Energy Transfer 2010 Annual Report Download - page 39

Furthermore, even if we construct a pipeline that we believe will be accretive, the pipeline may in fact adversely
affect our results of operations or results from those projected prior to commencement of construction and other
factors.
Expanding our business by constructing new pipelines and treating and processing facilities subjects us to
risks.
One of the ways that we have grown our business is through the construction of additions to our existing
gathering, compression, treating, processing and transportation systems. The construction of a new pipeline or
the expansion of an existing pipeline, by adding additional compression capabilities or by adding a second
pipeline along an existing pipeline, and the construction of new processing or treating facilities, involve
numerous regulatory, environmental, political and legal uncertainties beyond our control and require the
expenditure of significant amounts of capital that we will be required to finance through borrowings, the issuance
of additional equity or from operating cash flow. If we undertake these projects, they may not be completed on
schedule, at all, or at the budgeted cost. A variety of factors outside our control, such as weather, natural disasters
and difficulties in obtaining permits and rights-of-way or other regulatory approvals, as well as the performance
by third party contractors, may result in increased costs or delays in construction. Cost overruns or delays in
completing a project could have a material adverse effect on our results of operations and cash flows. Moreover,
our revenues may not increase immediately following the completion of a particular project. For instance, if we
build a new pipeline, the construction will occur over an extended period of time, but we may not materially
increase our revenues until long after the project’s completion. In addition, the success of a pipeline construction
project will likely depend upon the level of natural gas exploration and development drilling activity and the
demand for pipeline transportation in the areas proposed to be serviced by the project as well as our ability to
obtain commitments from producers in this area to utilize the newly constructed pipelines. In this regard, we may
construct facilities to capture anticipated future growth in natural gas production in a region in which such
growth does not materialize. As a result, new facilities may be unable to attract enough throughput or contracted
capacity reservation commitments to achieve our expected investment return, which could adversely affect our
results of operations and financial condition.
We depend on certain key producers for our supply of natural gas on the Southeast Texas System and North
Texas System, and the loss of any of these key producers could adversely affect our financial results.
For the year ended December 31, 2010, EnCana Oil and Gas (USA), Inc., EnerVest Operating, LLC, and
SandRidge Energy Inc. supplied us with approximately 70% of the Southeast Texas System’s natural gas supply.
For our year ended December 31, 2010, EOG Resources, Inc., affiliates of Chesapeake Energy Corporation, XTO
Energy Inc. (“XTO”) and EnCana Oil and Gas (USA), Inc., supplied us with approximately 71% of the North
Texas System’s natural gas supply. In June 2010, Exxon Mobil Corporation (“ExxonMobil”) completed its
acquisition of XTO. We are not the only option available to these producers for disposition of the natural gas
they produce. To the extent that these and other producers may reduce the volumes of natural gas that they
supply us, we would be adversely affected unless we were able to acquire comparable supplies of natural gas
from other producers.
We depend on key customers to transport natural gas through our pipelines.
We have several nine- and ten-year fee-based transportation contracts with XTO that terminate through 2019,
pursuant to which XTO has committed to transport certain minimum volumes of natural gas on pipelines in our
ET Fuel System. The acquisition of XTO by ExxonMobil has not resulted in any changes to these commitments.
We also have an eight-year fee-based transportation contract with Luminant Energy Company LLC (“Luminant”)
to transport natural gas on the ET Fuel System. We have also entered into two eight-year natural gas storage
contracts that terminate in 2012 with Luminant to store natural gas at the two natural gas storage facilities that
are part of the ET Fuel System. Each of the contracts with Luminant may be extended by Luminant for two
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