On November 15th, 2019 it was announced that the Draft MHI Regulations which had been mulled for the better part of a decade had finally been published for public comment via Regulation Gazette No. 11005, Volume 653, No. 42840 dated 15th November 2019. The publishing of the regulations for public comment marks a significant milestone for those involved in the drafting of the new requirements and will go some way in addressing some of the challenges encountered with the current regulations promulgated in 2001.  Being part of the technical committee put together by the Department of Employment and Labour (DEL) to draft these regulations I personally felt like a small victory has been achieved, and now look forward to the collation of comments and working towards promulgation. The current MHI Regulations have been in use since 2001 and in that time have observed by many companies required to. There have however been recognised challenges with the wording of the regulations and the interpretation of some of the requirements therein. Those challenges have led to the need to draft a new set of regulations to close those gaps.

Maybe let’s start with some definitions:

An MHI can be defined as an industrial facility (or process within that facility) where manufacturing and/or storage of bulk quantities of chemical materials takes place. The materials are those which, if they were to lose containment could result in effects that could cause harm to personnel and members of the public in the vicinity of the facility. Effects may include major fires, explosions and release of toxic materials which disperse over a distance.

By South African law (governed by the MHI Regulations, under Section 43 (1) of the Occupational Health and Safety Act No. 85 of 1993), every MHI (or suspected MHI) is required to undertake what is known as an MHI Risk Assessment, which is a Quantified Risk Assessment (QRA) of the facility which takes into account the potential effects in the case of loss of containment as well as the likelihood of occurrence. The MHI Risk Assessments are undertaken by Approved Inspection Authorities (AIAs) which are vetted by the South African National Accreditation System (SANAS). Under current legislation, MHI Risk Assessments are required to be repeated under the following circumstances:

• 5-yearly; or
• If a major incident occurs onsite involving hazardous materials and which requires activation of the Emergency Response Plan (ERP); or
• A change has occurred to the processes onsite such that the risk profile of the site changes (i.e. risk on the surroundings may have increased).

This article aims to describe the changes in the draft regulations, offers some opinions and insights and hopefully provides a basis for the reader to read and comment on the regulations before the closing date calculated to be 90 days from 15th November 2019.

NEW DEFINITIONS

The new regulations contain some new definitions not previously contained in the 2001 promulgated regulations, including (not verbatim):

Dutyholder – this is the employer or self-employed person who supplies or uses hazardous substances defined in the regulations.

Responsible person – A person designated by the dutyholder in writing, who works for the dutyholder in a full-time capacity and who will be the go-to person at the site for MHI-related matters.

Establishment – The area (site) under the control of the dutyholder and in which the quantities of hazardous substances prescribed in the regulations are present. Establishments are divided into three categories:

·      High Hazard Establishments;

·      Medium Hazard Establishments; and

·      Low Hazard Establishments.

The categorisation of establishments is based on newly defined threshold quantities (defined in Annexure MHI A1, MHI A2 and MHI A3 in the regulations). A short summary of the lower thresholds for selected hazardous substances is provided below, as well as the risk studies they would be compelled to produce:

In the current MHI Regulations (2001) an MHI is defined as a site which handles “a quantity” of a substance which may pose a risk that could affect the health and safety of employees and the public. That “quantity” was not defined; over time those in the industry have used the quantities of hazardous substances defined in the General Machinery Regulations as proxies for the MHI Regulations, which is technically not correct.

In the current regulations all MHI sites are compelled to compile MHI Risk Assessments (reports) and Emergency Response Plans (ERPs), regardless of how much material was stored. In the draft regulations three concepts have been introduced which Medium and High Hazard Establishments will have to observe in order to comply with the regulations:

• Major Incident Prevention Policy (MIPP): a high-level document is now a requirement for Medium and High Hazard establishments describing the following:

o  How are you organised to deal with major incidents?

o  What are your systems to identify major accident hazards and assess risk?

o  What are your procedures for operating plant safely?

o  How do you manage changes when they occur (Management of Change)?

o  How do you plan for emergencies?

o  How do you monitor your systems to ensure major incidents are prevented?

• A Process Safety Management System (PSM): A management system that feeds from the MIPP and provides ‘flesh’(the who, what where, when and how) to the topics stated in the MIPP.
• A Safety Report (or Safety Case): A comprehensive report comprising various, separate studies to ensure risk is comprehensively assessed and may include:

o  Information on Safety Management System of the Organisation with reference to the PSM (How are you structured to prevent major incident hazards?)

o  The location of the establishment (Where are you located geographically, any special features, who are your neighbours?)

o  The establishment (What are the specifics of your process and materials handled?)

o  Hazard identification and incident risk analysis (What hazards exist, what are the effects and likelihoods of occurrence? This may include Hazard Identification (HAZID) and Hazard and Operability (HAZOP) studies, among others.)

o  Measures of protection & intervention to limit consequences of a major incident (identifying Safety Critical Elements (SCEs), defining their performance criteria and ensuring that they are available when required).

