Energy Transfer 2012 Annual Report Download - page 58

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Climate change legislation or regulations restricting emissions of “greenhouse gases” could result in increased operating costs
and reduced demand for the natural gas, NGLs, crude oil and refined products that we transport, store or otherwise handle.
In December 2009, the EPA determined that emissions of carbon dioxide, methane and other “greenhouse gases” present an
endangerment to public health and the environment because emissions of such gases are, according to the EPA, contributing to
warming of the earth’s atmosphere and other climatic changes. Based on these findings, the EPA has begun adopting and
implementing regulations to restrict emissions of greenhouse gases under existing provisions of the federal Clean Air Act. The
EPA has recently adopted rules regulating greenhouse gas emissions under the Clean Air Act, one of which requires a reduction
in emissions of greenhouse gases from motor vehicles and another which regulates emissions of greenhouse gases from certain
large stationary sources, effective January 2, 2011. In November 2011, the EPA also adopted rules requiring companies with
facilities that emit over 25,000 metric tons or more of carbon dioxide to report their greenhouse gas emissions to the EPA by
September 30, 2012, a requirement with which we timely complied.
In addition, the United States Congress has from time to time considered adopting legislation to reduce emissions of greenhouse
gases and almost one-half of the states have already taken legal measures to reduce emissions of greenhouse gases primarily
through the planned development of greenhouse gas emission inventories and/or regional greenhouse gas cap and trade programs.
Most of these cap and trade programs work by requiring major sources of emissions, such as electric power plants, or major
producers of fuels, such as refineries and gas processing plants, to acquire and surrender emission allowances. The number of
allowances available for purchase may be reduced over time in an effort to achieve the overall greenhouse gas emission reduction
goal.
The adoption of legislation or regulatory programs to reduce emissions of greenhouse gases could require us to incur increased
operating costs, such as costs to purchase and operate emissions control systems, to acquire emissions allowances or comply with
new regulatory or reporting requirements. Any such legislation or regulatory programs could also increase the cost of consuming,
and thereby reduce demand for, natural gas, NGLs, crude oil and refined products. Consequently, legislation and regulatory
programs to reduce emissions of greenhouse gases could have an adverse effect on our business, financial condition and results
of operations.
Some have suggested that one consequence of climate change could be increased severity of extreme weather, such as increased
hurricanes and floods. If such effects were to occur, our operations could be adversely affected in various ways, including damages
to our facilities from powerful winds or rising waters, or increased costs for insurance. Another possible consequence of climate
change is increased volatility in seasonal temperatures. The market for our fuels is generally improved by periods of colder weather
and impaired by periods of warmer weather, so any changes in climate could affect the market for the fuels that we produce.
Despite the use of the term “global warming” as a shorthand for climate change, some studies indicate that climate change could
cause some areas to experience temperatures substantially colder than their historical averages. As a result, it is difficult to predict
how the market for our fuels could be affected by increased temperature volatility, although if there is an overall trend of warmer
temperatures, it would be expected to have an adverse effect on our business.
The adoption of the Dodd-Frank Act could have an adverse effect on our ability to use derivative instruments to reduce the
effect of commodity price, interest rate and other risks associated with our business, resulting in our operations becoming more
volatile and our cash flows less predictable.
Congress has adopted the Dodd-Frank Wall Street Reform and Consumer Protection Act (the "Dodd-Frank Act"), a comprehensive
financial reform legislation that establishes federal oversight and regulation of the over-the-counter derivatives market and entities,
such as us, that participate in that market. The legislation was signed into law by President Obama on July 21, 2010 and requires
the U.S. Commodity Futures Trading Commission ("CFTC"), the SEC and other regulators to promulgate rules and regulations
implementing the new legislation. While certain regulations have been promulgated and are already in effect, the rulemaking and
implementation process is still ongoing, and we cannot yet predict the ultimate effect of the rules and regulations on our business.
The Dodd-Frank Act expanded the types of entities that are required to register with the CFTC and the SEC as a result of their
activities in the derivatives markets or otherwise become specifically qualified to enter into derivatives contracts. We will be
required to assess our activities in the derivatives markets, and to monitor such activities on an ongoing basis, to ascertain and
to identify any potential change in our regulatory status.
Reporting and recordkeeping requirements also could significantly increase operating costs and expose us to penalties for non-
compliance. Certain CFTC recordkeeping requirements became effective on October 14, 2010, and additional recordkeeping
requirements will be phased in through April 2013. Beginning on December 31, 2012, certain CFTC reporting rules became
effective, and additional reporting requirements will be phased in through April 2013. These additional recordkeeping and
reporting requirements may require additional compliance resources. Added public transparency as a result of the reporting rules
may also have a negative effect on market liquidity which could also negatively impact commodity prices and our ability to
hedge.
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