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Regulatory Hot Topics, HCF, 18 th July 2006 Future Investment: Learning from Safety and Environmental Regulations Janet Murfin.

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Presentation on theme: "Regulatory Hot Topics, HCF, 18 th July 2006 Future Investment: Learning from Safety and Environmental Regulations Janet Murfin."— Presentation transcript:

1 Regulatory Hot Topics, HCF, 18 th July 2006 Future Investment: Learning from Safety and Environmental Regulations Janet Murfin

2 Regulatory Hot Topics, HCF, 18 th July 2006 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 31 st August, various discussions/ projects –Set up and run own business from scratch, used to discussing business implications of these regulations

3 Regulatory Hot Topics, HCF, 18 th July 2006 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 Regulatory Hot Topics, HCF, 18 th July 2006 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 Regulatory Hot Topics, HCF, 18 th July 2006 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 What are the costs? Need these for p/ permission on new build sites

6 Regulatory Hot Topics, HCF, 18 th July 2006 Cost comparisons – licences PPC Low Impact PPC Full (lowest) COMAH Lower Tier* COMAH Top Tier* Application2,76513,4503,00018,000 Annual fees4296,5003,0009,000 Estimate 1 year fees 3,19419,9506,00027,000 Time costs to apply 12,50025,00017,000135,000 Costs in Year 1 15,69444,95023,000162,000 *Figures from HSE report, 2003, for new entrants. Improvement costs not included.

7 Regulatory Hot Topics, HCF, 18 th July 2006 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 3 rd 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 Regulatory Hot Topics, HCF, 18 th July 2006 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 Regulatory Hot Topics, HCF, 18 th July 2006 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 Regulatory Hot Topics, HCF, 18 th July 2006 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 Regulatory Hot Topics, HCF, 18 th July 2006 IPPC key low impact points: Low Impact limits have just changed - agency.gov.uk/commondata/acrobat/ippc_rgs7_v3_0606_ p dfhttp://www.environment- agency.gov.uk/commondata/acrobat/ippc_rgs7_v3_0606_ p df 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 Regulatory Hot Topics, HCF, 18 th July 2006 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 agency.gov.uk/pdf/GEHO0603BIRB-e-e.pdfhttp://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 agency.gov.uk/subjects/waste/ / / / agency.gov.uk/subjects/waste/ / / / 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 agency.gov.uk/subjects/waste/ / / /?version =1&lang=_e agency.gov.uk/subjects/waste/ / / /?version =1&lang=_e

13 Regulatory Hot Topics, HCF, 18 th July 2006 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 agency.gov.uk/business/444251/444731/ppg/?lang=_ehttp://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 Regulatory Hot Topics, HCF, 18 th July 2006 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 Regulatory Hot Topics, HCF, 18 th July 2006 Further information on whether these regulations apply to you For COMAH, HSE website at For PPC, EA website at agency.gov.uk/commondata/acrobat/ippcr gsno4v2_ pdf, and also ring up for copy of “Chemicals CD” agency.gov.uk/commondata/acrobat/ippcr gsno4v2_ pdf

16 Regulatory Hot Topics, HCF, 18 th July 2006 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 Regulatory Hot Topics, HCF, 18 th July 2006 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 Regulatory Hot Topics, HCF, 18 th July 2006 Biodiesel summary page Biodiesel is definitely in PPC: agency.gov.uk/yourenv/857406/ /?version=1&la ng=_ehttp://www.environment- agency.gov.uk/yourenv/857406/ /?version=1&la ng=_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 Regulatory Hot Topics, HCF, 18 th July 2006 And finally – Murfin’s Law (business version) It always costs more than you think and it always takes longer than you think

20 Regulatory Hot Topics, HCF, 18 th July 2006 Thank you very much Any questions? Presentation available at Contact tel:


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