• South African National Standards (SANS): Two SANS standards were published in 2018 and are referred to in the draft regulations:

o  SANS 1514:2018 “Major hazard installation: Emergency response planning” – This standard details requirements for ERPs for MHI establishments.

o  SANS 1461:2018 “Major hazard installation — Risk assessments” – This standard details the technical requirements for compiling MHI Risk Assessments by AIAs.

In addition to the definitions above, some new concepts have been introduced in the regulations, including:

• Installation vs Establishment: Establishment refers to the site in which the quantities of hazardous substances mentioned above, are stored / handled. An installation can be a process or equipment onsite which uses or stores the hazardous substances mentioned. Therefore an establishment can multiple installations contributing to its MHI status.
• Licence to Operate – a licence applicable to the operation of a High Hazard Establishment, obtained from the Chief Inspector, DEL.

THE DRAFT REGULATIONS THEMSELVES

Regulation 3: Management of MHIs

Describes the responsibilities of the dutyholder as well as its responsible person. It states that the dutyholder must obtain certain approvals from Local Authority (municipality) before erecting, modifying or converting an establishment. This is currently the case in the current regulations, however, application has been inconsistent and slightly unclear. The regulations have sought to clarify what is meant by that.

The responsible person must be employed in full time capacity and be under the control of the dutyholder (employee). The Chief Inspector may impose relevant qualifications on the responsible person and the dutyholder must appoint deputies while still retaining the responsible person’s ultimate responsibilities for MHI matters at the site.

Regulations 3(6) and 3(7): Notifying neighbours

This regulation requires the dutyholder to have ongoing consultation with MHI neighbours, to inform those within the establishment’s “Impact Zone” of such and to keep a record of all such interactions. Under this regulation the Chief Inspector may designate MHIs within an area as a Group of MHIs. This regulation might open up the possibility to perform MHI Risk Assessments on complexes containing several industrial facilities with impact on one another. This has been a challenge under the current regulations where there are several MHIs in close proximity to one another and all perform separate risk assessments with no requirement to share knowledge, apart from a requirement to have their MHI Risk Assessments available for all interested parties.

Regulation 4: Notifying the Authorities

Several owners / users of MHIs have expressed the need for clarification of the process for notifying the authorities, especially when it comes to receiving feedback in the form of acknowledgement or some kind of certificate. As with the current regulations, the 2019 draft regulations require that the provincial DEL, the local authority (municipality) and the national DEL be notified of the existence of an MHI. A form for doing so (Annexure D) now exists.  Advertising the existence of an MHI is still a requirement, however, now it is specified that such advertisement must be in English and in a local language ubiquitous in the area and by notices in that area.

Regulations 5, 6 and 7: Registration of an MHI

The Chief Inspector may now issue a registration certificate or may choose to reject the registration of an MHI. As the draft regulations stand, the criteria and implications of refusal not clear. A registration fee will be payable for registration as well as re-notification after the required 5-year period. The regulations require that re-registration be undertaken at least 6 months before expiry. Typically with the current regulations, Clients aim to start the process of reviewing / updating their MHI Risk Assessment typically a month or two before the date written on the final report from 5 years before. That approach is not correct, and will be emphasised in the new regulations by the requirement to notify the Chief Inspector by the end of that 5 year period. That means the MHI and notification processes have to be completed before then. In reality an MHI Risk Assessment takes (give or take) 2 months to get to final report stage and a further 6 months to complete notification (in the best case), so the review / update has to be initiated at least 8 months to a year before the the expiry date on the report from 5 years before.

Regulation 8: Revoking MHI Registration

The Chief Inspector can revoke an MHI registration if:

·      Dutyholder not ensuring Works are carried out safely;

·      Change is effected making the establishment unfit for occupation or operation as an MHI;

·      Fact or circumstance not present at registration;

·      Failure to comply with Chief Inspector notice;

·      Contravention of registration condition(s) (conditions not

·      Where the dutyholder ceases operations.

