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Process Engineering & Construction

Since 2008 SPEC has been publishing our blog to share our knowledge and experience with the process engineering community. Our articles are based on current news and events, client projects, and changing industry regulations. Working across a variety of industries, including fine chemical, alternative energy, clean technology, and pharmaceuticals, we are exposed to innovations and trends that often have broad implications for a variety of users. The blog is published by SPEC and our authors include our engineers, real estate partners, and consultants depending on the topic. You can view the biographies of several of our engineers on our website at SPEC Problem Solvers.

Rhode Island Tax Code: What Manufacturers Don’t Know but Should

Posted January 23, 2014 4:07 PM by jsavage

In July of last year, the Rhode Island legislature enacted a change to the Rhode Island tax code regarding the state's version of the federal Section 179 deduction. We'd hoped this change would increase the limit of the deduction, from $25,000 to the federal limit, at the time of $500,000.[i] However, the federal tax code reverted to its original Section 179 deduction limit of $25,000 at the beginning of 2014; essentially making the change to the Rhode Island tax code moot.[ii]

While it's unfortunate that Rhode Island manufacturers won't have the opportunity to take advantage of the increased deduction limit, there are still a variety of other incentives we'd like to point out. These include tax credits, tax exemptions, or corporate accounting benefits; qualifications for these incentives include property and equipment investment, waste/pollution control, and hiring workers. We've included a list below that we thought would be of most interest to our clients and other Rhode Island manufacturers.

A manufacturer is allowed a 4% tax credit against the Rhode Island corporate income tax on buildings and structural components, as well as machinery and equipment, which are owned or leased and are principally used in the production process (including storage).

High-performance manufacturers are allowed a 10% investment tax credit against their corporate tax on the cost or qualified lease amounts for tangible personal property or other tangible property, as well as buildings and structural components owned, leased to own, or leased for at least 20 years.

Both the property value and the wage value portions in the numerators can be reduced by the portion they each or both increase from current taxable year compared to past year.

Affiliated multi-state corporations may file separate or consolidated tax returns, whichever is more favorable, using the average of a three factor formula.

The business corporation tax amortization provisions may include tangible personal property for the recycling, reuse, or recovery of materials from the treatment of hazardous waste.

Pollution control property and supplies are exempt from the state sales tax.

If you are a manufacturer in Rhode Island, or are looking to expand operations into Rhode Island, these incentives may be worth a closer look. SPEC has worked with several companies who received government funding or assistance and understands, first hand, the real value this type of incentive can provide manufacturers.


[i] http://www.tax.ri.gov/notice/Summary%20of%20Legislative%20Changes%202013.pdf

[ii] http://www.section179.org/

5 comments; last comment on 01/26/2014
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The Implications of RoHS and REACH Updates

Posted October 28, 2013 4:41 PM by jsavage

Electrical products and medical devices which are manufactured in the United States, and sold in the EU may be significantly impacted by recent updates to two sets of regulations:

  • RoHS, the Restrictions of Hazardous Substance Directive, and
  • REACH, the Registration, Evaluation, and Authorization of Chemicals.

RoHS 2 (the new version of RoHS) is a broadening of the original directive and makes a number of clarifications. REACH, implemented in 2007, has a 20 year implementation schedule and has ongoing updates.

Both are EU and UK based systems of risk management which can affect various manufacturing processes using chemicals, especially companies which produce cables and medical devices. RoHS restrictions are based on six hazardous substances (lead, cadmium, mercury, hexavalent chromium, PBDE and PBB) in the production of certain electronics. REACH restrictions apply to products placed on the European market and come into effect if human health or environmental risk can be proven, the chemicals cannot be controlled, and substitutes exist.

RoHS restricts the use of substances which present a high level of concern, such as the use of lead in the manufacture of certain electronic equipment. REACH has affected companies which use substances of high concern, as well as created laws relating to these substances, such as requiring companies to label items which contain certain substances. REACH went into effect in 2007 and has been the strictest law to date in the EU regulating chemical substances from international supplies.

The RoHS 2 directive is an evolution of the original RoHS, addressing the same substances but improving the legal clarity. It requires periodic reevaluations to broaden the scope of electrical equipment, cables, and spare parts (including medical devices). The RoHS 2 re-cast includes a broader scope of electrical cable products; you can learn which specific categories apply to certain products here. There are some products which are excluded from RoHS, including large scale industrial tools, as well as products which are specifically designed to function within another product.

