Fracking Risks To Secured Oil And Gas Lenders

Currently, the biggest legal and regulatory challenges for oil and gas industry participants and their lenders relate to the hot-button issue of hydraulic fracturing (or “fracking”), where a number of recent developments put credit risk front and center.

Faegre Baker Daniels associate Matthew Clark and partner Colin Deihl recently co-authored an article for Law360 where they explain that commodity prices are not the only source of risk. Clark and Deihl say the Office of the Comptroller of the Currency Oil and Gas Production Lending: Comptroller’s Handbook 11 identifies seven categories of risk that financial institutions must manage when lending to exploration and production companies. One of these risk categories—credit risk—takes into account threats to an operator’s ability to find, develop and profitably bring to market extracted hydrocarbons posed by changes to law and regulations governing the operator’s activities.