Sunoco 2012 Annual Report Download - page 18

Environmental Regulation
General
Our operations are subject to complex federal, state, and local laws and regulations relating to the protection
of health and the environment, including laws and regulations which govern the handling and release of crude oil
and other liquid hydrocarbon materials, some of which are discussed below. Violations of environmental laws or
regulations can result in the imposition of significant administrative, civil and criminal fines and penalties and, in
some instances, injunctions banning or delaying certain activities. Our management believes we are in substantial
compliance with applicable environmental laws and regulations. However, these laws and regulations are subject
to frequent change at the federal, state and local levels, and the trend is to place increasingly stringent limitations
on activities that may affect the environment.
There are also risks of accidental releases into the environment associated with our operations, such as
releases of crude oil or hazardous substances from our pipelines or storage facilities. To the extent an event is not
covered by our insurance policies, such accidental releases could subject us to substantial liabilities arising from
environmental cleanup and restoration costs, claims made by neighboring landowners and other third parties for
personal injury and property damage, and fines or penalties for any related violations of environmental laws or
regulations.
Sunoco indemnifies us for 100 percent of all losses from environmental liabilities related to the transferred
assets arising prior to, and asserted within 21 years of, February 8, 2002, the date of our initial public offering
(“IPO”). There is no monetary cap on this indemnification from Sunoco. Sunoco’s share of liability for claims
asserted thereafter will decrease by 10 percent each year through the thirtieth year following the IPO date. In
addition, this indemnification applies to the following, purchased from Sunoco subsequent to the IPO: interests in
the Mesa Pipeline System, Mid-Valley, West Texas Gulf and Inland, as well as the Eagle Point tank farm. Any
remediation liabilities not covered by this indemnity will be our responsibility.
We have agreed to indemnify Sunoco and its affiliates for events and conditions associated with the
operation of the transferred assets occurring after the IPO date, and for environmental and toxic tort liabilities
related to these assets to the extent Sunoco is not required to indemnify us. Total future costs for environmental
remediation activities will depend upon, among other things, the extent of impact at each site, the timing and
nature of required remedial actions, the technology available, and the determination of our liability at multi-party
sites. As of December 31, 2012, all material environmental liabilities incurred by, and known to, us are either
covered by the environmental indemnification or reserved for by us in our consolidated financial statements.
Air Emissions
Our operations are subject to the Clean Air Act, as amended, and comparable state and local statutes. We
will be required to incur certain capital expenditures in the next several years for air pollution control equipment
in connection with maintaining or obtaining permits and approvals addressing air emission related issues. In
addition, the federal government has enacted regulations relating to restrictions on emissions of greenhouse gases
(“GHGs”). At this time, our operations do not fall under any of the current GHG regulations. While the effect of
these current regulations will not impact our operations, the federal, regional or state laws or regulations limiting
emissions of GHGs in the United States could adversely affect the demand for crude oil or refined products
transportation and storage services as well as contribute to increased compliance costs or additional operating
restrictions.
Our customers are also subject to, and similarly affected by, environmental regulations. These include
federal and state actions to develop programs for the reduction of GHG emissions as well as proposals that would
create a cap and trade system that would require companies to purchase carbon emission allowances for
emissions at manufacturing facilities and emissions caused by the use of the fuels sold. In addition, the
Environmental Protection Agency (“EPA”) indicated that it intends to regulate carbon dioxide emissions. As a
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