Business 100 Day Senate Report Part 2 : LUSENET : TimeBomb 2000 (Y2000) : One Thread


Background and Vulnerabilities

The U. S. manages to feed not only its own population of 260 million people, but also to export $70 billion of food products each year to people around the world. Food shortages--even the threat of shortages--are uncommon here at home. Neighborhood grocery stores are taken for granted and are expected to have shelves stocked with food products that are safe and affordable. In addition, high quality and a variety of brands are the norm.

The food supply industry, which comprises 16% of our nation's economy, is large, complex, and interdependent. Within the U. S., the industry has integrated modern information technology into processes that increase productivity, yield, and profitability.

A survey earlier this year highlighted the fact that more than 80% of American farmers use computers as an integral part of their business; a third of those are connected to the Internet, and almost 75% own a cellular telephone. In the early 1990s, farmers began to use the GPS, leveraging the capability to pinpoint location information about specific field areas. This accurate location data eliminates the guesswork in determining yield variances, crop damage, and soil fertility.

These innovations, along with advances in seed, fertilizer, pesticide, and herbicide, have made American farmers the most productive in the world. A century ago, the average U. S. farm output fed eight people. Today, it feeds 212.

Ranchers, processors, manufacturers, distributors, and local retailers have made similar advances that have led to their dependence on high technology. For example, farmers and ranchers use electronic irrigation systems, animal feed systems, and transport systems. Processors rely on automated systems that help prepare and package consumer-ready products. Distributors, wholesalers, and retailers depend on computer-driven equipment and inventory and accounting systems to transport, deliver, store, display, and sell food products. They also rely on equipment with time-dependent embedded computer chips, such as harvesting equipment; grain elevators; plant, warehouse and truck refrigeration systems; store and plant security systems; and heating, ventilation and air conditioning systems. Each is important to the food supply chain. Possible Y2K disruptions in one can ripple through the chain, affecting all.

Like other industries, the food industry is critically dependent on the transportation and utilities industries, and their Y2K preparedness will directly impact the food supply.

What is Being Done?

The Committee met with significant resistance when it began investigating this vital industry more than a year ago. This resistance has substantially diminished. In early 1999, the Committee held two hearings focused on the food supply chain. Its February 5 hearing addressed the 'farm side' of the 'farm-to-fork' supply chain. Witnesses included Senator Lugar, Chairman of the Senate Agriculture, Nutrition, and Forestry Committee and presently a member of this Committee; the Secretary of Agriculture; and representatives from Cargill, Suiza, and the American Farm Bureau Federation.

The March 2 hearing shifted the spotlight toward the "fork side" of the food supply chain. Witnesses included representatives from the Food Marketing Institute (FMI), SUPERVALU Inc., Kroger Company, the Grocery Manufacturers of America (GMA), Kraft Foods, and Nestle USA.

The Food Supply Working Group

(FSWG), led by the U. S. Department of Agriculture (USDA), has shed a bright light on the preparedness of the food industry. The FSWG has taken a different approach than that of other working groups under the President's Y2K Council; it has decided not only to depend on industry associations for input into its assessment but has also contracted out for additional assessment work. 17 While there are shortcomings with assessing any industry as complex as that of food, USDA should be commended for its efforts to provide as complete and accurate picture as possible.

The USDA identified the top four companies in 25 separate industry topic areas across four general categories: processors, farm input (seeds, feed, and so on), wholesalers (to restaurants, institutions, supermarkets, and convenience stores), and retail supermarkets. The USDA analyzed the market share these four corporations, in aggregate, held within each particular industry, represented as a percentage. In the following figures, CR4 equates to Concentration Ratio of the four largest corporations.

Figure 4 shows eight selected industries topics of 19 identified by the USDA within food processing. As the figure shows, infant food, breakfast cereals, and beef have the highest percentage of concentrated market share among the leading four firms. As a result, the preparedness of these four companies has the greatest impact on the preparedness of the industry area as a whole. Fluid milk, fresh vegetables, and bread have the least market share concentrated with the four largest firms. As a result, a larger number of firms must be examined to determine the their health.

Figure 5 addresses the concentration ratio for other

categories used by the USDA help assess the overall industry Y2K preparedness.

Other inputs into the FSWG/ USDA food supply assessment include a survey commissioned by the FSWG of small-and medium-sized food producers, processors, wholesalers and retailers; a Year 2000 analysis of international food transportation modes prepared by USDA; and the results of surveys and audits conducted by the major food trade associations since the last FSWG report in March.

Since March, the GMA, FMI, Food Distributors International (FDI), National Retail Federation, National Grocers Association, National Association of Convenience Stores, and others have completed surveys, white papers, educational forums, and other activities to aid their members and the industry in addressing Y2K as well as assessing the industry preparedness. For example, in response to an invitation from the Committee, the overall readiness of the food manufacturing industry was assessed by GMA, in conjunction with EDS. The results were published in a March 1999 pamphlet, "Year 2000 & The Food and Consumer Products Industry" indicating an overall readiness. The reader should refer to the report for details of the snapshot provided by this assessment.

A collaborative effort earlier this year between GMA and FMI resulted in the publication, "Y2K Business Contingency Planning, Y2K Framework." The stated objective of the document is to provide grocery industry trading partners information to help deal with potential Y2K-related supply chain interruptions.

