Energy Transfer 2012 Annual Report Download - page 33

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Historically, apart from pipeline safety, Louisiana has not acted to exercise this jurisdiction respecting gathering facilities. In
Louisiana, our Chalkley System is regulated as an intrastate transporter, and the Louisiana Office of Conservation has determined
that our Whiskey Bay System is a gathering system.
We are subject to state ratable take and common purchaser statutes in all of the states in which we operate. The ratable take statutes
generally require gatherers to take, without undue discrimination, natural gas production that may be tendered to the gatherer for
handling. Similarly, common purchaser statutes generally require gatherers to purchase without undue discrimination as to source
of supply or producer. These statutes are designed to prohibit discrimination in favor of one producer over another producer or
one source of supply over another source of supply. These statutes have the effect of restricting the right of an owner of gathering
facilities to decide with whom it contracts to purchase or transport natural gas.
Natural gas gathering may receive greater regulatory scrutiny at both the state and federal levels. For example, the TRRC has
approved changes to its regulations governing transportation and gathering services performed by intrastate pipelines and gatherers,
which prohibit such entities from unduly discriminating in favor of their affiliates. Many of the producing states have adopted
some form of complaint-based regulation that generally allows natural gas producers and shippers to file complaints with state
regulators in an effort to resolve grievances relating to natural gas gathering access and rate discrimination allegations. Our gathering
operations could be adversely affected should they be subject in the future to the application of additional or different state or
federal regulation of rates and services. Our gathering operations also may be or become subject to safety and operational regulations
relating to the design, installation, testing, construction, operation, replacement and management of gathering facilities. Additional
rules and legislation pertaining to these matters are considered or adopted from time to time. We cannot predict what effect, if any,
such changes might have on our operations, but the industry could be required to incur additional capital expenditures and increased
costs depending on future legislative and regulatory changes.
Regulation of Interstate Crude Oil and Refined Products Pipelines. Interstate common carrier pipeline operations are subject
to rate regulation by FERC under the Interstate Commerce Act, the Energy Policy Act of 1992, and related rules and orders. The
Interstate Commerce Act requires that tariff rates for petroleum pipelines be "just and reasonable" and not unduly discriminatory.
This statute also permits interested persons to challenge proposed new or changed rates and authorizes FERC to suspend the
effectiveness of such rates for up to seven months and to investigate such rates. If, upon completion of an investigation, FERC
finds that the new or changed rate is unlawful, it is authorized to require the carrier to refund revenues in excess of the prior tariff
during the term of the investigation. FERC also may investigate, upon complaint or on its own motion, rates that are already in
effect and may order a carrier to change its rates prospectively. Upon an appropriate showing, a shipper may obtain reparations
for damages sustained for a period of up to two years prior to the filing of a complaint.
FERC generally has not investigated interstate rates on its own initiative when those rates, like those we charge, have not been
the subject of a protest or a complaint by a shipper. However, FERC could investigate our rates at the urging of a third party if the
third party is either a current shipper or has a substantial economic interest in the tariff rate level. Although no assurance can be
given that the tariffs charged by us ultimately will be upheld if challenged, management believes that the tariffs now in effect for
our pipelines are within the maximum rates allowed under current FERC guidelines.
We have been approved by FERC to charge market-based rates in most of the refined products locations served by our pipeline
systems. In those locations where market-based rates have been approved, we are able to establish rates that are based upon
competitive market conditions.
Regulation of Intrastate Crude Oil and Refined Products Pipelines. Some of our crude oil and refined products pipelines are
subject to regulation by the Texas R.R.C., the P A PUC, and the OCC. The operations of our joint venture interests are also subject
to regulation in the states in which they operate. The applicable state statutes require that pipeline rates be nondiscriminatory and
provide no more than a fair return on the aggregate value of the pipeline property used to render services. State commissions
generally have not initiated an investigation of rates or practices of petroleum pipelines in the absence of shipper complaints.
Complaints to state agencies have been infrequent and are usually resolved informally. Although management cannot be certain
that our intrastate rates ultimately would be upheld if challenged, we believe that, given this history, the tariffs now in effect are
not likely to be challenged or, if challenged, are not likely to be ordered to be reduced.
Regulation of Pipeline Safety. Our pipeline operations are subject to regulation by the U.S. Department of Transportation (“DOT”),
under the PHMSA, pursuant to which the PHMSA has established requirements relating to the design, installation, testing,
construction, operation, replacement and management of pipeline facilities. In addition, the states in which we conduct operations
administer federal pipeline safety standards under the Natural Gas Pipeline Safety Act of 1968, as amended (the “NGPSA”), which
requires compliance with safety standards during construction and operation of certain pipelines and subjects the pipelines to
regular inspections. Failure to comply with the safety laws and regulations may result in the imposition of administrative, civil
and criminal remedies. The “rural gathering exemption” under the NGPSA presently exempts substantial portions of our gathering
facilities from jurisdiction under the NGPSA, but does not apply to our intrastate natural gas pipelines. The portions of our facilities
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