| | emission-related
issues. However, we do not believe our operations will be materially adversely
affected by any such requirements. Federal regulations
require certain owners or operators of facilities that store or otherwise handle
oil, such as us, to prepare and implement spill prevention, control, countermeasure
(“SPCC”) and response plans relating to the possible discharge of oil into surface
waters. The Oil Pollution Act of 1990 (“OPA”) contains numerous requirements relating
to the prevention of and response to oil spills into waters of the United States.
The OPA subjects owners of facilities to strict joint and several liability for
all containment and cleanup costs and certain other damages arising from a spill,
including, but not limited to, the costs of responding to a release of oil to
surface waters. The OPA also requires owners and operators of offshore facilities
that could be the source of an oil spill into federal or state waters, including
wetlands, to post a bond, letter of credit or other form of financial assurance
in amounts ranging from $10 million in specified state waters to $35 million in
federal outer continental shelf waters to cover costs that could be incurred by
governmental authorities in responding to an oil spill. These financial assurances
may be increased by as much as $150 million if a formal risk assessment indicates
that the increase is warranted. Noncompliance with OPA may result in varying civil
and criminal penalties and liabilities. Our operations are also subject to the
federal Clean Water Act (“CWA”) and analogous state laws. In accordance with the
CWA, the State of Louisiana issued regulations prohibiting discharges of produced
water in state coastal waters effective July 1, 1997. Pursuant to other requirements
of the CWA, the EPA has adopted regulations concerning discharges of storm water
runoff. This program requires covered facilities to obtain individual permits
or seek coverage under an EPA general permit. Like OPA, the CWA and analogous
state laws relating to the control of water pollution provide varying civil and
criminal penalties and liabilities for releases of petroleum or its derivatives
into surface waters or into the ground. We also are
subject to a variety of federal, state and local permitting and registration requirements
relating to protection of the environment. We believe we are in substantial compliance
with current applicable environmental laws and regulations and that continued
compliance with existing requirements will not have a material adverse effect
on us. As further described in “—Significant Areas—Other
Areas of Interest—Rocky Mountain Region,” the issuance of new coalbed methane
drilling permits and the continued viability of existing permits in Montana have
been challenged in lawsuits filed in state and federal court. Coalbed
Methane Proceedings in Montana The issuance of
new coalbed methane drilling permits in Montana was halted temporarily pending
the Federal Bureau of Land Management’s (“BLM”) approval of a final record of
decision on Montana’s Resource Management Plan environmental impact statement
and the Montana Department of Environmental Quality’s approval of a statewide
oil and gas environmental impact statement. These two program approvals were obtained
in April and August of 2003, respectively. Environmental groups initiated six
lawsuits, challenging these program approvals. On February 25, 2005, the Federal
District Court for the District of Montana issued an opinion in Northern Plains
Resource Council v. BLM and a companion case vacating BLM’s approval of the state
plan and remanding the plan to BLM for further consideration. The Court further
entered an order limiting the issuance of federal drilling permits to 500 per
year and placed additional restrictions on certain operations. Various parties
appealed these orders to the Ninth Circuit Court of Appeals. On May 31, 2005,
the Ninth Circuit entered an order halting the issuance of any new permits pending
their review of the parties’ various appeals. Oral argument was held in the case
on September 15, 2005, and no decision has yet been issued. Although this decision
could result in a continued suspension of the state’s authority to issue new drilling
permits or could effect the continued viability of existing permits in Montana,
we believe that the decisions by the Federal Bureau of Land Management and the
State of Montana ultimately will be upheld on appeal and/or BLM’s reconsideration
will address the Court’s concerns and new coalbed methane development will continue
to be authorized in Montana. There can be no assurance that any new permits will
be obtained in a given time period or at all. Operating
Hazards and Insurance The natural gas and oil business
involves a variety of operating hazards and risks that could result in substantial
losses to us from, among other things, injury or loss of life, severe damage to
or destruction of property, natural resources and equipment, pollution or other
environmental damage, cleanup responsibilities, regulatory investigation and penalties
and suspension of operations. In addition, we may be
liable for environmental damages caused by previous owners of property we purchase
and lease. As a result, we may incur substantial liabilities to third parties
or governmental entities, the payment of which could reduce or eliminate the funds
available for exploration, development or acquisitions or result in the loss of
our properties. In accordance with customary industry
practices, we maintain insurance against some, but not all, potential losses.
We do not carry business interruption insurance or protect against loss of revenues.
We cannot assure you that any insurance we obtain will | |
