Environmental Regulations, Technology, and Cost of Compliance for Oil & Gas Operations

Abstract

Abstract The purpose of the paper is to emphasize the balance between cost of extraction & production (E&P) operations and complying environmental regulations to gain a better understanding of reducing overall costs associated with today’s oil and gas production while discussing importance of relevant technological innovations. Due to recent coherent global initiatives on environmentally safe energy production and use, it has become increasingly important that the industry constantly search & implement a practical balance between environmental regulations and use of best available technologies with objectives of cost savings, not only to comply with the regulations but also to keep the operations sustainable for both small and large companies. The industry nearly spends as much on environmental protection as it spends searching for new domestic supplies of oil and gas; roughly 9 cents per gallon of gasoline (U.S. Department of Energy), amounting to over $10 billion a year. The cost of compliance with environmental regulations places a substantial economic burden on industry. With this perspective, some specific conclusions and successful cost reduction technologies are listed along with general compliance items and costs data for each item (e.g., inspections and testing for drip & leaks, corrosion, costs incurred to safely dispose wastewater, etc). The paper further highlights cost factors based on surveys/industry data, including situations when full implementation of latest E&P technology was lacking. As an example, in recent past, producers spent more than $3 billion per year in the US to comply with environmental regulations only. For some, combined estimated costs sustained an overwhelming net loss of about $4 to $5 per barrel (including roughly 20% cost of compliance) making very difficult to sustain E&P operations. Therefore, paper discusses the importance of balance between costs of overall operations and environmental compliance in most practical ways to benefit both small and large companies.