Environmental Risk

Severe Weather Imperils Fuel Pipelines

Severe weather incidents are increasing pipeline loss frequency, especially in places where environmental risk was not previously a problem.
By: | April 3, 2017 • 3 min read

April showers bring peril to pipelines.

The hurricane season does not start officially until June 1, but spring rains and snowmelt highlight the growing peril to the aging energy infrastructure in the U.S. from severe weather. In most cases the leaks are small and contained locally, but underwriters see the emerging risk as one of frequency as much as severity.

In late October, the Associated Press reported that a “freak storm” around Williamsport, Pa., “caused a Sunoco Logistics gasoline pipeline to rupture, spilling an estimated 54,600 gallons into a tributary of the Loyalsock Creek that flows into the Susquehanna River at Montoursville.

John O’Brien, energy practice leader, Ironshore

The storm dumped as much as seven inches of rain on Western and Central Pennsylvania, triggering mudslides, turning roads into rivers and sweeping away at least two homes.

“The energy industry has environmental risks because their assets are set in places that have exposed named perils,” said John O’Brien, energy practice leader at underwriters Ironshore.

“These perils are not new. What is new is the greater awareness of weather events. Pipeline losses in particular seem to have greater frequencies. At least they are being reported more frequently and the losses seem to be bigger.”

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O’Brien noted that weather is not the only variable in the equation.

“Part of the perception is that there is more material in storage than ever. Both crude oil and refined products. The tanks and terminals are full. Storage capacity is at an all time high.” When weather comes in, it takes longer to drain tanks, and fewer options on where to put displaced material.

“Pipeline people understand the issues,” said O’Brien. “In the past they mostly focused on system integrity [from an operational and maintenance perspective]. Now issues like ground subsidence are being discussed more and more. There is definitely heightened awareness.”

Marcel Ricciardelli, senior vice president, environmental division, Allied World, corroborated that, “yes, the experts in weather tell us that, yes, we are in a cycle of more, and more severe weather incidents. And that has affected our industry and the industries we cover.”

“When much of the energy infrastructure now in place was installed, that was based on past weather incidents and experience to that time. As a result, today, we are not just seeing more and more severe incidents; we are seeing severity in new regions.”

Marcel Ricciardelli, Senior Vice President, Environmental Division, Allied World

That has led to some underwriters changing the way they run their business from underwriting to capacity deployment.

“The property and casualty guys can give you a thesis on this,” said Ricciardelli. “On the environmental side things are more nuanced. I can tell you some of the things we are starting to look more at are things like above-ground tanks that are below grade, such as in a parking structure.

“We are alert to concentrations of things like that in urban areas. That goes for smaller tanks to larger bulk storage. Overall there are clearly shifting considerations for our industry.”

“One of the best things about environmental coverage is that it includes recovery services.” — Marcel Ricciardelli, senior vice president, environmental division, Allied World

Traditionally property policies do not include much environmental coverage, Ricciardelli explained. “Environmental tends to come in at two spots: a time element within the casualty tower, and also within pollution. For those, the event is not really the issue. The trigger is simply a release.”

After a release from any cause, Ricciardelli added that “the most important thing is access for recovery. If the release was caused by a mudslide from heavy rains, is there flooding? Is the area stable enough to begin recovery? Or was the landslide from seismic activity?

“One of the best things about environmental coverage is that it includes recovery services. Most of the big pipelines have their own, but for smaller operators the access to equipment and expertise is important.”

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Recovery assets and preparation brings Ricciardelli back to the challenge of worse weather in new places. “There are landfills that were sited in places that were considered safe and are now flood zones.”

There are also environmental hazards that are not weather-related. Earthquakes associated with underground injection of wastewater have been a serious concern.

“The attention has been on homes and buildings with cracks,” said Ricciardelli, “but this comes back on the energy industry. There are pipelines and storage terminals in places like Oklahoma that have documented increased seismicity, and those facilities are not built to withstand earthquakes.”

