Sunoco 2012 Annual Report Download - page 27

Climate change legislation or regulations restricting emissions of “greenhouse gases” could result in
increased operating costs and reduced demand for our services.
The U.S. Senate has considered legislation to restrict U.S. emissions of carbon dioxide and other greenhouse
gases (“GHG”) that may contribute to global warming and climate change. Many states, either individually or
through multi-state regional initiatives, have begun implementing legal measures to reduce GHG emissions. The
U.S. House of Representatives has previously approved legislation to establish a “cap-and-trade” program,
whereby the U.S. Environmental Protection Agency (“EPA”) would issue a capped and steadily declining
number of tradable emissions allowances to certain major GHG emission sources so they could continue to emit
GHGs into the atmosphere. The cost of such allowances would be expected to escalate significantly over time,
making the combustion of carbon-based fuels (e.g., refined petroleum products, oil and natural gas) increasingly
expensive. Beginning in 2011, EPA regulations required specified large domestic GHG sources to report
emissions above a certain threshold occurring after January 1, 2010. Our facilities are not subject to this reporting
requirement since our GHG emissions are below the applicable threshold. In addition, the EPA has proposed new
regulations, under the federal Clean Air Act, that would require a reduction in GHG emissions from motor
vehicles and could trigger permit review for GHG emissions from certain stationary sources. It is not possible at
this time to predict how pending legislation or new regulations to address GHG emissions would impact our
business. However, the adoption and implementation of federal, state, or local laws or regulations limiting GHG
emissions in the U.S. could adversely affect the demand for our crude oil or refined products transportation and
storage services, and result in increased compliance costs, reduced volumes or additional operating restrictions.
Terrorist attacks aimed at our facilities could adversely affect our business.
The U.S. government has issued warnings that energy assets, specifically the nation’s pipeline and terminal
infrastructure, may be the future targets of terrorist organizations. Any terrorist attack at our facilities, those of
our customers and, in some cases, those of other pipelines, refineries, or terminals could materially and adversely
affect our results of operations, financial position, or cash flows.
Our risk management policies cannot eliminate all commodity risk, and our use of hedging arrangements
could result in financial losses or reduce our income. In addition, any non-compliance with our risk
management policies could result in significant financial losses.
We follow risk management practices designed to minimize commodity risk, and engage in hedging
arrangements to reduce our exposure to fluctuations in the prices of refined products. These hedging
arrangements expose us to risk of financial loss in some circumstances, including when the counterparty to the
hedging contract defaults on its contract obligations, or when there is a change in the expected differential
between the underlying price in the hedging agreement and the actual prices received. In addition, these hedging
arrangements may limit the benefit we would otherwise receive from increases in prices for such refined
products.
The accounting standards regarding hedge accounting are very complex, and even when we engage in
hedging transactions that are effective economically (whether to mitigate our exposure to fluctuations in
commodity prices, or to balance our exposure to fixed and variable interest rates), these transactions may not be
considered effective for accounting purposes. Accordingly, our consolidated financial statements may reflect
some volatility due to these hedges, even when there is no underlying economic impact at that point. In addition,
it is not always possible for us to engage in a hedging transaction that completely mitigates our exposure to
commodity prices. Our consolidated financial statements may reflect a gain or loss arising from an exposure to
commodity prices for which we are unable to enter into a completely effective hedge.
We have adopted risk management policies designed to manage risks associated with our businesses.
However, these policies cannot eliminate all price-related risks, and there is also the risk of non-compliance with
such policies. We cannot make any assurances that we will detect and prevent all violations of our risk
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