Energy Transfer 2013 Annual Report Download - page 167

Table of Contents
Asset Retirement Obligation
We have determined that we are obligated by contractual or regulatory requirements to remove facilities or perform other remediation upon retirement of
certain assets. The fair value of any ARO is determined based on estimates and assumptions related to retirement costs, which the Partnership bases on
historical retirement costs, future inflation rates and credit-adjusted risk-free interest rates. These fair value assessments are considered to be level 3
measurements, as they are based on both observable and unobservable inputs. Changes in the liability are recorded for the passage of time (accretion) or
for revisions to cash flows originally estimated to settle the ARO.
An ARO is required to be recorded when a legal obligation to retire an asset exists and such obligation can be reasonably estimated. We will record an asset
retirement obligation in the periods in which management can reasonably estimate the settlement dates.
Except for the AROs of Southern Union, Sunoco Logistics and Sunoco discussed below, management was not able to reasonably measure the fair value
of asset retirement obligations as of December 31, 2013 and 2012 because the settlement dates were indeterminable. Although a number of other onshore
assets in Southern Union’s system are subject to agreements or regulations that give rise to an ARO upon Southern Union’s discontinued use of these
assets, AROs were not recorded because these assets have an indeterminate removal or abandonment date given the expected continued use of the assets
with proper maintenance or replacement. Sunoco has legal asset retirement obligations for several other assets at its refineries, pipelines and terminals, for
which it is not possible to estimate when the obligations will be settled. Consequently, the retirement obligations for these assets cannot be measured at this
time. At the end of the useful life of these underlying assets, Sunoco is legally or contractually required to abandon in place or remove the asset. Sunoco
Logistics believes it may have additional asset retirement obligations related to its pipeline assets and storage tanks, for which it is not possible to estimate
whether or when the retirement obligations will be settled. Consequently, these retirement obligations cannot be measured at this time.
Below is a schedule of AROs by entity recorded as other non-current liabilities in ETP’s consolidated balance sheet:
December 31,
2013
2012
Southern Union $55
$ 46
Sunoco 84
53
Sunoco Logistics 41
41
$180
$140
Individual component assets have been and will continue to be replaced, but the pipeline and the natural gas gathering and processing systems will
continue in operation as long as supply and demand for natural gas exists. Based on the widespread use of natural gas in industrial and power generation
activities, management expects supply and demand to exist for the foreseeable future. We have in place a rigorous repair and maintenance program that
keeps the pipelines and the natural gas gathering and processing systems in good working order. Therefore, although some of the individual assets may be
replaced, the pipelines and the natural gas gathering and processing systems themselves will remain intact indefinitely.
As of December 31, 2013, there were no legally restricted funds for the purpose of settling AROs.
F - 20