The REACH updates are less notable than the RoHS updates but nonetheless important. For example, REACH may soon ban the use of BPA and will affect the use of reagents. Also important to note, REACH is now accelerating the phase out of hazardous substances. The list of SVHC's (Substances of Very High Concern) has recently been updated, and you can find it here.

Manufacturers of electronic equipment and medical devices should understand the nuances of these re-cast programs if they intend to sell to the EU market.

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Are You Ready for January 1st, 2014? The next deadline for permits for 527 CMR 33 is approaching at the end of the year.

Posted October 17, 2013 11:04 AM by jsavage

As we discussed in a previous post, Massachusetts has enacted a new regulation (527 CMR 33) that requires a permit to process hazardous materials. While those in Category 4 should have completed their permit applications for the June 1st deadline, the next deadline for Categories 3 and 2 is approaching at the end of year.

In some ways, preparing for the permit application for Categories 3 and 2 will present more of a challenge, even though the documentation required is much less than for Categories 4 and 5. These manufacturers use much smaller quantities and have likely not been previously required to develop or maintain the level and type of documentation the permit requires.

In the same way that Category 4 requirements are a subset of full Category 5 requirements (which are simply a state level enforcement of federal OSHA and EPA laws governing the processing hazardous materials), Categories 3 and 2 have fewer requirements but are still based on the same original OSHA and EPA laws.

Categories 3 and 2 have the next, upcoming compliance deadline of January 1, 2014.

  • Category 3 applies to "a process which involves or produces a hazardous material which occurs in a vessel that is greater than 60 gallons but is less or equal to 300 gallons or a process area that is classified as being a H occupancy as defined by 780 CMR: Massachusetts State Building Code."
  • Category 2 applies to "a process which involves or produces a hazardous material which occurs in a vessel that is greater than 2.5 gallons but less than or equal to 60 gallons."[i]

[i] 527 CMR 33.03


Category 3 Requirements in Simple Terms1. Category 3 Hazard Evaluation: "A written evaluation performed or procedure conducted to identify hazards, including adjacent vessels that contain hazardous materials, and determine the required preventive, protective, and safety control measures in conformance with recognized and generally accepted good engineering and safe work practices associated with a particular process or condition and the facility wherein such process or condition is taking place."[i]

2. Process safety controls as identified in hazard evaluation

3. Hazard evaluation is modified prior to each process change

4. Post Incident Analysis

a. Must be initiated within 48 hours, in the event of an incident involving a process in which there is a fire department, EMS response, or a reportable release of a hazardous material. The Head of the Fire Department shall be given a duplicate copy of the analysis upon completion.

b. Must be completed within 45 days, unless the Head of the Fire Department provides an extension for just reason.

c. Must include the following information:

  • A summary of the cause of the incident and contributing factors
  • Recommendations to prevent a future recurrence
  • A summary of the dates of implementation of the post-incident analysis recommendations and corrective actions
  • A reassessment and confirmation of the category under which the facility is operating or application for a new permit as part of the report.[ii]

5. Maintain Category 3 Hazard Evaluation documents for review by Head of the Fire Department for a minimum of 2 years following issuance of permit.[iii]

6. Provide documentation that the facility complies with requirements for a Category 2 process(as stated below).


[i] 527 CMR 33.02[ii] 527 CMR 33.07[iii] 527 CMR 33.05


Category 2 Requirements in Simple Terms1. Documentation that adequately demonstrates that the facility maintains and implements a policy in compliance with
a. OSHA Hazard Communication Standard (29 CFR 1910.1200), which requires "that information about the identities and hazards of the chemicals must be available and understandable to workers."[i] This includes:

  • Evaluation of the hazards of the chemicals produced or imported, and preparation of labels and safety data sheets to convey the hazard information to downstream customers
  • Labels and safety data sheets for exposed workers, and training to handle the chemicals appropriately[ii]

b. OSHA Exposure to hazardous chemicals in laboratories Standard (29 CFR 1910.1450),referred to as the Laboratory standard, specifies the mandatory requirements of a Chemical Hygiene Plan (CHP) to protect laboratory workers from harm due to hazardous chemicals.[iii]This includes:

  • Policies, procedures and responsibilities that protect workers from the health hazards associated with the hazardous chemicals used in that particular workplace.

