosives regulation, but instead merely "`assembl[es]' the guns' component parts." Halliburton attempts to distinguish a perforation gun from other "manufactured" products because the gun's components are "fitted" together by hand: workers place charges into a gun's scalloped holes and slide the charge holder into a gun carrier. Halliburton...