Wednesday, March 4, 2009

What Standard to Apply for IST - Limits

One of the big problems with a discussion about including mandatory inherently safer technology (IST) implementation rules in the CFATS re-authorization legislation is determining what standard should be applied to require IST implementation. After a facility reviews potential IST and determines that there is a possible substitution, what level of practicality will allow DHS to require that facility to implement that IST program?

Establish Boundary Conditions 

One way to do this is to set the extreme conditions that most people will be able to agree would allow a rather unambiguous DHS decision either for or against requiring implementation. Then we can discuss establishing some reasonable standard within those parameters. In establishing these boundary conditions I think that we could establish that there are two separate conditions that need to be taken into account; technical feasibility and financial feasibility.

Again, for the sake of establishing the boundary conditions we should agree that any IST provision that is feasible for both standards should be required to be implemented and any that fails both should not be required. Again, the ground in the middle remains open for discussion.

Technical Feasibility

If an IST substitution has been made at another facility using the same equipment to manufacture the same product to be sold into the same market, clearly that substitution is technically feasible. If an IST substitution has been tried at multiple other facilities using the same equipment to manufacture the same product to be sold into the same market and has never been successful, that substitution may practically be declared to be not technically feasible.

 Variations in manufacturing equipment, product made and the market being sold into can have a significant impact on the technical feasibility of a process change. Replicating a commercial chemical process in different equipment can often be quite a challenge and it is often next to impossible to tell in advance what differences in equipment will be critical.

Different products or even different grades of products can have subtle differences in the allowable variations from standard. A product with a part per thousand allowable variation in standard can withstand a lot more process changes than a product with a part per billion allowable variation in standard. Those allowable variations can vary with product and market.

Financial Feasibility Establishing realistic boundary conditions for financial feasibility is a little more difficult. To properly analyze financial feasibility you have to be able to compare fixed and variable costs, capital and operational expenditures, as well as determine equipment lifetimes and projected production volumes. Then you have to establish what baseline you want to use for comparison.

For this discussion we will assume that there are acceptable methods for computing the cost per unit volume for all of these variables. We will not want to use the current production method as the baseline for comparison; we will use the current production method plus the cost of alternative security measures as our baseline.

If an IST alternative can be implemented at the same or lower unit volume cost than the baseline, we can assume that the alternative is financially feasible. Setting an arbitrary top side boundary is more difficult. For some products increasing the unit volume cost by 10% will make it un-sellable. For others doubling the unit volume cost will make no difference in marketability. We are going to have to rely on the facility management to determine what increase in unit volume cost is acceptable in the market place, always keeping in mind that they are already going to have to pass on the increased cost of facility security.

Evaluate the Boundary Conditions 

At this point I am going to stop to see if anyone has any comments on the proposed boundary conditions. If we can get a broad consensus on these conditions, then we can start working in towards a acceptable standard to use for actual evaluations.

1 comment:

Anonymous said...

Giving chemical management any kind of discretion (for anything) e.g., to determine what is acceptable in the market, is a poison pill for IST.

Consider: since 9/11, railroad and chemical shipper mgts have agreed (re IST in transportation, i.e., re-routing) to protect not a single one of the 46 major target cities in the US. What makes you think the chemical management will ever act in good faith on any kind of risk reduction. Externalization of risks onto the public (and internalization of profits) is the essence of a corporation, right?

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