- Email: [email protected]
Risk management in the United States: Three case studies
57
ENVIRON IMPACT ASSESS REV 1987;7:57-65
RISK M A N A G E M E N T IN THE UNITED STATES: T H R E E CASE STUDIES LIQUIFIED NATURAL GAS: SPECTRE OF A MARINE SPILL IN BOSTON HARBOR
R. STEVEN KONKEL
Construction of a liquified natural gas (LNG) import terminal at Everett, Massachusetts began in 1969. The terminal, operated by Distrigas, a Massachusetts Corporation, began handling imports of Algerian LNG in November, 1979 (Auchy 1985). The plant received permits from the US Coast Guard, City of Everett, and two Massachusetts agencies, the Department of Safety and the Department of Public Utilities (Federal Power Commission 1976a). Beginning in 1972, the terminal was in full operation transshipping and storing LNG. According to the plant manager George Auchy, who joined the company in 1974, imports increased from seven to 14 ships per year almost immediately following construction. Distrigas distributed LNG in New York, Massachusetts, New Jersey, Connecticut, and Rhode Island. Distrigas had sought federal approval to construct and operate the terminal in order to minimize problems with conflicting and overlapping state and federal regulations (Auchy 1985). In 1972, the Federal Power Commission's (FPC) Bureau of Natural Gas declined to take jurisdiction for issuing a Certificate of Public Convenience and Necessity to Distrigas for operation of the terminal, storage, and gasification facilities. 1 Finally, in 1976, pursuant to the Natural Gas Act, the FPC issued the environmental statement containing the basis for its decision to authorize all or any part of the LNG import operations. 2 The following case study describes: (1) the operating and construction license decision made by the FPC, (2) the risk assessment that was done, (3) FPC's risk management decision, (4) the fragmentation of decision-making responsibilities and the need for integration of risk assessment and risk management, and (5) evaluation of the final decision. The FPC's purpose in assessing the safety risks of LNG transport was to make a retroactive decision about granting permission for the Everett LNG terminal © 1987 Elsevier Science Publishing Co., Inc. 52 Vanderbilt Avenue, New York, NY 10017
0195-9255/87/$3.50
58
R.S. KONKEL
to operate. At the post-operational stage, a risk assessment could no longer fully consider alternatives to the project or modifications in its design, site, or specifications. FPC staff had two major decision options. They could decide that the safety risks of an LNG explosion were too great, and shut down the facility. Alternatively, they could decide that the existing or a modified level of LNG transport in the Harbor constituted an acceptable risk to the public, and conditionally approve the existing facility.
Risk Assessment of the Safety of Importing LNG A risk analysis was commissioned by the FPC to address the probability of a marine accident involving a collision, ramming, or grounding in Boston Harbor, the waterway to Everett. Decision makers were concerned that an LNG spill, formation of an LNG/air vapor cloud, and ignition of the cloud would cause fatalities from direct exposure to fire as well as exposure to radiation from burning fuel. The risk analysis was done by Science Applications, Inc. (SAI), which acted as a consultant to the FPC staff. SAI was concurrently performing a site analysis for the FPC and a risk assessment and siting analysis for Western LNG Terminal Associates for the proposed Oxnard, Point Conception, and Los Angeles Harbor import terminal sites on the West Coast. A risk assessment was not conducted until 1976 for several reasons. Public opposition was minimal, no precedent existed for risk analyses of LNG terminals in the US, and Massachusetts environmental legislation did not require such an analysis. Until 1973, the public in the Boston area had not recognized the potential for an accident in handling and storing LNG. The Everett site had formerly been used for heavy industry, in particular, production of coal gas (Auchy 1985). The site was attractive to the company because it was adjacent to deep water, had good access to the interstate highway system for distribution via trucks, and was located at the confluence of a pipeline owned by Boston Consolidated Gas. A complete breakup of an LNG storage tank in Cleveland disgorged its contents in a 1944 accident, causing 130 fatalities, 225 injuries, and seven million dollars in property damage. Thus precedent existed for concern over LNG safety. Another accident occurred in 1973 during repair of an LNG storage tank on Staten Island: the tank explosion killed 43 workers. (The tank was not owned by Distrigas but its proposal for siting several tanks on Staten Island was subsequently abandoned at a financial loss when the site was sold to a New Jersey utility. The utility later attempted to get permits to use the site for a peak-shaving LNG operation, but was unsuccessful.) After the 1973 accident, a 60 Minutes news team visited the Everett terminal. At the same time, a Massachusetts chapter of BLAST (Bring Legal Action to Stop the Tanks) was formed and the group began protesting that the risks of the Everett LNG terminal were too great.
