Tuesday, December 4, 2007

Who should pay the cost of security?

Last week there was an interesting editorial discussion about the cost of implementing the newest round of Chemical Facility Anti-Terrorism Standards (CFATS) Top Screens and the follow-on SVA’s and SSP’s due to the recent release of the final version of Appendix A to 6 CFR part 27. The editor of GSNMagazine.com, Jacob Goodwin, started the discussion with his outlook on the recent DHS cost estimates of compliance with the new final rule for Appendix A (the same estimates that I discussed in my recent blog). This was followed by a response by the editor of HSDailywire.com, Ben Frankel.


Both editors appeared to accept the figures DHS provided in the Federal Register Notice; figures that I believe greatly underestimates the number of respondents required by the new rules and thus under count the ultimate cost of those responses. Even with that apparent underestimate, both editors agree that the cost is very large, especially since it did not include the costs associated with implementing the security programs developed under the CFATS rules. Both also agree that the cost of not securing these high risk chemical plants is unacceptably high.


Goodwin concludes his editorial by wondering “Does the risk of a terrorist attack on a chemical plant justify this huge investment in manpower and dollars?” and then responds to his own question that the answer is not clear. Frankel, on the other hand, believes that the answer to that question is clearly yes; it is worthwhile. What Frankel questions is why the chemical industry should pay for the security costs when it is the public that gains the benefit of that security suggesting that: “The government may pay for this measure of public good by direct subsidies to plants to improve their security,giving them tax breaks, or in other ways.”


I’m sure that there were similar discussions about the costs imposed on the chemical industry in the wake of Bhopal when the OSHA and EPA chemical process safety regulations were put into place. Wouldn’t it have been fair for the government to pay for the costs associated with putting safety processes into place since it would have been the innocent public that would be saved by stopping unsafe chemical releases? No, the government decided then that the costs of chemical process safety should be a cost of doing business.


Making process safety an integral part of a chemical company’s business forces those companies to take long hard looks at their process. The costs of safety procedures and devices become part of the business analysis process. If those costs raise the cost of manufacture too high, then the company has to re-evaluate the decision to proceed with that product. In my twelve years of process chemistry work I know of a number of projects that were scrapped because the safety controls were too expensive. Unsafe processes were avoided and the company, the employees and the public were protected as a result.


The same thing will happen with security issues if companies must bear the costs associated with adequate security measures. If the use or quantity of a specific chemical places too high a cost burden on the products manufactured with that chemical, the company will have to re-evaluate the use of that chemical or the quantity of that chemical kept on hand. If the market place is willing to pay the security premium, the product will be made; if not, the security problem will disappear as that chemical is replaced with one with a lower security cost.


What we must realize as a society is that chemical facility security is not a static, one-time solution to a problem. We will improve security at high risk chemical facilities and, if we do nothing more, terrorists will, sooner or later, figure out a way around those security measures at one or more facilities. To protect against these attacks we must continue to refine and improve our security techniques and procedures. If companies have to pay the costs of their security procedures, they will continue to refine and improve their techniques and procedures so that they can contain/reduce their costs.


If the government subsidized the general security costs of chemical manufacture there would be no incentive to decrease those costs. There would be no incentive for companies to find replacement chemicals with lower security costs. There would be no incentive for companies to develop chemical processes that are inherently safer with lower security costs.

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