Costs and Benefits From the Regulations

Nu Star Energy L.P. is a limited partnership that is publicly traded and headquartered in San Antonio. It has 9,063 miles of pipeline, eighty-six terminal facilities, four storage facilities for crude oil and two refineries for asphalt. It is the second in size among independent liquid terminal operators in the United States. It operates in the U.S., Netherlands, Canada, United Kingdom, Antilles and Mexico. The entire system of the partnership can hold up to 86 million barrels in its storage infrastructure. It has refineries for asphalt, crude oil and has pipelines for refined products. Also present are terminals for refined products, a storage facility for petroleum, a terminal operation as well as storage facilities for crude oil. NuStar strives to protect the environment and continually works to improve its programs and processes so as to meet even the most stringent of environmental practices. This has resulted in better environmental performance. Reportable releases have drastically reduced in the last eight years (Nustar Energy L.P, 2013).

Environmental and Safety Regulation

The operations of the company are controlled by extensive local, state and federal laws concerning the environment, including regulations concerning modes of waste disposal, management of wastes, measures to prevent pollution, qualifications to be an operator and pipeline integrity. Several federal and state laws and regulations concerning safety and health also apply, including the regulations that ensure the safety of pipelines. The main environmental concern of the company is making unauthorized emissions into the air, releasing waste into the soil, ground water or surface water and occasioning injury to people and damaging property. Complying with all the laws and regulations makes the company has high capital expenditures and so a high overall cost of doing business, and a violating the laws or any permits may result in heavy criminal and civil liabilities, penalties or injunctions. NuStar has incorporated procedures, practices and policies to govern the control of pollution, pipeline integrity, public education and relations, process safety management, product safety handling of materials, occupational health as well as the handling, usage and storage so as to ensure the pipelines, the employees, the public as well as the environment are safe and so limit the amount of liability that can arise from a malfunction or error. Future change or addition to environmental laws could mean more capital expenditure and costs of operations so the operating costs cannot be ascertained earlier on. Further, spills might cause contamination and this could cause liabilities. Such costs and risks are part of doing business in the field, and no assurances can be made towards the avoidance of future liabilities and costs (Nustar Energy L.P, 2013, Greenstone, 2001).

Capital Expenditures incurred in Complying with Environmental Regulations

The capital expenditures incurred by the company in complying with environmental regulations was $6.9 million in 2012 and it dropped slightly in 2013 to $6.5 million

The passage of the 1970 Clean Air Act Amendments saw the Environmental Protection Agency (EPA) establish national ambient air quality standards. This is the minimum air quality that every county is required to meet -- in 4 criteria: tropospheric ozone (O3), carbon monoxide (CO), total suspended articles (TSPs) and Sulfur dioxide (SO2). As a component of the legislation, every county in the United States gets their attainment or nonattainment designations in each of the four classes of pollutions. Nonattainment means that the county exceeded the set limit for that pollutant. Nonattainment attracts more scrutiny on the emitters in a county than the emitters in a county that attained the set standards. Free form the laws and regulations in all counties are those institutions considered non-polluters (Greenstone, List & Syverson, 2012).

Renewable Energy and Alternative Fuel Mandates

Many state and federal programs need the use of renewable energy as well as alternative fuels like engines that are battery-powered, wind energy, solar energy and biodiesel. The mandates can affect refined petroleum demand. For instance, the Energy Independent and Security Act of 2007 as well as the American Recovery and Reinvestment Act of 2009 enacted by Congress mandated the annual increment of the usage levels of renewable energy like ethanol starting from the year 2008 for the next 15 years, and also increasing goals for energy efficiency, including fuel economy standards that are higher for automobiles, subsidizing loans for projects targeting renewable energy and providing funding for renewable energy and energy efficiency programs. The requirements of the statute can in the long run offset the increases projected or lower refined petroleum demand, especially gasoline, in some markets. The increasing usage and production of biofuels might also create opportunities to construct new pipelines and the potential they have cannot be accurately quantified right now. Changes in legislation similar to the one above can affect the operations of the company and change the demand of the company's products (Nustar Energy L.P, 2013).

Water

The Clean Water Act, also referred to as The Federal Water Pollution Control Act of 1972 as well as strict statutes made at state level imposes several restrictions and controls concerning discharging pollutants into waters of the state or waters of the U.S. Such kind of discharge is outlawed, save for in situations where explicit permits have been offered by the concerned state and federal authorities. A law enacted in 1990, the Oil Pollution Act, makes amendments to the Clean Water Act as concerns response, liability and prevention of oil spills. The law has various requirements concerning preventing spills and some laws of the states need plans of response and the utilization of dikes and other structures of a similar nature to assist in curtailing contamination of waters of the U.S. Or those of the state in case unauthorized discharge takes place. Violating these laws and other attached regulations can cause a company to incur huge liabilities and costs (Nustar Energy L.P, 2013).

