INDIANAPOLIS (AP) — An Indianapolis-based company has agreed to reduce its use of a popcorn-flavoring chemical that has been linked to lung disease and pay a reduced fine as part of a settlement with state regulators.

As part of the deal signed last week, Sensient Flavors LLC also agreed to drop a federal lawsuit accusing the Indiana Occupational Safety and Health Administration of harassment.

An attorney for Sensient didn't immediately return a phone call seeking comment Wednesday.

The dispute involved Sensient's use of diacetyl, a chemical compound used to create a buttery flavor for microwave popcorn and other foods, the Indianapolis Business Journal reports (http://bit.ly/V4KdvU).

Diacetyl is a naturally occurring chemical compound that gives butter its flavor, and it has been approved by the Food and Drug Administration as a flavor ingredient.

But for several years, diacetyl has been linked to a rare, irreversible lung disease often called popcorn lung. Officially called bronchiolitis obliterans, the disease generally has been associated with people who worked in microwave popcorn plants mixing large vats of flavors.

Hundreds of workers have said they have severe lung disease or other respiratory illnesses from inhaling diacetyl vapors.

Sensient has said it already has taken steps to minimize exposure to the chemical. Executive James McCarthy said last year that the company had controls in place at its Indianapolis plant to minimize workers' exposure to the chemical. He said additional measures to meet the proposed standards would cost $4 million to $6 million.

As part of the settlement, Sensient agreed to reduce its usage of diacetyl by 20 percent and eliminate its use altogether by the end of this year where feasible.

"IOSHA acknowledges that the administrative and engineering controls represent a good faith effort by Sensient to reduce employee exposures and that these controls will represent a significant cost to Sensient," IOSHA said in the settlement.

Sensient had faced state fines totaling $323,500 for violating IOSHA standards, but that was reduced to $99,000 under the settlement.

The agreement settles a federal lawsuit that Sensient, a subsidiary of Milwaukee-based Sensient Technologies Corp., filed last year against IOSHA and the National Institute for Occupational Safety and Health, a wing of the Centers for Disease Control and Prevention.

Sensient claimed in the lawsuit that it had been "harassed and intimidated" and "subjected to enormous intrusions" that violated its constitutional rights.

The dispute started in 2008, when NIOSH inspected the plant at the request of the union that represents about 100 workers there and then requested another visit. Sensient sued, claiming there was no new information to warrant a second inspection, but a federal judge disagreed.

In June 2010, NIOSH publicly released a report that found the prevalence of abnormal lung functioning among workers at the Indianapolis plant was several times higher than would be expected in the overall U. S. population.

Sensient sued again in December 2011, calling the report "grossly inaccurate" and a misuse of the agency's discretion.

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Information from: Indianapolis Business Journal, http://www.ibj.com

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