DSS046: What Is The Potential Cost Of A Dust Explosion Incident With Chris Giusto

In this episode of the DustSafetyScience Podcast, we’re talking to Chris Giusto, Director of Industrial Projects at Hallam-ICS in Raleigh, North Carolina, about the potential cost of a dust explosion incident.

This is Chris’ second appearance on the podcast. In Episode #22, he outlined five common mistakes that companies make when addressing combustible dust hazards. More recently, he and Hallam-ICS presented a live webinar about the five benefits of completing a dust hazard analysis, which were:

Regulatory compliance
Developing a dust safety strategy
Avoiding a catastrophic or a cascading incident that could cause large loss
Plant and personnel safety
You can’t afford NOT to

In today’s episode, we expand on that fifth benefit and talk about the potential costs of a dust explosion incident. While some of them may be obvious, others aren’t so apparent and can come as a surprise to facility owners and managers after a dust explosion occurs.

Chris commented, “I personally enjoy helping make these existing facilities safer and working through the engineering and coming up with cost effective ways to help people address those hazards.” One of the many ways that he achieves this goal is by spreading awareness of the potential costs of a dust explosion incident.

The Six Primary Costs of a Dust Explosion

In the Hallam-ICS webinar, Chris talked about six primary costs. What these costs are and whether they even apply will depend on the size of the incident.

Fines
Increased insurance premiums
Lost revenue due to downtime
Compensation for injured workers
Rebuilding costs
Lawsuits

According to Chris, lawsuits have the potential to do the most financial damage to a company. Depending on the number of people involved and the extent of the injuries and/or damage, the cost can reach into the millions. Next in terms of financial gravity is lost revenue due to downtime, which will depend on the nature of the facility and the length of the downtime. He ranked rebuilding costs and medical expenses for injured workers as equal contenders for third place.

Lawsuits

Lawsuits can be extremely costly. On May 29, 2018, a grain elevator explosion occurred in South Sioux City, Nebraska. It leveled the elevator and compelled the city to evacuate two dozen residents for nearly a month while it was decided how to tear down what remained of the elevator. Early in 2019, the city sued the owner for the cost of the demolition and other expenses.

In the last two years, there have been large lawsuits that amounted to millions of dollars. With one case involving an explosion protection equipment installation that failed to work correctly, liability was split three ways between the facility owners, the equipment manufacturers, and the equipment installers.

One especially significant event occurred in 1992 in Westray Mine, Nova Scotia. A coal mine explosion took the lives of several workers, resulting in both a criminal and civil trial that led to the owner’s bankruptcy.

Lost Revenue

When estimating lost revenue as part of the Hallam-ICS webinar, Chris used the example of a facility that runs 24/7 for 50 weeks a year, with a total revenue of 50 million dollars. He assumed three days of downtime after an incident, which was, he admitted, “on the small end because I didn’t want anybody thinking that I was trying to exaggerate to prove a point or to make things sound worse than they really were.”

Three days of downtime for this hypothetical facility came to almost $430,000 in lost revenue. A facility is typically looking at only three days if protection measures are in place, such as explosion venting to prevent injuries and any catastrophic loss. The timeline might be significantly longer if prevention and protection is not in place.

Rebuilding Costs

Chris estimated that it would take his hypothetical facility $100,000 to rebuild after an incident that caused three days of downtime. He looked at the DustSafetyScience incident reports, which reported damage amounts of anywhere from $15,000 to millions of dollars, and determined that 69% of incidents reported damages in excess of $100,000.

Injured Workers Compensation

Chris estimated this cost to be $200,000, which could be typical if one person experienced burn injuries but were expected to make a full recovery, but the actual total could easily exceed a million dollars per person if someone is severely burned and requires several weeks of treatment in a burn unit.

Fines

Fines will vary according to how many violations a facility gets cited for. Chris used federal OSHA numbers to calculate that the standard fine for a serious violation is $13,260.

“Again, that’s probably on the low end of things,” he said. “Because if you have an incident like this and you do have an investigation, OSHA’s probably going to find more than one thing to cite that facility for. There’ll probably be multiple penalties assessed.”

Penalties for willful violations are nearly $133,000. If hazards were previously brought to the company’s attention but nothing was done about them, OSHA takes a more punitive approach with willful violation penalties.

One good example is the Didion Milling incident, which is still an open investigation. Penalties amounted to $63,375 for serious violations and $1.7 million for willful violations.

Increased Insurance Premiums

Most of us are familiar with how an accident affects insurance premiums. Anyone who has been in a collision know that their car insurance rates take a hike. Chris admitted that he didn’t know the precise impact that a dust explosion would have on a facility’s premiums, but said, “I would imagine you could be looking at, you know, 10, 20, 30 percent or so increase in your premiums, maybe even more than that.”

What’s the (Financial) Damage?

Asked about the ultimate cost of a dust explosion for his hypothetical facility, Chris rounded the total off at $800,000. For the lawsuit component, he assumed that only one lawsuit would result and be settled out of court for $50,000.

Other Complications

Chris reviewed additional costs and complications, one of which is the bad PR that arises after an incident where people are injured or killed. It can lead to hiring difficulties, which could end up affecting the company’s profitability and bottom line.

The Benefit of Doing a Dust Hazard Analysis (DHA)

DHAs are a key part of a combustible dust safety strategy that can reduce costs and increase efficiency. In the webinar, Chris indicated that some facilities have tried to address these hazards without having completed a DHA, and end up creating bigger problems.

He provided the example of an unprotected outdoor dust collector. “Venting is an acceptable means of protection, so they add a vent and think that they’re protected, when in reality, they’ve overlooked isolation. The fireball could still travel back inside the facility and create secondary explosions or fires. So there’s that false sense of security.”

Identifying all potential hazards and developing a strategy to address them is essential. It starts with a DHA and leads to an action plan that provides clear direction to facility staff and contractors and minimizes downtime while increasing morale.

Conclusion

September 7, 2020 is the NFPA 652 deadline for having a facility’s dust hazard analysis completed. In the meantime, Chris and the team at Hallam-ICS will continue to spread awareness about combustible dust safety.

“I think it’s important information to get out there and help give the folks who need it some perspective on why we’re trying to do what we’re doing to make these places safer,” he said.

If you would like to discuss further, leave your thoughts in the comments section below. You can also reach Chris Giusto directly:
Email: [email protected]
LinkedIn: https://www.linkedin.com/in/chrisgiusto/

If you have questions about the contents of this or any other podcast episode, you can go to our ‘Questions from the Community’ page and submit a text message or video recording. We will then bring someone on to answer these questions in a future episode