Energy Transfer 2012 Annual Report Download - page 57

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in the assessment of significant administrative, civil and criminal penalties, the imposition of remedial obligations, and the issuance
of injunctive relief.
We may incur substantial environmental costs and liabilities because of the underlying risk inherent to our operations. Certain
environmental laws and regulations can provide for joint and several strict liability for cleanup to address discharges or releases
of petroleum hydrocarbons or other materials or wastes at sites to which we may have sent wastes or on, under or from our current
or former properties and facilities, many of which have been used for industrial activities for a number of years, even if such
discharges were caused by our predecessors. Private parties, including the owners of properties through which our pipelines or
gathering systems pass or facilities where our petroleum hydrocarbons or wastes are taken for reclamation or disposal, may also
have the right to pursue legal actions to enforce compliance as well as to seek damages for non-compliance with environmental
laws and regulations, personal injury or property damage. Although we have established financial reserves for our estimated
environmental remediation liabilities, additional contamination or conditions may be discovered, resulting in increased remediation
liabilities. Environmental laws also authorize government agencies, in some circumstance, to seek compensation for natural
resource damages as an adjunct to remediation programs. If such natural resource damages claims are brought against us, our
liability associated with any such sites could substantially increase. Accordingly, we cannot assure you that our current reserves
are adequate to cover all future liabilities, even for currently known contamination.
Changes in environmental laws and regulations occur frequently, and any such changes that result in more stringent and costly
waste handling, emission standards, or storage, transport, disposal or remediation requirements could have a material adverse
effect on our operations or financial position. For example, the EPA in 2008 lowered the federal ozone standard from 0.08 ppm
to 0.075 ppm, requiring the environmental agencies in states with areas that do not currently meet this standard to adopt new rules
between to further reduce NOx and other ozone precursor emissions. We have previously been able to satisfy the more stringent
NOx emission reduction requirements that affect our compressor units in ozone non-attainment areas at reasonable cost, but there
is no guarantee that the changes we may have to make in the future to meet the new ozone standard or other evolving standards
will not require us to incur costs that could be material to our operations.
Product liability claims and litigation could adversely affect our business and results of operations.
Product liability is a significant commercial risk. Substantial damage awards have been made in certain jurisdictions against
manufacturers and resellers based upon claims for injuries caused by the use of or exposure to various products. There can be no
assurance that product liability claims against us would not have a material adverse effect on our business or results of operations.
Along with other refiners, manufacturers and sellers of gasoline, Sunoco is a defendant in numerous lawsuits that allege methyl
tertiary butyl ether (“MTBE”) contamination in groundwater. Plaintiffs, who include water purveyors and municipalities
responsible for supplying drinking water and private well owners, are seeking compensatory damages (and in some cases injunctive
relief, punitive damages and attorneys' fees) for claims relating to the alleged manufacture and distribution of a defective product
(MTBE-containing gasoline) that contaminates groundwater, and general allegations of product liability, nuisance, trespass,
negligence, violation of environmental laws and deceptive business practices. There has been insufficient information developed
about the plaintiffs' legal theories or the facts that would be relevant to an analysis of the ultimate liability to Sunoco. These
allegations or other product liability claims against Sunoco could have a material adverse effect on our business or results of
operations.
Recently proposed rules regulating air emissions from oil and natural gas operations could cause us to incur increased capital
expenditures and operating costs, which may be significant.
On April 17, 2012, the EPA issued final rules that would establish new air emission controls for oil and natural gas production
and natural gas processing operations. Specifically, the EPA's proposed rule package includes New Source Performance Standards
("NSPS") to address emissions of sulfur dioxide and volatile organic compounds ("VOCs"), and a separate set of emission standards
to address hazardous air pollutants frequently associated with oil and natural gas production and processing activities. The EPA's
proposal would require the reduction of VOC emissions from oil and natural gas production facilities by mandating the use of
"green completions" for hydraulic fracturing by January 2015, which requires the operator to recover rather than vent the gas and
natural gas liquids that come to the surface during completion of the fracturing process. The proposed rules also would establish
specific requirements regarding emissions from compressors, dehydrators, storage tanks and other production equipment. In
addition, the rules would establish new leak detection requirements for natural gas processing plants. These rules will require us
to modify certain of our operations, including the possible installation of new equipment. Compliance with such rules will be
required within three years of their effective date, and it could result in significant costs, including increased capital expenditures
and operating costs, which may adversely impact our business.
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