Costs and Benefits From the Regulations

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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.

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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.....

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