Sorting Through Repair Costs Following a Process Unit Explosion

Insurance Subrogation, North America

After an accidental hydrofluoric acid release, explosion, and fire at a refinery, the insurer made a subrogation claim against a vendor. Baker & O'Brien's task was to distinguish between true repair work versus that which is considered expense betterment. Our consultants visited the site and evaluated project documents to develop a "scorecard" to summarize costs as repair or betterment for use by the parties to achieve settlement.

Alkylation is a process used by refiners to produce a high-octane gasoline blendstock (alkylate). In the alkylation process, light hydrocarbons are chemically combined to produce the final product. Most alkylation units use some form of acid to catalyze (i.e., bring about or speed up) the chemical reactions. One process uses hydrofluoric acid (HF) which is a highly effective catalyst. However, because the reactions occur in the vapor phase and HF is highly toxic, the utmost caution must be exercised in its use. Any incidents involving HF alkylation units are considered to be extremely serious, since a release of HF may be life threatening to process personnel, first responders, and nearby residents.

An accidental HF release at an alkylation unit brought with it a significant quantity of light hydrocarbons, which reached an ignition source and caused an explosion and fire. Fortunately, the incident was quickly contained, and there were no injuries to personnel. However, there was substantial property damage to the alkylation unit and ancillary equipment. As part of a subrogation claim by the insurance company against a vendor, a disagreement arose as to which work items were true "repairs" and which fell into the category of "betterments" (improvements beyond normal repair), especially process improvements aimed at preventing a future release of HF.

Baker & O'Brien was engaged to review the validity of the sizeable repair costs. Our consulting team visited the site to review records and drawings describing the incident and the extent of the damage. We then evaluated project records, including contracts, engineering drawings and sketches, purchase orders, invoices, and communications. From that review a "score card" was developed, which summarized the repair costs and categorized costs as justified and as questionable. Our report was used by the parties in successful settlement discussions.

Charles J. Hirst

Executive Vice President

Petroleum Refining
Insurance Claims / Litigation
North America