c. MA Board of Fire Prevention Regulations: Flammable and Combustible Liquids, Flammable Solids or Flammable Gases (527 CMR 14.00)

2. Emergency Response Plan will include the following in writing:

a. Identification of all Emergency Coordinators who will be on premises or on call and available to respond to an emergency within one hour of an emergency situation.

b. Updated list with contact information of all designated Emergency Coordinators

c. Facility floor plan, showing locations of:

  • hazardous material stored
  • typical volume
  • location of additional emergency equipment

d. Emergency Coordinator will communicate with the local fire department any concerns and establish a protocol with the fire department on the shutdown of any process that would pose a risk to the public in the event of loss of any controls.

e. The facility will notify the Head of the Fire Department of any material changes to the Emergency Response Plan, including the name of the Coordinator, within 14 calendar days of the change.[iv]


[i]

http://www.osha.gov/dsg/hazcom/[ii] http://www.osha.gov/dsg/hazcom/[iii] http://www.osha.gov/Publications/laboratory/OSHAfactsheet-laboratory-safety-chemical-hygiene-plan.pdf[iv] 527 CMR 33.06

3 comments; last comment on 10/18/2013
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Quantitative Risk Analysis – How to Prevent Incidents like the Explosion in West, Texas

Posted May 08, 2013 1:51 PM by jsavage

The recent incident in Texas has prompted us to think about understanding the risks associated with operating a facility handling hazardous materials, and how to prevent these types of incidents. (Current estimates reveal that the facility contained as much as 54,000 pounds of toxic anhydrous ammonia, and reported to the Texas State Health Services Department that it possessed 270 tons of ammonium nitrate.)[1]

Since the explosion has also likely made many manufacturers re-evaluate their own facilities, we thought providing a starting point for this evaluation would be helpful. A quantitative risk analysis (QRA) is a good starting point because it attempts to quantify risk from potential incident scenarios so that you can focus on those with the highest risk. It does this by evaluating the consequence of a particular event vs. the probability of that event occurring, to determine the overall level of risk. This type of evaluation is key for low probability, but high consequence events. A QRA allows a company to identify high risk scenarios, and allocate resources towards preventing these.

QRA Steps

  1. To perform a QRA, a team must first identify the hazards that exist through a Process Hazard Analysis, which may include a HAZOP review. The regulation, OSHA 3133, Process Safety Management Guidelines for Compliance, provides an explanation of the methods for this analysis.
  2. Then identify the consequences that result if the hazards are released upon the plant or the surrounding community. There are a number of tools readily available to conduct consequence analysis, such as PHAST.
  3. Once a consequence has been established, the second key part of the QRA is needed: determining the probability of an event. This probability can be determined through various methods, such as fault tree analysis, or layer of protection (LOPA) analysis. Executing a fault tree analysis can be prohibitively expensive, and the results depend on the team recognizing all of the failure modes of complicated systems. For this reason, many organizations are using LOPA to estimate the consequences of a loss of containment of a hazardous material.
  4. A company can then analyze its risk based on the position of various events on a consequence vs. probability plot, which describes the exposed risk. The organization can then make the determination whether the risk of a particular event is too great based on a number of factors, and implement changes or improvements to bring that risk in line with the organization's goals.

Like any method for estimating probabilities, the limitations of the QRA include such factors as predicting human behavior during stressful conditions (although one can apply a factor for this.) The reliability of any safeguards is also important to consider. This is highly dependent on the safety culture of an organization, because maintenance and testing of safeguards is a key part of making sure these work when called upon.

Organizations such as the Center for Chemical Process Safety (CCPS at www.aiche.org) provide a wealth of reference materials and training courses that can help an organization determine how best to perform a QRA and implement the changes needed to mitigate the risk associated with a facility, specific operating unit, or a process.



[1] http://news.yahoo.com/texas-explosion-impact-chemical-security-laws-162223516--politics.html

10 comments; last comment on 07/02/2013
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Industrial Real Estate – the Importance of Local Communities

Posted March 12, 2013 5:07 PM by jsavage

In previous blog posts, we have discussed the importance of a variety of factors when purchasing or leasing industrial real estate. Previous posts focused on topics like code requirements and the appropriateness of the building for industrial use, such as multi-tenancy, zoning restrictions, etc. However, another significant factor in evaluating industrial real estate is the local community. The experience of a local company, while trying to relocate, highlights the challenges and pitfalls of heavy industry companies trying to relocate in facilities in a new community.

