This paper examines NuStar Energy L.P.'s operations within the framework of federal and state environmental regulations. It outlines the company's infrastructure, including 9,063 miles of pipeline and 86 terminal facilities, and details the regulatory landscape governing air emissions, water quality, hazardous waste, and pipeline integrity. The paper analyzes NuStar's capital expenditures for environmental compliance ($6.5–6.9 million annually) and contextualizes these costs within broader industrial competitiveness concerns. It also presents an overview of major environmental legislation including the Clean Air Act, Clean Water Act, and CERCLA, concluding that environmental compliance costs remain modest relative to industry benefits and economic gains.
NuStar Energy L.P. is a limited partnership that is publicly traded and headquartered in San Antonio. The company operates an extensive infrastructure comprising 9,063 miles of pipeline, eighty-six terminal facilities, four crude oil storage facilities, and two asphalt refineries. As the second-largest independent liquid terminal operator in the United States, NuStar maintains a global presence with operations in the U.S., Netherlands, Canada, United Kingdom, Antilles, and Mexico. The company's integrated storage infrastructure can hold up to 86 million barrels and includes refineries for asphalt and crude oil, pipelines for refined products, terminals for refined products, petroleum storage facilities, and crude oil storage and terminal operations.
Environmental stewardship is a stated priority for the company. NuStar works to improve its programs and processes to meet stringent environmental standards, resulting in better overall environmental performance. Reportable releases have drastically reduced over the past eight years, demonstrating the company's commitment to environmental responsibility.
NuStar's operations are controlled by extensive local, state, and federal laws concerning environmental protection. These regulations cover modes of waste disposal, waste management, pollution prevention measures, operator qualifications, and pipeline integrity requirements. Numerous federal and state safety and health regulations apply to the company, including those that ensure pipeline safety.
The primary environmental concerns for NuStar include unauthorized air emissions, releases of waste into soil, groundwater, or surface water, and potential injury to people or damage to property. Compliance with these laws and regulations results in high capital expenditures and increases the overall cost of doing business. Violations of environmental laws or permits can result in heavy criminal and civil liabilities, penalties, and injunctions.
To manage these risks, NuStar has incorporated comprehensive procedures, practices, and policies governing pollution control, pipeline integrity, public education and relations, process safety management, product safety, material handling, and occupational health. These measures are designed to protect pipelines, employees, the public, and the environment while limiting liability from malfunctions or errors. However, future changes or additions to environmental laws could necessitate further capital expenditures and operational costs that cannot be ascertained in advance. Additionally, spills may cause contamination and create unforeseen liabilities, which are inherent risks in the energy transportation and storage industry.
NuStar's capital expenditures for environmental compliance totaled $6.9 million in 2012 and decreased slightly to $6.5 million in 2013. These investments reflect the company's ongoing commitment to meeting and exceeding regulatory requirements.
One major driver of these expenditures relates to air quality standards. The Clean Air Act Amendments of 1970 directed the Environmental Protection Agency (EPA) to establish national ambient air quality standards—the minimum air quality that every county is required to meet. The standards apply to four criteria pollutants: tropospheric ozone (O₃), carbon monoxide (CO), total suspended particles (TSPs), and sulfur dioxide (SO₂). Each county in the United States receives attainment or nonattainment designations for each of these four pollutant classes. Nonattainment means that a county has exceeded the EPA's set limit for that pollutant, which triggers more stringent scrutiny of emitters in that county than those in attainment areas. Institutions classified as non-polluters are exempt from many of these laws and regulations.
The increasing stringency of air quality standards creates pressure on companies like NuStar to upgrade equipment and monitoring systems. Companies operating in nonattainment areas face heightened compliance costs due to more rigorous emission controls and reporting requirements. These economic pressures are offset, in part, by the public health and environmental benefits achieved through improved air quality nationwide.
NuStar's operations are controlled by the Federal Clean Air Act and strict local and state statutes. These regulations control the emission of air pollutants from varied sources, including NuStar's pipeline operations, terminals, and storage facilities. The regulations impose several reporting and monitoring requirements on the company. Facilities may need approval before constructing or modifying facilities that produce air emissions or cause a rise in emission levels, and they must obtain and comply with permits that specify allowable emission rates and control technologies.
