Our Nuclear Future - Financial Risk and Externalities II

Hanford Facility, Washington

In my last article on the nuclear issue, "Our Nuclear Future, Financial Risk and Externalities",

I discussed Rating Agency Capital Models in the context of nuclear risks such as those posed at Fukushima, Chernobyl and Three Mile Island.

The issue of managing the risks associated with both military and commercial nuclear applications is a vital one, that should interest all of us and speaks to the very concept of externalities and how to manage them in a global world.  In this article I focus on commercial applications.

The Fukushima disaster was impacted by inadequate safeguards.  The tsunami risk was not adequately taken into account in planning where to place the back up generators which could restore power in the event of an interruption of power.  The back up generators were placed at point too near the sea wall protection that left them exposed to the tidal wave action of the large tsunami that hit off Fukushima on March 11, 2011, when an 8.9 magnitude earthquake was experienced.

How do we deal with the risk management issues concerning the financing, construction and operation of nuclear plants, and with the issue of managing nuclear waste from both military and civilian applications?  These issues concern low probability, high risk events, issues that fall outside of the scope of normal everyday events.

The federal government offers nuclear power plants some degree of protection from liability.  These limits on liability, which exist in order to encourage the construction and operation of nuclear plants for power generation purposes, do not do as thorough a job of mitigating risk as they should.  This is because an external party, the federal government, is responsible for the oversight.  In the case of Fukushima, where plants are constructed and operated across national boundaries, the issues become more complex.

The Fukushima Daiichi nuclear power plant was constructed and operated in Japan, by Fukushima General Electric (GE), Boise, and Tokyo Electric Power Company (TEPCO).  The components of the nuclear plant were provided by contractors such as GE,which provided six GE nuclear reactors. Other contractors were also involved. Multi-national resources were employed.  Liability issues are very difficult to ascertain.  It is very probable that the loss of the ability of the generators to provide power after interruption in service due to the tsunami materially impacted the fate of the nuclear material in those reactors and magnified the effect of the event.

Management of these issues across national boundaries presents a serious issue.  How do you price for risk when governments put caps on liabilities?  It is easier for companies to price for risk when the risk is limited!  The incentive for commercial entities to manage risk is reduced when they do not have to absorb the risk of extreme events in either pricing of their products, mitigation of that risk, or the application of design elements to manage that risk. The risk is shifted to the governments.

When all else fails, due to the failure to put in place elements that will mitigate extreme risk, governments have to step in.  At this point, governments must ascertain their own issues of financial accountability and debate among themselves.  This issue is currently unfolding as nuclear radiation emerges from the Fukushima disaster and manifests itself in the ocean, carried by currents, and in the air, as was the case with the Chernobyl event.

Clearly, there must be a better match between potential liabilities and mitigation of risk.  The problem occurs when it becomes financially unfeasible for companies to price for the risk of very low probability, high risk externalities.  The government(s) must retain the capability to regulate.  History has shown that government regulation is difficult in the face of corporate profits.  This was shown in the history of seeking to regulate the ASARCO smelter.

Nuclear power plants do not arise ex nihilo. They must be financed, built, insured.  How do you finance nuclear power plants?  They can be built with government financing and the government can assume all the risk.  In a commercial enterprise, across national boundaries, private parties can finance nuclear power plants if they have sufficient funds and can insure the risk of loss, either by commercial carriers, government support or by self insuring.

There are many financial instruments that may be available to finance nuclear power plants.  In addition, nuclear power plants require real estate.   A component of a nuclear power plant can conceivably be moved from one site to another, yet the ground below stays, and is subject to the risk of contamination.

It is instructive to look back at the history of Nuclear Power Plant generation in the Northwest.  The situation with Washington Public Power Supply System Bonds is instructive (WPPSS).  An article from HistoryLink.org discusses this history of one of the largest bond defaults in history.  Five WPPSS power plants were envisioned, and WPPSS power plant 2, the Columbia Generating Station, survives.  The facility is now called Energy Northwest, and produces 12% of the power generated by the Bonneville Power Administration.

A great portion of the Northwest's power supply is generated by hydroelectric sources such as those operating along the Columbia River.

The discussion of financing nuclear power plants rests with a projection of bond default experience over time (default matrices), and how bond ratings emerge through Rating Agency models such as Standard and Poor's, Moody's and A.M. Best.

Clearly, the issue of using bonds to finance nuclear power plants is a critical one, in more than one way.  WPPSS financing has provided an example of the risk of building nuclear plants, financing them, and having companies such as insurers and banks assume the risk of financing them.

Financial institutions take risks when they purchase company bonds.  The construction and operational risks (there are separate bonds for construction and operation) are borne by those that purchase the bonds.  Riskier enterprises are assigned a risk premium that is reflected in the interest rate offered on the bond.  The riskier the enterprise, the higher the interest rate, and the longer it takes the enterprise to retire the bond.  This is basic economics.

Given the history of WPPSS, it is difficult to construct a model for financing nuclear power plant construction.  History has shown that even rating bonds for more ordinary applications, is fraught with risk.  The financial events of 2008 have demonstrated to us how the domino effects of  certain companies being taken down can bring a financial system to the brink.  It is clear that certain financial institutions were allowed fail, while others were bailed out by the government.  Insurer AIG, for example, was bailed out, while Washington Mutual was allowed to fail.  This is a very interesting aspect to investigate, since Chase was left purchasing and holding the assets that Washington Mutual had accumulated over time.

