Building or Buying a Biofuel Plant? Think PSM

A company that is constructing a new ethanol or other biofuel facility, or that is acquiring an existing facility, must identify compliance with the Process Safety Management standard as a primary aspect of its due diligence. Failure to require this documentation as part of the purchase of an existing facility, or as part of the contract to build or add on to a biofuel facility, could be a very costly oversight. Rebuilding a PSM program in a biofuel facility that is already operational is a daunting and expensive task.

The PSM standard is by far the most frequently cited standard in the industry code, *NAICS 325193 (Ethyl Alcohol Manufacturing). It is also the most complicated Occupational Safety and Health Administration standard that exists.

What does the PSM standard require?
Process Safety Information
The PSM program must include comprehensive documentation concerning the chemicals, technology and equipment used during the process. This documentation should include a block flow diagram or a process flow diagram, maximum inventory levels for chemicals used in the process, the system limits, including possible results if those limits are exceeded, and piping and instrument diagrams. Each of those documents just listed, require significant time and expense to prepare at the design stage. The preparation becomes much more costly for plants that have been operating without a compliant PSM program.

Process Hazard Analysis
This is described in 29 **CFR 1910.119, Appendix C as “one of the most important elements of the process safety management program. PHA is an organized and systematic effort to identify and analyze the significance of potential hazards associated with the processing or handling of highly hazardous chemicals.”

Operating procedures and practices
This section of the PSM should accurately reflect the process’s standard operating procedures, work flow, required documentation, operating conditions, sampling requirements and health and safety requirements to be followed by the employees.

Employee training
A clearly defined training program must be established. Employees must be able to demonstrate their knowledge to an acceptable level. This should be documented through written and practical testing or some other mechanism.

Contractors
A screening process must be established to ensure that any contractors hired by the employer are qualified to perform their jobs under PSM. Contractors should be advised of the PSM plan and prohibited from making changes to the physical plant without verifying that such changes are consistent with the plan and then incorporated into the plan. (See Managing Change below.)

Mechanical integrity
Routine review of the facility’s maintenance programs and schedules should be conducted to ensure the reliability of the equipment used in the process. The equipment to be monitored should include not only those directly in the process, but also those that are considered a primary or secondary line of defense (venting, scrubbers, alarms, sprinklers, overflow, etc.).

Managing change
The PSM standard defines change to include any modification in equipment, procedure, materials, or conditions, unless it’s a “replacement in kind.” A change management team should study, document and approve all changes.

Emergency preparedness and investigation of incidents
Procedures must be established to inform employees of their responsibilities in the event of release of highly hazardous chemicals. Local emergency response agencies should be advised of hazards associated with the process and included in emergency planning. Employers must also develop a procedure to investigate any incident that occurs at their facility.

The PSM standard applies to most biofuel facilities. Compliance with the standard will take time, expertise and resources. Contracts for construction of facilities should include a warranty that the plant and documents will be compliant with OSHA regulations including PSM.

For those acquiring an existing facility, compliance with the above elements should impact the purchase price or be a condition of closing. Therefore, someone with PSM expertise should be included in the due diligence team.

* North American Industry Classification System
** Code of Federal Regulations

Author: Charles B. Palmer
Michael Best & Friedrich LLP
262-956-6518
[email protected]