Energy Transfer 2015 Annual Report Download - page 30

Table of Contents
conditions are also subject to FERC review and approval. Should the FERC determine not to authorize rates equal to or greater than our currently approved
Section 311 rates, our business may be adversely affected. Failure to observe the service limitations applicable to transportation and storage services under
Section 311, failure to comply with the rates approved by the FERC for Section 311 service, and failure to comply with the terms and conditions of service
established in the pipeline’s FERC-approved statement of operating conditions could result in an alteration of jurisdictional status, and/or the imposition of
administrative, civil and criminal remedies.
Our intrastate natural gas operations are also subject to regulation by various agencies in Texas, principally the TRRC. Our intrastate pipeline and storage
operations in Texas are also subject to the Texas Utilities Code, as implemented by the TRRC. Generally, the TRRC is vested with authority to ensure that
rates, operations and services of gas utilities, including intrastate pipelines, are just and reasonable and not discriminatory. The rates we charge for
transportation services are deemed just and reasonable under Texas law unless challenged in a customer or TRRC complaint. We cannot predict whether such
a complaint will be filed against us or whether the TRRC will change its regulation of these rates. Failure to comply with the Texas Utilities Code can result
in the imposition of administrative, civil and criminal remedies.
Our NGL pipelines and operations may also be or become subject to state public utility or related jurisdiction which could impose additional safety and
operational regulations relating to the design, siting, installation, testing, construction, operation, replacement and management of NGL gathering facilities.
In addition, the rates, terms and conditions for shipments of NGLs on our pipelines are subject to regulation by FERC under the Interstate Commerce Act
(“ICA”) and the Energy Policy Act of 1992 (the “EPAct of 1992”) if the NGLs are transported in interstate or foreign commerce whether by our pipelines or
other means of transportation. Since we do not control the entire transportation path of all NGLs shipped on our pipelines, FERC regulation could be
triggered by our customers’ transportation decisions.
Regulation of Sales of Natural Gas and NGLs.The price at which we buy and sell natural gas currently is not subject to federal regulation and, for the most
part, is not subject to state regulation. The price at which we sell NGLs is not subject to federal or state regulation.
To the extent that we enter into transportation contracts with natural gas pipelines that are subject to FERC regulation, we are subject to FERC requirements
related to use of such capacity. Any failure on our part to comply with the FERC’s regulations and policies, or with an interstate pipeline’s tariff, could result
in the imposition of civil and criminal penalties.
Our sales of natural gas are affected by the availability, terms and cost of pipeline transportation. As noted above, the price and terms of access to pipeline
transportation are subject to extensive federal and state regulation. The FERC is continually proposing and implementing new rules and regulations affecting
those segments of the natural gas industry. These initiatives also may affect the intrastate transportation of natural gas under certain circumstances. The stated
purpose of many of these regulatory changes is to promote competition among the various sectors of the natural gas industry and these initiatives generally
reflect more light-handed regulation. We cannot predict the ultimate impact of these regulatory changes to our natural gas marketing operations, and we note
that some of the FERC’s regulatory changes may adversely affect the availability and reliability of interruptible transportation service on interstate pipelines.
We do not believe that we will be affected by any such FERC action in a manner that is materially different from other natural gas marketers with whom we
compete.
Regulation of Gathering PipelinesSection 1(b) of the NGA exempts natural gas gathering facilities from the jurisdiction of the FERC under the NGA. We
own a number of natural gas pipelines in Texas, Louisiana and West Virginia that we believe meet the traditional tests the FERC uses to establish a pipeline’s
status as a gatherer not subject to FERC jurisdiction. However, the distinction between FERC-regulated transmission services and federally unregulated
gathering services has been the subject of substantial litigation and varying interpretations, so the classification and regulation of our gathering facilities
could be subject to change based on future determinations by the FERC, the courts and Congress. State regulation of gathering facilities generally includes
various safety, environmental and, in some circumstances, nondiscriminatory take requirements and complaint-based rate regulation.
In Texas, our gathering facilities are subject to regulation by the TRRC under the Texas Utilities Code in the same manner as described above for our
intrastate pipeline facilities. Louisiana’s Pipeline Operations Section of the Department of Natural Resources’ Office of Conservation is generally responsible
for regulating intrastate pipelines and gathering facilities in Louisiana and has authority to review and authorize natural gas transportation transactions and
the construction, acquisition, abandonment and interconnection of physical facilities.
Historically, apart from pipeline safety, Louisiana has not acted to exercise this jurisdiction respecting gathering facilities. In Louisiana, our Chalkley System
is regulated as an intrastate transporter, and the Louisiana Office of Conservation has determined that our Whiskey Bay System is a gathering system.
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