Sunoco 2012 Annual Report Download - page 25

Our operations are subject to operational hazards and unforeseen interruptions for which we may not be
adequately insured.
Our operations and those of our customers and suppliers may be subject to operational hazards or
unforeseen interruptions such as natural disasters, adverse weather, accidents, fires, explosions, hazardous
materials releases, and other events beyond our control. If one or more of the facilities that we own, or any third-
party facilities that we receive from or deliver to, are damaged by any disaster, accident, catastrophe or other
event, our operations could be significantly interrupted. These interruptions might involve a loss of equipment or
life, injury, extensive property damage, or maintenance and repair outages. The duration of the interruption will
depend on the seriousness of the damages or required repairs. We may not be able to maintain or obtain
insurance to cover these types of interruptions, or in coverage amounts desired, at reasonable rates. In some
instances, certain insurance could become unavailable or available only for reduced amounts of coverage. Any
event that interrupts the revenues generated by our operations, or which causes us to make significant
expenditures not covered by insurance, could materially and adversely affect our results of operations, financial
position, or cash flows.
We are exposed to the credit and other counterparty risk of our customers in the ordinary course of our
business.
We have various credit terms with virtually all of our customers, and our customers have varying degrees of
creditworthiness. Although we evaluate the creditworthiness of each of our customers, we may not always be
able to fully anticipate or detect deterioration in their creditworthiness and overall financial condition, which
could expose us to an increased risk of nonpayment or other default under our contracts and other arrangements
with them.In the event that a material customer or customers default on their payment obligations to us, this
could materially and adversely affect our results of operations, financial position, or cash flows.
Mergers among our customers and competitors could result in lower volumes being shipped on our pipelines
or products stored in or distributed through our terminals, or reduced crude oil marketing margins or
volumes.
Mergers between existing customers could provide strong economic incentives for the combined entities to
utilize their existing systems instead of ours in those markets where the systems compete. As a result, we could
lose some or all of the volumes and associated revenues from these customers and we could experience difficulty
in replacing those lost volumes and revenues, which could materially and adversely affect our results of
operations, financial position, or cash flows.
Rate regulation or market conditions may not allow us to recover the full amount of increases in our costs.
Additionally, a successful challenge to our rates could materially and adversely affect our results of
operations, financial position, or cash flows.
The primary rate-making methodology of the Federal Energy Regulatory Commission (“FERC”) is price
indexing. We use this methodology in many of our interstate markets. In an order issued in December 2010, the
FERC announced that, effective July 1, 2011, the index would equal the change in the producer price index for
finished goods plus 2.65 percent (previously, the index was equal to the change in the producer price index for
finished goods plus 1.3 percent). This index is to be in effect through July 2016. If the changes in the index are
not large enough to fully reflect actual increases to our costs, our financial condition could be adversely affected.
If the index results in a rate increase that is substantially in excess of the pipeline’s actual cost increases, or it
results in a rate decrease that is substantially less than the pipeline’s actual cost decrease, the rates may be
protested, and, if successful, result in the lowering of the pipeline’s rates. The FERC’s rate-making
methodologies may limit our ability to set rates based on our true costs or may delay the use of rates that reflect
increased costs.
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