Impact of Greenhouse Gas Regulation
There has been a broad range of proposed or promulgated state, national and international laws focusing on GHG reduction. These proposed or promulgated laws apply or could apply in countries where we have interests or may have interests in the future. Laws in this field continue to evolve, and while it is not possible to accurately estimate either a timetable for implementation or our future compliance costs relating to implementation, such laws, if enacted, could have a material impact on our results of operations and financial condition. Examples of legislation or precursors for possible regulation that do or could affect our operations include:

• Federal mandatory GHG reporting (U.S., Canada, EU, Australia)
• US EPA Prevention of Significant Deterioration (PSD) GHG permitting
• California cap and trade
• California Cost of Implementation Fee
• New Mexico cap-and trade
• European Emissions Trading Scheme (ETS)
• Alberta Specified Gas Emitters Regulation
• Norwegian Carbon Tax
• British Columbia Carbon Tax
• Australia federal carbon tax

In the EU, we have assets that are subject to the ETS. The first phase of the EU ETS was completed at the end of 2007, with EU ETS Phase II running from 2008 through 2012. The European Commission has approved most of the Phase II national allocation plans. We are actively engaged to minimize any financial impact from the trading scheme.

In the United States, there are indications and ongoing government agency work on regulation at the federal level with respect to GHG emissions. Such regulation could take any of several forms that may result in the creation of additional costs in the form of taxes, the restriction of output, investments of capital to maintain compliance with laws and regulations, or required acquisition or trading of emission allowances. We are working to continuously improve operational and energy efficiency through resource and energy conservation throughout our operations.

Compliance with changes in laws and regulations that create a GHG emission trading scheme or GHG reduction policies could significantly increase our costs, reduce demand for fossil energy derived products, impact the cost and availability of capital and increase our exposure to litigation. Such laws and regulations could also increase demand for less carbon intensive energy sources, including natural gas. The ultimate impact on our financial performance, either positive or negative, will depend on a number of factors, including but not limited to:

• Whether and to what extent legislation is enacted
• The nature of the legislation (such as a cap and trade system or a tax on emissions)
• Whether both process and product emissions are covered
• The GHG reductions required
• The price and availability of offsets
• The amount and allocation of allowances
• Technological and scientific developments leading to new products or services
• Any potential significant physical effects of climate change (such as increased severe weather events, changes in sea levels and changes in temperature).
• Whether, and the extent to which, increased compliance costs are ultimately reflected in the prices of our products and services

The ultimate financial impact arising from environmental laws and regulations is neither clearly known nor easily determinable as new standards, such as air emission standards, water quality standards and stricter fuel regulations, continue to evolve. However, environmental laws and regulations, including those that may arise to address concerns about global climate change, are expected to continue to have an increasing impact on our operations in the United States and in other countries in which we operate. Notable areas of potential impacts include air emission compliance and remediation obligations in the United States.