The economic impact of proposed regulations on the discharge of drilling muds and cuttings from the offshore facilities on US undiscovered crude oil reserves

This paper presents the results of an assessment of the potential economic impact of proposed regulations. on the discharge of drilling fluids (muds) and cuttings on US offshore undiscovered crude oil resources. These regulations include proposed Best Available Technology economically achievable (BAT) and New Source Performance Standards (NSPS) effluent limitations under the Clean Water Act governing the discharge of drilling fluids and drill cuttings from offshore oil and gas drilling operations. The impact of the proposed RAT/NSPS regulations for the drilling fluids and drill cuttings disposal on the cost of funding, developing, and producing Lower-48 offshore undiscovered crude oil resources will depend significantly on operators perceptions on the chances of failing toxicity or static sheen tests. If operators, in economically justifying their projects, assume that the fluids fail one of these tests, thereby prohibiting them from being discharged, up to 11% of the economically recoverable offshore resource would be considered uneconomic to produce. This would amount to 845 million barrels of oil at an oil price around $25 per barrel. On the other hand, if operators are willing co take their chances and see if their fluids fail one of these tests, then, based on EPA`s assumptions concerning forecast fluid use and static sheen and toxicity test failure rates, up to 4% of the offshore undiscovered resource would be impacted, amounting to lost reserves of up to 270 million barrels.