Sunoco 2015 Annual Report Download - page 19

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In addition, some states maintain groundwater protection programs that require permits for discharges or operations that
may impact groundwater conditions. Our management believes that compliance with existing permits and compliance with
foreseeable new permit requirements will not have a material adverse effect on our results of operations, financial position or
expected cash flows.
Environmental Remediation
Contamination resulting from releases of crude oil, NGLs and refined products is not unusual within the petroleum
pipeline industry. Historic releases along our pipelines, gathering systems, and terminals as a result of past operations have
resulted in impacts to the environment, including soil and groundwater. Site conditions, including soil and groundwater, are
being evaluated at a number of properties where operations may have resulted in releases of hydrocarbons and other wastes.
Sunoco has agreed to indemnify us from environmental and toxic tort liabilities related to the assets contributed to the extent
such liabilities existed or arose from operation of these assets prior to the closing of the February 2002 IPO and are asserted
within 30 years after the closing of the IPO. This indemnity will cover the costs associated with performance of the assessment,
monitoring, and remediation programs, as well as any related claims and penalties. See "Environmental Regulation-General."
We have experienced releases for which we are not covered by an indemnity from Sunoco, and for which we are
responsible for necessary assessment, remediation, and/or monitoring activities. We have also purchased certain pipeline and
terminal assets for which we assume remediation responsibilities. Our management estimates that the total aggregate cost of
performing the currently anticipated assessment, monitoring, and remediation activities at these sites is not material in relation
to our operations, financial position or cash flows at December 31, 2015. We have implemented an extensive inspection
program to prevent releases of crude oil, NGLs or refined products into the environment from our pipelines, gathering systems,
and terminals. Any damages and liabilities incurred due to future environmental releases from our assets have the potential to
substantially affect our business and our ability to generate the cash flows necessary to make distributions or satisfy debt
obligations.
Rate Regulation
General Interstate Regulation
Interstate common carrier pipeline operations are subject to rate regulation by the FERC under the Interstate Commerce
Act, the Energy Policy Act of 1992, and related rules and orders. The Interstate Commerce Act requires that tariff rates for
petroleum pipelines be "just and reasonable" and not unduly discriminatory. This statute also permits interested persons to
challenge proposed new or changed rates and authorizes the FERC to suspend the effectiveness of such rates for up to seven
months and to investigate such rates. If, upon completion of an investigation, the FERC finds that the new or changed rate is
unlawful, it is authorized to require the carrier to refund revenues in excess of the prior tariff during the term of the
investigation. The FERC also may investigate, upon complaint or on its own motion, rates that are already in effect and may
order a carrier to change its rates prospectively. Upon an appropriate showing, a shipper may obtain reparations for damages
sustained for a period of up to two years prior to the filing of a complaint.
The FERC generally has not investigated interstate rates on its own initiative when those rates, like those we charge, have
not been the subject of a protest or a complaint by a shipper. However, the FERC could investigate our rates at the urging of a
third party if the third party is either a current shipper or has a substantial economic interest in the tariff rate level. Although no
assurance can be given that the tariffs charged by us ultimately will be upheld if challenged, management believes that the
tariffs now in effect for our pipelines are in compliance with the rates allowed under current FERC guidelines.
We have been approved by the FERC to charge market-based rates in most of the refined products locations served by our
pipeline systems. In those locations where market-based rates have been approved, we are able to establish rates that are based
upon competitive market conditions.
Intrastate Regulation
Some of our pipeline operations are subject to regulation by the Railroad Commission of Texas ("Texas RRC"), the
Pennsylvania Public Utility Commission ("PA PUC") and other state regulatory agencies, as applicable. The operations of our
joint venture interests are also subject to regulation in the states in which they operate. The applicable state statutes require that
pipeline rates be nondiscriminatory and provide no more than a fair return on the aggregate value of the pipeline property used
to render services. State commissions generally have not initiated an investigation of rates or practices of petroleum pipelines in
the absence of shipper complaints. Complaints to state agencies have been infrequent and are usually resolved informally.
Although management cannot be certain that our intrastate rates ultimately would be upheld if challenged, we believe that,
given this history, the tariffs now in effect are not likely to be challenged or, if challenged, are not likely to be ordered to be
reduced.