Energy industry’s EHS spending expected to exceed $50 billion by 2030

September 23, 2013

EHS

Oil and gas companies will dramatically increase the amount of money they spend to address environmental, health and safety (EHS) issues over the course of the next two decades, according to a report from Lux Research.

In “Using Technology to Drive Improvements in Health, Safety, and Environment,” Lux predicted that the industry’s annual spending on EHS initiatives would reach $56 billion by 2030—an increase of approximately 60 percent over the $35 billion invested during 2011.

The research firm described this trend primarily as the result of an increase in regulatory scrutiny that has followed in the wake of a string of recent high-profile natural disasters, most notably the 2010 BP oil spill in the Gulf of Mexico. At the same time, analysts also noted that companies in the industry may be looking to restore their reputations and prove to the public that they have learned from past mistakes.

Midstream companies shouldering greater portion of EHS investments

According to Lux, the upstream segment of the industry, composed of companies that extract crude oil and natural gas from underground reservoirs, is expected to continue accounting for the vast majority of the sector’s EHS investments. However, the firm’s analysts predicted that midstream companies—those that store, transport and market oil and gas—will be compelled to significantly increase their EHS spending in coming years as a result of heightened pressure from regulators and the general public.

Lux’s report specifically noted that midstream producers are increasingly facing confrontations with journalists and environmental groups whenever they seek to begin a new major project. The Keystone XL Pipeline may be the most prolific example of this trend, which Lux said has accelerated since a 2010 incident in which oil from an Enbridge pipeline spilled into the Kalamazoo River. Three years, multiple remediation projects and a $3.7-million fine later, the company is still locked in a dispute with the U.S. Environmental Protection Agency (EPA) over the extent of its liabilities.

U.S. to remain major market for EHS solutions

Today, approximately 40 percent of all EHS investments worldwide are made in the United States and analysts assert that the country will remain the leading market for related solutions, as the reach of the EPA and other regulatory agencies continues to grow. According to Lux, spilling a single barrel of oil on U.S. soil or waters can expose a company to as much as $8,000 in penalties. This gives companies operating in the country a compelling reason to take a proactive approach to managing potential environmental liabilities.

Working with independent experts can help industry stakeholders conduct risk assessments, perform compliance audits and implement comprehensive Spill Prevention, Control and Countermeasure (SPCC) Plans. Partnering with a full-cycle provider of environmental consulting and engineering services allows companies to resolve potential liabilities, limit the costs associated with remediation or monitoring and remain focused on their core business.

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