Characteristics of Oil and Gas Projects 33

Rules, Laws, Regulations, and Standards

Few industries are as subject to a multitude of rules, laws, regulations, and
standards as the oil and gas industry. Standards provide a common basis for
global commerce. Without standards, product compatibility, customer satis-
faction, and production efficiency cannot be achieved. Just as quality cannot
be achieved overnight, compliance with standards cannot be accomplished
instantaneously. The process must be developed and incorporated into regu-
lar operating procedures over a period of time. Standards define the critical
elements that must be taken into consideration to produce a high-quality prod-
uct that meets customers’ expectations. Each organization must then develop
the best strategy to address the elements. Both regulatory and consensus
standards must be taken into account when executing oil and gas projects.
Regulatory standards refer to standards that are imposed by a governing body,
such as a government agency. All firms within the jurisdiction of the agency
are required to comply with the prevailing regulatory standards. Consensus
standards refer to a general and mutual agreement among a group of compa-
nies to abide by a set of self-imposed standards. Industry alliances, such as
OPEC, impose their own consensus standards and rules on themselves. There
may also be contractual standards, which are imposed by the customer based on
case-by-case or order-by-order needs. Most international standards will fall in
the category of consensus. A lack of international agreements often leads to
trade barriers by nations, industries, and special interest groups.
In response to the widespread expressions of concerns about fracking, the
U.S. government, the Environment Protection Agency (EPA), in April 2012
issued new regulations to govern fracking (EPA, 2012).
The standards are to control air pollution from gas wells that are drilled
using fracking. The government strongly supports natural gas drilling as a
clean source of energy and wanted to ensure coordination to ease the pro-
duction burden on the oil and gas industry. EPA maintains that the new
regulations would ensure pollution is controlled without slowing natural
gas production. Much of the air pollution from fracked gas wells is vented
when the well transitions from drilling to actual production. This is a 3–10-
day process, which is referred to as “completion.” An earlier version of the
rule limiting air pollution from gas wells would have required companies
to install pollution-reducing equipment immediately. Under the new rules,
drillers will now be given more than 2 years to employ technology to reduce
emissions of smog and soot-forming pollutants during that stage. EPA would
require drillers to burn off gas in the meantime. This is an alternative that can
release smog-forming nitrogen oxides, but will still reduce overall emissions.
This is a good example of where a systems view is instrumental because as
one hole is plugged at one end, some other issue may develop at the other end.
The oil and gas industry must consider these new rules as well as other pro-
duction and economic considerations into their overall project management