The 2008 financial collapse is another blog article, however it is instructional in how bond defaults can bring down a financial system. Suffice it to say that mortgage backed securities, collateralized mortgage obligations, credit default swaps (CDS's) and collateralized debt obligations (CDO's) played a large role in this collapse. These issues reflected the financial arbitrage reflected in Rating Agency and regulatory agency capital analysis of financial institutions.  The actions that the government took, in deciding which institutions to rescue and which institutions to allow to fail, helped determine the path that would be taken.

Rating Agencies played a large role in the events that unfolded.  I have discussed Rating Agencies in previous articles.

Clearly, nuclear financing issues present complexities beyond those presented by other issues financed by our market system.  There are limits to liability that impact the nuclear arena.  We are left, then, with a cooperative issue impacting the ways in which governmental regulatory agencies can interject themselves into the system and regulate in a manner to mitigate low probability high impact risk.

This takes us again back to the past, and the issues attendant in regulating ASARCO Smelter Emissions and the problems that this issue presented.

These are the issues we face in these times of global warming and climate change, as we consider the risks and benefits of financing nuclear power plants.  Alternative energy sources are discussed in my article "Global Warming and Climate Change - Polar Pioneer" .

We must consider the issues of regulatory government as it is juxtaposed with issues concerning market operations, in dealing with situations that involve low probability, high risk events.  It is clear that unfettered market operations may bring about market collapse through the interrelationships that exist within the structure of markets. It is also clear that government regulation that is not strong enough may not be able to counter the impact of market forces that overrun it, especially considering the profits that can be developed in certain markets.  Furthermore, it is clear that government forces may act in a manner contradictory to public interest by choosing winners and loser, perhaps steered by an array of  predefined values of certain groups.

Can we trust government?  We must have checks and balances.  Do we want government to only have one option, or to offer choices?  I'm in favor of choices, as choices facilitate change, which is needed. Market research has shown that people can tolerate only so many choices; this has been in areas such as bottled peaches, cereal, etc.  Would we ever want our choices in cereals and bottled peaches to govern our choices in power generation and other key areas?  No, however the analogy is instructive.

We need a government strong enough to regulate; the problem in regulation, however, has shown that it is difficult for regulatory agencies to keep up with the profits that can be made from activities under investigation.  This is certainly true in the financial arena where new instruments, especially those employing financial arbitrage, arise in order to present profit opportunities that defy regulation.

Constitutional issues such as due process and informed consent are bell weather issues in our financial and social system.  The Justice Department has a long storied history in regulating monopoly.  These are all important issues as we consider regulation of markets, intrusion of regulators/law enforcement into markets, and imposition of systems which defy Constitutional rights.

These issues all reflect ongoing issues of climate change and global warming and the effect of the environment on certain populations.

Our Constitutional rights are now under attack and must be defended, especially as regards issues of due process and informed consent.  I have made a thorough examination of the social processes existing in our society today and find material flaws in social systems.

Social systems and the justice system as they currently exist need serious reforms to enforce the Constitutional rights that we hold so dear to us, as do imposed belief systems.

marilyndunstan.blogspot.com

Our Nuclear Future - Financial Risk and Externalities
Our Nuclear Future - Hanford and Spent Nuclear Fuel
Global Warming and Climate Change - "Polar Pioneer" and Arctic Drilling

Externalities

Chernobyl 25th anniversary 
Energy Choices and Risk
Global Warming and Climate Change-Polar Pioneer
Processing Risk and Uncertainty
Log in the Surf - 8.9 Japan Earthquake (9.0 updated)

History Link.org
Washington Public Power Supply System

Financial Rating Agencies and Risk

Pratt and Whitney J-58 Engine, Lockheed SR-71 Blackbird,

Museum of Flight, Seattle, Washington

How will a recent settlement of a Justice Department suit against Standard & Poor's Rating Agency impact the Rating Agency's assessment of companies that it rates?  With many companies having calendar year financial year ends, this is an emerging question as the various Rating Agencies reviews ratings.

The Justice Department is investigating Moody's Rating Service. The Moody's and Standard and Poor's suits are related to fraud in mortgage backed securities.  Mortgage backed securities experience contributed significantly to the financial crisis of 2008.  The U.S. Justice Department worked with State Agencies in filing the suits.

A recent example of the impact of credit ratings is shown by Standard & Poor's affirmation of General Electric's Credit Rating at AA+ in the wake of its earlier announcement to exit its GE Capital Finance arm and divest itself of real estate assets, as reported in Marketwatch.

Meanwhile, Moody's Investor Service downgraded GE on that decision, concerned about favoring equity investors over creditors. GE Capital has a history of aviation financing, as well as an interest in the future of aviation, as in supersonic flight.

It is interesting to note the responses of the two Rating Agencies in this particular case, in the light of Justice Department investigations and emerging circumstances in the financial markets.  What does the future hold in store?

In addition to the financial circumstances surrounding GE, and in particular, GE Capital, it is interesting to consider that jet engines might serve as a useful metaphor for emerging issues in the financial sector, and for Rating Agencies in particular.

A number of years have passed since the financial crisis of 2008.  In a previous blog article on August 22, 2011, I discussed the downgrade of  United States Long Term Sovereign Credit from AAA to AA+.  In this article I discuss some of the issues involving Rating Agency and other capital models.

Capital models are complex analytic models designed to measure the soundness of institutions.   The U.S. Justice Department has been evaluating a number of rating agencies to assess their impact on the financial markets and their adequacy in measuring company risk.

Generally, capital models look at total capital available and compare it a risk based capital measurement.  The risk based capital measurement is a formula based on the risks a company assumes in its various lines of business, assigning weighting capital factors to measure important items such as asset risk, insurance risk, asset liability/matching risk, business risk and other factors.  These types of measurements vary considerably between different types of business.  Depending on the use of the capital model, the structure of the model and the types of metrics used, the factors, and the analysis will differ considerably from institution to institution.

