Energy Transfer 2015 Annual Report Download - page 66

Table of Contents
and consents of, and have obtained or made all required material registrations, qualifications and filings with, the various state and local government and
regulatory authorities which relate to ownership of our properties or the operations of our business.
Substantially all of our pipelines, which are described in “Item 1. Business” are constructed on rights-of-way granted by the apparent record owners of the
property. Lands over which pipeline rights-of-way have been obtained may be subject to prior liens that have not been subordinated to the right-of-way
grants. We have obtained, where necessary, easement agreements from public authorities and railroad companies to cross over or under, or to lay facilities in
or along, watercourses, county roads, municipal streets, railroad properties and state highways, as applicable. In some cases, properties on which our pipelines
were built were purchased in fee. We also own and operate multiple natural gas and NGL storage facilities and own or lease other processing, treating and
conditioning facilities in connection with our midstream operations.
ITEM 3. LEGAL PROCEEDINGS
Sunoco, Inc., along with other refiners, manufacturers and sellers of gasoline, is a defendant in lawsuits alleging MTBE contamination of groundwater. The
plaintiffs typically include water purveyors and municipalities responsible for supplying drinking water and governmental authorities. The plaintiffs assert
primarily product liability claims and additional claims including nuisance, trespass, negligence, violation of environmental laws and deceptive business
practices. The plaintiffs in all of the cases seek to recover compensatory damages, and in some cases also seek natural resource damages, injunctive relief,
punitive damages and attorneys’ fees.
As of December 31, 2015, Sunoco, Inc. is a defendant in six cases, including cases initiated by the States of New Jersey, Vermont, the Commonwealth of
Pennsylvania, and two others by the Commonwealth of Puerto Rico with the more recent Puerto Rico action being a companion case alleging damages for
additional sites beyond those at issue in the initial Puerto Rico action and one case by the City of Breaux Bridge in the USDC in the Western District of
Louisiana. Four of these cases are venued in a multidistrict litigation proceeding in a New York federal court. The New Jersey, Puerto Rico, Vermont, and
Pennsylvania cases assert natural resource damage claims.
Fact discovery has concluded with respect to an initial set of 19 sites each that will be the subject of the first trial phase in the New Jersey case and the initial
Puerto Rico case. In November 2015, Sunoco along with other co-defendants agreed to a global settlement in principle of the City of Breaux Bridge MTBE
case. Insufficient information has been developed about the plaintiffs’ legal theories or the facts with respect to statewide natural resource damage claims to
provide an analysis of the ultimate potential liability of Sunoco, Inc. in these matters. It is reasonably possible that a loss may be realized; however, we are
unable to estimate the possible loss or range of loss in excess of amounts accrued. Management believes that an adverse determination with respect to one or
more of the MTBE cases could have a significant impact on results of operations during the period in which any said adverse determination occurs, but does
not believe that any such adverse determination would have a material adverse effect on the Partnership’s consolidated financial position.
In January 2012, Sunoco Logistics experienced a release on its products pipeline in Wellington, Ohio. In connection with this release, the PHMSA issued a
Corrective Action Order under which Sunoco Logistics is obligated to follow specific requirements in the investigation of the release and the repair and
reactivation of the pipeline. Sunoco Logistics also entered into an Order on Consent with the EPA regarding the environmental remediation of the release
site. All requirements of the Order on Consent with the EPA have been fulfilled and the Order has been satisfied and closed. Sunoco Logistics has also
received a “No Further Action” approval from the Ohio EPA for all soil and groundwater remediation requirements. Sunoco Logistics is now in initial
negotiations with the EPA and U.S. Department of Justice (“DOJ”) on a potential penalty associated with this release. The timing and outcome of this matter
cannot be reasonably determined at this time. However, Sunoco Logistics does not expect there to be a material impact to its results of operations, cash flows
or financial position. Sunoco Logistics continues to cooperate with both PHMSA and the EPA to complete the investigation of the incident and repair of the
pipeline.
In 2012, the EPA issued a proposed consent agreement related to the releases that occurred at Sunoco Logistics’ pump station/tank farm in Barbers Hill,
Texas and pump station/tank farm located in Cromwell, Oklahoma in 2010 and 2011, respectively. These matters were referred to the DOJ by the EPA. In
November 2012, Sunoco Logistics received an initial assessment of $1.4 million associated with these releases. Sunoco Logistics is in discussions with the
EPA and the DOJ on this matter to resolve the issue. The timing or outcome of this matter cannot be reasonably determined at this time; however, Sunoco
Logistics does not expect there to be a material impact to its results of operations, cash flows or financial position.
In September 2013, the Pennsylvania Department of Environmental Protection (“PADEP”) issued a Notice of Violation and proposed penalties based on
alleged violations of various safety regulations relating to the November 2008 products release by Sunoco Pipeline L.P., a subsidiary of Sunoco Logistics, in
Murrysville, Pennsylvania. In the fourth quarter 2015, the Partnership reached an agreement with the PADEP and settled this matter for $0.8 million, which
was paid in December 2015.
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