LIQU1FIED NATURAL GAS
59
The environmental risk assessment by SAI showed that the casualty per trip probability of a grounding, ramming or collision in Boston Harbor was about one in one thousand (1.1 × 10~3), based on evidence of four tanker accidents in 3627 total trips which took place over a five-year period (FPC 1976a: 3-l I). Annual casualty risk is then given by multiplying by the number of annual trips: 16 trips were forecasted by the FPC. The risk assessors chose a "worst-case" conditional probability model, calculating the risk in terms of fatal human exposure to an ignited vapor cloud. This method would place an upper bound on the risk, as opposed to calculating risk of higher probability but less significant consequences. The FPC staff felt that calculating the probability of injury was beyond the scope of the assessment, even though an intervenor suggested that injuries might exceed fatalities and that caring for the injured is essential to effective contingency planning. 3 The fatalities per exposed person per year (F/P/yr) were estimated at 3.57 × l0 -8 for direct exposure to the vapor cloud and at 2.63 × l0 -7 F/P/yr for exposure to the radiation that would accompany such an event (FPC 1976a). An estimated 2500 fatalities would result from exposure to the vapor cloud, and 3000 fatalities would result from exposure to radiant heat (FPC, 1976a: Attachment A, Tables 6 and 7). Two professors at MIT and Harvard University disagreed with assumptions made in the SAI analysis regarding the distance the vapor cloud might travel under given meteorological conditions; they were concerned that the flammable vapor cloud could travel much farther than estimated by SAI before ignition and cause significantly more fatalities, injuries, and property damage/~ Their objections were appended to the final environmental statement. The risk assessment contained in the final environmental statement suffered from many deficiencies. As mentioned, it came after the fact, so that an attempt to assess alternative sites was irrelevant. There was an extremely strong economic incentive to allow the plant to continue transshipping, storing, and distributing LNG. 5 The analysis was reduced to a worst-case marine spill of LNG. The risks from a spill during unloading, regasification, or trucking were not considered because they were thought to be of less concern than those from a marine spill (FPC 1976a). There was controversy over the maximum distance a flammable vapor cloud might travel, and disagreement over when it might ignite. Professor Fay of MIT was not convinced that the cloud would ignite within 4,000 feet of the spill; he estimated that the cloud could travel as far as 300,000 feet. 6 Immediate ignition has the result of fewer casualties. As is true of many state-ofthe-art applications, the methodology used by the consultant had not been subject to peer review by the scientific community (FPC 1976a: Appendix D). In administrative panel reviews, commonly used in licensing cases, all parties present their cases, and a decision is made by one or more administrative law judges. However, to be effective, each party must have adequate resources to present its case. In this case, the intervenors did not have sufficient funding to produce independent analyses. This gave the FPC staff and their consultant an
60
R.S. KONKEL
advantage in the presentation and critique of testimony before the administrative law judge. The risk assessment has been criticized on three major grounds: poor timing, disagreements outside the agency on models and assumptions, and possible consultant self interest in the outcome.
Effectiveness of the LNG Risk Management Strategy The risk control strategy considered by the FPC was to instruct the US Coast Guard to provide a "moving safe zone" for LNG tankers entering Boston Harbor, to escort LNG tankers to the Everett terminal, and to stand by until the cargo was unloaded. This enabled decision makers to dismiss from serious consideration the probability of collisions and rammings. Other potential risk control strategies, such as insurance options to reduce or mitigate on-site accidents or compensation of local residents, were neglected. The FPC did not seriously consider changes in regulations, laws, management practices, or personnel policies. The criterion that the FPC chose for site acceptability was fatalities per exposed person per year (F/P/yr). However, the standard of 10-5 F/P/yr was developed using the Everett site risk assessment and by making comparisons to rivc~accessible sites in Delaware Bay such as Racoon Island (Arvidlund 1985). The question arises, which should come first--the standard, or the application of the standard to a licensing decision? The Final Environmental Impact Statement assigned to the US Coast Guard the dominant risk management responsibility for enforcement of an LNG-LPG Operation/Emergency Plan that would "prevent a large spill from occurring." (See FPC, 1976a: Attachment A.) In response, the Coast Guard updated its existing LNG-LPG Operation/Emergency Plan by establishing a "moving safe" zone for all LNG and LPG tanker traffic. This plan stipulated actions that the applicant, Distrigas, would be required to take in order to minimize the probability of a ship collision in Boston Harbor. It is a very positive aspect of the risk management in that it is explicit about responsibilities and is updated as needed. However, Distrigas was privately of the opinion that much of this regulation is redundant. 7 This illustrates that various actors had different risk management agendas. The FPC did not insist on other kinds of risk control efforts. FPC's risk management strategy, including preparation of the environmental impact statement, did not specify physical design changes in the already operating facility. Alternative sites could not be meaningfully considered since the plant was already built. Because the scope of the risk assessment was segmented to focus on fatalities from a marine spill, and because the need for the plant was assumed, the risk management strategy leaves much to be desired in its treatment of a cargo as hazardous as LNG.
LIQUIFIED NATURAL GAS
61
Relationship of the Risk Assessment and the Risk Management The FPC treated risk management as if a sequential process were taking place. First, the consultant (SAI) was directed to assess the worst-case probability of a ramming, grounding, or collision inducing a marine spill. Second, the magnitude of the spill, the movement of the flammable vapor cloud, and its ignition were postulated. Next, fatalities per exposed person were calculated based on population density in the pathway of the ignited vapor cloud. Finally, the FPC risk management strategy was designed to reduce or eliminate the risk of this worst-case scenario. This analysis ignored the opportunity to define risks in a more comprehensive manner: offloading the LNG from ship-to-shore and regasification and trucking of the LNG deserved more attention than they received in the FPC risk assessment. At every stage the FPC failed to consider such important probabilities as that of a leak in offloading and transferring LNG, because this was not part of the "worst case scenario." Also, only fatalities were evaluated in this approach; injuries and property damage associated with an accident were not forecasted. Overall, jurisdictional matters influenced the actual licensing decision. For example, the FPC excluded from risk consideration the transportation of LNG by truck and barge since those activities do not fall under its jurisdiction. Instead, risk associated with these modes of LNG transport were to be addressed by the US Department of Transportation and the US Coast Guard, respectively; both agencies' efforts fell outside the FPC's environmental impact review process. Similarly, onshore storage, ship transfer operations, and regasification were not considered in depth from the public safety standpoint because it was felt that a marine spill accident would have more severe consequences. Thus, despite NEPA's charter to conduct interdisciplinary environmental reviews of federal projects, the FPC segmented its review to focus only on the impacts of a marine spill during LNG transport through Boston Harbor. Several important issues were not addressed in depth in the EIS. Most significantly, the need for the natural gas imports and the reliability of supply were assumed. Further, the suitability of the site for the scale of tanks and for the configuration of vaporization facilities was neglected. The effectiveness of inplant safety measures was not discussed, either. 8