Rating Agencies serve to provide information to investors that help them decide whether to invest in a company.  Thus the analysis of a rating agency focuses on issues of financial soundness, potential for growth, and a wide variety of issues that are of interest to potential investors, in both debt and equity securities.  Rating Agencies include such agencies as Standard & Poor's, Moody's, A.M. Best and Fitch.

Rating Agencies perform valuations of companies. Rating Agencies will provide a rating for a company based on data readily available through public sources.   However, in order to have a comprehensive financial evaluation, Rating Agencies typically require a fee to be paid which will enable the company under valuation to interact with the Rating Agency, allowing it greater access to information obtained by the Rating Agency and more sharing of information.

Rating Agency models will differ from models used by regulators to assess financial soundness.  For example, state insurance commissioners who regulate financial soundness of insurance companies will also model risk based capital.  Their analysis,  however, is focused more on solvency issues than indicators of growth to potential future investors. This is because state guarantee funds, which insurers pay into, are regulated by the states. State guarantee funds provide some funds according to regulation to certain classes of policyholders in the event of insolvency. The downside risks and upside benefits are different for regulators versus the various classes of investors interested in a company.

Because the focus of capital models vary widely according to the use for which they are intended, they tend to produce different types of results.  Regulatory models might be established through cooperation between certain government or quasi-government-private bodies that seek to promote some degree of uniformity (.e.g. the National Association of Insurance Commissioners - NAIC).

Private Rating Agency models by such major players in the system such as Standard & Poor's, Moody's, A.M. Best and Fitch will vary because each of these rating agencies are seeking to gain business by rating companies and each has developed its own model. This is called competition. Thus when a company is evaluated by rating agencies, their rating may vary between different rating agencies.  This is because different rating agencies will weight various activities differently than others.

Rating agencies have a considerable amount of power to impact the way in which a company is viewed in the marketplace.  The specific metrics and factors used by a rating agency to judge a company may impact whether a company gains or loses business and may influence a company's decisions.  An action by a rating agency to downgrade a company may result in the company losing a considerable amount of business, and even cascade that company to failure.

There is a certain psychology at work in companies dealing with rating agencies.  Because companies have an opportunity to gain a more favorable rating by interacting with a rating company if they pay a fee to have a more comprehensive analysis, the two entities are now bound by some sort of cooperative relationship (symbiosis) whereby it is in the interest of the rating agency to keep getting the fee.  The rating agency, however,to ensure its credibility, needs to report adverse conditions that may lead to failure of the rated company at some point.  Thus the rating agency is on the horns of a dilemma, whereby it must at some point act to ensure the credibility of its ratings.

However Rating Agency models are just that, models, and models may not take into account all the protective factors that companies use to ensure continued operation.  Rating Agency models reflect the biases of those who engineered them and may reflect psychological factors such as confirmation bias and cognitive dissonance.

The ability of a Rating Agency to cascade a company downhill towards failure,  into the hands of investors ready to swoop it up at bargain prices, may hinge on the use of specific metrics and factors which are keyed towards certain predetermined models or results.

A Rating Agency model, like the companies it rates, are very complex models.  Perhaps a jet engine is a suitable metaphor, in terms of complexity, in considering how such models operate in an ever complex world where problems such as climate change and global warming loom ever larger. My recent blog articles on the Polar Pioneer and Seattle-Tacoma International Airport discuss some of these issues which may impact aviation.

A jet engine such as the Pratt and Whitney J-58 engine, operating in conjunction with the titanium-skinned aircraft itself, a SR-71 Blackbird, needs to be able to operate in a range of atmospheric conditions reflecting different atmospheric pressures, levels of oxygen and carbon dioxide, and under various heat constraints and mechanical stresses.  The pilot's own physiological and psychological stressors are of paramount importance in such an environment, which includes exposure to a variety of environmental hazards, in various feedback modes.

It is in this context that we consider Rating Agency models not simply as a static model based on year end performance or occasional interaction with companies they rate but also a dynamic model that must take into account many complex factors and interactions in an environment where physiological and psychological stress tests, as experienced by test pilots, operating in a real environment may be the most dangerous elements, especially when so many unknown factors must be taken into account.

Many companies perform complex modeling analyses to stress test their operations under a range of potential situations.  The question is how Rating Agency models reflect the balance of risks and who, in this complex society is actually directing the emergence of results.

These are all very significant issues as we live in an interconnected society, perched on a bifurcation point of climate change and global warming, that has impacts on many sectors of the society, and, in fact the planet.  Externalities and systemic risk are major factors in our ever changing society as we address issues that go beyond individuals, corporations and governments.

Fuel and energy sources are important factors in a global economy, issues that affect many on a personal scale, in many ways that many not suspect, due to their ever increasing complexity. Rating Agencies, and their impact on society are but one of a number of factors influencing the outcomes of these very important issues as we tackle these significant problems.

Seattle-Tacoma International Airport - Medical Issues

Seattle-Tacoma International Airport, Third Runway,Sea Tac, Washington

Examination of the impact of the Seattle-Tacoma International Airport on the region poses a number of analytic challenges.  In a previous blog article, Seattle-Tacoma International Airport - Pollution, I discussed pollution issues.  Links to my other blog issues on the airport may be found listed below.

The focus of this blog article is on health related issues which may be related to airport operations, keeping in mind that there are other sources of pollution that may contribute to health conditions, and that there are factors other than environmental conditions which may contribute to health conditions.

