in all of the states in which we operate. In some states these laws are administered by state agencies, and in
others they are administered on a municipal level. With respect to the transportation of propane by truck, we are
subject to regulations promulgated under the Federal Motor Carrier Safety Act. These regulations cover the
transportation of hazardous materials and are administered by the DOT. We conduct ongoing training programs
to help ensure that our operations are in compliance with applicable regulations. We maintain various permits
that are necessary to operate our facilities, some of which may be material to our propane operations. We
believe that the procedures currently in effect at all of our facilities for the handling, storage and distribution of
propane are consistent with industry standards and are in compliance in all material respects with applicable
laws and regulations.
FERC Regulation of Operations
FERC regulation of pipeline gathering and transportation services, natural gas sales and transportation of
NGLs may affect certain aspects of our business and the market for our products and services.
Interstate Natural Gas Pipeline Regulation
The Discovery 105-mile mainline, approximately 60 miles of laterals and its market expansion project are
subject to regulation by FERC, under the Natural Gas Act of 1938, as amended, or NGA. Natural gas
companies may not charge rates that have been determined to be unjust or unreasonable. In addition, FERC
authority over natural gas companies that provide natural gas pipeline transportation services in interstate
commerce includes:
• certification and construction of new facilities;
• extension or abandonment of services and facilities;
• maintenance of accounts and records;
• acquisition and disposition of facilities;
• initiation and discontinuation of services;
• terms and conditions of services and service contracts with customers;
• depreciation and amortization policies;
• conduct and relationship with certain affiliates; and
• various other matters.
Generally, the maximum filed recourse rates for interstate pipelines are based on the cost of service
including recovery of and a return on the pipeline’s actual prudent investment cost. Key determinants in the
ratemaking process are costs of providing service, allowed rate of return and volume throughput and contractual
capacity commitment assumptions. The maximum applicable recourse rates and terms and conditions for
service are set forth in each pipeline’s FERC-approved gas tariff. Rate design and the allocation of costs also
can impact a pipeline’s profitability. FERC-regulated natural gas pipelines are permitted to discount their firm
and interruptible rates without further FERC authorization down to the minimum rate or variable cost of
performing service, provided they do not “unduly discriminate.”
Tariff changes can only be implemented upon approval by FERC. Two primary methods are available for
changing the rates, terms and conditions of service of an interstate natural gas pipeline. Under the first method,
the pipeline voluntarily seeks a tariff change by making a tariff filing with FERC justifying the proposed tariff
change and providing notice, generally 30 days, to the appropriate parties. If FERC determines, as required by
the NGA, that a proposed change is just and reasonable, FERC will accept the proposed change and the pipeline
will implement such change in its tariff. However, if FERC determines that a proposed change may not be just
and reasonable as required by NGA, then FERC may suspend such change for up to five months beyond the
date on which the change would otherwise go into effect and set the matter for an administrative hearing.
Subsequent to any suspension period ordered by FERC, the proposed change may be placed into effect by the
company, pending final FERC approval. In most cases, a proposed rate increase is placed into effect before a
final FERC determination on such rate increase, and the proposed increase is collected subject to refund (plus
20