• Abstract and Figures
• Public Full-text

KEEPING An intro to Starr Companies’ CLEAN & environmental STAYING practice GREEN Accident & Health | Aviation & Aerospace | Casualty | Construction | Crisis Management | Cyber Energy | ENVIRONMENTAL | Financial Lines | Marine | Professional Liability | Property | Public Entity Specialty Products | Travel Assistance A BAD DAY IN CHEMICAL VALLEY The Elk River chemical spill: a worst-case scenario The 2014 chemical spill into the Elk River, near Charleston, WV contaminated the water supply to some 300,000 local residents. Photo credit: © AP Photo/Tyler Evert The Elk River region near Charleston, West Virginia, is nicknamed “Chemical Valley,” thanks to its long history of being a center for the chemical industry. Many of those companies have since closed or moved elsewhere, but for years, pro-industry regulations made it easy for chemical companies to operate in the area with little to no offi cial oversight. This led to an unusually high concentration of environmental accidents from these facilities over the last few decades, but one in particular from 2014 stands out—not just as an example of what can happen when industrial facilities are left insuffi ciently monitored, but how much environmental impairment liability they can generate with just a single event. This is the story of Freedom Industries and the now-infamous Elk River chemical spill. Just after sunrise on January 9, 2014, residents in and around Charleston, WV, began complaining of a The Elk River spill strange, licorice-like odor near the Elk River. By 11:15 a.m., state Department of Environmental Protection was a case of inspectors had traced the smell to a chemical storage facility on the Elk River just 1.5 miles away from extreme negligence downtown Charleston. The facility, run by Freedom Industries, was a distribution hub for chemicals used and bad behavior. in coal mining, with 14 storage tanks and a combined storage capacity of four million gallons. Visibly rusty and 76 years old, Tank #398 probably shouldn’t have been containing anything, let alone some 40,000+ gallons of crude MCHM, or 4-methylcyclohexanemethanol, a toxic foaming agent used to clean coal particulate before being shipped to market. But like much of the rest of the Elk River facility, it had been pressed into service despite years of minimal inspection, maintenance and repair, made possible thanks to almost nonexistent environmental regulations. The tank had a 1-inch diameter hole in it that was spilling thousands of gallons of MCHM directly into the Elk River, which was literally a stone’s throw away. 1 Not only had Freedom Industries failed to notify officials about the leak—which had evidently been under way for some time—but all that had been put in place to contain the leak was a single cinder block and a 50 lb. bag of safety absorbent powder, in what DEP officials called a “Band-Aid approach.” The spill quickly overwhelmed the tank’s paltry containment dike and over the course of the day, some 10,000 gallons of MCHM leaked out. Much of the spill—though exactly how much nobody could determine— entered the Elk River, just a short distance upstream from the intake valves of the West Virginia American Water Company, which provided municipal tap water to a nine-county area, including Charleston. A lack of information on the toxicity of MCHM, a poorly coordinated official response and other factors led to a confused scene throughout the day. MCHM was toxic, but nobody knew how toxic, thanks to scant data on the chemical itself. Unable to guarantee the safety of the water, West Virginia Water issued a Do Not Drink advisory for the area around 5:00 p.m., noting that the water was suitable for toilet flushing only. Some 300,000 The Do Not Drink people—nearly one-sixth of West Virginia’s total population—suddenly found themselves both without advisory affected water and wondering how much MCHM they had consumed over the course of the day. some 300,000 people for days. The Do Not Drink advisory remained in place for five days, as the West Virginia National Guard rushed in bottled water for local residents. West Virginia Poison Control received over 1,000 calls related to the spill—its largest event in 20 years—with reports of vomiting, dizziness, headaches, diarrhea, reddening skin, itches and rashes. 169 people were treated for symptoms and released. 