The Cost of Catastrophe: Is There a Business Case for Chemical Safety?

In the first hours after a catastrophe, there’s a lot of confusion and a lot of unanswered questions. How extensive was the damage? Who was affected? How many were injured? How many were killed? Is the crisis past, or is damage-control ongoing?

refinery chemical explosion

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But there’s one question that can’t be answered until long after the last ember is extinguished and the last emergency vehicle has departed. One vitally important question must wait until the news crews have lost interest and the lawsuits have run their course: How much is it all going to cost? One federal agency has compiled thorough, detailed information on the cost of chemical catastrophes that can help you make the business case for chemical safety.

Independent Investigators

The United States Chemical Safety and Hazard Investigation Board (CSB) is a somewhat unusual federal agency. Authorized by the Clean Air Act of 1990 and created in 1998, the CSB was specifically created to function independently from the U.S. Environmental Protection Agency and the Occupational Safety and Health Administration, similar to the way that the National Transportation Safety Board (NTSB) operates independently from the Department of Transportation. Investigations by regulatory agencies, Congress decided, have a tendency be narrow and short-sighted, looking only for citable regulatory violations in a way that may exclude other, important information.

The NTSB and the CSB, in contrast, are nonregulatory. Their mandate is to “to determine the cause or causes of an accident whether or not those causes were in violation of any current and enforceable requirement.” The NTSB has investigational authority related to accidents in air, highway, marine, pipeline, and railroad transportation, as well as accidents related to the transportation of hazardous materials.

CSB’s mission is to conduct “root cause investigations of chemical accidents at fixed industrial facilities,” as well “investigations of more general chemical accident hazards, whether or not an accident has already occurred.” Because of its mandate, the CSB not only looks for any contributing cause of an accident but it also tends to follow the progress of an incident all the way to its conclusion. This makes the CSB an excellent source not only for information about the root causes of chemical accidents but also for information about the ultimate outcomes, including the costs, of these types of incidents.

Lessons Learned

The CSB has completed more than 130 investigations in its 19-year history. That may not sound like much, but the agency has only 40 staffers, and its investigations are very thorough.

In April 2017, the CSB issued a report aggregating the results of four of its investigations: West Fertilizer Company, the Chevron Richmond Refinery, the Deepwater Horizon/Macondo Well Blowout, and the BP Texas City Refinery. These investigations revealed both the human and the financial toll of large-scale chemical catastrophes:

  • The April 17, 2013, explosion at West Fertilizer Company in West, Texas caused 15 fatalities and more than 260 injuries. It cost more than $247 million, including $16 million in federal disaster assistance and $230 million in insurance-related losses. Worse, the company was only insured for $1 million.
  • The August 6, 2012, explosion at the Chevron Richmond Refinery in Richmond, California caused more than 15,000 injuries. It cost nearly $450 million, including $2 million in fines and restitution, and led to a $447 million in increase in gas prices.
  • The March 23, 2005, explosion at the BP Texas City Refinery in Texas City, Texas killed 15 workers and injured 180 more. Financial losses in the incident totaled $1.5 billion.
  • The April 20, 2010, explosion of the Macondo Well aboard the Deepwater Horizon in the Gulf of Mexico left 11 workers dead and 17 injured. Employers paid more than $21 billion in settlements and more than $11 billion in economic and medical claims—that’s almost as much as the entire budget proposed for the Department of Energy in 2017 ($32.5 billion). Worse, litigation remains ongoing in the case, and the settlement for medical costs was uncapped and also remains an ongoing cost.

When the costs of chemical incidents can be in the hundreds of millions, or even in the tens of billions of dollars, it ought to be relatively simple to make the case that prevention is a far more cost-effective option. Tomorrow we’ll look at some CSB recommendations that would cost less to implement than a chemical catastrophe costs to clean up.