Ernst & Young conducted research interviews along the entire food supply chain as part of the effort supporting this publication. One conclusion agreed upon by research participants was that "achieving stability throughout the supply chain at the close of 1999 and the beginning of 2000 will rest, in part, on business contingency planning between trading partners." 18 As it has previously been stated in this section of the report, it is important that contingency plans are coordinated externally.

Finally, the President's Y2K Council and FSWG hosted a food supply roundtable on May 20, 1999. More than 50 industry representatives from all links in the "farm-to-fork" chain participated. The roundtable's goal was to gather information on Y2K relative to food delivery and supply. Industry experts at the event noted that the industry, as a matter of course, is used to dealing successfully with emergency situations. Companies are prepared with contingency plans that are being refined for Y2K. Participants resolved to continue to work together and actively support community level efforts to provide detailed local food supply Y2K preparedness information.


As in its March 1999 assessment, the Gartner Group finds the current state of the food supply industry is still "encouraging." However, at this point, as in March, things should look better than encouraging. Nevertheless, it is important to credit the industry overall since much progress has been made during the last several months. Overall, the report concludes that "it is highly unlikely that no disruptions will occur, but with the current state of preparedness, it is expected they will have light to moderate effect. Most of the interruptions are expected to be very short lived and will be resolved within a few days." 19

Figure 6 gives a risk assessment of the industry topic areas in Figure 4 and 5 above. For a complete analysis of the original 25 industry topic areas discussed above in the background and vulnerabilities section, refer to the actual report. The status in Figure 6 and subsequent discussion of the Gartner Group's status assessments analyze the current state of the industry with some perspective, since this is its third assessment since December 1998.

The distribution column indicates: 0 ­ no impact; 1 isolated; 2 ­ moderate; and 3 ­ widespread. Severity is categorized as 0 ­ no impact; 1 ­ minor; 2 ­moderate; and 3 ­ severe. Finally, probability ranges from 0.0 ­ completely impossible; to 0.5 ­ a toss up; to 1.0 ­ this has already happened, but either the event has been hidden or the full impact is not yet realized. In the figure, 0. 2 indicates this will not happen, barring exceptional circumstances and 0.3 indicates there is good reason to believe this will not happen, but there is some chance it will. 20

One of the most revealing findings in the Gartner Group's current status assessment is that 25% of food supply companies have not addressed supply chain and embedded systems issues. While this number represents an increase of 10% since the March assessment, it is cause for concern and should be a signal to the industry that increased remediation and contingency planning effort is warranted in this area. A survey commissioned by the FSWG of small-and medium-sized food producers, processors, wholesalers, and retailers of perishable foods yielded results consistent with the NFIB. 1,133 firms responded to the survey and indicated that half of the firms will be conducting remediation efforts until almost December 31. Twenty-seven percent of the mid-sized firms have written contingency plans.

While this percentage is significantly higher than the 5% for small companies, it is still very low. As was pointed out in the SME section above, it is believed that the mid-sized firms are at greater risk to Y2K impacts than small firms are. Thus, their need for realistic, tested contin-gency plans is much greater.

GMA is in the process of completing the analysis of survey data it collected up to June 1. Indications are that survey respondents felt they would complete their Y2K work by September 1. This survey follows a member survey completed in December 1998. The areas covered during this current survey include contingency planning, technical readiness, and testing. Average member companies are spending $27 million to address Y2K while some global food companies spending exceeds $100 million.

Moving to the issue of transportation, USDA's Foreign Agriculture Service (FAS) personnel serving in foreign posts collected information used to assess international agriculture transportation issues related to Y2K during May 1999. They targeted the top 10 countries that are markets for U. S. agriculture exports and the top eight suppliers of imported food products excluding Canada. Key points of the survey include:

most U. S. export markets are generally in the testing and implementation stages as they relate to food distribution and transportation;

suppliers of food products to the U. S., mainly Central and South American countries, have already achieved a very high level of Y2K readiness; and

major ocean carriers appear to be the most compliant of any of the international food transport sectors. 21


The Gartner Group research indicates that Y2K system failures will occur in highest volumes from third quarter 1999 through first quarter 2001, with the highest volume peaks during fourth quarter 1999 and first quarter 2000 through third quarter 2000. Most companies understand this and are including it in their strategy for Y2K projects. Since the world is about to enter the first quarter of the anticipated peak period, those firms furthest behind must work with a sense of urgency and diligence on key contingency planning activities.

As with business in general, larger corporations are better prepared than SMEs. Studies and research conducted by this Committee, the NFIB, the Gartner Group, CapGemini, and others all appear to agree on this point. The food industry is no exception. Thus, the industry topic areas with higher estimated concentration rations (CR4) in the figures above are generally going to be more prepared than those with smaller ration percentages.

Disruptions will occur, however, the industry is likely to be very responsive in resolving them. Given the emphasis given to and resources spent on Y2K, the industry is alert and watchful. As noted, they are an industry that is accustomed to responding to natural disasters and have done well historically in those situations. The question that remains is whether there are Y2K-related disasters of unseen proportions (first order, second order, cascading, and so forth) and well prepared the industry might be for such disasters.