Evaluation of the Decision The evidence suggests that because the risk assessment was served to justify a
fait accompli, the company benefitted at the expense of a timely evaluation of public safety considerations. The assessment was probably overly stringent in its tanker-escorting provisions while it ignored other aspects of public safety on and around the site. The scope of the assessment was narrow and shortsighted: for example, potential injuries from a LNG transport accident were ignored, as
62
R.S. KONKEL
were potential impacts on the marine environment and historic Boston waterfront properties, including the USS Constitution docked in the Harbor. Given volatility in world energy markets, one would assume that the FPC would have included a detailed evaluation of the need for the Everett LNG facility in the decision making process. In fact, as stated earlier, this need was assumed an assumption that was proven erroneous. The FPC staff assured Distrigas that "business as usual" conditions would apply upon Issuance of the Certificate of Public Convenience and Necessity in 1976. This assurance in effect authorized the corporation to operate the terminal at a level that would meet its contractual obligations with the Algerians and would serve its present customers. At the peak of the LNG import business, the contract called for delivery corresponding to 17 full cargo ships, with a per-ship capacity of 125,000 cubic meters. 9 As demand declined, this was reduced in 1980 to 14 cargoes at a higher delivered price. Distrigas eventually stopped imports to the terminal because Algerian LNG was not competitive with other sources of natural gas and the company was unable to enforce its "take or pay" contracts with interstate customers, according to the company.l° The Federal Energy Regulatory Commission (which succeeded the FPC) issued an opinion (FERC Order 380) which allowed customers to renege on their long-term take or pay contracts. The Algerian gas contract price was tied to world oil prices. The market for Algerian gas, selling at prices in the range of $4.70 to $8.00 per thousand cubic feet (mcf) after the early 1970s gas shortages, was affected by passage of the Natural Gas Policy Act in 1978 and movement to full decontrol of gas prices in 1984. In 1985, when the Algerian gas delivery price was $3.50 per mcf due to falling world oil prices, the company was losing over one dollar per mcf to resell the imported gas. There is a certain procedural context for presenting and evaluating evidence during administrative hearings--through testimony by expert witnesses. Because of the technical nature of administrative decisions, agencies have used administrative law panels in licensing decisions. Administrative law panels are an effective vehicle for setting precedents concerning acceptability and coordinating review of extensive expert testimony. However, one significant drawback is the key role of the agency in presenting evidence and analysis. Was the FPC staff "captured?" Were they acting as promoters rather than as objective analysts of Distrigas's application for a construction and operating license? In this case, the ability of intervenors to affect the decision of the administrative law judge was substantially weakened by their lack of resources. During the public review process for the DEIS, intervenors questioned SAI's objectivity in performing the risk assessment. SAI, a consulting firm, was examining sites for a West Coast client and was hired by the FPC to evaluate four alternative sites for LNG terminals. Upon the recommendation of FPC legal counsel, the FPC staff was made responsible for the marine spill probability analysis (FPC 1976: Attachment A), although conclusions were identical to those
LIQUIFIEDNATURALGAS
63
developed by SAI in the DEIS. F P C ' s effort was aimed at preserving the FEIS credibility and reducing public claims of conflict of interest. Even though there was disagreement between the FPC staff and intervenors about the models and the assumptions that should have been used in the risk assessment, the FPC was still able to specify risk control measures that would mitigate the potential for a marine spill of LNG. The risk assessment proved valuable in later licensing cases. A 10-s F/P/yr standard was established as an informal benchmark of acceptable risk. This case demonstrates in particular how a postoperational and limited-scope risk assessment can facilitate a decision favoring the continued operation of a facility, given an assessed low risk of operation of 10-7 fatalities per exposed person per year.
I owe a principal debt to Dr. Merrie Klapp and Professor Lawrence Susskind for their editorial suggestions. ProfessorSusskindconceptualizedthe initial analyticalapproach. I have benefittedfrom fundingfrom the National Instituteof Dispute Resolution,under grant number 86-029, to research use of risk assessment and make practical recommendationson effective managementof risk in environmentaldecision making. I remain responsiblefor any errors in the case.
Notes 1. Federal Power Commission [FPC], 1976a: !-1, 1-2. 2. The National Environmental Policy Act (NEPA) of 1969 requires environmental review of major federal actions which have a significant effect on the environment. This plant provides a classic example of how some facilities may not receive a timely review due to changes in laws affecting their construction and operation. There was a lapse between the time NEPA was passed and the time administrative mechanisms were set up to implement the Act. Initially the Federal Power Commission (FPC) declined to take jurisdiction over the construction and operation of the Everett terminal, storage, and gasification facilities. The FPC ruled that the applicant, Distrigas, was primarily engaged in intrastate transport. In fact, the company was also attempting to have its application for a Staten Island terminal and facilities approved and it intended to transport LNG from the Everett terminal to New York, New Jersey and southern New England. It took over six applications, including rehearings and appeals, before the FPC finally decided to rule on the issuance of a certificate of public convenience and need for the plant. 3. See the specific comments of Dr. James A. Fay, MIT. FPC, 1976a: Appendix D Comments and Staff Responses on the DEIS, p. 39. 4. Dr. James A. Fay and Dr. William B. Fairley made extensive comments on the draft EIS. At that time they were, respectively, Professor of Mechanical Engineering at MIT and Associate Professor of Statistics at the John F. Kennedy School of Government, Harvard University. 5. "Staff is still of the opinion that a discussion of alternative sites and locations for the Everett facility would be fruitless to pursue," in FPC (1976a), Appendix D: Comments and Staff Responses on the DEIS, p. 12. The draft EIS (FPC 1976b) has
64
6. 7.
8. 9.
10.
