Regulating Chemical Plant Security
The New York Times has an editorial on regulating chemical plants:
Since Sept. 11, 2001, experts have warned that an attack on a chemical plant could produce hundreds of thousands of deaths and injuries. Public safety and environmental advocates have fought for strong safety rules, but the chemical industry used its clout in Congress in 2006 to ensure that only a weak law was enacted.
That law sunsets this fall, and the moment is right to move forward. For the first time in years, there is a real advocate for chemical plant security in the White House. As a senator, President Obama co-sponsored a strong bill, and he raised the issue repeatedly in last year's campaign. Both chambers of Congress are controlled by Democrats who have been far more supportive than Republicans of tough safety rules.
A good bill is moving through the House. It would require the highest-risk chemical plants to switch to less dangerous chemicals only in limited circumstances, but Republicans have still been fighting it. In the House Homeland Security Committee, the Republicans recently succeeded in adding several weakening amendments, including one that could block implementation of safer-chemical rules if they cost jobs. Saving jobs is important, but not if it means putting large numbers of Americans at risk of a deadly attack.
The Obama administration needs to come out forcefully for a clean bill that contains strong safety rules without the Republican loopholes. Janet Napolitano, the secretary of homeland security, said last week that she considers chemical plants a major vulnerability and promised that the administration will be speaking out on the subject in the days ahead.
It is looking increasingly likely that Congress will extend the current inadequate law for another year to take more time to come up with an alternative. That would be regrettable. There is no excuse for continuing to expose the nation to attacks that could lead to mass casualties.
The problem is a classic security externality, which I wrote about in 2007:
Any rational chemical plant owner will only secure the plant up to its value to him. That is, if the plant is worth $100 million, then it makes no sense to spend $200 million on securing it. If the odds of it being attacked are less than 1 percent, it doesn't even make sense to spend $1 million on securing it. The math is more complicated than this, because you have to factor in such things as the reputational cost of having your name splashed all over the media after an incident, but that's the basic idea.
But to society, the cost of an actual attack can be much, much greater. If a terrorist blows up a particularly toxic plant in the middle of a densely populated area, deaths could be in the tens of thousands and damage could be in the hundreds of millions. Indirect economic damage could be in the billions. The owner of the chlorine plant would pay none of these potential costs.
Sure, the owner could be sued. But he's not at risk for more than the value of his company, and -- in any case -- he'd probably be smarter to take the chance. Expensive lawyers can work wonders, courts can be fickle, and the government could step in and bail him out (as it did with airlines after Sept. 11). And a smart company can often protect itself by spinning off the risky asset in a subsidiary company, or selling it off completely. The overall result is that our nation's chemical plants are secured to a much smaller degree than the risk warrants.
Posted on August 4, 2009 at 12:52 PM • 49 Comments