Energy Transfer 2012 Annual Report Download - page 55

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some form of complaint-based regulation, which allow producers and shippers to file complaints with state regulators in an effort
to resolve grievances relating to the fairness of rates and terms of access. The states in which we operate have ratable take statutes,
which generally require gatherers to take, without undue discrimination, 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 have the effect of restricting our right as an owner of gathering facilities to decide with
whom we contract to purchase or transport natural gas. Should a complaint be filed in any of these states or should regulation
become more active, our business may be adversely affected.
Our intrastate transportation operations located in Texas are also subject to regulation as gas utilities by the TRRC. Texas gas
utilities must publish the rates they charge for transportation and storage services in tariffs filed with the TRRC, although such
rates are deemed just and reasonable under Texas law unless challenged in a complaint.
We are subject to other forms of state regulation, including requirements to obtain operating permits, reporting requirements, and
safety rules (see description of federal and state pipeline safety regulation below). Violations state laws, regulations, orders and
permit conditions can result in the modification, cancellation or suspension of a permit, civil penalties and other relief.
Certain of our assets may become subject to FERC regulation.
The distinction between federally unregulated gathering facilities and FERC-regulated transmission pipelines under the NGA has
been the subject of extensive litigation and may be determined by FERC on a case-by-case basis, although FERC has made no
determinations as to the status of our facilities. Consequently, the classification and regulation of our gathering facilities could
change based on future determinations by FERC or the courts. If our gas gathering operations become subject to FERC jurisdiction,
the result may adversely affect the rates we are able to charge and the services we currently provide, and may include the potential
for a termination of our gathering agreements with our customers.
We believe that our NGL pipelines do not currently provide interstate service and are not subject to FERC jurisdiction under the
ICA and the Energy Policy Act of 1992. We cannot guarantee that the jurisdictional status of our NGL pipelines will remain
unchanged. If any of our NGL pipelines became subject to regulation by FERC, pursuant to the ICA, FERC's rate-making
methodologies may, among other things, delay the use of rates that reflect increased costs and subject us to potentially burdensome
and expensive operational, reporting and other requirements. Any of the foregoing could adversely affect our revenues and results
of operations.
We are subject to extensive federal and state pipeline safety regulation, including integrity management requirements, which
may adversely affect our costs and operations.
Our pipeline operations are subject to regulation by the DOT, under PHMSA, pursuant to which PHMSA has established
requirements relating to the design, installation, testing, construction, operation, replacement and management of pipeline facilities.
Moreover, PHMSA, through the Office of Pipeline Safety, has promulgated a rule requiring pipeline operators to develop integrity
management programs to comprehensively evaluate their pipelines, and take measures to protect pipeline segments located in
what the rule refers to as “high consequence areas.” Activities under these integrity management programs involve the performance
of internal pipeline inspections, pressure testing or other effective means to assess the integrity of these regulated pipeline segments,
and the regulations require prompt action to address integrity issues raised by the assessment and analysis. Based on the results
of our current pipeline integrity testing programs, we estimate that compliance with these federal regulations and analogous state
pipeline integrity requirements will result in capital costs of $3 million and operating and maintenance costs of $18 million over
the course of the next year. For the years ended December 31, 2012, 2011 and 2010, $7 million, $18 million and $13 million,
respectively, of capital costs and $17 million, $15 million and $15 million, respectively, of operating and maintenance costs have
been incurred for pipeline integrity testing. There can be no assurance as to the amount or timing of future expenditures for pipeline
integrity regulation, and actual future expenditures may be different from the amounts we currently anticipate. Integrity testing
and assessment of all of these assets will continue, and the potential exists that results of such testing and assessment could cause
us to incur even greater capital and operating expenditures for repairs or upgrades deemed necessary to ensure the continued safe
and reliable operation of our pipelines.
Federal pipeline safety regulation is also becoming increasingly stringent and additional laws and regulations are being considered.
The recently enacted Pipeline Safety, Regulatory Certainty, and Job Creation Act of 2011, requires more stringent oversight of
pipelines and increased civil penalties for violations of pipeline safety rules. The law requires numerous studies and/or the
development of rules over the next two years covering the expansion of integrity management, use of automatic and remote-
controlled shut-off valves, leak detection systems, sufficiency of existing regulation of gathering pipelines, use of excess flow
valves, verification of maximum allowable operating pressure, incident notification, and other pipeline-safety related rules. The
DOT has already proposed rules that address many areas of the newly adopted legislation.
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