Environmental Challenges in the 1990's: How the OCS Will Be Affected by the CAA Amendments, CWA Regulations, and RCRA Reauthorization

Abstract

ABSTRACT Recent and pending legislative and regulatory changes in the Clean Air Act (CAA), Clean Water Act (CWA), and Resource Conservation and Recovery Act (RCRA) will profoundly affect oil and gas investment decisions and operations on the U.S. Outer Continental Shelf (OCS). Revisions in the CAA Amendments of 1990 transfer jurisdiction for regulating OCS air emissions from the U.S. Department of the Interior (DOI) to the U.S. Environmental Protection Agency (EPA) for all of the OCS except the Central and Western Gulf of Mexico Planning Areas. Program delegation to coastal states and local air agencies will drastically affect the California OCS. Stringent CWA regulations on effluent limitations for OCS discharges will force muds, cuttings, and produced sands from some operations to be barged ashore for disposal. Barging materials for onshore disposal will add to the industry's environmental liability under the (%4 Amendments and the materials may be subject to RCRA requirements. Depending upon how they are implemented, the requirements of each of these laws can exacerbate compliance problems with the other laws. The cross-media regulatory effects of these laws--those affecting air, water, and land--will compound industry compliance costs and affect domestic energy production. .&I energy impact analysis should assess the cumulative effects of these regulations on energy production. INTRODUCTION At a time when depressed oil and natural gas prices, combmed with burdensome environmental requirements, are limiting investment in exploration and development of hydrocarbon resources on the U.S. OCS, legislative and regulatory actions by the Federal Government will or have the potential to further increase the cost of environmental compliance. A report by the First Boston Company indicates that over the past 5 years, the average return on investment on the upstream side in the U.S. has been 6.2'% or less for five major companies. This return is less than the cost of capital during the same period. Among the reasons for these "anemic returns," the First Boston cites the array of access issues and the costs of environmental compliance.l As the Federal agency with the responsibility for leasing lands and regulating mineral exploration and development activities on the OCS, the Minerals Management Service (MMS) tracks legislation and regulatory actions that may affect the OCS program. The MMS is keeping close surveillance on two proposed rulemakhg actions by the U.S. EPA and a legislative reauthorization pending in Congress (at the time of this writing). This paper reports on the potential requirements that may flow from the individual rules or law, and focuses on their overlapping effects and possibly conflicting requirements. CLEAN AIR AC13 0(33 REGULATIONS In November 1990, section 328 of the CAA Amendments of 1990 (P.L. 101-549) transferred authority to regulate pollutant emissions from OCS sources from the DOI to the EPA for the entire OCS except for the Central and Western Gulf of Mexico Planning Areas. These Gulf of Mexico Planning Areas remain under the jurisdiction of the DOI.