Regulation 10: The MHI Risk Assessment

The MHI Risk Assessment must be done in line with SANS 1461:2018 mentioned above. For the 5-yearly reviews / updates (required as in the current regulations) there is a requirement to notify authorities (without advertisement) as before:

·      Chief Inspector (within 60 days)

·      Provincial director

·      Local authority

The dutyholder must make the most recent MHI report available for any interested party (anyone has right to see it).

Regulation 14: General duties of local authorities

A major challenge to the current MHI regime has been the resource constraints in smaller municipalities meaning that the approach by various local authorities has been inconsistent in how they manage the regulation of MHIs. This has not disappeared under the new regulations, however, there have been some clarifications on the roles of the local authorities, as well as prescription of how they can handle resource constraints by linking up with bigger municipalities. 

Under the draft regulations, the local authorities may not permit a new major hazard establishment (MHE) or expansion if risk is unacceptable. They can also prohibit development of an installation which can cause the establishment to be an MHE and must give consent for the Emergency Response Plan (ERP). If they don’t have capacity, neighbouring local authorities must be consulted.

Regulation 15: Emergency Response Plans / Emergency preparedness plans

All ERPs at MHIs must comply with SANS 1514 within 12 months of entry of new regulations. The dutyholder must obtain approval of their ERP from the Local Authority. Importantly, the dutyholder must give early warning to interested and affected parties if a major incident is likely to go offsite (often a recommendation made in MHI Risk Assessments where the effects can reach offsite).

Regulation 16: Reporting of incidents

There are no changes to the current requirements, incidents involving hazardous substances and where the ERP is activated must be reported within 48 hours. The dutyholder must to send a report to Chief Inspector within 7 days after incident and investigate and record all near misses in a register.

Regulation 17: Information and training

This is a new requirement and one which strengthens the process of MHI Risk Assessments. Often the MHI Risk Assessments and information therein have tended to be technical and inaccessible to most workers onsite, particularly those working on the field, next to the installations in question, which have the potential to cause death and injury to them. The dutyholder must provide training for all employees on the following:

·      The scope of the new MHI Regs once promulgated;

·      Nature of the establishment

·      Potential major hazards;

·      Potential health and safety risk caused by major incidents;

·      Practices and control procedures for a major incidents;

·      Refresher training must be provided when:

o  There is a change in the establishment; and

o  The risk assessment has been reviewed.

Regulation 18: General duties of suppliers

Suppliers must provide training on the use and handling of the hazardous substances they supply, including refresher training every 24 months. If they become aware of a major incident involving their substances, they must inform other customers. Suppliers must provide a 24-hour advice service on handling their substance in case of major incident.

Other requirements

The following are other requirements in the draft regulations:

·      Closure of an MHI: requires that the dutyholder notifies the Chief Inspector, Local Authority and Provincial Director at least 60 days before closure.

·      Offences and penalties: contravention of the regulations carries a maximum R500,000 fine or 12 months imprisonment.

CONCLUSION

In general, several issues would have been addressed by the draft regulations were they to be promulgated as they stand. However, there are questions particularly around the capacity of the local authorities and the DEL in implementing the new requirements. The lack of capacity will probably mean the DEL relies on self-regulation as is the case currently.

The answer to that question depends on what the person being questioned understands by what exactly a Major Hazard Installation (MHI) Risk Assessment contains (or should contain).  To date there has been something of a variety definitions for what an MHI Risk Assessment should contain and with it, a variety of costs for one.

I bet in the past when you’ve sent out a Request for Proposal (RFP/RFQ) you have received a number of very different responses with costs ranging wildly.  That is probably because to date the industry has relied on the definitions given in the MHI Regulations (2001) for what should be contained in an MHI Risk Assessment (which is a type of Quantitative Risk Assessment (QRA)).  The existing MHI Regulations (2001) provide a list of items to be contained in an MHI Assessment, and these are summarised as follows:

LIST OF ITEMS TO BE INCLUDED IN AN MHI ASSESSMENT (MHI REGULATIONS, 2001)

                     i.            A general process description of the facility;

                   ii.            A description of the major incidents associated with that type of installation and the consequences of such incidents, which shall include potential incidents;

                  iii.            An estimation of the probability of a major incident;

                  iv.            A copy of the site emergency plan;

                   v.            An estimation of the total result in the case of an explosion or fire;

                  vi.            In the case of toxic release, an estimation of concentration effects of such release;

                vii.            The potential effect of an incident on a major hazard installation or part thereof on an adjacent major hazard installation or part thereof;

               viii.            The potential effect of a major incident on any other installation, members of the public and residential areas;

                  ix.            Meteorological tendencies;

                   x.            The suitability of existing emergency procedures for the risks identified (covered in the emergency plan); and

                  xi.            Any organisational measures that may be required.

