Energy Transfer 2015 Annual Report Download - page 54

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regulation could be triggered by our customers’ transportation decisions. Any of the foregoing could adversely affect revenues and cash flow related to these
assets.
We may incur significant costs and liabilities resulting from performance of pipeline integrity programs and related repairs.
Pursuant to authority under the NGPSA and HLPSA, as amended by the PSI Act, the PIPES Act and the 2011 Pipeline Safety Act, PHMSA has established a
series of rules requiring pipeline operators to develop and implement integrity management programs for gas transmission and hazardous liquid pipelines
that, in the event of a pipeline leak or rupture, could affect “high consequence areas,” 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. These regulations require operators
of covered pipelines to:
• perform ongoing assessments of pipeline integrity;
• identify and characterize applicable threats to pipeline segments that could impact a high consequence area;
• improve data collection, integration and analysis;
• repair and remediate the pipeline as necessary; and
• implement preventive and mitigating actions.
In addition, states have adopted regulations similar to existing PHMSA regulations for intrastate gathering and transmission lines. At this time, we cannot
predict the ultimate cost of compliance with applicable pipeline integrity management regulations, as the cost will vary significantly depending on the
number and extent of any repairs found to be necessary as a result of the pipeline integrity testing. We will continue our pipeline integrity testing programs to
assess and maintain the integrity of our pipelines. The results of these tests could cause us to incur significant and unanticipated capital and operating
expenditures for repairs or upgrades deemed necessary to ensure the continued safe and reliable operation of our pipelines. Any changes to pipeline safety
laws by Congress and regulations by PHMSA that result in more stringent or costly safety standards could have a significant adverse effect on us and
similarly situated midstream operators. For instance, changes to regulations governing the safety of gas and hazardous liquid transmission pipelines and
gathering lines are being considered by PHMSA, including, for example, revising the definitions of “high consequence areas” and “gathering lines,” and
strengthening integrity management requirements as they apply to existing regulated operators and to currently exempt operators should certain exemptions
be removed. Most recently, the PHMSA has considered changes to its rural gathering exemption, including publishing a notice of proposed rulemaking
relating to hazardous liquid pipelines in October 2015, in which the agency is seeking public comment on, among other things, extending reporting
requirements to all gravity and gathering lines, requiring periodic inline integrity assessments of pipelines that are located outside of high consequence areas,
and requiring the use of leak detection systems on pipelines in all locations, including outside of high consequence areas.
Federal and state legislative and regulatory initiatives relating to pipeline safety that require the use of new or more stringent safety controls or result in
more stringent enforcement of applicable legal requirements could subject us to increased capital costs, operational delays and costs of operation.
The 2011 Pipeline Safety Act is the most recent federal legislation to amend the NGPSA and HLPSA pipeline safety laws, reauthorizing the federal pipeline
safety programs of PHMSA through 2015 and requiring increased safety measures for gas and hazardous liquids pipelines. Among other things, the 2011
Pipeline Safety Act directs the Secretary of Transportation to promulgate regulations relating to expanded integrity management requirements, automatic or
remote-controlled valve use, excess flow valve use, leak detection system installation, material strength testing, and verification of the maximum allowable
pressure of certain pipelines. The 2011 Pipeline Safety Act also increases the maximum penalty for violation of pipeline safety regulations from $100,000 to
$200,000 per violation per day and from $1.0 million to $2.0 million for a related series of violations. Moreover, new pipeline safety legislation that would
reauthorize the federal pipeline safety programs of PHMSA through 2019 is expected to be under consideration by Congress in 2016. One bill introduced in
late 2015, the SAFE PIPES, has already been approved by the Senate Committee on Commerce, Science, and Transportation and is now subject to
consideration by the U.S. Senate. The safety enhancement requirements and other provisions of the 2011 Pipeline Safety Act or any new pipeline safety
legislation as well as any implementation of PHMSA rules thereunder could require us to install new or modified safety controls, pursue additional capital
projects, or conduct maintenance programs on an accelerated basis, any or all of which tasks could result in our incurring increased operating costs that could
have a material adverse effect on our results of operations or financial position.
Our business involves the generation, handling and disposal of hazardous substances, hydrocarbons and wastes and may be adversely affected by
environmental and worker health and safety laws and regulations.
Our operations are subject to stringent federal, tribal state, and local laws and regulations governing the discharge of materials into the environment, worker
health and safety and protection of the environment. These laws and regulations may require the
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