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52 chapter seven SPECIAL ISSUES RISK MANAGEMENT From a risk management standpoint, the more fuel stored and dispensed on an airport, the greater the perceived risk and consequences a disruption in fuel supply can have. A fuel contingency plan is an important consideration for an airport operator, fuel provider, and fueling agent (Corzine 2013). The primary risks associated with operating fuel facilities are fire, explosion, contamination, spill- age, and environmental impact. Consequences of those risks affect many other areas of the airport, as delineated in Corzineâs 2013 ACRP Report 93. Fire and explosion risks are addressed through safety policies, procedures, and measures put into place during the design, installation, operation, and maintenance of the facilities. Building, electri- cal, and fire codes are established for safe operations. Adequate insurance coverage helps mitigate unforeseen accidents or liability. Risk of fuel contamination is mitigated by a number of standards and procedures identified in Appendix B. Standards also exist for the testing of fuel quality. Addi- tional protective measures are the training of personnel in standards and procedures. The level of risk exposure will change with a change in technologies, procedures, or organizational assignment. For that reason, common practice in the petroleum industry is to have a robust system for managing safety, most commonly known as a safety management system (SMS). As part of an SMS, ICAO specifically addresses the need for process change management in its guidance documents, to include evaluation of risk and notice to other stakeholders in the fueling chain (Manual on Civil Aviation Jet Fuel Supply 2012). Examples of changes that can affect risk in fuel system processes can include major system modification, introduction of new equipment, revised maintenance practices, new hiring and training practices, change in employee assignments or shifts, new supervisory or man- agement assignments, substitution or introduction of different aircraft types on various established routes, changes in fuel suppliers, change in performance or safety standards, etc. Each example intro- duces a change in risk exposure that, under a properly instituted fuel handlerâs SMS, is to be evaluated as part of its quality assurance requirements. Fuel Consortium Risk In conversation with personnel at the MemphisâShelby County Airport Authority, it was noted that three parties are generally involved in a fuel consortium: the fuel farm operator, the airport authority or municipality, and the airlines. Some airports have a fourth party involved, the into-plane agent, which is different from the fuel farm operator. For each party involved in the consortium, risks generally are evaluated separately. An article by Lahey and Heilbron (2008) provides insight into the structure of an airline interline agreement and identifies several areas of risk and uncertainty an airport and fuel consortium face when negotiating agreements. An LLC helps protect a company from financial and legal liability in the event of an accident or environmental breach. An airportâs assessment of risk normally includes an evaluation of the airportâs exposure given the limits of a LLC. Fuel Storage Risk and Liability During a telephone conversation, a noted aviation insurance expert said that there are three general concerns associated with the risk and liability exposure of owning or operating fueling facilities
53 (John Shorten, Willis Insurance, personal communication, Aug. 22, 2014). The first is environmen- tally related spills or releases; the second is UVCE exposure; and the third is infrastructure liability. Environmental Risk If an airport is acquiring property and facilities, such as fuel tanks, piping, and pumping equipment, the importance of conducting a condition assessment beforehand is a most effective practice. Whether or not federal AIP or state grant funding is used to make the acquisition, EPA documents available on the agencyâs website suggest that a preliminary environmental inquiry or assessment be made. The Com- prehensive Environmental Response, Compensation, and Liability Act (CERCLA) and Superfund Amendments and Reauthorization Act (SARA) establish environmental accountability for those who own or acquire property, including any equipment or facilities located on them (42 U.S.C. Â§9601 et seq. 1980). Conducting due diligence of an acquisition site before purchase can limit an airportâs liability exposure. A Transaction Screen Process (TSP) assessment is one method for conducting a limited due dili- gence review (Standard Practice for Limited Environmental Due Diligence: Transaction Screen Pro- cess 2014). A TSP is limited to assessment of low-risk, small-value property acquisitions and does not meet CERCLAâs or SARAâs requirements for financial responsibility. State laws and regulations for conducting an assessment can also exist and apply. A Phase I Environmental Site Assessment is a more involved due diligence approach than is a TSP. It is designed to identity potential environmental concerns associated with property acquisi- tion (Standard Practice for Environmental Site Assessments: Phase I Environmental Site Assessment Process 2013). A Phase I assessment determines a propertyâs or facilityâs baseline environmental con- dition, identifies environmental liabilities that may come with acquiring the property or equipment, and identifies potential issues that need further inquiry or resolution (40 CFR 312 2014). A Phase I assessment satisfies an airportâs liability investigation required under CERCLA and SARA. The procedures for conducting a Phase I assessment are found in ASTM E1527-05 (78 FR 79319 2013). If an airport does not conduct a Phase I assessment, it opens the airport to greater liability