Very interestingly, the existing MHI Regulations (2001) do not actually mention a quantification of ‘Risk’ as one of the items to include.

Risk, of course, is a combination of: (a) the effects or consequences from the realisation of a major accident hazard, and (b) the likelihood of that event taking place.  Risk can be expressed in a number of ways, all of which are basically a summation of all loss of containment events or scenarios and their associated likelihoods of occurring (including other things such as weather and wind tendencies, probabilities of ignition, probabilities of being fatally injured, etc.)

The absence of ‘Risk’ as a requirement in MHI Risk Assessments in the current MHI Regulations is a source of variability of cost and a reason for lots of wailing and gnashing of teeth among Approved Inspection Authorities (AIAs). International best practice says Risk has to be included in any study that is a QRA and there has been something of a split in the industry between AIAs who follow best practice (to include a quantification of Risk) and other AIAs who follow the exact wording of the MHI Regulations (2001) without quantifying Risk.

The step of quantifying risk adds significant effort in the process of QRA and often requires the use of internationally recognised software packages with hefty licence fees.  Hence, there often is a split in costs and an unfortunate categorisation of ‘cheap’ consultants vs ‘expensive’ consultants.  The lack of standardisation has meant that both ‘types’ of AIAs are correct … and therefore accreditation with the South African National Accreditation System (SANAS) can be maintained by both ‘types’ of AIAs.

Thankfully, standardisation has now been achieved with the publication of a new South African National Standard (SANS) 1461:2018 – ‘Major Hazard Installation – Risk Assessments’.  As of 2018 all AIAs have been instructed by SANAS to work towards ensuring that their MHI Assessments comply with SANS 1461:2018, with a deadline for compliance set for 31^st December 2019.  That standard is currently industry best practice for MHI Risk Assessments, but will become a legal requirement with the promulgation of the MHI Regulations currently in draft.  When will they be promulgated …? I don’t know but I can find out   I will provide an update on the progress of the regulations in another post.

The SANS 1461:2018 standard now requires the MHI Risk Assessment contain the following aspects (quantification of risk now included); the standard even suggests a report structure to ensure consistency throughout the industry:

SANS 1461:2018 LIST OF ITEMS TO BE INCLUDED IN AN MHI ASSESSMENT

·         Defining the scope of work;

·         Gathering relevant data;

·         Hazard identification;

·         Hazard analysis;

·         Consequence analysis;

·         Risk calculations (including individual and societal risk);

·         Risk judgement criteria;

·         Risk treatment;

·         Land-use planning;

·         Emergency response data (comparing Client’s Emergency Response Plan (ERP) with the requirements of another new SANS standard: SANS 1514:2018 “Major Hazard Installation – Emergency Response Planning”);

·         Conclusions and recommendations.

As an operator of a plant or plants with major chemical accident potential, your primary concern is probably compliance with Health and Safety legislation and about ensuring that what you receive is an MHI Risk Assessment.  Based on the information above, you should interrogate proposals and reports you receive, to ensure the consultant has done what they are required (soon by law) to do.

What we may find is something of a balancing of costs in future between AIAs. The differentiator between AIAs is likely to be the quality of conclusions and risk treatment recommendations provided by a consultant based on their aptitude and experience rather than what one may have chosen to include or exclude in their MHI Assessment.

INTRA-AFRIKAN TRADE

 

Meanwhile, on the Afrikan continent, we’ve also seen talk about trade and trade tariffs.  We have imposed a great number of restrictions on trade between ourselves, which to me is sad and bizarre.  Perhaps it’s a colonial hangover, and/or countries trying to boost manufacturing within their own countries.  I see benefit from Afrikan countries trading more with one another.  As an example, S.A. gets most of its oil from Saudi Arabia (40% in the 7 years from 2010 to 2017) and not Nigeria (30%) or Angola (16%).

 

But maybe I see benefit because I’m speaking from a South African perspective.  Our companies are the ones that probably stand to gain the most.  Well, arguably so are the multinationals who use South Africa as a platform to exploit the Afrika market.  For smaller economies on the continent there are real fears of significant tariff revenue losses and an uneven distribution of costs and benefits. Countries with significant manufacturing capacities will likely see significant economic growth and welfare gains, but small economies will face great fiscal revenue losses and threats to their local producers.  In the South Afrikan context, this is similar to how the big supermarket chains entering new areas in recent years has killed off local industry, like butchers, bakers and vegetable sellers.  

