Product Family

Mitigating Risks During Storage and Transfer


Associate – Risk Consulting, Environmental, AXA XL

In March 2019, a fire began in a petrochemical storage facility in Deer Park, Texas. Four days later, the fire was extinguished, but the damage was already done. Two storage tanks were destroyed, and roughly 9,000 gallons of a naphtha-butane mixture had been released into the air. Schools and businesses in the immediate area were closed, residents were ordered to shelter in place, and the busy Houston Ship Channel was closed temporarily. The initial estimated hit to the liability market: $175 million.

Accidents happen at bulk storage facilities every year and this is just one example. Bulk storage facilities have numerous operational and environmental exposures. Because of the materials they store – crude oil, natural gas, or refined products containing petrochemicals – storing and managing the shipment of such materials comes with a host of risks. One spark or one leak can impact the lives of humans and wildlife, and cost companies millions.

To keep facilities, employees, and surrounding communities safe, facilities operators must have a comprehensive and active risk management plan that encompasses six key areas: hazard evaluation, engineering controls, release prevention measures, employee training, spill and fire emergency planning, and a rigorous inspection and preventative maintenance program.

Hazard evaluation
These following areas have been identified by the American Petroleum Institute (API) as the main causes of petroleum-related releases:

  • Physical damage to tanks, valves, pumps and ancillary equipment
  • Tank and equipment leaks from mechanical failure, corrosion, and faulty valves or seals
  • Improper product handling and employee or contractor negligence
  • Poor housekeeping practices

Every facility should conduct routine visual surveys of tanks and equipment and containment. Beyond observations, hazard assessment should include current operating procedures, maintenance activities, and security to measure the effectiveness and exposures of each area. Key questions include whether employees are handling materials properly and what operational vulnerabilities exist.

Engineering controls
In the event of a leak or potential accident, you need the ability to contain the problem. Shutdown systems, ventilation, block valves, and fire retardant systems are essential. Your facilities should also have the following in place:

  • Centralized controls for continuous monitoring and reporting
  • Pressure relief devices to protect against failures and leaks
  • Intermediate alarms that allow time for corrective action
  • Automatic shutdown for selected equipment
  • Backup instrumentation for all critical controls

Release prevention
There are a variety of causes of spills and accidents that cannot be eliminated. However, you can reduce spill frequency and severity by combining comprehensive written operating procedures with best practices for your facilities.

  • Shutting off tank trucks and chocking wheels and grounding equipment during transfer of flammable liquids reduces the risk of explosion.
  • Check all hoses and fittings. Are they in good condition? Are the connections secure?
  • Also, verifying the available free tank volume is a basic, but essential step in avoiding overfill releases.
  • When there are other tanks in the storage area, confirming fill ports/piping during product transfer can help avoid putting the wrong product in a tank.
  • Tank, truck, rail car product transfer areas should be provided with secondary containment, catch basins and drip pans to prevent a release to the environment.
  • Maintain maximum safety and response time by requiring an attendant to be present during all transfers.

Beyond observations, hazard assessment should include current operating procedures, maintenance activities, and security to measure the effectiveness and exposures of each area.

Employee training
OSHA requires employers to develop and administer safety training programs for all employees. Your employees should be trained and re-educated regularly on safe handling and storage practices. This should include testing to measure knowledge and understanding.

A good training program should adhere to your written operating procedures, and should include information on the hazards of surrounding equipment as well as how each safety control functions. Most importantly, your training program should emphasize swift reporting and corrective action for any deficiencies. Facilities should halt operations when safety equipment is out of order.

Inspection and preventative maintenance
Your inspection and maintenance processes are the first line of defense in preventing equipment condition-related accidents. How often you inspect depends on the age and condition of equipment, as well as the potential threat to life and property should a leak or sudden release occur. Any defects should be addressed immediately.

Both visual and nondestructive testing of equipment can assess the integrity of your tanks and other equipment. Older equipment should be inspected more frequently and more rigorously. Inspect tank exteriors and interiors for structural integrity. Use a detailed recordkeeping system that includes useful life forecasts to stay ahead of any potential issues. Any equipment with a predictable lifespan should be replaced according to manufacturer’s recommendations.

Regular preventative maintenance should be done on a strict schedule, including lubricating mechanicals and checking valves, gaskets, and hoses for signs of degradation. Chart corrosion rates for metal parts, and replace when they reach a predetermined level. Keep oil/water separators maintained to ensure the ability to treat contaminated stormwater and help contain and prevent releases to the environment.

Spill & fire emergency planning
Even the most proactive safety program cannot cover every exposure. Your spill and emergency planning should include steps for responding to every potential hazard. Your plan should include:

  • Contact information for environmental, occupational safety, and fire safety agencies
  • Clear processes for responding to and cleaning up spills
  • A designated employee responsible for emergency response procedures
  • Emergency response drills and training
  • Placement of spill and fire response equipment near various hazards
  • Planning for severe weather or other natural disaster events

The focus on safety
Bulk petroleum storage facilities come with inherent operational risks. If your operations are not properly managed, the result could be devastating to your facilities, your employees, your community, and your bottom line.

Fortunately, a comprehensive management plan that addresses hazards, controls, prevention, emergency planning, and employee training can go a long way toward mitigating many of these risks. By establishing rigorous inspection and maintenance procedures, training employees in equipment use and incident response, and by being prepared for any potential event, your facilities can do much to decrease losses and keep employees and communities safe.

To learn more, read AXA XL’s Environmental Risk Bulletin - Bulk petroleum product storage terminals.

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