Because our operations emit greenhouse gases, our operations in California are subject to regulations
issued under Assembly Bill 32. These regulations increase our costs for those operations and
adversely affect our operating results. The EPA has also adopted regulations imposing permitting and
best available control technology requirements on the largest greenhouse gas stationary sources,
regulations requiring reporting of greenhouse gas emissions from certain facilities and is considering
additional regulation of greenhouse gases as “air pollutants” under the existing federal Clean Air Act.
Passage of climate change legislation or other regulatory initiatives by Congress or various states, or
the adoption of regulations by the EPA or analogous state agencies, that regulate or restrict emissions
of greenhouse gases (including methane or carbon dioxide) in areas in which we conduct business
could have an adverse effect on our operations and the demand for oil and natural gas.
Environmental liabilities could adversely affect our financial condition.
The oil and gas business is subject to environmental hazards, such as oil spills, gas leaks and
ruptures and discharges of petroleum products and hazardous substances and historical disposal
activities. These environmental hazards could expose us to material liabilities for property damages,
personal injuries or other environmental harm, including costs of investigating and remediating
contaminated properties. We also may be liable for environmental damages caused by the previous
owners or operators of properties we have purchased or are currently operating. A variety of stringent
federal, state and local laws and regulations govern the environmental aspects of our business and
impose strict requirements for, among other things:
• well drilling or workover, operation and abandonment;
• waste management;
•
land reclamation;
• financial assurance under the Oil Pollution Act of 1990; and
• controlling air, water and waste emissions.
Any noncompliance with these laws and regulations could subject us to material administrative,
civil or criminal penalties or other liabilities. Additionally, our compliance with these laws may, from time
to time, result in increased costs to our operations or decreased production, and may affect our costs
of acquisitions.
In addition, environmental laws may, in the future, cause a decrease in our production or cause an
increase in our costs of production, development or exploration. Pollution and similar environmental
risks generally are not fully insurable.
Some of our onshore California fields have been in operation for more than 100 years, and current
or future local, state and federal environmental and other laws and regulations may require substantial
expenditures to remediate the properties or to otherwise comply with these laws and regulations. The
Montebello field operates under a number of federal and California permits that are over and above
what may be required in our other California facilities. The primary reason for the additional permits
and associated restrictions on property use is the property’s location within what has been designated
critical habitat for the federally threatened songbird, known as the California gnatcatcher, in
accordance with Section 7 of the federal Endangered Species Act of 1973. A variety of existing laws,
rules and guidelines govern activities that can be conducted on properties that contain coastal sage
scrub and gnatcatchers and generally limit the scope of operations that we can conduct on this
property. The presence of coastal sage scrub and gnatcatchers in the Montebello field and other
existing or future laws, rules and guidelines could prohibit or limit our operations and our planned
activities for this property.
41