Sunday, March 30, 2014

Do company boards focus on process safety?

It is the time of the year, when company annual reports arrive in the mailbox, and it is always interesting to see how much focus these reports put on process safety. The annual report is a report from the company board - the highest level of management of the company - to the company shareholders. So if the report has significant coverage of safety or process safety, then this a clear message to shareholders, that the board is clearly focused on running a safe business.

The role of the company boards in process safety changed after the release of the Baker report following the explosion and fire at BP's Texas City Refinery in March 2005. From friends at HSE departments there are clear indications, that at least some boards now take process safety very seriously. Another such indication is the success of process safety courses aimed at board members.

Canadian Pacific

One of the first reports to arrive was the annual report from Canadian Pacific (CP). CP is a railway company, and last year Canada experienced the worst train disaster in more than 100 years. That was the derailment of an oil carrying train a Lac Mégantic on a section of track formerly owned and operated by CP. In this years annual report report Canadian Pacific devote 2 pages to safety. In my view the key message appear to be that the company "is intensifying is efforts to build a culture of safety across the organisation". That is good, and is clearly need in a company, which experienced some serious derailment in 2013:
  • On September 11th eigth cars of a CP train carrying a diluting agent used in oil pipelines derailed at a rail yard in southeast Calgary. More than 140 homes were evacuated.
  • On July 27th a CP locomotive and seven cars carrying oil left the tracks in Lloydminster on the border between Alberta and Saskatchewan. 
  • On June 27th seven cars - some of which carried ethylene glycol - of a CP train derailed while attempting to cross the flood-swollen Bow River in Calgary.
  • On June 2nd eleven cars of a CP train derailed at a trestle bridge east of Sudbury in Ontario. Half ended in the river, and a drinking water advisory was issued.
  • On May 23rd a runaway CP train car rumbled through the southern Alberta community of Okotoks.
  • On May 21st five cars of a CP train near the village of Jansen in southeastern Saskatchewan derailed spilling 91,000 liters of oil.
Among performance indicators CP reports both personal injuries per 200,000 employee hours and train accidents per million train-miles for the last three years as defined by the Federal Railway Administration in the US. The data are shown on the bar graph below, and it appear the two indicators are correlated.
Unfortunately CP does not provide goals for their safety performance indicators. If the company is serious about building a safety culture, then goals could be a good idea. However, in my view such goals cannot stand alone. There most also be guidance, so that the employees are encouraged to take as safe course of action, e.g. not crossing the Bow River when it is seriously swollen.
Clearly the CP board has some focus on safety, but it could be improved by setting performance goals in the safety area and publishing these, just like The Dow Chemical Company does.

Imperial Oil

Imperial Oil have stopped publishing the traditional annual report to shareholders - as far as I can tell. Imperial Oil is a major integrated oil company with operations only in Canada, and it is afiliated with ExxonMobil

This year shareholders receive a letter from the CEO and the annual financial statement. The latter does not mention safety at all. The letter to shareholders use the word 'safety' eight times - CEO Rich Kruger mention it in his opening remarks in the context "intense focus on the fundamentals - safety, operational integrity, reliability and profitability". Rich Kruger goes on to compliment employees for their commitment to achieve a workplace where Nobody Gets Hurt. Further in the section on operational highlights it is stated "Working more than 44 million hours, our second highest total on record, we achieved workforce safety performance on par with 2012's best ever". However, I find it a bit disappointing that a company with such clear focus on safety - see below - does not find it worthwhile to communicate the safety achievements directly to its shareholders. By this I mean setting long term goals towards which progress can be measured with relevant KPI's. 

On the Imperial Oil website the safety information is found under the heading "Community & society". Here it is clearly stated that the goal is "Nobody Gets Hurt", and that safety is the number one and first priority. Unfortunately it seems like there have been cut-backs in website maintenance. To the right of the nice words are links to 2009 safety record, with information about what the company said in 2008 it would do, what it did in 2009, and what it plan to do. A similar record can be found for 2010, but I did not succeed in finding it for the following years.

The data on Imperial Oils state performance IS available on the website. For the corporate performance you have to look at the Corporate Citizens Report, and the safety record is something to be proud of. During the years 2008-2012, when the huge Kearl project was being constructed among other activities, the company acheived zero work related fatalities among both employees and contractors. During the same period the total recordable incident rate from 0.35 to 0.15 among employees and from 1.07 to 0.37 among contractors. However, the standard deviations indicate, that the change may not be statistically significant.
Imperial Oil also publish community report or Neighbor News in the communities in which the operate, and these contain safety performance information related to the particular site. For example at the Sarnia Site the total recordable incident rate went from 0.51 in 2010 up to 1.49 in 2011, and then down to 0.21 in 2012. Also the site numbers for refinery sites, like Nanticoke, Sarnia and Strathcona appear to be higher than the corporate numbers.

