BP 2012 Annual Report Download - page 97

Business review: BP in more depth
Business review: BP in more depth
BP Annual Report and Form 20-F 2012
95
regulation in the US and the EU affecting our businesses and profitability
includes the following:
United States
t The Clean Air Act (CAA) regulates air emissions, permitting, fuel
specifications and other aspects of our production, distribution and
marketing activities. Stricter limits on sulphur and benzene in fuels will
affect us in future, as will actions on greenhouse gas (GHG) emissions
and other air pollutants. Additionally, states may have separate, stricter
air emission laws in addition to the CAA.
t The Energy Policy Act of 2005 and the Energy Independence and
Security Act of 2007 affect our US fuel markets by, among other things,
imposing renewable fuel mandates and imposing GHG emissions
thresholds for certain renewable fuels. States such as California also
impose additional fuel carbon standards.
t The Clean Water Act regulates wastewater and other effluent
discharges from BP’s facilities, and BP is required to obtain discharge
permits, install control equipment and implement operational controls
and preventative measures.
t The Resource Conservation and Recovery Act regulates the generation,
storage, transportation and disposal of wastes associated with our
operations and can require corrective action at locations where such
wastes have been released.
t The Comprehensive Environmental Response, Compensation and
Liability Act (CERCLA) can, in certain circumstances, impose the entire
cost of investigation and remediation on a party who owned or
operated a site contaminated with a hazardous substance, or arranged
for disposal of a hazardous substance at the site. BP has incurred, or
expects to incur, liability under the CERCLA or similar state laws,
including costs attributed to insolvent or unidentified parties. BP is also
subject to claims for remediation costs under other federal and state
laws, and to claims for natural resource damages under the CERCLA,
the Oil Pollution Act of 1990 (OPA 90) (discussed below) and other
federal and state laws. CERCLA also requires hazardous substance
release notification.
t The Toxic Substances Control Act regulates BP’s import, export and
sale of new chemical products.
t The Occupational Safety and Health Act imposes workplace safety and
health requirements on BP operations along with significant process
safety management obligations.
t The Emergency Planning and Community Right-to-Know Act requires
emergency planning and hazardous substance release notification as
well as public disclosure of our chemical usage and emissions.
t The US Department of Transportation (DOT) regulates the transport of
BP’s petroleum products such as crude oil, gasoline, petrochemicals and
other hydrocarbon liquids.
t The Marine Transportation Security Act (MTSA), the DOT Hazardous
Materials (HAZMAT) and the Chemical Facility Anti-Terrorism Standard
(CFATS) regulations impose security compliance regulations on around
50 BP facilities. These regulations require security vulnerability
assessments, security risk mitigation plans and security upgrades,
increasing our cost of operations.
OPA 90 is implemented through regulations issued by the US
Environmental Protection Agency (EPA), the US Coast Guard, the DOT,
the Occupational Safety and Health Administration and various states.
Alaska and the west coast states currently have the most demanding
state requirements although regulation in the Gulf of Mexico has
increased following the 2010 Deepwater Horizon incident. There is an
expectation that OPA 90 and its regulations will become more stringent
in the future. The impact will likely be more rigorous preparedness
requirements (the ability to respond over a longer period to larger spills),
including the demonstration of that preparedness. There are expected to
be additional costs associated with this increased regulation. In 2013, we
expect more unannounced exercises and potential penalties for any failure
to demonstrate required preparedness even without any OPA 90
amendments.
As a consequence of the Deepwater Horizon incident BP has become
subject to claims under OPA 90 and other laws and have established a
$20-billion trust fund for legitimate state and local government response
claims, final judgments and settlement claims, legitimate state and local
response costs, natural resource damages and related costs and
legitimate individual and business claims. We are also subject to Natural
Resource Damages claims and numerous civil lawsuits by individuals,
corporations and governmental entities. The ultimate costs for these
claims cannot be determined at this time. We also expect the industry in
general, and BP in particular, to become subject to greater regulation and
increased operating costs in the Gulf of Mexico in the future. For further
disclosures relating to the consequences of the 2010 Deepwater Horizon
oil spill, see Legal proceedings on pages 162-169.
BP is in settlement discussions with EPA to resolve alleged CAA
violations at the Toledo, Carson and Cherry Point refineries.
European Union
BP’s operations in the EU are subject to a number of current and proposed
regulatory requirements that affect or could affect our operations and
profitability. These include:
t The 2008 EU Climate and Energy Package, including the EU Emissions
Trading System (EUETS) Directive and the Renewable Energy Directive
(see Greenhouse gas regulation on page 52). In 2013, the European
Commission is expected to propose a new Climate and Energy Package
for the period up to 2030.
t Under the third trading period – ‘Phase III’ – which started on 1 January
2013, the EUETS has been expanded to include the petrochemical
sector, free allocation is via sector benchmarking, and auctioning is the
default method for allocating allowances to some sectors including
electricity generation and production, though sectors at risk of carbon
leakage are partially compensated with free allocation.
t The Energy Efficiency Directive (EED) was adopted in 2012. It requires
EU Member states to implement an indicative 2020 energy saving
target and apply a framework of measures as part of a national EED
programme. Such measures include mandatory industrial energy
efficiency surveys, and providing data on new and replacement of large
plants. Such a programme may result in requirements to implement
additional energy saving measures at BP’s sites and/or higher power
prices for BP’s operations.
t The EU Industrial Emissions Directive (IED) (revising and replacing the
Integrated Pollution Prevention and Control Directive (IPPC)) and several
other industrial directives including the Large Combustion Plant
Directive (LCPD) should be transposed into national law by the EU
Member states by 7 January 2013. The IED provides the framework for
setting permits for major industrial sites. Relative to IPPC and LCPD,
the IED imposes tighter emission standards for some large combustion
plants and is more prescriptive regarding the setting of emission of limit
values based on use of Best Available Techniques (BAT) in permits for
other discharges to air and water. The emission limit values are
informed by the sector specific and cross-sector BAT Reference
documents (BREFs), which are reviewed periodically. The outcome of
the review of several BREFs relevant to our major sites is expected in
2013. The IED transposition and output from the BREF revisions may
result in requirements for further emission reductions at our EU sites.
The LCPD imposes air quality standards requiring retrofit of flue gas
desulphurization equipment, particularly for coal-fired power stations,
that may force some of them to close. This is expected to impact the
relative demand for natural gas and electricity prices.
t The European Commission Thematic Strategy on Air Pollution and the
related work on revisions to the Gothenburg Protocol and National
Emissions Ceiling Directive (NECD) will establish national ceilings for
emissions of a variety of air pollutants in order to achieve EU-wide
health and environmental improvement targets. This may result in
requirements for further emission reductions at BP’s EU sites.
t The implementation of the Water Framework Directive and the
Environmental Quality Directive are likely to require BP to take further
steps to manage water discharges from its refineries and chemical
plants in the EU.
t The EU Regulation on ozone depleting substances (ODS), which
implements the Montreal Protocol (Protocol) on ODS was most
recently revised in 2009. It requires BP to reduce the use of ODS and
phase out use of certain ODS substances. BP continues to replace
ODS in refrigerants and/or equipment, in the EU and elsewhere, in
accordance with the Protocol and related legislation. Methyl bromide
(an ODS) is a minor by-product in the production of purified terephthalic
acid in our petrochemicals operations. The progressive phase-out of