14 were hospitalized. There were no deaths. Perhaps the greatest impact of the water stoppage was on local establishments, such as schools, medical offices, restaurants, hotels and retail stories, many of which simply could not operate without clean water. The Marshall University Center for Business and Economic Research investigated the incident and estimated that the total economic loss was around $19 million per business day due to the Do Not Drink order, for a total loss of $61 million, or about 24% of the total economic activity of the affected area. Some 75,000 workers—about 41% of the local workforce—were affected each day of the water ban. Three days after the Do Not Drink ban lifted—and only eight days after the spill was detected, Freedom Industries declared bankruptcy. Creditors sought more than $176 million from the company, but a proposed $2.9 million insurance settlement was the only pot of cash to be had. The severe negligence in this case—namely, that Freedom knew about critical flaws at its facility and never did anything about it—was considered criminal activity by various federal prosecutors, who indicted Freedom Industries itself on a number of environmental violations, which could result in fines of up to $25,000 per day of violation, or $100,000, whichever is greater. Six of Freedom Industries’ owner-operators were charged with various environmental violations that carry maximum three-year sentences. To date, one of these owner-operators has pled guilty. The FBI charged Freedom Industries president Gary Southern with bankruptcy fraud, wire fraud and lying under oath. If convicted on all charges, Southern could face 30 years in prison. The Elk River spill stands out as a case example on a number of fronts. It highlighted the risks of lightweight regulation of industries that pose a potential threat to public health and safety. In the months that followed the spill, numerous state and federal environmental regulations have been proposed or enacted to prevent such an event from recurring, but to date, more than 1,100 chemical tanks in West Virginia are still operating, and are considered unsafe. 2 As an exercise in crisis management, the spill showed what can happen when there is poor materials data on hand, poor coordination between industry and officials, and poor communication with the public itself. A disastrous press conference by Gary Southern—in which he drank bottled water on camera and repeatedly tried to duck reporters’ questions—sticks out as a factor that exacerbated public frustration. But as an example of environmental liability, Elk River really stands apart. This event was entirely preventable and made more severe by a number of unusual conditions—namely a ridiculously pro-industry climate that led to virtually absent regulation, and a bad actor of a company that showed a clear disregard for public safety. Freedom Industries, and the spill for which it is responsible, is not a good example of how all chemical companies behave. But it does provide a clear picture of what kind of harm an accidental release of environmental contaminants can do in terms of causing personal harm on a widespread basis and disrupting the businesses of others. While the conditions that led to the Elk River spill might have been unusual, the hazards of the spill themselves are not. In fact, they are present not just in big chemical storage facilities, but in a wide The Elk River range of operations—from a heavy manufacturing industry that accidentally releases excessive amounts spill was a fully of harmful emissions from its smokestacks, to a small landscaping contractor that accidentally lets too preventable much fertilizer runoff contaminate a pond stocked with lots of expensive fish, and everything in between. pollution event. But there is good news: these risks are insurable, and the Starr Companies’ Environmental program provides businesses of all types and sizes with the protection they need in the event of an environmental accident. Nobody wants to be the next Freedom Industries. And thanks to proper preventative measures and a strong insurance program, nobody has to be. 3 ENVIRONMENTAL INSURANCE Understanding a complex and valuable coverage Sofia, Bulgaria—May 19, 2015: A team working with toxic acids and chemicals is approaching a chemical cargo train crash near Sofia. Teams from fire departments are participating in an emergency training with spilled toxic and flammable materials. In the 1960s and 1970s, growing public environmental awareness spurred a number of regulatory changes meant to impose responsibility on those who cause severe pollution and contamination of air, water and soil. This legislation hit an apex with the Comprehensive Environmental Response Compensation and Liability Act (CERCLA), also known as Superfund, which imposed very costly new environmental cleanup standards. In response, many polluters sought relief from their commercial general liability policies, which were never meant to cover such losses. After years of legal wrangling, the insurance industry developed new policy language that by 1984 EIL started as had fully excluded most pollution losses from CGL policies. (Some exceptions remained, such as smoke specialty coverage damage from an out-of-control fire). Instead, these risks would be covered by a new kind of coverage: but has become impairment environmental liability insurance. more mainstream. Also known as EIL, this specialty insurance covers a wide range of costs that stem from environmental damage caused by the insured.

Load more

  13

Copy Link