Chesapeake Energy 2014 Annual Report Download - page 21

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Exploration and Production Operations
The laws and regulations applicable to our exploration and production operations include requirements for permits
or approvals 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
following:
• seismic operations;
• the location of wells;
• construction and operations activities, including in sensitive areas, such as wetlands, coastal regions or
areas that contain endangered or threatened species or their habitats;
• the method of drilling and completing wells;
• production operations, including the installation of flowlines and gathering systems;
• air emissions and hydraulic fracturing;
• the surface use and restoration of properties upon which oil and natural gas facilities are located, including
the construction of well pads, pipelines, impoundments and associated access roads;
• water withdrawal;
• the plugging and abandoning of wells;
• the generation, storage, transportation treatment, recycling or disposal of hazardous waste, fluids or other
substances in connection with operations;
• the construction and operation of underground injection wells to dispose of produced water and other liquid
oilfield wastes;
• the construction and operation of surface pits to contain drilling muds and other fluids associated with drilling
operations;
• the marketing, transportation and reporting of production; and
• the valuation and payment of royalties.
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 applicable regulations or permit requirements could
result in revocation of our permits, inability to obtain new 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 oil and natural gas 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, 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, some states’ conservation laws establish maximum rates of production from oil and natural
gas wells, generally limit the venting or flaring of natural gas and impose certain requirements regarding the ratability
of production. The effect of these regulations is to limit the amount of oil and natural gas we can produce and to limit
the number of wells and the locations at which we can drill.
Midstream Operations
Historically, Chesapeake invested, directly and through an affiliate, in gathering systems and processing facilities
to complement our natural gas operations in regions where we had significant production and additional infrastructure
was required. In 2012 and 2013, we sold substantially all of our midstream business, including most of our gathering
assets. As a result, the impact on our business of compliance with the laws and regulations described below has
decreased significantly since the fourth quarter of 2012.
In addition to the environmental, health and safety laws and regulations discussed below under Regulation -
Environment, Health and Safety Matters, a small amount of our midstream facilities is subject to federal regulation by
the Pipeline and Hazardous Materials Safety Administration of the DOT pursuant to the Natural Gas Pipeline Safety
Act of 1968 (NGPSA) and the Pipeline Safety Improvement Act of 2002, which was reauthorized and amended by the