About 400 industry representatives and regulatory personnel were on hand in Baltimore July 6-8 for the 2010 Chemical Sector Security Summit. The event was co-sponsored by the Department of Homeland Security (DHS) and the Chemical Sector Coordinating Council, whose members include The Fertilizer Institute (TFI), the Agricultural Retailers Association (ARA), CropLife America, and the Society of Chemical Manufacturers and Affiliates (SOCMA).

Attendees, which included numerous delegates from the fertilizer industry, were updated on the Chemical Facility Anti-Terrorism Standards (CFATS). CFATS were implemented in 2007 and expired last fall, but were reauthorized for one year while Congress considers extending them further or passing new legislation that could potentially expand the requirements.

One key issue is whether an inherently safer technologies (IST) provision, which was included in a Democrat-sponsored House bill (H.R. 2868) last fall but excluded in a bipartisan Senate bill (S. 2996) earlier this year, should be part of CFATS regulations going forward. Both TFI and ARA have indicated their opposition to any IST language in CFATS regulations, as have SOCMA and other chemical industry trade associations.

In a press conference on the opening day of the conference, SOCMA President and CEO Lawrence Sloan took aim at the IST provision in H.R. 2868, calling it “reckless” and reiterating SOCMA’s strong opposition. “IST is the sticking point. The concerns we have are many,” he said. “In its form, it’s elegant, it’s brilliantly named, but in execution it’s not that simple.”

Sloan said IST is more about process safety and less about security, adding that there is no agreement on methodology to determine whether one process is safer than another. He also said an IST mandate would simply transfer risk from the U.S. to other parts of the world.

Sloan said S. 2996, introduced by Sens. Susan Collins (R-Maine), Mark Pryor (D-Ark.), George Voinovich (R-Ohio), and Mary Landrieu (D-La.), is slated for markup later this month. “We stand behind the Senate bill,” he said, calling it a “pragmatic and common-sense approach that is working well.” The bill calls for a five-year reauthorization of existing CFATS without changes, but Sloan said SOCMA would support a 3-4 year authorization if that concession is ultimately required for passage. Sloan warned that another Senate bill may be introduced by Sen. Frank Lautenberg (D-N.J.) that is more in line with H.R. 2868.

When pressed by reporters, Sloan said he thinks another one-year reauthorization of existing CFATS is “the most likely outcome” as Congress focuses on other issues and remains deadlocked on chemical security. He also referred to the upcoming midterm elections, when Republicans are hoping to regain Congressional seats. Once beyond the November elections, Sloan said the chances of IST would be “greatly diminished.”

DHS also voiced its support for a simple reauthorization of existing CFATS regulations. In the conference’s keynote address, DHS Secretary Janet Napolitano said the current CFATS “gives us a sound regulatory framework” to accomplish the legislation’s primary goal – to identify and secure those facilities that, if attacked, could endanger the greatest number of people or have the greatest impact.

“I am confident that we will find common ground with Congress to permanently authorize CFATS,” Napolitano said. While noting that DHS “supports the use of safe technologies where possible,” she said the costs and benefits of doing so should be balanced.

That point was echoed by Sue Armstrong of DHS’s Office of Infrastructure Protection, who gave a CFATS and ammonium nitrate update at the conference. “DHS is not jumping off on an IST program,” she cautioned, “but we do want to engage in a productive dialogue with industry.”

Napolitano and Armstrong both touted CFATS successes, noting that 38,000 top-screen questionnaires have been received by DHS under CFATS. Of these, 7,000 facilities have been labeled as high-risk, and 2,000 of these sites have already taken sufficient security-related steps to be removed from the high-risk facilities list. Armstrong noted that DHS has conducted 244 compliance visits under CFATS, and has issued its first 18 administrative orders to 18 chemical facilities for failure to submit site security plans.

