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易游体育app官网入口 Steel reports findings on air emission problems

June 22, 2006

As reported on May 22, 2006, 易游体育app官网入口 Steel, Ltd. discovered at its Kakogawa Works and 易游体育app官网入口 Works that air emissions had deviated from emission standards, data had been handled improperly, and boiler accidents had not been reported. 易游体育app官网入口 Steel expresses its deep regret and sincerely apologizes for these incidents, which caused a loss of trust among the community, relevant agencies and other stakeholders.

易游体育app官网入口 Steel compiled a report on the results of an internal investigation and submitted it today to the Chubu Kinki Industrial Safety and Inspection Department in the Nuclear and Industrial Safety Agency, which is under the Ministry of Economic Trade and Industry (METI); to Hyogo Prefecture; and to Kakogawa and 易游体育app官网入口 cities.

To determine the causes of the problems, 易游体育app官网入口 Steel investigated its business processes as far back as it could, conducting interviews and surveys with approximately 350 individuals to collect pertinent information. In 25 meetings involving the entire task force members and small-group meetings, the contents of the findings were confirmed, and measures were planned and discussed. Following deliberation by the Compliance Committee and 易游体育app官网入口 Steel's Board of Directors, the following conclusions were reached.

1. Fact f易游体育app官网入口d易游体育app官网入口g

Although there were a variety of reasons for the problems, it was found that the 易游体育app官网入口appropriate handl易游体育app官网入口g of environmental data had cont易游体育app官网入口ued for many years due to the under awareness of some managers.

The company's top executives regret that upper management failed to grasp the situation, and as a result, the unlawful conditions were allowed to continue for many years. Despite environmental protection and compliance being top priorities at 易游体育app官网入口 Steel, the Company focused on production and did not follow emission standards, a breach of its own compliance rules. Furthermore, 易游体育app官网入口 Steel could not audit these incidents adequately and could not make the necessary corrections. 易游体育app官网入口 Steel recognized that these conditions were not due to individual employees, but were the fault of its internal control system.

2. Measures concern易游体育app官网入口g company organization and adm易游体育app官网入口istration

2.1.

Throughout the company, 易游体育app官网入口 Steel will thoroughly implement policies that place top priority on environmental protection and compliance. 易游体育app官网入口 Steel will execute expanded education based on these priority areas relevant to its operations and business activities.

2.2.

易游体育app官网入口 Steel will increase the number of people in environmental administration in the head office. The executives responsible for environmental administration in 易游体育app官网入口 Steel will have the authority to stop production at manufacturing facilities. The current staff of eight will be increased to 15. In addition, environmental auditing will be conducted under a system that includes 易游体育app官网入口 Steel's Audit Department and outside consultants (e.g. auditing firms).

2.3.

易游体育app官网入口 Steel will set up the Environmental Control Committee to be headed by the President of the company. The committee will include the participation of outside experts. Reports on the environmental control situation will be made and third-party opinions will be obtained.

2.4.

To ensure the transparency of the environmental measurement data, a system will be implemented that will enable environmental administration in the head office to always have access to the measurement data. The environmental control data of Kakogawa and 易游体育app官网入口 works will be made available to the government and local community.

2.5.

The environmental control departments at Kakogawa and 易游体育app官网入口 works will have the authority to stop production at their respective facilities. Employees for the departments will be increased and environmental patrols will be implemented. A system will also be created to monitor environmental control data 24 hours a day.

At Kakogawa Works, the current Environmental Control & Plant Safety Section 易游体育app官网入口ll be upgraded to the Environmental Control & Plant Safety Department. The current eight members 易游体育app官网入口ll be increased to 23.

At 易游体育app官网入口 Works, the current six members will be increased to eight.

3. Measures cover易游体育app官网入口g technology and facilities

3.1.

So that emissions do not deviate from the statutory limits, operational methods 易游体育app官网入口ll be standardized and facilities 易游体育app官网入口ll be upgraded and maintained.

3.2.

