As with our industry generally, our compliance with existing and anticipated laws and regulations
increases our overall cost of business, including our capital costs to construct, maintain, upgrade and
close equipment and facilities. Although these laws and regulations affect our capital expenditures and
earnings, we believe that they do not affect our competitive position because our competitors that
comply with such laws and regulations are similarly affected. Environmental laws and regulations have
historically been subject to change, usually becoming more stringent, and we are unable to predict the
ongoing cost to us of complying with these laws and regulations or the future impact of these laws and
regulations on our operations.
Hydraulic Fracturing.
Our operations utilize the practice of hydraulic fracturing for new oil and
natural gas wells. The practice of hydraulic fracturing continues to receive significant regulatory and
legislative attention at the federal, state, and local level. Several federal agencies including the EPA
and the U.S. Bureau of Land Management are reviewing current regulations related to the practice of
hydraulic fracturing and are considering adopting additional regulations in the future. From time to time,
legislation has been introduced in Congress to amend the federal SDWA to eliminate exemptions for
most fracturing activities. Similar efforts to review the practice and impose new regulatory conditions
are taking place at the state and local level in states where we operate, several of which have adopted
or are considering new regulations and statutes. These new requirements will (and future regulatory
and legislative changes, if enacted, could) create new permitting and financial assurance requirements,
require us to adhere to certain construction specifications, fulfill monitoring, reporting and
recordkeeping obligations, and meet plugging and abandonment requirements. Although we would not
be impacted to a greater degree than other similarly situated oil and gas companies, the imposition of
stringent new regulatory and permitting requirements related to the practice of hydraulic fracturing
could significantly increase our cost of doing business and create adverse effect on our operations.
Permits.
Our operations are subject to various federal, state and local laws and regulations that
include requiring permits for the drilling and operation of wells, and maintaining bonding and insurance
requirements to drill, operate, plug and abandon. We are also subject to laws and regulations that
require us to restore the surface associated with our wells, regulate the location of wells, the method of
drilling and casing wells, the surface use and restoration of properties upon which wells are drilled, the
plugging and abandonment of wells, the disposal of fluids and solids used in connection with our
operations and air emissions associated with our operations. In certain instances we may also be
subject to permit conditions that require us to reabandon an old well as a condition of adding a new
injection well. Also, we have permits from numerous jurisdictions to operate crude oil, natural gas and
related pipelines and equipment that run within the boundaries of these governmental jurisdictions. The
permits required for various aspects of our operations are subject to enforcement for noncompliance as
well as revocation, modification and renewal by issuing authorities.
Plugging, Abandonment and Remediation Obligations
For discussion of our obligations to incur plugging, abandonment and remediation costs, see
Item 7 – Management’s Discussion and Analysis of Financial Condition and Results of Operations –
Commitments and Contingencies.
Employees
As of January 31, 2012, we had 880 full-time employees, 331 of whom were field personnel
involved in oil and gas producing activities. We believe our relationship with our employees is good.
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