CenterPoint Energy 2014 Annual Report Download - page 37

There is inherent risk of the incurrence of environmental costs and liabilities in Enable’
s operations due to its handling of natural gas, NGLs
and crude oil, air emissions related to its operations and historical industry operations and waste disposal practices. These activities are subject to
stringent and complex federal, state and local laws and regulations governing environmental protection, including the discharge of materials into
the environment and the protection of plants, wildlife, and natural and cultural resources. These laws and regulations can restrict or impact
Enable’
s business activities in many ways, such as restricting the way it can handle or dispose of wastes or requiring remedial action to mitigate
pollution conditions that may be caused by its operations or that are attributable to former operators. Joint and several strict liability may be
incurred, without regard to fault, under certain of these environmental laws and regulations in connection with discharges or releases of wastes
on, under or from Enable’
s properties and facilities, many of which have been used for midstream activities for a number of years, oftentimes by
third parties not under its control. Private parties, including the owners of the properties through which Enable’
s gathering systems pass and
facilities where its wastes are taken for reclamation or disposal, may also have the right to pursue legal actions to enforce compliance, as well as
to seek damages for non-
compliance, with environmental laws and regulations or for personal injury or property damage. For example, an
accidental release from one of Enable’
s pipelines could subject it to substantial liabilities arising from environmental cleanup and restoration
costs, claims made by neighboring landowners and other third parties for personal injury and property damage and fines or penalties for related
violations of environmental laws or regulations. Enable may be unable to recover these costs from insurance. Moreover, the possibility exists
that stricter laws, regulations or enforcement policies could significantly increase compliance costs and the cost of any remediation that may
become necessary. Further, stricter requirements could negatively impact Enable’s customers’
production and operations, resulting in less
demand for its services.
Increased regulation of hydraulic fracturing could result in reductions or delays in natural gas production by Enable’
s customers, which
could adversely affect its results of operations and ability to make cash distributions.
Hydraulic fracturing is an important and common practice that is used to stimulate production of natural gas and/or oil from dense
subsurface rock formations. The hydraulic fracturing process involves the injection of water, sand, and chemicals under pressure into targeted
subsurface formations to fracture the surrounding rock and stimulate production. Many of Enable’
s customers commonly use hydraulic
fracturing techniques in their drilling and completion programs. Hydraulic fracturing typically is regulated by state oil and natural gas
commissions. In addition, certain federal agencies have proposed additional laws and regulations to more closely regulate the hydraulic
fracturing process. For example, in January 2015, the EPA indicated its intention to propose more stringent rules regulating methane and VOC
emissions from hydraulic fracturing and other well completion activity. Congress from time to time has considered the adoption of legislation to
provide for federal regulation of hydraulic fracturing under the Safe Drinking Water Act (SDWA) and to require disclosure of the chemicals
used in the hydraulic fracturing process. Some states have adopted, and other states are considering adopting, legal requirements that could
impose more stringent permitting, public disclosure or well construction requirements on hydraulic fracturing activities. Local government also
may seek to adopt ordinances within their jurisdictions regulating the time, place and manner of drilling activities in general or hydraulic
fracturing activities in particular, in some cases banning hydraulic fracturing entirely. Other governmental agencies, including the U.S.
Department of Energy and the EPA, have evaluated or are evaluating various other aspects of hydraulic fracturing such as the potential
environmental effects of hydraulic fracturing on drinking water and groundwater.
If new or more stringent federal, state or local legal restrictions relating to the hydraulic fracturing process are adopted in areas where
Enable’
s oil and natural gas exploration and production customers operate, they could incur potentially significant added costs to comply with
such requirements, experience delays or curtailment in the pursuit of exploration, development, or production activities, and perhaps even be
precluded from drilling wells, some or all of which activities could adversely affect demand for Enable’s services to those customers.
Enable’
s operations are subject to extensive regulation by federal, state and local regulatory authorities. Changes or additional regulatory
measures adopted by such authorities could have a material adverse effect on Enable’
s results of operations and ability to make cash
distributions.
The rates charged by several of Enable’
s pipeline systems, including for interstate gas transportation service provided by its intrastate
pipelines, are regulated by the FERC. Enable’
s pipeline operations that are not regulated by the FERC may be subject to state and local
regulation applicable to intrastate natural and transportation services. The relevant states in which Enable operates include North Dakota,
Oklahoma, Arkansas, Louisiana, Texas, Missouri, Kansas, Mississippi, Tennessee and Illinois.
The FERC and state regulatory agencies also regulate other terms and conditions of the services Enable may offer. If one of these regulatory
agencies, on its own initiative or due to challenges by third parties, were to lower its tariff rates or deny any rate increase or other material
changes to the types, or terms and conditions, of service Enable might propose or offer, the profitability of Enable’
s pipeline businesses could
suffer. If Enable were permitted to raise its tariff rates for a particular pipeline, there might be significant delay between the time the tariff rate
increase is approved and the time that the rate increase actually goes into effect, which could also limit its profitability. Furthermore, competition
from other pipeline systems may prevent Enable from raising
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