Simplifying Environmental Compliance and Making It Less Costly
Authors: Haunschild Greg 
Published: February 2015

The benefits of a cleaner, healthier environment are obvious and inarguable. Society, business, and life itself flourish and prosper when pollutants are controlled and the potentially harmful impact on the world is minimized. Environmental regulations are important tools for achieving these benefits.

Unfortunately, the regulatory process is unnecessarily complicated and expensive. According to figures from the U.S. Environmental Protection Agency (EPA), the total expenditures by business (in all industries) to achieve environmental compliance topped a record U.S. $3.5 billion in 1999, which was the last year for which such cost data were released. A study of other EPA data, however, clearly indicates that the cost of environmental compliance has continued to increase and will continue to do so into the foreseeable future.

The EPA study included both regulatory compliance measures and the direct cost of pollution-abatement technologies. Other agency studies support the contention that the work required to achieve and maintain environmental regulatory compliance has become a significant drain on the resources of American businesses, particularly the oil and gas industry.

The Environmental Information Agency has published a report titled “The Impact of Environmental Compliance Costs on U.S. Refining Profitability” (http://www.eia.doe.gov/emeu /perfpro/ref_pi/keyfind.html), which shows that demonstrating compliance costs more than achieving compliance. The report indicates that for every U.S. $1 spent on pollution control, a company may need to spend an additional $1.50 to prove to regulators that it is in compliance with mandated limits. This $1.50 is not tied to pollution abatement, but only to filing and processing paperwork.

Even if these costs are averaged to only $2/BOE per year, the total amounts to more than $2.6 billion per year. This is a staggering amount of money to spend on just filling out forms and filing reports.

There has to be a better way . . . and there is.

A Taxing Situation

In the U.S., as well as in any other country that collects taxes from businesses and individuals, the tax system works for an extraordinarily simple reason. That is, if it did not, the government would not collect as much money. To maximize collections, the U.S. Internal Revenue Service (IRS) receives and processes an enormous quantity of tax returns in a fairly short time. In contrast, since environmental compliance is not a revenue-generating venture, any incentive for streamlining its speed and efficiency does not exist.

In a market-driven economy, almost everything, from cars to copy machines, eventually becomes a commodity—something useful that can be turned to commercial or other advantage. In spite of the obvious advantages inherent in having a clean environment, the process of achieving environmental regulatory compliance defies commoditization and, in fact, shows no indications that it is moving in that direction. The reason for this resistance seems to stem from several factors, including the ad hoc way in which agencies approach the creation and implementation of regulations. Often, scientific concerns are ignored or overruled in favor of special interest groups with goals that are not based on science, but on emotional or financial concerns.