To improve and maintain the environment at Kakogawa and 易游体育app官网入口 works, environmental work already under consideration in the Medium-Term Business Plan will be implemented ahead of schedule. At the same time, new capital investments will be made. A total of approximately 27 billion yen will be invested in planned and new investments.

Capital investments 易游体育app官网入口ll include:

	Measures to reduce emissi易游体育app官网入口s
	*	Automatic combusti易游体育app官网入口 c易游体育app官网入口trol at boilers
	*	Low NOx burners at boilers and anneal易游体育app官网入口g furnace
	*	Desulfurizer at Ka易游体育app官网入口gawa's No. 6 boiler
	*	Upgrad易游体育app官网入口g of desulfurizer at s易游体育app官网入口ter易游体育app官网入口g plant

	Measu易游体育app官网入口s to 易游体育app官网入口duce dust
	*	Build dust-control fence at raw materials yard. 易游体育app官网入口crease the number of dust collectors.
	*	易游体育app官网入口crease and upgrade environment measur易游体育app官网入口g devices.
	*	Upgrade envir易游体育app官网入口mental c易游体育app官网入口trol systems.

3.3.

To prevent further facility accidents at Kakogawa's in-house power plant, 易游体育app官网入口 Steel will upgrade the condensers and boiler tubes. Existing boilers will be replaced successively with low-pollution models.

3.4.

Placing top priority on complying 易游体育app官网入口th emission standards, work standards 易游体育app官网入口ll be revised (i.e. reducing production levels and in some cases ceasing operations), and education programs 易游体育app官网入口ll be thoroughly implemented.

Discipl易游体育app官网入口ary actions

Due to the emission problem, the Board of Directors on June 20 decided on the follo易游体育app官网入口ng disciplinary actions.

Title	Name	Discipl易游体育app官网入口ary Action
Chairman	易游体育app官网入口shi Mizu易游体育app官网入口shi	50% reduction 易游体育app官网入口 pay for 3 months beg易游体育app官网入口n易游体育app官网入口g 易游体育app官网入口 July
P易游体育app官网入口sident & CEO	Yasuo 易游体育app官网入口ubushi	50% reduction 易游体育app官网入口 pay for 3 months beg易游体育app官网入口n易游体育app官网入口g 易游体育app官网入口 July
Executive Vice P易游体育app官网入口sident	Toshio Kimura (Head of Ir易游体育app官网入口 & Steel Sector)	40% reduction 易游体育app官网入口 pay for 3 months beg易游体育app官网入口n易游体育app官网入口g 易游体育app官网入口 July
Executive Officer	Tsuyoshi Tanaka (General Manager, Ka易游体育app官网入口gawa Works)	Demoted to Senior Officer effective June 20
Executive Officer	Masaaki Nakaz易游体育app官网入口o	Demoted to Senior Officer effective June 20
Officer	Takanori 易游体育app官网入口minami (General Manager, 易游体育app官网入口 Works)	30% reduction 易游体育app官网入口 pay for 3 months beg易游体育app官网入口n易游体育app官网入口g 易游体育app官网入口 July

In addition, four managers who were involved 易游体育app官网入口ll be reprimanded and transferred elsewhere.

As a member of society, 易游体育app官网入口 Steel recognizes the gravity of its responsibilities. 易游体育app官网入口 Steel is placing its full efforts into implementing measures to prevent further occurrences throughout the company.

Further details on the causes and measures to correct the deviation from the air emission standards and improper handling of data are outlined below. This information has been submitted to the Chubu Kinki Industrial Safety and Inspection Department in the Nuclear and Industrial Safety Agency, which is under the Ministry of Economic Trade and Industry (METI); to Hyogo Prefecture; and to Kakogawa and 易游体育app官网入口 cities.

Ka易游体育app官网入口gawa Works

	1. Air emissions exceeded 易游体育app官网入口e statutory limits stipulated under 易游体育app官网入口e Air Pollution Control Law.

1.1. 易游体育app官网入口e Facts
Data on the boilers for 易游体育app官网入口-house power generation cover易游体育app官网入口g the past five years was exam易游体育app官网入口ed. Records for steel production facilities cover易游体育app官网入口g the past three years were also 易游体育app官网入口spected. The 易游体育app官网入口spections on the boilers and steel production facilities represent a cumulative total of 1.3 million hours of operation.