Kroger testified at the March Committee hearing that it maintains safety stock inventory levels that are typically about 35 days in distribution centers and stores. However, shelf-life is clearly one determining factor in the amount of inventory of a product. In response to Senator Dodd's question regarding product contingency planning, FMI's president said "S for processed products, there are somewhere between three and five weeks of products on hand in retail facilities, and in the pipeline all the way through from the processor to retail, there would be several months of supply on the way already here and available for consumption."

The FSWG's third quarterly report to the President's Y2K Council noted that most major corporations expect to increase inventory along their supply chains as part of their contingency planning. The weak link in the chain may be the ability to transport this robust inventory to the needed locations for sale.

If Y2K causes significant problems for utilities in rural areas, the farm side of the food supply chain will experience longer outages than if problems occurred in urban areas and cities. This is largely due to the realities of rural living and the fact that resources most often are first applied where the greatest concentration of people is located. Thus, some farmers are preparing for possible disruptions that may last a little longer than a few days.

If the Y2K problem does cause severe disruptions in some countries, the U. S. may be asked to provide humanitarian assistance in the form of food aid.


Some food supply companies are not open and responsive to inquiries in Y2K preparedness at the local level despite their awareness that public perception of their preparedness will ultimately affect the types of personal preparations individuals make. One great area of concern is that panic buying and stockpiling of food might result in a self-fulfilling prophecy resulting in shortages and disruptions. Continued movement by the food industry to the more open stance it has recently taken at the local level will help ameliorate the situation.

Food banks should plan for the possibility of a surge in donations during the first quarter of 2000 if Y2K impacts are few.

If buying were to increase to a pace exceeding the current supply, it is important that Americans who need help most and are least able to prepare individually for Y2K are considered as part of local and state contingency and business continuity plans. Non-governmental agencies that support these individuals should be included in these plans.

As with most of the industry assessments, most of the information base upon which analysis is conducted is founded upon self-reported information. Again, the Committee is concerned that the nature of this information raises the suspicion that it is overly optimistic. Independent validation and verification are critical elements of successful Y2K programs. The Committee commends USDA for expending additional effort to balance the association industry assessments with one which may be more objective.


Background and Vulnerabilities The chemical industry is essential to the nation's quality of life, economic prosperity, and national security. The crude oil refining industry keeps American transportation running. Our health--and sometimes our lives--depend on pharmaceuticals produced by the chemical industries. And the manufacture of virtually every consumer product is in some way dependent on vital chemical ingredients.

On the economic side, the $392 billion chemical industry is the largest in the manufacturing sector and employs more than 1 million workers. It is also the largest exporter, accounting for $69.5 billion or 10% of the total exports in 1997, easily outdistancing the second leading industryÐ agricultureÐ and generating a trade surplus on average of more than $16 billion annually over the last ten years.

The chemical industry has set high standards for safety, and has a very proactive program to preserve this record and to continuously improve on health, safety, and environmental performance. Nevertheless, the chemical industry warrants attention because accidents can have such devastating effects. Even though it happened more than 15 years ago in another country, most of us remember the Bhopal accident that killed several thousand people and injured tens of thousands of others. There never has been a chemical release of that size in the U. S, but the potential for harm is great. An estimated 85 million Americans ­ more than 30% of the U. S. population­ live within 5 miles of one of the 66,000 sites that assessed and potentially remediated and tested for Y2K problems in the chemical-handling sector. Examples of systems that have failed during testing or in operations can be found at an EPA website 22 and a U. K. "Faults Casebook" listing problems actually found with embedded systems in the office or factory use. 23

In addition to safe "on-site" operations, chemical-processing plants must prepare to deal with vulnerabilities in external services. For example, on November 24, 1998, a power outage caused the shutdown of an Anacortes, Washington refinery. 24 As the refinery was returning to operation after a cool-down period, an accident occurred that took the lives of six workers. The power outage may not have directly caused the accident, but it brought about the circumstances that put six men in danger, and ultimately cost them their lives.

Similar incidents have occurred recently at the Kaiser aluminum plant in Gramercy, Louisiana 25 and the Celanese plant in Mobile, Alabama. 26 The Celanese event killed one worker and injured four others, one critically. The Kaiser accident injured 24 and sent six to the hospital, cut the plant's operations in half and reduced the hourly workforce by half, caused a related facility in Jamaica to reduce mining operations and cut its workforce two-thirds, and forced a neighboring facility owned by LaRoche Industries to lay off 40 employees. These examples highlight the startup and shutdown risks in chemical plants, a situation analogous to airline accidents that are more likely during takeoffs and landings. This industry must be ready for any sudden Y2K-induced shutdowns.

One other recent incident highlights the chemical-handling industry's potential vulnerability to malfunctioning data systems. On June 10, 1999, a pipeline rupture in Bellingham, Washington killed 3 young men and spilled 277,000 gallons of gas. According to a DOT Office of Pipeline Safety official, "Our concern is that perhaps the (computer) system wasn't used appropriately or maintained appropriately." 27

This event spurred DOT to issue a Pipeline Safety Advisory Bulletin 28 on July 7, 1999 alerting "pipeline owners and operators of potential operational limitations associated with supervisory control and data acquisition systems and the possibility of those problems leading to or aggravating pipeline releases."

