INDUSTRY INPUT NEEDED IN ENVIRONMENTAL AND REGULATORY PROGRAMS

Based on a workshop sponsored by PTTC’s North Midcontinent Region on February 24, 1998, in Wichita, KS.

BOTTOM LINE

Communication and dialogue are the keys to a strong working relationship between the oil and natural gas industry and the government regulatory bodies— both state or federal.

PROBLEM ADDRESSED

During the past few years, operators in all oil and gas producing regions have expressed concern over the ever-increasing volume, burden, and cost of environmental regulations. However, independent producers in Kansas have worked closely with their state regulators to develop a program that meets environmental needs and recognizes the economic realities of the industry. Operators have found many areas of confusion within regulatory bodies, including reporting. A better understanding of the where, how, and why of environmental reports and compliance is needed.

KEY WORDS:

Regulation, Environment, Compliance, Reporting

SPEAKERS

Impact of Federal Environmental Laws on the Oil and Gas Industry:
William Bryson, environmental consultant

REGULATORY OVERVIEW

The impact of federal environmental laws on state regulations and the oil-and gas-producing industry has dramatically increased since 1972, when the Federal Water Pollution Control Act took effect. In 1974, the Safe Water Drinking Act was passed. These acts have been renewed, along with even more regulations and new federal acts. As a result, environmental compliance costs in the US oil and gas industry will increase from $1.5 billion in 1990 to an estimated $4.5 billion in 2000. These costs mainly are administrative, rather than technical.

Since state regulators are closer to industry than their federal counterparts, state regulations often address the needs of producers better than national laws, which are designed to protect all resources. The petroleum exploration and production (E& P) business is significantly different from other industries, and has little in common with even petroleum’s downstream operations.

Several federal regulations have the potential to confuse the line of reporting, responsibility, and accountability. Operators must comply with multiple agencies at both the state and federal level, and any failure to meet all requirements can mean fines and licensing problems. The large number of duplicative reporting requirements are also of concern to operators.

From 1980 to 1992, the total printed oil and natural gas regulations in Louisiana, New Mexico, Texas, and Oklahoma doubled to almost 16,000 pages. All states must balance two of their most important interests: (1) environmental protection to improve the quality of life and the stewardship of future resources, and (2) oil and gas production which is responsible for revenues (through taxes), employment, goods and services, and critical energy supplies.

An ideal state environmental regulatory program would balance both concerns. Since state programs, such as those in Kansas, are directly funded by the oil and gas industry through production assessments, funds should be kept within the program, and capped to prevent potential abuses. A rational program would limit liabilities to those directly responsible for errors and/ or omissions, rather than those who may have had prior title to the process, lease, or organization. To make this program strong and enforceable, it should not become part of the petroleum industry, since its framework is set by state regulators.

Oil Spill Measures
Oil spills are uppermost in the problems faced by independents. The protection of surface and ground water motivates an in-depth reporting and remediation program. The US Environmental Protection Agency (EPA) requires that operators contact the National Response Center (NRC) when they first become aware of a spill causing a sheen, sludge, or emulsion that is in, on, or threatens to reach a waterway (including rivers, lakes, ponds, storm drains, creeks, or dry ditches).

Kansas independents should file reports required for oil spills with the Kansas Corporation Commission (KCC), the Kansas Department of Health and Environment (KDHE), and EPA Region VII. A Spill Prevention Control and Countermeasures (SPCC) report also needs to be sent to the appropriate district of the KCC and KDHE.

Abandoned Well Program
The Financial Assurance Obligations and the Abandoned Well program was created in Kansas in 1996 to provide funds to handle orphan wells. The funds, totaling $1.6 million, come from: 1) increased assessments on crude oil and natural gas production, 2) general fund money, 3) money received by the state through the federal mineral-leasing program, and 4) money from the state water plan. These funds are being applied to the documented 10,573 orphan wells, of which, approximately 9,000 require plugging. In 1997, the funds were used to abandon 428 wells at a total cost of $1.5 million, and 109 remediation sites were reduced to 88 sites using $334,000.

The legislation also directed KCC’s Conservation Division to establish financial responsibility requirements for operators to comply with the program. Those with an acceptable compliance record with KCC regulations over the preceding 36 months pay a non-refundable $50 fee. Those who have not been licensed for the preceding 36 months, or have not met the acceptable compliance record, must furnish one of the following on an annual basis:

1. A performance bond or letter of credit equal to $0.75 multiplied by the depth of the operator’s wells, or

2. A blanket bond or letter of credit between $5,000 and $30,000 (based upon the depth and number of wells),

3. A fee equal to 3% of the required blanket bond,

4. A lien on equipment equal to the bond requirement, or

5. Other financial assurance approved by KCC.

Other Federal Regulations
The Federal Migratory Bird Act protects birds that fly through multiple jurisdictions. Exposed oil in pits appears to birds as water. When they land, their feathers are fouled and the birds either die from drowning, thermal exposure, hypothermia, or oil ingestion. In 1997, Kansas had 250 open oil pits with dead birds in 52 sites. Possible solutions are netting, tanks, and pit removal. The US Fish and Wildlife Service cannot tell an operator which option to use, but can issue fines and pursue imprisonment for violators.

In 1988, EPA decided to exempt E& P waste from Subpart C regulations of the Resource Conservation and Recovery Act of 1980. This means that the wastes are not judged to be hazardous or non-hazardous; they are merely exempt. The wastes are only those intrinsically associated with E& P, including: drilling mud, cuttings, stimulation and packer fluids, produced waters and sand, workover fluids, field tank bottoms, waste crude oil and natural gas, and waste triethylene glycol. Not included are lubricants, solvents, hydraulic fluids, paints, motor oil, and sanitary and refining wastes. Operators must document the source of all such fluids. 

CONNECTIONS:

Kansas Department of Health and Environment
Phone 785-296-1679 (day) Phone 785-296-0614 (nights/ weekends)

National Response Center
Phone 800-424-8802

Kansas Corporation Commission (KCC)
Phone 785-271-3100

KCC District Offices:
Dodge City (316-225-8888)
Wichita (316-337-6230)
Chanute (316-432-2300)
Hays (785-628-1200)

For information on PTTC’s North Midcontinent Region and its activities contact:
Rodney Reynolds, Project Manager, Energy Research Center, and Petroleum Engineer,
Tertiary Oil Recovery Project, University of Kansas,
1930 Constant Ave., Lawrence, KS 66047
Phone 785-864-7398, Fax 785-864-7399, E-mail reynolds@cpe.engr.ukans.edu

Disclaimer: No specific application of products or services is endorsed by PTTC. Reasonable steps are taken to ensure the reliability of sources for information that PTTC disseminates; individuals and institutions are solely responsible for the consequences of its use.

The not-for-profit Petroleum Technology Transfer Council is funded primarily by the US Department of Energy’s Office of Fossil Energy, with additional funding from universities, state geological surveys, several state governments, and industry donations.

Petroleum Technology Transfer Council, 2916 West T. C. Jester, Suite 103, Houston, TX 77018
Toll-free 1-888-THE-PTTC; Fax 713-688-0935; E-mail hq@pttc.org; web www.pttc.org