Capital Preservation, Businesses’ Life Blood

By Dave Harrold

“Those who ignore history tend to repeat it,” says the old adage.  No doubt that’s true, yet we continue to ignore the message.

For more than four decades the chemical industry has talked about process safety management (PSM), created sophisticated ways and means to identify and analyze risks, developed quantified probability statistics, implemented multiple layers of protective procedures and systems, and yet serious incidents continue to kill and injure people.

Why?

Ignoring the past

During the 1970s and 1980s a series of chemical incidents occurred that are so legendary that they are often referenced by the nearby city: Flixborough (1974), Seveso (1976), Mexico City  and Bhopal (1984). These were catastrophic incidents that awakened the world to chemical industry risks and each has been summarized in Lees’ Loss Prevention in the Process Industry (Sam Mannan, ed., © 2005, Elsevier.)

Despite some of these incidents occurring as many as three decades ago, the errors and root causes that led to these accidents still exist today. Process safety guru Trevor Kletz discusses this problem in his book, Lessons from Disaster: How Organizations Have No Memory and Accidents Recur, (© 1993, Institution of Chemical Engineers, Rugby, U.K.). Kletz discusses with significant detail numerous incidents that were examined, documented, and the results openly shared, only to have a nearly duplicate incident occur at a different facility just a few years later. Kletz’s findings reveal that organizations tend to have poor memories resulting from such factors as insufficient failure investigation, inadequate communication and distribution of investigation findings, lack of information retention and little training concerning previous plant, company and industry near misses and incidents.

A recent example of how those who ignore history tend to repeat it occurred on March 23, 2005, at BP’s Texas City facility, where 15 people died and more than 170 were seriously injured.

Since that 2005 explosion, numerous committees have examined the Texas City incident, and their findings have been made public. Among these are the Mogford Report, the Stanley Report and BP’s Management Accountability Report.

There is also The Baker Panel Report, a 347-page document prepared by an 11-member panel chaired by former secretary of state James A. Baker III. (For a copy of the report, go to www.csb.gov/completed_investigations/docs/Baker_panel_report.pdf.)

Issued in January 2007, the Baker Panel Report was prepared as a result of urgings from the U.S. Chemical Safety and Hazard Investigation Board (CSB, www.chemsafety.gov/) for BP to commission an independent study of all of its U.S. refineries.

In the report, the panel said that BP failed to provide "effective" leadership to make the safety of its industrial equipment "a core value" at its five U.S. refineries. In other words, BP did not foster and embrace a robust safety culture.

In March 2007, CSB issued its own 341-page report about the Texas City incident. (See www.chemsafety.gov/index.cfm?folder=completed_investigations&page=info&INV_ID=52 for a copy.)
Dr. Daniel Horowitz, CSB Director of Congressional, Public and Board Affairs, summed up the findings of both reports when he said, "It is a very significant finding that BP does not effectively investigate incidents throughout the corporation. If you're not learning from near misses, you're not in a position to prevent major disasters like the one in Texas City."

So there it is once again, that age old prophecy, “Those who ignore history tend to repeat it,” – but it really doesn’t need to be that way.

It begins at the top

The Baker Report included ten recommendations, the first being, “The Board of Directors of BP p.l.c, BP’s executive management (including its Group Chief Executive), and other member’s of BP’s corporate management must provide effective leadership on and establish appropriate goals for process safety. Those individuals must demonstrate their commitment to process safety by articulating a clear message on the importance of process safety and matching that message both with the policies they adopt and the actions they take.”

The CSB report wholeheartedly endorsed the Baker Report’s recommendations.

The message to BP and the rest of the chemical industry was clear: Create a top-to- bottom safety culture that talks the talk and walks the walk. Learn from the past and apply it to the present. Do what you are morally and legally obligated to do in order to provide a safe working environment for your employees and the surrounding community. Establish a safety culture that helps preserve shareholder value. Stop making excuses.

Stop the eye rolling

Stand before an audience of senior executives and/or shareholders, use the word “safety” in your opening remarks and watch the eyes begin to roll as everyone begins looking for the nearest exit.

Now imagine that same audience’s reaction if you substituted the word “capital preservation” for “safety.” Imagine just how attentive the audience, especially the shareholders, would become if you explained to them that a proven-in-use, industry- and regulator-accepted, fully documented guideline is available that significantly helps to preserve capital investments.

Of course they’ll listen. These are people who pay very close attention to the stock market, commodity prices and world events that can affect both. These are people who are all about reducing risk and preserving capital. You will have their attention.

This “revolutionary” capital preservation method really isn’t all that new or revolutionary. What’s being suggested is that companies apply the principles described in the recently published book, Guidelines for Safe and Reliable Instrumented Protective Systems (IPS) (© 2007, Wiley) to reduce risk and thereby preserve capital investments.

