Energy Transfer 2012 Annual Report Download - page 31

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which will be reduced over a three year period beginning in April 2012. The settlement also resolves certain non-rate matters,
and approves Transwestern's use of certain previously approved accounting methodologies. Under the settlement, Transwestern
is required to file a new NGA Section 4 rate case on October 1, 2014.
In December 2009, the FERC issued an order granting Fayetteville Express Pipeline LLC (“FEP”) authorization to construct and
operate the Fayetteville Express pipeline, subject to certain conditions, and FEP accepted the FERC’s certificate. Interim service
began on the Fayetteville Express pipeline in the fourth quarter of 2010 and commenced service to all of its firm shippers on
December 1, 2010, with the primary term of each firm shipper’s contract commencing by January 1, 2011. The rates charged for
services on the Fayetteville Express pipeline are largely governed by long-term negotiated rate agreements. In the certificate order,
the FERC also approved cost-based recourse rates available to prospective shippers as an alternative to negotiated rates.
In April 2010, the application for authority to construct the Tiger pipeline was approved by the FERC and field construction began
on the pipeline in June 2010. The Tiger pipeline was placed in service on December 1, 2010. The rates charged for services on
the Tiger pipeline are largely governed by long-term negotiated rate agreements. In June 2010, we filed an application for authority
to construct and operate a 0.4 Bcf/d expansion of the Tiger pipeline with the FERC and in February 2011 we accepted the FERC’s
certificate order authorizing the construction and operation of this expansion and the rate-related arrangements for the services to
be provided on this expansion. The expansion was placed in service on August 1, 2011.
In July 2010, in response to an intervention and protest filed by BG LNG Services (BGLS) regarding its rates with Trunkline LNG
applicable to certain LNG expansions, FERC determined that there was no reason at that time to expend FERC's resources on a
rate proceeding with respect to Trunkline LNG even though cost and revenue studies provided by the Company to FERC indicated
Trunkline LNG's revenues were in excess of its associated cost of service. However, since the current fixed rates expire at the
end of 2015 and revert to tariff rate for these LNG expansions as well as the base LNG facilities for which rates were set in 2002,
a rate proceeding could be initiated at that time and result in significant revenue reductions if the cost of service remains lower
than revenues.
The maximum rates to be charged by NGA-jurisdictional natural gas companies and their terms and conditions for service are
generally required to be on file with the FERC in FERC-approved tariffs. Most natural gas companies are authorized to offer
discounts from their FERC-approved maximum just and reasonable rates when competition warrants such discounts. Natural gas
companies are also generally permitted to offer negotiated rates different from rates established in their tariff if, among other
requirements, such companies’ tariffs offer a cost-based recourse rate available to a prospective shipper as an alternative to the
negotiated rate. Natural gas companies must make offers of rate discounts and negotiated rates on a basis that is not unduly
discriminatory. Existing tariff rates may be challenged by complaint, and if found unjust and unreasonable, may be altered on a
prospective basis by the FERC. We cannot guarantee that the FERC will continue to pursue its approach of pro-competitive policies
as it considers matters such as pipeline rates and rules and policies that may affect rights of access to natural gas transportation
capacity, transportation and storage facilities.
Pursuant to the FERC’s rules promulgated under the Energy Policy Act of 2005, it is unlawful for any entity, directly or indirectly,
in connection with the purchase or sale of electric energy or natural gas or the purchase or sale of transmission or transportation
services subject to FERC jurisdiction: (1) to defraud using any device, scheme or artifice; (2) to make any untrue statement of
material fact or omit a material fact; or (3) to engage in any act, practice or course of business that operates or would operate as
a fraud or deceit. The Commodity Futures Trading Commission (“CFTC”) also holds authority to monitor certain segments of the
physical and futures energy commodities market pursuant to the Commodity Exchange Act (“CEA”). With regard to our physical
purchases and sales of natural gas, NGLs or other energy commodities; our gathering or transportation of these energy commodities;
and any related hedging activities that we undertake, we are required to observe these anti-market manipulation laws and related
regulations enforced by the FERC and/or the CFTC. These agencies hold substantial enforcement authority, including the ability
to assess civil penalties of up to $1 million per day per violation, to order disgorgement of profits and to recommend criminal
penalties. Should we violate the anti-market manipulation laws and regulations, we could also be subject to related third party
damage claims by, among others, sellers, royalty owners and taxing authorities.
Failure to comply with the NGA, the Energy Policy Act of 2005 and the other federal laws and regulations governing our operations
and business activities can result in the imposition of administrative, civil and criminal remedies.
Regulation of Intrastate Natural Gas and NGL Pipelines. Intrastate transportation of natural gas and NGLs is largely regulated
by the state in which such transportation takes place. To the extent that our intrastate natural gas transportation systems transport
natural gas in interstate commerce, the rates and terms and conditions of such services are subject to FERC jurisdiction under
Section 311 of the Natural Gas Policy Act (“NGPA”). The NGPA regulates, among other things, the provision of transportation
services by an intrastate natural gas pipeline on behalf of a local distribution company or an interstate natural gas pipeline. The
rates and terms and conditions of some transportation and storage services provided on the Oasis pipeline, HPL System, East Texas
pipeline and ET Fuel System are subject to FERC regulation pursuant to Section 311 of the NGPA. Under Section 311, rates
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