Chesapeake Energy 2012 Annual Report Download - page 26

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Regulation
General
All of our operations are conducted onshore in the U.S. The U.S. natural gas and oil industry is regulated at the
federal, state and local levels, and some of the laws, rules and regulations that govern our operations carry substantial
administrative, civil and criminal penalties for non-compliance. Although we believe we are in substantial compliance
with all applicable laws and regulations, and that remaining in substantial compliance with existing requirements will
not have a material adverse effect on our financial position, cash flows or results of operations, such laws and regulations
could be, and frequently are, amended or reinterpreted. Additionally, currently unforeseen environmental incidents
may occur or past non-compliance with environmental laws or regulations may be discovered. Therefore, we are
unable to predict the future costs or impacts of compliance or non-compliance. Additional proposals and proceedings
that affect the natural gas and oil industry are regularly considered by Congress, the states, the local governments,
the courts and federal agencies, such as the U.S. Environmental Protection Agency (EPA), the Federal Energy
Regulatory Commission, the Department of Transportation, the Department of Interior and the Department of Energy.
We actively monitor regulatory developments regarding our industry in order to anticipate and design required
compliance activities and systems.
Exploration and Production Operations
The laws and regulations applicable to our exploration and production operations include requirements for permits
to drill and to conduct other operations and for provision of financial assurances (such as bonds) covering drilling and
well operations. Other activities subject to such laws and regulations include, but are not limited to:
• the location of wells;
• the method of drilling and completing wells;
• the surface use and restoration of properties upon which wells are drilled;
• water withdrawal;
• the plugging and abandoning of wells;
• the recycling or disposal of fluids used or other substances handled in connection with operations;
• the marketing, transportation and reporting of production; and
• the valuation and payment of royalties.
Our operations may require us to obtain permits for, among other things,
• air emissions;
• construction activities, including in sensitive areas, such as wetlands, coastal regions or areas that contain
endangered or threatened species or their habitats;
• the construction and operation of underground injection wells to dispose of produced water and other non-
hazardous oilfield wastes; and
• the construction and operation of surface pits to contain drilling muds and other non-hazardous fluids
associated with drilling operations.
Delays in obtaining permits or an inability to obtain new permits or permit renewals could inhibit our ability to
execute our drilling and production plans. Failure to comply with provisions of our permits could result in revocation
of such permits and the imposition of fines and penalties.
Our exploration and production activities are also subject to various conservation regulations. These include the
regulation of the size of drilling and spacing units (regarding the density of wells that may be drilled in a particular area)
and the unitization or pooling of natural gas and oil properties. In this regard, some states, such as Oklahoma, allow
the forced pooling or integration of tracts to facilitate exploration, while other states, such as Texas, Ohio, West Virginia
and Pennsylvania, rely on voluntary pooling of lands and leases. In areas where pooling is voluntary, it may be more
difficult to form units and therefore, more difficult to fully develop a project if the operator owns or controls less than
100% of the leasehold. In addition, state conservation laws establish maximum rates of production from natural gas
and oil wells, generally limit the venting or flaring of natural gas and impose certain requirements regarding the ratability