CenterPoint Energy 2015 Annual Report Download - page 36

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 DOE 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 its tariff rates even if
regulatory agencies permit it to do so. The regulatory agencies that regulate Enable’s systems periodically implement new rules, regulations and terms and
conditionsofservicessubjecttotheirjurisdiction.NewinitiativesorordersmayadverselyaffecttherateschargedforEnable’sservicesorotherwiseadversely
affectitsfinancialcondition,resultsofoperationsandcashflowsanditsabilitytomakecashdistributions.
A change in the jurisdictional characterization of some of Enable’s assets by federal, state or local regulatory agencies or a change in policy by those
agencies may result in increased regulation of its assets, which may cause its revenues to decline and operating expenses to increase.
Enable’s natural gas gathering and intrastate transportation operations are generally exempt from the jurisdiction of the FERC under the NGA, but FERC
regulationmayindirectlyimpactthesebusinessesandthemarketsforproductsderivedfromthesebusinesses.TheFERC’spoliciesandpracticesacrosstherange
ofitsoilandnaturalgasregulatoryactivities,including,forexample,itspoliciesoninterstateopenaccesstransportation,ratemaking,capacityrelease,andmarket
center promotion may indirectly affect intrastate markets.In recent years, the FERChas pursued pro-competitive policies in itsregulation of interstate oil and
naturalgaspipelines.However,wecannotassureyouthattheFERCwillcontinuetopursuethisapproachasitconsidersmatterssuchaspipelineratesandrules
andpoliciesthatmayindirectlyaffecttheintrastatenaturalgastransportationbusiness.AlthoughtheFERChasnotmadeaformaldeterminationwithrespecttoall
ofEnable’sfacilitiesitconsiderstobegatheringfacilities,EnablebelievesthatitsnaturalgasgatheringpipelinesmeetthetraditionalteststhattheFERChasused
to determine that a pipeline is a gathering pipeline and are therefore not subject to FERC jurisdiction. The distinction between FERC-regulated transmission
services and federally unregulated gathering services, however, has been the subject of substantial litigation, and the FERC determines whether facilities are
gatheringfacilitiesonacase-by-casebasis,sotheclassificationandregulationofEnable’sgatheringfacilitiesissubjecttochangebasedonfuturedeterminations
bytheFERC,thecourtsorCongress.IftheFERCweretoconsiderthestatusofanindividualfacilityanddeterminethatthefacilityand/orservicesprovidedbyit
arenotexemptfromFERCregulationundertheNGAandthatthefacilityprovidesinterstateservice,theratesfor,andtermsandconditionsof,servicesprovided
bysuchfacilitywouldbesubjecttoregulationbytheFERCundertheNGAortheNGPA.Suchregulationcoulddecreaserevenue,increaseoperatingcosts,and,
depending upon the facility in question, could adversely affect Enable’s financial condition, results of operations and cash flows and its ability to make cash
distributions.Inaddition,ifanyofEnable’sfacilitieswerefoundtohaveprovidedservicesorotherwiseoperatedinviolationoftheNGAortheNGPA,thiscould
resultintheimposition ofsubstantialcivil penalties,as wellasarequirementto disgorgerevenuescollected forsuch servicesinexcessofthemaximumrates
establishedbytheFERC.
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