natural gas marketers and end-users. In addition, in our wholesale propane logistics business, we purchase
propane from a variety of sources and resell the propane to retail distributors. We may not be successful in
balancing our purchases and sales. A producer or supplier could fail to deliver contracted volumes or deliver in
excess of contracted volumes, or a purchaser could purchase less than contracted volumes. Any of these actions
could cause our purchases and sales to be unbalanced. While we attempt to balance our purchases and sales, if
our purchases and sales are unbalanced, we will face increased exposure to commodity price risks and could
have increased volatility in our operating income and cash flows.
Our NGL pipelines could be adversely affected by any decrease in NGL prices relative to the price of
natural gas.
The profitability of our NGL pipelines is dependent on the level of production of NGLs from processing
plants. When natural gas prices are high relative to NGL prices, it is less profitable to process natural gas
because of the higher value of natural gas compared to the value of NGLs and because of the increased cost
(principally that of natural gas as a feedstock and fuel) of separating the NGLs from the natural gas. As a result,
we may experience periods in which higher natural gas prices relative to NGL prices reduce the volume of
natural gas processed at plants connected to our NGL pipelines, as well as reducing the amount of NGL
extraction, which would reduce the volumes and gross margins attributable to our NGL pipelines and NGL
storage facilities.
Third party pipelines and other facilities interconnected to our natural gas and NGL pipelines and
facilities may become unavailable to transport or produce natural gas and NGLs.
We depend upon third party pipelines and other facilities that provide delivery options to and from our
pipelines and facilities for the benefit of our customers. Since we do not own or operate any of these third-party
pipelines or other facilities, their continuing operation is not within our control.
A reduction in demand for NGL products by the petrochemical, refining or other industries or by the fuel
markets could materially adversely affect our results of operations and financial condition.
The NGL products we produce have a variety of applications, including as heating fuels, petrochemical
feedstocks and refining blend stocks. A reduction in demand for NGL products, whether because of general or
industry specific economic conditions, new government regulations, global competition, reduced demand by
consumers for products made with NGL products (for example, reduced petrochemical demand observed due to
lower activity in the automobile and construction industries), increased competition from petroleum-based
feedstocks due to pricing differences, mild winter weather for some NGL applications or other reasons, could
result in a decline in the volume of NGL products we handle or reduce the fees we charge for our services.
Service at our propane terminals may be interrupted.
Historically, a substantial portion of the propane we purchase to support our wholesale propane logistics
business is delivered at our rail terminals or by ship at our leased marine terminal in Providence, Rhode Island
and at our owned marine terminal in Chesapeake, Virginia. We also rely on shipments of propane via the
Buckeye Pipeline for our Midland Terminal and via TEPPCO Partners, LP’s pipeline to open access terminals.
Any significant interruption in the service at these terminals would adversely affect our ability to obtain
propane, which could reduce the amount of propane that we distribute and impact our revenues or cash
available for distribution.
Our operating results for our Wholesale Propane Logistics Segment fluctuate on a seasonal and quarterly
basis.
Revenues from our Wholesale Propane Logistics Segment have seasonal characteristics. In many parts of
the country, demand for propane and other fuels peaks during the winter months. As a result, our overall
operating results fluctuate on a seasonal basis. Demand for propane and other fuels could vary significantly
from our expectations depending on the nature and location of our facilities and pipeline systems and the terms
of our transportation arrangements relative to demand created by unusual weather patterns.
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