Category Archives: Environmental Risk

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Garbage In, Garbage Out

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Last week I wrote about a train derailment on the line I take to work every day. It was the third derailment in only a few months for the MTA. It turns out that two sets of tracks were destroyed as the result of a derailment of 10 cars on a CSX train hauling garbage at night.

The MTA responded promptly and by the next morning had plans in place, using buses and a subway line to get people to work in Manhattan. That was a Friday, and by Monday garbage had been removed from the tracks and one track was replaced so that service could mostly be restored. The second track was back a few days later.

But a recent letter to the editor of our local newspaper gave the incident a new perspective.

The reader pointed out that a CSX garbage train makes a trip four times each day to and from the Bronx, through Albany, to Virginia.

He stated, “The garbage is loaded next door to two gas-fired electric generating plants,” and pointed out that “every advanced country is converting garbage to gas for electric production – we are not.” Instead, we are hauling it to faraway locales to be placed in landfills.

Randy Leonard wrote in a column for The New York Times in September 2012 that strides have been made with a process called plasma arc gasification, developed by the U.S. Air Force. The gasification process was designed as an alternative to the open pit burns of garbage that some Iraq and Afghanistan veterans claim made them sick.

He noted that David Robau, an environmental scientist for the Air Force, “tours the country promoting a system that sounds too good to be true: It devours municipal garbage, recycles metals, blasts toxic contaminants and produces electricity and usable byproducts — all with drastic reductions in emissions.”

New York City and some waste companies are interested in the process, which is favored by some because it can destroy medical waste, asbestos, hydrocarbons and PCBs, he said.

Robau added that not all environmentalists are convinced, believing that complete disposal of waste will discourage recycling and development of renewable products. They also feel that gasification will still create toxic substances such as dioxins.

David Wolman reported in Wired Magazine, February 2012 that a huge garbage operation in Northern Oregon has included a plasma gasification facility. It is run by a startup company called S4 Energy Solutions – the first commercial plant in the U.S. to use the process to convert household garbage into gas products like hydrogen and carbon monoxide. The products can be burned as fuel or sold for other industrial applications.

So far gasification has not taken off, because the value of the product has yet to offset the energy required to power the high temperature furnaces needed to melt the trash. But I have faith (fingers crossed) that eventually solutions to many of the issues at hand will be found.

After all, garbage is cheap fuel.

As open land gets scarce and water tables are threatened, we will realize that capping landfills is not a long-term solution. Fossil fuels will also become too expensive, making that cheap fuel look better and better. In fact, I predict that we will eventually be mining garbage out of our landfills.

It’s only a matter of time.

Recent Anti-Pollution Activism Underscores Importance of Community Relations

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Since the beginning of May, anti-pollution activism has been directed against several industrial projects in Chengdu, Kunming and Shanghai, China. The level of opposition has prompted street demonstrations and varying levels of response by local authorities.

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While foreign companies have not been involved in the latest examples of environmental activism, past incidents have targeted foreign companies. The latest incidents underscore the importance of early and effective two-way communication with local communities before undertaking a new industrial project.

In May, residents opposing two major industrial projects in Chengdu and Kunming stepped up their anti-pollution activism by holding protests on May 4 and May 16. Authorities in the city were also concerned that protests could occur during the opening of the China-South Asia Expo, which took place in the city June 6-10.

On May 4, media reports indicated that hundreds of protesters converged at Nan Ping Plaza in Kunming’s city center to protest plans to construct a paraxylene (PX) plant at an industrial zone in Anning city, approximately 45 kilometers southwest of Kunming.

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Also on May 4, local authorities in Chengdu reportedly increased security in the city’s downtown Tianfu Plaza to prevent anti-pollution activists from holding protests over a major refinery and petrochemical facility local authorities have been planning to construct in nearby Pengzhou. According to the South China Morning Post, the increased police presence effectively deterred protesters from holding a rally.

