A Sharp Reminder of Externalized Costs
By Paul Rosenberg, Senior Editor
On Feb. 18 at about 8:50 a.m., an explosion sent flames and ashes into the sky at the ExxonMobil refinery in Torrance.
Four workers were injured by the blast and 14 Torrance schools initiated “shelter in place” procedures, keeping their students indoors. CalTech researchers said that the blast was the equivalent of a 1.7-magnitude earthquake.
A Feb. 25 update report from the South Coast Air Quality Management District stated that the blast “blew off sections of the electrostatic precipitator, venting the fluid catalytic cracking unit, and released spent catalyst into the air which deposited it in the neighborhood on top of cars and homes and other areas around the refinery.”
The good news was that nobody was killed. Moreover, the AQMD reported that there was no detectable air pollution impacts of the kinds that it normally monitors.
“Our air monitoring didn’t show an increased air pollution exposure to residents following the explosion,” said AQMD spokesman Sam Atwood.
In addition, the update report stated that all the asbestos detected afterwards was confined to within the refinery.
Still, ExxonMobil was needlessly—even foolishly—tight-lipped, and unresponsive to public concerns, in the eyes of Connie Rutter, a retired oil industry consultant, who worked as a refinery environmental officer before establishing her own consulting firm.
“It just seems to me that the best policy is honesty, even if that puts the company in a bad light,” Rutter said. “The issue with the ash should be handled by clearly naming what it is and hazards associated with it.”
The bad news is that the direct negative consequences of the explosion—the first wave of externalized costs imposed on the broader community—pale in comparison to the indirect costs, most notably the sharp increase in the already-rising gas prices statewide (a 42-cent increase in one week, compared to 52 cents over the previous three weeks combined). Those, in turn, pale in comparison to the costs of business-as-usual in the oil and gas business, which amount to at least $1,400 per person per year, primarily in health-related costs, according to academic research. In Los Angeles County, according to a 2008 study led by California State University Fullerton economist Jane Hall, twice as many people die annual from air pollution than die in traffic accidents.
Chaos and confusion dominated the immediate post-blast response, and led to fierce criticism on social media and at a community meeting on the night of Feb. 20. Almost 200 people attended. While some public criticism was directed toward the Torrance Fire Department, the lion’s share of anger and blame was directed toward ExxonMobil, which appeared to be both ill-prepared and uninformed.
Most notably, ExxonMobil had failed to act immediately to activate two aspects of the Torrance Community Warning System, which it has authority to initiate “if an incident at the refinery warrants immediate community notification.”
First, the community sirens used to alert residents within a 1.2-mile radius of the refinery to shelter in place; second, the Crenshaw Street Barriers, similar to railroad barriers, used to prohibit traffic between Del Amo Boulevard and 190th Street on Crenshaw Boulevard.
At the meeting, ExxonMobil’s refinery manager Brian Ablett—just three months on the job—tried to shift blame onto the city of Torrance.
“The communication is generally not from us, it’s from the city,” he said.
That much is true—but with an emphasis on “generally.” As explained in a document posted on the refinery’s website, the overall, multifaceted warning system is run by the city. But a note at the bottom specifically cites these two safety provisions as being in ExxonMobil’s hands when immediate notification is required. Ablett further obscured the truth—if not outright lied—when he added that the siren system (which is tested once a month, but was not activated in response to the explosion) was also not operated by ExxonMobil. “It’s the city’s response system, it’s not ours.”
It’s unclear whether Ablett was lying, uninformed, confused himself, or knowingly deceptive. But it is clear that ExxonMobil as a whole was not on top of things operationally.
“Honestly, I’m not at all surprised that happened,” Torrance City Councilman Tim Goodrich said at a council meeting the following week. “How many close calls is ExxonMobil willing to have before we have one we’re really going to regret?”
Indifference to such impacts is commonplace in the oil industry, with only few exceptions, Rutter observed. Exxon had a long history of high-handedness and indifference to the public before its merger with Mobil, epitomized by its response to the Exxon Valdez disaster in 1989. Mobil had been more image conscious, as the creating sponsor of PBS’s Masterpiece Theatre.
“Mobil seemed to act as if once they done that, they didn’t have to do anything more.” Rutter noted. Although “not blatant as Exxon,” Rutter said Mobil “pretty much had the attitude, ‘Hey we’re here to refine oil, you people need gasoline, let us alone.’”
Buying off the political system is where the industry excels, as illustrated by another recent development. On Feb. 27, the New York Times reported that ExxonMobil had reached a settlement agreement with the state of New Jersey, paying just $250 million in an 11-year-old suit, which initially asked for $8.9 billion in damages for pollution damage to wetlands from two refineries dating back to the 1870s.
The surprise announcement came just as a ruling was expected from the judge in the case—as the Times put it, “Exxon’s liability was no longer in dispute; the only issue was how much it would pay in damages”—and was immediately denounced by environmental advocates.
“This is an outrageous abuse of power by the administration selling out the environment and the taxpayers of New Jersey,” Jeff Tittel, director of the New Jersey Sierra Club, told Bloomberg News. “This is a complete giveaway to corporate polluters.”
