This paper discusses the potential effects of drilling fluids on semienclosed bodies of water such as estuaries. Drilling fluids have been discharged into outer continental shelf waters for many years but there is some concern of potential ecological impact when drilling fluids are discharged near coral reefs or in bays and estuaries. The concern is based on potential adverse effects of the fluids to corals, shellfish, fish, grass beds and general productivity. Potential effects can be evaluated through a hazard assessment process that involves effects and exposure measurements. A suggested hazard assessment involving the Adaptive Environmental Assessment Approach (AEA) is presented. The components of the AEA approach are described and evaluated.