Future Investment: Learning from Safety and Environmental Regulations

1. Future Investment:Learning from Safety and Environmental Regulations Janet Murfin

2. Background: • Is this applicable to me? • New investors in chemical industry • Existing chemical businesses (current upturn) • Does the speaker know what they’re talking about? • Just finished environmental aspects of COMAH Top Tier safety report; help SMEs keep out of COMAH • Successful low-impact PPC permit last year; one permit surrender accepted, two more in pipeline; three more PPC applications due 31st August, various discussions/ projects • Set up and run own business from scratch, used to discussing business implications of these regulations

3. Being in any business… • Is ultimately about the WILL to do it, and the MONEY to make it happen • Chemical industry has very long investment cycles: both these qualities are absolutely essential for success • Safety and Environmental Regulations will eat away at your WILL to stay in business (“hassle factor”) as much as your pocket • Permits/ annual charges • Costs of waste and effluent disposal • Training and infrastructure compliance costs • Safety and environmental monitoring (sampling and lab costs!) • All the PAPERWORK and MEETINGS – time, effort, hassle

4. Traditional attitudes to safety and environmental regulatory costs • “world class” company metrics have lots of areas process companies can improve on - generally ignore safety and environmental costs eg waste disposal, PPC & COMAH permit costs • But fastest growing costs are in this area - costings must show these • Have worked with 2 chemical companies who didn’t realise they needed PPC permits for new processes – Company A stopped making the product, avoided prosecution; Company L reverted to being an R & D company and stopped manufacture (800kgs a year high value ester – full PPC permit, £12k to apply, £6k annual charges – annual charges alone are £7.50 a kilo) • Problem for existing processes too –Company R’s site in France, had sudden product growth which overwhelmed effluent plant capacity and led to problems in river – French regulators stepped in – now pay for offsite effluent disposal (20 tankers per week)

5. What are the costs? • Licences to operate (can be closed/ prosecuted/ fined/ imprisoned for failure to have these): • COMAH • IPPC • Waste Management Licence • Planning Permission – for buildings, and Hazardous Substances • Ongoing annual licence and compliance costs • All of the above except p/permission • Other environmental costs • Solid waste recycling or disposal • Liquid waste recycling or treatment and disposal • Effluent treatment and disposal • Air emissions treatment (scrubber liquor, extraction wastes) • Unfortunately, these charges are a significant barrier to small businesses – it’s only worthwhile for turnover of a certain size Need these for p/ permission on new build sites

6. Cost comparisons – licences *Figures from HSE report, 2003, for new entrants. Improvement costs not included.

7. COMAH key business points (1): • In business terms - if you can avoid COMAH, do so • Inventory management is the key to avoiding COMAH/ keeping out of Top Tier • Keep stocks of COMAH materials below overall and individual thresholds (you really need computerised inventory for this) • Just-In-Time techniques – discharge from a tanker directly into a reaction vessel is often not included (but depends on the material being discharged, and risks must be controlled very well during discharge) • Using 3rd party warehousing for raw materials and/or finished products (but if the warehouse only work for you, you may still have liability - example company C) • As well as the HSE, COMAH is also a hassle because of Hazardous Substances Planning Consent – councils can be a problem (example - company J)

8. COMAH key business points (2): • Be aware of changing classifications which might put you into COMAH unexpectedly: • HSE have reclassified some substances as carcinogens (example - Diethyl Sulphate) • Environmental classifications have had COMAH limits lowered • More substances are being classified as environmentally harmful • Companies are re-testing substances to get more accurate environmental results • There’s more lab standardisation, better QC/QA procedures • Some substances are less environmentally harmful than we thought • REACH will be a driver for more accurate testing, and may reduce number of COMAH environmental substances • You can now be a Top Tier COMAH site with very little human risk, but large environmental risk (EA become lead regulators) – should there be a new class of COMAH site to reflect this?

9. IPPC key business points (1): • If you manufacture ie have a reaction, you will be under PPC • Biodiesel is definitely in PPC • If you don’t have a reaction, you can only be under PPC if you put hazardous substances (basically the old Red List) to groundwater, surface water or sewer • If you can get low impact, do it • Similar application indirect costs (ie consultants/ management time) • Big savings on application, annual and surrender fees • But you do need to justify why still LI every year • And don’t try to pull the wool over the EA’s eyes – it won’t work • Watch out for your boiler company having to make a separate application

10. IPPC key business points (2): • Once you’re under PPC, investment and growth brings its own problems • If you’re Low Impact, you might get to Full size • If you’re already Full PPC, may alter EP-OPRA • Full PPC problems • Change in chemistry/ very large size change will need “major change” permit application – time, hassle, cost, on top of planning the changes • Same chemistry, but increase in production (not a “major change” can still increase your EP-OPRA score – eg tipping you up a notch on your product volumes; or increasing your wastes • Make sure your product costing includes these “hidden” costs, and you can still charge enough to make a profit

