**CASE STUDY**

**Industrial Accident:**

**Lng Release and Explosion**

**Developed by Dr. John R. Harrald and Gregory Shaw**

**The George Washington University Institute for Crisis, Disaster, and
Risk Management**

**1998**

**The case study authors authorize reproduction and use of this case
study in this course.**

# All events and names are fictitious.

**CASE STUDY**

**INDUSTRIAL ACCIDENT: LNG RELEASE AND EXPLOSION**

The purposes of this exercise are:

-   To identify the functions of a corporate crisis management team.

-   To identify the interactions between corporations, government
    organizations, the public and other stakeholders during a corporate
    crisis.

-   To identify the attributes of effective crisis communications.

The tasks of the exercise are:

-   Analyze the attached case scenario.

-   Answer the questions (below).

-   Complete the "Post Crisis Audit" (below).

-   Prepare for a class discussion of the case during the next session
    by considering the questions (below).

The products of the exercise are:

-   Completed questions (no more than 2 pages).

-   Completed "Post Crisis Audit" (no more than 2 pages).

## QUESTIONS: CASE STUDY

1.  Describe the actual and potential impacts of this accident on the
    Staten Island Gas Co.

2.  How can SIGCO minimize the short term impacts on the company? How
    can it minimize the long term impacts?

3.  What should be the initial priorities of the SIGCO's management?

4.  What government organizations are involved? How should SIGCO relate
    to them?

5.  What should SIGCO communicate? Who should it communicate with? How
    should it communicate?

6.  In conducting a "Post Crisis Audit," whom should SIGCO consult with?

**POST CRISIS AUDIT:** [^1]

1.  What happened? Determine the basic facts (disputed and undisputed).

2.  What caused the incident/accident?

3.  Which factors (internal and external to the organization) led to the
    occurrence?

4.  Did the structure, culture, technology, or people in the
    organization contribute to the crisis potential?

5.  Did the business environment or pressure from external stakeholders
    create or exacerbate the organization's vulnerability to this type
    crisis?

6.  When responding to the crisis, what was done well?

7.  What was done poorly?

8.  Does the organization continue to be vulnerable to this type of
    crisis?

9.  Could a crisis of this type lead to other crises? What are they?

10. What steps must the organization take to reduce its risk to future
    crises, both this type and others?

**ADDITIONAL QUESTIONS FOR CLASS DISCUSSION:**

You have been hired by SIGCO as a crisis management consultant. How
would you answer the following questions posed by CEO Samuel Krisken?

1.  What should SIGCO have done before this event to prepare for the
    eventuality of such a terrible accident?

2.  How should SIGCO have reacted in the immediate aftermath (3 hours
    following) the event?

3.  How should SIGCO have reacted in the first few days after the
    initial event had passed?

4.  What can SIGCO do to restore its public image?

5.  Does SIGCO need a Crisis Management Team (CMT) and if so, who should
    be members of the CMT?

**STATEN ISLAND GAS FIRE KILLS THREE**

**TANKER STRUCK BY BARGE CAUSED EXPLOSION**

***MAYOR CALLS FOR SPECIAL INQUIRY***

*Special to the New York Traveler*:

Three workers at the Staten Island Gas Company were killed early this
morning when an explosion rocked the SIGCO natural gas facility located
only blocks away from residential and retail areas containing thousands
of persons. The explosion occurred when the 800 ft ship *Dyna*,
offloading its cargo of Liquefied Natural Gas (LNG) at the SIGCO Port
Richmond terminal on Kill Van Kull, was struck by a passing cement
barge. The impact of the collision ruptured the transfer connection on
the dock, releasing a cloud of vaporizing natural gas. An explosion
occurred within seconds, according to witnesses, when the gas was
ignited by an unknown ignition source. Three SIGCO workers on the dock
were killed instantly; their identity has been withheld pending the
notification of their next of kin. Firefighters from the SIGCO facility,
the Staten Island Fire Boat, and Staten Island Fire Company 11
extinguished the fire on the facility. Automatic shut off valves
apparently prevented the explosion from igniting the LNG tanks on the
*Dyna* or the natural gas in the SIGCO storage tanks according to
Captain Manual Suarez of the NYFD.

