Chesapeake Energy 1998 Annual Report Download - page 32

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plans and facilities response plans relating to the possible discharge of oil into surface waters. The Oil Pollution Act
of 1990 ("(WA") amends certain provisions of the federal Water Pollution Control Act of 1972, commonly referred
to as the Clean Water Act ("CWA"), and other statutes as they pertain to the prevention of and response to oil spills
into navigable waters. The OPA subjects owners of facilities to strict joint and several liability for all containment
and cleanup costs and certain other damages arising from a spill, including, but not limited to, the costs of
responding to a release of oil to surface waters. The CWA provides penalties for any discharges of petroleum
product in reportable quantities and imposes substantial liability for the costs of removing a spill. State laws for the
control of water pollution also provide varying civil and criminal penalties and liabilities in the case of releases of
petroleum or its derivatives into surface waters or into the ground. Regulations are currently being developed under
OPA and state laws concerning oil pollution prevention and other matters that may impose additional regulatory
burdens on the Company. In addition, the CWA and analogous state laws require permits to be obtained to
authorize discharges into surface waters or to construct facilities in wetland areas. With respect to certain of its
operations, the Company is required to maintain such permits or meet general permit requirements. The EPA has
adopted regulations concerning discharges of storm water runoff. This program requires covered facilities to obtain
individual permits, participate in a group permit or seek coverage under an EPA general permit. The Company
believes that with respect to existing properties it has obtained, or is included under, such permits and with respect
to future operations it will be able to obtain, or be included under, such permits, where necessary. Compliance with
such permits is not expected to have a material effect on the Company.
NORJvI. Oil and gas exploration and production activities have been identified as generators of concentrations of
low-level naturally-occurring radioactive materials ("NORM"). NORM regulations have recently been adopted in
several states. The Company is unable to estimate the effect of these regulations, although based upon the
Company's preliminary analysis to date, the Company does not believe that its compliance with such regulations
will have a material adverse effect on its operations or fmancial condition.
Safe Drinking Water Act. The Company's operations involve the disposal of produced saltwater and other
nonhazardous oilfield wastes by reinjection into the subsurface. Under the Safe Drinking Water Act("SDWA"), oil
and gas operators, such as the Company, must obtain a permit for the construction and operation of underground
Class II injection wells. To protect against contamination of drinking water, periodic mechanical integrity tests are
often required to be performed by the well operator. The Company has obtained such permits for the Class II wells
it operates. The Company also has disposed of wastes in facilities other than those owned by the Company which
are commercial Class II injection wells.
Toxic Substances Control Act. The Toxic Substances Control Act ("TSCA") was enacted to control the adverse
effects of newly manufactured and existing chemical substances. Under the TSCA, the EPA has issued specific
rules and regulations governing the use, labeling, maintenance, removal from service and disposal of PCB items,
such as transformers and capacitors used by oil and gas companies. The Company may own such PCB items but
does not believe compliance with TSCA has or will have a material adverse effect on the Company's operations or
fmancial condition.
Title to Properties
Title to properties is subject to royalty, overriding royalty, carried, net profits, working and other similar
interests and contractual arrangements customary in the oil and gas industry, to liens for current taxes not yet due
and to other encumbrances. As is customary in the industry in the case of undeveloped properties, only cursory
investigation of record title is made at the time of acquisition. Drilling title opinions are usually prepared before
commencement of drilling operations. From time to time, the Company's title to oil and gas properties is challenged
through legal proceedings. The Company is routinely involved in litigation involving title to certain of its oil and
gas properties, none of which management believes will be materially adverse to the Company, individually or in
the aggregate.
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