Finally, the concern about the chemical industry's Y2K vulnerability is far from a U. S.-only problem. The Organization for Economic Cooperation and Development's Working Group on Chemical Accidents stated in December 1998 that Y2K is "a serious problem which must be addressed immediately." 29 In fact, the case can be made that many parts of the world are more vulnerable to this problem than the U. S. due to the earlier start the U. S. made on Y2K.

What is Being Done?


The Committee took several actions in this area since its February 1999 report. First, the report to the Committee by the Chemical Safety and Hazards Investigation Board referred to in the earlier report was completed and delivered in March 1999. On March 15, 1999, a press conference 30 on the findings of the report was held. Besides the Committee Chair and the report's principal author, the industry was represented at the press conference by the Y2K coordinator of the Chemical Manufacturers Association. The press conference was attended by a fair cross section of the general and trade press and the event lead to coverage in national and local papers and on CNN.

At the press conference, the Committee's chair declared he was significantly concerned by the report and that he would hold a committee hearing on this issue. This hearing was held on May 10, 1999 31 in Trenton, New Jersey. The hearing had nine witnesses to represent the breadth of stakeholders in this sector: industry (large, medium and small), governmental oversight bodies, emergency response organizations, and workplace-safety and environmental advocates. The hearing addressed Y2K and chemical safety from two perspectives. The first hearing panel addressed the potential impact of the Y2K problem on chemical production, storage, or transportation. The second panel examined the issue from the perspective of emergency management and contingency planning.

The most recent action by the Committee was a letter 32 from the Committee Chairman and Vice-chairman to the Chair of the President's Y2K Council asking him to convene a Chemical Industry Summit on this important topic. The concern expressed in the letter was generated by the lack of substantiated information on the overall readiness for Y2K of this vast and potentially very dangerous sector.

Finally, the Subcommittee on Clean Air, Wetlands, Private Property, and Nuclear Safety of the Senate Committee on Environment and Public Works also held a hearing on February 24, 1999 where the Chemical Safety and Hazard Investigation Board testified on the impact of Y2K on the chemical-handling industry. 33

The President's Y2K Council

The Council was slow to focus on the Y2K vulnerabilities in this sector. There is no mention of this topic in its first quarterly assessment 34 released in January 1999, although there are assessments in the second 35 and third 36 quarterlies. The major Council activity in this area was to convene a Chemical Industry Roundtable on August 30, 1999 in response to the Committee's letter requesting more attention on this area.

The Roundtable was attended by the chair of the Council and representatives from EPA, OSHA, and CSB, several chemical industry trade associations, major chemical firms, unions, environmental organizations, and public interest groups. The call and preparation for the meeting itself have created a resurgence of interest in collecting assessment data in this sector. So far both CMA and SOCMA have announced they will update their surveys of member readiness in the near future.

The findings and action plan for this roundtable were not available at the time of this report. However, it is expected that more attention will be paid in ascertaining the readiness of firms that not members of the major trade associations who have so far accomplished the most in alerting enterprises in the chemical industry to this issue.

Chemical Safety and Hazards Investigation Board

The Chemical Safety and Hazards Investigation Board (CSB) has been tracking and addressing the Y2K issues in this area since the early part of 1998 if not earlier. The CSB lead board member for this issue has addressed numerous groups within the industry on the importance of this issue and the potential public safety and economic risks Y2K represents to the industry.

At the request of the Committee, the CSB conducted a full day workshop on this topic in December 1998. That event generated the most comprehensive analysis so far on this problem. The major findings of this study, available from the CSB website 37 , are:

Large enterprises with sufficient awareness, leadership, planning, financial and human resources are unlikely to experience catastrophic failures and business continuity problems unless their current progress is interrupted or there are massive failures of utilities.

The overall situation with small and mid-sized enterprises is indeterminate, but efforts on the Y2K problem appears to be less than appropriate based upon inputs from many experts.

While the impact of the Risk Management Plans should be positive, there are no special emphases or even specific mention of Y2K technology hazards in either EPA or OSHA regulations regarding process safety.

Federal agencies are aware of and involved in Y2K technology and chemical safety issues. However, significant gaps exist, and there do not appear to be specific plans to address these gaps.

Another specific action the CSB has taken was to send a letter 38 to all 50 state governors and chief executives of the Northern Mariana Islands, the District of Columbia, Guam, Puerto Rico, and the U. S. Virgin Islands. This July 22, 1999 letter urged them to review and act on Chemical Safety Board (CSB) recommendations designed to avert or minimize the effects of Year 2000 technology problems which may affect industrial chemical safety.

Environmental Protection Agency

EPA is the lead agency on the Federal level for ensuring that the public and the environment are protected from excessive or dangerous releases of toxic or hazardous chemicals. A good summary of EPA's responsibilities and legislative authorities to act was presented in testimony before the Committee on May 10, 1999. 39 Based on its charter and long-standing relationship to the chemical sector, EPA was tasked by the President's Y2K Council to lead the outreach to the Chemical Sector.