Other sources of pollution may include vehicular traffic, such as cars, trucks, vans, buses and rail systems, as well as industry and commerce as well as other human activity such as wood burning. Many factors, in addition to pollutants, contribute to health.  Economic and sociological factors such as poverty, education and disenfranchisement all are factors which influence health.

There is considerable information available from the King County Health Department on the geographical distribution of various medical conditions.  These are listed below. Incidences of cancer, respiratory disease, cardiac and pulmonary heart conditions vary throughout the county.

MEDICAL ISSUES

Known

• A number of medical conditions may be impacted by environmental factors, including cancer, respiratory/pulmonary,sleep disorders,  blood/vascular disorders, immune system disorders, cardiac disorders and neurological/psychiatric/psychological issues that can emerge as a result of increased environmental exposure. The impact of air pollution on the generation of reactive species such as oxygen and other radicals may also adversely impact sleep states.
• Environmental pollutants often increase generation of reactive species or oxygen radicals, increasing oxidative stress, impacting a number of medical conditions, and may create new ones.
• Electromagnetic fields (microwaves) - Potential effects vary according to the distance from the source with general public exposure lessened.  Health effects studied include cancer, physiological and thermoregulatory responses, reproductive issues, cataracts, and impacts on calcium ion mobility.  Effects have not been sufficiently established to be able to determine regulatory standards.
• Studies have been made by the Washington State Department of Health on glioblastoma multiforme and other conditions.
• A February 25, 1999 report from the State Health Department and King County Health Department indicates: "While the state health department found that the occurrence of all SeaTac Concerned Citizen cancers in the area within 5 miles of the airport was less than expected in comparison to King County, the Seattle-King County health assessment found an increase in cancer deaths around SeaTac Airport."  This study examines health issues in the neighboring communities around the airport.
• There are extensive studies from the King County Department of Public Health available regarding a variety of health and socioeconomic factors for the communities in King County. These reports indicate increased incidence of cancer and pulmonary disease, but decreased risk of heart attack, stroke and Alzheimers relative to other areas.  There is also a higher degree of cigarette smoking in the region, complicating analysis.  There is a range of socioeconomic indicators showing lower socioeconomic indicators in the region.

Past Legacy

• One of the cardinal features of evolution is the incorporation of biologicals and minerals into a system in order to advance features that have evolutionary advantage.  This is called biomineralization.  It is not inconceivable that out of the many molecules emitted through airport operations (and other sources throughout the region), that one in the witches brew of combinations might find a home within the human body, evolving the system, or throwing a monkey wrench into it. Calcite enabled the creation of the eye in trilobytes  in the pre-Cambrian.  However a serious problem in this process is the issue of interoperability between systems in such processes.
• To what extent does the ground on which we sit impact health?  The area holds the legacy of the ASARCO Tacoma Smelter Plume  formed in 1899, and the emissions since that period.  This legacy impacts rock, soil, water and air.  The Seattle-Tacoma International airport sits on a considerable amount of fill, which is in addition any deposition that may have fell on the underlying soil.  Other parts of the region may also have been impacted by sand, rock and gravel transported from sites more heavily impacted by the ASARCO Smelter's operations.
• The airport sits on Fraser Glaciation,  Vashon Stade.  To what extent do the rocks around the airport and the water affect health? It is possible that the area of the airport could hold some clue to past evolution.  A sloth was discovered in a swampy area north of the airport in 1961, and a mammoth tusk was discovered in the South Lake Union area of Seattle. Both sit at the Burke Museum.  DNA analysis from an archaeological find could perhaps provide scientists with clues to help solve emerging problems germane to our evolution and our ancestors.

Emerging or Unknown

• The emergence of new and novel health risks may occur in the witch's brew of chemical soup surrounding the airport and other areas subject to environmental risk. Illnesses that normally occur in other areas of the world may emerge in this arena, given the geological milieu in which the airport sits, the meteorological conditions, and the increased levels of pollutants, including carbon dioxide.  Carbon dioxide is a sensitive indicator of global warming and climate change and may also impact the respiratory system in a similar fashion in the immediate neighborhood of the airport.
• Seasonal flu and emerging viruses, could recombine in the environment surrounding the airport, mixing human and bird migration patterns with environmental factors impacting local populations.  Thus viruses could serve as a vector for the incorporation of novel or emerging features resulting from the witches brew of chemicals.
• Chemicals emitted in the witches brew of chemical emitted from airport operations could be impacted by solar radiation, a source of energy, especially during periods of geomagnetic storms.  Potentially subatomic collisions could evoke a transitional state in molecules, and be incorporated into the body.  Any impact from the creation of transitional molecules would be in addition to any direct effect from any solar storms.
• The witches brew of chemicals emitted by air transport, given the power, acceleration, deceleration and forces put on aircraft engines, abrasion, means that more exotic chemicals may be created.  However, it is possible that similar types of reactions may also be occurring in different parts of the region, perhaps to a different extent.