Napolitano said terrorist threats to the U.S. are constant, citing the recent Times Square bomb attempt (GM May 10, p. 1) and the Christmas Day airline bombing attempt over Detroit. She said the threats to chemical facilities include potential attacks on facilities themselves or chemicals in transit; the theft or diversion of chemicals; and the use of chemicals for contamination or sabotage.

Napolitano stressed the importance of chemical industry involvement in securing chemicals and facilities. “Our starting point has been and will continue to be partnership,” she said. “It has to be a collaborative and comprehensive effort.” She also stressed the importance of voluntary industry efforts. “Investments in security are ultimately investments in your company,” she said. “In short, they make good business sense.”

Armstrong said DHS anticipates completing the rule making process this fall for the Secure Handling of Ammonium Nitrate program, which will require purchasers and sellers of AN to be registered and AN sales to be documented. She said DHS seeks rules that are “appropriate and not overly burdensome,” and is working on how to facilitate registration, clarify what happens at the point of sale, and codify what steps to take if AN goes missing.

DHS is an umbrella over 22 other federal agencies, and harmonization of security regulations was the subject of a panel discussion on the conference’s opening day. Representatives from the Federal Railroad Administration, the Transportation Security Administration, the Pipeline and Hazardous Materials Safety Administration, the U.S. Coast Guard, and the DHS Infrastructure Security Compliance Division stressed their support for a coordinated DHS effort. “We don’t want facilities trying to do different things to comply with different regimes,” said Jim Bull of the Coast Guard. “That is counterproductive for us, and it’s counterproductive for you.”

A Congressional Perspectives panel discussion the second day tackled the IST debate. Representatives from the Senate Homeland Security and Government Affairs Committee and the House Committee on Homeland Security squared off on whether an IST mandate is necessary to enhance chemical facility security.

Chris Beck, senior advisor for science on the House committee, said that asking companies to consider IST is reasonable. “It should really affect a small number of people that weren’t really doing a good job anyway,” he said, noting that the others are “success stories” under CFATS. He said the IST language already maintains that the technology must be technically feasible and cost effective, and use processes that try to stay within risk-based performance standards. “If it is (reasonable), it ought to be evident that the business would want to do it,” he said.

“The problem is that there is no clear definition of what is inherently safer technology,” countered Sterling Marchand, Republican professional staff member of the House committee. “To mandate that companies begin to look at this vague notion of IST, with regulatory consequences, that is when we start to have a problem.” Marchand said the IST language in H.R. 2868 “leaves an inappropriate amount of discretion” to DHS.

Marchand’s position was echoed by Brandon Milhorn, Republican staff director for the Senate committee. “To require additional regulatory burdens for facilities that have already met the minimum security requirements is completely inconsistent with the purpose of the program,” he said. “It would undermine the collaboration that has been built between industry and the department in this context.”

Holly Idelson, counsel for the Senate committee, said the IST language is “too important to leave out” of continuing CFATS regulations, but urged proactive involvement from the chemical industry. “Work with us,” she said. “If you don’t think we can write this right, help us do it the right way.”

IST was again the focus of a final panel discussion of the conference, featuring two representatives each from industry and DHS. Steve Poorman of FujiFilm and Peter Lodal of Eastman Chemical Company took up the industry position, offering the usual litany of reasons for opposition – IST is a process safety concept, not a security one; it shifts risk; there is no agreed-upon methodology; IST will have unintended consequences, including job losses, as production moves from one location to another; and substitution of a less acutely toxic raw material may lead to lower reaction efficiency, increased waste, increased costs, and increased energy usage. “The things that make chemicals more hazardous are also the qualities that often times make them the most useful,” Lodal said.

DHS’s George Famini and Larry Stanton took up the agency’s position on IST. Famini of DHS’s Chemical Security Analysis Center presented the agency’s agreed-upon definition of IST, which in short states that IST permanently eliminates or reduces hazards, that it is an iterative process that considers options for reaching this goal, and that there is no clear boundary between IST and other security strategies.

