Chesapeake Energy 2013 Annual Report Download - page 25

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Legislative, regulatory and enforcement efforts, as well as guidance from regulatory agencies, at the federal level
and in some states have been initiated to require or make more stringent the permitting and compliance requirements
for hydraulic fracturing operations. For example, New York has placed a permit moratorium on high volume fracturing
activities combined with horizontal drilling pending the results of a study regarding the safety of hydraulic fracturing.
Certain communities in Colorado have also enacted bans on hydraulic fracturing. The EPA has asserted federal
regulatory authority over hydraulic fracturing involving “diesel fuels” under the SWDA's UIC Program and has released
final guidance regarding the process for obtaining a permit for hydraulic fracturing involving diesel fuel. We believe the
guidance will not materially affect our operations, as we do not use diesel fuel in connection with our hydraulic fracturing.
The EPA also has commenced a study of the potential impacts of hydraulic fracturing activities on drinking water
resources, with a progress report released in late 2012 and a final draft report expected to be released for public
comment and peer review in late 2014. In addition, the BLM published a revised draft of proposed rules that would
impose new requirements on hydraulic fracturing operations conducted on federal and tribal lands, including the
disclosure of chemical additives used in hydraulic fracturing operations. EPA's guidance, including its interpretation of
the meaning of “diesel fuel”, EPA's pending study, BLM's proposed rules, and other analyses by federal and state
agencies to assess the impacts of hydraulic fracturing could each spur further action toward federal and/or state
legislation and regulation of hydraulic fracturing activities.
Restrictions on hydraulic fracturing could make it prohibitive to conduct our operations, and also reduce the amount
of oil, natural gas liquids and natural gas that we are ultimately able to produce in commercial quantities from our
properties. For further discussion, see Item 1A. Risk Factors - Federal and state legislative and regulatory initiatives
relating to hydraulic fracturing could result in increased costs and additional operating restrictions or delays.
Endangered Species
The Endangered Species Act (ESA) restricts activities that may affect areas that contain endangered or threatened
species or their habitats. While some of our assets and lease acreage may be located in areas that are designated as
habitats for endangered or threatened species, we believe that we are in substantial compliance with the ESA. However,
the designation of previously unidentified endangered or threatened species in areas where we intend to conduct
construction activity could materially limit or delay our plans. For example, as a result of a settlement reached in 2011,
the U.S. Fish and Wildlife Service is required to make a determination on the listing of more than 250 species as
endangered or threatened over the next several years. Some of these species are included in the list of over 100
species that are currently proposed for listing as endangered or threatened species. In addition, the imposition of
seasonal restrictions on our construction or operational activities could materially limit or delay our plans.
Global Warming and Climate Change
Various state governments and regional organizations are considering enacting new legislation and promulgating
new regulations governing or restricting the emission of greenhouse gases from stationary sources such as our
equipment and operations. At the federal level, the EPA has already made findings and issued regulations that require
us to establish and report an inventory of greenhouse gas emissions. Legislative and regulatory proposals for restricting
greenhouse gas emissions or otherwise addressing climate change could require us to incur additional operating costs
and could adversely affect demand for the natural gas and oil that we sell. The potential increase in our operating costs
could include new or increased costs to obtain permits, operate and maintain our equipment and facilities, install new
emission controls on our equipment and facilities, acquire allowances to authorize our greenhouse gas emissions, pay
taxes related to our greenhouse gas emissions and administer and manage a greenhouse gas emissions program.
Title to Properties
Our title to properties is subject to royalty, overriding royalty, carried, net profits, working and other similar interests
and contractual arrangements customary in the natural gas and oil 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. We believe we have satisfactory title to substantially all of our active properties in accordance with
standards generally accepted in the natural gas and oil industry. Nevertheless, we are involved in title disputes from
time to time which result in litigation.