Energy Transfer 2010 Annual Report Download - page 47

any additional rights-of-way is also critical to Transwestern’s ability to pursue expansion projects. We cannot
provide any assurance that Transwestern will be able to acquire new rights-of-way on tribal lands or maintain
access to existing rights-of-way upon the expiration of the current grants. Our financial position could be
adversely affected if the costs of new or extended right-of-way grants cannot be recovered in rates.
Transwestern’s existing right-of-way agreements with the Navajo Nation, Southern Ute, Pueblo of Laguna and
Fort Mojave tribes extend through November 2029, September 2020, December 2022 and April 2019,
respectively.
We may be unable to bypass the processing plants, which could expose us to the risk of unfavorable
processing margins.
Because of our ownership of the Oasis pipeline and ET Fuel System, we can generally elect to bypass our
processing plants when processing margins are unfavorable and instead deliver pipeline-quality gas by blending
rich gas from the gathering systems with lean gas transported on the Oasis pipeline and ET Fuel System. In some
circumstances, such as when we do not have a sufficient amount of lean gas to blend with the volume of rich gas
that we receive at the processing plant, we may have to process the rich gas. If we have to process when
processing margins are unfavorable, our results of operations will be adversely affected.
We may be unable to retain existing customers or secure new customers, which would reduce our revenues
and limit our future profitability.
The renewal or replacement of existing contracts with our customers at rates sufficient to maintain current
revenues and cash flows depends on a number of factors beyond our control, including competition from other
pipelines, and the price of, and demand for, natural gas in the markets we serve.
For the year ended December 31, 2010, approximately 28% of our sales of natural gas was to industrial end-users
and utilities. As a consequence of the increase in competition in the industry and volatility of natural gas prices,
end-users and utilities are increasingly reluctant to enter into long-term purchase contracts. Many end-users
purchase natural gas from more than one natural gas company and have the ability to change providers at any
time. Some of these end-users also have the ability to switch between gas and alternate fuels in response to
relative price fluctuations in the market. Because there are many companies of greatly varying size and financial
capacity that compete with us in the marketing of natural gas, we often compete in the end-user and utilities
markets primarily on the basis of price. The inability of our management to renew or replace our current
contracts as they expire and to respond appropriately to changing market conditions could have a negative effect
on our profitability.
Our storage business may depend on neighboring pipelines to transport natural gas.
To obtain natural gas, our storage business depends on the pipelines to which they have access. Many of these
pipelines are owned by parties not affiliated with us. Any interruption of service on those pipelines or adverse
change in their terms and conditions of service could have a material adverse effect on our ability, and the ability
of our customers, to transport natural gas to and from our facilities and a corresponding material adverse effect
on our storage revenues. In addition, the rates charged by those interconnected pipelines for transportation to and
from our facilities affect the utilization and value of our storage services. Significant changes in the rates charged
by those pipelines or the rates charged by other pipelines with which the interconnected pipelines compete could
also have a material adverse effect on our storage revenues.
Our pipeline integrity program may cause us to incur significant costs and liabilities.
Our pipeline operations are subject to regulation by the DOT, under the PHMSA, pursuant to which the PHMSA
has established requirements relating to the design, installation, testing, construction, operation, replacement and
management of pipeline facilities. Moreover, the PHMSA, through the Office of Pipeline Safety, has
promulgated a rule requiring pipeline operators to develop integrity management programs to comprehensively
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