West Virginia Chemical Spill: How will it affect regulatory requirements and M&A transactions?

By: Bruce Martin

On January 9, 2014, approximately 10,000 gallons of the hazardous chemical substance 4-methylcyclohexane methanol (“MCHM”), a chemical used in the coal industry to “wash” coal before it is burned, leaked from a storage tank at Freedom Industries facility and flowed into the Elk River in West Virginia.  The release travelled 1.5 miles downstream to a water treatment plant, and contaminated a great deal the public drinking water supply. The 300,000 residents, schools, restaurants, and businesses in Charleston and nine surrounding counties were ordered not to use the water for up to ten days.

Aboveground-Fuel-TankThis release brought not only this event, but issues and concerns around bulk storage of chemicals and petroleum to the forefront.  The incident was front page news for several weeks and caused the local and state agencies millions of dollars in response costs.   This release is anticipated to cause storage regulations to be thoroughly reviewed and updated not only in West Virginia, but nationwide.   Do you own or operate bulk storage tanks part of your operations?  Are you planning to acquire or divest a company that stores bulk chemicals? If you answered yes to either of these questions you need to ensure your team understands and manages the actual and perceived risks around this operations.

A thorough assessment of the operation and the systems and equipment in place for storing and managing chemicals should be completed immediately.  As part of understanding your operational risks and pre-acquisition environmental due diligence, key questions and documents should be reviewed and well understood.  Information on the following related to chemical storage is typically requested to understand and quantify bulk chemical storage risks:

  • Records of previous spills and releases of hazardous chemicals
  • Inventories of aboveground and underground storage tanks, including age, capacity, materials of construction
  • Records of tank inspections and integrity tests
  • Records of tank cleanouts, sludge removals, and estimated sludge volumes
  • Records of agency inspections, notices of violation, or other enforcement
  • Copies of spill prevention plans, procedures, and training records for spill responders

 

This type of information, along with thorough inspections of the facility, can provide you with an accurate picture of the environmental management of the operation and an evaluation of the real and perceived risks and liabilities associated with the facility or operations.

Since the chemical spill, West Virginia governor Tomblin has proposed legislation to regulate above ground storage tanks (ASTs). The new legislation would in part assure that ASTs were built and maintained in accordance with safety standards.  The legislation would also allow for the DEP to implement an AST regulation program that would require operators to report a tank’s location, construction and maintenance. Lastly the new regulation would require annual inspections and certifications and allow the head of the DEP the authority to make a plant take corrective actions when storing a “potentially harmful material.”

Bruce MartinABOUT THE AUTHOR
As a certified professional environmental auditor (CPEA), Bruce Martin has 23 years of varied experience in environmental management consulting, including environmental, health and safety auditing; merger and acquisition environmental due diligence; environmental management systems; site assessments, training, and environmental investigations…
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