Energy Transfer 2010 Annual Report Download - page 48

evaluate their pipelines, and take measures to protect pipeline segments located in what the rule refers to as “high
consequence areas.” Activities under these integrity management programs involve the performance of internal
pipeline inspections, pressure testing or other effective means to assess the integrity of these regulated pipeline
segments, and the regulations require prompt action to address integrity issues raised by the assessment and
analysis. Based on the results of our current pipeline integrity testing programs, we estimate that compliance with
these federal regulations and analogous state pipeline integrity requirements will result in capital costs of $12.1
million and operating and maintenance costs of $10.4 million over the course of the next year. For the years
ended December 31, 2010, 2009 and 2008, $13.3 million, $31.4 million and $23.3 million, respectively, of
capital costs and $15.4 million, $18.5 million and $13.1 million, respectively, of operating and maintenance costs
have been incurred for pipeline integrity testing. Integrity testing and assessment of all of these assets will
continue, and the potential exists that results of such testing and assessment could cause us to incur even greater
capital and operating expenditures for repairs or upgrades deemed necessary to ensure the continued safe and
reliable operation of our pipelines.
Changes in other forms of health and safety regulations are also being considered. New pipeline safety legislation
requiring more stringent spill reporting and disclosure obligations has been introduced in the U.S. Congress and
was passed by the U.S. House of Representatives in 2010, but was not voted on in the U.S. Senate. Similar
legislation is likely to be considered in the current session of Congress. The DOT has also recently proposed
legislation providing for more stringent oversight of pipelines and increased penalties for violations of safety
rules, which is in addition to the PHMSA’s announced intention to strengthen its rules. Such Legislative and
regulatory changes could have a material effect on our operations through more stringent and comprehensive
safety regulations and higher penalties for the violation of those regulations.
Since weather conditions may adversely affect demand for propane, our financial conditions may be
vulnerable to warm winters.
Weather conditions have a significant impact on the demand for propane for heating purposes because the
majority of our customers rely heavily on propane as a heating fuel. Typically, we sell approximately two-thirds
of our retail propane volume during the peak-heating season of October through March. Our results of operations
can be adversely affected by warmer winter weather, which results in lower sales volumes. In addition, to the
extent that warm weather or other factors adversely affect our operating and financial results, our access to
capital and our acquisition activities may be limited. Variations in weather in one or more of the regions where
we operate can significantly affect the total volume of propane that we sell and the profits realized on these sales.
Agricultural demand for propane may also be affected by weather, including unseasonably cold or hot periods or
dry weather conditions that impact agricultural operations.
A natural disaster, catastrophe or other event could result in severe personal injury, property damage and
environmental damage, which could curtail our operations and otherwise materially adversely affect our cash
flow and, accordingly, affect the market price of our Common Units.
Some of our operations involve risks of personal injury, property damage and environmental damage, which
could curtail our operations and otherwise materially adversely affect our cash flow. For example, natural gas
facilities operate at high pressures, sometimes in excess of 1,100 pounds per square inch. Virtually all of our
operations are exposed to potential natural disasters, including hurricanes, tornadoes, storms, floods and/or
earthquakes.
If one or more facilities that are owned by us, or that deliver natural gas or other products to us, are damaged by
severe weather or any other disaster, accident, catastrophe or event, our operations could be significantly
interrupted. Similar interruptions could result from damage to production or other facilities that supply our
facilities or other stoppages arising from factors beyond our control. These interruptions might involve
significant damage to people, property or the environment, and repairs might take from a week or less for a
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