Chesapeake Energy 1997 Annual Report Download - page 26

Activities of the Company with respect to the exploration, development and production of oil and natural
gas are subject to stringent environmental regulation by state and federal authorities including the United
States Environmental Protection Agency ("EPA"). Such regulation has increased the cost of planning,
designing, drilling, operating and in some instances, abandoning wells. In most instances, the regulatory
requirements relate to the handling and disposal of drilling and production waste products and waste created
by water and air pollution control procedures. Although the Company believes that compliance with
environmental regulations will not have a material adverse effect on operations or earnings, risks of substantial
costs and liabilities are inherent in oil and gas operations, and there can be no assurance that significant costs
and liabilities, including criminal penalties, will not be incurred. Moreover, it is possible that other
developments, such as stricter environmental laws and regulations, and claims for damages for injuries to
property or persons resulting from the Company's operations could result in substantial costs and liabilities.
Waste Disposal. The Company currently owns or leases, and has in the past owned or leased, numerous
properties that for many years have been used for the exploration and production of oil and gas. Although the
Company has utilized operating and disposal practices that were standard in the industry at the time,
hydrocarbons or other wastes may have been disposed of or released on or under the properties owned or
leased by the Company or on or under other locations where such wastes have been taken for disposal. In
addition, many of these properties have been operated by third parties whose treatment and disposal or release
of hydrocarbons or other wastes was not under the Company's control. State and federal laws applicable to oil
and natural gas wastes and properties have gradually become more strict. Under such laws, the Company
could be required to remove or remediate previously disposed wastes (including wastes disposed of or released
by prior owners or operators) or property contamination (including groundwater contamination) or to perform
remedial plugging operations to prevent future contamination.
The Company generates wastes, including hazardous wastes, that are subject to the federal Resource
Conservation and Recovery Act ("RCRA") and comparable state statutes. The EPA and various state
agencies have limited the disposal options for certain hazardous and nonhazardous wastes and are considering
the adoption of stricter disposal standards for nonhazardous wastes. Furthermore, certain wastes generated by
the Company's oil and natural gas operations that are currently exempt from treatment as hazardous wastes
may in the future be designated as hazardous wastes, and therefore be subject to considerably more rigorous
and costly operating and disposal requirements.
Superfund. The Comprehensive Environmental Response, Compensation and Liability Act
("CERCLA"), also known as the "Superfund" law, imposes liability, without regard to fault or the legality of
the original conduct, on certain classes of persons with respect to the release of a "hazardous substance" into
the environment. These persons include the owner and operator of a site and persons that disposed of or
arranged for the disposal of the hazardous substances found at a site. CERCLA also authorizes the EPA and,
in some cases, third parties to take actions in response to threats to the public health or the environment and to
seek to recover from responsible classes of persons the costs of such action. In the course of its operations, the
Company may have generated and may generate wastes that fall within CERCLA's definition of "hazardous
substances." The Company may also be or have been an owner of sites on which "hazardous substances" have
been released. The Company may be responsible under CERCLA for all or part of the costs to clean up sites
at which such wastes have been released. To date, however, neither the Company nor, to its knowledge, its
predecessors or successors have been named a potentially responsible party under CERCLA or similar state
superfund laws affecting property owned or leased by the Company.
Air Emissions. The operations of the Company are subject to local, state and federal regulations for the
control of emissions of air pollution. Legal and regulatory requirements in this area are increasing, and there
can be no assurance that significant costs and liabilities will not be incurred in the future as a result of new
regulatory developments. In particular, regulations promulgated under the Clean Air Act Amendments of
1990 may impose additional compliance requirements that could affect the Company's operations. However, it
is impossible to predict accurately the effect, if any, of the Clean Air Act Amendments on the Company at
this time. The Company may in the future be subject to civil or administrative enforcement actions for failure
to comply strictly with air regulations or permits. These enforcement actions are generally resolved by
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