Stanton defended DHS’s position on IST while addressing industry concerns, calling IST “one tool in the toolbox.” Stanton said consequences figure prominently in any IST consideration. “At no time have we made any indication that we will try to make anybody implement anything,” he said at the start, addressing what he called the hyperbole that has surrounded the IST issue.

Stanton said DHS believes it is possible to build a program that would allow it to implement IST-like measures into CFATS, saying the agency believes a “systematic approach to the consideration of IST-type options would yield some eye-opening findings and could materially reduce security risk in the Homeland.” He stressed, however, that industry involvement is crucial. “We are reaching out today,” he said. “We want to talk about how this could be done. What we are trying to do is engage in a dialogue.”

Agrico Canada Ltd. announced last week that its two-year partnership (GM June 2, 2008) with Yara International ASA has ended. Yara acquired 25 percent of Agrico two years ago, and according to Agrico, Yara had the option to buy the remainder at the end of August 2010.

Agrico said Yara is backing away from the deal and is exercising a put option that will require the Agrico shareholders to buy back Yara’s 25 percent stake.

“This news, while somewhat disappointing, does not change Agrico’s commitment to its customers and joint venture partners,” said R.L. “Bob” Whitelaw, Agrico president. “My understanding is the main reason for the cancellation of the deal is that Yara has set a new course for their core business, to be production oriented. We are satisfied this change in direction has nothing to do with what Agrico did or didn’t do that led Yara to this decision.”

“In May of 2008, Yara purchased a 25 percent share in Agrico Canada Ltd. The new partnership was aimed at strengthening the supply relationship between the two companies, allowing both a more solid platform for growth and the ability to focus on value added services,” Pete Valesares, president of Yara North America, told Green Markets. “Since this important investment, Yara acquired Saskferco, providing significant Western Canadian nitrogen production, and Agrico met its goal of creating joint venture partnerships with its company-owned retail centers. Now, as both companies focus on their strategic plans for the future, at Yara’s request, Agrico will repurchase Yara’s shares, thereby ending Yara’s term as an investor in Agrico Canada Ltd.”

“Yara greatly appreciates Agrico’s willingness and subsequent dedication to the investment,” added Valesares. “Although the formal partnership will soon be coming to an official end, both companies look forward to maintaining and advancing the improved relationships that resulted.”

Agrico said it will focus on the future and continue its commitment to strengthen its relationships with members of its Crop Care network, joint venture partners, and dealer customers. “For Agrico, it is business as usual as we continue to work to offer excellent service, products, and technology transfer to our many customers,” said Whitelaw. “While we are disappointed that Yara has chosen to change direction, it will not affect how we, at Agrico, conduct our business and continue to maintain our excellent working relationship with Yara.”

Agrico, which has been supplying fertilizer to the Canadian market since 1931, has grown to include a network of company-owned farm centers and joint venture partnerships. It also operates a network of warehouses for dry and liquid product across Canada and in St. Paul, Minn.

Yara has liquid and dry fertilizer terminals at Montreal and Contrecoeur, Que., respectively, that service Eastern Canada and the Northeast U.S. At the time the Agrico-Yara partnership was announced, the companies said Yara’s strong eastern presence would be an excellent fit with the facilities and resources that Agrico utilizes in Ontario and Western Canadian markets. The companies said the deal would provide an improved fertilizer import position and enhance operational efficiency. The partners noted that they had complementary flagship terminals at Hamilton, Ont. (Agrico) and Contrecoeur, Que. (Yara). In 2008, Agrico’s storage capacity was put at 235,000 mt, and 2007 revenues were listed as C$160 million.

Soon after the Agrico-Yara deal was announced in 2008, Yara went on to enhance its position as the world’s largest nitrogen producer by buying the Belle Plaine, Sask., nitrogen plant owned by The Mosaic Co. and Investment Saskatchewan (GM July 21, 2008).