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Staggering Oil Spill Economics Revealed: The True Financial Burden of Oil and Water Spills and How to Reduce Costs


The Cost of Spills Infographic


Introduction

In the oil and gas industry, spills and leaks are not just environmental hazards; they are also significant financial burdens. The Visionaery team spent 2 months conducting interviews and test to collect as much real-life spill and leak data as possible. What the data shows is shocking, and a clear indication that spill mitigation is a desperate need for the oil and gas industry.

 

The Source of Our Data

VisionAery collected the data that is displayed here through 11 different sources including 3 US institutes, 3 US producers, and 5 environmental cleanup companies.


-          The statistics about spills in the US came from internet research and collected from the websites and online reports of the American Geosciences Institute, the US Environmental Protection Agency, and the US Geological Survey.


-          The statistics about the average cost per gallon to clean up a crude oil or produced water spill was derived from 8 different direct interviews. 3 interviews were with US producers. The producers were primarily located in the Permian Basin, the Eagleford, and the Bakken. The other 5 interviews were conducted with nationally recognized environmental clean up organizations in the US. The interviews consisted of reviewing spill data and cost data of each spill. The data set consisted of spills in Texas, Colorado, Wyoming, North Dakota, and Oklahoma. For the sake of protecting the producer’s reputation and the environmental company’s data protection clauses, we have chosen to keep the sources anonymous.


VisionAery also conducted a series of tests of the VisionAery Liquid Leak Detection solution using over 200 hours of spill/leak footage to determine the mean time to detection of the analytic.

 

The Reality of Spills and Leaks

According to the American Geosciences Institute, an estimated 5.5% of oil and gas sites in the United States experience spills or leaks annually.


The US Environmental Protection Agency (EPA) states that out of all the spills in the US: 40% are below 500 gallons, 55% between 500 and 10,000 gallons, and 5% exceed 10,000 gallons.

Lastly, The US Geological Survey reported annual spills of 14 million gallons of crude oil and 24 million gallons of produced water.

5.5% of Oil Sites Have Spills/Leaks Annually

40% of Spills Will be Below 500 Gallons

55% of Spills Will be Between 500 and 10,000 Gallons

5% of Spills will be over 10,000 Gallons

14 million Gallons are Crude Oil are Spilled Annually in the US

24 million Gallons of Produced Water are Spilled Annually in the US

 

The Cost of Cleanup

The cleanup cost for spills is staggering. Our research indicates that the average cost per gallon to clean up produced water ranges from $38.13 to $76.50, while crude oil spill cleanup costs are even higher, between $78.75 and $157.81 per gallon. These numbers were calculated by using real life spill clean-up data and associated cleanup efforts. Additional costs include lost product in crude oil spills and significant fines imposed for environmental damage.

Produced Water Clean Up Cost Per Gallon

Crude Oil Cost to Clean Up Per Gallon

$38.13 - $76.50

$78.75 - $157.81

 

Understanding Cleanup Efforts

Cleanup efforts can be categorized into 2 primary areas: remediation and restoration. Remediation involves removing the contaminants from the environment, while restoration focuses on returning the affected area to its original state, often requiring extensive efforts if the spill occurs near sensitive areas like clean water sources or public zones.

 

Financial Implications of Fines

Fines for spills are hefty. For produced water spills, fines range from $1,000 for spills under 100 gallons to over $1 million for spills exceeding 10,000 gallons. Crude oil spills attract even higher fines, starting at $2,000 for small spills and potentially exceeding $2 million for large-scale incidents.


A table chart of the cost of fines for p[roduced water spills and crude oil spills based on volume of spills in gallons

 

Case Study: Theoretical Cost Analysis

In our case study, we consider a hypothetical oil field with 200 sites. Based on the data from the American Geosciences Institute, we can expect that 5.5% of these sites, or approximately 11 sites, will experience spills in a year. The distribution of these spills, according to the US EPA's categorization, is as follows: 40% (4 spills) will be less than 500 gallons, 55% (6 spills) will be between 500 and 10,000 gallons, and 5% (1 spill) will be above 10,000 gallons.


Knowing this data, combined with the average cost per gallon to clean up produced water and crude oil spills as well as the likely fine schedule imposed for each spill range, we can accurately estimate the low end and high-end spill costs for a 200-site field. This data can be broken down like this:


-          If all 11 spills are produced water spills that are at the least cost per gallon to clean up and are the least amount spilled in order to fall into the EPA’s percentage categories, then we can assume the low-end cost for 11 spills is roughly $617,250.00.


-          However, if all 11 spills are crude oil spills that are at the highest cost per gallon to clean up and are the highest amount spilled in order to fall into the EPA’s percentage categories, then we can assume the high-end cost for 11 spills is roughly $15,568,850.00.


Obviously, in this scenario, we are taking the extreme low end and extreme high end of what the 11 leaks could cost. It is much more likely that the cost for 11 leaks would be in the range of $2,000,000.00 to $4,000,000.00 depending on multiple factors. Although, some outliers have been recognized to cost well over $1B in total costs. That is of course unless you are using the VisionAery Liquid Leak Detection solution.

 

VisionAery Liquid Leak Detection Solution



The introduction of VisionAery’s Liquid Leak Detection technology changes these calculations dramatically. Our solution significantly increases the likelihood of detecting spills early, which can greatly reduce the volume and therefore the cost of the spill. With a high probability of detecting small spills before they escalate, the technology can potentially shift the majority of spills into the lower cost bracket, thereby saving substantial and immeasurable cleanup costs and drastically reducing environmental impact.


In a test where we ran the analytic over 200+ hours of footage, we discovered that the VisionAery Liquid Leak Detection solution had a 70% chance of detecting and alerting on leaks before they reached 50 gallons, an 80% chance of detecting before they reached 100 gallons, a 90% chance of detecting and alerting before they reached 250 gallons, and a 95% chance of detecting and alerting before they reached 500 gallons.


A Graph that depicts the VisionAery Liquid Leak Detection solution's mean time to detecting a spill or leak


 

Conclusion

The VisionAery team was shocked to learn the massive costs of spills that oil and gas companies ae subject to every year. We were even more surprised at the lack of options on the market to mitigate the cost. In summary, the financial and environmental implications of oil and gas spills are immense. VisionAery's Liquid Leak Detection analytic offers a groundbreaking approach to mitigating these risks, potentially saving millions of dollars, and preserving our environment. By integrating our solution, companies can not only adhere to environmental standards but also ensure more sustainable and cost-effective operations.









If you have questions or would like to get in touch, please contact us at sales@visionaery.com

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