exposure if a question of environmental condition is raised at a later date. Should a Phase I assessment determine additional inspection or analysis is required, a Phase II assessment is in order. Performed by an environmental specialist, a Phase II inspection includes soil and groundwater sampling, underground or aboveground tank testing, and pipeline testing. More information on environmental assessment can be found on the FAAâs website (http://www.faa.gov/ airports/environmental). Unconfined Vapor Cloud Explosion Risk A second risk area is related to the exposure of others from an airport having a UVCE, primarily from a fuel farm tank mishap. UVCE refers to the release of flammable gas into the air such that the collection of vapor can be easily ignited and, if ignited, produce significant blast pressures. The consequences of the resultant blast can extend outside the airport fence and affect the com- munity downwind of the blast. For this reason, airport contingency planning for such risks is a most effective practice. Infrastructure Risk A third area of risk exposure is related to the fueling infrastructure and its proximity to physical assets, such as terminal buildings, aircraft, hangars, aprons, and the public. To minimize both UVCE and infrastructure risks, airport planners take into consideration the location of installed tanks, pipes, fuel transfers, fuel truck parking, and the degree of exposure to others in, on, and around the airport. Although many airports in the United States have claimed
54 tort immunity under governmental laws, operating a fueling concession is considered a proprietary function that may not be covered by such immunity laws; gross negligence, if proven, also is not usually covered. INSURANCE A 2011 study identified most airports carry property, general liability risk, and business interruption insurance (Rakich et al. 2011). Insurance policies are normally available and acquired to mitigate environmental risks. Other coverage to consider is contingent, service, and/or supply chain inter- ruption insurance. An example of the impact of a supply chain interruption is the Buncefield refinery explosion in 2005 at the Hertfordshire Oil Storage Terminal in the United Kingdom. It was a UVCE event that required the evacuation of the local community downwind of the tanks and disrupted 30% of the jet fuel capacity at Heathrow International Airport. Jet fuel rationing affected the air carriers at Heathrow for months after the explosion, forcing airlines to adjust their operations. Coverage for war and terrorism insurance is a concern at several of the larger airports (Rakich et al. 2011). An alleged attempt to disrupt the fuel supply line at New Yorkâs John F. Kennedy Inter- national Airport points toward this concern (Faiola and Mufson 2007). In his report, Rakich found that smaller airports tend to not purchase terrorism or pollution liability insurance. A recommenda- tion of the study was for further research to determine whether the decision to not purchase insurance was related to cost or whether there was a valid reason to assume limited exposure. Airport leases often require a tenant fueling agent to indemnify and hold harmless the airport oper- ator and require the fuel handlerâs insurance policy to have the airport as named-insured on the policy. Although those clauses are good practices, airports may not be adequately covered for the environ- mental, UVCE, or infrastructure risk exposures mentioned. The limitations of named-insured clauses are found in the limits-of-liability covered or from certain aspects of coverage not being included in the fueling agentâs policy. A benefit to an airport and fueling agent on an airport from a branded fuel supplier can be the availability of a supplemental or umbrella liability policy. Of potential concern for an airport is the stability of any company or organization managing fuel on an airport to adequately address environmental mitigation or clean-up issues in the unlikely event of a spill. Having airport legal counsel review all documents and requiring adequate insurance or reserves is an important consideration for such a situation (Brian Kuhn, MemphisâShelby County Airport Authority, personal communication, Aug. 28, 2014). Airport owners can manage the environmental risks of fueling operations through one or more approaches: â¢ purchase insurance, â¢ establish a rate ordinance or something similar to recover the costs of environmental or capital costs, â¢ establish covenants in leases or other agreements to protect the airport, and â¢ require tenants to have appropriate and adequate insurance coverage. ALTERNATIVE FUELS Dependency on fossil-derived fuels and their associated environmental, political, and economic costs has led to efforts to consider alternative fuels. Background information on alternative fuel possibilities at airports can be found in ACRP Reports 48 and 60 (Spitz and Berardino 2011; Miller et al. 2012) and on the FAAâs Office of Environment and Energy website. Although efforts to develop and produce a cost-effective alternative to fossil fuel are ongoing, the literature indicates it may be some time before the use of such fuels becomes mainstream (Blease 2013). The difficulty is in the need to meet the precise fuel properties required by jet fuel specifica- tions, such as ASTM D1655. Industry expectations and efforts are for any alternative fuel to be 100%