Imperial Oil continue to have a clear focus on safety with a stated goal of nobody gets hurt. One must compliment the company for being open about a very difficult goal. However, the community reports show, that there is room for improvement in the downstream operational units of the company. I would suggest, that setting long term - i.e. 5-10 year - sustainability and safety goals may help achieve such goals.

EnCana

EnCana, which is Northamerican energy producer, use the word 'safety' just seven times in its more than 100 pages long annual report. There is no information about safety performance in the report, and the section on 'Risk Management' have 3 subsections labelled respectively 'financial risks', 'operations risks', and 'environmental, regaulatory, reputational and safety risks' in my view shows were the focus is in this company. 
The TRI performance of EnCana appear much like the one of Imperial Oil. Generally employee performance is better than contractor performance. The two companies are also similar in both just reporting KPI in the area of occupational safety even though the CCPS have suggested a set of process safety indicators, and these have been endorsed by some organisations.

EnCana - like Canadain Pacific and Imperial Oil - does set publicly available performance goals in the area of process safety or occupational safety. This is unfortunate, since the results, that on a chart as the one above we don't know if the year to year variations just happen by chance, or if there is a program to reduce contractor TRI-rate.

Cenovus

Cenovus is Canadian oil company focusing on the upstream end of the oil and gas business. In the company's annual report for 2013 the company CEO state, that neither he nor the board is satisfied with the current safety performance of the company. 

Unfortunately the CEO does state clear and quantified objectives for the company's safety performance - and we are just talking about occupational safety - just like the previous three companies. 
Again the picture here is very similar to that for TRI for Imperial Oil and EnCana. I clearly suspect, that in order to improve both occupational safety and process safety Cenovus need to take a good look at its systems - especially those for investigating incidents. Do the incidents dig deep enough? Or do the stop with the first identified mistake?

Conclusion

There appear to be a general reluctance to set specific goals in the area of process safety, occupational safety and sustainability. This is unfortunate, since only by setting quantifiable and public goals will the industry and individual companies move in the direction of improved process safety and improved sustainability.

In this connection it is worth remembering, that when the CEO of the Dow Chemical Company set the first set of safety goals in 1985, then neither he nor anyone else in company had any idea about how to achieve these goals. Only a belief, that with a joint effort it would be achievable. 

Probably stating occupational safety and process safety goals will not be sufficient to achieve improved safety performance. Most likely the investigations of incidents need to go a step deeper. Take a look at the recent Chemical Processing article by Nancy Leveson Sidney Dekker "Get to the Root of Accidents".

Thursday, March 13, 2014

Transport of crude - by railcar or by pipeline - what are the NGO's fighting for?

Currently in Canada there is a strong opposition to the National Energy Board's (NEB) decision to allow the flow in the Enbridge Line 9 from Montreal to Sarnia to be reversed, so the crude in the near future can flow from Sarnia to Montreal in order to transport pre-treated bitumen from Alberta's oil-sands to refineries near Montreal.

During media coverage of the decision CTV W5 - a Canadian TV station - have discovered, that over the 38 history of Enbridge Line 9 there has been 35 spills. The graphics below from the Toronto Star shows the locations of these spills and the amount of oil involved.



To me most of the spills - except for 2 near Edwardsburgh/Cardinal and 2 at Terrebonne near the Montreal terminal - have been minor. CTV W5 also uncovered, that during the past 10 years 22 spills have been reported to the authorities. However, is appears the different reporting requirements of the NEB and the Ontario Ministry of the Environment is part of the issue. Another reporting issue is wether a spill occurred along the main line or a company facilities associated with the pipeline. There clearly are room for improving the uniformity of the reporting requirements to local and national authorities.

Most people agree, that transport of crude oil by pipeline is safer than transport by railcars. Even the US-only Pipeline Safety Tracker acknowledge this. So opposition to reversing the flow of crude in order to avoid a large number of daily crude oil trains makes a lot of sense. In my view the NGO's opposition to this seems completely unjustified.

However, in its decision the NEB also allowed the capacity of the pipeline to be increased from 240.000 barrels of oil per day to 300.000. That is a 25% increase. Since the diameter of the pipeline is fixed, then this can only be done by increase the flow rate through the pipeline, and this requires increasing the outlet pressure at pumping stations along the line or the addition of compounds to lower the viscosity of the transported crude. The former approach clearly have some integrity risk with a 38 year old pipeline, and the latter is properly to costly. Therefore it make perfect sense, that the NEB requirer Enbridge to improve pipeline integrity monitoring.

So satisfy the public need to feel and be secure it would have been nice if the NEB had also required Enbridge to regularly release information to the public about the findings of their integrity monitoring of their Line 9 pipeline.