Permit Coverage under Phase I Has Been Obtained by a Small Fraction of Total Oil and Gas Activities

A small fraction of total oil and gas construction activities have sought  permit coverage under Phase I of EPA’s storm water program. Although there is currently no centralized storm water permit database that  tracks storm water permit coverage nationwide, our review of Phase I  storm water permit data for three major oil and gas producing states— Louisiana, Oklahoma, and Texas—confirmed that permit coverage has  been obtained for only a small number of oil and gas construction  activities, compared with the thousands of drilling activities occurring in  those states. Three  hundred four of the 433 activities for which permit coverage was obtained  in the most recent 12-month period—about 70 percent—were for pipeline  construction activities. Another key oil and gas construction activity in these states was oil and gas  well drilling, with 72 of the 433 permits—about 17 percent—involving  drilling activities. Fifty-six percent of these drilling activities disturbed  between 5 and 8 acres of land. Industry officials must decide whether or not they will apply for permit  coverage, and some may have applied for storm water permit coverage on  few occasions because they broke their construction activities—which  taken together would exceed 5 acres—into what they believed were  distinct projects that disturbed less than 5 acres each. Most Oil and Gas Construction Activity Will Likely Be Affected by Phase II, but the Financial and Environmental Implications of Phase II Are Difficult to Quantify

EPA, industry and state government representatives agree that Phase II  permit coverage will be required for most oil and gas construction  activities, but the actual number of activities that will be affected by the  rule is unknown. Most Oil and Gas Construction Activities Will Likely Be Required to Obtain Storm Water Permit Coverage under Phase II, but the Actual Number of Activities That Will Be Affected by the Rule Is Unknown

EPA, industry and state government representatives agree that most oil and  gas construction activities will disturb 1 acre or more of land and, as such,  will have to obtain permit coverage under the Phase II rule. Phase II May Lead to Additional Costs that Are Difficult to Quantify

The Phase II rule may lead to additional costs for industry and federal  agencies, but these costs are difficult to quantify. EPA Has Not Completed Its Assessment of the Number of Oil and Gas Sites Impacted by Phase II or Its Financial and Environmental Implications

Almost 2 years after delaying the implementation of Phase II for oil and gas  activities in order to study and evaluate the impact on the industry, EPA  initiated an analysis of the rule but has not completed the study, quantified  the number of activities affected, or determined its potential financial and  environmental implications. Agency Comments and Our Evaluation

We requested comments on a draft of this report from the Administrator of  the Environmental Protection Agency (EPA). Objectives, Scope, and Methodology

This report provides information about (1) oil and gas construction  activities for which permits have been obtained under Phase I and (2) oil  and gas construction activities that are likely to be affected by Phase II and  its financial and environmental implications.
Why GAO Did This Study

To prevent pollutants from entering storm water runoff, the Clean Water Act's National Pollutant Discharge Elimination System Storm Water Program requires controls for construction activities that disturb land. Phase I of this program requires permitting for construction activities that disturb 5 acres or more, while Phase II requires permitting for activities disturbing between 1 and 5 acres. The Environmental Protection Agency (EPA) extended the Phase II compliance date for discharges associated with oil and gas construction activities until March 2005 to analyze the impact of Phase II on the oil and gas industry. GAO was asked to provide information about oil and gas construction activities--such as well drilling and pipeline construction--affected by Phase I and likely to be affected by Phase II, as well as Phase II's financial and environmental implications.

What GAO Found

A small fraction of total oil and gas construction activities have been permitted under Phase I of EPA's storm water program. Phase I storm water permit data for three of the six largest oil and gas producing states--Louisiana, Oklahoma, and Texas--showed that 433 construction activities were permitted under Phase I over the most recent 12 months for which data were available. About 70 percent, 304 of the 433, were oil and gas pipeline activities, most of which were much larger than the 5 acre criterion under Phase I. About 17 percent, 72 of the 433, were drilling activities. In comparison, these three states reported drilling an average of about 10,000 wells for each of the past 3 years. Industry must decide whether to seek permit coverage, and it has sought to have its drilling activities permitted on few occasions because it has determined that most drilling activity involves distinct projects that disturb less than 5 acres each. In states we reviewed, there were few reported compliance problems associated with oil and gas construction activities. While it appears that most oil and gas construction activities may have to be permitted under Phase II, the actual number of activities that could be affected is uncertain, and the financial and environmental implications are difficult to quantify. The oil and gas construction activities affected by the rule may lead to increased financial costs for the oil and gas industry and federal agencies implementing the rule. Many of the potential costs stem from meeting permit requirements to review the impact of construction activities on endangered species, although this impact would be site specific and difficult to quantify. Potentially offsetting these costs, the rule may lead to additional environmental protections that are difficult to quantify, such as decreased levels of sediment in water and benefits for endangered species and their habitat. After delaying implementation of this rule for oil and gas construction activities for 2 years to study the impact of Phase II, EPA is analyzing the impact but, as yet, has not quantified the number of activities affected or the potential financial and environmental implications.