Energy Transfer 2015 Annual Report Download - page 58

Table of Contents
to temporarily cease drilling activities offshore and, in any event, may from time to time issue further safety and environmental laws and regulations
regarding offshore oil and gas exploration and development. The overall costs imposed on our customers to implement and complete any such spill response
activities or any decommissioning obligations could exceed estimated accruals, insurance limits, or supplemental bonding amounts, which could result in
the incurrence of additional costs to complete. We cannot predict with any certainty the full impact of any new laws or regulations on our customers’ drilling
operations or on the cost or availability of insurance to cover some or all of the risks associated with such operations. The occurrence of any one or more of
these developments could result in decreased demand for our services, which could have a material adverse effect on our business as well as our financial
position, results of operation and liquidity.
Our business is subject to federal, state and local laws and regulations that govern the product quality specifications of the petroleum products that we
store and transport.
The petroleum products that we store and transport through Sunoco Logistics’ operations are sold by our customers for consumption into the public market.
Various federal, state and local agencies have the authority to prescribe specific product quality specifications to commodities sold into the public market.
Changes in product quality specifications could reduce our throughput volume, require us to incur additional handling costs or require the expenditure of
significant capital. In addition, different product specifications for different markets impact the fungibility of products transported and stored in our pipeline
systems and terminal facilities and could require the construction of additional storage to segregate products with different specifications. We may be unable
to recover these costs through increased revenues.
In addition, our patented butane blending services are reliant upon gasoline vapor pressure specifications. Significant changes in such specifications could
reduce butane blending opportunities, which would affect our ability to market our butane blending service licenses and which would ultimately affect our
ability to recover the costs incurred to acquire and integrate our butane blending assets.
Our business could be affected adversely by union disputes and strikes or work stoppages by unionized employees.
As of December 31, 2015, approximately 18% of our workforce is covered by a number of collective bargaining agreements with various terms and dates of
expiration. There can be no assurances that we will not experience a work stoppage in the future as a result of labor disagreements. Any work stoppage could,
depending on the affected operations and the length of the work stoppage, have a material adverse effect on our business, financial position, results of
operations or cash flows.
Governmental regulations and policies, particularly in the areas of taxation, energy and the environment, have a significant impact on our retail
marketing business.
Federally mandated standards for use of renewable biofuels, such as ethanol and biodiesel in the production of refined products, are transforming traditional
gasoline and diesel markets in North America. These regulatory mandates present production and logistical challenges for both the petroleum refining and
ethanol industries, and may require us to incur additional capital expenditures or expenses particularly in our retail marketing business. We may have to enter
into arrangements with other parties to meet our obligations to use advanced biofuels, with potentially uncertain supplies of these new fuels. If we are unable
to obtain or maintain sufficient quantities of ethanol to support our blending needs, our sale of ethanol blended gasoline could be interrupted or suspended
which could result in lower profits. There also will be compliance costs related to these regulations. We may experience a decrease in demand for refined
petroleum products due to new federal requirements for increased fleet mileage per gallon or due to replacement of refined petroleum products by renewable
fuels. In addition, tax incentives and other subsidies making renewable fuels more competitive with refined petroleum products may reduce refined petroleum
product margins and the ability of refined petroleum products to compete with renewable fuels. A structural expansion of production capacity for such
renewable biofuels could lead to significant increases in the overall production, and available supply, of gasoline and diesel in markets that we supply. In
addition, a significant shift by consumers to more fuel-efficient vehicles or alternative fuel vehicles (such as ethanol or wider adoption of gas/electric hybrid
vehicles), or an increase in vehicle fuel economy, whether as a result of technological advances by manufacturers, legislation mandating or encouraging
higher fuel economy or the use of alternative fuel, or otherwise, also could lead to a decrease in demand, and reduced margins, for the refined petroleum
products that we market and sell.
It is possible that any, or a combination, of these occurrences could have a material adverse effect on Sunoco, Inc.’s business or results of operations.
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