Clean Processes and

Sustainable Development*
CHG 4307

Graham D. Creedy, P. Eng, FCIC, FEIC

gcreedy@uottawa.ca

University of Ottawa
Winter 2017

CHG4307 Class 1. Introduction

• Welcome and introductions
– TAs: Andre Guerra aguer044@uottawa.ca
Alexander Peltekoff apelt033@uottawa.ca
• Course overview: organization, objectives, marking
scheme, resources
• Blackboard Learn

• Content:
– Introduction to risk and sustainability issues and concepts

• Discussion Group for Wednesday Tutorial

• Any other business

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 CHG 4307 Schedule Winter 2017
• Lectures are:
– Tuesdays 10:00 to 11:30 am
– Thursdays 8:30 to 10:00 am
Both are in MRT 212

• Discussion Groups are:

– Wednesdays, 1900 – 2030 in STE G0103
There are no other classes
Discussion Groups are expected in this course
3

CHG4307 Course Outline

• Comment on course title, description and purpose
• Content overview:
1. Nature of risk: chemical engineering and its societal context
2. The legal and regulatory framework for control of risk
3. Technical aspects: acute risk
4. Technical aspects: chronic (mainly environmental) risk
5. Sociological aspects: system safety

• The Mid-term exam will be in the DGD class on Wednesday March 1.

If you miss it for any reason you must arrange to write the exam under
TA supervision before the next DGD on March 8

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 Course Description
This course examines the management of risk and sustainability in the
chemical process industries, and how the practical considerations of hazard
identification, risk assessment and risk control apply in the broader context of
engineering and society.
It starts with an introduction to industrial risk and sustainability issues and the
societal control framework using Canadian and other examples, then considers
the basic ways in which industrial companies and regulatory agencies
approach control of these issues in workplace safety & health, major accident
hazards (through process safety management) and the environment (through
green chemistry and engineering).
The course then examines the sociological aspects of organizational behavior
(through system safety) to show how vulnerabilities can arise in spite of
supposed control measures, and provides practical guidance on how to
manage risk as a chemical engineer.

CHG4307 Course Content

Part 1. Nature of risk: chemical engineering and its societal context
• Introduction, course organization and overview, marking scheme, resources
• Introduction to risk and sustainability concepts
• Economic aspects and project management (financial/business risk and
sustainability)
• Introduction to management systems
– A management system in action: Responsible Care®, worldwide and in Canada
• Societal framework for control of risk
• Roles and responsibilities of chemical engineers
– ECAB Graduate Attributes Criteria
– Ethical aspects and accountability

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 CHG4307 Course Content
Part 2. The legal and regulatory framework for control of risk
• How harm is caused: introduction to toxicology, industrial hygiene
• Codification of experience and knowledge: international conventions, codes,
standards
• The role of governments in protecting society: laws & regulations and how
they are applied
– Who is to do what, and how? Performance vs prescription
• Overview from regulators:
– International conventions and other major relevant controls and their application:
– Canadian Environmental Protection Act, Ontario OH & S Act, Criminal Code

CHG4307 Course Content

Part 3. Technical aspects: acute risk
• Process safety management
• Inherent safety
• Hazard Identification & Risk Assessment (HIRA) techniques
• Management of change
• Process & equipment integrity
• Fires and explosions, dust explosions
• Reactive chemical hazards
• Public safety

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 CHG4307 Course Content
Part 4. Technical aspects: chronic (mainly environmental) risk
• Perspectives: business, regulator
• The Precautionary Principle
• Environmental performance and ecosystem risk
– Approaches based on chemical structure, green chemistry
• Evaluating environmental performance during process synthesis
– Introduction to Tier 1, 2, 3 environmental performance tools
• Unit Operations and Pollution Prevention
• Tuning the process design: Flowsheet Analysis for Pollution Prevention,
– Heat and mass exchange networks
• Environment cost accounting, life-cycle assessment, product stewardship,
green engineering

CHG4307 Course Content

Part 5. Sociological aspects: system safety
• Sociological aspects of risk and human behaviour
• Overview of concepts
• Human error: individual and organizational aspects
• Incident investigation: organizational and societal context
• Issues in risk assessment
• Normalization of deviance
• Practical aspects for your career as a chemical engineer:
– Dealing with a safety problem
– Managing risk

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 CHG4307 Course Objective
1. Provide students with a basic understanding of chemical engineering risk
and sustainability issues in a societal context.
2. Provide students with the principles of guidance in addressing these issues
through regulation, codes/standards and voluntary initiatives.
3. Provide students with a basic sense of the main technical approaches for
hazard identification and risk assessment in the chemical process
industries.
4. Provide students with a sense of the sociological implications of human
and organizational behavior in managing risk, in theory and in practice.
5. Develop the students’ ability to analyze and present issues and potential
solutions through critical thinking and the application of management
systems.