Establishing Correlations between Pollutants and Medical Conditions

• While some pollutants in particular are points of focus, the extensive lists provided make it difficult to correlate exposures to any one or any combination of health outcomes.  This is an issue of multiple correlation analysis in the face of numerous variables and outcomes, many of which may interact with each other to alter individual correlation between any two variables. 
• Analysis of risk focuses on cancer metrics.  While the emergence of the cancer risk is important (and critical), identification of other outcomes is also important. Early indicators of future outcomes may serve as helpful markers of environmental distress before its impact becomes too severe.
• Environmental markers might include blood coagulation measurements, markers for the impact of oxidative stress, markes for nuclear DNA and mtDNA damage, and markers for the preference of glycolysis in cells (Warburg Hypothesis), among other things.
• Categorization of medical systems, or medical coding, puts medical conditions in "boxes" which may make analysis difficult when causes and/or outcomes cross boundaries, medical conditions are inappropriately categorized or new information informs medicine.
• The division of conditions into physiological versus psychological causes presents such difficulties, especially when these conditions are subject to such a wide disparity of treatment throughout the existing sociological framework. The bifurcation of conditions into physiological versus behavioral outcomes tends to create categories that diminish or ignore the health and sociological impact of pollution exposure and/or cross category lines.
• Some indices that represent psychological stress may combine various psychological indicators in a weighting formula that may impede the ability to do correlation analysis on any one factor. One is left with memories of Upton Sinclair's "The Jungle", a book about meat packing plants, wondering how the whole was constructed from the parts.   Thus, the question remains in indices and tests as to whether the manner in which the indices are constructed drive a certain result or whether indices keep pace with changes in their individual components.
• Occupational and environmental health outcomes are not appropriately measured in a manner that can express the full continuum of types of work that exists in the sociological sphere.  This reflects the existing dysfunctional definitions of work and disability, and impacts correlation analysis between occupational and environmental health.
• Medical fields studying intersecting fields of study, such as neurology, psychiatry and psychology can come into conflict at times, making it more difficult to study health outcomes emerging from environmental factors. 
• Definitions based on subjective issues such as behavior and, belief systems, emerge to complicate the analysis of the impacts of environmental pollutants.
• The drive to cut medical costs conflicts with testing the impacts of increased environmental load on the public, leaving the impacts uncertain and placing the burden on those impacted. 
• Increased population and economic activity has impacted Western Washington so that environmental risk exists in many places throughout the region, to varying degree.
• The medical system currently does not provide sufficient support to provide both testing and treatment of medical conditions which may arise from the increased exposure to environmental pathogens. There are barriers to entry into the medical system which impede the ability to measure outcomes and protect human test subjects in the evolutionary process.
• Assessment of different contributors to morbidity and mortality may confound research into the underlying environmental issues.  An example of this is assessing the contribution of smoking to morbidity and mortality versus the environmental effects caused by airport operations.
• Different statistical measures may be used by reports, confusing the reader or making it difficult to interpret data shown in different forms;  Data may be presented with an incidence rate (occurrence of a condition in a population over a period of time), a prevalence rate (percentage of a population having a condition at a specific period of time) or mortality rate (percentage of deaths in a population over a period of time).  The US Government publishes data on morbidity and mortality .

The challenge is to put together to what extent the environmental factors drive the medical and  socioeconomic factors and are in turn influenced by them, in a positive feedback loop.

Sources:
Puget Sound Clean Air Agency - Final Report - Puget Sound Air Toxics Evaluation - October 2003
Department of Ecology - Toxic Cleanup Program (ASARCO Smelter Plume)
World Health Organization - Electromagnetic Fields
Port of Seattle - Part 150 Study
Port of Seattle - Groundwater Monitoring
Port of Seattle - Stormwater Pollution Prevention Plan
Scandanavian Journal of Health - Glioblastoma Multiforme
Tacoma Smelter Plume Information - Washington Department of Ecology
King County Community Health Indicators - King County (Top 10 Leading Causes of Death)
King County Public Health -School District Health Profiles
King County Health Profile
King County Public Health - Data and Reports

Blog Articles:
Externalities and Risk - The Seattle-Tacoma International Airport
Seattle-Tacoma International Airport - Environmental Issues
Seattle-Tacoma International Airport - Pollution

Seattle-Tacoma International Airport - Pollution

Seattle-Tacoma International Airport, Third Runway,Sea Tac, Washington

Environmental impacts of the Seattle-Tacoma International Airport present a number of issues, as discussed in my previous blog articles, Externalities and Risk - The Seattle-Tacoma International Airport and The Seattle-Tacoma International Airport - Environmental Issues. Cities around the airport such as Burien, Sea Tac, Tukwila, Normandy Park and Des Moines have gained economically from airport operations and have suffered costs, or externalities from airport operations.

The airport and the trade that it generates are the 800 pound gorilla in the neighborhood, are the drivers of economic change and development, and through the multiplier effect are responsible for a great deal of economic development in the region which they do not directly manage.

It is clear to those living in the neighborhood of the airport that there are considerable externalities involved with regards to airport operations. Citizens note the impact of air and noise pollution.  It is also true that the airport has a significant impact on the larger region.  Increased airport operations may necessitate it compressing activities within its existing space, enlarging its footprint by buying properties, or having some operations move to other airports. Airports in the region include Renton Municipal Airport, King County Airport/Boeing Field and Paine Field in Everett.  Moses Lake in Eastern Washington, which has a large runway, could even be considered a possibility to relieve additional load.

A recent Sea Tac City Council meeting (April 16, 2015) addressed a number of these issues, looking towards long term growth in airport utilization (2.9% average per year over a twenty year period with greater increase in the near term), and the potential of a Federal Aviation Agency building to the South of the Airport. There is already a Federal Detention Center to the south of the airport.  Some airport usages, such as food services, could potentially move outside the perimeter of the airport.

It is difficult to extract the specific environmental impact of the airport on the region from other sources of pollution, to attribute differences in health and socioeconomic metrics to specific environmental factors when air, noise and electromagnetic waves show no boundaries, and where there are many other sources of pollution including cars, trucks and other industries or point sources. There are feedback mechanism which work between all the relevant variables which complicate analysis.

There are a variety of studies available from governmental sources regarding emissions, sociological parameters and assessing the risk from the pollutants that the public is exposed to. These studies present analytic challenges due to the extensive number of variables involved, the manner in which the variables are measured (or not measured), their subjectivity and issues of comparability over time.

