Chesapeake Energy 2015 Annual Report Download - page 35

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the designation of previously unprotected species as threatened or endangered in areas where we operate, may
negatively impact our industry. We cannot predict the actions that future regulation will require or prohibit, but our
business and operations could be subject to increased operating and compliance costs if certain regulatory proposals
are adopted. In addition, such regulations may have an adverse impact on our ability to develop and produce our
reserves.
Federal and state legislative and regulatory initiatives relating to hydraulic fracturing could result in
increased costs and additional operating restrictions or delays.
Several states are considering adopting regulations that could impose more stringent permitting, public disclosure,
and/or well construction requirements on hydraulic fracturing operations. In addition to state laws, some local
municipalities have adopted or are considering adopting land use restrictions, such as city ordinances, that may restrict
or prohibit the performance of well drilling in general and/or hydraulic fracturing in particular. Our inability to secure
sufficient amounts of water, or to dispose of or recycle the water used in our operations, could adversely impact our
operations in certain areas. There are also certain governmental reviews either underway or being proposed that focus
on deep shale and other formation completion and production practices, including hydraulic fracturing. These studies
assess, among other things, the risks of groundwater contamination and earthquakes caused by hydraulic fracturing
and other exploration and production activities. Depending on the outcome of these studies, federal and state
legislatures and agencies may seek to further regulate or even ban such activities. Certain environmental and other
groups have also suggested that additional federal, state and local laws and regulations may be needed to more closely
regulate the hydraulic fracturing process. For example, on February 16, 2016, the Oklahoma Corporation Commission
(OCC) implemented a volume reduction plan for oil and natural gas disposal wells injecting wastewater into the Arbuckle
formation. The OCC’s plan, in conjunction with a 191,000 barrel per day reduction plan already implemented in the
Byron/Cherokee area, will create a total volume cutback of over 500,000 barrels per day, or about 40%.
We cannot predict whether additional federal, state or local laws or regulations applicable to hydraulic fracturing
will be enacted in the future and, if so, what actions any such laws or regulations would require or prohibit. If additional
levels of regulation or permitting requirements were imposed on hydraulic fracturing operations, our business and
operations could be subject to delays, increased operating and compliance costs and process prohibitions.
Our ability to produce oil, natural gas and NGL economically and in commercial quantities could be
impaired if we are unable to acquire adequate supplies of water for our operations or are unable to dispose
of or recycle the water we use economically and in an environmentally safe manner.
Development activities require the use of water. For example, the hydraulic fracturing process that we employ to
produce commercial quantities of oil and natural gas from many reservoirs requires the use and disposal of significant
quantities of water. In certain areas, there may be insufficient local aquifer capacity to provide a source of water for
drilling activities. Water must be obtained from other sources and transported to the drilling site. Our inability to secure
sufficient amounts of water, or to dispose of or recycle the water used in our operations, could adversely impact our
operations in certain areas. Moreover, the imposition of new environmental initiatives and regulations, such as the
EPA’s April 2015 proposed pretreatment standards for wastewater, could include restrictions on our ability to conduct
certain operations such as hydraulic fracturing or disposal of waste, including, but not limited to, produced water, drilling
fluids and other materials associated with the exploration, development or production of oil and natural gas.
Potential legislative and regulatory actions addressing climate change could significantly impact our
industry and the Company, causing increased costs and reduced demand for oil and natural gas.
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. There were attempts at comprehensive federal
legislation establishing a cap and trade program, but this legislation did not pass. The EPA also issued a final rule that
makes certain stationary sources and newer modification projects subject to permitting requirements for GHG
emissions, beginning in 2011, under the CAA. However, in June 2014, the U.S. Supreme Court, in UARG v. EPA,
limited the application of the GHG permitting requirements under the Prevention of Significant Deterioration and Title
V permitting programs to sources that would otherwise need permits based on the emission of conventional pollutants.
In April 2015, the D.C. Circuit Court of Appeals narrowed the rule in accordance with the Supreme Court’s decision.
Additional legislative and/or 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 oil and
natural gas that we sell. The potential increase in our operating costs could include new or increased costs to obtain