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Tip for learning in this course

• This is not a course where you calculate solutions to
defined problems. Some aspects are technical, but much
of the course is on how these are influenced by human
and organizational behaviour
• As you go through this course, try to get a sense of
broad concepts and principles rather than details
• When explaining (in an assignment or exam), focus on
the concept or principle and use detail only to illustrate
how it applies (as you think about issues, start from the
broad perspective then zoom to the close-up – not the
other way round)

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 Grading Scheme
• Assignments 25 %
• Mid-term exam 25 %
• Final exam 50 %

• Note that most assignments will involve working in

groups in the tutorial

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Resources for this course

Red font shows how identified in the slides

• There is no formal textbook, but these provide background on

certain parts of the course:
– Green Engineering: Environmentally Conscious Design of Chemical Processes,
by Allen, D.T. and D.R. Shonnard, Eds., Prentice Hall, Upper Saddle River, NJ
(2002) (Call number TP 155.2 .E58 A52 2002) AS
– Chemical Process Safety: Fundamentals with Applications, 3rd ed., by Crowl,
D.A., and Louvar, J.F., Prentice Hall, Upper Saddle River, 2011 CL
– CSChE Process Safety Management Guide, Canadian Society for Chemical
Engineering, 2012 PSMG
(www.cheminst.ca/sites/default/files/pdfs/Connect/PMS/PSM%20Guide%204th%
20Edition.pdf)
– Lees’ Loss Prevention in the Process Industries is a comprehensive overall
reference (e-version and book at Morisset) Lees
• Relevant material and other useful resources will be presented in
class, and made available via Blackboard Learn™ and/or email.

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 Resources
• I do not have an office on campus and am not usually
here outside of class. I’ll be available during many of the
Wednesday tutorials if needed, either by appointment or
on an ad hoc basis
My e-mail is gcreedy@uottawa.ca

• The course TAs are:

– Andre Guerra (mainly content)
aguer044@uottawa.ca
– Alexander Peltekoff (mainly administration)
apelt033@uottawa.ca

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CHG4307

Part 1
Nature of Risk:
Chemical Engineering
and its Societal Context

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 Risk and Society
• Human industrial and economic activity has
brought many benefits to society, but also with
costs. Sometimes we do not understand the
balance of benefits and costs until they have
been incurred

• Where undesired effects could be significant and

cannot easily be reversed, we need ways to
assess potential costs before making the
decision to proceed

17

Scope of impacts
• The effects could be sudden, from an acute incident
such as a fire, explosion or loss of containment of toxic
material:

Lac Megantic, QC, 2013

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9
 Scope of impacts
• Or they could be gradual, accumulating after exposure
for months or years, where the significance is in dispute
and the causative relationships are even less clear

• To understand this, we need a comprehensive sense of:

– What could go wrong?
– Who could be affected?
– How might the actions of the players be perceived?

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Scope of environmental impacts (AS Ch 1)

This and the slides following are adapted from or by David Shonnard
Dept of Chemical Engineering, Michigan Technological University and available on the EPA website
www.epa.gov/oppt/greenengineering/pubs/educational.html#modules

Materials Materials Materials Materials

Life-
Energy Energy Energy Energy
Cycle
Stages

Raw
Chemical Product Use, Reuse,
Materials
Processing Manufacturing Disposal
Extraction

Pollution Pollution
Control Control
Wastes Wastes Wastes Wastes

Midpoints

global ozone smog acidifi- ecological Human health

warming depletion formation cation harm and ecosystem
damage
Endpoint

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 U.S. Energy Flows, 2013

Source: U.S. Energy Information Administration, Monthly Energy Review, May 2014
www.eia.gov/todayinenergy/detail.cfm?id=16511 21

Global warming and related impacts

Materials Energy Cause and Effect Chain
Products

greenhouse
Chemical climate change; human mortality
gas emissions
Processing CO2, CH4, N2O sea level change or life adjustments

N2 O
O3

CH4
CO2

CFCs

Contribution to global
Warming; Phipps, NPPC, Climate Change 1995, Intergovernmental Panel on Climate Change, WMO and
www.snre.umich.edu/nppc/ UNEP, Cambridge University Press, 1996.

Adapted from the EPA website www.epa.gov/oppt/greenengineering/pubs/educational.html#modules 22

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 Stratospheric ozone and related impacts
Materials Energy Cause and Effect Chain
Products

Chemical ozone depleting ozone layer loss human mortality

Processing substances increase in uv or life adjustments
CFCs, HCFCs ecosystem damage

1.E+06
Toxics Release Inventory Data
1.E+06

8.E+05

6.E+05

4.E+05

2.E+05

0.E+00
1995 1996 1997

Year
Total On- and Off-site Releases

Adapted from the EPA website www.epa.gov/oppt/greenengineering/pubs/educational.html#modules 23

Smog formation and related impacts

Materials Energy Cause and Effect Chain
Products

Chemical NOx and volatile photochemical human/ecological

Processing organic substances oxidation reactions damage from O3
and other oxidants

1 - Chemical & Allied Processing

2 - Petroleum & Related Industries
NOx VOCs 6 7
1
5

NOx 2
1997
Miscellaneous 4 3

3 - Metals Processing, 4 - Other Industrial Processes

5 - Solvent Utilization, 6 - Storage & Transportation
Transportation 7 - Waste Disposal & Recycling

