Hess 2011 Annual Report Download - page 41

rules under this Act, when issued, including potential additional costs to engage in certain derivative transactions.
We also market motor fuels through lessee-dealers and wholesalers in certain states where legislation prohibits
producers or refiners of crude oil from directly engaging in retail marketing of motor fuels. Similar legislation
has been periodically proposed in various other states. As a result of the accident in April 2010 at the BP p.l.c.
(BP) operated Macondo prospect in the Gulf of Mexico (in which the Corporation was not a participant) and the
ensuing significant oil spill, a temporary drilling moratorium was imposed in the Gulf of Mexico. While this
moratorium has since been lifted, significant new regulations have been imposed and further legislation and
regulations may be proposed, including an increase in the potential liability in the event of an oil spill. The new
regulatory environment has resulted in a longer permitting process and higher costs.
Political instability in areas where we operate can adversely affect our business. Some of the
international areas in which we operate, and the partners with whom we operate, are politically less stable than
other areas and partners. Political unrest in North Africa and the Middle East has affected and may continue to
affect our operations in these areas as well as oil and gas markets generally. The threat of terrorism around the
world also poses additional risks to the operations of the oil and gas industry.
Our oil and gas operations are subject to environmental risks and environmental laws and regulations
that can result in significant costs and liabilities. Our oil and gas operations, like those of the industry, are
subject to environmental risks such as oil spills, produced water spills, gas leaks and ruptures and discharges of
substances or gases that could expose us to substantial liability for pollution or other environmental damage. For
example, the accident at the BP operated Macondo prospect in April 2010 resulted in a significant release of
crude oil which caused extensive environmental and economic damage. Our operations are also subject to
numerous United States federal, state, local and foreign environmental laws and regulations. Non-compliance
with these laws and regulations may subject us to administrative, civil or criminal penalties, remedial clean-ups
and natural resource damages or other liabilities. In addition, increasingly stringent environmental regulations,
particularly relating to the production of motor and other fuels, have resulted and will likely continue to result in
higher capital expenditures and operating expenses for us and the oil and gas industry in general.
Concerns have been raised in certain jurisdictions where we have operations concerning the safety and
environmental impact of the drilling and development of unconventional oil and gas resources, particularly using
the process of hydraulic fracturing. While we believe that these operations can be conducted safely and with
minimal impact on the environment, regulatory bodies are responding to these concerns and may impose
moratoriums and new regulations on such drilling operations that would likely have the effect of prohibiting or
delaying such operations and increasing their cost. For example, a moratorium prohibiting hydraulic fracturing is
currently impacting the Corporation’s operations in France.
Concerns about climate change may result in significant operational changes and expenditures and
reduced demand for our products. We recognize that climate change is a global environmental concern.
Continuing political and social attention to the issue of climate change has resulted in both existing and pending
international agreements and national, regional or local legislation and regulatory measures to limit greenhouse
gas emissions. These agreements and measures may require significant equipment modifications, operational
changes, taxes, or purchase of emission credits to reduce emission of greenhouse gases from our operations,
which may result in substantial capital expenditures and compliance, operating, maintenance and remediation
costs. In addition, we manufacture petroleum fuels, which through normal customer use result in the emission of
greenhouse gases. Regulatory initiatives to reduce the use of these fuels may reduce our sales of, and revenues
from, these products. Finally, to the extent that climate change may result in more extreme weather related
events, we could experience increased costs related to prevention, maintenance and remediation of affected
operations in addition to costs and lost revenues related to delays and shutdowns.
Our industry is highly competitive and many of our competitors are larger and have greater
resources than we have. The petroleum industry is highly competitive and very capital intensive. We
encounter competition from numerous companies in each of our activities, including acquiring rights to explore
for crude oil and natural gas, and in purchasing and marketing of refined petroleum products, natural gas and
electricity. Many competitors, including national oil companies, are larger and have substantially greater
resources. We are also in competition with producers and marketers of other forms of energy. Increased
competition for worldwide oil and gas assets has significantly increased the cost of acquisitions. In addition,
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