API: Industry environmental outlays hit $12.4 billion in 2005

The American Petroleum Institute reports the US petroleum industry spent about $12.4 billion on the environment and on environment-related research and development during 2005.

Paula Dittrick
Senior Staff Writer

HOUSTON, July 18 -- The American Petroleum Institute reports the US petroleum industry spent about $12.4 billion on the environment and on environment-related research and development during 2005.

It was the highest environmental-related expenditure total since 1990, API said in an annual report released in June.

Of the 2005 total, statistics indicate $10.7 billion was spent to implement technologies, create cleaner fuels, and finance environmental initiatives. Another $1.7 billion was spent for research and development, corporate environmental programs, and spill remediation.

API statistics since 1990 show the industry's lowest environmental expenditures for any one year were $7.5 billion during 1999, which coincided with low oil and gas prices. Expenditures have climbed fairly steadily every year since then, records show.

The industry invested more than $148 billion since 1990 toward improving the environmental performance of its products, facilities, and operations. This works out to $504/person based upon a US Census Bureau population estimate of 296.6 million.

About 64% of the industry's environmental expenditures in 2005 targeted air pollution abatement, meeting or surpassing the requirements of the 1990 Clean Air Act.

Hazem Arafa, API director of statistics, said he had expected the numbers to go up in 2005 compared with previous years. Ultralow-sulfur diesel regulations drove 2005 downstream expenditures of $8 billion, and increased drilling activities drove exploration and production expenditures of $2.28 billion for that year.

Since 1990 API reports environmental spending by refiners of nearly $84 billion while E&P spending on environmental expenditures during that same time was $28 billion. The 10-year total for refining was nearly $50 billion compared with $16.5 billion for E&P.

"The operating and maintenance spending numbers are pretty consistent over the last 3-4 years, or they just increased a little because the refining capacity is going up," Arafa said. "It's really the capital expenditure numbers that make the total numbers oscillate up and down. Those are usually driven by certain mandates or regulations, and that is why they spike up."

The US has experienced the equivalent of increased refining capacity of one refinery every year for 10 years, he said.

"Just to put it in perspective, the refining industry has spent $50 billion in the last 10 years on cleaning the environment. That $50 billion could have built an extra 12 refineries, so it's significant spending," Arafa said.

API's data include survey responses and federal statistics. The environmental expenditures survey is sent to a sample of the industry representing all large and midsize companies along with a randomly selected group of smaller companies. In 2005, 72 companies completed the survey.

Contact Paula Dittrick at paulad@ogjonline.com

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