Air Emissions

The operations of the company are controlled by the Federal Clean Air Act plus some other strict local and state statutes. These regulations and laws control the emission of pollutants of the air from varied sources, including NuStar's operations. The regulations also impose on the companies several reporting and monitoring requirements. They might need a facility to get approval before they start constructing or modifying particular facilities or projects that are expected to be producing air emissions or cause a rise in the level of emissions, and so get and comply strictly to the particulars in the permits. It is probable that the statutes as well as attached regulations can be revised and be more stringent in the near future, and so making the company to spend more so as to comply with the applicable provisions. It is not possible to estimate the effects that such amendments will have on the financial standing of the company (Nustar Energy L.P, 2013).

The Clean Air Act Amendments of 1990, plus the stringent Clean Air Act interpretations could cause imposition of certain control requirements regarding pollution in the future as concerns air emissions made by the pipeline operations, terminals and storage facilities. The Environmental Protection Agency (EPA) has been developing for many years several regulations for the implementation of the requirements of the Act. Also to be implemented are the revisions made to Section 211 of the Clean Air Act that deals with specifications of diesel fuel and the usage of MTBE in gasoline. Such revisions and some other regulations of EPA or other requirements which the state or local authority can impose may cause the company to spend more and have higher capital expenditures for the coming many years in buying equipment for controlling air pollution or getting permits to operate and being approved to have air emissions (NuStar Energy L.P., 2007).

The Kyoto Protocol was operationalized in February 2005. Under the protocol, member countries should implement various programs to help in the reduction of certain gas emissions, generally known as greenhouse gases, which are thought to contribute to global warming. The U.S. is not partner to the protocol. In 2007, the Consumer Solutions to Global Warming, the Senate Subcommittee on Private Sector and the Wildlife Protection made the approval of SB 2191 which is the United States Climate and Security Act of 2007, which would need companies to reduce particular emissions to the levels in 2005 by 2012 and the levels in 1990 by 2020. SB 2191 was brought before the Senate Environment and Public Works Committee. California assimilated the Global Warming Solutions Act of 2006 that required a reduction of 25% in the emission of greenhouse gases by the year 2020. This law needed the California Air Resources Board to operationalize the regulations given by 2012 and so lower the emissions by 25% from all the sources of emission present in the state. In the recent past, the California Air Resources Board made an announcement of its intent to propose a draft of California's baseline as well as compulsory regulations for reporting and so start mandatory Green House gas emission reporting. New Mexico state as well as other states which comprise the Western Climate Initiative made proposals of almost the same regulations. New Jersey saw the adoption of a legislation concerning the emission of Green House Gas from different sources particularly from power plants. The natural gas and oil industry is major emitter of Green House gases such as methane and carbon dioxide, and restrictions made in the future concerning these emissions could greatly impact the operations of the company. Estimating the possible effects of such alterations to regulations on the operations of the company is not possible right now (NuStar Energy L.P., 2007).

Solid Waste

The company generates hazardous and non-hazardous solid wastes which are controlled by the federal Resource Conservation and Recovery Act (RCRA) together with other related statutes. The company is not inherently needed to comply with a significant portion of the requirements of the Act since they do not have any waste storage, disposal or treatment facilities. Nonetheless, it is probable that some wastes that could comprise of wastes being currently generated by the company, can be considered hazardous. Hazardous wastes are controlled by stricter and more expensive requirements than those of non-hazardous wastes (Nustar Energy L.P, 2013).

Hazardous Substances

The Comprehensive Environmental Response, Compensation and Liability Act, known as CERCLA or the Superfund and other attached legislation impose on various persons contributing to "hazardous substance" emission many liabilities, without regarding legality or fault of the act. The persons are the operator or owner of the facility and various entities that were involved in the disposal of the substances in question. CERCLA also gives authorization to EPA and, in some cases, third parties to take action against threats to the heath of the public or environmental safety and so go after recovery from the concerned individuals to recoup the costs that have been incurred. In the course of the ordinary operations of the company, the company might generate waste that CERCLA considers hazardous. They currently lease or own, and in leased or owned in the past, properties in which hydrocarbons were handled or are being handled. Although the company believes that they have followed best practices in the disposal of wastes, some hydrocarbons have been released in properties that they own or lease or in locations of disposal of wastes. Further, the company bought several of the properties from various third parties, and they didn't have any control on how those people treated or disposed their wastes including hydrocarbons. The properties and the wastes that have been disposed on them might be answerable to RCRA, CERCLA and other attached laws in the states. Under the regulations and laws, the company could not be required to compensate for wastes that had been disposed before (including those wastes released or disposed by the previous operators or owners), clean the property that has been contaminated (including groundwater that has been contaminated) or to carry out operations to remedy any contamination that might happen in the future. Also, the company experiences exposure to several and joint liability under the regulations of CERCLA for the entire or portion of costs needed to clean the sites up -- the sites where the hazardous wastes had been released or disposed. While remedying the contamination at the subsurface levels is ongoing at many of the facilities, given the prevailing information, the company believes that the expenses incurred for the activities shall not affect NuStar materially in terms of finances or hamper its operations. Costs like that, nevertheless, are always not predictable and so no assurances can be made concerning the costs that will be incurred in the future (Nustar Energy L.P., 2013)