This Center for Chemical Process Safety (CCPS) guideline book explains the decision-making processes necessary to ensure safe and reliable operation. The authors establish a framework for a protective management system, including the elements necessary for a top-to-bottom corporate safety culture. The CCPS IPS Book expands upon IEC and ISA work processes for the design and management of IPSs frequently used to address safety, environmental and asset risks.

Using practical, real-world examples, the reader is guided through the IPS’s life cycle in a way that ensures a better appreciation of the intent of ANSI/ISA 84.00.01 (IEC 61511). With specific focus on the roles of management, engineering, maintenance and operations readers gain a greater understanding of individual roles, responsibilities and duties. The book serves as a useful primer, practical reference and ready resource manual that helps companies preserve capital investments. Examples are used extensively to explain “real-world” applications. This new book is a companion publication to the 1993 book published by CCPS, Guidelines for Safe Automation of Chemical Processes.

But before you begin convincing an audience of executives and/or shareholders, you must first come to the same conclusion as Dallas Green of Rohm and Haas Chemical LLC, Dave Deibert of Air Products, George Schultz of The Dow Chemical Company, Richard Dunn of Dupont, Jan Windhorst of NOVA Chemicals, just to name a few, who are already convinced and on record as saying that a meaningful safety culture represents good business.

Dallas Green, for example, says that he believes that this book includes the latest information and understanding on how to successfully apply instrumented technology to the protection of people, and for the first time ever, extends those systems, processes and concepts to include the protection of corporate assets and our shared environment. Green goes on to say that with its focus on "what to do," users can learn not only what the ANSI/ISA 84.00.01 (IEC 61511) standard says, but, equally important,, what organizations need to do and how to do it.

It is for everyone

A safety culture does not rely on balance sheet improvements to justify protection systems. It understands that the potential for incidents is an inherent part of the process design and that, without focused effort, incidents invariably will occur and reoccur.

During a recent AIChE Global Conference, several very important observations related to capital preservation became evident.

One of the most enlightening came from Kevin Klein of Solutia (www.solutia.com/pages/corporate/).

Klein shared that Solutia’s senior management views its continued commitment to environmental, safety and health as a key element to its successful recovery from bankruptcy. Klein went on to say that every company wants to avoid incidents that result in injuries or fatalities and the public scrutiny that follows. However, when a company like Solutia is reorganizing under bankruptcy protection, it is absolutely essential that everything be done to preserve capital, including strict adherence to the design, implementation, operation and maintenance of instrumented protection systems, Klien explained.

Klein’s message to the audience was loud and clear: Environmental safety and health are critical to a business success.

A second revelation at the conference was that an increasing number of people tasked with process safety management responsibilities were quite young or not yet born when the incidents of Flixborough, Seveso, Mexico City and Bhopal occurred. Some have not even heard these names. Many of the young people that have read about these historical incidents did not read them with the intent of learning from history to prevent future repeats. Furthermore, many people, including many senior managers, innocently believe the lessons and best practice recommendations that resulted from these incidents are being followed when they’re not.

These misconceptions must change. It’s time to dust off those reports and use them to educate these newer minds. Those who ignore (or aren’t aware of) history, tend to repeat it.

Lastly, conference participants shared that the gap between companies that have achieved even a rudimentary level of standards conformance and those who have not begun is growing, not shrinking. That too must change.

Among conference attendees admitting their companies have barely or not yet begun applying the standards, most are smaller companies. On first blush this is understandable; unlike the Dows and Duponts of the world, small companies don’t have the resources to establish departments that focus each and every day on ensuring process safety. However, small companies are far less likely to recover from a major accident, such as that experienced by BP. Thus when presented as “capital preservation” systems, it makes sense for small companies to design and implement instrumented protective systems in accordance with international standards.

So what’s the hold up?

Ready, fire, aim

One conference attendee shared that his company is waiting for the standards to stabilize—that is to stop changing. The problem with that argument is that by definition “best practices” are a work in progress that should be changed when better practices and/or improved technologies become available. Certainly best practices shouldn’t change too frequently—that’s why ANSI/ISA 84.00.01 (IEC 61511) undergoes five-year reviews—but changes are inevitable.

In his book In Search of Excellence, Tom Peters encouraged companies not to wait until they had every i dotted and every t crossed before beginning their journey to excellence. Peters’ advice was Ready, Fire, Aim, meaning learn what you can and do some preparation, launch the initiative, adjust your knowledge based on the results and fire again. Ready, Fire, Aim was Peters’ way of describing what is often referred to as a continuous improvement process (i.e., Six Sigma). Ready, Fire, Aim also describes the safety life cycle that forms the foundation of ANSI/ISA 84.00.01 (IEC 61511) (See Fig. 1).

Figure 1