Increased Environmental Concern Faces Oil Industry

Article excerpt

When taking into account oil's sidekick, natural gas, the industry is precariously poised for the so-called Era of the Environment of the 1990s.

Oil spills offshore in the past 1 1/2 years have caused environmental watchdogs to turn an eye to onshore drillers as well. At the same time, natural gas is being hailed as a clean-burning alternative to the oil-based gasoline that is clogging U.S. airways with smog and the coal stacks of electric generators.

In the search for oil and gas, though, the string of imposed safeguards are the same.

Born-again environmentalism in the United States is seen by the oil and gas industry as the most pervasive issue it will face in this decade and beyond. The 1990 International Petroleum Encyclopedia devoted a new section to the environment.

While associated costs seem overwhelming, the issue has formed new segments of industry as an offshoot. It has, for example, propelled environmental law as a specialty among the legal profession and created a demand for consulting services to environmentally assess or audit oil and gas properties.

More new environmental-related regulations are appearing on the offshore forefront than onshore, but there is more attention being paid to onshore activities.

For instance, the U.S. Environmental Protection Agency is staging the first international symposium on oil and gas exploration and production waste management practices Sept. 10-13 in New Orleans.

EPA issued a $300,000 grant to the Interstate Oil Compact Commission, based in Oklahoma City, to study regulatory needs on oilfield wastes such as drilling fluids, cuttings, produced water and a list of some 20 others.

A draft report that offers criteria for state regulation has been issued and written comments are being taken through Aug. 17. The oil commission council and advisory members who authored the report will meet in Oklahoma City Aug. 26-28 to review comments. A final report is due in December.

EPA delegated the study after determining regulation of oilfield wastes would be better handled by states. In considering federal regulation of oilfield wastes by reclassifying such materials as hazardous, the agency found astounding economic impact.

Annual costs to the industry and consumers for additional management requirements, excluding corrective action, was estimated at $1 billion to $6.7 billion a year. Net impact on oil prices could be up to 76 cents a barrel with projected maximum costs to consumers of $4.5 billion a year and increases in the deficit of up to $11 billion.

The cost scenarios were based on American Petroleum Institute survey estimates of the quantity of wastes produced, assuming only 40 to 60 percent would require management.

It is speculated such regulation, which remains a possibility, would reduce domestic drilling by as much as 12 percent.

"There is some talk that RCRA (Resource Conservation and Recovery Act) will be up for reauthorization in the next Congress," said Mike Fitzpatrick with the EPA solid waste office in Washington.

"It could be reclassified by Congress, but not the agency. There is some talk to that extent."

There are new agencies and regulations for the oil and gas industry to contend with, though.

For years, oilfield drillers in Oklahoma have reckoned with the Clean Water Act, Safe Drinking Water Act, Superfund Amendment and Reauthorization Act, Hazardous Communication Standards and others. State agencies like the Oklahoma State Health Department, Oklahoma Department of Pollution Control and Oklahoma Water Resources Board have patrolled the oilpatch.

Now, the U.S. Game and Wildlife Commission is writing tickets for failure to put nets over oilfield pits to protect migratory birds.

The current cost of environmental measures taken on by the industry and the cost of environmental cleanups are difficult to quantify. …