7 1
2 3
6
4
Industrial Processes

VOCs 1997
Fuel Combustion

National Air Quality and Emissions Trends Report, 1997, U.S. EPA Office of Air Quality Planning and Standards, http://www.epa.gov/oar/aqtrnd97/chapter2.pdf

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 Acid rain / Acid deposition
Materials Energy Cause and Effect Chain
Products

Chemical SO2 and NOx Acidification rxns. human/ecological

Processing emission to air & acid deposition damage from H+
and heavy metals

SO2
6 7
5
Miscellaneous 1997
4 1 1 - Chemical & Allied Processing
2 - Petroleum & Related Industries
Transportation 3 - Metals Processing
4 - Other Industrial Processes
Industrial Processes 5 - Solvent Utilization
6 - Storage & Transportation
7 - Waste Disposal & Recycling
Fuel Combustion

3 2

National Air Quality and Emissions Trends Report, 1997, U.S. EPA Office of Air Quality Planning and Standards, http://www.epa.gov/oar/aqtrnd97/chapter2.pdf

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Human health toxicity

Materials Energy
Products

Chemical Toxic releases to Transport, fate, Human health

Processing air, water, and soil exposure pathways damage; carcino-
& routes genic & non...

All Other EPCRA

Transport- Industries Toxic Rubber All Other
ation 16%
Equipment
Waste and Miscel- Industries
RCRA laneous 23%
7% Chemical
Hazardous Petroleum Plastics and Allied
Chemical / Refining 3%
Waste Allied Products
Primary 3% 27%
Metals Products
51% Paper and
8% Primary
Allied
Metals
Products
Petroleum Electronic 22%
5%
Refining Equipment
Transport- Electronic
9% 9% Fabricated
ation Equipment
5% Metals 6%
Allen and Rosselot, 1997 6%

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 What is risk?
• Undesirable consequences
x
likelihood that they will occur

• What consequences, and to whom?

• And this is offset against the benefits
(there must be some benefit, otherwise the activity would
not occur)
What benefits, and to whom?

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The nature of managing safety, health and

environmental risk in the process industries
• What kind of risks are we talking about?
– Potential for harm to people, property, the environment, from:
• Products
• Processes for making, distributing, using and disposing of them
• Other impacts on society arising from the above
– Relationship to benefits
• risks to whom, benefits to whom, how much, when, etc.
• “when used as intended”, potential for misuse

• Perspectives:
– Logical aspects
– Ethical aspects
– Human and sociological aspects

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 Potential consequences
• Some examples of undesirable consequences
associated with chemical engineering
processes, products and activities:
– Fatalities
– Injuries and illnesses
– Adverse impacts of operations on people, property or
the environment
– Product safety issues
– Issues related to sustainability, such as resourcing,
waste processing
– Economic issues
– etc, etc.

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Typical Questions
“Risk managers must clearly answer many questions, some of which
are:
– What level of exposure to a chemical risk agent is an unacceptable risk?
– How great are the uncertainties and are there any mitigating
circumstances?
– Are there any trade-offs between risk reduction, benefits, and additional
cost?
– What are the chances of risk shifting (transferring the risk to other
populations)?
– Are some of the risks worse than others?

The answers to these questions often depend on the culture and values
of the organization that commissioned the risk assessment. Minimizing
risk through improved design and proactive process development
should be the core values of the engineer.”

Allen and Shonnard, p44

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 Fatality Statistics

Crowl and Louvar, Chemical Process Safety: Fundamentals with Applications, Prentice Hall, 1990
31

Some considerations affecting

judgments on risk
• Risk assumed voluntarily/Risk borne involuntarily
• Effect immediate/Effect delayed
• No alternative available/Many alternatives available
• Risk known with certainty/Risk not known
• Exposure is an essential/Exposure is a luxury
• Encountered occupationally/Encountered non-occupationally
• Common hazard/‘Dread’ hazard
• Affects average people/Affects especially sensitive people
• Will be used as intended/Likely to be misused
• Consequences reversible/Consequences irreversible

Lowrance (Lees’ Loss Prevention in the Process industries, 4th ed. Vol.1, 4/5)
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 Risk Concepts
• Risk
– The probability of undesired consequences as a result of some thing
or action
– Compared with the benefits of that thing or action

• But, as AS states on p39-40:

– “Safety may be thought of as the likelihood of immediate adverse
consequences, and risk as the likelihood of long-term adverse
consequences.”
– “One important distinction between long-term risk and conventional
safety issues is that while the consequences of chemical accidents are
readily linked to their cause, chronic exposures from chemicals often
are not.”
– Risk-benefit analysis is therefore difficult when the benefits are
apparent but the risks are much less so
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Risk Acceptability

• Acceptable to whom?

• According to what criteria

• Who decides, and by what process?

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 Public perception and public policy
• After the Exxon Valdez oil disaster people were asked
how much they would pay for nets to protect migratory
birds from an oil spill. Different groups were asked to say
how much they would be willing to pay to protect 2,000,
20,000 and 200,000 birds.