R.S. KONKEL
additional information in this regard. Distrigas had over $30 million invested in the construction of the terminal, which had a replacement value of over a quarter of a billion dollars in 1976. Comments of Dr. James A. Fay, MIT. FPC, 1976a: Appendix D Comments and Staff Responses on the DEIS, p. 43. Distrigas asserted that the presence of multiple tugs on entry of a tanker into the harbor and of a US Coast Guard vessel escort on arrival, while in transit in the harbor, during discharge, and while departing from the Port of Boston is an expensive and overly stringent risk control strategy (Auchy 1985). Engineering safety of the plant itself was addressed in an in-house "Cryogenic Design and Safety Review." There were only six ships from 1971-1973, which increased to 14 ships per year in 1974. By 1976, a peak of 17 was reached, before declining in 1980 to 14 ships (Auchy 1985). Initially, Distrigas proposed to use a variety of LNG tankers, including the 29,000 cubic meter capacity Venatar and the 120,000 cubic meter capacity Ben Franklin. Transfer to a towed barge, the Massachusetts, was proposed in early submissions but later dropped. Barge transfer operations could have had a significant effect on historic structures in the North End of Boston and to vessels like the USS Constitution in the Harbor. The Federal Energy Regulatory Commission issued opinion 380 which allowed two customers to get out of their take or pay contracts. The upholding of this ruling ensured that Distrigas, and its parent the Cabot Corporation, would lose money on their existing take or pay contract with the Algerians. In 1986, Distrigas filed for bankruptcy and Chapter 11 protection of its assets. The market in 1985 would only support nine or ten ships. The Algerians sought a price for natural gas equivalent to world oil prices on the Btu basis. El Paso shelved plans for shipments via nine supertankers after investing almost a billion dollars because of an inability to contract for Algerian LNG (Auchy 1985).
References Aronson, J. and Cowley P. 1983. Profit and the Pursuit of Energy: Markets and Regulation. Boulder, CO: Westview Press. Aronson, J. and Westermeyer W. 1982. US public and private regulation of LNG transport. Marine Policy 6,1 : 11-26. Arvidlund, R. 1985. Federal Power Commission project manager for the Everett licensing application. Personal communication. September 3. Atallah, S. and Schneider A. L. 1983. LNG safety research in the USA. Journal of Hazardous Material 8: 25-42. Auchy, G. 1985. Personal communications. Everett, Massachusetts. Fay, J. A. 1980 Risks of LNG and LPG Annual Review of Energy. 5:89-105. Fay, J. A. 1984. Experimental observations of entrainment rates in dense gas dispersion tests, in Ooms, G. and H. Tennekes (eds.), Atmospheric Dispersion of Heavy Gases and Small Particles. Proceedings of a Symposium held at Delft, the Netherlands, August 29-September 2, 1983. New York: Springer-Verlag. Federal Power Commission, Bureau of Natural Gas. 1976a. Final Environmental Impact
Statementfor the Construction and Operation of an LNG Import Terminal at Everett, Massachusetts (Port of Boston). Washington, DC: Federal Power Commission.
LIQUIFIED NATURAL GAS
65
Federal Power Commission, Bureau of Natural Gas. 1976b. Draft Environmental Impact Statement for the Construction and Operation of an LNG Import Terminal at Everett. Massachusetts (Port of Boston). Washington, DC: Federal Power Commission. Federal Power Commission, Bureau of Natural Gas. 1976c. Final Environmental Impact Statement: Pacific-Indonesia Project. Washington, DC: Federal Power Commission. Journal of Hazardous Materials. 1984. Special Issue. Amsterdam, the Netherlands: Elsevier Science Publishing Company. 9(3): 265-401. Jones, D. A. 1984. A Review of Developments in LNG Storage Safety as Reflected by Risk Assessment. Gastech 84 LNG/LPG Conference. November 6-9, Amsterdam: 133-141. Kunreuther, H. et al. 1983. Risk Analysis and Decision Processes: The Siting of Liquified Energy Gas Facilities in Four Countries. Luxembourg, Austria. International Institute for Applied Systems Analysis. Kunreuther, H. and Ley E. (eds.). 1982. The Risk Analysis Controversy: An Institutional Perspective. New York: Springer-Verlag. Lee, W. H. and Weinstein M. 1980. Computer modeling of massive LNG spills from storage tanks at Point Conception, Oxnard, and Los Angeles Harbor, CA. in Cryogenic Processes and Equipment in Energy Systems. New York: American Society of Mechanical Engineers. Ligthart, H. M. 1980. Determination of the probability of marine accidents with respect to gas carriers proceeding in Dutch coastal waters. Journal of Hazardous Materials 3: 233-247. Little, Arthur D. 1979. Assessment of the Risks and Risk Control Options Associated with Liquified Natural Gas Trucking Operationsfrom Distrigas Terminal, Everett MA. Contract No. DOT-RC-82037, ADL Ref. #82280. Washington, DC: US Department of Transportation. Little, Arthur D. 1982. Ignition Sources of LNG Vapor Clouds, by D. Jeffreys, N. Moussa, R. Caron, and D. Allan. Report No. GRI-80/0108. Chicago: Gas Research Institute. Meroney, R. N. 1984. Transient characteristics of dense gas dispersion. Part I: A depthaveraged numerical model, and Part II: Numerical experiments on dense gas cloud physics. Journal of Hazardous Materials 9,2 (August). Mudan, K. S. 1984. Thermal radiation hazards from hydrocarbon pool fires. Progressive Energy Combustion Science 10: 59-80. Mudan, K. S. and Croce, P, 1984. A Thermal Radiation Model for LNG Trench Fires. Ref. #84-WA/HT-75. New York: American Society for Mechanical Engineers. Ooms, G. and Tennekes, H. (eds.). 1983. Atmospheric Dispersion of Heavy Gases and Small Particles. Proceedings of a Symposium held at Delft, the Netherlands, August 29-September 2, 1983. New York: Springer-Verlag. 1984. Susskind, L. and Cassella, S. 1980. The dangers of preemptive legislation: the case of LNG facility siting in California. Environmental Impact Assessment Review 1,1 : 9-26. US National Materials Advisory Board. 1980. Safety Aspects of Liquefied Natural Gas in the Marine Environment. Contract No. DoT-CG-74248-A for the US Coast Guard. Washington: US Department of Commerce. Available from the National Technical Information Service, Springfield, VA. Valckenaers, M. 1982, Risk assessment of LNG installations. Gastech 82 LNG/LPG Conference. Paris. October 5-8. Chicago: Institute of Gas Technology. Wicks, K. M. 1982. Risk assessment techniques for LNG/LPG shipping terminals. Gastech 82 LNG/LPG Conference. Paris. October 5-8. Chicago: Institute of Gas Technology.