The environment around the airport serves as a metaphor for the environmental challenges that confront us, an example that is repeated in other environments.  Thus any studies done in the microclimate or vicinity of the airport could be used as examples for other areas facing similar issues. The situation around the airport must be examined in the context of the growth and economic development issues that we face, so that we can develop policy which will help us face the increasing social and economic challenges that face us.

A Washington Department of Health and King County Department of Public Health study in 1999 provides an example of a report that is focused on the area around the airport, looking at one, three and five mile bands around the airport.  Perhaps this report could be expanded to include the examination of additional variables of concern.  This report looked at the condition of glioblastoma, a neurological cancer disorder and other conditions. King County Department of Health has an extensive variety of reports available on health and sociological issues.

Future studies must include all communities impacted in the area around the airport, including those indicated in the first paragraph.  The larger question is how the externalities of airport operation may be addressed and compensated for, and the needs of the immediate and larger communities met.  It is apparent that there is a problem, that it does impact health and well being, including both psychological well being and physiological well being.  While another study would be valuable, and should be done, as the study is undertaken, steps should be taken to remedy the immediate situation in the face of increased economic development.  Perhaps permanent residential properties in the close vicinity of the airport can be purchased and used for their operations which can be moved outside the fence.

However difficult it is to bring all the variable together in a rigid analytic framework, analysis of the situation becomes apparent when you take a step back and look at the big picture.  The airport has a profound effect that does not appear to be captured fully by the measurements that are provided to us. Human beings are being experimented on, and the environment around the airport is transforming people, perhaps in a way that they do not wish to be transformed.  This issue has profound psychological, medical, economic and sociological implications.

Examination of the situation presents a number of analytic problems, many of which involve measurements and their interpretation. I discuss these issues in this and future blog articles.

The Pollutants

• The wide range of pollutants discussed form a witch's brew of chemicals, including diesel particulate matter, cadmium, arsenic, polycyclic aromatichydrocarbons (PAHs), lead, and many others.
• Air quality and water quality standards do not exist for many of the pollutants mentioned, presenting a problem in taking regulatory action.
• Pollutants may interact in unexpected ways.  With so many pollutants, and so many combinations, it may be difficult to ascertain the impact of all the interactions and the direct contribution of the airport to those interaction.  
• While it may be difficult to attribute the direct contribution of the airport to pollutant levels, the airport's impact through the multiplier effect gives greater credibility to the airport's contribution to overall pollutant levels.  At that point it becomes an issue of assigning the costs of those externalities to those benefiting from the airport's presence through the multiplier effect. An example of this would be shuttle pick up services and cabs.
• Pollutants may combine with meteorological or solar conditions in unexpected ways, perhaps generating new, transitory, and unanticipated chemical reactions
• The movement of pollutant monitors over time makes it difficult to perform long term studies analyzing the impact of pollution on public health.  Opportunity to measure long term trends and make comparisons between stations is decreased when stations are moved elsewhere.
• The methods of measuring pollutants and standards for assessing health risks have changed over the years, especially as new equipment has been developed. Questions arise as to what extent new measurement methods correlate with old methods, what information is gained or lost by using these new methods, and how the continuity of data has been impacted.
• There are locations which have not been monitored, at the western edge of the airport, which may represent a microclimate more susceptible to the pooling of polluted air, especially during inversions when the air is stagnant, considering the barrier formed by the third runway's berm.
• It is not clear to what extent the aquifer is impacted by pollutants affecting water quality, and to what extent any water pollution is due to airport operations or property.  This is an issue reflecting the Tacoma Smelter Plume and any fill underlaying the airport and its impact on the environment and other issues.
• It is difficult to ascertain the contributions of the individual sources to the pollutant load in the area, although to a certain extent usage of fuels of various types may serve as a proxy.
• While there is some information on noise levels, the metrics do not do a sufficient job of measuring the risk and the impacts. Noise decibel level frequency distributions would be helpful, especially in capturing the impact of engine backblast. It is clear that the full time population lives too close to the airport for the noise levels experienced.  Increased insulation helps, but to have full impact, requires windows to be closed.  The experience of the Federal Detention Center in Sea Tac might be helpful in analyzing this issue.
• The focus on carbon dioxide has been on its contribution as a greenhouse gas to global warming.  While this is important on a global scale, the impacts of carbon dioxide in smaller areas, microclimates may be important to analyze in so far as they may impact the emergence of health conditions.
• Air traffic control and weather radars may contribute to a variety of health conditions through the generation of electromagnetic fields ranging from 300 MHz to 15 GHz which fit within the microwave energy spectrum.  Microwaves are electromagnetic waves with frequencies between 300 MHz and 300 GHz.  It would be helpful to have more monitoring information regarding electromagnetic fields and their attenuation over distance resulting from airport operations, including radar and radio signals.
• Study results discussing pollutant results with other parameters are sometimes expressed as not exceeding a certain standard level.   It would be helpful to present the actual data values themselves, so that the public can ascertain how close the levels are to exceeding standards, and what their trends are. 

I will discuss health and other issues in the next blog article.

Sources of Information
Puget Sound Clean Air Agency - Final Report - Puget Sound Air Toxics Evaluation - October 2003
Department of Ecology - Toxic Cleanup Program (ASARCO Smelter Plume)
World Health Organization - Electromagnetic Fields
Port of Seattle - Part 150 Study
Port of Seattle - Groundwater Monitoring
Port of Seattle - Stormwater Pollution Prevention Plan
Scandanavian Journal of Health - Glioblastoma Multiforme
Tacoma Smelter Plume Information - Washington Department of Ecology
King County Community Health Indicators - King County (Top 10 Leading Causes of Death)
King County Public Health -School District Health Profiles
King County Health Profile
King County Public Health - Data and Reports

Seattle-Tacoma International Airport - Environmental Issues

Airplane Landing in the Fog at Night

Seattle-Tacoma International Airport

In my recent article, "Externalities and Risks, the Seattle-Tacoma International Airport", I discussed externalities associated with Airport operations.  The Airport environment presents a number of environmental issues, many of which are impacted by meteorological factors.