If saving birds is an economic good one would expect

some logical relationship between the amount people
were willing to pay and the number of birds protected –
but the average amount each group were willing to pay
was US$80, US$78 and US$88 respectively.
D. Kahneman, Thinking, Fast and Slow, p93

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Douglas’ Cultural Bias Grid

do not knowingly willing to set
take risks but acceptable risks
accept what is in at high levels so
store for them long as decisions
are made by
experts or in
Social interactions
other socially
conducted
approved ways
according to rules
rather than
negotiated

accentuate the
risks of
technological
development and
see risk and economic growth
opportunity so as to defend
as going their own way of
hand-in-hand life and attribute
blame to those
who hold to other
cosmologies

As referred to in Lees’ Loss Prevention in the Process Industries, 4th ed.,vol. 1, p4/8
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• For decisions on where to focus attention
on risk control, we need to balance
expected benefits against potential harm,
and that calls for some standard ways to
measure harm

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Risk Assessment: Important Questions

• What are the risks associated with a chemical,

manufacturing process, or use of a product?

• How is risk quantified by professional risk assessors?

(for ranking, comparing with criteria for acceptability
and setting priorities for managing)

• How is risk assessment used by government

agencies and industries in risk control?

Adapted from AS Ch. 2 and the EPA website

www.epa.gov/oppt/greenengineering/pubs/educational.html#modules
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 Risk Management Elements

Former CSA Standard Q634 (since replaced by Q850)

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Risk Management Elements

• The version from the international ISO 31000 is more relevant for risk assessment than for
risk management, because the important monitoring and review role is shown as a general
step that fits in everywhere. This is not much help in understanding why vulnerabilities
occur in managing residual risk:

40

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 The difference between
chronic and acute risk
• Chronic
Human safety, health and environmental effects due to ongoing or long
term exposures
– Effects often not recognized for some time, and mechanism of
causation is often unclear
– Trends are gradual (the actual situation on one day does not differ much
from the day before)
– Societal attention varies over time, driven by:
• Acute aspects, e.g major conference or release of report
• Other trends that develop may develop slowly or quickly, e.g. economic
situation
– Societal negotiation is ongoing, with govts and others having teams
permanently assigned with certain defined issues as their major focus
– Progress re goals is monitored and action plans are modified as relative
priority and resources change over time
Covered extensively by regulation and voluntary initiatives
e.g. climate change, PCBs, asbestos

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The difference between

chronic and acute risk
• Acute
Human safety, health and environmental effects due to unplanned
sudden, episodic events

– Absence of incidents is not like presence of emissions

(trying to control what isn’t there)

– Societal negotiation is typically conducted in aftermath of major event (“smoking

gun”), with an attention span that decays rapidly unless fed by vested interests

– Risk generators and regulators think that lack of serious incidents is proof of
effective controls; even near misses may be viewed as aberrations

– Jurisdictions do not appear to learn from other jurisdictions (this also seems to be
true for industries and some companies)

Body of knowledge known as process safety management

Process industries largely unregulated in Canada

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 The difference between
chronic and acute risk
• These are general categories, as the nature of the risk
can vary with the context:

– Road traffic accidents are acute for the victims, but may be
considered as chronic by a regulator because they are continually
occurring

– Chronic issues can have acute political aspects, such as when a

major report is issued

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Economic Aspects
and Project Management

With material from Chapter 8: Evaluating Environmental Performance During Process

Synthesis, in Allen, D.T., and Shonnard, D.R., Green Engineering: Environmentally
Conscious Design of Chemical Processes, 2002, Prentice Hall PTR

44

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 Process Design
• Process design proceeds through a series of
steps, each involving an evaluation of
process performance.
• At the earliest stages of a design, only the
most basic features of a process are
proposed.
– raw materials
– chemical pathway to be used,
– overall material balances for the major products,
byproducts, and raw materials.

45

Engineering Economic Analysis

of Chemical Plants

• Estimation of Capital Costs

• Estimation of Manufacturing Costs
• Engineering Economic Analysis

46

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Engineering Economic Analysis
of Chemical Plants

• Estimation of Capital Costs

• Estimation of Manufacturing Costs
• Engineering Economic Analysis

47

Estimation of Capital Costs

• Capital costs associated with:

– construction of a new plant, or
– modifications to an existing plant

48

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 Classification of Capital Cost
Estimates
1. Order of magnitude estimate
2. Study estimate
3. Preliminary estimate
4. Definitive estimate
5. Detailed estimate

49

Order of Magnitude Estimate

(Ratio or feasibility estimate)

• cost estimate taken from previously built

plants
• adjust costs using appropriate scaling
factors
• block flow diagram required
• accuracy range: + 40 % to -20 %

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 Study Estimate
(Major Equipment or Factored Estimate)

• list major equipment found in the process

• each piece is roughly sized and the
approximate cost determined
• based on the process flow diagram (PFD)
• accuracy range: + 30 % to -20 %