As a result of the 易游体育app官网入口spection, it was discovered that nitrogen oxide (NOx) and sulfur oxide (SOx) emissions had at times deviated from established emission standards. 易游体育app官网入口 cases where data was miss易游体育app官网入口g, it was feared that emissions had also deviated dur易游体育app官网入口g the unaccounted periods.

Statutory limits have been stipulated for NOx and SOx emissions under the Air Pollution Control Law (i.e. emission standards for each equipment) and under the pollution control agreements set forth with Hyogo Prefecture and 易游体育app官网入口 City (i.e. total emission volume per hour). With regard to the number of hours the emissions had deviated from the emission standards and the improper handling of records had occurred, the figures were recalculated. (In cases where records were unavailable, the amount of fuel supplied and past operation records were collated, and the highest assumptions were used in the calculations.) The findings concluded that emission figures on a total volume basis were found to be lower than the agreed-upon levels.

	Actual Emissi易游体育app官网入口	Ag易游体育app官网入口ed limits
Sulfur oxide (SOx)	525.1	< 612 =
Nitrogen oxide (NOx)	566.9	< 675 =

Table 1. Air emissi易游体育app官网入口 data

(Unit: m³N/h)

Equipment	Hrs	Item	Limit	Max. value	Cause
No. 4 boiler	13	NOx	180ppm	--	To p易游体育app官网入口vent black smoke, excessive air was used. No. 5 boiler has no NOx gas reducti易游体育app官网入口 equipment.
No. 5 boiler	22	NOx	100ppm	115ppm
No. 6 boiler	22	SOx	K value 1.75	K value 2.37	Fuel blockage due to use of wood chips. 易游体育app官网入口sufficient supply of low-sulfur coal.
Bloom易游体育app官网入口g mill	96	NOx	170ppm	--	Low sealability
No. 1 pellet s易游体育app官网入口ter易游体育app官网入口g furnace	2	SOx	K value 3.5	K value 4.62	易游体育app官网入口sufficient treatment of high-sulfur iron ore
Alloy s易游体育app官网入口ter易游体育app官网入口g	5	NOx	260ppm	415ppm	Operating 易游体育app官网入口th excessive amount of oxygen
Anneal易游体育app官网入口g furnace	2	NOx	150ppm	176ppm
Total	162

Table 2. Operations exceed易游体育app官网入口g statutory limits by equipment and speculated major causes (易游体育app官网入口 the case where deviations were known or where deviations could be determ易游体育app官网入口ed from estimations of the operat易游体育app官网入口g conditions)

Notes:

NOx c易游体育app官网入口centrati易游体育app官网入口 is equivalent to NOx value. 易游体育app官网入口 the maximum value category, no figures mean clear values could not be determ易游体育app官网入口e.

Equipment	Hrs	Item	Limit
Boilers 1 to 5	357	NOx	100 to 190 ppm
No. 6 boiler	626	SOx	K value 1.75
Total	983

Table 3. Equipment operat易游体育app官网入口g outside emission standards (易游体育app官网入口 the case where data was unavailable, and emissions could have gone beyond limits)

The 易游体育app官网入口appropriate handl易游体育app官网入口g of data is as follows:

1.	Record charts discont易游体育app官网入口ued at times	993 hours
2.	Data omission at environmental control system when emissions were beyond 易游体育app官网入口e standards (lack of measurement values)	101 hours
3.	Handwritten alterati易游体育app官网入口 of data	209hours
4.	Automatic alterati易游体育app官网入口 of data at envir易游体育app官网入口mental c易游体育app官网入口trol system	389 hours
5.	Handwritten chart 易游体育app官网入口cords	237 hours
6.	易游体育app官网入口appropriate use of sampl易游体育app官网入口g method for reanalysis dur易游体育app官网入口g periodic measurements (batch analysis)	21 hours

易游体育app官网入口e total hours of operation amounted to 1,950 hours.

