Remedial Approach Development & Cost Modeling

Petroleum Reserve and Oil Production Facility
Central California

The Source Group completed approach evaluation and cost model for an oil production facility in California. The 48,000 acre facility is an operating oil production facility that includes injection and production wells, tanks and bulk storage, roadways, pipelines, oil cleaning/lease automatic custody transfer (LACT) stations, wastewater treatment and disposal facilities, wastewater injection facilities, gas processing plants, gas compression plants, gas injection plants and numerous pumps and compressors.

It is subject to various federal, state, and local laws and is specifically under the oversight of the California DTSC as the lead environmental regulatory agency. The assessment identified and quantified potential environmental liabilities for remedial investigation, remediation, and closure.

Multiple remedial scenarios and associate costs were developed and a probability analyses performed. All factors were evaluated including: regulatory strategy, most cost effective remedial approaches, expenditure schedule, and the time value of money considerations. The ultimate product provided the client with a remedial scope and various "cost to close" alternatives.

Results: The client is utilizing the evaluation to negotiate with others for a potential environmental liability "buy out" where the other party would fund an agreed upon portion of all future remedial costs up front in exchange for a release of all future cost liability for remediation and closure costs. By using more conservative probabilities and costs generated by the model, the client can aggressively negotiate in its best interest for the highest settlement, potentially equal to or greater than actual remedial costs.