51

Preliminary Design Estimate

(Scope Estimate)
• equipment is more accurately sized
than in study estimate
• approximate layout of equipment is
made
• estimate piping, instrumentation and
electrical requirements
• utilities estimated
• based on PFD
• accuracy range (+ 25 % to -15%)
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 Definitive Estimate
(Project Control Estimate)
• requires preliminary specification for all the
equipment, utilities, instrumentation,
electrical…
• final PFD, vessel sketches, plot plan, and
elevation diagrams, utility balances and a
preliminary P&ID
• accuracy range (+ 15 % to -7 %)

53

Detailed Estimate
(Firm or Contractor’s Estimate)
• requires complete engineering of the
process
• vendor quotes for all expensive items
need to be obtained
• after this stage, the plant goes to
construction
• requires final PFD and P&ID diagrams,
vessel sketches, etc.
• accuracy range: + 6 % to - 4 %
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Engineering Economic Analysis
of Chemical Plants

• Estimation of Capital Costs

• Estimation of Manufacturing Costs
• Engineering Economic Analysis

55

Estimation of Manufacturing Costs

• costs associated with the day-to-day

operation of the plant
• manufacturing costs ($/unit time)
• capital costs ($)

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 Cost of Manufacture (COM)
Costs of Manufacture (COM) =

Direct Manufacturing Costs (DMC) +

Fixed Manufacturing Costs (FMC) +

General Expenses (GE)

57

Cost of Manufacture
COM = DMC + FMC +GE

• Direct Manufacturing Costs

– Costs represent operating expenses that vary with
product production rate.
– If product demand drops, production rate is reduced
below the design capacity.
– Lower production rate results in a reduction in the
factors making up the direct manufacturing cost.
– These reductions may be:
• directly proportional to the production rate
example: reduced raw material costs
• or might they be reduced differently
example: different maintenance costs or operating labor costs

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 Cost of Manufacture
COM = DMC + FMC +GE

• List of Direct Costs

– Raw materials
• costs of chemical feed stocks required by the process
– Waste treatment (old-school)
– Utilities
• fuel gas, oil, and/or coal, electric power, steam, cooling water,
process water, boiler feed water, instrument air, inert gas
(nitrogen), refrigeration
– Labour
• operating labour, direct supervisory and clerical labor,
maintenance and repairs
– Operating supplies
– Laboratory charges
– Patents and royalties 59

Cost of Manufacture
COM = DMC + FMC +GE

• Fixed Manufacturing Costs

– Costs that are independent of changes in production rate
– Property taxes, insurance, and depreciation are judged
at constant rates even when the plant is not in operation

• List of Some Fixed Costs

– depreciation
– local taxes and insurance
– plant overhead costs (also called factory expenses)
– payroll, accounting, fire protection and safety, medical
services, cafeteria and any recreation facility,
housecleaning staff, overhead and employee benefits,
general (staff) engineering
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 Cost of Manufacture
COM = DMC + FMC +GE

• General Expenses
– Costs represent an overhead burden that is necessary
to carry out business functions.
Example: management, administration, sales,
financing, and research functions.
– General expenses seldom vary with production level.
– Items such as research and development and
distribution and selling costs may decrease if extended
periods of low production levels occur.
• List of Some General Expenses
– Administration costs
– Distribution and selling costs
– Research and development (much less now than ever)
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Typical Progression
• Order of Magnitude or study estimate: compare
several process alternatives

• Preliminary or definitive estimate: made for

most profitable processes identified.

• Perform detailed estimates: normally limited to

the most promising processes

• The detailed estimate is used to make the final

decision to finance and construct the plant.
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Engineering Economic Analysis
of Chemical Plants
• Estimation of Capital Costs
• Estimation of Manufacturing Costs
• Engineering Economic Analysis
This should include consideration of costs of potential
safety, health & environmental impacts, including
estimation of “toxicity”, which includes concepts such as
persistence, bioaccumulation, etc.

These additional costs could have a major effect on the

viability of the project, and must therefore be taken into
account when deciding whether to proceed
63

Economic Aspects
• So far we’ve been considering the cost
aspects of a business, but the
sustainability depends not simply on
controlling costs (although that is certainly
important) but on:
– Making a profit
– Making sure that you always have enough
funds available to cover necessary expenses

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 Economic
Aspects
• Profitability can be
examined in a break-
even chart
• This shows sensitivity
to changes in volume,
fixed or variable cost,
and selling price
• Here are two
illustrations of a
break-even chart:

65

Economic Aspects
Break-even Analysis
• Here are some short video examples showing how a
break-even analysis chart works:
– www.youtube.com/watch?v=aUnTVNzZwCw
– www.youtube.com/watch?v=j5-hcUBElk0
– www.youtube.com/watch?v=jiWpF3zsamk

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 Economic Aspects
• You can try this yourself on your design project, to see what
difference it makes if you change the fixed cost, variable cost or
selling price by 10% up or down

• Note that the capital cost of building the plant and initial start-up is
“sunk” cost – it’s already spent whether you produce anything or not.
Unless you decide to sell it or scrap it, it doesn’t affect the business
economics in the short term. If you are above break-even on
variable cost, it pays to operate the plant. In the long run the
business must recover the capital cost to remain viable, but that is
considered under the capital budget rather than the operating
budget