 

There is resistance to drops in import tariffs by bigger countries like Nigeria, and understandably so, after all protectionism built some of their biggest companies, including Dangote and they’re not really about to forego that benefit.  In fact I wouldn’t be surprised to learn that Aliko has tried to lobby government not to sign to a new intra-African trade agreement which would drop import tariffs.

 

THE RISK

 

To link these two issues, we export a lot of products to China, which are converted to things like electronics, medical equipment, televisions, cars, printers, chemicals which are sold back to us, and which are exported from China to America among a lot of other places around the world.  The US$ 46-billion of goods America wants to tariff is a lot of money, and if America imposes tariffs on products entering through its harbours, there’ll likely be a drop in sales and therefore a slow-down in production.  A slow-down in production will of course hurt us poor blades of grass down here… hence the pain that’s already been displayed through the recent drop in the JSE’s All-Share and Resources indices. 

 

As we know the term ‘slow-down’ is synonymous with the terms ‘job-losses’ and ‘restructuring’.

 

This downside is likely to be balanced somewhat by potential drops in tariffs between Afrikan countries, but who knows how long that will take to kick in, and as explained, that’s likely to benefit countries with lots of manufacturing capacity, not all Afrikan countries who will participate.  And if we look closely enough, will it not be multinationals with trade posts in countries like South Afrika who will benefit most?

In some cases companies sitting with large sums of cash would have opted to spend it on themselves (increasing the value of their assets) and then applying accelerated depreciation on those as the most tax efficient use of their cash.  This admittedly would have opened up some opportunities for consultants.

However, I am hoping that companies will be loosening up their purse strings even more to start making meaningful investments as they did in the years leading up to 2008.

One hopes this new phase of our country’s life will be characterised by decisiveness and certainty, one way or another.  One of the bills that’s going through parliament is of course that of the new Major Hazard Installation regulations and one hopes for a speedy review of this, so we can move on to public comment and promulgation, and therefore confirmation of process safety legislative requirements going forward.

A Happy New Year and welcome to 2018.  We all hope that it turns out a better year economically than 2017 was.  Of course the spectre of the ANC’s December Conference hung over all of us last year; after the Cyril victory the hope is that there is a certainty now and companies are able to move forward.

 

Certainly, the beginning of 2018 has shown some signs of optimism from my conversations with people.  The rand has strengthened against the Dollar, Pound and other major currencies.  Great news for those moving money out of S.A. but not so great if you’re moving money in, and if you’re an exporter.

 

In the Process Safety and Risk world, the year has not started so well, with news of some high profile incidents.  On Boxing Day, 26^th December 2017 a large explosion was reported in Libya at a pipeline carrying oil to that country’s largest export terminal, Es Sider.  The explosion resulted in a drop in production immediately after the event from 170,000 barrels per day to about 100,000 barrels per day.  The total output from Libya was about 1-million barrels per day.  Brent Crude Oil rose by about 2.5% on the news.

 

Then, in China on the 6^th of January this year there was collision between an Iranian-owned tanker (the SANCHI) and a Hong-Kong-owned cargo ship in the East China Sea.  The Sanchi was carrying about 1 million barrels of condensate (which is a light oil associated with natural gas extraction).  Condensate is a low density and particularly volatile type of crude and from a risk perspective we tend to pay attention to it due to its tendency to have its light ends evaporate forming flammable atmospheres more readily than heavier crudes.  Soon after the collision the Sanchi caught aflame and sank on 14^th January.  A large amount of the oil (unconfirmed exactly how much) leaked into the ocean; being so light it is expected that a large quantity of the oil evaporated, however, the incident has caused alarm of adverse environmental impact.   Sadly, also, none of its 32 crew survived.

 

These incidents may sound far away from us here in South Africa but their causes may not be unique.  The Libyan incident is reported to have been a vandalism incident (or terrorist attack) while the Sanchi sank as a result of ship collision (the exact cause of the collision remains unknown).  More increasingly around the world we look at vandalism, terrorism or piracy events when considering hazards to a facility.  I recall in a Hazard Identification (HAZID) study I was part of in 2012 for a Norwegian client we considered piracy as a possible threat to its platform in the North Sea.  Ship Collisions routinely form part of Offshore Safety Cases, with standalone Ship Collision studies considering probable causes of ship collisions, SIMOPS (simultaneous operation) issues and the like.

 

Accidents do happen and unfortunately we do sometimes learn the hard way, but there are opportunities for us all to analyse and introduce control measures to keep accidents from occurring, and to learn from the misfortune of others.  Let us aim for a safe 2018!