"We were lucky," said Mayor Smith, "This could have been a major
catastrophe; it shows that we are more vulnerable than we thought we
were and that there are not adequate safeguards in place to protect the
citizens of New York." Smith announced that he had directed his
Commissioner of Public Safety to convene a Special Board of Inquiry.
Bayonne City Mayor John Jones in a special statement to the New York
Times criticized both SIGCO and the New York City Fire Department for
failure to immediately notify the City of Bayonne that an emergency
situation existed that might require an evacuation of Bayonne residents
across Kill Van Kull from the SIGCO terminal. All we knew, we got from
the fire department radio transmissions, according to Jones.

Dr. Herman Falck of the New York University Center for Systems Safety,
during an interview with NNEW TV this morning, criticized SIGCO, the
city, and the U.S. Coast Guard. According to Dr. Falck the accident was
caused by the failure of SIGCO to provide protection for moored LNG
ships and of the Coast Guard for allowing barges and ships to transit
Kill Van Kull when LNG ships were moored at the SIGCO terminal. He
termed the SIGCO facility "a disaster waiting to happen" and stated that
"The U.S. Coast Guard and the city of New York should never have allowed
the siting of an LNG facility within the city and have been negligent in
not requiring SIGCO to install protective barriers around the tanker
dock. The explosion of a Liquefied Natural Gas ship or a fire caused by
a massive cargo release could kill thousands of people."

Bertram Roth, the public relations director of SIGCO, stated to the NY
Times that SIGCO was in compliance with all federal, state, and local
regulatory requirements and that this was the first serious accident at
the facility since it started receiving LNG from ships in 1973. Samuel
Kriskin, SIGCO President and CEO, could not be reached for comment.

Captain Joseph Manning, Commanding Officer of the New York U.S. Coast
Guard Marine Safety Office, stated that the tug *Annie Bea* reported to
the USCG Vessel Traffic System at 7:10 a.m. that he had struck the LNG
carrier moored at the SIGCO pier. The tug was pushing a barge of cement
from the Newark Cement company and was not able to control the barge
when it passed under the Bayonne Bridge and entered Kill Van Kull.
Responding to questions from a New York Times reporter, Captain Manning
stated that the Coast Guard provided a safety zone around LNG tankers
when they were underway, but did not impose any restrictions on traffic
in Kill Van Kull when LNG tankers were moored at SIGCO. He also noted
that the Coast Guard did not set size and power standards for tug boats
pushing loaded barges.

The SIGCO facility, originally established in 1964 to distribute natural
gas received from Texas and Oklahoma through the Northeast Pipeline,
started to augment its supply of gas by importing LNG in the mid 1970s.
The liquefied gas, produced by pressurizing and cooling natural gas, is
carried in specially constructed spherical tanks on board LNG carriers.
Professor Falck compared these tanks to giant thermos bottles, but
warned that the rupture of one of these tanks could be deadly to
anything within miles. "SIGCO and the government have not been honest
with the public about the risks of operating an LNG facility on Staten
Island," said Falck. "Perhaps this incident will finally bring the
public scrutiny this operation deserves."

Joseph Reilly, a former employee of the SIGCO terminal interviewed by
the *Times,* said that supervision at the SIGCO terminal was lax and
management was complacent. "I am not surprised that their luck finally
ran out," he said, "I feel sorry for the families of the workers, and I
hope that this will lead to changes so that no one else gets killed."

STATEN ISLAND GAS COMPANY MANAGEMENT STRUCTURE

Chief Executive Officer Samuel Krisken

Corporate Attorney Adam Slades

VP, Finance and Administration Albert Crownshield

Director, Accounting Peter Tobias

Director, Personnel Maria Sanchez

Director, Insurance & Loss Control Michael Wilton

VP, External Affairs Zachary Tyler

Director, Government Affairs Joseph Willis

Director, Corporate Communications Bertram Roth

VP, Marketing Susan Spoltzer

Director, Residential accounts Judy Marsh

Director, Business accounts Walter Winfrey

Director, Advertising Hannah Lee

VP, Operations Carlos Rodriques

Director, Service and Emergency Response Hal Goldman

Director, Distribution John Richards

Manager, Pipelines Norman Johnson

Manager, Staten Island Terminal Ted Kozikouski

Marine Operations Manager Roger Quimby

Tank Farm Manager Bruce Kastle

Operations Center Manager Greta Michaels

SEQUENCE OF EVENTS: STATEN ISLAND GAS COMPANY FIRE/EXPLOSION

[SIGCO OP CENTER]{.underline} [N.Y.City (S.I.) FIRE CO]{.underline}
[U.S. Coast Guard]{.underline}