Meanwhile, in Shanghai’s Songjiang district, local residents also held a demonstration outside the main district government office on May 1 in opposition to a previously planned battery factory at a local industrial park. The company behind the project has since cancelled its plans, ending local opposition.

Growing Environmental Activism

These latest anti-pollution protests highlight an ongoing trend of local communities exposing potential pollution issues to environmental authorities. The scale of pollution in China, especially in major industrial areas, is a huge challenge for China’s leadership.

State media reported this week that Ministry of Environmental Protection statistics from last year revealed that 58% of underground water at the ministry’s monitoring sites around the country had been categorized as polluted or extremely polluted. The statistics also revealed that 298 million rural residents do not have access to safe drinking water. Activism and calls for greater efforts to clean up decades of pollution caused by China’s rapid industrial growth have mounted in recent months, accompanied by China’s new leadership transition.

Environmental authorities have tried to respond, but the extent of the problem will likely require years to make substantial progress in cleaning up the environment. In May, environmental authorities reported that they punished 15 factories for air and water pollution violations in the first quarter of this year. Given the scale of the problem, this number appears relatively low.

The Role of Social Media and Street Protests

The increased awareness and activism, especially in urban and suburban areas, combined with the limits of enforcement, have given rise to local communities resorting to social media to expose concerns about pollution. In some cases, local opposition has escalated to street protests if local governments are perceived as slow to respond.

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In May, local media reported that environmental authorities would investigate suspected water pollution at the Dabai Bay Industrial Zone in Shanghai’s Pudong New District. The posting of pictures online that showed blue sewage water discharged into a local river reportedly prompted local authorities to take action.

Recent protests, including some that have turned violent, have prompted local governments to suspend or cancel certain projects. The latest protests, especially against a major battery factory planned for construction in Shanghai’s Songjiang Industrial Park, have highlighted concerns about the transparency of the environmental impact assessment (EIA) process and the input of local communities. According to media reports, local authorities have decided that the planned production site of the battery factory would not engage in chemical processes which can produce pollution. Instead, the project originally planned to focus on lithium cell production and battery assembly.

Although local protests have resulted in the suspension of some major projects, the importance of local GDP growth and the development of industry present challenges to local governments. The importance of the battery factory to the development of Songjiang’s auto industry prompted the local government to initially try to strike a balance between economic development and pollution concerns. According to a local resident, authorities placed notices within at least one residential community in the district to inform them of the government’s latest decision about the project. This could be an indication that the local government understood the need for greater communication with the public. It may have also been an attempt to counter a relatively well-organized online opposition campaign created by residents concerned about their health and the potential for declining property values.

Proactive Risk Mitigation

Although foreign companies typically operate at a high standard of environmental protection, the communications and community involvement aspects of an industrial project will likely become increasingly important. As residential communities and industrial areas expand and encroach on each other in suburban areas of major cities, local residents’ environmental concerns will continue to rise.

Foreign companies can encourage local governments and industrial parks to ensure the transparency of the EIA process is upheld on their project and that extensive two-way dialogue is conducted with local residents. Foreign companies should also emphasize clean technologies and other processes used to treat waste. Using similar projects in other parts of the world as examples of the high standard of their operations can also be an effective component of a campaign. Management should also be prepared for some residents to demand compensation during the community relations process.

Lastly, companies should develop contingency plans in the event that an accident occurs after a project has started operation. Plans to address this type of contingency should include increased security measures as part of a response due to the potential for strong local reactions, including protests directed against the project.

Green Construction Risks and Rewards

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Green construction has become more and more popular over the past decade. Businesses and homes are turning to green while the government encourages it through tax incentives. But going green is not just about sustainable or local products in construction. It involves specific construction standards, various rating systems and green construction codes. Last week, a session at the RIMS Annual Conference & Exhibition helped us understand the complexities of green construction.

