Page 161 - DCP AR2011 Dev

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DCP MIDSTREAM PARTNERS, LP
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Years Ended December 31, 2011, 2010 and 2009 — (Continued)
sellers in the Acquisition. At this point, we cannot predict whether we will have any liability for the Claim. This
proceeding is subject to the uncertainties inherent in any litigation, and the ultimate outcome of this matter may
not be known for an extended period of time. We intend to vigorously defend this matter.
Other
— We are not a party to any other significant legal proceedings, but are a party to various
administrative and regulatory proceedings and commercial disputes that have arisen in the ordinary course of
our business. Management currently believes that the ultimate resolution of the foregoing matters, taken as a
whole, and after consideration of amounts accrued, insurance coverage or other indemnification arrangements,
will not have a material adverse effect on our consolidated results of operations, financial position, or cash
flows.
Insurance
— We renewed our insurance policies in May, June and July 2011 for the 2011-2012 insurance
year. We contract with third party and affiliate insurers for: (1) automobile liability insurance for all owned,
non-owned and hired vehicles; (2) general liability insurance; (3) excess liability insurance above the
established primary limits for general liability and automobile liability insurance; and (4) property insurance,
which covers replacement value of real and personal property and includes business interruption/extra expense.
These renewals have not resulted in any material change to the premiums we are contracted to pay in the 2011-
2012 insurance year compared with the 2010-2011 insurance year. We are jointly insured with DCP Midstream,
LLC for directors and officers insurance covering our directors and officers for acts related to our business
activities. All coverage is subject to certain limits and deductibles, the terms and conditions of which are
common for companies that are of similar size to us and with similar types of operations.
Our insurance on Discovery for the 2011-2012 insurance year includes general and excess liability,
onshore property damage, including named windstorm and business interruption, and offshore non-wind
property and business interruption insurance. The availability of offshore named windstorm property and
business interruption insurance has been significantly reduced over the past few years as a result of higher
industry-wide damage claims. Additionally, the named windstorm property and business interruption insurance
that is available comes at uneconomic premium levels, higher deductibles and lower coverage limits. As such,
Discovery has elected to not purchase offshore named windstorm property and business interruption insurance
coverage for the 2011-2012 insurance year.
Environmental
— The operation of pipelines, plants and other facilities for gathering, transporting,
processing, treating, or storing natural gas, NGLs and other products is subject to stringent and complex laws
and regulations pertaining to health, safety and the environment. As an owner or operator of these facilities, we
must comply with United States laws and regulations at the federal, state and local levels that relate to air and
water quality, hazardous and solid waste management and disposal, and other environmental matters. The cost
of planning, designing, constructing and operating pipelines, plants, and other facilities must incorporate
compliance with environmental laws and regulations and safety standards. Failure to comply with these laws
and regulations may trigger a variety of administrative, civil and potentially criminal enforcement measures,
including citizen suits, which can include the assessment of monetary penalties, the imposition of remedial
requirements, and the issuance of injunctions or restrictions on operation. Management believes that, based on
currently known information, compliance with these laws and regulations will not have a material adverse
effect on our consolidated results of operations, financial position or cash flows
During the first quarter of 2011, we discovered excess emissions at our East Texas gas plant. We met with
the Texas Commission on Environmental Quality, or TCEQ, in April 2011 to discuss this matter and included
these issues in Title V reports we submitted to the State. In August 2011, the TCEQ conducted a standard
inspection at the East Texas gas plant to evaluate compliance with applicable air quality requirements. On
August 31, 2011, the TCEQ issued us a Notice of Violation and a Notice of Enforcement citing a number of
alleged violations of terms and requirements of the facility air permit. We responded to the Notice of Violation
on September 28, 2011, including the implemented measures to ensure the facility is in compliance with the
relevant air permit terms and conditions. We responded to the Notice of Enforcement on October 14, 2011,
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