Ze-gen, an up and coming green technology company, had plans to build a commercial scale facility in Attleboro, MA. The plant would convert waste to energy and chemical products using advanced gasification, a seemingly green technology developed by Ze-gen. The Attleboro location would be a commercial scale version of their existing plant in New Bedford, which had already proved successful. The company was also chosen in 2011 from AlwaysOn as one of the Going Green 200 winners. At first glance, the company's future looked bright, with promising technology and positive, public recognition.

However, while initial response to the Attleboro plant was positive, environmental and zoning concerns soon changed the public's opinion. Although Ze-gen had chosen an old industrial site, the former Texas Instruments facility, a local resident pointed out that while it "was at one time a fairly remote location" the past 50 years of development had brought residential development within 800 feet of the plant. Another concern was the need for 100 foot high smoke stacks, and their associated emissions. Residents did not feel that enough was known about the composition and toxicity of these emissions, given their proximity to the plant's neighbors. (source: http://www.bizjournals.com/boston/real_estate/2011/05/ze-gen-drops-plan-for-attleboro-facility.html).

Eventually, after a local community group petitioned to participate in a conservation commission visit to the site and numerous complaints, Ze-gen cancelled their development plans. Ze-gen's experience highlights an important factor that industrial users should not overlook when evaluating industrial real estate: the local community. Although the public's reaction to a project is not as clear-cut or as obvious a factor as zoning laws or property infrastructure, it can still have a significant impact on the feasibility of a project. While it may not be easy to gauge public opinion in advance, or to position your company in a way that appeases community concerns; researching and planning for community reaction to your project is always a good idea when evaluating industrial locations.

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Massachusetts Requires New Permit to Process Hazardous Material, starting in 2013

Posted January 25, 2013 3:42 PM by jsavage

In February of last year, the Massachusetts Department of Fire Services enacted regulation 527 CMR 33 regarding the processing of hazardous material. This new regulation was developed in response to incidents of fire and explosion in Middleton in 2011, Danvers in 2006, and Leominster in 2005, all of which involved the processing of hazardous materials.

The new regulation means that any business which processes hazardous materials (in addition to storing them) will need a permit to continue to do so, beginning this year. It categorizes users into five categories with Category 5 (highest volumes) having the most requirements for permitting, while Category 1 (lowest volumes, vessel capacity less than or equal to 2.5 gallons) does not require a permit although users are still responsible for compliance. The permits must be renewed annually and are issued by the local fire department.

Aside from requiring a permit, the new regulation means that federal OSHA and EPA laws governing hazardous materials will now be enforceable under state law for Category 5 users. Lower level users will have fewer requirements for compliance but will still need to provide required documentation, upon request, to their local fire department (summarized below). It is also important to note that this permit is separate from a storage permit.

Category 4 has the next, upcoming compliance deadline of June 1, 2013, and applies to a process which involves or produces Hazardous Material, which occurs in a vessel with a capacity that is greater than 300 gallons and is not considered a Category 5 Process. A Category 5 Process involves or produces Hazardous Material which occurs in a vessel with a capacity that is equal or in excess of threshold quantities stated in 29 CFR 1910.119 (OSHA Process safety management of highly hazardous chemicals Requirements) or 40 CFR Part 68 (EPA Chemical Accident Prevention Provisions).[i]

Category 4 Requirements in Simple Terms

Although not as stringent as Category 5 requirements, the requirements for Category 4 are still fairly complex, so we've provided a summary below, for reference.

1. Hazard Evaluation: A written evaluation performed or procedure conducted to identify hazards, including adjacent vessels that contain hazardous materials, and determine the required preventive, protective, and safety control measures in conformance with recognized and generally accepted good engineering and safe work practices associated with a particular process or condition and the facility wherein such process or condition is taking place.

2. Limited Process Safety Program: A written evaluation to ensure compliance with:

· Process information: MSDS, P&ID, process control safety alarms, safety relief valves

· Facility suitability: Building code compliance, electrical hazard classification, ventilation design, secondary containment / spill control, fire alarm / fire protection (see table below for summary)

Building Code Compliance

High Hazard Features

Electrical Classification

· Height and area, construction type

· Control Area layout and separation

· Group H occupancy classification and location

· Exhaust separation and routing

· Fire suppression and alarm systems

· Means of egress

· Explosion control

· Spill control, secondary containment, drainage for sprinkler discharge

· Monitor controls, standby/e-power, haz-mat alarm system

· Smoke and heat venting for >15,000 sq.ft. areas

· Fire detection

· Review to code at time of construction, not new code.

