Field Operations Environmental  Industry Capacity Constraints 44  High levels of field activity can result in shortages of services, products, equipment, or manpower in many or all  necessary components of the exploration and development cycle. Increased demand leads to higher land and service  costs during peak activity periods. In addition, access to transportation and processing facilities may be difficult or  expensive to secure. Storm’ s competitors include companies with far greater resources, including access to capital  and the ability to secure oilfield services at more favourable prices and to build out operations on a scale which  lowers the economic threshold for exploitation of a resource. Storm competes by maintaining a large inventory of  self-generated exploration and development locations, by acting as operator where possible, and through facility  In addition to Company-specific environmental concerns, increasing public and political focus on climate change and  its possible amelioration, may cause changes in demand for the Company’ s products and the introduction of  regulations which may result in changes to the Company’ s operating practices as well as additional and  unforeseeable costs and the incurrence of future liabilities, real or contingent. Changes in public policy over the next  several years cannot be determined at this stage, but given that the Company is a producer of primary hydrocarbons  it is likely that its business will be subject to increased regulation and potentially subject to additional taxes, costs and  obligations.  The evolution of environmental regulation, in particular as it relates to fracturing applications, cannot be predicted at  this stage. Nevertheless it is reasonable to expect that management of environmental issues and related societal  expectations will become an increasingly important part of the Company’ s business, with a corresponding effect on  costs and economic returns.  The Company’ s operations are subject to extensive environmental regulations which are addressed through formal  policies and procedures and application of best field practices. In addition, the Company’ s approach to property  development frequently involves horizontal drilling and fracturing applications. Fracturing involves the use of large  quantities of liquids and chemicals, whose use and subsequent disposal has resulted in the emergence of  environmental concerns, primarily in more heavily populated areas elsewhere in North America. In particular, natural  gas produced by the Company at Umbach contains hydrogen sulfide, which is potentially lethal and has to be  removed from the gas stream. This requires access to specialized processing facilities. Although the Company  considers that access to such facilities is adequate for current and near-term production levels, this may not be the  case in the future. In addition, exploitation of shale gas in the HRB may cause management of carbon dioxide  volumes produced concurrently with natural gas to become an operational issue.  Storm maintains industry-specific insurance policies, including environmental damage and business interruption, on  important owned and non-owned production and processing facilities. Although the Company believes its current  insurance coverage corresponds to industry standards, there is no guarantee that such coverage will be available in  the future, and if it is, at a cost acceptable to the Company, or that existing coverage will necessarily extend to all  circumstances or incidents resulting in loss or liability.  The Company’ s areas of activity are largely remote and relatively undeveloped and, particularly the HRB in northeast  British Columbia, are climatically hostile. In any new area of activity, property access and production require  considerable early stage investment, for example, road construction, access to processing facilities, pipelines and  other transportation arrangements, which is not necessarily applicable to more mature producing areas. In addition,  supervision and maintenance of production facilities is likely to be more expensive than in existing and more  accessible producing areas.  Storm’ s current and future exploration, development and production activities involve the use of heavy equipment and  the handling of volatile liquids and gases. Catastrophic events such as well blowouts, explosions and fires within  pipeline, gathering, or facility infrastructure, as well as failure of gathering systems or mechanical equipment, could  lead to releases of liquids or gases, spills of contaminants, personal injuries and death and damage to the  environment, as well as uncontrolled cost escalation. With support from suitably qualified external parties, the  Company has developed and implemented policies and procedures to mitigate environmental, health and safety  risks. These policies and procedures include the use of formal corporate policies, emergency response plans, and  other policies and procedures reflecting what management considers to be best oil field practices. These policies  and procedures are subject to periodic review. Storm also manages environmental and safety risks by maintaining its  operations to a high standard and complying with all provincial and federal environmental and safety regulations. Nevertheless, application of best practices to field operations serves only to mitigate, not eliminate, risk.