Fog is an important risk factor.  Fog reduces visibility, and although airports have radar systems, fog is still a hazard for pilots to be aware of.  Fog is a cloud at ground level, water droplets or ice suspended in air.  Suspended particulates or gas molecules can provide a nucleus around which water droplets or ice can form, thus encouraging the formation of clouds.  Enucleated pollutants, such as sulfur dioxide gain an easier entry into the respiratory system, increasing the impact on health.

During the fall, winter and spring, when temperature inversions form, often in the wake of high pressure systems, there is an increased risk from pollutants, often accompanied by fog.  This is especially true in the Pacific Northwest with the influence of marine air from the Pacific Ocean.  

A normal temperature gradient is warmer air on the surface and colder air aloft.  A temperature inversion reverses the normal gradient, trapping colder air on the bottom layer, with warmer air aloft.

Temperature inversions early this year influenced the snow pack in the mountains, as temperatures warmed aloft.  Temperature inversions can impact the levels of ice pack and the availability of water from mountain sources.  Because pollutants are trapped with the warm air aloft and the cold air on the bottom,  pollutants are trapped within a lesser layer of air, increasing the density of pollutants. These conditions lead to air stagnation advisories and burn bans, which are called by the Puget Sound Clean Air Agency.

Climate change and global warming may impact a variety of meteorological factors, increasing severity.  Other meteorological factors affecting air traffic may include wind shear, thunderstorms, snow storms and heat, which is of concern in the southwest, where a certain air density is required for take off.

Pollutants from aviation operations are a concern.  Pollutants are the product of combustion of aircraft fuel, burning of oils and solvents as well as particulate matter which may become abraded especially during take off and landing (TO/L) where the stresses on parts are higher.

Aircraft emissions include a variety of gases, including those of interest in analysis of climate change and global warming.  These gases include carbon dioxide, methane, nitrous oxide, nitrogen oxides, volatile organic compounds, carbon monoxide and sulfur dioxide. 

A study by the Federal Aviation Administration (FAA) gives a comprehensive study of aircraft emissions.

The components of aircraft emissions may vary depending on whether they are aloft, and considered greenhouse gasses, or local air quality pollutants.  " Aircraft engine emissions are roughly composed of about 70 percent CO2, a little less than 30 percent H2O, and less than 1 percent each of NOx, CO, SOx, VOC, particulates, and other trace components including HAPs."

About ten percent (10%) of aircraft emissions, except for carbon monoxide and hydrocarbons occur at ground level.  Thirty percent (30%) of Carbon monoxide and hydrocarbon emissions from aircraft occur at ground level.

Carbon Dioxide and Nitric oxides, and methane, as well as water vapor have significant contributions to climate change and global warming. Ozone is also an issue with aircraft emissions, although the effect is felt downwind due to the impact and timing of the photochemical effect that produces ozone.

The airport industry, according to industry source Air Transport Action Group (ATAG), produces 2% of world carbon dioxide emissions and 12% of carbon dioxide emissions from transportation sources. The impact of carbon dioxide may be more significant before springtime, when leaves emerge on the deciduous trees.  Levels of carbon dioxide in the atmosphere can be illustrated by the Keeling Curve which graphs levels of carbon dioxide in the atmosphere over time. One concern is that carbon dioxide emissions may impact feedback mechanisms that determine breathing patterns and modulate delivery of oxygen throughout the body.

An Airport Report Quality Manual published by the International Civil Aviation Organization discusses Airport Pollution issues. They discuss various particulate matter of varying sizes (10 micrometers or less, or PM2.5 of 2.5 micrometers or less.  Particulate matter "has a very diverse composition (heavy metals, sulphates, nitrates, ammonium, organic carbons, polycyclic aromatic hydrocarbons, dioxins/furans)."

The manual states: "Effects: fine particles and soot can cause respiratory and cardiovascular disorders, increased mortality and cancer risk; dust deposition can cause contamination of the soil, plants and also, via the food chain, human exposure to heavy metals and dioxins/furans contained in dust."

Air pollution impacts many systems. Respiratory systems, in particular, are affected, impacting the delivery of oxygen to the bloodstream, and thus to the brain, affecting the respiratory muscles and vasculature, and impacting sleep.  Air Pollution and the Respiratory System is a comprehensive journal article discussing the topic.  Cardiovascular systems also are impacted.  Air quality issues raise a number of concerns.

Noise pollution from airport operations also have a significant impact.  Meteorological conditions also affect the sound propagation, or noise emissions from airport operations.  According the "Encyclopedia of the Earth", microclimate effects can impact the refraction of sound waves through the atmosphere, intensifying sound levels.  Noise emissions may result in a variety of physiological and psychological impacts, including cardiovascular effects.  Such effects may reflect exposure to short, high intensity effects from jet engine backblast, to longer term impacts of exposure to moderate sound levels.

Emissions from Airport operations play an important role in contributing to pollution, both in the immediate area of the airport, in a larger, regional context, and with regards to global issues of planetary climate change and global warming.   Externalities from such emissions encapsulate the full downstream effects of these emissions, which impact citizens who may incur the cost of such emissions but not share in the economic benefits that the airport brings to the region.

