Energy Transfer 2015 Annual Report Download - page 31

Table of Contents
We are subject to state ratable take and common purchaser statutes in all of the states in which we operate. The ratable take statutes generally require
gatherers to take, without undue discrimination, natural gas production that may be tendered to the gatherer for handling. Similarly, common purchaser
statutes generally require gatherers to purchase without undue discrimination as to source of supply or producer. These statutes are designed to prohibit
discrimination in favor of one producer over another producer or one source of supply over another source of supply. These statutes have the effect of
restricting the right of an owner of gathering facilities to decide with whom it contracts to purchase or transport natural gas.
Natural gas gathering may receive greater regulatory scrutiny at both the state and federal levels. For example, the TRRC has approved changes to its
regulations governing transportation and gathering services performed by intrastate pipelines and gatherers, which prohibit such entities from unduly
discriminating in favor of their affiliates. Many of the producing states have adopted some form of complaint-based regulation that generally allows natural
gas producers and shippers to file complaints with state regulators in an effort to resolve grievances relating to natural gas gathering access and rate
discrimination allegations. Our gathering operations could be adversely affected should they be subject in the future to the application of additional or
different state or federal regulation of rates and services. Our gathering operations also may be or become subject to safety and operational regulations
relating to the design, installation, testing, construction, operation, replacement and management of gathering facilities. Additional rules and legislation
pertaining to these matters are considered or adopted from time to time. We cannot predict what effect, if any, such changes might have on our operations, but
the industry could be required to incur additional capital expenditures and increased costs depending on future legislative and regulatory changes.
Regulation of Interstate Crude Oil and Products Pipelines. Interstate common carrier pipeline operations are subject to rate regulation by the FERC under
the ICA, the EPAct of 1992, and related rules and orders. The ICA requires that tariff rates for petroleum pipelines be “just and reasonable” and not unduly
discriminatory and that such rates and terms and conditions of service be filed with the FERC. This statute also permits interested persons to challenge
proposed new or changed rates. The FERC is authorized to suspend the effectiveness of such rates for up to seven months, though rates are typically not
suspended for the maximum allowable period. If the FERC finds that the new or changed rate is unlawful, it may require the carrier to pay refunds for the
period that the rate was in effect. The FERC also may investigate, upon complaint or on its own motion, rates that are already in effect and may order a carrier
to change its rates prospectively. Upon an appropriate showing, a shipper may obtain reparations for damages sustained for a period of up to two years prior
to the filing of a complaint.
The FERC generally has not investigated interstate rates on its own initiative when those rates, like those we charge, have not been the subject of a protest or
a complaint by a shipper. However, the FERC could investigate our rates at the urging of a third party if the third party is either a current shipper or has a
substantial economic interest in the tariff rate level. Although no assurance can be given that the tariffs charged by us ultimately will be upheld if challenged,
management believes that the tariffs now in effect for our pipelines are within the maximum rates allowed under current FERC policies and precedents.
For many locations served by our product and crude pipelines, we are able to establish negotiated rates. Otherwise, we are permitted to charge cost-based
rates, or in many cases, grandfathered rates based on historical charges or settlements with our customers.
Regulation of Intrastate Crude Oil and Products Pipelines. Some of our crude oil and products pipelines are subject to regulation by the TRRC, the PA PUC,
and the Oklahoma Corporation Commission. The operations of our joint venture interests are also subject to regulation in the states in which they operate.
The applicable state statutes require that pipeline rates be nondiscriminatory and provide no more than a fair return on the aggregate value of the pipeline
property used to render services. State commissions generally have not initiated an investigation of rates or practices of petroleum pipelines in the absence of
shipper complaints. Complaints to state agencies have been infrequent and are usually resolved informally. Although management cannot be certain that our
intrastate rates ultimately would be upheld if challenged, we believe that, given this history, the tariffs now in effect are not likely to be challenged or, if
challenged, are not likely to be ordered to be reduced.
Regulation of Pipeline Safety. Our pipeline operations are subject to regulation by the DOT, through the PHMSA, pursuant to the Natural Gas Pipeline
Safety Act of 1968, as amended (“NGPSA”), with respect to natural gas and the Hazardous Liquids Pipeline Safety Act of 1979, as amended (“HLPSA”), with
respect to crude oil, NGLs and condensates. Both the NGPSA and the HLPSA were amended by the Pipeline Safety Improvement Act of 2002 (“PSI Act”) and
the Pipeline Inspection, Protection, Enforcement, and Safety Act of 2006 (“PIPES Act”). The NGPSA and HLPSA, as amended, govern the design, installation,
testing, construction, operation, replacement and management of natural gas as well as crude oil, NGL and condensate pipeline facilities. Pursuant to these
acts, PHMSA has promulgated regulations governing pipeline wall thickness, design pressures, maximum operating pressures, pipeline patrols and leak
surveys, minimum depth requirements, and emergency procedures, as well as other matters intended to ensure adequate protection for the public and to
prevent accidents and failures. Additionally, PHMSA has established a series of rules requiring pipeline operators to develop and implement integrity
management programs for certain gas and hazardous liquid pipelines that, in the event of a pipeline leak or rupture, could affect high consequence areas
(“HCAs”), which are areas where a release could have the most significant adverse consequences, including high population areas, certain drinking water
sources and unusually sensitive ecological areas. Failure to comply with the pipeline safety laws and
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