The Clean Air Act Amendments of 1990 and stringent interpretations of the statute could impose additional pollution control requirements on NuStar in the future. The EPA has been developing regulations for many years to implement the requirements of the Act. Revisions to Section 211 of the Clean Air Act, which deals with diesel fuel specifications and the use of methyl tertiary-butyl ether (MTBE) in gasoline, are also under development. Such revisions and other EPA regulations or state and local requirements may cause the company to spend significantly more on pollution control equipment, operating permits, and air emission approvals in the coming years.
The Kyoto Protocol, operationalized in February 2005, requires member countries to implement programs to reduce greenhouse gas emissions thought to contribute to global warming. Although the United States is not a party to the protocol, several state and federal initiatives have advanced climate policy. In 2007, the United States Climate and Security Act of 2007 (SB 2191) proposed that companies reduce particular emissions to 2005 levels by 2012 and to 1990 levels by 2020. California enacted the Global Warming Solutions Act of 2006, which requires a 25 percent reduction in greenhouse gas emissions by 2020. The California Air Resources Board was directed to implement regulations by 2012 to achieve this target across all emission sources in the state. New Mexico and other states in the Western Climate Initiative have proposed similar regulations. New Jersey has adopted legislation concerning greenhouse gas emissions from various sources, particularly power plants.
The natural gas and oil industry is a major emitter of greenhouse gases such as methane and carbon dioxide. Restrictions on these emissions could significantly impact NuStar's operations. Accurately estimating the financial effects of such regulatory changes is not currently possible, creating uncertainty in long-term planning and capital allocation.
The Clean Water Act, also referred to as the Federal Water Pollution Control Act of 1972, and strict state-level statutes impose numerous restrictions and controls concerning the discharge of pollutants into state or U.S. waters. Such discharge is prohibited except where explicit permits have been issued by state and federal authorities. The Oil Pollution Act of 1990 amended the Clean Water Act to address the response, liability, and prevention of oil spills. This law imposes various requirements concerning spill prevention and mandates that some states develop spill response plans and utilize dikes and other containment structures to curtail contamination of U.S. or state waters in the event of unauthorized discharge.
Violating water quality laws and their associated regulations can expose a company to substantial liabilities and costs. NuStar must maintain detailed plans for spill response, implement secondary containment systems, and conduct regular monitoring to prevent violations. These compliance measures represent significant operational expenses but are essential to protecting water resources and limiting the company's environmental liability.
NuStar generates both hazardous and non-hazardous solid wastes, which are controlled by the federal Resource Conservation and Recovery Act (RCRA) and related statutes. The company is not inherently required to comply with all provisions of the Act because it does not operate waste storage, disposal, or treatment facilities. However, some wastes generated by the company may be classified as hazardous, and hazardous wastes are subject to stricter and more expensive requirements than non-hazardous wastes.
The Comprehensive Environmental Response, Compensation and Liability Act (CERCLA), commonly known as Superfund, and related legislation impose liabilities on various entities contributing to "hazardous substance" releases, regardless of legal responsibility or fault. Liable parties include facility owners, operators, and entities involved in the disposal of hazardous substances. CERCLA authorizes the EPA and, in some cases, third parties to take action against environmental and public health threats and to recover costs incurred in remediation from responsible parties.
In the course of ordinary operations, NuStar may generate wastes that CERCLA classifies as hazardous. The company currently owns or leases, and has previously owned or leased, properties where hydrocarbons were handled. Although the company has followed best practices in waste disposal, some hydrocarbon releases have occurred at properties it owns, leases, or has used for waste disposal. Additionally, NuStar has acquired properties from third parties without control over how those parties managed or disposed of wastes, including hydrocarbons. Such properties may be subject to RCRA, CERCLA, and state environmental laws.
Under these regulations, NuStar could be required to compensate for contamination, clean up contaminated properties and groundwater, or conduct remediation for future contamination. The company also faces potential joint and several liability under CERCLA for the entire cost of cleanup at sites where hazardous wastes were released or disposed, even if the company's contribution was partial. While remediation efforts are ongoing at many facilities, the company believes that current expenses for these activities will not materially affect NuStar's finances or operations. However, costs associated with contamination remediation are often unpredictable, and no assurances can be made regarding future liabilities.
NuStar's pipelines are subject to numerous state and federal laws and regulations controlling pipeline safety and integrity. Key legislation includes 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, along with their implementing regulations.