· Massachusetts Electrical Code - amended

· NFPA 70 (2011) - National Electrical Code

· Article 500 - hazardous locations

o Class I - flammable gases and vapors

o Class II - combustible dusts

o Division 1 - hazard under normal operation

o Division 2 - hazard due to spill, leak, etc

o Class I Groups - A (acetylene), B (hydrogen), C (ethylene), D (propane)

o Class II Groups - E (aluminum), F (carbon black), G (wood)

· Process hazard safety analysis (FMEA, what-if analysis, HAZOP with appropriate process safety controls to mitigate the hazards associated with normal and abnormal operating conditions)

· Written procedures for startup, shutdown, routine operating / maintenance, emergency response measures

· Training program for employees and contractors

· Records management protocol including management of change

· Internal review every 3 years

3. Good Engineering/Safe Work Practices

· American Institute of Chemical Engineers (AIChE)

The guiding principles for these practices have been established by AIChE, please see their website for further information.

· Building Codes (High Hazard Use Groups)

· National Consensus Standards (NFPA standards)[ii]

The above summary of Category 4 requirements is simply a recommendation based on the regulations referenced in 527 CMR 33.05 (outlined below) and may not apply for all Category 4 users. The compliance requirements for each category build upon those established for the previous one (i.e. Category 4 compliance requirements include those for Category 3, plus additional requirements) and are based on previously established regulations from OSHA, the EPA, etc. If you would like to understand where these requirements come from and the laws and regulations they are based on, we have provided a list below for your reference.

Category 4 Compliance Requirements and Regulations

1. (Applicant must) Provide documentation that adequately demonstrates that the facility complies with the requirements for a Category 3 process in accordance with 527 CMR 33.05 which include:

  • Documentation that adequately demonstrates that the facility maintains and implements a policy in compliance with

- 29 CFR 1910.1200 (OSHA Hazard Communication Standard)

- 29 CFR 1910.1450 (OSHA Exposure to hazardous chemicals in laboratories Standard)

- 527 CMR 14.00 (MA Board of Fire Prevention Regulations: Flammable and Combustible Liquids, Flammable Solids or Flammable Gases)

  • Completed Hazard Evaluation: Hazard Evaluation policy must be in place and completed prior to conducting such processes or activity modification thereto
  • Appropriate process safety controls to mitigate the hazards associated with normal and abnormal operating conditions as identified in the Category 3 Hazard Evaluation.

2. Completed Category 4 Limited Process Safety Program (based on a limited portion of OSHA PSM 14 standards)

  • Category 4 Limited Process Safety Program policy is in place and has been completed prior to each process or being modified.

3. Appropriate process safety controls to mitigate the hazards associated with normal and abnormal operating conditions as identified in the Category 4 process limited safety program.

4. Comply with the permitting requirements of 527 CMR 33.04.

5. Comply with the Emergency Response provisions of 527 CMR 33.06.

6. Maintain Category 4 Limited Safety Program documents and records for review by the Head of the Fire Department or Marshal for a minimum of two years following issuance of a permit. [iii]

Please contact SPEC if you are unsure how these new regulations impact your business or you need help assembling the appropriate documents to apply for a permit to process hazardous materials.

SPEC has worked with many businesses that process hazardous materials and has significant experience working with clients to ensure they comply with state and federal regulations including OSHA PSM and EPA CAPP. In fact, SPEC continues to work with Bostik after their recent explosion to rebuild their facility and bring them into compliance.

For further information on this new regulation, please visit the Office of the State Fire Marshall's website.

Please watch for future installments of the SPEC Report where we will continue to shed light on this and other new regulations and standards that impact the process community.

[i] http://www.lawlib.state.ma.us/source/mass/cmr/cmrtext/527CMR33.pdf

[ii] http://www.mass.gov/eopss/docs/dfs/osfm/fire-prevention/training/527-cmr-33-hazardous-material-process-or-processing-training.ppt

[iii] http://www.lawlib.state.ma.us/source/mass/cmr/cmrtext/527CMR33.pdf

2 comments; last comment on 01/27/2013
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