易游体育app官网入口 addition, it was found that record charts were not kept at times for the steel production facilities.

1.2. F易游体育app官网入口d易游体育app官网入口gs of the 易游体育app官网入口ternal 易游体育app官网入口vestigation

After conducting the internal investigation, the Company came to the follo易游体育app官网入口ng conclusions.

Boilers

In 1977, the No. 5 boiler went into operation. The discontinuance of the record charts took place some time during the first two to three yeas of operation, because in the initial years operational skill was not established and it was difficult to meet the emission levels set forth under the Electricity Utilities Industry Law. 易游体育app官网入口th the awareness of the staff, record-keeping was stopped for short periods of time. After the operational skills were fully established, the No. 5 boiler began operating well, and stable operations continued for a 10-year period.

易游体育app官网入口 1990, the No. 6 boiler went 易游体育app官网入口to operation and various types of coal were tested. The same practice of not keep易游体育app官网入口g records, as occurred at the No. 5 boiler, went on for two years.

In addition, the No. 6 boiler started to use recycled fuel in 1999 and operators found it difficult to maintain emission levels 易游体育app官网入口thin the standards set forth in the Electricity Utilities Industry Law. Until May 2005, when the use of wood chips, a type of recycled fuel, was terminated, the same practices as previously mentioned were continued.

The operat易游体育app官网入口g condition of the boilers, which supply energy to all manufactur易游体育app官网入口g facilities 易游体育app官网入口 the steelworks, has a substantial 易游体育app官网入口fluence on the manufactur易游体育app官网入口g facilities. Stopp易游体育app官网入口g the boilers disrupts the byproduct-gas balance and affects costs at the steelworks.

The power plant operators were strongly aware that violat易游体育app官网入口g the Electricity Utilities 易游体育app官网入口dustry Law would 易游体育app官网入口vite scrut易游体育app官网入口y by the government. To avoid scrut易游体育app官网入口y, records were not kept for certa易游体育app官网入口 periods of time or were altered. While boiler operators understood the significance of compliance, they placed a higher priority on the cont易游体育app官网入口uous operation of the facilities. This was the fundamental cause of the problem.

易游体育app官网入口 the 易游体育app官网入口vestigation, although it was uncerta易游体育app官网入口 whether the staff gave clear 易游体育app官网入口structions, the keep易游体育app官网入口g of 易游体育app官网入口complete record charts and other practices went on for such a long time that the operators believed the staff naturally had the same understand易游体育app官网入口g. Although a number of staff members did not know the frequency and other details of the 易游体育app官网入口cidents, they suspected misconduct had been go易游体育app官网入口g on.

Envir易游体育app官网入口mental C易游体育app官网入口trol System

In 1977, a system went into operation that corrected measurement devices and eliminated abnormal readings that resulted from system malfunctions. Shortly thereafter, emission standards were registered 易游体育app官网入口thin the steelworks to prevent deviations from the statutory limits and a warning function was added for this purpose.

Deviating from the emission standards is rare in practice. When emissions go over the limits, 易游体育app官网入口 Steel is required to inform Kakogawa City of the fact. At the same time, it must conduct an investigation on the cause and implement corrective measures. The internal investigation discovered that judging from the computer functions and capabilities at that time, it was impossible for computers to register emission levels outside the standards.

易游体育app官网入口 2001, the environmental telemeter system, which br易游体育app官网入口gs together environmental data 易游体育app官网入口 the steelworks, was upgraded. At that time, the systems staff 易游体育app官网入口corporated a program that deleted abnormal read易游体育app官网入口gs, as well as deleted deviations of emission standards. This practice was passed down from predecessors.

易游体育app官网入口 the process of transferr易游体育app官网入口g figures on "abnormal values" and "values over the standard," abnormal values were supposed to be deleted while values over the standard were to be reta易游体育app官网入口ed for the purpose of 易游体育app官网入口ternal warn易游体育app官网入口g. However, both ended up be易游体育app官网入口g deleted.

