b'Environmental MattersGeneralWe are subject to various stringent and complex international, foreign, federal, state and localenvironmental, health and safety laws and regulations governing matters including the emission anddischarge of pollutants into the ground, air or water; the generation, storage, handling, use andtransportation of regulated materials; and the health and safety of our employees. These laws andregulations may, among other things:\x7f require the acquisition of various permits before operations commence;\x7f enjoin some or all of the operations or facilities deemed not in compliance with permits;\x7f restrict the types, quantities and concentration of various substances that can be released intothe environment in connection with oil and natural gas drilling, production and transportationactivities;\x7f limit, cap, tax or otherwise restrict emissions of GHG and other air pollutants or otherwise seekto address or minimize the effects of climate change;\x7f limit or prohibit drilling activities in certain locations lying within protected or otherwisesensitive areas; and\x7f require measures to mitigate or remediate pollution, including pollution resulting from our blockpartners or our contractors operations.These laws and regulations may also restrict the rate of oil and natural gas production below therate that would otherwise be possible. Compliance with these laws can be costly; the regulatory burdenon the oil and natural gas industry increases the cost of doing business in the industry and consequentlyaffects profitability. We cannot assure you that we have been or will be at all times in compliance withsuch laws, or that environmental laws and regulations will not change or become more stringent in thefuture in a manner that could have a material adverse effect on our financial condition and results ofoperations.Moreover, public interest in the protection of the environment continues to increase. Offshoredrilling in some areas has been opposed by environmental groups and, in other areas, has beenrestricted. Our operations could be adversely affected to the extent laws or regulations are enacted orother governmental action is taken that prohibits or restricts offshore drilling or imposes environmentalrequirements that increase costs to the oil and gas industry in general, such as more stringent or costlywaste handling, disposal or cleanup requirements or financial responsibility and assurance requirements.Per common industry practice, under agreements governing the terms of use of the drilling rigscontracted by us or our block or lease partners, the drilling rig contractors typically indemnify us andour block partners in respect of pollution and environmental damage originating above the surface ofthe water and from such drilling rig contractors property, including their drilling rig and other relatedequipment. Furthermore, pursuant to the terms of the operating agreements for our blocks and leases,except in certain circumstances, each block or lease partner is responsible for its share of liabilities inproportion to its participating interest incurred as a result of pollution and environmental damage,containment and clean-up activities, loss or damage to any well, loss of oil or natural gas resulting froma blowout, crater, fire, or uncontrolled well, loss of stored oil and natural gas, as well as for plugging orbringing under control any well. We maintain insurance coverage typical of the industry in the areas weoperate in; these include property damage insurance, loss of production insurance, wreck removalinsurance, control of well insurance, general liability including pollution liability to cover pollution fromwells and other operations. We also participate in an insurance coverage program for the FPSOs which38'