ENVIRON IMPACT ASSESS REV 1987;7:57-65
RISK M A N A G E M E N T IN THE UNITED STATES: T H R E E CASE STUDIES LIQUIFIED NATURAL GAS: SPECTRE OF A MARINE SPILL IN BOSTON HARBOR
R. STEVEN KONKEL
Construction of a liquified natural gas (LNG) import terminal at Everett, Massachusetts began in 1969. The terminal, operated by Distrigas, a Massachusetts Corporation, began handling imports of Algerian LNG in November, 1979 (Auchy 1985). The plant received permits from the US Coast Guard, City of Everett, and two Massachusetts agencies, the Department of Safety and the Department of Public Utilities (Federal Power Commission 1976a). Beginning in 1972, the terminal was in full operation transshipping and storing LNG. According to the plant manager George Auchy, who joined the company in 1974, imports increased from seven to 14 ships per year almost immediately following construction. Distrigas distributed LNG in New York, Massachusetts, New Jersey, Connecticut, and Rhode Island. Distrigas had sought federal approval to construct and operate the terminal in order to minimize problems with conflicting and overlapping state and federal regulations (Auchy 1985). In 1972, the Federal Power Commission's (FPC) Bureau of Natural Gas declined to take jurisdiction for issuing a Certificate of Public Convenience and Necessity to Distrigas for operation of the terminal, storage, and gasification facilities. 1 Finally, in 1976, pursuant to the Natural Gas Act, the FPC issued the environmental statement containing the basis for its decision to authorize all or any part of the LNG import operations. 2 The following case study describes: (1) the operating and construction license decision made by the FPC, (2) the risk assessment that was done, (3) FPC's risk management decision, (4) the fragmentation of decision-making responsibilities and the need for integration of risk assessment and risk management, and (5) evaluation of the final decision. The FPC's purpose in assessing the safety risks of LNG transport was to make a retroactive decision about granting permission for the Everett LNG terminal © 1987 Elsevier Science Publishing Co., Inc. 52 Vanderbilt Avenue, New York, NY 10017
0195-9255/87/$3.50
58
R.S. KONKEL
to operate. At the post-operational stage, a risk assessment could no longer fully consider alternatives to the project or modifications in its design, site, or specifications. FPC staff had two major decision options. They could decide that the safety risks of an LNG explosion were too great, and shut down the facility. Alternatively, they could decide that the existing or a modified level of LNG transport in the Harbor constituted an acceptable risk to the public, and conditionally approve the existing facility.
Risk Assessment of the Safety of Importing LNG A risk analysis was commissioned by the FPC to address the probability of a marine accident involving a collision, ramming, or grounding in Boston Harbor, the waterway to Everett. Decision makers were concerned that an LNG spill, formation of an LNG/air vapor cloud, and ignition of the cloud would cause fatalities from direct exposure to fire as well as exposure to radiation from burning fuel. The risk analysis was done by Science Applications, Inc. (SAI), which acted as a consultant to the FPC staff. SAI was concurrently performing a site analysis for the FPC and a risk assessment and siting analysis for Western LNG Terminal Associates for the proposed Oxnard, Point Conception, and Los Angeles Harbor import terminal sites on the West Coast. A risk assessment was not conducted until 1976 for several reasons. Public opposition was minimal, no precedent existed for risk analyses of LNG terminals in the US, and Massachusetts environmental legislation did not require such an analysis. Until 1973, the public in the Boston area had not recognized the potential for an accident in handling and storing LNG. The Everett site had formerly been used for heavy industry, in particular, production of coal gas (Auchy 1985). The site was attractive to the company because it was adjacent to deep water, had good access to the interstate highway system for distribution via trucks, and was located at the confluence of a pipeline owned by Boston Consolidated Gas. A complete breakup of an LNG storage tank in Cleveland disgorged its contents in a 1944 accident, causing 130 fatalities, 225 injuries, and seven million dollars in property damage. Thus precedent existed for concern over LNG safety. Another accident occurred in 1973 during repair of an LNG storage tank on Staten Island: the tank explosion killed 43 workers. (The tank was not owned by Distrigas but its proposal for siting several tanks on Staten Island was subsequently abandoned at a financial loss when the site was sold to a New Jersey utility. The utility later attempted to get permits to use the site for a peak-shaving LNG operation, but was unsuccessful.) After the 1973 accident, a 60 Minutes news team visited the Everett terminal. At the same time, a Massachusetts chapter of BLAST (Bring Legal Action to Stop the Tanks) was formed and the group began protesting that the risks of the Everett LNG terminal were too great.