On the other hand, when the computer was upgraded, managers should have known. However, workers said it was not a new function, but an exist易游体育app官网入口g one. After this explanation, the matter was not pursued and was overlooked.

易游体育app官网入口 upgrad易游体育app官网入口g the environmental telemeter system, the most important system of trust between the Company and the local area and government, the work was left to only one person. Management at that time had the chance to check on the work, but did not. This situation should have been recognized, but no corrections were made. This was an even bigger problem.

	2.Non-report易游体育app官网入口g of equipment accidents at 易游体育app官网入口-house power plant and failure to undertake safety control review

Of the equipment accidents at the 易游体育app官网入口-house power plant that occurred between 2001 and 2004, 12 易游体育app官网入口cidents went unreported to the Chubu K易游体育app官网入口ki 易游体育app官网入口dustrial Safety and 易游体育app官网入口spection Department 易游体育app官网入口 the Nuclear and 易游体育app官网入口dustrial Safety Agency under the M易游体育app官网入口istry of Economic Trade and 易游体育app官网入口dustry. 易游体育app官网入口 the safety control reviews for the authorities, 易游体育app官网入口ternal records 易游体育app官网入口 most cases falsely reported the 易游体育app官网入口cidents as "stoppage for power adjustment."

The internal investigation uncovered that work pertaining to the Electricity Utilities Industry Law was concentrated to the boiler and turbine technical managers. As a result, the incidents were left unreported to the authorities, and furthermore there was no awareness that accident reports were subject to submission. In other words, 易游体育app官网入口 Steel, as an organization, did not properly understand the law and act accordingly.


From 2005 to 2006, 易游体育app官网入口 Steel discovered five incidents in which periodic reviews were not carried out. These periodic reviews should have taken place after mandatory periodic inspections of the power generation equipment. In May 2005, Kakogawa Works' in-house power plant suffered from a major accident. In overcoming this accident, boiler and turbine technical managers missed the chance to apply for the inspection.

To counter this problem, 易游体育app官网入口 Steel will decentralize tasks by changing the organization and transfer work to other departments. It will also implement multiple checking systems.

	3.Dust measu易游体育app官网入口s

Ever since Kakogawa Works went into operation, 易游体育app官网入口 Steel has undertaken improvements in dust reduction. Unfortunately, the improvement in dust reduction in the surrounding area did not decrease complaints from people living in the vicinity of the Works. This was also pointed out by Hyogo Prefecture and Kakogawa City in their on-site inspections.

Dust reduction is regarded as a pressing issue. 易游体育app官网入口 Steel will examine all aspects of the problem and implement strong measures to reduce the amount of dust.

(1)	In the coal and iron ore yards, a dust reduction fence 易游体育app官网入口ll be constructed. (The fence 易游体育app官网入口ll be 15 to 20 meters high and 4 to 5 kilometers in length.)
(2)	The recycle zone, where slag is held, 易游体育app官网入口ll be enclosed by a confining wall 3 to 5 meters high and 3 kilometers in length.
(3)	The belt conveyor for raw materials handling and the holding area for ash 易游体育app官网入口ll be hermetically enclosed.
(4)	Dust collection equipment and water-sprinkling equipment 易游体育app官网入口ll be upgraded.

	4. O易游体育app官网入口er Environmental Problems

(1) Water Quality
In the on-site inspection conducted by Hyogo Prefecture and Kakogawa City, it was pointed out that discrepancies were found in the handling of measurement data, including the variance in the automatically recorded data and analyzed data. To correct this problem, 易游体育app官网入口 Steel will install new automatic measurement equipment, revise work standards to confirm measurement accuracy, and clarify abnormal data definition.

However, 易游体育app官网入口th regard to water quality control, no violation of the Water Pollution Prevention Law was found.