Gregory DL Morris is an independent business journalist based in New York with 25 years’ experience in industry, energy, finance and transportation. He can be reached at [email protected]

More from Risk & Insurance

More from Risk & Insurance

Risk Management

The Profession

Verizon’s risk manager David Cammarata loves when his team can make a real impact on the bottom line.
By: | May 2, 2017 • 4 min read

R&I: What was your first job?

I was a financial analyst with the N.J. Casino Control Commission.

R&I: How did you come to work in risk management?

I was told at a Christmas luncheon in 2003 that I was being promoted into a new job.

R&I: What is the risk management community doing right?

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I think the risk management community is getting a lot better at utilizing big data and analytics to manage risk. Significant improvements have been made, but there is still much more room for improvement.

R&I: What could the risk management community be doing a better job of?

I think that the insurance and brokerage communities need to really start thinking about what this industry is going to look like in 10 years. They need to start addressing how they are going to remain relevant. I think that major disruptions to existing business models will occur and that these disruptions combined with innovation and technological advances may catch many of today’s industry leaders by surprise.

David Cammarata, assistant treasurer, risk management and insurance, Verizon Communications Inc.

R&I: What was the best location and year for the RIMS conference and why?

San Diego, any year.

R&I: What’s been the biggest change in the risk management and insurance industry since you’ve been in it?

I think the advent of cyber risk and cyber insurance. For several years it has been, and it continues to be, the main topic of discussion at industry meetings.

R&I: What emerging commercial risk most concerns you?

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I think the most scary scenarios include a nuclear, biological, chemical or radiological event, a widespread global health epidemic and/or a widespread state sponsored cyber shutdown.

R&I: How much business do you do direct versus going through a broker?

We do almost all of our business through a broker.

R&I: Is the contingent commission controversy overblown?

No. It’s a conflict.

R&I: Are you optimistic about the U.S. economy or pessimistic and why?

Optimistic because hopefully President Trump’s policies (lower taxes and less regulation) will be pro-business and good for the economy.

R&I: Who is your mentor and why?

My dad, who passed away many years ago. He was very influential during the formative years of my career. He taught me how important integrity and reputation were to your brand and he had a very strong work ethic.

R&I: What have you accomplished that you are proudest of?

I would have to say raising two awesome kids. My daughter is graduating from James Madison University this year as co-valedictorian. My son is finishing his sophomore year at Rutgers and has near perfect grades. But more importantly, both of my kids have turned out to be really good people.

R&I: How many emails do you get in a day?

A lot.

“I love it when the risk management organization is able to contribute in a way that makes a real impact to the corporation’s overall objectives. On several occasions we have been able to make real contributions to the bottom line.”

R&I: What is your favorite book or movie?

“My Cousin Vinny.” That movie makes me laugh no matter how many times I watch it.

R&I: What’s the best restaurant you’ve ever eaten at?

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My dad used to take me to a place called Chick & Nello’s. It was an Italian place that did not have a menu. They came to your table and told you the two or three items they were making that day. The food was out of this world.

R&I: What is your favorite drink?

Iced tea. The non-alcoholic kind.

R&I: What is the most unusual/interesting place you have ever visited?

I can think of several places but for me it would be a tie between India and Italy. India just has such a different culture and way of life and Rome has breathtaking historical sites.

R&I: What is the riskiest activity you ever engaged in?

Well, one of the best thrill rides I’ve been on was Kingda Ka at Great Adventure. It feels risky but probably isn’t all that risky. I flew in a prop plane with my brother-in-law one time … that felt kind of risky. I have also parasailed, does that count? I think it definitely has to be driving on the N.J. Turnpike day in and day out.

R&I: If the world has a modern hero, who is it and why?

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What about the Fukushima 50? I don’t think I could have done what they did.

R&I: What about this work do you find the most fulfilling or rewarding?

I love it when the risk management organization is able to contribute in a way that makes a real impact to the corporation’s overall objectives. On several occasions we have been able to make real contributions to the bottom line.

R&I: What do your friends and family think you do?

I don’t think they really know. My children see me as dad; others just see me as an executive with Verizon.




Katie Siegel is a staff writer at Risk & Insurance®. She can be reached at [email protected]