67

Economic Aspects
• The factors affecting operating economics in the chemical industry
are:
– Manufacturing inputs such as raw materials and energy (labour is not as
significant due to automation)
– Selling price and volume
• Selling price and volume can be subject to significant changes.
Sometimes the selling price will move in company with raw material
and energy costs, and the effects cancel out
• Volume however could be affected by competitive position, customer
access and preferences re alternatives, disruption due to an upset at
your own or a competitor’s plant, etc.
• When several large-scale plants come on stream at once, the result
can be overcapacity where no-one makes money. This can lead to
pressure to cut costs, which can impact safety

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 Leverage* and Financial Risk
• Apart from the economic risk of the business, the way it is financed can
affect both economics and safety
• To understand the effect of leverage, consider this simplified example:
– You can invest funds and get a 10% return
– Case A
• You invest $100
• One year later it’s worth $110
• Return on your investment = 10%
– Case B
• You invest $10 yourself
• You borrow $90 at 5% interest
• One year later it’s worth $110
• Return on your investment =
$110-94.5 or $15.50 on the $10 you put in, or 55%

69

Leverage and Financial Risk

• But suppose things don’t turn out as planned, and at the end of the
year it’s worth only $90
– In Case A you put in $100, you’ve a loss of 10%
– In Case B you put in $10 and borrowed $90 at 5%, you’ve a loss of
$(10+90) – 94.5 = $5.50 on $10, or 55%

• If at the end of the year it’s worth only $80, the figures are
-20% and -155% respectively

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 Leverage and Financial Risk
• This could be the situation if you borrow to gamble or invest on the
stock market
• But suppose you used the funds to buy an operating chemical
company with the intent of breaking it up and selling off the parts for
more than the cost of the whole, e.g., you spotted that the company
was undervalued (its assets were worth more than its stock price
indicated)
• Now your investment isn’t passive – you’ve got ongoing costs for
raw materials, labour, maintenance, sales, distribution, etc., etc., so
if you can’t sell parts of the company quickly to pay down your debt,
you’ll have to come up with more funds and/or sell off parts at less
than you intended – perhaps even the most valuable assets at “fire
sale” prices

71

Leverage and Financial Risk

• This is why how the business is financed has a big effect on risk
• With high leverage, the new owners are under great pressure to cut
costs, by laying off staff, deferring maintenance, etc. The remaining
personnel are demoralized, and some key people could look for
opportunities elsewhere
• If the new owners are not experienced in chemical plant operations,
their attempts to reduce the financial risk could have a significant
effect on safety risk
• We’ll return to this later in this course

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 Cash Flow
• Apart from break-even analysis and
leverage, another major factor to
consider is cash flow

• This is the net amount of cash coming

into or out of a business

• Look at the diagram, and think what

effect a delayed start-up has on cash
flow!

• The investors must have enough cash

on hand to meet immediate payments
such as interest on any debt,
supplies, labour to build and operate
the plant, etc.

• This is characteristic of capital-

intensive businesses such as the
chemical industry
Source: https://chemicalprojects.wordpress.com/2014/05/13/economic-
evaluation-of-chemical-engineering-projects/

73

Cash Flow
• “A banker is someone who, when the sun is shining,
can’t wait to lend you an umbrella. The trouble is, the
moment it starts to rain, he wants it back!”
Quote from a businessman in an interview on CBC Radio

• If creditors think you might not be able to pay, they could

call the loan. The borrower might then have to sell
assets at “fire sale” prices to come up with cash quickly

• This can lead to tremendous pressure to cut costs and

get the plant operating – with implications for safety

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 An Example: Gas Flaring in the Bakken
• Oil prices are so low it’s not
worth drilling new wells, but if
you’ve already borrowed
money to drill one, you might
have to operate to keep up
your interest payments.
• In the Bakken area there is no
pipeline infrastructure to move
the associated natural gas, so
it is simply flared. The amount
of flaring is such that it can
easily be seen from space, as
the image shows.
• This means lost profit, and also
doesn’t help US energy
sustainability or climate
change. Safety isn’t likely to be
top of mind either -- see
http://midwestenergynews.com/ The Bakken oilfield in N Dakota at night; Hardly anyone
2015/01/09/documentary- lives there, but the light is like that of a major city
highlights-dangers-for-bakken-
oil-field-workers/
75

Introduction to
Management Systems

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 Roles and Focus

• Executives do the right things

business direction, policy, strategy, broad
goals
• Managers do things right
assignment of resources, performance
objectives, monitoring progress, corrective
action

77

Management System
• The most important point about a management
system is the feedback loop to ensure that the
following are acceptably consistent with the
design intent (= the plan):
– Performance of people (Equipment performance is also
covered here, but typically depends on the people operating and
maintaining it)
and that performance is producing:
– Results (e.g. output for resources used – can often
be measured)
– Outcomes (more related to long-term goals – may or
may not be measured in quantitative terms,
depending on nature)