But David Sirota of International Business Times drew attention to two key factors: First was ExxonMobil’s contributions of more than $1.9 million to the Republican Governors’ Association since Chris Christie first ran for governor in 2009.
“That includes $79,000 during Christie’s 2009 campaign and $200,000 during his re-election campaign in 2013,” Sirota reported. “It also includes $500,000 when he chaired the organization during the 2014 election cycle.”
Second was the fact that a previous Christie-appointed Attorney General, Paula Dow, was a former Exxon lawyer.
But even if ExxonMobil had paid that $8.9 billion settlement in full, it would only be a fraction of the worldwide externalized costs of the industry on an annual basis. The 2008 study by Jane Hall mentioned above found that “almost $22 billion” would be saved annually in the South Coast Air Basin “if federal ozone and PM2.5 [fine particle, aka “soot”] standards were met,” plus almost another $6 billion in the San Joaquin Valley. Thus, the routine externalized costs of the oil and gas industry far outshadow the acute damages seen in incidents like the Torrance refinery explosion, or even major lawsuits like the one in New Jersey.
Bringing those massive figures down to Earth, the average health costs per person from air pollution probably remain around $1,400 annually for local residents, despite significant improvements in air quality throughout the past 30 years. While pollution levels locally have improved significantly since 2005 and 2006, when the 2008 study’s data was collected, a followup study lead by Hall, comparing that study with an earlier one in 1989, found little net change in per-capita health impacts.
“The core point is that enormous progress has been made in reducing pollution,” Hall said. “But new scientific research that indicates a broader array of impacts, and impacts at lower concentrations, along with larger populations in more polluted sub-regions, means that there are still large numbers of significant adverse effects on health in the region.”
There are no studies that comprehensively capture all the externalized costs of the oil and gas industry. Hall’s studies are typical of how most similar studies are done. They only capture differences in externalized costs between current levels and some future target. In her case, that means full compliance with the Clean Air Act, hence the title of her 2008 study: “The Benefits of Meeting Federal Clean Air Standards in the South Coast and San Joaquin Valley Air Basins.” Specific itemized benefits listed in the report include:
• 3,860 fewer premature deaths among those age 30 and older
• 3,517,720 fewer days of reduced activity in adults
• 1,259,840 fewer days of school absence
• 2,078,300 fewer days of respiratory symptoms in children
• 466,880 fewer lost days of work
The AQMD uses a similar comparative process in evaluating its repeated air quality management plans. These are produced every five years or so, issuing a socioeconomic report several months after the main plan is produced. The last two air quality management plans were in 2007 and 2012, and another is due out next year. The 2007 plan was projected to produce $200 billion in savings, almost $12 billion annually through 2024. Industry costs for new pollution control measures were projected to range from $2.0 to $2.7 billion per year, with benefits topping $14 billion.
“It’s always easy to quantify [industry] costs,” explained Dr. Elaine Chang, AQMD deputy executive officer for Planning, Rule Development and Area Sources, about covering that report. “We’re trying to quantify the benefits as well. We can see the ratio [of benefits to costs] is 7 to 1, so society is bearing the costs of not internalizing the economic costs of polluting.”
According to the 2007 report, “The $14 billion includes approximately $9.2 billion for averted illness and higher survival rates, $3.6 billion for visibility improvements [a factor in real-estate values], $966 million for congestion relief, $204 million for reduced damage to materials, and $18 million for increased crop yields.”
In that report, the lion’s share of impacts were clearly fossil fuel based—congestion relief would apply regardless of the fuel source. The 2012 report involved a much different policy mix, so its projected savings, $10.7 billion, included a much larger share of congestion relief—$7.7 billion. Because the policy mix has such a strong impact on the cost savings produced, air quality management plans are a less accurate gauge of overall costs than the kind of comprehensive studies that Hall has produced. Still, they make the same broad point—the annual externalized costs of fossil fuels dwarf the costs of any headline-grabbing disaster, and thus deserve serious public debate and action.
This point only becomes more pressing as we add the growing threat of climate change costs—already being felt via increased costs due to extreme weather, from hurricanes to heatwaves and droughts. Toward this end, a 2014 report from the Environmental Defense Fund, “Driving California Forward”, found savings of $10.4 billion by 2020 and $23.1 billion by 2025 from two California programs, the state’s Low Carbon Fuel Standard and the savings in transportation fuels under the state’s cap and trade program.
The report broke these savings down as follows:
Air pollution and
Reductions of PM2.5, NOx, and SOx impacts will clean up California’s air and reduce harm to Californians. This can save $6.0 billion from PM2.5 and $2.3 billion from NOx and SOx.
Reducing California’s reli- iance on imported energy and insulating the state from energy price fluctuations can save up to $6.9 billion, while also reducing gasoline and diesel consumption by 33.1 billion gallons between 2010 and 2025.
Cutting climate change pollution will reduce the social cost of carbon by a cumulative $7.9 billion between 2010–-2025.
In short, this report suggests that public health costs from transportation fossil fuels are only about one third of their total externalized costs. That would equate to more than $4,000 per person annually in the Los Angeles area, based on Hall’s earlier work. It’s something to think about while waiting for the next oil company disaster to strike.