U.S. safety regulators on Friday hit oil giant BP with a record $87.4- million fine for failing to fix safety violations at its Texas City, Texas, refinery after a deadly 2005 explosion.

In announcing the fines, U.S. Labor Secretary Hilda Solis said old and new safety violations found by the U.S. Occupational Safety and Health Administration at the nation's third largest refinery could lead to another catastrophe like the 2005 explosion that killed 15 workers and injured 180.

BP filed a contest to the fine, calling OSHA's actions disappointing as the company believed the Texas City refinery had honored a 2005 agreement with the agency to fix safety problems that led to the blast.

BP said contesting the fine will send the dispute to a U.S. administrative law judge for a ruling. BP also has an appeal pending before the Occupational Safety and Health Review Commission, an independent panel that reviews OSHA actions.

We believe our efforts at the Texas City refinery to improve process safety performance have been among the most strenuous and comprehensive that the refining industry has ever seen, said Texas City Refinery Manager Keith Casey in a statement.

A United Steelworkers safety official said the union, which represents Texas City refinery workers, would seek to participate in any settlement talks or hearings before the commission and judge.

We want this settlement to be fair to company, fair to OSHA and especially fair to workers and to the community around the refinery, said the USW's Michael Wright.

Of the fine, $56.7 million was for 270 instances of failure to abate problems found in 2005. The remaining $30.7 million was for 439 new willful violations of industry process safety standards, OSHA said.

BP took multiple steps to fix problems found at Texas City in the first three years after the 2005 blast, but later their commitment waned, said Dean McDaniel, OSHA regional administrator.

The multiple life-threatening problems raise questions about, said a Labor Department official.

There are some serious systemic safety problems within the corporation, specifically within this refinery as well, said Jordan Barab, acting assistant labor secretary for OSHA.

The U.S. Chemical Safety Board said the refinery industry has problems beyond Texas City. The board had concluded in 2007 after a two-year probe that BP suffered from a broken safety culture in which warnings of disaster were ignored in pursuit of profit.

While OSHA reported that a potential for another catastrophic accident remains at BP Texas City, the CSB has found that safety problems continue across the U.S. refinery industry, board Chairman John Bresland said in a statement.

In 2005, BP paid a then-record $21.3 million fine to OSHA and entered into a four-year agreement with the agency. As the agreement neared its end in September, OSHA warned the company that numerous problems remained.

BP gets to claim they have the No. 1 and No. 2 largest fines of any industry under OSHA supervision, said Brent Coon, attorney for victims of the BP blast.

BP has said it has invested more than $1 billion to repair safety problems at Texas City. The company has paid more than $2 billion to settle civil lawsuits stemming from the blast.

Earlier this year, BP pleaded guilty to criminal charges in the explosion and paid a $50-million fine to the U.S. Justice Department. The company was placed on three years' probation, a condition of which was fulfilling the agreement with OSHA.

The U.S. attorney's office in Houston was reviewing OSHA's action, a spokeswoman said in a statement.

We will take all appropriate actions to ensure the plea agreement is not violated and cannot comment further at this time, said Angela Dodge, spokeswoman for the U.S. attorney's office.

Eva Rowe, who lost both her parents in the explosion hailed OSHA's action.

I think it's fantastic OSHA is standing up to BP, Rowe said in a statement issued by her attorney. I hope that this will still lead to criminal prosecution and conviction of the BP officials that were responsible.

(Editing by Marguerita Choy and David Gregorio)

Safety