Pipeline Integrity and Safety

The pipelines of the company are subject to many state and federal laws and regulations controlling pipeline safety and integrity. For instance, the Federal Pipeline Safety Act of 1968, the Pipeline Inspection, Protection, Enforcement and Safety Act of 2006, the Pipeline Safety, Regulatory Certainty and Job Creation Act of 2011 and the Pipeline Safety Improvement Act of 2002 plus all the regulations attached to the implementation of these Acts. These laws and regulations require the companies to have programs of qualification for the main personnel, to update and review the existing education programs concerning pipeline safety, to give information to the National Pipeline Mapping System, to maintain plans for responding to spills, to ensure the implementation of programs for pipeline integrity management for those pipelines that can have effects on areas of high consequence ( i.e. places with high populations, waterways that are navigable and other extremely sensitive places), ensure the maintenance of detailed maintenance and operating procedures and to ensure the management of human factors in the pipeline control centers like fatigue of the controller. While complying with all these regulations would result in the company incurring high capital expenditures, they believe that costs will not affect the operations of the company materially in terms of its finances or competitive advantage (Nustar Energy L.P., 2013).

Environmental Regulations

The U.S. Environmental Protection Agency (EPA) and other agencies concerned with the environment regulate what impacts businesses have on the environment. The EPA comes and ensures the enforcement of regulations that ensure the implementation of congress-enacted environmental laws. Similarly, state agencies ensure the implementation of regulations that are concerned with the implementation of laws the state legislature enacts. Several environmental regulations are applicable to small businesses. The agencies and EPA assist small businesses comprehend the particular requirements of the regulations through the publishing of guides in plain-language to give an explanation to business owners concerning the actions they are required to take so as to comply with the regulations of the federal government. Similarly, a majority of states give guidance like that for the laws enacted at the state level. Guides like this assist the businesses comprehend what their responsibilities are under the environmental regulations of the nation (Environmental Regulations, n.d).

Environmental Permits

Certain environmental laws need businesses to get environmental permits before they can discharge or emit pollutants into the water or the sea, dispose hazardous substances, or take part in certain activities that are regulated. Permits may also be made use of by the local, state or federal government agencies in implementing the regulations or laws whose intention is to protect certain kinds of resources like endangered species and wetlands. Several environmental permits are given by state governments (Environmental Regulations, n.d).

Commonly Required Permits

The permits below are often needed, plus an explanation of compliance requirements.

Clean Air Act Permits: A majority of large sources and a number of smaller sources of air pollution are required by law to get operating permits asked for by Title 5 of the Clean Air Act Amendments of 1990. Most of the permits are given by the local and state permitting authorities and are always referred to as part 70 permits since the regulations giving the minimum requirements for permits issued by the state are in 40 CFR part 70.

Endangered Species: The Endangered Species Act, save for some instances, does not allow activities that affect endangered or threatened species unless authorization is given by the National Oceanic and Atmospheric Administration's National Marine Fisheries Service or the U.S. Fish and Wildlife Service. Certain activities might require that a state permit be given.

Wetlands: If the company will be operating near a wetland, the local, state and local governments may have various requirements for permits. At the level of the federal authorities, the discharge of fill or dredged materials into the waters of the United States is regulated by the Army Corps of Engineers. Section 404 of the Clean Water Act allows the EPA to give permits for persons discharging pollutants including storm water and waste water from the source points of the wastes provided the provisions of Section 402 of the Clean Act are met. Environmental authorities at the state level oversee the wetlands under the laws of the state like those concerned with water pollution, management of shorelines and forest practices. The wetlands are regulated by the local governments by zoning and through similar ordinances (Environmental Regulations, n.d).

RCRA Permits: The permits of the Resource Conservation and Recovery Act (RCRA) are designed to assist in ensuring safe storage, disposal and treatment of hazardous wastes. The permits are given by states having authorization or by the regional offices of the EPA (Environmental Regulations, n.d).

Clean Air Act

The main objective of the Act is human health. Its secondary objective is not related to health and concern things like aesthetics, agriculture, etc.