These laws require companies to maintain qualification programs for key personnel, update and review pipeline safety education programs, submit information to the National Pipeline Mapping System, maintain spill response plans, implement pipeline integrity management programs for pipelines affecting high-consequence areas (populated areas, navigable waterways, and sensitive locations), and ensure detailed maintenance and operating procedures. The regulations also require management of human factors in pipeline control centers, such as controller fatigue. While compliance with these regulations results in substantial capital expenditures, NuStar believes that such costs will not materially affect the company's finances or competitive standing in the industry.
The U.S. Environmental Protection Agency (EPA) and other environmental agencies regulate the environmental impacts of businesses. The EPA enforces regulations that implement congressional environmental laws, while state agencies implement state-level environmental regulations. Many environmental regulations apply to businesses of all sizes. The EPA and state agencies publish plain-language guides to help business owners understand their regulatory obligations and required compliance actions. These resources assist businesses in comprehending their responsibilities under federal and state environmental law.
Certain environmental laws require businesses to obtain environmental permits before discharging or emitting pollutants into water or air, disposing of hazardous substances, or engaging in regulated activities. Permits are issued and enforced by local, state, or federal agencies to implement regulations protecting resources such as endangered species and wetlands. Many permits are issued by state governments.
Clean Air Act Permits: Majority of large sources and numerous smaller sources of air pollution must obtain operating permits under Title V of the Clean Air Act Amendments of 1990. Most permits are issued by local and state authorities and are referred to as "Part 70 permits," based on the minimum permit requirements in 40 CFR Part 70.
Endangered Species Permits: The Endangered Species Act generally prohibits activities affecting endangered or threatened species unless authorization is granted by the National Oceanic and Atmospheric Administration's National Marine Fisheries Service or the U.S. Fish and Wildlife Service. Some activities may also require state permits.
Wetlands Permits: Companies operating near wetlands may face permit requirements from local, state, and federal authorities. At the federal level, the Army Corps of Engineers regulates the discharge of fill or dredged materials into U.S. waters. Section 404 of the Clean Water Act allows the EPA to issue permits for discharges of pollutants, including stormwater and wastewater, from point sources, provided the conditions of Section 402 are met. State environmental agencies oversee wetlands under state laws concerning water pollution, shoreline management, and forest practices. Local governments regulate wetlands through zoning and similar ordinances.
RCRA Permits: Resource Conservation and Recovery Act permits are designed to ensure the safe storage, disposal, and treatment of hazardous wastes. Permits are issued by authorized states or by EPA regional offices.
The Clean Air Act's primary objective is the protection of human health. Its secondary objective addresses non-health concerns such as aesthetics and agriculture. The Act divides the country into air quality regions and establishes concentration goals for different pollutants to reduce health risks to near zero. Ambient air pollutants regulated include hydrocarbons (HCs), ozone, lead (Pb), carbon monoxide (CO), nitrogen oxides (NOₓ), sulfur oxides (SOₓ), and particulates. The Act established technology-based emission limits for every industrial category. Standards specify the technology and emission limits permitted for air pollutants. Initially focusing on point source pollution, the Act has expanded to include technology requirements for moving sources such as automobiles. The 1990 amendments added regulation of air toxics through technology-based standards set for different industry categories. Air toxics do not have ambient air quality goals.
The Clean Water Act's primary goal is the complete elimination of pollutant discharge into U.S. waters. Its secondary goal is to restore and maintain water quality so that fishing and swimming can be conducted safely. Current regulatory trends focus on watershed-specific goals for major pollutants including nutrients, oxygen demand, suspended solids, pathogens, toxic metals, salts, and pH. The CWA established technology-based effluent standards for specific industry categories, outlining the effluent quality and treatment technology required before wastewater discharge into any water body. Initially addressing point source pollution, the 1987 amendments added requirements for controlling non-point source pollution such as urban and agricultural runoff.
The Safe Drinking Water Act's primary goal is ensuring that water is safe for human consumption. Its secondary objective is ensuring palatable water—addressing aesthetics such as odor, taste, and color. A tertiary goal is protecting underground water sources. The Act requires suppliers to meet four standard categories: chemical, radiological, microbiological, and physical standards. Physical standards address suspended solids, turbidity, dissolved solids, temperature, odor, taste, and color but are not enforceable; they aim to improve water portability. Chemical standards establish maximum contaminant levels (MCLs) that are enforceable and must be met. The Act also establishes maximum contaminant level goals (MCLGs), which are not enforceable. Similar MCLGs, MCLs, and technology standards exist for microbiological and radiological contaminants.
