Sunoco 2013 Annual Report Download - page 23

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catastrophic releases of toxic, reactive, flammable or explosive chemicals. These regulations apply to any process which
involves a chemical at or above specified thresholds or any process which involves flammable liquid or gas, pressurized tanks,
caverns and wells. Flammable liquids stored in atmospheric tanks below their normal boiling points without the benefit of
chilling or refrigeration are exempt.
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 our butane blending assets.
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 certain products we market. 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