55 compatible with existing tanks, piping, and equipment because the industry is hesitant to replace or add to existing infrastructure because of capitalization costs. Biomass fuel is one of several alternative fuels being considered to substitute for fossil-based jet fuel. Biomass fuel takes organic compounds such as trees, shrubs, grasses, seeds, fungi, seaweed, algae, and animal fats and turns them into a usable jet fuel. It has been tested and used in several commercial aircraft on scheduled routes because it is similar to fossil-based jet fuel in chemical and physical characteristics. A changeover to biomass fuel is anticipated to require little infrastructure modification of the currently used jet fuel delivery systems. The drawback to greater use of biomass fuel has been the cost of production. The cost of biomass fuel is more than three times that of jet fuel because the buildup of manufacturing capacity is rolled into the cost of production, whereas fossil fuel systems previously have been amortized over many years (Davies 2014). Should an airport organization seek to accommodate alternative fuels, a report has been published to assess the opportunities (Miller et al. 2013). Background information on the research can be found in the Contractorâs Final Report (Miller et al. 2012). From the 2013 report, a guidebook was pro- duced that includes a description of the steps necessary to evaluate opportunities and constraints for program delivery and a toolkit that enables airport decision makers to evaluate all of the elements needed to implement an alternative fuels marketing and distribution program (Miller et al. 2014). For avgas, the challenge is to find a suitable replacement for lead-infused specifications that are required for the majority of piston engine aircraft still in existence and use. Lead-contaminated infrastructure will need to be cleaned or replaced. The FAA recently started testing several replace- ment fuels, but it may be several years before alternatives are approved and accepted by the industry (âFAA Selects Four Unleaded Fuels for Testingâ 2014). The challenges for avgas are the number of high-horsepower aircraft engines that will continue to need the benefits of higher octane avgas and the need to clean infrastructure of lead before introduction of a nonlead alternative. The FAAâs Fuels Program Office, AIR-20, has responsibility for efforts to transition GA to an unleaded avgas. CASE EXAMPLES The following cases provide an example of the processes, challenges, and opportunities regarding the topics discussed in this synthesis. Example: Fuel Island Installation Pekin Municipal Airport in Illinois is a small GA airport with approximately 54 based aircraft. It was faced with the problem of having to upgrade its fuel system. The airport owned the fuel system, including two 10,000-gallon tanksâone for avgas and one for jet fuel. What drove the decision to upgrade the system was the high maintenance costs and difficulty of obtaining parts for the old pumps and dispensers. The tanks are thought to be 50 years old. It was assumed they were installed in 1964, when the air- port was built; no records were found indicating exactly when they had been installed or if they had been replaced. Leaking Underground Storage Tank (LUST) program regulations in 1988 required airports to address underground storage tanks. As a result, the airport plumbing was upgraded in the early 2000s. A decision was also made to line the tanks rather than replace them. The piping was replaced to new EPA standards. A 10-year-in-service fitness test had resulted in a 5-year extension for the tanks because they were still good. A lease agreement extension with the FBO was not agreed to in 2008, and the FBO left the airport. The state of Illinois code requires fuel sales to be available at public-use airports. After the branded fuel provider to the previous FBO approached the city and suggested the city operate the FBO, the city took over fueling operations. The city recognized the need for fuel services because the airport serves numerous business and corporate aircraft and is a base for several agricultural operators and other aeronautical activities. The city agreed to manage the fueling operation because the fuel
56 provider offered a turnkey operation, set the airport up with training and quality control measures, and provided a third-party insurance umbrella. Because of liability concerns and the desire to keep personnel costs low, the city decided to opt for commercial self-service with âassisted service.â The lone airport employee, the airport man- ager, was available to provide guidance to fueling operation but would not actually pump the fuel. This was not deemed an issue because pilots frequented the airport to obtain fuel at costs lower than those at surrounding airports. Pilots, even the jet operators who frequented the airport, had no issues with fueling their aircraft. The airport manager indicated that self-fueling by corporate operators could pose a problem in the future if the airport runway is extended, allowing use by larger jet aircraft. The fuel delivery process is simple as a result of the fuel management, tank monitoring, and auto- mated billing system provided by the branded fuel provider. The airport manager conducts the daily inspections and tests, monitors the tank levels, and is alerted to fuel purchases by the fuel manage- ment system and fuel provider. The fuel provider handles all requirements for transport of fuel to the airport upon a fuel order from the manager. At the time of the interview, a load of avgas had been delivered by a dedicated tanker truck from Houston, while jet fuel was dispatched on a dedicated tanker truck from the Chicago area. The fuel provider handles all electronic transactions through a point-of-sale terminal associated with the fuel management system, accepting various credit and travel cards. Sales can also be com- pleted through a web-based application on an Internet-capable device, such as a computer or smart- phone. The airport receives a check in the mail from the fuel provider. The airport has agreements with the several on-airport commercial operators for discounted fuel. The point-of-sale terminal/fuel management system is set up with two readers, one for transient