Landmark Study Identifies Environmental Costs in U.S. Oil Fields

Dec. 14. 1999

New Orleans - A new national study shows that U.S. oil and gas producers spend more than $2.6 billion a year - or nearly $2 per barrel of oil equivalent - to comply with environmental regulations.

The findings of Assessing the Cost of Environmental Compliance were released at the Annual Meeting of the Interstate Oil and Gas Compact Commission (IOGCC) by Oklahoma Gov. Frank Keating, who requested the study earlier this year.

The report is the first non-industry effort to document costs of environmental compliance. The study will help states and the federal government weigh costs and benefits of new and existing regulations.

Less than 2 percent of the operators surveyed paid fines in 1998 for violating environmental regulations, while they spent an average of 18 percent of their revenue on regulatory compliance. The survey identified the cost of 17 different regulatory programs.

"The domestic petroleum industry often is falsely portrayed as environmentally harmful, " said Governors Keating and Ed Schafer, North Dakota. "This report refutes that misconception." "This report reminds states and the federal government that regulatory programs need constant attention. Increased research will develop even more cost-effective ways to protect the environment."

U.S. Sen. James Inhofe of Oklahoma and U.S. Energy Secretary Bill Richardson have reviewed the report and commented on its findings.

"It is imperative that each cost imposed on domestic oil producers be based on sound research," Inhofe said.

"Unnecessary costs should be removed so that we can help save our domestic oil industry." "These numbers are very enlightening," Richardson said. "This is a great effort toward understanding how we can restructure our regulatory process. Domestic producers are working in a very expensive production environment, making it difficult for them to compete in a global marketplace."

Modeled after a smaller study of a single county in Oklahoma, the new survey was mailed to almost 4,000 oil and gas operators in 24 states having significant oil and gas production. Nearly 25 percent responded to the request for information.

The study was conducted by researchers at the Bureau for Social Research at Oklahoma State University directed by Dr. Christine Johnson. StateSource, LLC., an independent consulting firm, compiled the report.

In presenting the findings to several hundred regulators and producers, Keating noted that the domestic industry needs the assurance that the IOGCC-member states are promoting sound, cost-effective regulations. "Collectively, we must focus on tomorrow if the domestic industry is to remain vital," he said. "We must focus on where we (state regulators) are going."

The IOGCC represents the governors of 37 states producing nearly all the oil and gas in the United States. It promotes the conservation and efficient recovery of domestic petroleum resources while protecting health, safety and the environment. For more information on the organization, visit its Web site, http://www. iogcc. state. ok. us.