Tuesday, July 27, 2010

NACD Opposes IST

Today the National Association of Chemical Distributors issued a press release urging the Senate Homeland Security and Governmental Affairs Committee to pass S 2996 instead of HR 2868 which they are scheduled to mark-up tomorrow. While most chemical industrial organizations have opposed the imposition of an inherently safer technology (IST) mandate the NACD came out today in opposition to even the requirement to consider IST implementation. This is a position that has not been clearly expressed before and needs to be examined in detail. Their press release explained:

“The act of conducting IST assessments would be extremely costly for chemical distributors. These assessments will require expertise with IST methods, the likelihood of these methods to reduce risk, and their costs. The majority of NACD members are small businesses that do not have teams of chemical and process safety engineers on staff that would be able to conduct the IST assessments. These companies would be forced to hire consultants, who at rates of hundreds of dollar per hour, would easily drive the costs of the assessments into tens of thousands of dollars per facility.”

Small Companies and IST While we don’t know exactly what chemical facilities make up the list of 6,000 plus CFATS covered facilities it is almost certainly true that most are small companies. For the most part NACD is absolutely correct that those facilities do not have “have teams of chemical and process safety engineers on staff”. In fact, I would be willing to bet that a significant number of these facilities do not have any chemical engineers or process safety engineers on staff. NACD uses that fact to argue that it is financially impractical for these facilities to conduct such assessments. Again, this certainly has a large element of truth supporting the claim. On the other hand, this can equally be viewed as an added reason to require such facilities to conduct such a review. We should be able to expect that larger facilities with the requisite staff would be conducting these types of reviews as a matter of course as a part of the on-going process safety management (PSM) program at the facility. Those in-depth PSM reviews would also be expected to identify and correct a wide variety of problems that could result in chemical releases in the event of process upsets, mechanical failures and terrorist attacks. Smaller companies without the same resources would not be able to conduct the same level of PSM reviews. While these smaller companies would have a PSM program in accordance with Federal regulations, they would not have the ability to conduct the same level of proactive review and process improvements as facilities with large in-house technical staffs. It is extremely unlikely that they would voluntarily undertake an assessment of their processes to determine if there were legitimately safer alternatives that would be economically feasible to implement. The safe and reasonable solution to that inherent problem is not to avoid the imposition of an IST consideration mandate, but to make it easier for smaller facilities to undertake the financial risk of conducting such a review. One way to accomplish that would be to include tax incentives to allow smaller companies to partner with engineering and chemical education institutions to conduct such reviews. Financial grants could also be provided to educational institutions to conduct such reviews. Either would have the additional benefit of producing a new crop of chemists and engineers with the training and experience to continue making such reviews. Chemical Distributors and IST Having said all of that, it is not clear that any IST mandate included in current legislation would actually apply to chemical distributors. Typically chemical distributors take chemicals produced by other companies and simply store, re-package and perhaps blend those chemicals prior to shipping them to other facilities for use in other manufacturing processes. If their customers are buying chlorine gas, for instance, there is no amount of substitution that is going to provide that customer with chlorine gas. Even inventory reductions would be difficult to accomplish because the original suppliers typically only ship large bulk orders. Otherwise the customer would go directly to the supplier, getting a price break by avoiding paying the middle-man’s costs. This should make any IST consideration at a chemical distribution facility fairly straight forward. They would simply need to look at storage and handling conditions and inventory management options. None of the other, more complex options would apply to a chemical distributor. Detailed reviews of storage and handling conditions are already a part of the required PSM process and inventory management is the lifeblood of a distributor’s business model. This means that the only IST requirement would be to document actions already undertaken by chemical distributors. Cost is a Legitimate Issue

So far Congress has attempted to deal with the cost issues of implementing an IST program. Legitimately Congress has exempted facilities from the IST implementation mandates in HR 2868 if the implementation is not financially feasible. Congress also needs to address the issue of the cost of conducting the IST review as HR 2868 continues to wend its way through the legislative process. None of the IST advocates that I have heard or talked with have any desire to run small businesses into bankruptcy. They should be more than willing to work with industry and Congress to develop methodologies to address the study cost issue for the large number of smaller facilities covered by the CFATS regulations.

1 comment:

Jennifer Gibson, NACD said...

This is an excellent description of the issues that chemical distributors would face in considering inherently safer technologies. The point about distributors having the materials on site that their customers seek to buy is the key issue. Chemical distributors maintain specific inventories of products in order to respond to the needs of these customers. For these facilities, IST assessments would produce limited options that would not justify the cost and effort of the exercises themselves. I would like to clarify that both H.R. 2868 as passed by the House of Representatives and S. 3599 as recently introduced by Senator Lautenberg would in fact impose IST consideration requirements on chemical distributors. These bills make no distinctions among the types of facilities. All tiered facilities under CFATS would be required to conduct the IST assessments. Because of this and the fact that the CFATS program is still being implemented, NACD prefers the approach taken in the bill passed by the Senate Homeland Security and Governmental Affairs Committee this morning as described in a press release we issued today at http://www.nacd.com/news/home.aspx?newsID=481.

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