pilots at regular price and one for discount cards issued by the airport. The airport is listed in the National Plan of Integrated Airport Systems (NPIAS) because Illinois is a state block grant state. Pekin Municipal Airport is eligible to receive $148,000 AIP entitlement funds annually from the state program. The grant amount did not cover the cost for full system replacement, so it was decided to stage improvements over several years. The airport recently upgraded the fuel island, which is a low-profile dispensing unit placed in the middle of its ramp for 360-degree access. The dispenser is a skid-mounted cabinet because the intent is to be able to move the unit, if necessary, when the tanks are replaced within the next 5 years. Currently, the tanks are located close to the run- way and require the fuel delivery transport vehicle to drive across the ramp to the tanks. A challenge faced by the airport during the upgrade was the different interpretations made by fire marshals throughout the state because Illinois law was not clear on what was required for an airport. The laws were written primarily to address automotive convenience store installations and required such things as video surveillance. In contemplating tank removal, the city is not sure which type of tank to installâAST or UST. A new AST could not be placed in the same location as the current tanks because doing so would violate FAA standards for objects close to the runway. Installing a UST would require a tank decom- missioning, and the current operating issues would still exist. Environmental issues will play a part in the decision because monitoring wells are required for USTs. The bidding process for the fuel island installation was problematic because of the limited number of state-qualified vendors able to perform the work. Accurate engineering estimates for the cost of the project were difficult to obtain. That made it difficult to meet AIP guidelines once bids were received. A company outside the state was awarded the contract. Problems were incurred with the installation, and the travel distance may have been a factor. The local fuel company now services the maintenance needs of a system installed by others. When asked what lessons could be learned, the airport manager stated if he had it to do over again, he would want to bite the bullet and do a complete installation of tanks, pipes, and dispenser,
57 rather than do it piecemeal. He also would like to see more consistent interpretation or clarification of state regulations and guidance from the Office of the State Fire Marshal and the Department of Agricultural Bureau of Weights and Measures. Example: Tank Farm Approval Process To illustrate the environmental process and permitting required for fuel tank installations, a case exam- ple was found in the literature about the installation of a fuel farm at Centennial Airport, Colorado (âXJet Fuel Farmâ 2007â2008). To have a successful installation process, airport management and the consultant had to acquire permits and approvals from the following governmental and environmental agencies: â¢ Arapahoe County Public Airport Authority, â¢ Arapahoe County Engineering, â¢ Arapahoe County Water and Wastewater Authority, â¢ South East Metro Storm Water Authority, â¢ South Metro Fire & Rescue, â¢ Cherry Creek Basin Water Quality Authority, and â¢ InterPort Development Design Review Committee. Specific engineering services included site layout, grading, drainage, erosion control, fire access and hydrant locations, utilities, landscaping, primary and secondary fuel spillage containment, SPCC planning, state storm water management pollution prevention plan (SWMPPP), and FAA 7460 obstruction permitting. The lesson to be learned is that the installation of a fuel tank can require approval at many dif- ferent levels and can be a lengthy process. Planning and stakeholder involvement is imperative to a successful installation. With so many factors to consider, a qualified airport design and engineering firm along with input from users is invaluable to help an airport obtain the most effective results. This point was echoed by A4A and several other participants in this study. Example: Fixed-base Operator Inspection This report highlights the need for the airport to provide safety oversight of fueling activities on the airport. There are other stakeholders in the process as well. The following examples illustrate the various stakeholders and responsibilities for ensuring the safe delivery of fuel. In an interview with the manager of an FBO at a medium hub airport, the manager indicated the following organizations have inspected his fuel facilities: â¢ direct oil company fuel supplier (annually), â¢ air carrier operator (annually), â¢ air cargo operator (annually), â¢ airport authority operations (regular and continuous), â¢ airport authority fire department (quarterly), â¢ airport authority environmental officer (continuous), â¢ FAA airport Part 139 inspector (annually), â¢ state fire marshal (annually), â¢ state EPA (as necessary), â¢ state Department of Agriculture (certified metersâannually), â¢ insurance company (annually), â¢ internal FBO company risk manager (as necessary), â¢ DoD (has military service contractâannually), and â¢ OSHA (as necessary).
58 With all the inspections, the FBO manager was comfortable with the processes and procedures he uses to ensure proper fuel quality. His company places an emphasis on safety culture and adherence to procedures. His biggest fear was that of a spill getting into the airportâs drainage system (R. Hartwein, personal communication, Aug. 24, 2014). The lesson to be learned is the importance of management setting the tone for a positive safety culture, including having policies and procedures in place, following them, and keeping records that help build trust among stakeholders.