The Act has the country divided into air quality regions. It also sets the goals for concentration of different pollutants in the surrounding air. The setting of the goals is done so that the potential risks to health of the pollutants are reduced to zero. Pollutants of ambient air are HCs, ozone, Pb, CO, NOx, Sox, plus other particulates. The Act established emission limits that are technology-based for every category of industry (SICs). The standards clarify the technology as well as emission limits allowed for air pollutants. The initial focus of the Act was pollution "point sources," however, the Act has included technology requirements for moving sources like automobiles. The amendments made in 1990 added to the regulation air toxics. Air toxics' control is by standards that are technology-based which are set for the different categories of industries. Air toxics do not have any ambient air goals (Environmental Decision Making, Science and Technology, n.d; Deschenes, Greenstone & Shapiro, 2012).

Clean Water Act

The primary goal of the Act is eliminating the discharge of pollutants entirely. It'd secondary goal is the restoration and maintenance of the quality of the waters of the nation so that fishing and swimming can be done in them.

The prevailing trend is regions having watershed specific goals regarding main pollutants (nutrients, oxygen demand, suspended solids, pathogens, toxic metals, salts, heat, pH and heat). The CWA has come up with technology-based effluent standards for particular categories of industries. The standards outline the effluent and technology limits which should be used in treating waste water before their disposal in any water body. Initially, the regulation focused on pollution point sources, but the amendments made in 1987 added requirements to help in controlling non-point source pollution like urban and agricultural runoff (Environmental Decision Making, Science and Technology, n.d).

Safe Drinking Water Act

The primary goal of the act is ensuring that water is safe for human consumption (potable water). Its secondary objective is ensuring palatable water -- concerned with the aesthetics like odor, taste and color. The tertiary goal is protecting the quality of the sources of water found in the underground.

The Act has four standard categories that must be met by suppliers. These categories are chemical, radiological, microbiological and physical. Physical standards comprise suspended solids, turbidity, dissolved solids, temperature, odor, taste and color. These standards are not enforceable and their aim is improving the portability of the water being supplied. The chemical standards ensure maximum levels of contaminants are not exceeded for the various kinds of contaminants. The maximum contaminant levels (MCLs) are enforceable and must be met. The Act also established stricter maximum contaminant levels (MCLGs) which cannot be enforced. Similarly, there exist MCLGs, MCLs as well as technology standards concerning contaminants of a microbiological nature. Same is the case for contaminants of a radiological nature (Environmental Decision Making, Science and Technology, n.d).

Resource Conservation and Recovery Act / Hazardous and Solid Waste Amendments

The objective of the Act is managing the generation, transport, storage, treatment and disposal of hazardous solid wastes from facilities and to minimize the disposal of waste on land.

RCRA/HSWA is divided into different sections which regulate different activities. One of the sections concerns itself with the method of characterization of wastes into solid waste or hazardous waste. Another is concerned with the framework for tracking hazardous waste which includes having paper trails from the moment of the generation of the waste to the point of disposal. Another section is concerned with the requirements to be met by facilities that store, treat or dispose hazardous waste. The requirements have to be met before any facility is given a permit for commencing operations. Another section is concerned with how the different hazardous wastes ought to be treated before they are disposed. Some other sections exist for various issues like underground storage tanks (Environmental Decision Making, Science, and Technology, n.d).

Comprehensive Environmental Response, Compensation and Liability Act / Superfund Amendments and Reauthorization Activities

The objective of the Act is to clean up abandoned hazardous spills and waste sites and give to the community a right-to-know industrial waste management practices.

CERCLA/SARA has established a fund called Superfund which provides funds for the cleaning up of abandoned waste sites which pose significant health risks. The fund has a basis on the taxes charged to petroleum and chemical industry. Sites can be eligible to use the fund if enough risk is posed to warrant inclusion on the National Priorities List (NPL). CERLA/SARA has also established the National Contingency Plan which gives information for emergency response for chemical spills. The Act details the procedure for cleanup (Remedial Investigation/Feasibility Study) which is to be applied in the abandoned hazardous waste sites. Plus, the Act establishes framework for liability that entails joint, several and strict liability for cleaning up abandoned hazardous waste sites. Besides the cleanup, CERCLA/SARA has a provision for community right-to-know. The provision is referred to as SARA Title 3 or the Toxic Release Inventory and requires biennial industry reports regarding emissions and the regulated chemicals management. Recently, the focus on environmental pollutions has been on the prevention of voluntary pollution. The activities reduce/prevent the generation of the wastes (Environmental Decision Making, Science, and Technology, n.d). The Pollution Prevention Act of 1990 outlines a hierarchy of waste management that prefers techniques of waste management in the order below: