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Knowledge Bank:

What is the cost of a spill?

With environmental pollution highlighted in the BBC’s Blue Planet and an increasing number of high-profile water pollution events reported, environmental damage is no longer something that the public or regulator are prepared to accept. Things are changing, especially in the UK, and the cost of a pollution event can be far greater than most businesses could possibly expect. 

I am addressing the costs of spill containment failures in the order that they occur to the businesses that I speak to. Unfortunately, most often, they speak to me after a spill event, which is clearly too late. 

Immediately after the event they are most concerned about the fine and reputation costs. This early in the process they are yet to have discovered that their environmental insurance is ineffective if they have failed to comply with CIRIA 736, and by polluting the environment they have essentially failed to comply. Once they understand that they are liable, they tend to become concerned about the clean-up costs. 

If they wish to continue with their operations they will have to make improvements to their facilities to guard against a repeat event: polluting the environment tends to put you at the very top of The Environment Agency’s to do list. There is clearly a cost to completing that work. The irony here is that if businesses were more proactive this would be the only outlay they would face, and it is typically a fraction of the fine, clean up and reputation costs as reliable, effective spill containment has never been more cost effective, or easier to implement.

But lets get the entirely avoidable costs out of the way first.

Fines.

The good news for the population is that the government takes water pollution extremely seriously and the overall situation is improving. 

The bad news for polluters is that this is largely being achieved through enforcement, usually fines but also potential imprisonment, and The Environment Agency wants to crack down harder and increase fines.

It is reported that there were more than 300 serious water pollution events in the UK last year, with water companies typically averaging more than sixty serious water pollution events per year over the last decade.

So spills happen, if you were to suffer a spill that causes pollution what fine should you expect to face?

Here it is in black and white.

“Magistrate Courts can impose fines up to £50,000 for pollution offences. If the case goes to crown court there is no limit to the fine and you could go to prison. As the polluter you may also have to pay the clean up and court costs.” 

Source: Environment Agency ‘Pollution Prevention Pays’ January 2013 

As the polluter you will most likely be liable for the clean up costs and legal fees.

“If the case goes to Crown Court there is no limit to the fine and you could go to prison.” That needs some context. The ignominious record is currently held by Thames Water who were fined £20m in 2017 for prolonged pollution of the Thames. In June 2017 Tescos were fined £8m for a fuel leak at one of their filling stations in Haslingden in Lancashire.

The Environmental Sentencing Guidelines published in 2015 marked a step change in removing all financial gain. Fines are now based on the polluters entire turnover with no hiding place for the subsidiaries of larger corporations. 

So the precedent for fines is already in the tens of millions, but there is no limit. Before the event the only way to describe the fine liability is inestimable.

Reputation Cost

Once pollution has occurred a business needs to respond quickly to repair the damage as fast as it can to reduce long-term reputation damage. The regulator has a responsibility to protect the environment and all commercial pollution is considered a crime. There is always a possibility that the regulator will decide to prosecute a business; even if the event came from a fire or other unforeseen event it is the regulator who decides if the polluter failed to act responsibly or could have managed the risk better. 

Environmental pollution is high in the consciousness of the media and the public. There are no end of special interest groups who make it their mission to hold industry to account and businesses are increasingly measured against their environmental performance in the media. The most immediate effect of a spill event is the inability to deliver, the longer term impact is a failure to secure operating licenses and loss of business. The only certainly in reputational damage estimations is the bigger your brand the greater your exposure. 

Calculating reputation costs from a pollution event is nye on impossible – it is entirely reasonable to describe the costs as immeasurable and the costs in some instances have proved terminal. 

The best way to describe the risk to reputation from a pollution event is inestimable.

Clean up costs.

The cost of a clean-up will depend enormously on the scale of the spill and the impact that it has on the environment. We work with our customers to provide them with a Spill Mapping service that provides them with insight into the flow of liquids that leave  their site as a result of a spill event. When mapped against the materials and volumes that they handle this provides the very best indication of how a spill might effect their local environment and what the clean up costs could be.

Beyond these estimates that we have to look at precedent. The most famous, and expensive pollution incidents tend to be marine events. The Deepwater Horizon incident reportedly cost £14bn in response and clean up costs and the Sea Empress incident £60m. There is less information available for inland spills, the best known case is in the UK is Buncefield which has cost £70m to date.

But isn’t this why we have insurance?

This is exactly why we have insurance but it may be worth looking at the small print on your policy. Environmental pollution is a liability that even insurers don’t want to carry.

Since the introduction of the Environmental Damage (Prevention and Remediation) Regulations 2009 (now the Environmental Damage (Prevention and Remediation) (England) Regulations 2015), full liability for environmental harm has become more common. Bartoline Ltd v Royal Sun Alliance (2006) established that “the scope of ‘damages’ covered under a public liability policy should be limited to losses arising from a third party claim rather than from a statutory action by an enforcing authority.” This case found in favour of the insurers and refused a claim of £770,000 for clean up costs after a fire at at Bartolines’ solvents and wood preservative plant caused the pollution of two water courses.

Whilst there is some work we can do in estimating the clean-up costs the actual costs can’t possibly be known before an event.

Prevention

I apologise if this has become a frightening piece and I thank you for getting this far.

There is of course some good news in all of this and that is coming, before that there is a question that needs to be addressed. The question is, why, if these costs are so frighteningly high, do businesses continue to carry these liabilities?

That is a good question and there is a good answer. 

It isn’t the case that businesses have refused to mitigate these liabilities. Industry works incredibly hard to avoid spills, fires and floods and has invested significantly in spill containment. The issue is that historically spill containment has relied on reactive spill kits, hugely expensive civil works like bunds and largely ineffective, adapted penstock valves. These methods of spill containment have been considered to be the industry standard, but there is an issue with all of them – they don’t work.

The best example of this is of course Buncefield. All of these measures were in place and the outcome was a huge pollution release. So, if the industry standard is hugely expensive and ultimately fails what option do businesses have: don’t invest and face these horrifying liabilities or, invest and still face these horrifying liabilities?

Except of course the world has changed and the technology has evolved with it. I have committed my career to developing cost effective spill containment processes and equipment to the point that I was involved in drafting and presenting CIRIA736, the guidance published in response to the failings at Buncefield.

And the good news is that we are providing reliable spill containment processes and equipment at a fraction of the cost of the expensive and less effective alternatives. We are supporting some of the UK’s leading brands with fail safe solutions and saving them hundreds of thousands of pounds in the process.

I do this because I am hugely passionate about the environment. Businesses are run for profit and so there is always a cost justification that has to be weighed against all other benefits. The really good news is that spill containment technology has evolved to the point where investing in the environment will have a positive effect on your bottom line and help you to sleep better at night.

If spill containment and CIRIA736 compliance is currently a consideration for you please do not hesitate to call 0330 223 4372 or email us, we will be very happy to discuss our solutions with you.

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