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 Functions of a management system

Planning Direction Organizing

Measurement

Structure
Leadership

Controlling Results Implementing

CCPS: Guidelines for Technical Management of Chemical Process Safety

79

Features and characteristics of a

management system for process safety
Planning Organizing
Explicit goals and objectives Strong sponsorship
Well-defined scope Clear lines of authority
Clear-cut desired outputs Explicit assignments of roles and
Consideration of alternative achievement responsibilities
mechanisms Formal procedures
Well-defined inputs and resource Internal coordination and communication
requirements
Identification of needed tools and training
Implementing Controlling
Detailed work plans Performance standards and
Specific milestones for accomplishments measurement methods
Initiating mechanisms Checks and balances
Performance measurement and reporting
Internal reviews
Variance procedures
Audit mechanisms
Corrective action mechanisms
Procedure renewal and reauthorization

CCPS: Guidelines for Technical Management of Chemical Process Safety

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40
 Strategic Managerial Task

Planning
Planning
Organizing
Planning
Organizing
Implementing
Implementing
Organizing

Controlling Controlling Controlling

Examples of PSM management systems concerns at

different organizational levels
CCPS: Guidelines for Technical Management of Chemical Process Safety
81

Another way of representing a

management system
• Comes from quality management, and
is associated with performance gain
through:
– Breakthrough
– Continual improvement
– Daily work
• Useful, but typically is applied in a
context where executive direction has
already been established
• If applied by itself there should be a
“Lead” in the centre to show the
The Plan-Do-Check-Act
direction step (PDCA) cycle

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 Responsible Care
• Responsible Care
– Shows the application of a management system by
the chemical industry for the control of chemical risks
– Internationally (via the International Council of
Chemical Associations (ICCA)):
Global Responsible Care Charter
www.icca-chem.org/wp-content/uploads/2015/08/Responsible-Care-
Global-Charter-Guide.pdf

– Canadian progress report

http://canadianchemistry.ca/library/uploads/RC_Report_EN_FINAL_sing
le.pdf

83

Fundamental features of
Responsible Care
Each national chemical association establishes and manages its own national
Responsible Care programme based on a set of eight common fundamental features.
They are:
1. Establish and implement a set of Guiding Principles that member companies sign.
2. Adopt a title and logo that are consistent with Responsible Care.
3. Implement management practices through a series of systems, codes, policies or
guidance documents to assist companies to achieve better performance.
4. Develop a set of performance indicators against which improvements can be
measured.
5. Communicate with interested parties inside and outside the membership.
6. Share best practices through information networks.
7. Encourage all association member companies to commit to and participate in
Responsible Care.
8. Introduce and apply systematic procedures to verify the implementation of the
measurable elements of esponsible Care by member companies.

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 Societal Framework for
Controlling Risk

• Control framework

• Players and their roles

85

Controlling risk
• The control framework and hierarchy
– Laws
– Regulations
– Codes and standards (international, national
or regional)
– Company/industry codes and standards
– Guidelines
– Good practice

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43
 Controlling risk
• Note that the actual order in which the control
framework develops is often almost the reverse
of the hierarchy (especially for acute risk)
– Good practice
– Guidelines
– Company/industry codes and standards
– Codes and standards (international, national or
regional)
– Laws ) the order here stays the same –
– Regulations ) a law precedes a regulation

87

Controlling risk
• Players and their roles
– Industrial companies operating processes, and industry
associations
• manufacturers and distributors of hazardous materials
• users of hazardous materials
– Government agencies
• Federal
health, environment, transport, justice
• Provincial
workplace safety & health, environment, public safety
• Municipal
water & waste treatment, land use planning, emergency services
– Organizations providing services to industry
• suppliers, contractors, consultants, insurers, etc.
– Other
• academia, the media, activist groups, etc.

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• Risk management is a complex process involving
multiple actors and disciplines (Rasmussen)

Hierarchical Model of Sociotechnical System involved in

Risk Management (Rasmussen, 1997) 89

The Roles and Responsibilities of

Chemical Engineers
• In the early stages of your career you are
unlikely to be making executive decisions about
the business, product line or nameplate capacity
• You are more likely to be involved in
implementing or providing recommendations to
expand or improve an existing business, product
or activity

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45
 The Roles and Responsibilities of
Chemical Engineers
• Chemical engineers may be directly responsible for
control of safety, health and environmental risks, or may
be providing recommendations to line management on
appropriate controls
• They therefore need to be aware not just of what laws
and regulations require, but on the range of available
good practices
• This course will give an introduction, but you’ll need to
supplement that as your career progresses by asking
around as you encounter specific issues in your own
workplace

91

Sports Analogy for Chemical Engineers

• Involves offensive and defensive aspects:

a) Offence
How to bring about what you intend to happen
e.g. expand output of substance x, reduce cost, reduce by-product
formation or waste, improve energy efficiency, etc.

b) Defence
How to prevent and be ready for what you don’t intend to happen
e.g. loss of containment, explosions, fires, spills, injuries, damage to
surroundings, bad publicity, etc.