Meteorological conditions affect the deposition of such emissions, near or far, through the atmosphere, in soil or water, or perhaps deposited in human tissue, blood or other organs of the body. Thus the effects of emissions on water systems is important  It is interesting to note that the human body is about 55% to 65% water, depending on who and what is being measured, so that the study of water systems can include the atmosphere, rivers, lakes, oceans, and even the human body.

Given the dispersion and deposition of emissions from airport operations, a challenge is to pluck out the impacts attributable to airport operations from other sources surrounding the airport, some of which are directly related to, and gain from, the airport's presence.  This issue brings me back to the original blog article on "Externalities and Risks, the Seattle-Tacoma International Airport",

Future blog articles will further explore these issues, taking into account current locally available information, assessing the measurement of risks, and considering means of compensating those impacted for the economic and social burden of the externalities in question. These are important issues that have implications for both local and global health, extending into physiological and psychological areas that impact humanity.

Blog Articles:
Externalities and Risk - The Seattle Tacoma International Airport
Climate Change and Carbon 

Climate Change and Global Health

World Health Organization Report on Air Pollution and Health

Externalities

Externalities


Refinery Exhaust Stacks, Anacortes, Washington (image on Photoshelter)

Air pollution from a fixed stack is a good example that can be used to explain the concept of an externality. I discussed the externalities previously in a blog article (Risk and Externalities) in the context of the BP oil spill and its widespread impact in the Gulf of Mexico.

On the production side, externalities come into play when the full cost of production is not reflected in the cost of the good.

Air pollution emissions may contain various pollutants, gaseous and particulate matter. The area impacted and the degree of impact will be affected by the pollutants released and the meteorological conditions.

For example, a temperature inversion will keep cold air close to the surface under a layer of warm air so that the air does not mix well vertically. The pollutants will be kept closer to the surface and their impact will be greater.

Sulfur dioxide emissions may impact lakes and fish (as acid rain), and thus ecosystems. Sulfur dioxide is a harmful pollutant for humans as well as fish. Sulfur dioxide can adhere to airborne suspended particulate matter. If the particulate matter is small, this may ease entry into the lung where the sulfur dioxide can do greater harm.

Air pollution is a direct result of the manufacturing process that extends from the stack into the community and beyond. It’s impact results in costs to others. Thus there are costs associated with air pollution that are not included in the production costs. To the extent that this is true, the product produced is under priced, and the public, an external entity, is paying those additional costs.

Costs include medical costs, as well as reduced life expectancy due to the pollution. Air pollution, in addition to being unhealthy, reduces visibility, may add odor, and adds quality of life issues. Pollution impacts maintenance of buildings and other structures.

Determing costs attributable to air pollution is a complex problem. There have been studies done to ascertain such costs. For example, a RAND study looked at health costs in California attributable to air pollution above state standards. That study would reflect air pollution due to a variety of causes, not just the point sources discussed in this blog article. California has a great deal of automobile pollution which contributes to carbon monoxide and ozone pollution problems.

Monitoring and regulation of air pollutants requires resources as well. Air pollution regulation and monitoring exists at the federal, state and local levels.

To reiterate, the producer’s price does not reflect these costs. Thus the price of the good is under priced with respect to other options because it does not include the cost of these “external” costs which others must bear.

When full external costs are brought into the mix, the producer’s price must necessarily increase. As it increases, other competing options may become more attractive and the producer may lose business. Alternatively, the producer may choose to upgrade the method of production to reduce the pollution, a cost they may not be willing to take if full external costs were included.

Air pollution is one example of an externality.

The situation becomes more complicated where the risk matrix considers low probability, high risk events. Such events may be difficult to estimate and to price for. Even assuming these low probability, high risk events could be reasonably priced for, it may be impossible for the producer to compete with prices reflecting such a risk margin. Competitors in the same field may refuse to include such a risk margin, thus driving the producer out of business. Competitors in other fields without such a risk margin will be at an advantage.

Where the risk margin for the low probability, high impact event is not priced for and is not included in the pricing there is the potential for considerable externality impacts should the low probability high impact risk event materialize.

As previous nuclear disasters have shown, the low probability, high risk event presents considerable externality issues in the nuclear arena, considering the serious impacts of radiation. (See my blog articles, Chernobyl 25th Anniversary and Energy Choices and Risk).

Risk and Externalities

Western Sandpipers Flying (blurred motion), Ocean Shores, Washington

Events are unfolding as the President’s Commission continues its inquiries into the 2010 Gulf Oil Spill. A major focus is around the cement used to plug the Macondo well. As Halliburton was a contractor for BP, issues of responsibility swirl around the interpretation of contractual language as well as actions in determining responsibility. These issues then emerge into the financial marketplace in as part of stock decisions and rating agency actions.

The decisions made by Halliburton and BP regarding the cementing and associated issues will be exposed to heavy scrutiny. The degree of indemnification provided to Halliburton in the BP-Halliburton contract will be closely examined and interpreted. Time will tell where all the lawsuits will come down, how many civil and criminal penalties will be assessed, and to who.

It is likely the quantum of risk will reflect decision-making processes in key areas such as the cementing issue. Those decisions should reflect the impact of externalities on the risk-decision spectrum. The question will be how much weight was given to immediate issues of cost and time versus the long tail risk of a disaster, including the impact of a spill on the coastal areas, the ocean ecosystem and birds that don’t buy stocks, don’t pump gas and whose idea of take out is a worm coming out of the sand.

Societies like to look at redress, at making victims whole, bringing back ecosystems. The concern is where does the money come from to accomplish these goals and is it enough? Redress also includes assessing and enforcing responsibility. Societies also need to address solutions looking forward to help prevent and mitigate future disasters, including regulatory and other solutions.