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Abstract

A number of legislative and regulatory initiatives being considered to protect the environment could affect the economics of U.S. oil and gas exploration and production (E and P). Not all environmental statutes require the Environmental Protection Agency (EPA) or other regulatory agencies to consider costs and/or energy impacts when establishing regulations or standards. Even when energy impact analyses are performed, they are often limited in scope, because they generally only consider the impacts associated with a specific regulation. and almost always assume no impacts from regulations in other areas. Many have expressed concerns that the cumulative costs of multiple regulatory initiatives could significantly impact U.S. oil and gas operations. This paper summarizes the results of a more comprehensive assessment of the potential cumulative energy and economic impacts of environmental regulatory initiatives on U.S. crude oil supplies (ICF Resources- 1990).

The economic recovery potential of various crude oil resource categories at four constant oil prices - $16. $20. $24. and $32 per barrel (in 1988 dollars) was considered in this analysis. Future supplies from four categories of U.S. crude oil resources were evaluated: oil recoverable from the continued conventional production of known onshore lower 48 fields, oil recoverable from future infill drilling and waterflood projects in known onshore Lower-48 fields. oil recoverable from future enhanced oil recovery (EOR) projects in known onshore Lower-48 fields. and oil recoverable from onshore and onshore crude oil fields remaining to be discovered in the Lower-48 and Alaska (onshore and offshore).

The results of this analysis clearly demonstrate that increased regulations on U.S. crude oil E and P operations can have a significant impact on potential ultimate crude oil recovery. The extent of regulations imposed clearly will determine the level of impact, but the results show that significant impacts are felt over a wide range of regulations, over a wide range of crude oil prices, and at two levels of development for extraction technologies. All resource categories analyzed in the study are impacted by the regulations evaluated.

Introduction

This study is a comprehensive assessment of the cumulative impact of current regulatory initiatives on future U.S. crude oil production. The assessment involved a review of selected regulatory production. The assessment involved a review of selected regulatory initiatives that could affect the UPS. oil and gas E and P industry. Potent regulatory initiatives being considered under the authority of some environmental statutes that may affect oil and gas operations are easily quantifiable in terms of estimated compliance cost. These statutes include: the Resource conservation and Recovery Act (RCRA). the Safe Drinking Water Act (SDWA), the Clean Water Act (CWA), and the Clean Air Act (CAA). The nature of and estimated incremental compliance costs associated with each initiative considered was determined. From a review of these initiatives, three regulatory scenario were developed. representing low, medium, and high levels of incremental compliance cost. The regulatory initiatives considered under each scenario are summarized in Tables 1 through 4, organized by environmental statute.

Based on available models developed by the U.S. Department of Energy (DOE), the cumulative impacts associated with each scenario were determined. Impacts are presented in terms of the estimated crude oil reserves and/or production that could become uneconomic as a result of the regulations imposed Other impacts are also considered, such as the impact on state and federal revenues from royalty and tax receipts.

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