Environment Costs May Hit $23 Billion, Oil Industry Says

The total cost for complying with proposed clean air and other environmental regulations will hit between $15 billion and $23 billion a year by the end of the decade, according to the first comprehensive study by the oil industry, which was released Tuesday.

That works out to as much as 15 to 20 cents more per gallon that consumers may have to pay for gasoline, oil industry executives estimated, though others questioned the magnitude of per-gallon increases.

If the costs are spread evenly over the estimated 250 billion gallons of refined products--not just gasoline--produced by the industry every year, per-gallon increases would actually be less than 10 cents.

The study, released by the oil industry trade group the American Petroleum Institute at its annual meeting here, is part of the industry’s increasing resistance to strict environmental regulation that does not take into account costs.

“They really don’t look at the cost-benefit (ratio),” said C. J. (Pete) Silas, chairman of Phillips Petroleum Co. “If we continue to pass laws and regulations that get zero risk, we’re not going to be able to afford to live in that particular world.”

The oil industry contends that the new regulations should weigh the benefits of such new procedures against the costs and that it is unrealistic to eliminate all risk involved in the use of petroleum products.

The study assesses the potential costs to the oil industry of a variety of environmental initiatives, including:

* Requirements of the new federal Clean Air Act that refineries produce less-polluting gasoline.

* Provisions of the federal Oil Pollution Act of 1990 that mandate double-hulled tankers.

* Rules requiring leak-proof underground storage tanks at gas stations.

All told, the industry stands to incur about 12% to 17% of national environmental expenditures by the year 2000, the study said.

Alfred C. DeCrane, chairman of Texaco Inc., called for regulations that are flexible rather than prescriptive and that allow industry to meet standards in the most efficient and cost-effective ways.

“There are many different ways to achieve the same kind of environmental improvement in fuels,” added Kenneth G. Riley, a vice president of Atlantic Richfield Co.’s refining and marketing subsidiary. “The government and (Environmental Protection Agency) would like to have everyone do it the same way, and in doing so, they often choose the highest cost way, if only because that’s the one that’s easiest to enforce.”

As an example, industry opposes strict formulas for less-polluting gasoline, such as those under consideration by the California Air Resources Board, and also favors programs to pay motorists to junk older, more polluting cars.

But environmentalists said there would be costs of not responding to environmental problems.

“There are countervailing costs with continuing to discharge massive amounts of pollutants into the air and water, which are also borne by the consumer in terms of dirty air and health costs,” said Lisa Speer, a staff attorney with the Natural Resources Denfense Council in New York.