Pit & Quarry, February 2015

BY MICHAEL T HEENAN Impact of MSHA penalties A number of things can be said about MSHA penalties and the effects that penalty assessment procedures have on mine operators Penalties are part of a companys reputation If an adverse event occurs that attracts media coverage invariably a companys compliance history and MSHA penalties are publicly reported The larger and more numerous the penalties the poorer the picture that emerges Major customers are increasingly considering compliance history and mine operators often consider the MSHA history of independent contractors in connection with their hiring criteria MSHA reviews penalty records to decide whether additional enforcement is required such as impact inspections and pattern of violations orders Penalties are a non tax deductible financial burden and operators often do not realize exactly how points assigned to inspector findings increase the cost of penalties Operators also sometimes miss the cost significance of too many violations History of violations is one of six criteria considered for every penalty calculation An operators history of violations in MSHAs records is used to calculate present penalties MSHA regulations provide Overall history is based on the number of assessed violations in a preceding 24 month period For mine operators the penalty points will be calculated on the basis of the average number of assessed violations per inspection day An operators current penalties can increase up to 25 points assigned for an average of 21 violations per inspection day or more History points can greatly inflate penalties For instance 77 points convert to a penalty of 436 Add 20 points for a total of 102 and the penalty is 3224 Even small operators can be assessed sizable penalties depending on other findings Other criteria for penalty calculations are size of operator and mine Sometimes small mines are hit harder by application of history points A small operation might have inspections lasting only two days If a mere five violations are issued in that period the small operator will have maximum history points 20 that will disproportionately inflate penalties and can produce a devastating financial impact Proposed new MSHA regulations may provide some relief for this long standing disparity Three other criteria negligence gravity of violation and demonstrated good faith in abatement all add penalty points but these are largely based on inspector findings Operator before the fact mitigation in the form of precautions safeguards preventative actions and employee training can help reduce the seriousness of findings and penalty assessment impact Finally there is a criterion related to the effect of penalty on the operators ability to continue in business MSHA presumes an operator will not be affected but the regulations provide The operator may submit information to the District Manager concerning the business financial status to show that the penalty will affect the operators ability to continue in business This could produce a downward adjustment of penalty Most often this procedure is invoked during settlement efforts in penalty contests before the Federal Mine Safety and Health MSHA has been soliciting and receiving comments on proposed regulations related to civil penalties but what areas will be regulated Review Commission That brings up another critical impact of penalties the time and expense of using procedures including litigation to rectify unfair citations and penalties When total industry penalties skyrocketed from about 20 million in 2005 to almost 200 million in 2010 most companies were compelled to challenge penalties both regular point based assessments and special assessments Regulations allow MSHA to waive the regular assessment formula if it determines conditions surrounding the violation warrant a special assessment Special assessments are used for fatal accident citations unwarrantable failure charges and other serious matters including imminent danger and charges of unlawful discrimination against people who exercised safety rights Special assessments are invariably thousands of dollars and frequently at the 70000 level Flagrant violations can be assessed up to 242000 Negligence and gravity of violation are the criteria that most affect the magnitude of any special assessment Since August 2014 MSHA has been soliciting and receiving comments on proposed regulations related to civil penalties That process is concluding New procedures will be adopted but what will they say As proposed MSHA would remove Continued on page 63 52 PIT QUARRY February 2015 www pitandquarry com