Federal Environmental Regulations Affecting Oil and Gas Operations

By: Cameron Kinvig, PRACTICAL GUIDANCE ENERGY & UTILITIES ATTORNEY EDITOR

This article provides you and your clients with an overview of the federal environmental regulation affecting the oil and gas exploration and production (E&P) industry. 

THERE IS SUBSTANTIAL ENVIRONMENTAL REGULATION of oil and gas E&P at the federal and state levels through the Environmental Protection Agency (EPA) and other agencies. Although it is estimated that states conduct between 80% and 90% of all enforcement actions affecting the E&P industry, these actions are often taken based on federal environmental regulations. For the purposes of providing state examples, we have used Texas as the model here. The practitioner should recognize that the rules do vary by state, as the federal government has left a lot of the enforcement of the federal laws to the states, and the states in turn, have incorporated portions of the federal laws into their own, while adding others as well.

The Need for Environmental Regulation

Environmental regulation is critical to address the environmental impacts of oil and gas E&P, which arise largely because of the methods employed to drill oil and gas wells. As a well is drilled, drill cutting—rock and mud from the hole—are brought to the surface along with drilling fluids and mud used to lubricate and cool the drill bit, as well as various chemical compounds. Drilling deep and horizontal wells can produce prodigious amounts of this waste, which is generally stored in surface pits or tanks before being disposed of at or near the drilling site (usually by the E&P company).

Environmental regulations ensure that your clients dispose of this waste in an environmentally friendly way, and that complete disposal of waste and rehabilitation of the environment surrounding the well is accomplished by the time drilling is completed. Environmental regulations also require your client, as the owner, to monitor the entire life cycle of an operating well to guarantee the well is properly plugged and abandoned when it has reached the end of its life.

The Resource Conservation and Recovery Act

The Resource Conservation and Recovery Act (RCRA)¹ regulates solid and hazardous waste and underground storage tanks. Its intention was to aid state governments in creating their own waste disposal schemes.

Exempt and Nonexempt Waste

Drilling waste is exempt from regulation under the RCRA. However, the RCRA does regulate temporary underground hydrocarbon storage tanks located at or near a well site and other waste associated with drilling operations (e.g., empty drums, solvents used to clean drums or trucks, waste associated with painting and sandblasting, and other solvents, chemicals, and acids used at or around drill sites). In total, hundreds of chemical compounds and other items are listed as nonexempt hazardous waste under the RCRA.²

It is important for you to make your client aware that if they mix exempt and nonexempt waste, this will often cause the entirety of the waste to be deemed nonexempt, which can significantly increase expenses when dealing with large volumes of drilling tailings and mud that may be tainted by only a small amount of nonexempt chemicals or other waste. A listing of exempt waste and a discussion of specific nonexempt waste under the RCRA follows:

Exempt Waste

• Household hazardous waste, such as garbage, sanitary waste, and trash
• Agricultural waste, such as waste from crops or animals that is returned to the soil as fertilizer
• Mining overburden returned to the mine site
• Fossil fuel combustion waste, such as fly ash, bottom ash, slag waste, and flue gas emission control waste generated from the combustion of fossil fuel and/or coal
• Oil, gas, and geothermal waste, such as drilling fluids, produced waters, and other wastes associated with the exploration, development, or production of crude oil, natural gas, or geothermal energy
• Trivalent chromium wastes, as long as it can be proven such waste is not generated through a process that also generates hexavalent chromium
• Mining and mineral processing wastes, including slag from primary copper processing, slag from primary lead processing, red and brown muds from bauxite refining, phosphogypsum from phosphoric acid production, etc.
• Cement kiln dust waste
• Arsenically treated wood
• Petroleum-contaminated media and debris from underground storage tanks
• Certain types of injected groundwaters that were reinjected as part of a hydrocarbon recovery operation, if those groundwaters were reinjected prior to January 25, 1993
• Spent chlorofluorocarbon refrigerants from totally enclosed heat transfer and air conditioning systems, provided the refrigerant is reclaimed for further use
• Used oil filters, as long as the filter has been drained of oil utilizing one of the four methods approved by the EPA
• Used oil distillation bottoms that are used as feedstock to manufacture asphalt products
• Landfill leachate or gas condensate derived from certain listed wastes, as long as it does not exhibit any characteristic of hazardous waste and meets certain other requirements
• Waste generated by participants in the Project XL Pilot Project

Nonexempt Hazardous Waste

Hazardous waste under the RCRA is categorized into six separate hazard codes: ignitable waste, corrosive waste, reactive waste, toxicity characteristic waste, acute hazardous waste, and toxic waste. Thus, E&P operators must be careful to ensure solvents and other chemicals used at a drill site do not mix with exempt waste from drilling activities.

It should also be noted that the RCRA implements cradle-to-grave requirements for the hazardous wastes it covers. This allows the EPA to establish controls to monitor compliance and cleanup procedures required by the RCRA, and imposes strict recordkeeping and reporting requirements on any party that generates, transports, treats, or disposes of any nonexempt waste.

Although the vast majority of waste at a drill site is exempt from the RCRA requirements, the RCRA remains a powerful tool for the EPA to enforce environmental standards over ancillary activities that occur at or around a drill site.

For Practical Guidance on additional related environmental regulations, including implications of The Clean Water Act, Safe Drinking Water Act, Comprehensive Environmental Response, Compensation, and Liability Act, Clean Air Act, Oil Pollution Act, Toxic Substances Control Act, Endangered Species Act, Migratory Bird Treaty Act, and the National Marine Sanctuaries Act, subscribers may view the full article in Practical Guidance.

Not yet a Practical Guidance subscriber? Sign up for a free trial of Practical Guidance to read this complete article.

Related Content

1. Pub. L. No. 94-580, 90 Stat. 2795 (Oct. 21, 1976). 2. A complete listing of nonexempt hazardous waste, and a discussion of the RCRA hazardous waste categories, can be found in 40 C.F.R. Ch. I, Subch. I, Pt. 261. The EPA’s exclusions to hazardous waste regulations under the RCRA can be found at A User-Friendly Reference Document for Hazardous Waste Exclusions.