Specific actions EPA has taken include:

Provided EPA speakers for many industry Y2K meetings

Developed and distributed a Y2K "tool kit" for the chemical sector

Worked with chemical industry trade associations to raise awareness, collect assessment data, and conduct contingency planning workshops

Directly contacted Toxic Release Inventory and pesticide registrants through the Office of Prevention, Pesticides, and Toxic Substances to remind them of their obligation to ensure the integrity of the data reported to EPA. 40

Developed and distributed a Year 2000 Chemical Safety Alert for the chemical sector through the Chemical Emergency Preparedness and Prevention Office. Within this alert is the explicit reminder to the industry that under the Clean Air Act, "owners and operators of facilities with hazardous substances have a general duty to prevent and mitigate accidental releases, including those cause by Y2K failures." 41 This alert goes further to add, "under EPA's Risk Management Program (RMP) Rules S accidental releases related to Y2K problems (e. g., loss of utilities, interruption of raw material deliveries, failure of monitoring devices) would be reasonable alternative scenarios to consider."

Issued a Y2K enforcement policy on November 30, 1998 to encourage testing of computers and systems that potentially Under this policy, EPA has stated that it will waive 100% of the civil penalties and recommend against criminal prosecution for environmental violations that occur during testing conducted specifically for Y2K preparations.

Supported the outreach and education programs of others such as the Internet based compliance assistance center, ChemAlliance 43 , which provides Y2K preparation guidance to the chemical industry.

Issuing an alert "encouraging regulated entities to take prompt and proper measures to prevent potential Year 2000 (Y2K) computer failures that may cause releases detrimental human health and the environment." 44

Occupational Safety and Health Administration

OSHA testified before the Committee on May 10, 1999. According to the testimony, "OSHA's core mission is to provide a safe and healthful workplace for every working man and woman in the nation." OSHA's data indicates that despite a common impression, the chemical production sector has a substantially lower injury/ illness rate than the national average. The outcome of this analysis is that the chemical industry has not been a target for OSHA programmed inspections. In Fiscal 1998, Federal OSHA conducted about 950 inspections in the chemical sector out of 32,000 total inspections. OSHA does enforce many standards that apply to the chemical sector.

Two of the most important are the Hazard Communication Standard, which requires employers to alert workers to hazardous chemicals they may be exposed to and the Standard on Process Safety Management of Highly Hazardous Chemicals, (PSM). Under PSM, employers who possess a threshold quantity or greater of substances on OSHA's list of highly hazardous chemicals are required to assess the risk posed to workers and to develop a plan to mitigate those risks. Employers must include equipment and controls in their plans, and thus, "employers have a responsibility to assure the effects of the Y2K problem on any such equipment or controls are appropriately managed." 45

However, OSHA's position is that it cannot assure chemical industry Y2K readiness through inspections under the PSM program for two major reasons: (1) many chemical facilities potentially facing Y2K compliance issues are not covered by the PSM rule and (2) OSHA does not have the resources to execute the lengthy and numerous inspections required. OSHA has also stated that its General Duty clause "would be a cumbersome tool with which to address Y2K-realted equipment failures." 46 Finally, OSHA rejects the idea that chemical companies should submit Y2K-readiness certifications to OSHA on several grounds, including the lengthy time to initiate such a process absent a congressional mandate and because it would be impractical with OSHA's existing resources.

Given the reasoning above, "OSHA has concluded that the existing

regulatory framework will not effectively deal with the Y2K problem in the chemical industry." 47 OSHA has opted instead for an outreach and education based program. Specific actions OSHA is taking include:

Producing an OSHA fact sheet, "How the Millennium Bug Can Affect Workplace Safety and Health" 48

Alerting OSHA Area Directors, Regional Administrators, and Consultation Project Mangers of websites with educational materials on Y2K

Including the Y2K fact sheet in a mailing to the 12,500 employers with the highest injury rates in April 1999

Requiring that OSHA compliance officers distribute Y2K fact sheets during each of their approximately 32,000 inspections in 1999

Making the OSHA fact sheet available to an additional 60,000 state OSHA inspectors

Providing Y2K information during OSHA consultation visits during 1999 Distributing Y2K information through the Voluntary Protection Programs Participant's Association.

Trade Associations

The chemical industry has a number of trade associations active in raising members' Y2K awareness, conducting Y2K readiness surveys, and supporting contingency planning efforts. The CMA was perhaps first onto the issue. CMA represents the largest chemical producers and has approximately 190 members. CMA's first survey was released in March 1999 and represented about 70% of the membership. In general, reported progress was good. Highlights of the survey include:

All respondents have [written] Y2K action plans. 98% of respondents have addressed the readiness of key suppliers, customers and supply chain organizations.

97% have addressed safety, environmental and health systems.

90% expect to be ready by September 30, 1999 and 100% expect to be Y2K ready by December 31, 1999.

Testing of mission-critical systems is a plan element for 98% of the respondents.

92% of respondents have contingency planning elements for all business systems.

One must keep in mind that these numbers correspond to the approximately 70% who responded and the data may not be accurate for the 30% who did not, and that this is all self-reported data. CMA has announced plans to update this survey and will keep it as a running survey as more data becomes available.

Two other products from the trade associations are the CMA "Consensus Document on Y2K Contingency Planning" and the more detailed "Y2K Contingency Planning Guidelines, March 1999" from the Chemical Information Technology Association. Both can be found on the CMA website 49 under the "News and Information" section.