Speaking on the matter were:

Stephen Grossmark, partner at Tressler
James McIlnerney, vice president, field operations and risk manager for Leopardo
Matt Lumelleau, producer for Lockton Companies

There are many different green construction standards depending on what type of construction is being done and what the intent is. ASTM International (formerly the American Society for Testing and Materials) is known as the gold standard for green construction standards. There is also ASHRAE (the American Society of Heating, Refrigerating and Air Conditioning Engineers), which focuses on building ventilation.

And of the different green construction rating systems, the most prominent is LEED (Leadership in Energy and Environmental Design), which addresses:

  • Sustainable sites
  • Water efficiency
  • Energy and atmosphere
  • Materials and resources
  • Indoor environmental quality
  • Innovation in operations and regional priority (using local products)

With LEED there are four certifications: certified, silver, gold, platinum. As the speakers said, LEED is a flexible program as to the number of points needed to earn a green construction certification and how they are earned.

“It’s not whether you can get a green certification, it’s how green are you going to be,” said Grossmark.

“Basically, the whole point of LEED is to convert structures from energy efficiency to energy neutral to energy-producing buildings,” he added.

The most impressive example is the Bullitt Center in Seattle, which is known as the greenest commercial building in the world. The building captures rainwater and uses it on site. It even uses raw swage as fertilizer off site. “The goal is to be self sustained, not to pull electricity from the grid if they don’t have to, or water for that matter,” said Grossmark.

According to McInerney, there is a basic formula for sustainable design. He believes that design plus construction plus commissioning equals:

  • Higher productivity
  • Healthier conditions for occupants
  • Meeting green market demands
  • Potential tax credits

But of course, as McInerney pointed out, there are performance and contractual concerns. As with anything, there are risks involved.

The major causes of loss for green buildings are:

  • Envelope leaks
  • Electrical fires
  • Plumbing leaks
  • Mold growth
  • Building code and rating upgrades
  • Unknown green construction risk
  • Vegetative roofs (the weight of the soil can cause problems)
  • Indoor air-quality problems (can use vapor extrusion to move bad air out)
  • Materials characteristics and integration
  • Brownfield sites (environmental exposures related to prior land use)

Then there are the builder’s issues, including:

  • Inexperienced contractors and subcontractors
  • LEED projects require experienced personnel
  • Alternative energy and other advanced systems/learning curves
  • “Greenwashing”
  • LEED point challenges

“If it’s your first time building a green building, you’re not going to get everything right,” said Lumelleau.

There are two ways of dealing with that from insurance standpoint: OCIPs (owner-controlled insurance programs) and CCIPs (contractor controlled insurance program). Current carriers of such insurance include Liberty, Fireman’s Fund, FM Global, Travelers, Zurich, GenRe and Lexington/AIG. Many times, carriers will offer discounts for green-certified buildings for property coverage or upgrades to greener technologies after a loss occurs. 

Mouse Bombs to the Rescue

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Guam seems like a creepy place. Back in 2010, I wrote about how the island had become infested with hordes of brown tree snakes that cause millions of dollars in property damage and frequent power outages every year. On top of that, the snakes have wiped out most of the native bird population and, in doing so, have allowed the spider population to thrive to the point that Guam now has 40 times more spiders than any neighboring Pacific island. Tourism has obviously suffered because, well, snakes and spiders are everywhere. It’s basically nightmare fuel.

The U.S. Department of Agriculture has a plan though. This spring they plan to drop a bunch of dead mice from helicopters into the jungles in Guam’s Andersen Air Force base. The mice will be laced with acetaminophen, which is deadly to the snakes, and attached to cardboard and streamers so they can float down into the jungle canopy where the snakes live and deliver a last meal right to their doorstep. They did a smaller mouse bomb drop over the naval base in 2010 and evidently it was successful enough to try again in the larger, 110-acre area. It sounds crazy but, hey, anything that works.

And if nothing else, you have to give them points for creative risk management.