Environmental regulatory requirements at both the state and federal level are constantly changing, making it difficult for industry and R&D program managers to project future compliance requirements and costs. Even if a company is trying to keep abreast of various proposed regulatory initiatives, the number of possible combinations of initiatives that could occur in the future seems virtually limitless. Uncertainty associated with potential future environmental compliance requirements makes the identification and evaluation of future investment and R&D opportunities exceedingly difficult, and makes the process of systematic strategic planning increasingly complex.
This paper describes a methodology for accounting for uncertain future environmental compliance costs in a systematic, comprehensive manner. Through analysis of proposed initiatives for making future environmental requirements more stringent, forecasting the likelihood of occurrence and potential timing of each initiative, and estimating potential future compliance costs associated with each initiative, a thorough process for incorporating regulatory uncertainty into strategic planning and project evaluation is described. This approach can be used for evaluating R&D opportunities to determine where development of new technologies or assessment of risks posed by industry operations may have the greatest impact on future industry costs of compliance. This approach could also be used to account for the uncertainty of future environmental costs in corporate strategic planning or for factoring future compliance costs into project evaluation. This approach could also be enhanced through use in conjunction with other modeling and forecasting systems that could consider a broad range of impacts, including impacts on gas production, industry activity levels, and tax revenues.