Sunoco 2012 Annual Report Download - page 26

Under the Energy Policy Act adopted in 1992, certain interstate pipeline rates were deemed just and
reasonable or “grandfathered.” On our FERC-regulated pipelines, most of our revenues are derived from such
grandfathered rates. A person challenging a grandfathered rate must, as a threshold matter, establish a substantial
change since the date of enactment of the Act, in either the economic circumstances or the nature of the service
that formed the basis for the rate. If the FERC were to find a substantial change in circumstances, then the
existing rates could be subject to detailed review. There is a risk that some rates could be found to be in excess of
levels justified by our cost of service. In such event, the FERC would order us to reduce rates prospectively and
could order us to pay reparations to shippers. Reparations could be required for a period of up to two years prior
to the date of filing the complaint in the case of rates that are not grandfathered and for the period starting with
the filing of the complaint in the case of grandfathered rates.
In addition, a state commission could also investigate our intrastate rates or terms and conditions of service
on its own initiative or at the urging of a shipper or other interested party. If a state commission found that our
rates exceeded levels justified by our cost of service, the state commission could order us to reduce our rates.
Potential changes to current rate-making methods and procedures may impact the federal and state
regulations under which we will operate in the future. In addition, if the FERC’s petroleum pipeline rate-making
methodology changes, the new methodology could materially and adversely affect our results of operations,
financial position, or cash flows.
Our operations are subject to federal, state, and local laws and regulations relating to environmental
protection and operational safety that could require substantial expenditures.
Our pipelines, gathering systems, and terminal operations are subject to increasingly strict environmental
and safety laws and regulations. The transportation and storage of refined products and crude oil result in a risk
that refined products, crude oil, and other hydrocarbons may be suddenly or gradually released into the
environment, potentially causing substantial expenditures for a response action, significant government penalties,
liability to government agencies for natural resource damages, personal injury, or property damage to private
parties and significant business interruption. We own or lease a number of properties that have been used to store
or distribute refined products and crude oil for many years. Many of these properties also have been previously
owned or operated by third parties whose handling, disposal, or release of hydrocarbons and other wastes were
not under our control, and for which, in some cases, we have indemnified the previous owners and operators.
Failure to comply with these laws and regulations may result in assessment of administrative, civil and
criminal penalties, imposition of cleanup and site restoration costs and liens and, to a lesser extent, issuance of
injunctions to limit or cease operations. We may be unable to recover these costs through increased revenues.
Our business is subject to federal, state and local laws and regulations that govern the product quality
specifications of the petroleum products that we store and transport.
The petroleum products that we store and transport are sold by our customers for consumption into the
public market. Various federal, state and local agencies have the authority to prescribe specific product quality
specifications to commodities sold into the public market. Changes in product quality specifications could reduce
our throughput volume, require us to incur additional handling costs or require the expenditure of significant
capital. In addition, different product specifications for different markets impact the fungibility of products
transported and stored in our pipeline systems and terminal facilities and could require the construction of
additional storage to segregate products with different specifications. We may be unable to recover these costs
through increased revenues.
In addition, the operations of our butane blending services are reliant upon gasoline vapor pressure
specifications. Significant changes in such specifications could reduce butane blending opportunities, which
would affect our ability to market our butane blending services licenses and which would ultimately affect our
ability to recover the costs incurred to acquire and integrate the butane blending acquisition.
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