LIQU1FIED NATURAL GAS
59
The environmental risk assessment by SAI showed that the casualty per trip probability of a grounding, ramming or collision in Boston Harbor was about one in one thousand (1.1 × 10~3), based on evidence of four tanker accidents in 3627 total trips which took place over a five-year period (FPC 1976a: 3-l I). Annual casualty risk is then given by multiplying by the number of annual trips: 16 trips were forecasted by the FPC. The risk assessors chose a "worst-case" conditional probability model, calculating the risk in terms of fatal human exposure to an ignited vapor cloud. This method would place an upper bound on the risk, as opposed to calculating risk of higher probability but less significant consequences. The FPC staff felt that calculating the probability of injury was beyond the scope of the assessment, even though an intervenor suggested that injuries might exceed fatalities and that caring for the injured is essential to effective contingency planning. 3 The fatalities per exposed person per year (F/P/yr) were estimated at 3.57 × l0 -8 for direct exposure to the vapor cloud and at 2.63 × l0 -7 F/P/yr for exposure to the radiation that would accompany such an event (FPC 1976a). An estimated 2500 fatalities would result from exposure to the vapor cloud, and 3000 fatalities would result from exposure to radiant heat (FPC, 1976a: Attachment A, Tables 6 and 7). Two professors at MIT and Harvard University disagreed with assumptions made in the SAI analysis regarding the distance the vapor cloud might travel under given meteorological conditions; they were concerned that the flammable vapor cloud could travel much farther than estimated by SAI before ignition and cause significantly more fatalities, injuries, and property damage/~ Their objections were appended to the final environmental statement. The risk assessment contained in the final environmental statement suffered from many deficiencies. As mentioned, it came after the fact, so that an attempt to assess alternative sites was irrelevant. There was an extremely strong economic incentive to allow the plant to continue transshipping, storing, and distributing LNG. 5 The analysis was reduced to a worst-case marine spill of LNG. The risks from a spill during unloading, regasification, or trucking were not considered because they were thought to be of less concern than those from a marine spill (FPC 1976a). There was controversy over the maximum distance a flammable vapor cloud might travel, and disagreement over when it might ignite. Professor Fay of MIT was not convinced that the cloud would ignite within 4,000 feet of the spill; he estimated that the cloud could travel as far as 300,000 feet. 6 Immediate ignition has the result of fewer casualties. As is true of many state-ofthe-art applications, the methodology used by the consultant had not been subject to peer review by the scientific community (FPC 1976a: Appendix D). In administrative panel reviews, commonly used in licensing cases, all parties present their cases, and a decision is made by one or more administrative law judges. However, to be effective, each party must have adequate resources to present its case. In this case, the intervenors did not have sufficient funding to produce independent analyses. This gave the FPC staff and their consultant an
60
R.S. KONKEL
advantage in the presentation and critique of testimony before the administrative law judge. The risk assessment has been criticized on three major grounds: poor timing, disagreements outside the agency on models and assumptions, and possible consultant self interest in the outcome.
Effectiveness of the LNG Risk Management Strategy The risk control strategy considered by the FPC was to instruct the US Coast Guard to provide a "moving safe zone" for LNG tankers entering Boston Harbor, to escort LNG tankers to the Everett terminal, and to stand by until the cargo was unloaded. This enabled decision makers to dismiss from serious consideration the probability of collisions and rammings. Other potential risk control strategies, such as insurance options to reduce or mitigate on-site accidents or compensation of local residents, were neglected. The FPC did not seriously consider changes in regulations, laws, management practices, or personnel policies. The criterion that the FPC chose for site acceptability was fatalities per exposed person per year (F/P/yr). However, the standard of 10-5 F/P/yr was developed using the Everett site risk assessment and by making comparisons to rivc~accessible sites in Delaware Bay such as Racoon Island (Arvidlund 1985). The question arises, which should come first--the standard, or the application of the standard to a licensing decision? The Final Environmental Impact Statement assigned to the US Coast Guard the dominant risk management responsibility for enforcement of an LNG-LPG Operation/Emergency Plan that would "prevent a large spill from occurring." (See FPC, 1976a: Attachment A.) In response, the Coast Guard updated its existing LNG-LPG Operation/Emergency Plan by establishing a "moving safe" zone for all LNG and LPG tanker traffic. This plan stipulated actions that the applicant, Distrigas, would be required to take in order to minimize the probability of a ship collision in Boston Harbor. It is a very positive aspect of the risk management in that it is explicit about responsibilities and is updated as needed. However, Distrigas was privately of the opinion that much of this regulation is redundant. 7 This illustrates that various actors had different risk management agendas. The FPC did not insist on other kinds of risk control efforts. FPC's risk management strategy, including preparation of the environmental impact statement, did not specify physical design changes in the already operating facility. Alternative sites could not be meaningfully considered since the plant was already built. Because the scope of the risk assessment was segmented to focus on fatalities from a marine spill, and because the need for the plant was assumed, the risk management strategy leaves much to be desired in its treatment of a cargo as hazardous as LNG.
LIQUIFIED NATURAL GAS
61
Relationship of the Risk Assessment and the Risk Management The FPC treated risk management as if a sequential process were taking place. First, the consultant (SAI) was directed to assess the worst-case probability of a ramming, grounding, or collision inducing a marine spill. Second, the magnitude of the spill, the movement of the flammable vapor cloud, and its ignition were postulated. Next, fatalities per exposed person were calculated based on population density in the pathway of the ignited vapor cloud. Finally, the FPC risk management strategy was designed to reduce or eliminate the risk of this worst-case scenario. This analysis ignored the opportunity to define risks in a more comprehensive manner: offloading the LNG from ship-to-shore and regasification and trucking of the LNG deserved more attention than they received in the FPC risk assessment. At every stage the FPC failed to consider such important probabilities as that of a leak in offloading and transferring LNG, because this was not part of the "worst case scenario." Also, only fatalities were evaluated in this approach; injuries and property damage associated with an accident were not forecasted. Overall, jurisdictional matters influenced the actual licensing decision. For example, the FPC excluded from risk consideration the transportation of LNG by truck and barge since those activities do not fall under its jurisdiction. Instead, risk associated with these modes of LNG transport were to be addressed by the US Department of Transportation and the US Coast Guard, respectively; both agencies' efforts fell outside the FPC's environmental impact review process. Similarly, onshore storage, ship transfer operations, and regasification were not considered in depth from the public safety standpoint because it was felt that a marine spill accident would have more severe consequences. Thus, despite NEPA's charter to conduct interdisciplinary environmental reviews of federal projects, the FPC segmented its review to focus only on the impacts of a marine spill during LNG transport through Boston Harbor. Several important issues were not addressed in depth in the EIS. Most significantly, the need for the natural gas imports and the reliability of supply were assumed. Further, the suitability of the site for the scale of tanks and for the configuration of vaporization facilities was neglected. The effectiveness of inplant safety measures was not discussed, either. 8
