Energy Transfer 2015 Annual Report Download - page 51

Table of Contents
of operations and cash flows. Moreover, our revenues may not increase immediately following the completion of a particular project. For instance, if we build
a new pipeline, the construction will occur over an extended period of time, but we may not materially increase our revenues until long after the project’s
completion. In addition, the success of a pipeline construction project will likely depend upon the level of oil and natural gas exploration and development
drilling activity and the demand for pipeline transportation in the areas proposed to be serviced by the project as well as our ability to obtain commitments
from producers in the area to utilize the newly constructed pipelines. In this regard, we may construct facilities to capture anticipated future growth in oil or
natural gas production in a region in which such growth does not materialize. As a result, new facilities may be unable to attract enough throughput or
contracted capacity reservation commitments to achieve our expected investment return, which could adversely affect our results of operations and financial
condition.
We depend on certain key producers for our supply of natural gas and the loss of any of these key producers could adversely affect our financial results.
Certain producers who are connected to our systems represent a material source of our supply of natural gas. We are not the only option available to these
producers for disposition of the natural gas they produce. To the extent that these and other producers may reduce the volumes of natural gas that they supply
us, we would be adversely affected unless we were able to acquire comparable supplies of natural gas from other producers.
Our intrastate transportation and storage and interstate transportation and storage operations depend on key customers to transport natural gas through
our pipelines and the pipelines of our joint ventures.
During 2015, Kinder Morgan, Inc., EDF Inc., Natural Gas Exchange Inc., Calpine Energy Services, L.P., and XTO Energy Inc. collectively accounted for
approximately 27.1% of our intrastate transportation and storage revenues.
With respect to our interstate transportation and storage operations we have an agreement with Chesapeake Energy Marketing, Inc. that provides for a 15-year
commitment for firm transportation capacity on the Tiger pipeline of approximately 1.0 Bcf/d. We also have agreements with other shippers that provide for
10-year commitments for firm transportation capacity on the Tiger pipeline totaling approximately 1.4 Bcf/d, bringing the total shipper commitments to
approximately 2.4 Bcf/d of firm transportation service in the Tiger pipeline project. Transwestern generates the majority of its revenues from long-term and
short-term firm transportation contracts with natural gas producers, local distribution companies and end-users.
Our joint ventures, FEP and Citrus, also depend on key customers for the transport of natural gas through their pipelines. FEP has 10- and 12-year agreements
from a small number of major shippers for approximately 1.85 Bcf/d of firm transportation service on the 2.0 Bcf/d Fayetteville Express Pipeline, while Citrus
has 10- and 14-year agreements with its top two customers which accounted for 60% of its 2015 revenue.
During 2015, Chesapeake Energy Marketing, Inc., Ameren Corporation, EnCana Marketing (USA), Inc., Exelon Generation Company, LLC and Petrohawk
Energy Corporation collectively accounted for 32.1% of our interstate transportation and storage revenues.
The failure of the major shippers on our and our joint ventures’ intrastate and interstate transportation and storage pipelines to fulfill their contractual
obligations could have a material adverse effect on our cash flow and results of operations if we or our joint ventures were unable to replace these customers
under arrangements that provide similar economic benefits as these existing contracts.
Our interstate natural gas pipelines are subject to laws, regulations and policies governing the rates they are allowed to charge for their services, which
may prevent us from fully recovering our costs.
Laws, regulations and policies governing interstate natural gas pipeline rates could affect the ability of our interstate pipelines to establish rates, to charge
rates that would cover future increases in its costs, or to continue to collect rates that cover current costs.
We are required to file tariff rates (also known as recourse rates) with the FERC that shippers may pay for interstate natural gas transportation services. We
may also agree to discount these rates on a not unduly discriminatory basis or negotiate rates with shippers who elect not to pay the recourse rates. The FERC
must approve or accept all rate filings for us to be allowed to charge such rates.
The FERC may review existing tariffs rates on its own initiative or upon receipt of a complaint filed by a third party. The FERC may, on a prospective basis,
order refunds of amounts collected if it finds the rates to have been shown not to be just and reasonable or to have been unduly discriminatory. The FERC has
recently exercised this authority with respect to several other pipeline companies. If the FERC were to initiate a proceeding against us and find that our rates
were not just and reasonable or unduly discriminatory, the maximum rates we are permitted to charge may be reduced and the reduction could have an
adverse effect on our revenues and results of operations.
45