March 27, 2024

The Cost of Non-Compliance: Staying Ahead of Regulations

Compliance & Regulations in Natural Gas

In the natural gas industry, compliance with environmental regulations set by agencies like the EPA is non-negotiable, and failing to meet these stringent standards can result in severe financial and operational consequences, which can be staggering, especially in an industry where safety and environmental stewardship are paramount.

Hefty Fines & Penalties

One of the most immediate and evident repercussions of non-compliance is the fines and penalties imposed by these regulatory bodies, which can easily get into millions of dollars, depending on the severity of the violation. In 2023, for instance, a major natural gas company was fined a combined $3.5 million by the U.S. and Colorado for alleged Clean Air Act violations at three gas processing plants within the Fort Lupton Complex, 35 miles north of Denver. This settlement was part of a broader enforcement action announced by the EPA and state regulators.

And it doesn't just stop there. Beyond any financial implications, damage to reputation is also highly likely, making attracting and retaining customers, investors, and top talent more challenging.

Operational Disruptions & Shutdowns

Perhaps even more costly than the fines themselves are the operational disruptions and potential shutdowns resulting from non-compliance. Should a facility violate these regulations, all operations may be forced to halt, leading to downtime that results in a significant loss in revenue, productivity, and market share until resolving all issues.

In October 2021, Spire Inc., a company that specializes in the distribution of natural gas, requested the U.S. Supreme Court to stay an order that would shut down the company's STL natural gas pipeline after a federal appeals court vacated an earlier permit for the pipeline, citing environmental concerns and questioning the necessity of the pipeline for public use. 

This shutdown would have significant implications for Spire Inc., potentially leading to a loss of revenue and impacting the natural gas supply in the region it serves, highlighting the consequences that can arise from regulatory non-compliance and the importance of adhering to environmental and safety standards set forth.

Increased Insurance Premiums & Legal Fees

Non-compliance can also lead to increased insurance premiums and legal fees as insurance carriers view companies with a history of regulatory violations as higher-risk clients whose premiums are adjusted accordingly. Similarly, legal fees can quickly mount as companies navigate the complex system of environmental regulations and defend themselves against potential lawsuits.

Environmental Remediation Costs

In some cases, non-compliance can result in environmental damage that requires costly remediation efforts. For example, suppose a facility improperly disposed of hazardous waste. In this case, the company may be responsible for cleaning up the contaminated areas and restoring the environment to its original state while involving remediation costs that can run into the millions, depending on the extent of the damage.

Competitive Disadvantage

Beyond the direct financial costs, non-compliance can also put companies at a competitive disadvantage. Customers, particularly those in environmentally conscious industries, may opt to work with competitors with a more substantial track record of regulatory compliance and environmental stewardship.

Moreover, companies that invest in compliance and sustainability measures can operate more efficiently and cost-effectively in the long run, giving them a competitive edge over their less conscientious counterparts.

The Path Forward: Prioritizing Compliance

Given the substantial costs of non-compliance, it is imperative that, as natural gas companies, we prioritize regulatory compliance as a core part of operations by starting with a comprehensive understanding of the relevant regulations and a commitment to staying ahead of any changes or updates.

Investing in robust environmental management systems, employee training programs, and regular audits can help identify and address potential areas of non-compliance before they become an issue.

Additionally, partnering with experienced engineering firms like Siege Engineering can provide valuable expertise and guidance in navigating the complexities of environmental regulations. At Siege Engineering, we specialize in advanced engineering solutions and consulting services that help companies optimize their operations while minimizing risks and ensuring regulatory compliance.

After all, In an industry with high stakes, the cost of non-compliance is simply too great to ignore. However, by prioritizing compliance and working with knowledgeable partners, natural gas companies can protect their bottom line, safeguard their reputation, and contribute to a more sustainable future for our industry and our planet.