Evaluation of the Decision The evidence suggests that because the risk assessment was served to justify a
fait accompli, the company benefitted at the expense of a timely evaluation of public safety considerations. The assessment was probably overly stringent in its tanker-escorting provisions while it ignored other aspects of public safety on and around the site. The scope of the assessment was narrow and shortsighted: for example, potential injuries from a LNG transport accident were ignored, as
62
R.S. KONKEL
were potential impacts on the marine environment and historic Boston waterfront properties, including the USS Constitution docked in the Harbor. Given volatility in world energy markets, one would assume that the FPC would have included a detailed evaluation of the need for the Everett LNG facility in the decision making process. In fact, as stated earlier, this need was assumed an assumption that was proven erroneous. The FPC staff assured Distrigas that "business as usual" conditions would apply upon Issuance of the Certificate of Public Convenience and Necessity in 1976. This assurance in effect authorized the corporation to operate the terminal at a level that would meet its contractual obligations with the Algerians and would serve its present customers. At the peak of the LNG import business, the contract called for delivery corresponding to 17 full cargo ships, with a per-ship capacity of 125,000 cubic meters. 9 As demand declined, this was reduced in 1980 to 14 cargoes at a higher delivered price. Distrigas eventually stopped imports to the terminal because Algerian LNG was not competitive with other sources of natural gas and the company was unable to enforce its "take or pay" contracts with interstate customers, according to the company.l° The Federal Energy Regulatory Commission (which succeeded the FPC) issued an opinion (FERC Order 380) which allowed customers to renege on their long-term take or pay contracts. The Algerian gas contract price was tied to world oil prices. The market for Algerian gas, selling at prices in the range of $4.70 to $8.00 per thousand cubic feet (mcf) after the early 1970s gas shortages, was affected by passage of the Natural Gas Policy Act in 1978 and movement to full decontrol of gas prices in 1984. In 1985, when the Algerian gas delivery price was $3.50 per mcf due to falling world oil prices, the company was losing over one dollar per mcf to resell the imported gas. There is a certain procedural context for presenting and evaluating evidence during administrative hearings--through testimony by expert witnesses. Because of the technical nature of administrative decisions, agencies have used administrative law panels in licensing decisions. Administrative law panels are an effective vehicle for setting precedents concerning acceptability and coordinating review of extensive expert testimony. However, one significant drawback is the key role of the agency in presenting evidence and analysis. Was the FPC staff "captured?" Were they acting as promoters rather than as objective analysts of Distrigas's application for a construction and operating license? In this case, the ability of intervenors to affect the decision of the administrative law judge was substantially weakened by their lack of resources. During the public review process for the DEIS, intervenors questioned SAI's objectivity in performing the risk assessment. SAI, a consulting firm, was examining sites for a West Coast client and was hired by the FPC to evaluate four alternative sites for LNG terminals. Upon the recommendation of FPC legal counsel, the FPC staff was made responsible for the marine spill probability analysis (FPC 1976: Attachment A), although conclusions were identical to those
LIQUIFIEDNATURALGAS
63
developed by SAI in the DEIS. F P C ' s effort was aimed at preserving the FEIS credibility and reducing public claims of conflict of interest. Even though there was disagreement between the FPC staff and intervenors about the models and the assumptions that should have been used in the risk assessment, the FPC was still able to specify risk control measures that would mitigate the potential for a marine spill of LNG. The risk assessment proved valuable in later licensing cases. A 10-s F/P/yr standard was established as an informal benchmark of acceptable risk. This case demonstrates in particular how a postoperational and limited-scope risk assessment can facilitate a decision favoring the continued operation of a facility, given an assessed low risk of operation of 10-7 fatalities per exposed person per year.
I owe a principal debt to Dr. Merrie Klapp and Professor Lawrence Susskind for their editorial suggestions. ProfessorSusskindconceptualizedthe initial analyticalapproach. I have benefittedfrom fundingfrom the National Instituteof Dispute Resolution,under grant number 86-029, to research use of risk assessment and make practical recommendationson effective managementof risk in environmentaldecision making. I remain responsiblefor any errors in the case.
Notes 1. Federal Power Commission [FPC], 1976a: !-1, 1-2. 2. The National Environmental Policy Act (NEPA) of 1969 requires environmental review of major federal actions which have a significant effect on the environment. This plant provides a classic example of how some facilities may not receive a timely review due to changes in laws affecting their construction and operation. There was a lapse between the time NEPA was passed and the time administrative mechanisms were set up to implement the Act. Initially the Federal Power Commission (FPC) declined to take jurisdiction over the construction and operation of the Everett terminal, storage, and gasification facilities. The FPC ruled that the applicant, Distrigas, was primarily engaged in intrastate transport. In fact, the company was also attempting to have its application for a Staten Island terminal and facilities approved and it intended to transport LNG from the Everett terminal to New York, New Jersey and southern New England. It took over six applications, including rehearings and appeals, before the FPC finally decided to rule on the issuance of a certificate of public convenience and need for the plant. 3. See the specific comments of Dr. James A. Fay, MIT. FPC, 1976a: Appendix D Comments and Staff Responses on the DEIS, p. 39. 4. Dr. James A. Fay and Dr. William B. Fairley made extensive comments on the draft EIS. At that time they were, respectively, Professor of Mechanical Engineering at MIT and Associate Professor of Statistics at the John F. Kennedy School of Government, Harvard University. 5. "Staff is still of the opinion that a discussion of alternative sites and locations for the Everett facility would be fruitless to pursue," in FPC (1976a), Appendix D: Comments and Staff Responses on the DEIS, p. 12. The draft EIS (FPC 1976b) has
64
6. 7.
8. 9.
10.