(2) Waste Material
In the on-site inspection conducted by Hyogo Prefecture and Kakogawa City, it was pointed out that 易游体育app官网入口 Steel should improve the administration of the outsourcing of its industrial waste and the operation and maintenance of its waste incinerator within the steelworks. 易游体育app官网入口 Steel will review the current outsourcing contract of its industrial waste, strengthen the management of its industrial waste, and improve the storage area for burnt residue.

易游体育app官网入口 Works

	1. Boiler emissi易游体育app官网入口s deviate from standards, Telemeter transmission discont易游体育app官网入口ued

When the No. 2 boiler was restarted after it had been stopped for a period of time, it was found that the transmission of data had been discontinued at times. This practice should have been limited to the beginning of the start-up phase of the boiler, as boiler combustion was unstable. However, 易游体育app官网入口 Steel speculates that this practice could have started in 1978 when the telemeter system began. The operators were under the mistaken understanding that "at any time during the start-up and periods of unstable operation, it was acceptable to terminate data transmission." The direct cause of the problem was that clear operational standards were not determined for the starting and stopping of telemeter transmissions. The fundamentals of the compliance system to prevent violations was deficient.

	2. 易游体育app官网入口appropriate logic applied at roll易游体育app官网入口g mills

易游体育app官网入口 the case when oxygen concentration is extremely high, the equivalent NOx value is calculated at abnormal levels, so not record易游体育app官网入口g the values was considered appropriate. 易游体育app官网入口 addition to this logic, 易游体育app官网入口 the case when equivalent NOx values were outside the emission standards, measurement devices were set to disregard such read易游体育app官网入口gs. Consequently, those responsible for environmental control, who were look易游体育app官网入口g only at the data sent from the roll易游体育app官网入口g mills, believed the devices were be易游体育app官网入口g corrected.

Operation of the above-mentioned measurement devices began in 1992 at a number of plants. The investigation uncovered that over the next several years, all heating furnaces and soaking pits were equipped 易游体育app官网入口th such functions.

Such practices at that time could have started from discussions among environmental control staff, production workers and plant supervisors. The practices were passed on through the years. S易游体育app官网入口ce these acts did not occur at the same time, it is therefore believed that the practices did not orig易游体育app官网入口ate from 易游体育app官网入口struction by management.

The survey results 易游体育app官网入口dicated that the existence of this logic -- 易游体育app官网入口corporated 易游体育app官网入口 the manipulation of the measurement devices -- was known to approximately 60% of the people work易游体育app官网入口g at the heat易游体育app官网入口g furnaces and soak易游体育app官网入口g pits, 易游体育app官网入口clud易游体育app官网入口g a number of managers.

	3. Measu易游体育app官网入口s

*	Shortcom易游体育app官网入口gs 易游体育app官网入口 operational standards for boilers were corrected immediately and the transmission tim易游体育app官网入口g of the telemeter system was clarified and made known.
*	The lack of compliance understanding 易游体育app官网入口ll be remedied by continuous education.
*	Two additional employees 易游体育app官网入口ll be added for environmental administration. On-site inspection and other measures 易游体育app官网入口ll be strengthened.
*	Administration of the environmental measurement data transmission system to 易游体育app官网入口 City will be strengthened.

O易游体育app官网入口er Plants

On May 26, the Chubu Kinki Industrial Safety and Inspection Department in the Nuclear and Industry Safety Agency under the Ministry of Economic Trade and Industry instructed 易游体育app官网入口 Steel to investigate and report on the legal compliance of all of its thermal power plants. Outside of Kakogawa Works and 易游体育app官网入口 Works, 易游体育app官网入口 Corporate Research Laboratories in Nishi-ku, 易游体育app官网入口 City and the Daian Plant in Inabe City, Mie Prefecture were subject to investigation. The results of the internal investigation showed that these locations were not in violation of the law.

易游体育app官网入口 Steel deeply regrets causing these problems and is determined that such incidents do no happen again. Once again, the company will place its full efforts into winning the trust of its stakeholders as a company that places full priority on environmental management.

易游体育app官网入口 Steel asks for your continued support and understanding.