Energy Transfer 2010 Annual Report Download - page 45

insurance. Another possible consequence of climate change is increased volatility in seasonal temperatures. The
market for our propane and natural gas is generally improved by periods of colder weather and impaired by
periods of warmer weather, so any changes in climate could affect the market for the fuels that we produce.
Despite the use of the term “global warming” as a shorthand for climate change, some studies indicate that
climate change could cause some areas to experience temperatures substantially colder than their historical
averages. As a result, it is difficult to predict how the market for our fuels could be affected by increased
temperature volatility, although if there is an overall trend of warmer temperatures, it would be expected to have
an adverse effect on our business.
Any reduction in the capacity of, or the allocations to, our shippers in interconnecting third-party pipelines
could cause a reduction of volumes transported in our pipelines, which would adversely affect our revenues
and cash flow.
Users of our pipelines are dependent upon connections to and from third-party pipelines to receive and deliver
natural gas and NGLs. Any reduction in the capacities of these interconnecting pipelines due to testing, line
repair, reduced operating pressures, or other causes could result in reduced volumes being transported in our
pipelines. Similarly, if additional shippers begin transporting volumes of natural gas and NGLs over
interconnecting pipelines, the allocations to existing shippers in these pipelines would be reduced, which could
also reduce volumes transported in our pipelines. Any reduction in volumes transported in our pipelines would
adversely affect our revenues and cash flow.
The recent adoption of derivatives legislation by the United States Congress could have an adverse effect on
our ability to use derivative instruments to reduce the effect of commodity price, interest rate and other risks
associated with our business.
The United States Congress recently adopted the Dodd-Frank Wall Street Reform and Consumer Protection Act
(HR 4173), which, among other provisions, establishes federal oversight and regulation of the over-the-counter
derivatives market and entities that participate in that market. The new legislation was signed into law by the
President on July 21, 2010 and requires the CFTC and the SEC to promulgate rules and regulations implementing
the new legislation within 360 days from the date of enactment. The CFTC has also proposed regulations to set
position limits for certain futures and option contracts in the major energy markets, although it is not possible at
this time to predict whether or when the CFTC will adopt those rules or include comparable provisions in its
rulemaking under the new legislation. The financial reform legislation may also require us to comply with
margin requirements and with certain clearing and trade-execution requirements in connection with our
derivative activities, although the application of those provisions to us is uncertain at this time. The financial
reform legislation may also require the counterparties to our derivative instruments to spin off some of their
derivatives activities to a separate entity, which may not be as creditworthy as the current counterparty. The new
legislation and any new regulations could significantly increase the cost of derivative contracts (including
through requirements to post collateral, which could adversely affect our available liquidity), materially alter the
terms of derivative contracts, reduce the availability of derivatives to protect against risks we encounter, reduce
our ability to monetize or restructure its existing derivative contracts, and increase our exposure to less
creditworthy counterparties. If we reduce our use of derivatives as a result of the legislation and regulations, our
results of operations may become more volatile and our cash flows may be less predictable.
We may be impacted by competition from other midstream, transportation and storage companies and propane
companies.
We experience competition in all of our markets. Our principal areas of competition include obtaining natural gas
supplies for the Southeast Texas System, North Texas System and HPL System and natural gas transportation
customers for our transportation pipeline systems. Our competitors include major integrated oil companies,
interstate and intrastate pipelines and companies that gather, compress, treat, process, transport, store and market
natural gas. The Southeast Texas System competes with natural gas gathering and processing systems owned by
43