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Author's profile photo John Harrison

Environmental regulations: How much do they really cost?

Great article in Hydro Carbon Processing  talking about understanding the cost of compiling with environmental regulations.

What really caught my eye was this opening paragraph “It is not unusual for some hydrocarbon processors to make environmental compliance activities a lower priority than daily operational needs, such as plant maintenance, product flow and product transport. After all, compliance does not directly generate profit. though not all owners/operators intentionally ignore environmental compliance, this mode of operating has been seen in the industry throughout the years—until now.”

I can understand the authors point. Nothing gets in the way of production in most companies. And in my experience when companies are trying to save money they look at a lot of “non value” activities to eliminate or reduce in priority. But my reaction was, but the cost of not complying with regulations (no matter how much a pain) is massive.

And then  they put my thought into better words ” The costs associated with the “wait-and-see”  compliance model (which is not uncommon throughout the industry) are monumental in comparison to the costs of compliance”.

From the article  ” an individual processor can have up to $2.25 MM in fines levied against it, if the company is found to be out of compliance for a mere 60 days” – my bolding.

They conclude that complying with regulations should remain a top priority and suggest that nine steps should be considered to successfully integrate environmental activities into the core of operations.

  1. Understand the intricacies of all the applicable regulations.
  2. Know the plant operation inside and out
  3. Implement asset and risk management programs
  4. Be proactive
  5. Chose the right consultant
  6. Develop the right plan
  7. Do not treat environmental activities as commodities
  8. Openly Communicate
  9. Follow through but be effective

To this list I would add, ensure that you have the systems in place and software that supports compliance with the regulations as gathering, compiling, and submitting all the necessary documentation manually is an extremely time consuming task.

When reading the article I was struck by the similarities to some companies attitudes towards maintenance, a cost sink, something to be reduced. After the equipment is still running so don’t invest in maintenance (after all we can catch up next year or the year after …). But the costs associated with a breakdown (lost production, equipment repair costs, potential injuries, environmental damage, government investigation & fines etc.) can also be considerable. So I feel that the above advice is also broadly applicable to maintenance & safety processes.

The other thing that struck me was that there was no mention of continuously training people.  With more complex environment regulations being put in place,  different standards bodies recommending a variety of standards for operation, it is easy to fall behind. But the ultimate responsibility for compliance and for operating safety is yours, you need to keep on top of this changing environment and understand the regulations and standards that governments expect you to follow. Hire expert consultants if you need to,  but you have to have sufficient understanding of these requirement , after all you are signing that you are in compliance not the consultant.

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