Following on the CSB report that emphasized the lack of readiness information about the Small and Medium Enterprises (SME) in the chemical sector, a joint survey was conducted by seven trade associations of these firms, aided by the CMA, CSB and EPA. The results of this survey 50 became available in May 1999, and were reassuring on the surface. Highlights from the survey include:

99% of respondents report business IT systems will be Y2K ready by September 30, 1999.

All respondents report that manufacturing, inventory and distribution IT systems will be Y2K ready by September 30, 1999.

99% indicate that embedded systems will be Y2K ready by September 30, 1999.

93% report that supply chain relationships will be Y2K ready by September 30, 1999. All respondents state that they will be ready in all areas of concern by December 31, 1999.

Based on direct conversations with member companies, many report not having issues with embedded systems because their processes are not automated.

However, the Committee did not feel that it was justifiable to extend these survey results to all small and medium chemical firms for the following reason. The survey had less that a 5% response and was not a statistically valid sampling of the entire universe of small and medium sized chemical firms. This was a prevailing reason in the Committee's request to the President's Y2K Council to conduct a Chemical Industry Summit on this topic.

Finally, as reported in the President's Conversion Council's third quarterly assessment, "To assist SMEs who are not members of trade associations, EPA, the Chemical Safety and Hazard Investigation Board and trade associations representing small to medium-sized chemical companies are jointly preparing a special guidance document entitled: "Addressing Year 2000 Issues in Small and Medium-Sized Chemical Facilities." The document, which will be published in the third quarter 1999, is a part of an on-going effort to assess and address potential Y2K disruptions in facility operations, with a particular emphasis on safety-related control systems and equipment. EPA will distribute the guidance to its Toxics Release Inventory respondents (approximately 30,000 chemical facilities) and to its Federal Insecticide, Fungicide and Rodenticide Act registrants. The trade associations will make the guidance available through mailings, on their web sites and at various industry conferences throughout the year." This document is now available from many sources on the web and elsewhere, including EPA's Year 2000 website. 51

Activities by Other Entities

California Office of Emergency Services Y2K Hazardous Materials

Project: As a result of Governor Gray Davis' Executive Order D-3-99, the Governor's Office of Emergency Services (OES) initiated the Y2K Hazardous Materials Project 52 to protect the health and safety of the people of California and its environment by assisting in the Y2K readiness of approximately 130,000 hazardous materials facilities/ handlers in California. The objectives of this project include:

Communicate with hazardous materials facilities/ handlers regarding the potential impact of Y2K;

Work with the technical experts to identify those facilities/ handlers most vulnerable to Y2K failures which could impact health, safety and the environment;

Coordinate the Y2K efforts of technical experts in fields such as water quality, air quality, radiological and chemical process safety, toxicology, industrial hygiene, pesticide and medical waste;

Emphasize compliance with existing laws and regulations;

Conduct onsite visits to the most vulnerable facilities/ handlers, and encourage them to remediate technical problems, create work- around procedures and update contingency plans; and Develop contingencies to avoid possible hazardous material incidents.

Small and Medium Sized Enterprises Study: The Mary Kay O'Connor

Process Safety Center has initiated a study on "Y2K Readiness of Small and Medium-sized Enterprises (SMEs) involved in chemical, petrochemical, refining, and offshore petroleum activities." 53 The project is supported by a grant from the Nathan-Cummings Foundation. Included in the study is a:

1. A scientific survey of the awareness and engagement of SMEs regarding the Y2K problem,

2. Development of a few credible Y2K induced scenarios, including the potential for catastrophic events as well as economic disruptions, and

3. A report based on the research and conclusions derived from the study, including recommendations of critical steps that industry, federal agencies, state and local authorities, and congress can take to prevent Y2K disasters related to SMEs.

EDF Checklist: The Environmental Defense Fund recently released two checklists 54 to help communities identify industrial facilities using hazardous chemicals that could pose serious hazards due to Y2K-related computer problems. One checklist provides plant process and financial characteristics that can help identify facilities not now Y2K-compliant, and the other lists characteristics that can worsen the public impacts of a hazardous chemical or petroleum release. Plant neighbors can use these checklists to identify facilities that need to act now to prevent Y2K-related problems.

NIEHS Worker Training Course: A special training course to help workers prepare for potential health and safety risks associated with Y2K is being developed by the National Institute of Environmental Health Sciences (NIEHS) and the National Clearinghouse for Worker Safety & Health Training. 55

The course will target workers in a variety of sectors including the industrial trades, the construction trades, the health care industry, hazardous materials related fields, and emergency response activities. It will include an overview of who and what the Y2K problem could potentially impact, an update of the state of individual industries' Y2K compliance, an outline of how the problem might affect different workplaces, as well as measures workers can take to safeguard themselves and others.

Local Emergency Planning Committee Y2K Compliance Requirement: The City of Ann Arbor Michigan and Washtenaw County Local Emergency Planning Committees issued a letter on April 15, 1999 "requiring all facilities in the County that use, produce or store more than 55 gallons of chemicals to send a letter indicating that Y2K computer and process safety management issues have been addressed and that your facility is in compliance. The LEPCs will be publishing lists of facilities that have submitted compliance letters." 56 At the time of this report, the Lepers had received 231 responses to over 800 letters mailed. 164 responses said they have no computers, while 65 report they are compliant or will be before January 1. Two of the responses were noncommittal. The LEPCs are striving to increase the response rate.