• These two aspects involve somewhat different but related

approaches to the understanding and control of risk.

• We‘ll consider chronic risk, including Green Engineering, under (a)

and acute risk, including process safety management, under (b)

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 ECAB Graduate Attributes Criteria
• Engineers Canada (the business name of the Canadian
Council of Professional Engineers) is the national
organization of the 12 engineering regulators that license
the engineering profession in Canada
• Its Engineers Canada Accreditation Board (ECAB –
formerly the Canadian Engineering Accreditation Board
or CEAB) approves educational institutions giving
degrees in engineering in Canada, and has a list of 12
criteria graduates are expected to meet
• ECAB monitors this standard by periodic visits to each
institution, which is expected to track how it teaches and
assesses results for each of these criteria

93

ECAB* Graduate Attributes Criteria (1-6 of 12)

(for information – not part of exam)
italic=some coverage in CHG4307, bold italic=strong coverage, bold=major focus

1. A Knowledge Base for Engineering: Demonstrated competence in university level mathematics,

natural sciences, engineering fundamentals, and specialized engineering knowledge
appropriate to the program.
2. Problem Analysis: An ability to use appropriate knowledge and skills to identify, formulate,
analyze, and solve complex engineering problems in order to reach substantiated conclusions.
3. Investigation: An ability to conduct investigations of complex problems by methods that include
appropriate experiments, analysis and interpretation of data, and synthesis of information in
order to reach valid conclusions.
4. Design: An ability to design solutions for complex, open-ended engineering problems and to
design systems, components or processes that meet specified needs with appropriate
attention to health and safety risks, applicable standards, economic, environmental,
cultural and societal considerations.
5. Use of Engineering Tools: An ability to create, select, apply, adapt, and extend appropriate
techniques, resources, and modern engineering tools to a range of engineering
activities, from simple to complex, with an understanding of the associated limitations.
6. Individual and Team Work: An ability to work effectively as a member and leader in
teams, preferably in a multi-disciplinary setting.
* Engineers Canada Accreditation Board (the body that approves the university engineering curriculum)
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 ECAB Graduate Attributes Criteria (6-12 of 12)
7. Communication Skills: An ability to communicate complex engineering concepts
within the profession and with society at large. Such abilities include reading, writing,
speaking and listening, and the ability to comprehend and write effective reports and
design documentation, and to give and effectively respond to clear instructions.
8. Professionalism: An understanding of the roles and responsibilities of the
professional engineer in society, especially the primary role of protection of the public
and the public interest.
9. Impact of Engineering on Society and the Environment: An ability to analyse social
and environmental aspects of engineering activities. Such abilities include an
understanding of the interactions that engineering has with the economic, social,
health, safety, legal, and cultural aspects of society; of the uncertainties in the
prediction of such interactions and of the concepts of sustainable design and
development and environmental stewardship.
10. Ethics and Equity: An ability to apply professional ethics, accountability, and equity.
11. Economics and Project Management: An ability to appropriately incorporate economics and
business practices including project, risk and change management into the practice of
engineering, and to understand their limitations.
12. Life Long Learning: An ability to identify and to address their own educational needs in a
changing world, sufficiently to maintain their competence and contribute to the advancement
of knowledge. 95

Top 10 Reasons Why You Need To Know

How To Manage Risk*

1. Because it’s the law!

2. What you don’t know can hurt you and it can kill you!
3. Because it makes good business sense
4. Because you want to know your rights and responsibilities
5. Because it’s part of your job and you want to keep it
6. To avoid lawsuits
7. Because it’s connected to everything human resources –
recruitment/retention/internal
responsibility/productivity/employee engagement
8. To protect your company’s reputation
9. To avoid industrial relations disputes/grievances
10. Moral obligations

* These points were developed by Vic Pakalnis, formerly of the Ontario Ministry of Labour and now teaching at Queens. 96
They referred to managing workplace health & safety, but the principles are also valid for management of risk in general 96

48
 Ethical Aspects
• As you consider engineering issues,
alternative courses of action and
recommendations or decisions on what to
do, ask yourself “What is the right thing to
do?”
• This leads into moral philosophy where the
answers can be influenced by the
positions and attitudes of those involved,
but engineering ethics provides a guide
97

Engineering Ethics
• Obligation to society
– The paramount value recognized by engineers is the safety and welfare of the
public, as demonstrated by the following selected excerpts:
– Professional Engineers Ontario: ”A practitioner shall, regard the practitioner's
duty to public welfare as paramount."
– National Society of Professional Engineers: "Engineers, in the fulfillment of
their professional duties, shall: Hold paramount the safety, health, and welfare of
the public."
– American Institute of Chemical Engineers: "To achieve these goals, members
shall hold paramount the safety, health and welfare of the public and protect the
environment in performance of their professional duties."
– Chemical Institute of Canada: “To accept and defend the primacy of public
well-being.”

• We’ll consider the above later in this course, but see

https://en.wikipedia.org/wiki/Engineering_ethics for more
background on this topic.

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Questions?

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