7:10 am Explosion and fire on LNG

dock

7:12 Called Fire Dept, Coast Rec'd call from SIGO dispatched

Guard engine, pumper, and fire boat

Requested police to close

> Bayonne Bridge

7:15 Executed emergency call list Dispatched harbor

(Terminal Manager, Marine tugs, patrol boats

Operations Manager, Corporate

> Communications Officer)

7:20 Closed Kill Van

> Kull to all traffic

7:35 Evacuated 4 persons to

Staten Island Hospital

> 3 DOA, 1 in stable condition

7:40 Terminal Manager arrives, Fire boat on scene CG tugs on

> assumes control of ops scene, secure tug
>
> & barge, commence safety patrol

7:45 TV crew arrives, held

at security until terminal

manager available

7:50 Fire extinguished, monitoring LNG vessel *Dyna*

> for possible reflash directed to depart terminal ASAP

8:05 Pub Relations (Roth)

arrives

8:20 Roth makes statement

to TV crew

9:30 LNG Vessel *Dyna* *Dyna* escorted

departs terminal by CG tug to

Stapleton Anchorage

10:10 All fire resources secured

SIGCO LNG EXPLOSION: The Aftermath

The meeting of SIGCO management was called to review the SIGCO LNG
incident, to discuss damage control, and to determine what could be done
to restore the company's image and protect its profitability. The ten
days since the explosion and fire had been unpleasant ones for the
company and for its executives.

"Why does the media always want to talk to the boss?" Bert Ross
complained. "Just because Sam Krisken was in Hawaii on a vacation, the
press kills us." Bert was examining the text of a TV 4 special "LNG on
Staten Island---An Unacceptable Risk?" The report was based primarily on
statements by academics and public safety "experts." The only input from
SIGCO was the clip of Bert's statement on the morning of the accident
that, "SIGCO's safety record was a good one, and that we were in
compliance with all federal, state, and local laws and regulations." TV
4 had refused his offer for an in depth interview, insisting that they
would talk only to the CEO about this crisis.

Worse yet, the New York Traveler had started an in depth series about
the risk of transporting LNG and other hazardous cargoes on ships and
barges around New York City. Illustrations showing the number of persons
within ½ mile and 1 mile radii of the SIGCO facility made the point that
what went on at SIGCO affected thousands of residents, workers, and
commuters. The articles criticized the Coast Guard for its lax
supervision of the waterways and its failure to require tugs to live up
to the same standards as larger ships and criticized the state and city
for their lack of control over the location of hazardous industrial
sites. The main target of the series was, however, SIGCO. The articles
questioned why the facility needed to bring in LNG by vessel, whether or
not transfers of LNG from vessels at SIGCO were safe. Much was made of
the apparent reluctance of SIGCO officials to discuss the incident.

"Don't they understand the liability implications of those three
deaths?" Adam Slades commented. He recalled his advice to Bert Roth and
Ted Kozikouski that the less said the better until they could find out
why the three workers were standing so close to the transfer line when
they were killed. It was still not clear if the workers had violated the
standard procedure to stand clear while a transfer is underway.

Carlos Rodriques brought the meeting to order with a reminder that their
objective was to decide what to do next. He directed Ops Boss John
Richards to determine what the impact would be of closing the marine
terminal as demanded by Bayone Mayor Jones. "What alternatives do we
have, John, besides not selling gas to our customers " This exchange got
Susan Spoltzer's attention; she was sure that the new Staten Island
Industrial Park could result in a 5% increase in demand over the next
three years. If rumors got out that SIGCO could not meet that demand,
the developer might back down on his commitments.

The discussion of the State of New York hearings, and the Coast Guard's
proposed rules on LNG transfers and traffic control were equally gloomy.
No one mentioned the demand of the Staten Island Citizen's Council for
Krisken's resignation. After several hours, the group had not decided on
which actions were required to help the company get past this event.
Frustrated, Sam Krisken closed the meeting with a threat to bring in a
good crisis management consultant to "straighten this mess out."

[^1]: Mitroff, Ian I., Pearson, Christine M., Harrington, L. Katharine.
    1996. *The Essential Guide to Managing Corporate Crises.* New York:
    Oxford University Press. Pages 68--71.