Concerns and Expectations

In a sector with so many small, medium and large entities that also has such a variety of processes and potential vulnerabilities as the chemical sector, it is impossible to make precise predictions what the Y2K impact will be, especially given the scarcity of verifiable and independent assessment data. From the Committee's research, it appears that the largest companies that would cause the greatest public health threat or environmental disaster in a Y2K-related incident are working the problem hard and will be ready come December 31. In addition, the medium-and small-sized producers are most often batch processors 57 who would generally not be processing at midnight on New Year's Eve anyway and this December 31 should be no exception. Despite this general impression of progress, the Committee feels that it is still essential to continue to maintain vigilance in this area because of the risk associated with problems in this area.

During the course of the Committee's investigations, several activities were identified that will assist in maintaining surveillance and managing the century transition successfully:

Surveys still underway: Because of the continual attention on this issue, several trade associations have decided to update their surveys. At the time of this report, SOCMA and CMA are collecting new data and plan to have releasable information soon. Other entities such as the LEPCs in Ann Arbor, Michigan and Washtenaw County, Michigan are publishing lists of compliance letters received in response to their request.

A very useful snapshot of the Y2K preparations being made by small- and medium-sized firms should arise from the Mary K. O'Connor Process Safety Center's study. While focusing on only four states, albeit important states to the chemical industry, this is the only activity the Committee is aware of that will either challenge or support the depiction of the industry that emerges from the self reported surveys.

Managing the Rollover:

During the course of investigating this issue, the Committee was pleased to learn that many major firms in this industry were planning to implement "Early Warning" or "Follow the Sun" alerting systems analogous to the "First Alert" early warning system the Committee called for in October 1998. 58 These systems will monitor and report events at chemical plants spread around the globe to a central location as the New Year occurs in successive time zone on December 31, 1999. Chemical plants in later time zones may be able to capitalize on this advance notice to minimize potential incidents.

The EPA plans several actions to be able to respond to incidents involving chemicals. First, the agency's Emergency Operations Center will be up and running during the century change. There will be separate desks operating for the chemical, water and emergency response sectors. Next, EPA will have personnel in FEMA's Emergency Response Center to support actions required under the Federal Response Plan. EPA is the lead agency for Emergency Support Function #10, Hazardous Materials, under that plan. Finally, EPA will have personnel located at the ICC to handle chemical, water, and emergency response issues.

To alert oil companies and oil spill response organizations around the world to incidents that occur as a result of the "Millennium Bug", and to record the level of response, Oil Spill Response, Ltd. is establishing a Communications Center at its operational base in Southampton, England.

OSRL's Communications Center will collect data on incidents from participating companies and response centers. A Global Status Report will be regularly prepared and distributed via an agreed Communications Network to all those who are participating, and is also available to interested parties via the Internet on OSRL's website. 59

Chemical Plant Stand-downs: Several large chemical firms have announced plans to shut down at least some of their plants before midnight December 31 and restart in gradually after January 1. In addition, some small and medium sized firms have decided as a public reassurance effort to increase staff over normal levels on December 31 to increase visibility and deal with potential disruptions.

1 "The New American Evolution: The Role and Impact of Small Firms," June, 1998. A report on small firms prepared by the Office of Economic Research of the U. S. Small Business Administration's Office of Advocacy.

2 Statistics of U. S. Businesses ­ Microdata and Tables, SBA/ CENSUS, Data on Establishment by Firm Size,
Contract #7.3112.0188, June 4, 1998. 3
United States Small Business Administration Office of Advocacy, RS Number 183, April 1998, U. S. Summary Corporate Change Tables.

4 http:// y2khelp. nist. gov/ tool. nsf/ frmEF? ReadForm
5 William J. Dennis, Jr., Small Business and the Y2K Problem: Part III, NFIB Education Foundation, June 7,
1999. 6
Ibid. 7
Reuters, "Many small businesses in Europe not ready for Y2K," Special to CNET News. com, September 6, 1999.

8 General Accounting Office Report to the Committee on Small Business, U. S. Senate, "Year 2000
Computing Challenge: SBA Needs to Strengthen Systems Testing to Ensure Readiness," August 1999, GAO/ AIMD-99-265.

9 NAM Press Release #99-239 dtd July 15, 1999; "New NAM-Yardeni Poll Shows Major Manufacturers
Optimistic about Overcoming 'MILLENNIUM BUG'," News Contacts: Rob Schwarzwalder (202) 637-3090, Jan Amundson (202) 637-3055.

10 CapGemini Press Release dtd August 10, 1999, "Fewer than Half of Major Firms Anticipate Full Year
2000 Compliance in Critical Systems by Year's End," Press Contacts: Steve Vitoff (212) 481-7000 x137, Mark Schroeder (212) 481-7000 x145.