11. IPPC key low impact points: • Low Impact limits have just changed - http://www.environment-agency.gov.uk/commondata/acrobat/ippc_rgs7_v3_0606_509888.pdf • Waste water has increased from 20 cu m/ day to 50 cu m/ day • If you extract dust and fumes, describe them as LEVs for COSHH purposes – they’re not abatement equipment, because they don’t scrub • Defining the installation can be important if you have a site where you also do non-PPC operations – keep PPC separate, otherwise whole site can be brought in • COMAH substances must be not more than 10% of lower tier threshold (up from 5%) • Hazardous waste threshold can be quite tight (10kg/day over 1 yr, ie 3.65 tonnes) – see next slide!

12. Wastes key business points: • Correct waste classification is vital these days • Don’t assume your waste contractors are correct - read the small print on the EWC http://publications.environment-agency.gov.uk/pdf/GEHO0603BIRB-e-e.pdf • As well as immediate costs, getting it wrong can take you out of Low Impact (example Company C) • If you produce hazardous waste, you need to register with the EA as a producer, and RENEW your permit every year http://www.environment-agency.gov.uk/subjects/waste/1019330/1217981/1218079/ • Review your consent to discharge to foul sewer regularly • Re-use, recycling and composting are much cheaper than disposal • Check whether you need to apply for a free waste exemption eg for using waste oils for biodiesel; or washing out containers for re-use http://www.environment-agency.gov.uk/subjects/waste/1019330/1087290/1329426/?version=1&lang=_e

13. Infrastructure key business points: • Infrastructure is vital for environmental protection – bunds, hardstanding, drainage systems, effluent systems etc • Can cost significant amounts of money – “right first time” is best • Beware of “off-the-shelf” industrial units – pollution prevention standards are higher for chemical businesses. Avoid: • Emissions to groundwater eg soakaways • Emissions to surface water eg car parks draining into rivers (even via interceptors) (example - Company L) • Surface water drains in areas where chemicals are handled • Making your bunds too small (consider business growth) • Storage of chemicals on or near open ground • Guidance at http://www.environment-agency.gov.uk/business/444251/444731/ppg/?lang=_e • Watch out for the storage and segregation rules – they keep changing, you may need to alter your current arrangements

14. Relationships with Regulators • Build relationships as you would with a key supplier (or your bank manager) • Regulators are human beings too! Coffee and conversation helps • Don’t fall out – it’s not their fault the regulations are complicated. • The person on the ground has more power than you think –their good opinion of you may be the difference between Low Impact or full PPC • Use their experience to help your project – it’s not all “business prevention”, a good regulator will help you find your way through the red tape • Once you’re inside the COMAH/PPC envelopes, don’t make investments unless they agree it’s appropriate (this advice is direct from the EA – people are wasting £10s of thousands) • If you change what you’re doing, let them know in advance – it’s polite, and may be able to negotiate no “major change” charges

15. Further information on whether these regulations apply to you • For COMAH, HSE website at http://www.hse.gov.uk/comah/ • For PPC, EA website at http://www.environment-agency.gov.uk/commondata/acrobat/ippcrgsno4v2_412508.pdf , and also ring up 08708 506 506 for copy of “Chemicals CD”

16. Don’t finalise that investment unless you’re sure that: • You know what licences and permits are needed • You understand the upfront costs of these, and the ongoing fees and compliance costs • You have an idea of the limits of your capacity; when you go into a higher permit, of if permit costs increase; when your infrastructure can’t cope etc • You understand your wastes and effluent costs, and what would happen if these costs increased

17. Do: • Let regulators know your plans early on (and request confidentiality if necessary) • Keep up to date with latest requirements via EA and HSE websites • Talk to people in industry for advice • If using consultants, get them in sooner rather than later (particularly on new build)

18. Biodiesel summary page • Biodiesel is definitely in PPC: http://www.environment-agency.gov.uk/yourenv/857406/1173616/?version=1&lang=_e • You MUST have a buyer for your glycerine by-product, otherwise the permit might not be granted (and you certainly won’t get Low Impact for PPC) • If you’re buying a going concern, or a site with a “live” PPC permit, arrange for this to be transferred to you – costs £4,400, but saves at least a year plus all other costs for making a new application and getting it passed by the EA • Make sure you hire people with recent experience of the chemical industry – regulations are changing rapidly

19. And finally – Murfin’s Law (business version) It always costs more than you think and it always takes longer than you think

20. Thank you very much • Any questions? • Presentation available at www.ttenvironmental.co.uk/library.htm • Contact tel: 01274 870306 • Email: janet@ttenvironmental.co.uk