The Resource Conservation and Recovery Act (RCRA) and its Hazardous and Solid Waste Amendments (HSWA) aim to manage the generation, transport, storage, treatment, and disposal of hazardous solid wastes and to minimize land disposal of waste. RCRA/HSWA is divided into sections regulating different activities. One section addresses waste characterization into solid or hazardous waste categories. Another establishes the framework for tracking hazardous waste through documentation from generation to disposal. Sections address requirements for facilities storing, treating, or disposing of hazardous waste before permit issuance. Additional sections specify treatment requirements for hazardous wastes before disposal and address special issues such as underground storage tanks.
The Comprehensive Environmental Response, Compensation and Liability Act (CERCLA) and the Superfund Amendments and Reauthorization Act (SARA) aim to clean up abandoned hazardous spills and waste sites and to provide communities with a right-to-know regarding industrial waste management practices. CERCLA/SARA established a Superfund financed through taxes on the petroleum and chemical industries to pay for cleanup of abandoned waste sites posing significant health risks. Sites may be eligible for Superfund resources if they meet criteria for inclusion on the National Priorities List (NPL). CERCLA/SARA established the National Contingency Plan, providing guidance for emergency response to chemical spills. The Act details the Remedial Investigation/Feasibility Study (RI/FS) cleanup procedure for abandoned hazardous waste sites and establishes a strict liability framework involving joint, several, and strict liability for cleanup costs. Beyond cleanup, CERCLA/SARA includes a community right-to-know provision referred to as SARA Title III or the Toxic Release Inventory, requiring biennial industry reports on emissions and regulated chemical management.
Recent focus on environmental pollution has emphasized prevention of voluntary waste generation. The Pollution Prevention Act of 1990 outlines a waste management hierarchy preferring techniques in the following order: Reduction, Reuse, Recycling, Treatment/Transformation, and Disposal.
At the average U.S. manufacturing facility, total costs attributable to environmental compliance are less than half of one percent of total product shipment value. Since Congress enacted pollution control laws after 1970, Americans have enjoyed better water and air quality while the nation's GDP doubled and then tripled. Experience demonstrates that the benefits of clean water and air far outweigh compliance costs. Nevertheless, a perennial concern—albeit often exaggerated—persists that domestic environmental regulations can cause job offshoring, reduce manufacturing competitiveness relative to other jurisdictions, and harm the national economy.
Data from the Pollution Abasement Costs and Expenditures (PACE) survey conducted by the U.S. Census Bureau in 2005 reveal that the average U.S. manufacturing facility incurs environmental costs of less than half of one percent of product shipment value. In context, total material costs, labor costs, and energy costs represent approximately 54 percent, 16 percent, and 2 percent of product shipment value, respectively. Even in the top ten industries with the highest pollution abatement costs, total regulatory costs typically average about 3 percent of product shipment value—less than average labor costs (16 percent) and energy costs (9 percent). Notably, the sectors generating the most pollution are often energy-intensive and stand to gain significantly from energy efficiency improvements.
For at least 82 percent of surveyed sectors in the top ten most regulated industries, total environmental costs remain below 1 percent of product shipment value. With appropriate policy instruments, costs can be offset through savings achieved via energy efficiency upgrades using available technology. Other factors influencing manufacturing competitiveness and international trade flows—such as natural gas prices and currency exchange rates—have historically created greater cost pressures and investment uncertainties than compliance with domestic environmental regulations.
Investing in energy efficiency represents an attractive option as U.S. manufacturers seek to reduce costs without layoffs or reductions in climate protection spending, public health improvements, and community benefits. Congress supports manufacturers in pursuing these strategies to enhance global competitiveness without compromising the Clean Air Act. The focus is on legislation removing financial and technical barriers to investment in energy efficiency and pollution prevention. Congressional action is justified by salient facts: environmental compliance costs are modest in the broader context, demonstrating that significant environmental and public health gains can be achieved at relatively low cost to industry.
The nation stands to benefit substantially from this balanced approach. Pending EPA regulations concerning greenhouse gas emissions will initially require permits from only a small portion of manufacturers and will account for economic impacts. The fundamental choice confronting policymakers is between preserving the status quo at a cost to manufacturers and the nation, or adopting policies that enable capital investment in U.S. manufacturing, generate substantial energy savings for American businesses, and protect the environment from pollution. Evidence indicates that environmental stewardship and economic competitiveness are not mutually exclusive but, rather, complementary objectives achievable through thoughtful regulation and technological innovation.
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