11 Merrill Lynch Special Report, "Y2K: Bulls, Bears or Bugs?," July 1999.
12 Testimony of Gary Beach, Publisher of CIO Magazine, before the US Senate Special Committee on the
Year 2000 Problem, Washington D. C., July 22, 1999. 13
CapGemini Press Release dtd August 10,1999, "Fewer than Half of Major Firms Anticipate Full Year 2000 Compliance in Critical Systems by Year's End," Press Contacts: Steve Vitoff (212) 481-7000 x137, Mark

Schroeder (212) 481-7000 x145.
14 Merrill Lynch Special Report, "Y2K: Bulls, Bears or Bugs?," July 1999.
15 Testimony of Joseph C. Pucciarelli, Vice President and Research Director, Business Management of
Information Technology Research Center, GartnerGroup, Inc., before the U. S. House of Representatives Science Committee's Subcommittee on Technology and the Committee on Government Reform's

Subcommittee on Government Management Information and Technology, Washington, D. C., August 4, 1999.
16 Prepared statement of Jacquelyn L. William-Bridgers, Inspector General of the US Department of State,
Arms Control and Disarmament Agency, and US Information Agency, including the Broadcasting Board of Governors, before the Special Committee on the Year 2000 Technology Problem, July 22, 1999.

17 The contractor performing the work for the USDA is the GartnerGroup. Gartner has performed to reports
in response to the contract. The most recent was dated July 2, 1999. 18
GMA/ FMI Y2K Business Contingency Planning Framework. 19
GartnerConsulting, "Assessment of the Year 2000 Remediation Status within the Nation's Food Supply," Prepared on Behalf of U. S. Department of Agriculture, dtd July 2, 1999.

20 Ibid.
21 Caron, James, Shipper and Exporter Assistance, Transportation and Marketing, Agricultural Marketing
Service, USDA, and Gressel, Field Communications Office, Foreign Agriculture Service, USDA, "Y2K and International Agriculture Transportation: Analysis of Export Markets, Import Suppliers, and Major Food Aid

Recipient Countries," prepared for USDA's Food Supply Working Group, September 1999. 22
http:// www. epa. gov/ region02/ y2k/ y2kcase. htm 23
http:// business. bug2000. co. uk/ databases/ index. shtml 24
http:// www. csb. gov/ 1999/ i9908. htm 25
Associated Press, PM-AL --Chemical Plant Reaction, 0350, 07: 29: 34, 31 August 1999. 26
Associated Press, BC-LA --Kaiser Explosion, 0290, 02: 27: 40, 07 September 1999. 27
Associated Press, PM-WA ­ Pipeline Explosion, Bjt, 750, 02: 28: 11, 12 August 1999. 28
http:// www. chemsafety. gov/ y2k/ brochure9907. htm 29
http:// www. oecd. org/ news_ and_ events/ release/ nw98-113a. htm 30
http:// y2k. senate. gov/ news/ pr990315. htm 31
http:// y2k. senate. gov/ hearings/ 990510/ 32
http:// y2k. senate. gov/ news/ pr990809. htm 33
http:// www. senate. gov/~ epw/ stm1_ 106. htm# 02-24a99 34
http:// www. y2k. gov/ new/ FINAL2. htm 35
http:// www. y2k. gov/ new/ FINAL3. htm 36
http:// www. y2k. gov/ new/ 3rdquarterly. html 37
http:// www. chemsafety. gov 38
http:// www. chemsafety. gov/ 1999/ news/ n9932. htm 39
http:// y2k. senate. gov/ hearings/ 990510/ jmakris. htm 40
Ibid. 41
"Prevent Year 2000 Chemical Emergencies," US Environmental Protection Agency, Office of Solid Waste and Emergency Response (5104), EPA 550-F-99-003, February 1999, p. 4.

42 http:// www. epa. gov/ year2000
43 http:// www. chemalliance. org
44 "Enforcement Alert," Vol. 2, No. 5, Office of Regulatory Enforcement, EPA 300-N-99-010, August 1999.
45 http:// y2k. senate. gov/ hearings/ 990510/ ffrodyma. htm
46 Ibid.
47 Ibid.
48 http:// www. osha. gov/ Y2knews. pdf
49 http:// www. cmahq. com
50 http:// y2k. senate. gov/ hearings/ 990510/ soc. htm
51 http:// www. epa. gov/ year2000/ smefinal. pdf
52 http:// www. oes. ca. gov/
53 http:// process-safety. tamu. edu/
54 http:// www. edf. org/ pubs/ newsreleases/ 1999/ aug/ h_ Y2KcheckAC2. html
55 http:// wetp/ clear/ y2k/ index. htm
56 http:// www. co. washtenaw. mi. us/ depts/ EIS/ env_ resp/ lepc/ mtinfo/ y2kletter. html
57 For a discussion of 'batch' processing, see the: http:// y2k. senate. gov/ hearings/ 990510/ jschleck. htm
58 http:// y2k. senate. gov/ news/ pr981002. htm
59 http:// www. oilspillresponse. com/

-- Brian (, September 23, 1999


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*****Senate 100 Day Report in HTML*****  Home Page (TB 2000)

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 Y2K in Canada and Beyond

Senate Report

*****Senate 100 Day Report in HTML*****  Home Page (TB 2000)

Executive Summary of 100 day report

 Business 100 Day Senate Report Part One

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 Financial Services 100 Day Senate Report

 Transportation 100 Day Senate Report

 Telecommunications 100 Day Senate Report

 Health Care 100 Day Senate Report

 Utilities 100 Day report

 International 100 Day Senate Report Part One

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 Preparedness 100 Day Senate Report

Senate Y2K Committee 100 Day report  Senate Report Home Page (PDF)

-- Brian (, September 23, 1999.

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