Compliance Costs Top Oil Companies’ Concerns
For the third consecutive year, regulatory changes and increased cost of compliance remain the top concern for all oil and gas companies in their 10-K filings, according to BDO’s annual analysis of risk factors. This year, hydraulic fracturing (fracking) regulation entered the top 20 risks cited by oil and gas companies for the first time, with 85 percent of companies listing it as a threat to operations.
Now in its second decade, the US shale boom is running up against an increasingly stringent regulatory environment as it drives industry growth and development of new technologies.
Infrastructure that has not kept pace with increasing production volumes is another factor shadowing the optimism around the shale boom. Concerns about a lack of adequate pipeline, storage and trucking capacity grew by 27 percent this year, with four out of five companies citing it in their 10-Ks, BDO reports.
Concerns about broader environmental regulations also remain high, with 96 percent of companies citing it as a risk. BDO says this year will serve as a reality check for these companies as they face increased opposition to fracking, refining capacity constraints and Keystone XL pipeline project delays.
Political instability and fractured relations in the Middle East have also propelled the pace of the shale boom, with the US wanting to rely more on its own oil resources. Terrorism and threats to political instability also entered the risk factor list for the first time this year.
In a February article about staying ahead of the regulatory curve in fracking, Environmental Leader guest columnist Eli Grubber says that regulations surrounding fracking have not kept pace with the boom in shale production. But because of the widespread opposition and concerns about fracking, eventually local, state and federal regulations will catch up says Grubber, CEO of Ecologix Environmental Systems.
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