Energy Transfer 2012 Annual Report Download - page 59

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The CFTC has also issued regulations to set position limits for certain futures and option contracts in the major energy markets
and for swaps that are their economic equivalents. The CFTC’s position limits rules were to become effective on October 12, 2012,
but a United States District Court vacated and remanded the position limits rules to the CFTC. The CFTC has appealed that ruling
and it is uncertain at this time whether, when, and to what extent the CFTC's position limits rules will become effective.
The new regulations may also require us to comply with certain margin requirements for our over-the counter derivative contracts
with certain CFTC- or SEC-registered entities that could require us to enter into credit support documentation and/or post significant
amounts of cash collateral, which could adversely affect our liquidity and ability to use derivatives to hedge our commercial price
risk; however, the proposed margin rules are not yet final and therefore the application of those provisions to us is uncertain at
this time. The financial reform legislation may also require the counterparties to our derivative instruments to spin off some of
their derivatives activities to a separate entity, which may not be as creditworthy as the current counterparty.
The new legislation also requires that certain derivative instruments be centrally cleared and executed through an exchange or
other approved trading platform. Mandatory exchange trading and clearing requirements could result in increased costs in the
form of additional margin requirements imposed by clearing organizations. On December 13, 2012, the CFTC published final
rules regarding mandatory clearing of certain interest rate swaps and certain index credit default swaps and setting compliance
dates for different categories of market participants, the earliest of which is March 11, 2013. The CFTC has not yet proposed
any rules requiring the clearing of any other classes of swaps, including physical commodity swaps. Although there may be an
exception to the mandatory exchange trading and clearing requirement that applies to our trading activities, we must obtain
approval from the board of directors of our General Partner and make certain filings in order to rely on this exception. In addition,
mandatory clearing requirements applicable to other market participants, such as swap dealers, may change the cost and availability
of the swaps that we use for hedging.
Rules promulgated under the Dodd-Frank Act further defined forwards as well as instances where forwards may become swaps.
Because the CFTC rules, interpretations, no-action letters, and case law are still developing, it is possible that some arrangements
that previously qualified as forwards or energy service contracts may fall in the regulatory category of swaps or options. In
addition, the CFTC's rules applicable to trade options may further impose burdens on our ability to conduct our traditional hedging
operations and could become subject to CFTC investigations in the future.
The new legislation and any new regulations could significantly increase the cost of derivative contracts (including through
restrictions on the types of collateral we are required to post), materially alter the terms of derivative contracts, reduce the availability
of derivatives to protect against risks we encounter, reduce our ability to monetize or restructure existing derivative contracts, and
increase our exposure to less creditworthy counterparties. If we reduce our use of derivatives as a result of the legislation and
regulations, our results of operations may become more volatile and our cash flows may be less predictable. Finally, if we fail to
comply with applicable laws, rules or regulations, we may be subject to fines, cease-and-desist orders, civil and criminal penalties
or other sanctions.
A natural disaster, catastrophe or other event could result in severe personal injury, property damage and environmental
damage, which could curtail our operations and otherwise materially adversely affect our cash flow and, accordingly, affect
the market price of our Common Units.
Some of our operations involve risks of personal injury, property damage and environmental damage, which could curtail our
operations and otherwise materially adversely affect our cash flow. For example, natural gas facilities operate at high pressures,
sometimes in excess of 1,100 pounds per square inch. Virtually all of our operations are exposed to potential natural disasters,
including hurricanes, tornadoes, storms, floods and/or earthquakes.
If one or more facilities that are owned by us, or that deliver natural gas or other products to us, are damaged by severe weather
or any other disaster, accident, catastrophe or event, our operations could be significantly interrupted. Similar interruptions could
result from damage to production or other facilities that supply our facilities or other stoppages arising from factors beyond our
control. These interruptions might involve significant damage to people, property or the environment, and repairs might take from
a week or less for a minor incident to six months or more for a major interruption. Any event that interrupts the revenues generated
by our operations, or which causes us to make significant expenditures not covered by insurance, could reduce our cash available
for paying distributions to our Unitholders and, accordingly, adversely affect the market price of our Common Units.
As a result of market conditions, premiums and deductibles for certain insurance policies can increase substantially, and in some
instances, certain insurance may become unavailable or available only for reduced amounts of coverage. As a result, we may not
be able to renew existing insurance policies or procure other desirable insurance on commercially reasonable terms, if at all. If
we were to incur a significant liability for which we were not fully insured, it could have a material adverse effect on our financial
position and results of operations. In addition, the proceeds of any such insurance may not be paid in a timely manner and may
be insufficient if such an event were to occur.
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