API MEMBER COMPANIES CONSIDER SELF-REGULATION ON ENVIRONMENTAL, OTHER ISSUES

March 16, 1992
Major U.S. oil companies are considering a form of mandatory self-regulation in environmental, health, and safety issues. Member companies of the American Petroleum Institute are reviewing a set of management practices as part of a broad environmental and safety initiative called "Strategies for Today's Environmental Partnership (STEP)."

Major U.S. oil companies are considering a form of mandatory self-regulation in environmental, health, and safety issues.

Member companies of the American Petroleum Institute are reviewing a set of management practices as part of a broad environmental and safety initiative called "Strategies for Today's Environmental Partnership (STEP)."

FINA Inc. Pres. and Chief Executive Officer Ron W. Haddock, who heads an API group handling parts of the STEP program, said companies have been asked to respond to the proposed management practices by June. His strategic planning oversight group hopes the proposal will be ready for API directors to consider in November.

Haddock reported on progress of the 18 month old STEP initiative at a joint meeting last week of Houston chapters of API and the International Association of Drilling Contractors.

He called for a new approach to environmental regulation, saying the current approach raises costs for often doubtful environmental gains.

COMPLIANCE COSTS

The U.S. Environmental Protection Agency projects that the costs of complying with environmental regulations will double to $200 billion/year by 2000, with the petroleum industry's share about 1/10 of the total. The total excludes perhaps $30 billion/year for the updated Clean Air Act.

Reform will be difficult to achieve, Haddock said. "The only sensible reaction on our part is to address the challenge of public distrust which has brought this about."

And the industry can deal with distrust only by "proving to the American people that we can conduct our operations in ways that advance environmental progress and are compatible with their values and goals."

The proposed STEP management practices would be required for all API members, with companies certifying their compliance. They aim to help managers focus on environmental, health, and safety issues, leading to actions to improve environmental programs, Haddock said.

The proposed practices grew out of a set of guiding principles API adopted as part of its bylaws in 1990. The principles, also part of the STEP initiative, commit the industry to safe operations and set broad goals in areas such as communications and training.

Also under the STEP program, API is reviewing its more than 400 equipment and operational standards and guidelines to ensure they are consistent with environmental principles.

The program also sets up strategic plans in these areas:

  • Used motor oil recycling. API is working with state and local officials to establish used oil collection programs and to support efforts to make proper disposal convenient, to ensure proper handling during recycling, and to inform the public about the need for safe recycling. It will test the program in eight states.

  • Operating hazards. API members are tightening training standards and trying to solve potential operational problems.

  • Groundwater protection. Activities include research, prevention and cleanup, evaluation of industry operations in search of safer ways to store products, a planned center for excellence for groundwater research and technology transfers, studies of the effects of abandoned wells, well-plugging technical guidance, and evaluation of leak detection methods for above ground storage tanks.

  • Air toxics. API seeks ways to further reduce emissions of toxic chemicals, plans a database for emissions trends, and will conduct research and work with communities to improve communication.

Another part of STEP, performance documentation, will track, consolidate, and demonstrate with data the industry's work toward improving the environment.

API also plans to set up an environmental advisory group, which may include persons from outside the industry,, to identify areas of concern and suggest priorities.

The $1 billion, industry-funded Marine Spill Response Corp. and joint auto/oil industry emissions research program also are parts of STEP.

THE COSTS

Pointing out that costly regulations divert capital away from the U.S., Haddock said failure by Congress to lease the Arctic National Wildlife Refuge Coastal Plain will deny the U.S. perhaps $50 billion in gross national product and as many as 750,000 jobs during the next 12 years.

If Congress imposes stringent new requirements on exploration and production wastes when it reauthorizes the Resource Conservation and Recovery Act, even more petroleum industry spending will move overseas, and further jobs will be lost. In addition, the resulting increase in oil imports will raise the environmental risks that tankers represent.

"Resources are being badly misallocated," Haddock declared.

He attributed the problem to official misuse of science leading to faulty risk assessments, a tendency to ignore costs, a "command and control" approach toward policy making, and "the horrendous legal complexity of the whole system."

Reform is difficult because regulatory costs don't appear in budgets, extremist environmental groups are well funded and politically active, and the environmental arena has become a "source of pork," Haddock said.

"Producers of alcohol fuels, waste treatment firms, Superfund contractors all pressure Congress, EPA, and the White House for regulations that will increase their revenues regardless of real environmental benefit or efficiency."

The FINA chief said the White House should simplify and harmonize environmental rules.

He called on the government to reject exorbitantly expensive rules that achieve minor gains and to base risk assessments on sound assumptions and good science.

He said Congress should make clear that economic effects are important in environmental regulation. Congress and EPA, Haddock said, should set performance standards and not dictate details of compliance.

Copyright 1992 Oil & Gas Journal. All Rights Reserved.