R.S. KONKEL
additional information in this regard. Distrigas had over $30 million invested in the construction of the terminal, which had a replacement value of over a quarter of a billion dollars in 1976. Comments of Dr. James A. Fay, MIT. FPC, 1976a: Appendix D Comments and Staff Responses on the DEIS, p. 43. Distrigas asserted that the presence of multiple tugs on entry of a tanker into the harbor and of a US Coast Guard vessel escort on arrival, while in transit in the harbor, during discharge, and while departing from the Port of Boston is an expensive and overly stringent risk control strategy (Auchy 1985). Engineering safety of the plant itself was addressed in an in-house "Cryogenic Design and Safety Review." There were only six ships from 1971-1973, which increased to 14 ships per year in 1974. By 1976, a peak of 17 was reached, before declining in 1980 to 14 ships (Auchy 1985). Initially, Distrigas proposed to use a variety of LNG tankers, including the 29,000 cubic meter capacity Venatar and the 120,000 cubic meter capacity Ben Franklin. Transfer to a towed barge, the Massachusetts, was proposed in early submissions but later dropped. Barge transfer operations could have had a significant effect on historic structures in the North End of Boston and to vessels like the USS Constitution in the Harbor. The Federal Energy Regulatory Commission issued opinion 380 which allowed two customers to get out of their take or pay contracts. The upholding of this ruling ensured that Distrigas, and its parent the Cabot Corporation, would lose money on their existing take or pay contract with the Algerians. In 1986, Distrigas filed for bankruptcy and Chapter 11 protection of its assets. The market in 1985 would only support nine or ten ships. The Algerians sought a price for natural gas equivalent to world oil prices on the Btu basis. El Paso shelved plans for shipments via nine supertankers after investing almost a billion dollars because of an inability to contract for Algerian LNG (Auchy 1985).
References Aronson, J. and Cowley P. 1983. Profit and the Pursuit of Energy: Markets and Regulation. Boulder, CO: Westview Press. Aronson, J. and Westermeyer W. 1982. US public and private regulation of LNG transport. Marine Policy 6,1 : 11-26. Arvidlund, R. 1985. Federal Power Commission project manager for the Everett licensing application. Personal communication. September 3. Atallah, S. and Schneider A. L. 1983. LNG safety research in the USA. Journal of Hazardous Material 8: 25-42. Auchy, G. 1985. Personal communications. Everett, Massachusetts. Fay, J. A. 1980 Risks of LNG and LPG Annual Review of Energy. 5:89-105. Fay, J. A. 1984. Experimental observations of entrainment rates in dense gas dispersion tests, in Ooms, G. and H. Tennekes (eds.), Atmospheric Dispersion of Heavy Gases and Small Particles. Proceedings of a Symposium held at Delft, the Netherlands, August 29-September 2, 1983. New York: Springer-Verlag. Federal Power Commission, Bureau of Natural Gas. 1976a. Final Environmental Impact
Statementfor the Construction and Operation of an LNG Import Terminal at Everett, Massachusetts (Port of Boston). Washington, DC: Federal Power Commission.
LIQUIFIED NATURAL GAS
65
Federal Power Commission, Bureau of Natural Gas. 1976b. Draft Environmental Impact Statement for the Construction and Operation of an LNG Import Terminal at Everett. Massachusetts (Port of Boston). Washington, DC: Federal Power Commission. Federal Power Commission, Bureau of Natural Gas. 1976c. Final Environmental Impact Statement: Pacific-Indonesia Project. Washington, DC: Federal Power Commission. Journal of Hazardous Materials. 1984. Special Issue. Amsterdam, the Netherlands: Elsevier Science Publishing Company. 9(3): 265-401. Jones, D. A. 1984. A Review of Developments in LNG Storage Safety as Reflected by Risk Assessment. Gastech 84 LNG/LPG Conference. November 6-9, Amsterdam: 133-141. Kunreuther, H. et al. 1983. Risk Analysis and Decision Processes: The Siting of Liquified Energy Gas Facilities in Four Countries. Luxembourg, Austria. International Institute for Applied Systems Analysis. Kunreuther, H. and Ley E. (eds.). 1982. The Risk Analysis Controversy: An Institutional Perspective. New York: Springer-Verlag. Lee, W. H. and Weinstein M. 1980. Computer modeling of massive LNG spills from storage tanks at Point Conception, Oxnard, and Los Angeles Harbor, CA. in Cryogenic Processes and Equipment in Energy Systems. New York: American Society of Mechanical Engineers. Ligthart, H. M. 1980. Determination of the probability of marine accidents with respect to gas carriers proceeding in Dutch coastal waters. Journal of Hazardous Materials 3: 233-247. Little, Arthur D. 1979. Assessment of the Risks and Risk Control Options Associated with Liquified Natural Gas Trucking Operationsfrom Distrigas Terminal, Everett MA. Contract No. DOT-RC-82037, ADL Ref. #82280. Washington, DC: US Department of Transportation. Little, Arthur D. 1982. Ignition Sources of LNG Vapor Clouds, by D. Jeffreys, N. Moussa, R. Caron, and D. Allan. Report No. GRI-80/0108. Chicago: Gas Research Institute. Meroney, R. N. 1984. Transient characteristics of dense gas dispersion. Part I: A depthaveraged numerical model, and Part II: Numerical experiments on dense gas cloud physics. Journal of Hazardous Materials 9,2 (August). Mudan, K. S. 1984. Thermal radiation hazards from hydrocarbon pool fires. Progressive Energy Combustion Science 10: 59-80. Mudan, K. S. and Croce, P, 1984. A Thermal Radiation Model for LNG Trench Fires. Ref. #84-WA/HT-75. New York: American Society for Mechanical Engineers. Ooms, G. and Tennekes, H. (eds.). 1983. Atmospheric Dispersion of Heavy Gases and Small Particles. Proceedings of a Symposium held at Delft, the Netherlands, August 29-September 2, 1983. New York: Springer-Verlag. 1984. Susskind, L. and Cassella, S. 1980. The dangers of preemptive legislation: the case of LNG facility siting in California. Environmental Impact Assessment Review 1,1 : 9-26. US National Materials Advisory Board. 1980. Safety Aspects of Liquefied Natural Gas in the Marine Environment. Contract No. DoT-CG-74248-A for the US Coast Guard. Washington: US Department of Commerce. Available from the National Technical Information Service, Springfield, VA. Valckenaers, M. 1982, Risk assessment of LNG installations. Gastech 82 LNG/LPG Conference. Paris. October 5-8. Chicago: Institute of Gas Technology. Wicks, K. M. 1982. Risk assessment techniques for LNG/LPG shipping terminals. Gastech 82 LNG/LPG Conference. Paris. October 5-8. Chicago: Institute of Gas Technology.